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Public Sector Finance Depts Competent, Ambitious

18 August 2008

Deloitte Study Finds Public Sector Finance Departments Are Competent And Ambitious

NZ organisations included in global study into public sector finance

The finance functions of New Zealand’s public sector agencies are aiming to raise their overall capability to more ambitious levels, according to a new Deloitte study, Mastering Finance in Government. However, the study showed that only 29% of the government finance officials surveyed describe their organisation’s capabilities as having moved beyond a “baseline level” in risk management.

The report is based on the findings of one of the largest global surveys ever conducted of government finance officials in more than 200 departments across 28 countries.

Aloysius Teh, chairman of Deloitte’s public sector practice in New Zealand, said it was commendable that finance leaders of New Zealand public sector agencies were intent on achieving finance mastery.

“Not only are they aiming very high in terms of their targeted performance levels, but they are also looking to have a broad range of expertise across all four facets of the finance role: stewardship, operations, strategy and acting as the catalyst for behavioural change. If we look at the views of the New Zealand participants, the targeted goals are pretty tough especially when sourcing and managing talent and capability will be key drivers for success.”

New Zealand’s public sector finance teams had self-assessed their capability as higher than the global average. Mr Teh said they had not yet reached mastery of their functions but demonstrated the typical profile of “intermediates”.

“They are reasonably competent operators and stewards, however they still lack focus and capability in supporting their organisations to make better strategic choices, improve processes, and boost performance,” he said.

Areas for improvement

Looking ahead, New Zealand agencies indicated they needed to make “step changes” to support improved quality in decision-making. There appear to be four areas of improvement to focus on: establishing rigorous performance measurements; defining management reporting requirements; supporting business analysis; and improving capital asset planning.

Mr Teh said the survey results show that government finance leaders recognise they must address a number of significant challenges to reach a maturity level that justifies their place at the executive decision-making table.

“Finance leaders should provide strategic support to guide programmes, policies, investment and procurement decisions. Financial management capability has weakened over the years, partly because of a reasonably benign operating environment, and partly because of increased compliance activity that has crowded out ‘value-add’ activities. The demotion of finance leader roles to the third tier in the organisational hierarchy is another threat to long term financial governance and performance management.”

Information vacuum and value for money

Another area of concern was the lack of timely management information and data. Close to 68% of global entities surveyed cited the lack of current information as either a moderate or significant barrier to improving the performance of their organisations.

For example, a majority indicated that they did not have enough information on asset costs to understand the full cost of delivering public services. Most respondents also indicated that they did not have the data they needed to measure the return-on-investment (ROI) from government programmes.

“Given the weak economic outlook and tighter fiscal conditions, agencies will need to continue to lift their transactional efficiency. They will also need to improve the overall quality of performance information and financial capability within and outside finance. This will ensure better decision-making and value for money is achieved,” Mr Teh said.

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