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Last updated: 25 October 2007
Building Better Governance
Part Three—Departmental Case Studies
Attorney-General’s Department
Redesigning internal financial systems, governance arrangements and procedures—how Attorney-General’s shifted to a more structured and centrally supported approach by implementing an internal financial framework to meet its financial obligations. How it strengthened its financial management and accountabilities through strong leadership, reporting, communication and compliance arrangements.
The department
The Attorney-General’s Department (AG’s) provides expert support to the Government in the maintenance and improvement of Australia’s system of law and justice, national security, and emergency management. The department employs approximately 1 300 people predominantly in its Canberra offices with a small number of staff in the states and territories.
The challenge
In the last five years, several factors combined to prompt AG’s to review the adequacy and appropriateness of its financial management systems and the ability of these systems to support the department’s operations as well as to meet current and emerging accountability requirements, including the new Compliance Statement requirements.
The AG’s budget has increased in response to increasing and more diverse responsibilities and complexity of work. The department is now responsible for administering complex indigenous, legal and security related programmes as well as full cost recovery operations when previously much of its work was confined to policy. The consequence is more complex budgeting and reporting, challenges in matching annual revenue with expenditure as well as aligning budgets and expenditure against expected programme delivery outcomes and timeframes, and increased financial management responsibilities for line managers.
A review of the financial ‘health’ of AG’s, done in conjunction with the Department of Finance and Administration (Finance) in 2004, identified that:
- improvements were needed in strategic financial management and analysis
- a review of the budget position and forward estimates was necessary
- additional support should be provided in relation to financial management including to the groups though divisional business manager positions.
The review also concluded that the responsibilities of the Chief Finance Officer (CFO) should be broadened and that the CFO should be part of the executive team.
The system
Previously, AG’s operated with financial management as part of the corporate services function without a CFO in the executive team and with financial strategy development and management largely devolved to divisions. Its financial management team was a small group largely focused on the operational aspects of financial management and meeting external requirements and deadlines. There were few documented financial polices or processes and heavy reliance was placed on a few, very experienced people.
What was done
Following the review a CFO was appointed to the executive team, and tasked with advising on the financial health of the department as well as developing and driving a programme of ongoing financial reform and change.
The CFO’s first action was to conduct her own review of financial management in consultation with division heads. This resulted in the establishment of an internal financial management framework which is the strategic financial governance framework for the department and forms the basis for all financial performance and activities within the department and guides further reforms. This framework is set out in Figure 1.
Figure 1: The elements of the financial management framework
Business managers were placed in every division with ‘dotted line’ reporting to a new central strategic financial management section providing additional support to the groups and divisions. Previously while the Deputy Secretaries had been supported by business managers, only two divisions out of 11 had the support of a business manager.
As well as this strategic financial support to divisions, the expanded financial management branch is responsible for developing and implementing the internal financial management framework and providing consistent guidance and processes for financial management in addition to ongoing transaction processing, financial management information system maintenance and support, and internal and external budgeting and reporting roles.
Although broader financial guidance and support is centralised, business managers placed in divisions provide day-to-day support. Business managers report to their division head but also fully participate in developing and implementing financial reforms in cooperation with the central finance team.
While the need for change was initially identified by the Finance health review and endorsed through the CFO’s own review it has been enthusiastically embraced by senior managers as well as business managers and staff within the financial management branch.
In each step of the reform process, senior managers and division business managers were consulted and involved and are now kept informed through ‘30 second updates,’ but there also needed to be strong upward and downward management from the new finance team to ensure momentum and compliance.
Managers are appreciative of the additional support and financial information they now receive both from their business managers and from financial management branch, especially given the broadened financial responsibilities and the complexities of the programmes they run. This is motivating them to be more proactive and to think collaboratively from a ‘whole of department’ perspective instead of just about the financial outcomes for their own group or division.
Business managers are kept engaged and informed through a formal network and regular forums and information sessions in which they are encouraged to discuss issues and share ideas. A business manager support network has also been established which is run and managed by the business managers themselves.
The appointment of the CFO to the executive has been a key factor in success both because of the senior level influence of the financial role and also because of the strategic and sustained focus of this position to identify and drive further necessary reforms and improved approaches to financial management.
Changes and the higher standards needed are also supported by a financial management learning and development programme for all managers and staff with financial management responsibilities. This programme has become a key part of the corporate training calendar.
The central finance team is now better resourced as are all divisions. With the addition of the business managers and changes to the central finance team, financial management support for the department has significantly increased since the original review in November 2004. There is only a small number of financial staff remaining who were there two years ago resulting in a higher than average turnover within the finance group. This has created the opportunities to bring on new staff with fresh perspectives and to develop a highly professional and cohesive financial management branch to take the financial reforms forward and meet new and changed responsibilities.
The financial management framework still needs further development before it reaches the point where the Executive and the CFO would like it to be.
The financial management branch needs to finish documenting all financial procedures to support their day-to-day work and that of the business areas; roll out the learning and development programmes to complement the new financial framework; and tackle procurement processes and practices to ensure that AG’s is fully compliant with the external framework and regulations and is applying consistent processes.
Monitoring
The reforms continue to be guided by the financial vision for AG’s that ‘The Department, its managers and external stakeholders have confidence in the financial management framework and the Department’s financial management capability’.
A financial management framework programme is implementing the continuous improvement projects. Fifteen projects have been completed, five are currently underway and around fifteen projects have been identified for the future.
A ‘governance’ board of senior managers representing each of the groups oversees and monitors the development and implementation of this programme of financial reforms. It recently requested an assessment of how well the changes already rolled out have been accepted and implemented. This assessment will consider the current approach, what has changed and improved, and what still needs to be done as well as assess the effectiveness of communication mechanisms between the Financial Services Group and its key internal stakeholders.
Benefits
Apart from the obvious benefit of a healthy, effective and compliant financial management system, AG’s identifies further benefits.
There has been a change in culture for the better. Managers and staff have a strong awareness of their responsibilities and the importance of strategic financial management. There is much better collaboration among senior managers, whose concerns stretch to the financial health of the whole department, and not just their own domains.
There is a strong relationship between the rest of the department and the finance team reflecting trust and confidence. The strong finance team is seen as an enabler, helping the department meet its policy and programme objectives.
Key messages
- Set realistic timeframes—make sure you take into account the impact of change and the time it takes for others to understand and implement it. Regularly take stock of where you are in your schedule and how you might need to adapt.
- Resource new projects appropriately—ensure you have dedicated staff responsible for developing and rolling out projects. Assign your experienced staff to the projects allowing them to have the time to put in for the success of the project and bring in temporary, additional staff to provide the usual day-to-day financial services.
- Target senior staff—it’s always a challenge to engage senior management and to communicate finance reforms effectively but they are essential to the successful adoption of reforms.
- Put the time and effort into documentation—written guidance and procedures are core to providing support and continuity in business processes no matter who is doing the job.
- Invest in skilling and training financial staff and senior managers—a challenge for all departments is attracting and retaining skilled financial staff. Establish ongoing formal and on-the-job financial training to ensure that knowledge and skills are spread widely and that future staff turnover will not have an impact.
- Be prepared to review and critique progress and make sure you celebrate successes—ongoing review and communication is key to maintaining the momentum and ensuring reforms remain current and relevant.
