From Senator Sarah Ferguson, chairman, Corporate Services Scrutiny Panel.
DURING last autumn’s elections great concern was expressed at States expenditure and the cost of running the Island.
Electors found it hard to understand why, with the excellent example set by the parishes, the States could not be run as efficiently.
It is really quite simple – the parishes know what things cost, have tight controls and plan ahead.
While it is not as simple to run a large disparate organisation as it is to run a small organisation, the same principles apply. These were discussed at length in the recent paper by the Comptroller and Auditor General on Financial Management (issued in June 2009).
In this report he said: ‘Effective financial management is of critical importance in a period of limited resources. In such times, allocating resources efficiently to achieve the greatest benefit and managing resources to achieve the greatest value lie at the heart of political debate. Improvements in financial management thus lie at the heart of government and are not a peripheral matter.’
It is essential that good financial information is collected in a standardised format throughout the organisation. Use of computer technology enables this to be available easily and readily accessible to the central finance department.
In any organisation the finance department will still access and collect financial information from across the organisation. Any forward looking organisation will also have resources to consider:
(1) development and monitoring of effective internal controls;
(2) management of investments;
(3) realisation of proper returns from strategic investments;
(4) financial forecasting;
(5) project evaluation and appraisal;
(6) treasury management;
(7) policy development and appraisal;
(8) risk assessment and management; and
(9) forensic accounting.
In other words, strategic planning as well as pure record keeping.
During the first three years of operation of the Public Accounts Committee, we worked with the Comptroller and Auditor General to assess the state of financial management of the States of Jersey.
We came across a number of areas that concerned us and we raised them in our reports, much as the Comptroller and Auditor General has raised concerns in his.
There were questions as to the quality of information in the system since there were no common definitions of cost items to be posted to the ledgers throughout the States. However, as the Comptroller and Auditor General says in his report:
‘This position has reflected the preferences of many departments and politicians. For example, the lack of discipline in financial recording has assisted departments in obscuring their cost profiles and this has been regarded by some as convenient.’
Until we can clearly identify the drivers of cost, it is almost impossible to forecast expenditure accurately.
At the moment the States only plans a year in advance. However, without knowledge of the drivers of cost it is not possible to set spending levels intelligently and, to quote again from the Comptroller and Auditor General:
‘The point is to set spending levels intelligently and to enable, for example, the T&R Department’s expenditure planners to challenge chief officers effectively on the assumptions underlying their expenditure plans.’
Furthermore, it is quite common in industry to have professional staff reporting to their line managers for departmental matters and to their head of profession for professional matters. This does not establish a dictatorship but ensures the professional integrity of the organisation.
In our amendments to the Business Plan 2009, the then Public Accounts Committee required the Treasury and Resources Department to take certain steps to improve various aspects of financial management.
In particular an objective was set to the effect that: ‘Central authority and responsibility of the Treasurer of the States as corporate head of finance strengthened, with all finance officers and accounting staff recognising their direct responsibility and accountability to the Treasurer;’ This is a change to which Deputy Southern now objects. Deputy Southern will remember that he did not speak in this part of the debate and the amended objectives were accepted without question by the Assembly.
What the Treasury Minister is doing is, in fact, in line with the objectives set by the Assembly last year and follows the amendments brought by my Public Accounts Committee as well as the recommendations of the Comptroller and Auditor General.
Unfortunately, as the Comptroller and Auditor General said:
‘Some steps require changes in personnel but all are likely to require an increase in the number and aptitudes of staff. These should be permanent positions since the skills required are fundamental to sustainable and professional financial management.’
This expenditure is essential to ensure that we can establish sound financial management throughout the States so that comments by the Comptroller and Auditor General such as, ‘the lack of discipline in financial recording has assisted departments in obscuring their cost profiles and this has been regarded by some as convenient’ no longer appear in his reports.