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Video transcript: Strategic financial management and the finance development programme

Transcript for a video about strategic financial management and development opportunities for finance staff in the public sector.

Title: Strategic financial management and the finance development programme, Paul Helm, Head of Government Finance Profession and Chief Government Accountant, the Treasury

Paul Helm, Head of Government Finance Profession and Chief Government Accountant, The Treasury

What I wanted to talk about, is about where we’re taking the finance profession; but as has just been mentioned, I do have actually a couple of other roles.

I am Chief Government Accountant and as you go forward, if you’re looking at changes going on, one of the big things we did this last year – in fact the Auditor-General did it – was to issue the first… well I think Auckland City was the other one – a new form of audit opinion, with all the key audit matters in there.

And, I would stress that you’re all going to go in that direction, so have a good look at those two.

As far as I’m aware, have a look at what was staying in there now. Most of our documents are public anyway; most of them go through FEC, the Finance Expenditure Committee. But, do have a look at that because it does help you as you go forward, as to how you work that through with your auditors.

For those of you that are involved because you’re a Crown entity, I would just say thank you. If you’re in a government department I’d also say thank you, because the quality of our financial statements of government are pre-eminent around the rest of the world and we want to maintain that, so that the quality of the work you are doing is really supporting that. So again, thank you on that score.

Another of my roles is I’m a Director in Treasury, and as part of being a Director of Treasury means that I’m actually helping Treasury to put through a few changes, because we’re aware that while you have to work with international financial reporting standards and PBE IPSAS, you are also impacted, the bulk of you, by what government puts through either as legislation or by reporting requirements from Treasury.

So, acknowledging from the centre that we also need to change; it's not just about getting you to do things right, as Wellington tends to sort of pose these things. It's actually asking Treasury to look at itself and say, “How do we join this up, how do we use the data that we’ve got and how do we be smarter?”

So, part of my role is working back into Treasury to help them; and in fact, most of Treasury are now in that headspace. You might not see the subtle changes, they might not have got out this far, but they are starting to happen; so, that’s another role.

But, then turning to the real reason I’m up here as Head of the Government Finance Profession; it's a role that, when he was Minister of Finance and now Prime Minister, Bill English was really, really focused on creating along with Gabriel Makhlouf  in terms of making sure that we lift the finance profession, because for quite a few years under the Public Finance Act and other mechanisms, we seem to, certainly in Wellington, have taken the role down several pegs, and we really need to take it back up.

There’s been a lot of focus on the finances. There’s been a lot of focus on getting a clean audit opinion. But, as you folks know, and as Steven actually touched upon earlier, you’ve got to get into the non-financial aspects of the work; you’ve got to be able to join the financial and the non-financial to tell the real story.

As was mentioned, I have been for five years, CFO of the Transport Agency; and it's great to be able to say the roading system is worth $33billion. But, as you know and I know, it doesn’t mean anything in itself. It does mean something, but it doesn’t tell you really what’s going on with the roading system, because in actual fact the value has probably gone up because Auckland land value has gone up; and that’s not necessarily meaning that the state highway is any better.

So, it really is about the value proposition; what have we done with the state highways, can we actually put more trucks down it, have we maintained the quality, has it deteriorated, are we actually helping the economy of the country?

Because one of the things that comes through in my slides; you will see a reference to living standards framework. We’re trying to lift the living standards of all New Zealanders; that is what Treasury is trying to do. You might challenge that on occasions and say, “Well, it doesn’t feel like it,” but it is what we’re trying to do and we’re trying to link back to that.

Well, actually it's not just about having X billion dollars to spend each year and did we spend it yes or no. That’s part of the stewardship, but what we’re really trying to do is move… well, I’ve got to hesitate from saying, “Move away from it.” You’ve still got to have the stewardship; we need that. That underpins and that gives us the firm foundations to work forward from. But, we also want to be a catalyst for change. We want to be able to strengthen what we’re doing, be it in health, education, or whatever the sectors are – economics. We have to actually support what’s going on from a firm foundation.

And, for finance teams – and to catch you all in this – just to focus on the finances is really no longer answering the need. Most of you have already got this, but quite a few agencies haven’t. And, you’ve really got to be saying, “If you’re just preparing a finance report and saying ‘Hey, look at this, we’ve spent the money we were given,’ it's really but what have you done.”

If we’re going to look forward, and I know CANZ has done various reports in saying, “Well, actually quite a few of the jobs in the finance industry will disappear in the next few years because it will be automated,” I look at it and go, “Great, absolutely great, because those are probably the boring automated jobs that should be automated.” We can get out of that; we can start adding value.

So, what my proposition to all of you is, and these slides go on about, is really, “So, where are you adding value? Do you understand your business? And, how can we in the centre help that, because some of our conversations tend to be sliding back towards pure finances and we’ve got to say, “No, there’s a richer story here.”

So, I’ll be honest. Through the financial statements of government, I’ve got one of my team looking at, with a number of people in Treasury, the integrated reporting direction of travel, shall we say. That talks about six capitals. Well, actually under our living standards framework in Treasury, we actually talk about four capitals. They’re almost the same. So, we’re trying to say, “What would that look like?” and people get very nervous when we then say, “We’re going to capture all this data and put it in.”

Actually, a lot of it is already out there. If I think about the various sectors, if we look at natural capital, the Ministry for the Environment actually report on the state or standard of the environment; so, we don’t need to do anything extra, we just want to capture that and put it in and link it up to the financials.

Better go back to my slides, otherwise I will lose where I am.

One thing I was going to stress, because I thought you might be a bit unnerved by it, I’m not one of the security guards by the way. I know they said, “If you’re in a dark suit with a white shirt you’re a security guy.” I’m not one of those, I am just head of the Finance Profession.

So, in a lot of ways one of things we’re trying to do is lift strategic financial management; and you could almost drop the ‘finance’ word out of there. It is about strategic management. It is about looking into the future. But, it's really saying why do we want to do that? And, a lot of it is about enabling better decision-making. As I like to say to people, “We in finance don’t like to make decisions.” I always say, “I don’t like to say yes and I don’t like to say no,” because in reality most of the budgets has already been delegated out to a GM, a group manager, or whatever it happens to be, or a Deputy Chief Exec. They’ve got the money. I see my job as a finance person helping them do better with that money; getting more value out of it.

So, they make the decisions. And, that goes back to something Steven talked about in terms of ethics and probity and making sure people are doing the right things; and that we don’t want any frauds out there. We want to remain at the top of that transparency indicator. But, in reality we don’t have the delegation all of the time. So, it is about we can help them make more informed decisions; we can help them with their decisions if we provide them with more information. And, that isn’t more information looking back over our shoulders so that we can tell them.

I have to admit, and don’t quote me on this; in terms of our Crown accounts, we put out a set of accounts every month because the Public Finance Act tells us to, and the degree of accuracy in those is huge. They don’t change very often. But, they don’t have to be audited, and I wonder if the amount of effort we’re putting into getting the accuracy of something that’s still looking over our shoulder and how much time we could then, as an alternate, look into the forecast. Everybody seems to say that Treasury’s forecasts aren’t all that brilliant; we’re always understating the revenue and overstating something. But, it is about where do we put the effort.

So, I was looking at where can finance add value and how can we help have the right conversations to help people? And, that’s why we do it. It is about enabling smart decisions, but it's also moving down and how do we go about doing that? And, it is about focusing on the future. But, it's also looking at the whole entity thinking; because a lot of times we look at things we’ll just look at a little bit. And, the number of budget bids I look at and people will say, “But, what about this and how it works,” and I look at it can go, “But, how does it fit in the wider because you are a big agency? Why are we looking at a new budget bid for a couple of million dollars when you already have $300million? How does it fit? How can it work?”

As you’ll see down that left-hand side, it's all about asking the questions. So, what can we actually do in that space?

So, moving down to the ‘What?’ It is about integrated strategic business and financial planning. And, one of the things that I’ve noticed is that a lot of finance people don’t tend to get as involved I think as they should in the planning; and I need you folks to be right involved in the planning, and I say that to every Chief Executive I meet, because a lot of strategic planning tends to go on in a CE’s office and finance is too busy with the transactional. We’ve got to get out of the transactional and get back to the strategic. That’s where you should be; it's also a lot more interesting.

But, it is then going, “Well, so who do we actually impact on?” and this is back to my area, which is working with finance professionals, with the decision-makers and the central agencies. We’re a bit unusual my little team – we’re not a big team – but we call on a lot of people within the sector; within Treasury and across agencies. We’ve nominated I think there’s nine key position CFOs out there. Across the public sector they are the CFOs of the bigger agencies and we expect them then to work with other agencies; so, we create this pyramid of people working together. It is about working together and not working in your silos.

So, that’s sort of where we get to. So, it is about integrating, strategy planning and performance to ensure that the value is at the heart of everything we do; if it's not we should be asking why. If it's just a form filling, why do it?

In part, that leads onto this; and I want you to just think about these three questions. It's all about the business. So, what is your business trying to achieve? What are the best things that you can do to achieve that? And, I think at this juncture when I was in Wellington I had to point out – and I felt really sorry afterwards (not for very long) – with the Treasury team that were there, there was a couple of management accountants there, and I pointed out that I haven’t done a variance report in two and a half years; because my area of Treasury looks after a budget of about a million dollars. It's so small because I rely on others and I use other people. I said, “Even if I’m completely out in my variances, in my forecast and my actual – it's all about wages and salaries – who cares?” It's diddly squat in the overall scheme of things.

I said, “The other point is that the management accountant comes through and asks me, ‘Why has my variance occurred and what’s gone on?’”  They never ask what the business is; what’s my business and what am I trying to achieve. So, when I start having that conversation I’ll elevate them in I suppose the respect I will give them and the time I will give them.

Maybe it's hard in front of 200 people to call them out like that, but I just thought, “What the heck?” But, it is about making sure that you’re doing the same thing. Add value, because those guys are coming through and asking about a $20,000 variance in a month and I’m going, “Who cares?”

So, make sure you’re adding value. If you’re not adding value why are you doing it? Because to me, going back to Steve’s point, that’s a fraud on the taxpayer because the taxpayer has paid you money, usually, or ratepayer has paid you money to do something and you’re not actually adding any value. That to me is wrong.

So, I would get to know your business and ask about the business and if you’re not doing those reports that cover finances and the business, then ask yourselves, “Am I really adding a lot of value with this exercise?”

The other is, are we applying resources to prioritise the appropriate things. When I look at comments going out about big data and all the rest of it, I actually think it would be smarter if the finance teams just grabbed any non-financial data to actually say, “What do we know about whatever this thing is?” Use that data, use the analytics and use the insights, because when you look at what a lot of finance teams do, it's not just putting the information together and understanding it and having standards around it; you can do so much more.

You have data, you play with data and it's got a dollar in front of it, so why can’t you do the same with non-financial data. Find those anecdotes, find those stories, find that data – because the business has probably got it – and marry it up with your financial information. Then you’ll be producing a lot more useful information.

That then can lead to questions. You can then turn around and say, “Hang on is this right?” Not just is the information right; that’s from an audit perspective and the auditors will look at that. But, actually, what does this tell us?

Going back to my roading background, we could spend $300million a year on maintaining roads. What does that tell me? Has the quality improved? Has it deteriorated? Are we heading down the route of the Americans and the Brits and whole lot of other countries around the world, who have pulled back on maintenance and now they’ve got massive problems; billions and billions of dollars around the world to be spent on infrastructure? The same with water; it’s not just roads. You can see that with some of the work that’s gone on with stop-banks and things like that.

I’ll be honest, that’s where I like the work that the Audit Office and Audit New Zealand has done; that they have done some of that analysis. You can use that information and use it as finance people to persuade your businesses to think about, “Hang on, are we not cutting things off and we’re not doing the right level of maintenance?” Usually if you take it to the end extreme, the one area of finance and investment that hasn’t gone on is probably in your systems.

When I went into NZTA I found we had seven general ledgers; actually, five completely different systems for one agency. How smart is that? How accurate is the data? So, you’ve got to then invest. So, we did. But, you’ve got to persuade the board that that’s not a good space to be.

Now a lot of you, you’re probably a lot smarter than we were, but bearing in mind this was done like six years ago and I know from other agencies that have been set up, or merged, or whatever in the last few years, that we do not invest in our systems. We have to. We have to invest in our people and that’s why I support this sort of function.

So, understand your business and ask those hard questions, but really do try and understand it.

So, where are we going? A lot of you probably will have seen a slide like this before; and it is moving us from the operational to the strategic. You know, where are we at the moment in terms of the amount of time we spend on transactional activities and where should we be in the future?

We need to be in that strategic ‘inverting the triangle’. We can’t remain where we are. We don’t expect it with our own systems now; in our cell phones and our banking arrangements and what have you. And, yet we are decreasing the reliance on a postal system from 175 years ago or whatever. So, we have a state of the art system; we then print things off and send it through. We’re getting smart at that; we are actually sending it through. But, in actual fact, we’re doing it electronically but at the same time have we changed the skill base of our people so that they can support that strategic decision-making; because that’s where a CE will be asking you to engage. That’s where the CE wants to know, not just what does this mean for today and tomorrow, but actually for a lot of us in local government, central government and Crown entities we’re actually in for the long haul; we’re not just a one hit wonder where we have to generate a surplus this year or anything; it's actually, we’ll be in there five, 10 or 15 years. Or, if you’re in the Defence or roading you’re probably looking 20 to 30 years out. And, if you’re in local government probably up to 100 years.

That’s what I found when I was at Audit. I worked in Dunedin for two years and looked after Invercargill City Council and their piping. They said, “We’ve no idea what our piping looks like,” because it had been in there for about 100 years at that stage and it was cast iron.

All I’m saying is, going back to that earlier slide, find out about the business because you can’t make assumptions. Really asking the questions; and it's all though asking questions.

But, at the end of the day what are we aiming towards? Well, my team in Treasury are aiming towards those higher living standards. We have this thing called ‘the investment approach’ which is actually trying to challenge Treasury to link up all these things we’ve been doing. So, there’s lot of things that Treasury does and it frustrates a lot of the sector because we ask for the same information slightly differently several times over. We’re trying to join all that up.

So, one of the things that we’ve been doing with a bunch of the key position CFOs is to say, “What are we actually about? What are we trying to do? Where are we trying to go with things?” And, what we came up with – and it didn’t take us long, we didn’t spend long, so we didn’t spend lots and lots of time – but it's a working view of where are we taking the finance profession in the state sector.

What we are trying to say is that, “Yeah, we know that quite a few CFOs are not a tier two, some are at tier three, but there’s also a cohort of former CFOs who are actually now at tier one.” So, if we look to Chai Chuah who is the Chief Executive or Director-General with Ministry of Health, he’s a CA. Andrew Crisp who’s at Land Information New Zealand he’s a CA.

So, there’s a few qualified accountants getting through there. But, for finance people what are we trying to actually hold out that we’re trying to do for business? The answer is, we came up with this, which is about financial leadership driving excellent performance.

Now, we don’t know for each agency what that excellent performance looks like, but what we’re really saying is, “What do we do in that space?” And, it's about excellence in decision-making, being passionate about delivery, building alliances and collaboration. And, I would stress that’s part of the key thing, is working outside your normal confines, working within a sector.

Now, I know a lot of local government do this, and you’ll probably sit down and go, “Well, that’s fine for Treasury to say it, but you create all these silos.” We’re actually trying to not break the silos – we still have to have our accountabilities and our stewardship – but we’re trying to make smarter decisions across those divides; and you do it in a transparent manner. So, there’s that element.

And, then it is leading through change; so, we’re trying to stimulate that change by asking questions: Is that logical that that sits there and that sits there? How do you get things working together?

And, so what we came up with was this, to really sort of help the finance profession think about what do they do and why are they doing it? You’ll all get it because the slide packs will be available.

You should be able to put your own logo on the bottom of there if you want, and actually say, “Actually, that’s fine, that’s what we’re doing, let's be consistent,” because otherwise you’ve got X number of government departments and Y number of Crown entities around Wellington and the rest of the country are all doing something different. And, we were trying to say, “But, surely the value proposition is the same,” which is about financial leadership, driving excellence and performance.

Just one other thing I want to stress in relation to this, is something I talk about with a number of people – Chief Execs and others down in Wellington – when making changes to a structure, is look at your CFO role and actually think about proposing it or propositioning it as a Chief Performance Officer; which means you stop just looking at finances and you start looking at
“But, what’s the rest of the performance?” You’re not necessarily responsible for all of that performance, but I would be saying, “Capture that non-financial information.”

Certainly, when I was at the Transport Agency, the first few months that I was there we didn’t discuss the figures, we just debated different sets of figures, because I had seven GLs. After a few months, we started narrowing those down and then people would just go, “We don’t…” well actually nobody else would come up with any figures. Probably because of my ex-audit training but you get to that quality behind the figures and people go, “There’s no point in challenging the figures because if Paul says the figures are that, the figures are that, they ain’t changing.” And, everybody else who had actually set up their own little spreadsheets and what have you, just got rid of theirs because there was no point.

Then we turned to the non-financial information and said, “Okay, what’s going on in that space?” and that’s where my role started to change to be more of a Chief Performance Officer where you capture more of the non-financial. We had a head count issue – which is a nice way of putting it. HR said the head count in NZTA was a certain figure, and I think I can share it with you now, but we said, “No, it's another hundred above that because of the way they’re counting it.” The Chief Exec looked at it and six months later the HR GM left; never mind.

All I’m saying is be sure of your figures and people will trust you. But, it then moves the debate on and that’s where you can become that Chief Performance Officer, where you can say, “Actually, this is what’s really going on with the dollars we’ve spent.” Capture that information and help the other people. I wish they’d helped somebody leave, but never mind; but that’s a different story.

But, it does come back to people trust you guys. When your figures say it's X then it is. That’s what you want.

Now, you can’t read this. I’ll tell you that now, ‘cause I put it up when I was in Wellington and thought people would be able to read it.

This is something that we’re then moving on to, in terms of how do we build the finance profession? You will get this, as I say, in the slides. The key thing in here, and it's probably under the little circular diagram, and it talks about the 70/2010. We talk about this in terms of this is what we want to move the training to; we want it to be experiential. So, instead of coming to sessions just like this, actually get out there and learn.

The reason I’m in my current role is that I have moved so many times not between agencies but into different roles within the agency. Get out and learn about the business. Sit alongside the business and be a business person, but go back to finance ‘cause you’ll be a better person for it. And, what we’re trying to do in this space is actually link people up to have those experiential opportunities.

One of the last things I did – I suppose I could give you a bit of a story – when I first went into the Transport Agency, the state highway team wanted nothing to do with finance; they even had their own finance team and their own GLs – but never mind. Four and a half years later when we were doing Transmission Gully they just said, “We want Paul in there, we want finance at the heart of this because we know the value they’re going to add and the way they will add it.” That then meant that I had to walk away.

At the same time, we were putting in SAP which is not easy, so I gave that to my team; walked away and spent four months solidly with a different email address and a different office in Wellington just working on the financials and commercials around Transmission Gully and the PPP. It was about an $850million spend that turns out over $3billion when you include interest and all the other charges. That’s what I was asked to do. And, that’s the experience that sort of lasted with me; not just the change in the business that they wanted Finance involved, but the lessons I learnt from it.

Even now, and this is where I find I’m conflicted on occasions, is that there’s things we do as the financial statements of Government that impact of NZTA or Kiwi Rail and your experiences come back, not to bite you, but to support you.

So, I would just say, “Get those external experiences.”

What we’re doing, and one that we kicked off last December I think it was, was something called ‘Advantage Programme’. It's for aspiring CFOs and we’re doing that with Deloittes. There’s somebody from I think it's Auckland Council that’s involved in that, and there’s about nine or ten people and that person goes down to Wellington. They’re getting exposure to a whole bunch of senior CFOs in Wellington, commercial CFOs and CEs; so, we get four or five CEs along. They’re getting that opportunity, so we are reaching out to other centres to get people involved in those sorts of things.

I’m a Yorkshireman, I’ll put my hand up and say that; we’re tight fisted, it's world renowned, up there with Scotsmen. We’re not actually paying for this. A lot of the work that my team does is actually reaching out. Deloitte said they’d do it for free, which I didn’t think was appropriate because a free good to me gets abused; so, we turned around and said, “No, charge him like $2,500,” which they’re doing for admin and a few other bits. But, in actual fact, Deloitte are putting that on. And, we’re doing a lot of these sort of things with other agencies and saying, “Well, actually you’re going to be spending all your time doing X, Y and Z, why don’t you club that funding together and use that money to train people. Or, if Treasury has got somebody that’s really good at the Public Finance Act…

You know, one of the questions I’ve got is how often do they come up here and put on a session on the Public Finance Act in Auckland? And, I think the answer is zip; if that’s useful. So, we want to engage with you and please, I’m sure you’ll be able to find my email address, it's pretty straightforward, it's paul.helm@treasury.govt.nz.

Let us know what training you need and who wants to engage with us; because we’ve come up with this by working with not just CFOs – because I have to admit I get frustrated that we seem to target everything at CFOs. We’ve got a graduate programme; so DIA are leading that. They’re this year hiring I think it's about 15 grads on behalf of the public sector in Wellington. So, a couple are going to Police, a couple are going to another agency and spreading them around. They’re going to be moving around for about two to three years. That’s what the CFOs have come up with so they’re actually working together. And, we have put no money into it; and I’m really happy about that, because I actually think it's reusing the money that’s already out there in a smarter way.

So, if there’s courses that we’re putting on, or that somebody’s putting on, why don’t we invite a whole lot of other people in there? Why don’t we actually club-up, and actually use the public sector money smarter?

And, that’s what sits behind this. And, the reason it's probably working is it's not a finance person that put it together; it's an HR person. She’s learning finance; we’ve sent her on a couple of courses and she now knows what double entry bookkeeping is and the balance sheet. She still spends money on coffee and things like that; and I keep talking to her and saying, “You can’t afford those shoes, if you spend it on coffees.” But, anyway, we’re training her.

All I’m saying is, it's working with the other professions like HR and others that are helping us to get into this space. We want everybody doing the right thing. We now have a couple of other forums that we get together; the graduates get together now across the public sector in Wellington. There’s two other forums; one for I suppose Deputy CFOs and they’re running themselves. So out of 90 Deputy CFOs in Wellington I think we’re usually getting about 70 turn up; and they’re inviting people and we’re facilitating that. We know the contacts and they want to speak to them. We’re just that catalyst to make things happen.

So, if there’s things like that, that would help up here, to connect it, rather than you just coming to this one event, or through the institutes ‘cause we work with CANZ and we work with CPA; we’re just trying to lift that profession.

But, have a look at that when you can see it. I don’t expect you to be able to read it. Have a good look at it. I am interested in how we can support Auckland, because Auckland is so important to the country and it's where the population is and a lot of the services are needed; and therefore, how do we as agencies actually get on board with that? Because if we keep doing what we’re doing we’re not going to change things.

But, yeah, if there’s training you need on the Public Finance Act, or whatever it happens to be, just let us know and we’ll see what we can do; because we do have some CFOs up here, the Stats CFO lives up here and works up here two days a week. There’s various other CFOs that are up there, so we can do whatever.

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