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The CIPFA Financial Management Model

The CIPFA FM Model
Statements of good practice in public financial management

Building on the success of the 2004 Model, CIPFA has launched an updated version. The principles of good financial management are unchanged: that this is the business of the whole organisation, that it requires a tone set from the top, sound processes, competent and motivated people and attention to the needs of stakeholders. The new version retains the existing structure and has been updated to reflect further developments in what makes for good financial management, and includes for example a greater emphasis on the role of the organisation’s leadership and on value for money.

The Model is structured around 3 styles of financial management:

• Securing Stewardship – an emphasis on control, probity, meeting regulatory requirements and accountability.
  
• Supporting Performance – responsive to customers, efficient and effective, and with a commitment to improving performance.
• Enabling Transformation – strategic and customer led, future orientated, proactive in managing change and risk, outcome focused and receptive to new ideas.

The styles of financial management are intended to be progressive and it is expected that all 3 styles will be present in an organisation exhibiting best practice financial management characteristics. For example, stewardship alone is not sufficient to enable an organisation to drive performance and to develop its transformational capacity and, conversely, performance or transformation programmes that are not founded in a robust approach to controlling and accounting for resources are unlikely to succeed.

The Model is also organised by 4 management dimensions. These cover both “hard edge” attributes that can be costed and measured, as well as “softer” features such as communications, motivation, behaviour and cultural change. These are:

• Leadership – focuses upon strategic direction and business management, and the impact on financial management of the vision and strategy of the Board.
• People – includes both the competencies and the engagement of staff. This aspect generally faces inward to the organisation.
• Processes – examines the organisation’s ability to design, manage, control and improve its financial processes to support its policy and strategy.
• Stakeholders – deals with the relationships between the organisation and those with an interest in its financial health, whether government, inspectors, taxpayers, suppliers, customers or partners. It also deals with customer relationships inside the organisation, between finance services and their internal users.

A matrix approach is used in the Model, combining the styles of financial management and management dimensions. The organisation’s position is assessed through 37 statements of good practice, with a set of supporting questions sitting behind each statement. Each statement is scored on a scale of 0-4, with half point increments, to establish an overall picture of strengths and weaknesses in terms of financial management, with a traffic light approach being used to highlight stronger and weaker areas.

A full implementation of the model involves a number of evidence gathering techniques. The evidence gathered is necessary to determine the scores of an organisation against each of the 37 statements of good practice which then form the assessment matrix.

Examples of the evidence gathering techniques that are typically used are:

Document Review. Existing documentation and conclusions drawn from previous external scrutiny provide a useful starting point in the review process.

Electronic Survey. The views of large number of stakeholders can be easily obtained through the Model’s electronic survey tool. The survey tool is designed to ensure the stakeholders only receive questions that are relevant to their role e.g. senior managers, central finance, local finance teams and customers of finance. The survey explores views on the extent to which each good practice statement currently applies within an organisation. In addition to awarding a score to good practice statements, participants also have the opportunity to provide comments and examples of evidence to support their score.

Interviews. Senior officials are interviewed as part of the evidence gathering process, with broad questions being drawn from the CIPFA Model. For some questions, the interviews explore similar areas to the electronic survey, but enabling senior officials’ views to be collated, and in other cases, interviews are used to investigate specific issues which staff more widely would not necessarily have a general awareness of e.g. internal audit, risk management, procurement.

Workshops. These sessions are used to present preliminary findings, explore where there are differences in views between survey groups and explore areas where all survey groups have provided a low score, in order to identify how improvements could be made.

The assessment matrix that is formed based on the evidence collated does show simply the high level issues that an organisation faces. The evidence that underpins the scores enables organisations to identify the key issues that need to be addressed in order to raise scores and most importantly improve Financial Management.

The updated CIPFA FM model was launched at the CIPFA conference in June 2007.

For further information about the model and to place your order click here.