Addressing Financial Management


Nov 9, 2013 (4 years and 6 months ago)




Addressing Financial Management

Challenges and Transformation Opportunities

Financial Management Institute

Presented by: Murray Lindo, Director, Financial Management and Control Branch

Ministry of Finance, Ontario Government

February 25, 2009


Today’s Discussion

Outline the key public sector financial management issues,
especially during a global economic slow

Describe the leadership role that the controllership function and
the financial community must play in supporting the decision
makers through this challenging time.

Provide some thoughts on how the financial function may need
to transform to support the emerging economic and public sector


Key Messages

An effective controllership function is forward looking, acting as the
business’s “head lights”: scanning the environment, anticipating issues and
seeking effective resolutions.

Controllership must be involved in the front
end of the decision
process helping to assess options and thereby contribute to successful

Controllership function must balance a professional understanding with
practical skills in advanced management accounting, risk management,
process and structure cost control, and revenue management.


Section 1:

What is Controllership and

Why is it Challenging?


What is (Financial) Controllership?

Controllership is:

ethical behaviour;

conscious managing of risks;

clear lines of accountability;

stewardship of resources; and,

reporting and evaluation of results against stated objectives.


Why Controllership is important?

Accountability to the public

Stability and transparency

Ensures compliance against stated standards

Enables efficient and effective use of public resources

Defines roles and responsibilities

Enables performance measurement against agreed expectations

Fulfills legal obligations and mandate


Why is Controllership Challenging?

Equal Footing:

financial/controllership analysis not always on an equal footing
to policy, operational and communication considerations, in the decision

Management Perceptions:

controllership seen by management as “end state”
technical process rather being critical to transparency and accountability.

Credible Information
: ability to produce timely, reliable, usable and accurate
financial and risk information to decision


providing clear and accessible financial/controllership
information to line

revitalizing financial capacity by attracting, retaining and developing
financial/controllership talent.


Key Principles in the Controllership’s Evolution

Supporting the evolution of the Controllership function are four key


a trusted business advisor, providing accurate, timely and reliable
financial information and advice;


combine business knowledge with financial expertise to optimize
value added;


a shared commitment to the goals of financial management and
effective program service and delivery; and


open communication across government, with external
professional organizations and counterparts in other jurisdictions.


Section 2:

“Think globally, act locally”

Controllership’s Transformation

in Challenging Economic Times


Key Challenges

New Economic Challenges

Borderless global economic recession, where governments have a role supporting families,
jobs and industry.

Financial market uncertainty and impact of the economic environment on government
revenues and expenses.

Existing Structural Challenges

An aging population increasing demands for healthcare and income security.

The need to address the infrastructure deficit through sustainable capital investments.

Current Financial Management Challenge

Governments must balance the need to respond to these immediate economic challenges
without compromising its responsibilities for addressing the longer
term objectives.

Increased complexity of transactions and external reporting requirements (PSAB, IFRS).


Today’s Operating Environment

Greater public expectations for seamless, quality and value
money services.

Focus on results and financial sustainability in health care, education and



Government’s evolving “oversight” role, where increasingly Broader Public Service
(BPS) partners deliver front
line services.

Increased intergovernmental cooperation and collaboration between federal/
provincial/ municipal governments.

Advent of new technologies enabling integrated business and financial solutions.

Increasing demand to elevate financial management function in supporting programs,
managing risk and leveraging strategic outcomes.


Controllership must exercise Financial Leadership

During economic downturns, the role of the public sector financial
community is even more critical.

Our role is to provide government decision
makers with the best financial
information possible, so that they can make well informed decisions amongst
the competing public policy demands.

To be successful in this role, in supporting financial decision
making, we

establish a robust financial management framework;

emphasize value for money and fiscal accountability;

balance immediate fiscal impacts with longer
term stewardship;

ensure appropriate controls are in place and functioning;

apply financial risk management principles; and

ensure transparency in financial reporting through public disclosure


Controllership’s role in financial management

The controller/controllership function plays a key financial management role
in making the government’s business objectives achievable.

Controllership adds to the financial management discipline by providing
assurance of compliance with financial reporting and controls.

However, the controllership function’s “value” is fully realized by supporting
makers with financial analyses that identifies:

links between costs and performance;

opportunities to reduce direct and indirect costs; and

opportunities to increase delivery efficiency in meeting public policy goals.

Realizing this contribution can only happen when we fully apply advanced
management accounting, risk management, effective costing and revenue


Financial Management Transformation*






Focused on the prudent use
of resources by standardizing,
consolidating and automating

Procedural policies.

Establishing financial data
integrity, timeliness and

Results Planning:

Ensuring effective
budgeting, forecasting and
planning systems in place.

Asset/Capital Management.

Establish policy framework

Risk management and
effective controls

Decision Support:

Focused on performance
management and supporting
effective investment decisions

Ensure value

Policies that strengthen
performance by promoting
positive behaviours.

Effective BPS management

Robust Cost/Benefit analysis


Support decision
makers and
identify opportunities for
service delivery transformation

Creates partnerships to drive
innovation and service delivery

Finance integrated with policy
and operational considerations

Enterprise risk management

Effective horizontal

Trusted Advisor



* Four Faces Framework discussed in Deloitte study
“Mastering finance in government:
Transforming the government enterprise through better financial management”


Required Financial Management Elements

Management Decision Support

Financial evaluation expertise

Business risk management expertise

Capital investment analysis expertise

Financial performance management

Business Planning, Fiscal Planning and

Strategic business planning expertise

based Fiscal planning expertise

Capital planning expertise

Integrated capital, operating and cash
budgeting expertise

year fiscal management expertise

Accounting, Appropriations and
Financial Reporting

Accounting policy application and control

Appropriation compliance and control

Costing and pricing expertise

Financial reporting expertise

Financial information analysis and integrity
assurance expertise

Risk Management, Accountability and

Program risk management and control

Project risk management and control

Asset and Liability risk management and
control expertise

Transfer Payment, Agency and Trust risk
management and control expertise.


Financial Competencies needed

Business Knowledge

Effective Costing, Planning & Evaluation

Risk Management

Standards Compliance

Effective Communication

Performance Management

Forecasting, Planning and Budgeting

Accounting/ Financial Knowledge










How is the OPS Responding to this challenge

Integrated Planning:

a reconstituted Treasury Board Office integrates fiscal planning,
controllership and audit leadership enabling government to be better equipped to deal with
the competing demands.

Financial Management:

review of the appropriate financial management functions to
assist ministries in providing decision support to line
ministry decision

Policy Framework:

revitalize and streamline financial policy framework to clarify and
strengthen roles, responsibilities and accountabilities.

Transfer Payment Accountability:

continue efforts to reduce administrative duplication
for TP recipient partners while ensure improved accountability.

Asset Management:

capitalization of minor Tangible Capital Assets so that ministries can
more effectively plan, account and budget for their portfolio of investments.


revitalize OPS financial capacity through attraction (financial internships and
trained professional programs), training on core competencies and retention, so
that Ontario can build the financial leadership of the future.


Section 2: Questions

What do you think needs to happen for the
controller/controllership function to assume a more advisory
“decision support” role?

In your role as controller, what strategies can you employ to
strengthen the controllership function's links with line
management decisions?

What incentives can we develop to support the transformation of
the controllership function?


Section 3:

Case Studies


Case Study 1: Government support for the Auto Sector


Balancing socio
economic imperative to save manufacturing jobs against the public
policy and accountability requirements.


Provide ailing automobile companies a credit bridge through difficult times.

Key Issues:

Supporting the auto sector is multi
jurisdictional issue. Loan agreements cannot be made in
vacuum and must take into account all aspects of the various governments’ initiatives.

Managing the risk of longer
term investments in an industry with weak consumer demand
and volatile stock markets.

Ensuring public money is spent appropriately and contributes to wider public policy goals,
such as more environmentally friendly cars.

Making sure public loans are repaid and that government exposure is based on the
associated risks.


Case Study 2: Vancouver Olympics Capital Projects


City of Vancouver has taken full financial control of the 2010 Olympics
athletes village $1 billion project.


Balancing increasing costs against a drop
dead deadline, without
encumbering the city with substantial debt.

Key Issues:

term “showcase” event against a substantial public debt at a time of falling revenues.

Original Alternative Financing and Procurement (AFP) agreement was supposed to transfer
the “risks” of construction and financing to the developer. With evaporation of “market”
credit the construction company has been unable to make payments. Since September, 2008
the city has covered construction costs through a $100 million loan to the developer.

The city’s takeover could help cut the interest rate from as much as 11.5 per cent to as little
as five per cent.

Risk that assuming the liability could downgrade of the city’s triple “A” credit rating which
could make it harder to borrow other funds until the athletes’ village loan is paid off.

The take
over of financial responsibility for the project means that the city now has the
entire “village” as an asset (and project liabilities), not just the land it sits on.


Case Study 3: Alternative Financing Arrangements


Ontario has an infrastructure deficit estimated at more than $100 billion.


Alternative Financing and Procurement (AFP)
represents an opportunity
to leverage private
sector project management expertise and financing to help bridge
the infrastructural deficit.

Key Issues:

Public policy considerations in the government’s construction, management and ownership
of assets.

The higher private
sector financing rates must be balanced against construction risks (i.e.
cost overruns) transferred to the private partners.

term AFPs that include design, build and asset management components, require
performance criteria to ensure value
money throughout the asset’s life

The openness and transparency of the alternative financing process are critical to ensure the
highest return on investments and public accountability.

Differing financing rates methodologies impact the recognised value of the assets. Using a
project costing model will increase financing costs, while a internal discounted rate will
decrease financing costs and change the asset’s value.


From a Controllership Perspective

We need to ensure:

solid financial management information is provided to support an effective balance
between the need to stimulate the economy against the stewardship role of asset
management for the longer

a strong and transparent decision
making framework is in place that provides value
money to taxpayers;

public resources are effectively controlled in accordance with legislative and public sector
accountability standards;

a strong understanding and independent assessment of AFP rival bids based on robust and
reasonable costing/financing assumptions; and,

transactions are accurately accounted for and represented in the province’s Public

Overall, we need to put this in a language that helps the decision makers make
informed investment choices.


Section 4:

Looking Forward


Key Requirements for Success

Informed Decisions:

Further integration of risk and performance management into the fabric of financial

Effective Governance:
establishing clear roles and accountabilities, linked to decision
making structure and
supported by a robust policy framework.

Financial Leadership:

to set priorities, support capacity improvements and provide a strategic financial
“voice” at the decision
making table.

Financial transformation:
continue to

migrate the financial function away from a transaction
rules focus to
an “advisory” decision support and oversight role.

Business “ownership” of Finance:
progressively, delegate financial management to program managers and
other government organizations, while maintaining accountability and oversight.

Measuring Progress:

establish clear performance measures, evaluate progress toward achieving the desired
goals and taking remedial action when necessary.


open and transparent communications to allow knowledge of risks, challenges and
solutions to flow throughout the organization(s).

Financial Capacity:
attract, retain and develop financial capacity that is aligned to future needs.


Looking Ahead

Controllership closes the financial management “accountability loop”.

Effective controllership provides the front
end financial information to make
informed business decisions but also ensures controls are met in the
achievement of results.

As the demands of controllership function increase, it is critical to integrate
risk management, process and structure cost control, and revenue
management into the fabric of decisions.

Ultimately, our success depends upon the professional knowledge we bring
to the decision
making table. Only up
date, strategic competencies and a
robust financial community can ensure we provide value
added expertise
needed to achieve public policy goals.


A more complex world…