This article was first published in the April 2016 international edition of Accounting and Business magazine.

Expenditure on public services is one of the most significant investments made in almost any part of the world, with government expenditure in some countries accounting for more than a third of GDP.

Public services come with high public expectations attached and are, quite rightly, closely managed and scrutinised. The level of accountability and transparency around the spending of public money has increased in recent years, as has the pressure for public bodies to do more with less, to become more lean, efficient and cost effective.

‘The public sector across the globe is in more need of effective financial management – and therefore good accountants – than ever before,’ says ACCA’s head of technical advisory, Glenn Collins. ‘It is essential that the many thousands of finance professionals working within public services have the right skills. ACCA has long been aware of this; our members across the world work in a wide range of public-sector bodies, from national and local government to regulators and healthcare.’

As part of its work in this area, ACCA reviews public service provision and publishes a report for ACCA members, as well as governments, employers and other stakeholders with an interest in the public sector, setting out the main criteria for effective provision. Its latest report, Setting High Professional Standards for Public Services around the World, has recently been released and covers four main topics: 

  • the principles for achieving good governance 
  • the principles for effective financial management 
  • the importance of the quality of information reporting to help decision-making
  • the criteria for effective performance management. 

One of the interesting elements of the report is the way in which it highlights the subtle differences – but also the many similarities – between the requirements of effective financial management in the private and public sectors. On the question of governance, for example, there are many definitions of what good governance should look like, but each depends on its context and on the specific stakeholders of the organisation. The report argues that the most appropriate definition of good governance for public services is the one developed by the UK’s Audit Commission in 2009: ‘Ensuring the organisation is doing the right things, in the right way, for the right people, in a timely, inclusive, open, honest and accountable manner’.

Leading the way

Finance professionals in the public sector are under more pressure than ever before to lead the way in strengthening public financial management. Indeed, it is seen as a priority in many countries, as governments struggle to find financial sustainability and manage fiscal risk in a volatile global economic environment. 

The role and size of the public sector is under close scrutiny in many countries and the emphasis on financial discipline, transparency, and value for money is stronger than ever. In practice, this means that finance professionals in the public sector are being asked to show that budgets are linked to policy objectives, that value for money is secured, and that financial reporting is credible and transparent.

The risk is, though, that finance professionals, as the visible face of financial management, could find themselves in the firing line. As ACCA’s report points out, however, this is not, and should not be, a task for financial professionals alone. ‘Strong leadership and the support and political will of national governments are vital to the success of any financial management change programme aimed at strengthening fiscal management across a country. There is no “quick fix”, as many of the improvements may require legislative, structural and cultural changes.’

One of the consequences of the spotlight on public services has been a shift in the form and quantity of financial information expected by stakeholders. In fact, standards of transparency are generally higher in the public sector, but increasingly stakeholders in both the public and private sectors are looking for an approach that combines financial reporting with other information, including narrative reporting and sustainability reporting. In practice, this means that the trend towards integrated reporting (IR) seen in business is seeping into the public services. 

One potential problem is that IR frameworks – most notably the framework of the International Integrated Reporting Council (IIRC) – are developed with business in mind rather than public-service organisations. An IR framework developed for private business will not necessarily meet the needs of all public services; in its response to an IIRC consultation in 2011, ACCA said it was important that public services were not forgotten in the development phases of any international framework. The IIRC has since developed a Public Sector Pioneer Network, through which public-sector organisations can discuss how IR could be applied to the sector.

Skills to the fore

An underlying question is whether finance professionals working in the public sector are a different breed from those in the private sector. Do they need different skills? The ACCA report discusses the basic skills requirements of financial professionals in the public sector, but also the best principles for performance management, setting the emphasis on ‘value for money (economy, efficiency and effectiveness) in public services. Central performance management systems and targets can be valuable, but they should be intelligent, streamlined and sensitive to local needs.’

Strategic financial management skills are, of course, a prerequisite, but the demands on finance professionals working in public services are increasing by the day. So what does it take to work in the public sector? 

The report lists the key requirements for public-sector finance professionals today, which include:

  • Strategic leadership skills
  • Organisational and change-management skills
  • Creative thinking and effective decision-making, including the implications of professional values, ethics and attitudes
  • Technical skills that cover numeracy, IT proficiency, decision modelling and risk analysis, measurement, reporting and compliance
  • Communication, negotiation and influencing skills
  • Team-working skills
  • ICT skills.

But that is not all – public-sector professionals must be able to see beyond their own horizons, particularly in a world where the public and private sectors are working more closely together. As the ACCA report puts it: ‘A modern-day financial professional should be capable of having a perspective on the bigger picture, as well as having the capability to affect what is happening and judging the right time to make an intervention.’

‘While we’re not in ourselves a provider of public services, ACCA members play a very significant role in the public sector in countries around the world,’ says Collins. ‘Finance professionals are crucial to public financial management and governance – the consistent policies they follow help public service providers meet the enormous challenges they face today.’ 

Liz Fisher, journalist