Report October 2006

Strategy, Accountability and

the New Role of the CFO
Modernizing Financial
Management in Government
ORGANIZATIONAL EXCELLENCE
Strategy, Accountability and the New Role of the CFO: Modernizing Financial Management in Government
by Janet Milne

Preface
About The Conference Today’s public sector organizations are expected to have
Board of Canada strategic financial management capability in addition
to the skills and knowledge necessary to navigate the
We are: complex environment of policy and program decisions.
• A not-for-profit Canadian organization that In recent years, the pressure to demonstrate value-for-
takes a business-like approach to its operations. money has gained momentum. Managing financial
• Objective and non-partisan. We do not lobby resources is a key element of effective government, and
for specific interests. not since the Lambert Royal Commission of the late
• Funded exclusively through the fees we 1970s has financial management been under greater
charge for services to the private and public scrutiny.
sectors.
• Experts in running conferences but also at con- Governments in Canada and most other developed
ducting, publishing and disseminating research, countries are implementing significant changes in their
helping people network, developing individual approach to financial management. The Conference
leadership skills and building organizational Board of Canada’s goal in this report was to examine
capacity. the challenges facing government leaders and their
• Specialists in economic trends, as well as senior financial executives. We wanted to understand the
organizational performance and public current state of financial management—its culture, its
policy issues. workforce, its leadership and its priorities. The report
• Not a government department or agency, also examines the approaches of several other govern-
although we are often hired to provide ments around the world. Their experience provides
services for all levels of government. insights that will prove useful to Canadian governments
• Independent from, but affiliated with, The as they transition to strategic financial management.
Conference Board, Inc. of New York, which Our report is based on a survey that was undertaken
serves nearly 2,000 companies in 60 nations with the support of various departments of the Canadian
and has offices in Brussels and Hong Kong. federal and provincial governments, supplemented by
interviews with public sector financial leaders and two
©2006 The Conference Board of Canada*
commissioned papers that explore related topics.
Printed in Canada • All rights reserved
ISSN 0827-1070 • ISBN 0-88763-741-8
Agreement No. 40063028
*Incorporated as AERIC Inc.

Forecasts and research often involve numerous assumptions and data

sources, and are subject to inherent risks and uncertainties. This information
is not intended as specific investment, accounting, legal or tax advice.
 © The Conference Board of Canada. All rights reserved. Please contact cboc.ca/ip with questions or concerns about the use of this material.

Contents
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i

Chapter 1—Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Focus of the Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Why the Urgency? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
A Vision for the Federal Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Managing a Dilemma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
An Overview of the Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Chapter 2—The Drivers of Change in Financial Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Expanding Responsibilities and Policy Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
More Demanding Accountability Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
The Impact of Ever-Changing Technology on Operations and Expectations . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Evolving Funding Sources and Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Points to Consider . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Chapter 3—Designing the Future: The Vision for Financial Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

A New Model in the Canadian Federal Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Recent Changes in Other Countries and the Private Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
An Emerging Profile of the CFO in the Public Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
The Changing Emphasis of the Finance Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Development of Financial Management Capability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Transactional Level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Control Management Level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Strategic Management Level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Achieving Strategic Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Measuring Where You Are: Moving Toward Strategic Financial Management . . . . . . . . . . . . . . . . . . . . . . . . 15

Chapter 4—Leadership and Vision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Ministerial Engagement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
The Role and Capacity of Treasury and Management Boards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Senior Executive Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Organizational Maturity and Teamwork . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Points to Consider . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Chapter 5—The Strategic CFO Role and Service Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Accountability, Control and Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
Integrated Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Performance Measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
The Strategic Role of the CFO: Planning, Resource Allocation and Reallocation . . . . . . . . . . . . . . . . . . . . . 26
Resources and Administrative Efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Points to Consider . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Chapter 6—The Financial Workforce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

The Knowledge Base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Leadership and Strategic Skills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Analytical Capability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Career and Succession Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Points to Consider . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Chapter 7—Strategic Levers That Accelerate Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
The Starting Point for Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
The Strategic Change Levers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Leadership and Vision—The First Strategic Lever . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
High-Quality Information—The Second Strategic Lever . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
A High-Performance Workforce—The Third Strategic Lever . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Chapter 8—Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Appendix A—List of Participating Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Appendix B—Glossary of Key Terms and Abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Appendix C—Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Appendix D—Related Reports and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

Acknowledgements
The Conference Board of Canada would like to
acknowledge the financial contribution of 14 fed-
eral departments, as well as the governments of the
provinces of Ontario and British Columbia, which
were represented on our advisory committee; this
committee was indispensable in helping to set prior-
ities for the research.
Robert Siddall, Ontario Ministry of Finance;
Paul Gauvin, Royal Canadian Mounted Police;
David Baxter, Social Development Canada;
Charles-Antoine St-Jean, Treasury Board of Canada
Secretariat; and
Ann Marie Sahagian, Treasury Board of Canada
Secretariat.

In addition, we want to express our appreciation to
the many executives who took part in the field inter-
views and the organizations that participated in the
survey. We are also grateful to those individuals who
reviewed the results of the research and offered
important advice on the shaping of this report:
Jean-Pierre Boisclair, Jonathan Breul, David Good,
Andrew Graham, Bruce Manion, Rod Monette,
James Ralston, and Gabriel Sékaly.
In particular, the author would like to thank those
executives who were participants, for providing
their wisdom, experience and enthusiasm:
Bruce Deacon, Agriculture and Agri-Food Canada;
Peter Estey, Atlantic Canada Opportunities Agency;
Arn van Iersel, British Columbia Ministry of Finance;
James Ralston, Canada Revenue Agency;
Gordon White, Canadian Food Inspection Agency;
Bruce Manion, Canadian Heritage;
Denis Kingsley, Canadian International
Development Agency;
Terry Hearn, Human Resources and Skills
Development Canada;
Thanks also to the following executive participants
for their contribution:
Josée Touchette, Justice Canada; Mary Chaput,
Public Safety and Emergency Preparedness Canada;
André Morency, Transport Canada; and Keith Hillier,
Veterans Affairs Canada.
Special thanks go to Andrew Graham, David Good
and Evert Lindquist for the discussion papers they
contributed. We are also grateful to the experts who
contributed their time and knowledge to our round-
table discussion—their support and perspectives
were invaluable.
The author would like to thank Carolyn Farquhar
for her wise advice, patience and unflagging sup-
port without which this report would not have been
possible. As well, Nicole Stewart was central to the
work providing energy, great judgment and persist-
ence in ensuring things were done, with tact and
thoroughness. Yvonne Latta also provided indis-
pensible advice and assistance during the interview
process.
 © The Conference Board of Canada. All rights reserved. Please contact cboc.ca/ip with questions or concerns about the use of this material.
EXECUTIVE SUMMARY
Strategy, Accountability and
the New Role of the CFO
Modernizing Financial
Management in Government
At a Glance
• There is a trend for public sector financial manage-
ment to provide long-term advice, contribute to
business decisions and develop effective strategies.
• With a particular focus on the federal government,
this report defines the components of strategic
financial management and proposes strategies
for closing gaps in capacity.
• The report lays out a roadmap for engaging
stakeholders in long-term change, drawing on
quality information and building a high-performing
workforce.
G
overnments in Canada collect and disburse
over $400 billion on behalf of their citizens
each year. Canadians want their political
leaders to achieve the best results with these funds
at the most reasonable cost. And they want evidence
that tough spending choices are based on high-quality,
reliable financial and performance information.
The capacity of governments to deliver highly
effective financial management strategies has become
an issue of major concern. Governments face policy and
spending choices that grow more complex every day,
and accountability requirements that are increasingly
demanding. They must make new choices in informa-
tion technologies and sort through a growing array of
funding sources and strategies. Keeping pace with the
pressures and opportunities inherent in this decision-
making process demands a renewed focus on financial
management capacity.
The Conference Board of Canada
As a result of these influences, governments in
Canada and other countries are introducing significant
changes in how they carry out financial management.
Finance organizations are now playing a central role
in the department’s planning and management and as
they do, governments are creating strategic financial
management capability. The trend to providing long-
term financial advice, contributing to business decisions
and developing strategies is gaining momentum. These
activities are recognized as the essential elements of a
strategic finance organization.
Governments’ capacity to deliver highly effective
financial management strategies is in question.
The research for this report was undertaken to
understand and describe the current state of financial
management in governments in Canada, with a parti-
cular focus on the federal government. We wanted to
define the components of strategic financial management
and to propose strategies for closing gaps in capacity.
Some of the questions we sought to answer are: How
widespread is strategic financial management in gov-
ernments? What does it take to achieve this capability?
What are the commitments that deputies must make?
What are the roles and responsibilities of the chief
financial officer (CFO)?
To help organizations understand their own levels of
financial management capability, we present a continuum
of development in financial management, represented by
three broad stages. From a largely transactional focus in
i
the beginning, the continuum moves to an emphasis on
effective financial control of resources, and finally, to a
fully developed strategic financial management capabil-
ity. The research suggests that at least 12 factors help to
pinpoint the stage of strategic financial management
that an organization has reached.
Three strategic change levers determine whether
departments are able to achieve strategic financial
management, and help predict how long it will take.
This report finds that, while many of the components
for strategic management may generally be in place,
the level of capability can vary among departments and
agencies. A concerted effort is needed to ensure that
strategic financial management capacity is fully applied
throughout the system. Three “strategic change levers”—
areas of action that will have an impact beyond their
immediate scope—determine whether or not departments
are able to achieve strategic financial management, and
help to predict how long it will take them to do so.
They are:
• leadership and vision, on the part of the deputy
head (DH) and the CFO;
• improved reliability and analysis of financial infor-
mation and strengthened performance measurement;
and
• greater quality and capacity in the finance workforce.
RECOMMENDATIONS
The report concludes with 11 recommendations
related to these three strategic levers. Collectively, they
provide a roadmap for actively engaging all stakeholders
in long-term change, drawing on quality information and
building a high-performing workforce. These recom-
mendations put the onus squarely on the shoulders of
leaders—at the centre and in line departments—who
set the standards and culture of financial management.
LEADERSHIP AND VISION
Recommendation 1: Build Vision and Commitment
Treasury Board should convene a group of deputy
ministers and CFOs (or their equivalents) to define their
expectations of a CFO, the CFO’s role, and the kind of
performance they want from the finance organization
ii
within each department or agency. This collective state-
ment should be reviewed by experts to ensure that the
approach is based on leading-edge models and the most
advanced knowledge available. Leaders should commit
to taking the necessary actions to establish a culture
that supports more effective financial management.
Recommendation 2: Establish a New Vision of
the Role of the CFO and Finance Organization
Large government departments or agencies must
ensure that the CFO’s responsibilities link the organiz-
ation’s performance to planning and resource alloca-
tion. These responsibilities encompass the components
of finance, planning, performance measurement and
reporting, but they should also include the financial
system as a whole. During the transition to a strategic
organization, the CFO will need incremental resources
to hire individuals with the necessary skills.
Recommendation 3: Provide Functional Leadership
The Comptroller General should provide functional
leadership by defining the resource levels required by
finance organizations, establishing standards for the
finance workforce, and defining and reporting annually
on government-wide financial services performance.
HIGH-QUALITY INFORMATION
Recommendation 4: Create the Conditions
to Generate High-Quality Information
DHs and CFOs need to provide incentives for timely,
accurate and relevant financial information and reporting
by branches. The conditions created should include:
• a shared understanding of the desired results of the
organization, the expected contribution of each
executive and the measures that will be used to
assess performance;
• active support for a culture in which rewards are
given for contributions to the organization’s per-
formance as a whole;
• recognition of accurate reporting of significant,
unpredicted lapses or shortfalls at year-end (and
sanctions when this information is not accurately
reported); and
• enterprise-wide financial policies and frameworks,
supported by training for all financial staff.
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Recommendation 5: Improve the Relevance
of Performance Measures
Treasury Board and CFOs should develop guidelines
for performance measures, including common approaches
to assessing the delivery of value-for-money. Measures
related to areas of shared responsibility need to be
coordinated. Departments should publish these per-
formance measures annually; performance reports
should include measures of efficiency, performance
and value-for-money.
Recommendation 6: Measure Performance
in Difficult Areas
Governments need new approaches to measure per-
formance in policy and risk control. Experts in organi-
zations such as think-tanks and universities could make
valuable contributions to developing better indicators
of productivity and performance in these areas. At the
federal level, Treasury Board should take the lead.
Recommendation 7: Demand High-Quality
Financial Information
Clearly defined quality standards for financial infor-
mation should be included in budget proposals, Treasury
Board submissions, committee presentations and briefing
material. This information should be a required element
of all such documents prior to any formal budgetary
consideration.
These recommendations provide a roadmap for
actively engaging all stakeholders in long-term
change.
Recommendation 8: Reduce Transactions and
Improve Systems
Governments should ensure that departments have
access to systems that integrate information smoothly
from many domains and contribute to greater produc-
tivity. This could include shared services, outsourcing,
and self-service mechanisms such as the use of credit
cards for purchase and payment. Steps should be taken
to process financial transactions more efficiently.
The Conference Board of Canada
A HIGH-PERFORMANCE WORKFORCE
Recommendation 9: Establish CFO Standards
and Competencies
The key elements of a high-performing strategic
finance organization should be clearly defined. The
model presented in this report can be used as a starting
point for this discussion. A strategic finance organiza-
tion should have competency standards for CFOs that
include financial expertise, knowledge of the business
and leadership capacity. Different jurisdictions could
collaborate to identify the competencies and tools needed
for competency evaluation. All governments need struc-
tured approaches to developing competencies; these
could include assignments in non-financial areas and
importing financial leaders from the private sector. Once
identified, the competencies should be supported with
targeted training and mentoring programs, both for newly
minted and existing CFOs.
Recommendation 10: Respond to Short- and
Medium-Term Shortages
Given the shortage of financial expertise in the public
sector, CFO recruitment from outside will be important.
Outside recruits should receive specialized training and
mentoring to help them move more easily into the gov-
ernment culture. External recruitment of mid-level
finance officers with strong analytical capacities should
be added to the Financial Officer Recruitment and
Development program mandate. Senior finance exec-
utives who aspire to become CFOs should have the
opportunity to achieve the required competencies
through education, assignments and mentoring.
Recommendation 11: Build Capacity in Finance
Organizations
Governments should increase the number (and type)
of human resources dedicated to financial planning and
analysis. Human resource experts should work with CFOs
and the Office of the Comptroller General to define a
“core finance organization” in terms of structure, func-
tion and the appropriate skill mix and resources.
iii
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CHAPTER 1
Introduction
Chapter Summary
• Rebuilding public trust in government’s financial
management requires urgent and visible action.
• Finance organizations play as central a role in plan-
ning and management as policy and programs
currently do.
• This report examines the components of strategic
financial management and identifies the changes
needed to close the gap between what is in place
and what is required to meet future challenges.
• The report considers a new model of financial
leadership and management articulated by the
Comptroller General of Canada, and proposes
what it would take to achieve that vision.
• Deputy heads and CFOs at the federal level have
not yet agreed that the changes initiated by the
Comptroller General will make it easier for them
to carry out their responsibilities.
M
ore than $400 billion flows through the
coffers of federal and provincial govern-
ments every year in Canada.1 This money,
which comes from taxes, user fees, contributions (e.g.,
to Employment Insurance and pension plans) and
duties, pays for all government programs and services.
Governments in this country handle more money each
year than all but a few of our largest private corporations.
Managing financial resources professionally ought
to be the core of effective government, not an after-
thought. Financial management is often overshadowed by
a focus on policy development and program delivery—
yet it deserves to be given just as much prominence and
attention. In fact, Canadians want politicians and public
service leaders to take seriously the challenge of achieving
the best results at the most reasonable cost. They want
more than orderly accounting and protection against
The Conference Board of Canada
fraud. They want to see evidence that tough spending
choices, which can account for billions of dollars, are
based on high-quality, reliable financial and performance
information. And they want to know that those at the
helm put a priority on well-managed organizations.
The missions, long-term objectives and financial
strategies of well-managed organizations are clear. In
the case of governments, policy and program proposals
have funding plans that are developed as part of the
planning process, not tacked on at the end.
Well-managed organizations are characterized by
transparent governance structures, criteria for decision-
making and well-defined costs that are monitored and
controlled. In such an organization, the expertise of the
department’s finance organization is valued, and the
chief financial officer (CFO) is a key member of the
management team.
Today’s CFO is not the CFO of the
past. Successful CFOs possess not only
financial acumen and subject expertise,
but have the full range of leadership
skills that are found in well-run private
sector organizations . . . these financial
executives and their offices have a com-
prehensive understanding of both the
operational and strategic missions of
their agencies.
—Linda Springer, (former) Controller,
Office of Federal Financial Management,
U.S. Office of Management and Budget, 2004.
1
FOCUS OF THE RESEARCH
The Conference Board of Canada set out to under-
stand and describe the current state of financial manage-
ment in Canadian government organizations, in light of
the importance it has for effective government operations.
We examine the components of strategic financial
management, and identify the changes that are needed
to close the gap between what is in place and what is
required to meet future challenges. The research aims
to explore and understand the culture in which finances
are managed. It seeks to answer such questions as: How
widespread is strategic financial management in gov-
ernments? What does it take to achieve this capability?
What are the commitments that deputies must make?
What are the roles and responsibilities of the CFO?
This report identifies the changes needed to close
the gap between the current state and effective
strategic financial management capabilities.
As government participants articulate their vision
of high-performing and strategic financial management
capability, the research examines how well departments
are currently performing, what elements are vital to
achieving their visions of strategic financial manage-
ment, and what it will take to close the gap between
the vision and current reality. In particular, this report
considers a new model of financial leadership and man-
agement articulated by the Comptroller General of
Canada, and looks at the steps neccessary to achieve
that vision.
The results of this work are designed to assist those
responsible for leading change: central agencies with
the responsibility for functional leadership; deputy heads
(DHs) who determine the culture, define standards and
establish the working environment; and CFOs,2,3 who
lead change, both within their organizations and as part
of the government-wide community of financial leaders.
WHY THE URGENCY?
Today, in the wake of the highly publicized events
surrounding the Sponsorship Program, incidents of
uncontrolled cost overruns in other high-profile pro-
grams, and questionable grants to companies and
2 The Conference Board of Canada
organizations, citizens are losing confidence in govern-
ments’ ability to manage their money with expertise
and full accountability. Scandals in the private sector
have contributed to an overall skeptical view that those
who run large organizations are not acting in the best
interests of stakeholders. Reports of government waste
have generated serious doubt that taxpayers are getting
value-for-money from their hard-earned tax dollars.
Although the amounts of money involved are actually
small relative to the overall budget of government,
these reports create a public perception of broad-based
financial mismanagement.
Rebuilding public trust in government’s financial
management requires urgent and visible action. Finance
organizations in departments must move out of the back
office, with its focus on transaction processing, to the
forefront of government operations, where they must play
a centre role in planning and management. Government
decision-makers require advice and analysis that addresses
medium- to long-term financial demands. They also
need broad-based financial advice that helps them to
make smart, cost-effective choices and to meet both the
short- and long-term interests of citizens. Executives in
finance organizations must look for ways to fund activi-
ties, that are creative yet grounded in a firm knowledge
of the larger business context, including clients, stake-
holders, suppliers and partners.
A VISION FOR THE FEDERAL GOVERNMENT
In 2004, the federal government appointed a
Comptroller General, whose mandate was to overhaul
key aspects of financial management in the federal gov-
ernment. A year later, changes to the roles and qualifica-
tions of CFOs, and to internal auditing processes were
announced. New funds were allocated for financial
training for all public service managers. Since then,
progress has been made in a number of areas, including
recruitment and staffing.
Provincial governments have also made changes.
British Columbia recently passed legislation that with-
holds a portion of a minister’s salary, pending completion
of the fiscal year without overspending of that ministry’s
budget. The Balanced Budget Ministerial Accountability
Act, combined with a move to include expenditures of
the public sector (e.g., schools, universities, colleges,
hospitals) in government accounts, has made financial
 © The Conference Board of Canada. All rights reserved. Please contact cboc.ca/ip with questions or concerns about the use of this material.
reporting more comprehensive. In Ontario, the creation of
a shared services organization and recent restructuring
were designed to ensure that central agencies play a
strategic, facilitating role and that they work “upstream”
with line ministries.
MANAGING A DILEMMA
In the federal government context, there are some
serious questions about the potential for many of the
proposed changes to take root within the system. Deputy
heads and CFOs have not yet fully agreed that the changes
initiated by the Comptroller General will make it easier
for them to carry out their responsibilities. In some
quarters, these leaders feel that the proposed model is
driven by private sector requirements that do not reflect
the needs of the public sector. The evidence examined
in this report indicates that the conditions for successful
change have not been firmly established, and that there
is resistance to the new model. In fact, the prevailing
view is that the new model will not enhance the ability
of DHs to run their departments successfully.
There are serious questions about the potential for
many of the proposed changes to take root within
the federal government system.
And yet, these very leaders are vital to the sustain-
ability of strategic financial management in their depart-
ments and throughout the government. The current state
of the CFO community, with respect to qualifications,
capacity and the impact of changing demographics, sug-
gests that the finance community has been undervalued
for too long. Deputy heads should define the role that
CFOs are expected to play in their organizations and
the resources upon which they will be able to draw. If
they do not value and demand high-quality financial
advice and analysis, CFOs will struggle to implement
directives from central government that clash with the
prevailing culture in their departments. Even in cases
where support from the DH is solid, the finance organi-
zation still needs to have the expertise, experience and
vision to build its credibility.
The Conference Board of Canada
Scope and Methodology
To gain an understanding of the challenges and performance expectations for CFOs,
the Conference Board conducted 45 face-to-face interviews with CFOs and DHs. These
executives represent many federal government departments, as well as provincial gov-
ernments. To help establish a baseline of current financial management practices and
challenges, a survey of senior finance executives was also carried out among these
governments. While this report focuses primarily on the federal government, provincial
examples are also included (with a focus on British Columbia and Ontario), to provide
a basis for comparison.
An advisory board was established to help steer the research. Board members singled
out two issues that they considered to be essential to successful strategic financial
management capability:
1. the quality of information available to ministers, executives and managers to support
decisions; and
2. the capacity of governments to change spending patterns by reallocating funds from
existing to new priorities.
Expert insight on how other jurisdictions approach these two issues was provided through
two commissioned discussion papers: Integrating Financial and Other Performance
Information: Striking the Right Balance of Usefulness, Relevance and Cost, by Andrew
Graham of Queen’s University’s School of Policy Studies, and Strengthening Resource
Re-allocation in Government: Culture, Incentives and the Chief Financial Officer, by
David A. Good and Evert Lindquist of the University of Victoria’s School of Public
Administration. In addition, a roundtable of experts, including experienced academics
and practitioners, was convened to review the findings of these papers, along with these
Conference Board research findings.
Source: The Conference Board of Canada.
Brief Overview of Canadian Public Sector Financial Reform
Financial management in the public sector is linked to a series of acts that establish
responsibility and accountability. In the past century, various governments have
reviewed and altered these structures, starting in 1931, with the Consolidated and
Audit Revenue Act, which centralized expenditure control under the Comptroller of the
Treasury.
The recently published Gomery Report1 provides an overview of the evolution of legisla-
tion and management philosophy in the intervening years. Royal Commissions, notably
the Glassco Commission in 1962 and the Lambert Commission in 1979, made recom-
mendations that led to the decentralization of accountability for financial management to
line departments, giving DHs specific accountabilities under the Financial Administration
Act.
Since then, the debate has continued over the relative roles and accountabilities of
ministers and deputy ministers, with the most recent intervention by Judge Gomery rec-
ommending that deputy ministers be made accountable before Parliament for financial
management. Given the federal government’s Accountability Act of 2006, it is clear that
issues concerning the public purse remain a core concern.
1 Mr. Justice John H. Gomery, Restoring Accountability, Phase 2 Report, Commission of Inquiry
into the Sponsorship Program and Advertising Activities (Ottawa: Government of Canada,
February 2006).
Source: The Conference Board of Canada.
3
AN OVERVIEW OF THE REPORT
Chapter 2 focuses on the environmental drivers of
change and emphasizes that each department must
address the drivers within its own finance organization.
Governments need to develop strategic financial
management capabilities. Chapter 3 sets out a framework
that identifies the components of financial management
and offers guidance to organizations as they build and
maintain strategic financial management through three
keys areas:
• organizational leadership and vision;
• capacity in the CFO role; and
• more effective management of the finance organi-
zation.
1 This figure has been derived by adding the Expenditure estimates for the
year 2004–05 for each province and the federal government, presented in
published main estimates for that year. Individual figures can be obtained
by consulting the website of provincial and federal governments.
2 The term “chief financial officer” comes from the private sector and has not
been used widely in government in Canada. In this report, it refers to the
most senior official below the DH level, whose core responsibility is financial
management. For ease of reference, this report uses the term “finance” to
refer to financial organizations or units within ministries or agencies, rather
than the Department of Finance, which is the central government financial
agency.
4 The Conference Board of Canada
To help organizations attain better strategic capability,
we have developed a self-assessment tool that pinpoints
strengths and areas of improvement.
Chapters 4 through 6 examine these three areas in
detail and provide a benchmark for strategic financial
management. In Chapter 7, the report focuses on the
significant gap between the financial management capabil-
ity of most departments and agencies, and their ability
to deliver strategic financial management. Closing this
gap will require focused effort on three levers:
• building leadership and vision at the top;
• improving the reliability and use of information; and
• building the capacity of the finance workforce.
The last chapter also sets out a roadmap to address
this gap by identifying 11 recommendations.
3 Different jurisdictions use various titles (e.g., assistant deputy minister, exec-
utive finance officer, chief administrative officer) in designating these roles.
The CFO may be dedicated to finance, but, in most instances, that person
has broader corporate responsibilities. In contrast, the controller is specifi-
cally responsible for financial control, accounting and oversight. Both roles
may be played by the CFO, or the controller may report to the CFO.
 © The Conference Board of Canada. All rights reserved. Please contact cboc.ca/ip with questions or concerns about the use of this material.
CHAPTER 2
The Drivers of Change in
Financial Management
Chapter Summary
• Four drivers are currently creating complexity and
demanding greater capability from CFOs and
finance organizations: expanding responsibilities
and policy challenges; changing accountability
requirements; the impact of technology on opera-
tions and expectations; and changing funding
sources and strategies.
• Departments need to be able to address these drivers
of change within their own finance organizations,
with CFOs playing a central strategic role.
• To add value and provide relevant, timely advice
to decision-makers, CFOs need to possess highly
developed financial expertise and indepth knowl-
edge of the department’s business and it’s business
environment.
• The department’s culture and leadership must be
predisposed to hearing the insights of CFOs, making
them a core part of the executive team, particularly
during policy and program development.
• CFOs must be supported by high-quality financial
analysts and excellent technology to perform their
duties well.
T
he role of the chief financial officer (CFO) in
government has already evolved in important
ways. Deputy heads (DHs) and CFOs consulted
for this study underscored that the environment in which
they are managing today is more complex and diverse
than that of a decade ago. Internal control, accounting
and risk management are still a high priority. The need
for the CFO to keep the department “out of trouble” is
seen by CFOs and DHs as self-evident. However, CFOs
are now engaged in activities that go well beyond these
preventative measures. Today’s financial strategy can no
longer be an afterthought—it must be core to organiza-
tional planning.
The Conference Board of Canada
Four drivers are creating complexity and the need for
greater capability from CFOs and finance organizations:
• expanding responsibilities and policy challenges;
• more demanding accountability requirements;
• the impact of ever-changing technology on opera-
tions and expectations; and
• evolving funding sources and strategies.
Although these drivers are not new to government,
they have taken on an increased sense of urgency. The
CFO should play a central strategic role, equivalent to
program and policy managers. This significant shift will
require that CFOs are actually engaged in addressing
these drivers. Each of the following sections describes
the implications for CFOs.
Financial strategy can no longer be an afterthought
— it must be core to organizational planning.
EXPANDING RESPONSIBILITIES AND
POLICY CHALLENGES
COMPLEX CHOICES
The range of issues on which governments must act
is expanding rapidly. The public has high expectations
for both excellent service and low risk, particularly as
issues such as preventing mad cow disease, safeguarding
the environment and ensuring national security loom
larger. Yet governments cannot do everything the public
may expect of them. Money is scarce, despite surpluses,
and policy choices are increasingly complex. Under-
standing costs and measuring performance are critical
to effective decision-making. Although this has always
been true, CFOs and finance officers today are being
asked to assess the financial implications of strategic
choices (e.g., those between different energy production
and delivery models).
5
 These investigations require different levels and types
of skill and knowledge than those used in traditional
budget analysis; they also have long-term, high-cost
implications. CFOs need highly skilled analysts who
understand the role they can play. These analysts must
be included at the outset of discussions and work as full
partners with policy and program colleagues. The CFO
needs a clear understanding of both the business and
the policy objectives and implications.
VALUE-FOR-MONEY
Citizens want assurance that they are getting good
value for their tax dollars. However, measuring value-
for-money in governments is an imprecise science, at best.
Results are a complex fabric of tangible and intangible
factors with long- and short-term benefits. How does
government measure such results as maintaining national
security, or creating equity among the diverse regions of
a very large country? Results may also mean assessing
success according to what did not happen: in other words,
diseases did not spread, attacks did not occur, high school
dropout rates did not rise. Taking the measure of this
fabric is a task fraught with ambiguity and plagued by
unpredictable changes in direction. There is no real
equivalent to the private sector’s financial “bottom line”
as a handy yardstick for measuring progress.
Public servants find themselves between the “rock”
of public demand for value-for-money and the “hard
place” of political priorities.
Improving service delivery in ways that would seem
to make common sense in the private sector often has
an unacceptable impact on local economies. Balancing
efficiency measures against legitimate concern about
the local and regional impacts of change—and giving
the appropriate weight to cost in these decisions—is
central to the struggle to demonstrate value-for-money
in government investments. This is seen by senior exec-
utives as a major obstacle to better financial informa-
tion. For example, if local communities are likely to be
affected in a negative way (e.g., job loss) by changing
service delivery to improve efficiency, politicians fre-
quently opt for the status quo. On one hand, study par-
ticipants believed that such situations sometimes lead
6 The Conference Board of Canada
public servants to view financial information as being
of little real value. On the other hand, participants also
believed that there is growing pressure from the public
and government to improve both the quality and the
cost-effectiveness of service delivery. Auditors General
commented on inefficiencies in government spending,
reporting that the public demands evidence of return
on government investments. Public servants find them-
selves between the “rock” of public demand for value-
for-money and the “hard place” of political priorities.
The CFO must provide clear assessments of the
financial impact of different choices. Factoring into such
analyses the wide range of policy objectives requires a
deep understanding of the political environment and a
capacity to communicate information in a clear and
subtle manner. Whether or not decision-makers choose
to act on the information given, CFOs have a duty to
advise them on financial implications, while demon-
strating the courage to “speak truth to power.”
THE IMPACT OF GLOBALIZATION ON
POLICY FLEXIBILITY AND CONTROL
Governments today are part of a complex network
of global communities, acting on their commitments to
national and international agreements. They must work
in concert with others to develop the policy and program
mechanisms for accomplishing agreed upon objectives.
They make financial commitments to broad initiatives that
span many jurisdictions. Time frames, accountability and
costs are often fuzzy and hard to control; these factors
require effort and dialogue to create clarity and consensus.
Like organizations in the private sector, governments
also compete in a global marketplace to attract immi-
grants, better trade deals, high-profile educators and
researchers, and investment from companies—all of
which are critical to the economic and social well-being
of the country. Making good financial investments is an
important strategy in this competitive environment; in
addition, these strategies must take into account complex
trade agreements and rules. Good financial analysis can
reduce uncertainty and clarify the real cost of many ini-
tiatives. The ability to attentively manage risk is essential.
CFOs need to understand the full context before they
advise on the costs and legality of specific measures.
 © The Conference Board of Canada. All rights reserved. Please contact cboc.ca/ip with questions or concerns about the use of this material.
MORE DEMANDING ACCOUNTABILITY
REQUIREMENTS
CERTIFICATION AND AUDIT OF
DEPARTMENTAL STATEMENTS
Regulatory regimes (similar to the Sarbanes–Oxley
legislation in the United States) are being introduced for
publicly traded companies, both in Canada and around
the world, to protect investors from fraud. While gov-
ernments produce government-wide audited statements,
today they are moving toward professionally certified
and audited statements at the departmental level. The
U.S. government took this route in the early 1990s with
its Chief Financial Officers Act.
In Canada, recently established federal agencies
such as Canada Revenue Agency, Parks Canada and
Canadian Food Inspection Agency have already begun
to produce agency accounts, audited by the Auditor
General. For other departments that will soon face the
same requirement, it will be vital to understand the
implications, whether the CFO, the DH or the minister
certifies that financial statements are accurate, com-
plete, clear and timely. CFOs must be clear about what
level of assurance is required, what degree of due dili-
gence is needed to meet the standard, and what will be
the cost of doing so. CFOs gain from having detailed
knowledge of business processes and enterprise-wide
financial frameworks.
TRANSPARENCY AND THE NEED
FOR EFFECTIVE COMMUNICATION
Governments are providing more information through
the Internet, partly in response to skyrocketing public
demand for access to information. Presenting financial
information clearly and fairly is a challenging task that
demands sophisticated communication skills. It is not
sufficient to post raw data, or information in financial or
government jargon. Partisan politics and intense media
scrutiny can create a controversial environment for such
disclosure, often leaving the public unable to gauge how
government has really performed. Information must be
organized and articulate to minimize misunderstanding.
Governments and their officials should be front and
centre in responding to public interest, especially when
information has just been made available. The CFO
needs a new level of judgment and communication
skills: a capacity for transparency, and an ability to
explain the impact and meaning of the information.
The Conference Board of Canada
NEW APPROACHES TO SERVICE DELIVERY
New options for funding and delivering government
services have become more prevalent in the past decade,
with governments seeking innovation and greater effi-
ciency. These new approaches include outsourcing,
public–private partnerships and strategic alliances, special
operating agencies, and shared services and foundations.
Attention to these new approaches has been driven by a
desire to improve services, reduce operating costs and
help organizations to focus on their core business. How-
ever, mixing public and private money requires precise
control and accountability frameworks.
New ways of funding and delivering government
services have become more prevalent in the
past decade.
Sophisticated contract management skills are essen-
tial to ensure clear expectations and effective control,
without burdensome reporting being required of service
providers. Risk levels can be significantly higher with
external providers involved than with internally deliv-
ered services, and many departments struggle to find
experienced personnel to manage these arrangements.
For the CFO, these options mean that finance officers’
skill mix has to change if the department is to have the
capacity to manage these new risks.
THE IMPACT OF EVER-CHANGING
TECHNOLOGY ON OPERATIONS AND
EXPECTATIONS
ON-LINE SERVICES
Governments are migrating to the provision of serv-
ices online—a natural fit, given the extensive services
provided and the expansive geography involved in pro-
viding them. Governments are shifting their services
(e.g., payments, licensing) to these convenient, less
costly channels, and tailoring them to the preferences
of citizens. The CFO and the finance organization have
added a new task to manage—now they must be able
to assess the full costs of different channels of service
delivery, while balancing a range of policy, operational
and cost factors. These tasks require the CFO to have
a detailed understanding of how business is conducted,
where the major cost drivers of operations are, and how
they can be controlled.
7
FINANCIAL SYSTEMS
Modern financial systems make complex analysis
possible and help governments to share information
rapidly with other governments and countries that are
oceans away. The ability to provide complex informa-
tion instantly has fuelled expectations that the CFO and
finance should provide sophisticated business intelligence
to support policy choices, as well as day-to-day manage-
ment. Several provinces (e.g., Ontario, British Columbia,
Alberta) have adopted a single, government-wide finan-
cial system. However, federal departments still operate
with separate systems that generally do not integrate data
from functions such as human resources, procurement
and contracting with performance, expenditures and
revenues. This makes it much more difficult for CFOs in
federal departments to provide integrated information.
Many departments are struggling with outdated tech-
nology that is no match for clients’ expectations for
financial information and analysis. And keeping pace
with the continuous evolution of systems can be unsus-
tainable, for cost reasons alone.
Several provinces have adopted a single,
government-wide financial system.
EVOLVING FUNDING SOURCES
AND STRATEGIES
The range of methods that governments use to raise
revenues and fund activities has grown well beyond the
traditional source of appropriations. Strategic partnerships
and alliances, user fees, intellectual property royalties,
8 The Conference Board of Canada
new approaches to asset and property management, and
loans from central agencies are all options to consider
when developing programs. Accrual accounting tech-
niques are changing the way in which costs are allocated
over time, offering opportunities to spread start-up costs
over several years. The CFO has a responsibility to
understand the full range of partners, clients, and
accounting and financial tools, and to develop innova-
tive approaches to funding new proposals. Funding
options also need to be appropriate to the activity. For
example, the public is suspicious of arrangements where
industry pays all or part of the cost of environmental or
health assessment of their products. Such activities do
not lend themselves to partnerships with industry. In these
cases, finance needs to partner with the department’s
policy branch early in the development of proposals so
that they can determine which kind of financial strategy
will be consistent with the objectives of the initiative.
POINTS TO CONSIDER
To play a value-added role and provide relevant,
timely advice to decision-makers, CFOs need to possess
highly developed financial expertise and a deep knowl-
edge of the business and the business environment,
including clients and stakeholders. At the same time,
the department’s culture and leadership must be pre-
disposed to hearing their insights, making CFOs a core
part of the executive team, particularly during policy
and program development. These key individuals need
to be supported by top-notch financial analysts and the
best and latest technology to be able to perform their
duties. They must also have access to innovative finan-
cial strategies to accomplish their goals.
 © The Conference Board of Canada. All rights reserved. Please contact cboc.ca/ip with questions or concerns about the use of this material.
CHAPTER 3
Designing the Future: The
Vision for Financial Management
Chapter Summary
• This chapter sets out the attributes of a strategically
managed finance organization, providing an overview
of approaches introduced by federal and provincial
governments in Canada, national governments of
other countries, and the private sector.
• The chapter also profiles the qualities most beneficial
in an effective CFO and describes the organizational
characteristics that underpin strategic financial
management.
• The chapter analyzes the phases of financial man-
agement and suggests that public sector finance
organizations can be placed on a continuum of
three stages of development: transactional, effective
accounting and controls, and strategic financial
management.
• A self-assessment tool helps organizations to iden-
tify where they are on that continuum and illustrates
how to progress to the next level.
• To further assist organizations in evaluating their
status, 12 factors are identified as being integral
to high performance in financial management.
T
hese drivers for change underscore the urgent
need to develop progressive and strategic finan-
cial management capability. The ability to
respond to this need hinges on the individual strength
of the organization’s finance officers and chief financial
officer (CFO), as well as the importance that the deputy
head (DH) attaches to their roles. No change is possible
unless the CFO and finance officers understand what
clients need from them, and unless they have the skills
and resources to provide it.
This chapter sets out the attributes of a strategically
managed finance organization, providing an overview
of approaches to financial management introduced by
governments in Canada and internationally, as well as by
the private sector. The chapter also profiles the qualities
The Conference Board of Canada
needed in a CFO and describes the organizational char-
acteristics that underpin strategic financial management.
Although the building blocks of high-performing or
strategic financial management are similar for all organi-
zations, our research revealed different levels of capa-
bility, as indicated in a continuum. This report introduces
a self-assessment tool to help organizations determine
where they are on that continuum, both in strengths and
weaknesses.
A NEW MODEL IN THE CANADIAN
FEDERAL GOVERNMENT
The federal Comptroller General (CG) has described
new expectations for financial management, which will
take time for government to implement. The CG expects
the new CFO to play a senior corporate role, working
closely with the DH. This individual now has a broad
mandate to challenge spending patterns and the authority
to oversee financial controls, policies and performance
measurement, as well as accounting and reporting. The
CFO is also expected to be a certified accountant who
acts as a “business partner,” providing financial advice,
information, analysis and risk-management strategies
to colleagues. The CFO will report to the DH. In large
departments, the CFO will be solely dedicated to finance;
in smaller organizations, there may be broader corporate
responsibilities. The CFO (and DH) will certify that
departmental financial statements meet required standards.
The CFO will be a senior player at the management
table—one who has a significant impact on strategic
decisions.
In this model, the CG has functional responsibility
for the government-wide finance function, including
common policies, standards, business processes, infor-
mation management and support of the financial com-
munity. This helps to establish the cornerstone of a
government-wide financial framework that could
reduce costs and enhance the quality of information
9
 and reporting. CFOs will continue to report directly to
their DHs, but they will have a functional relationship
with the CG that allows the CG to ensure adherence to
the common framework. It offers CFOs an independent
source to consult, should issues arise that cannot be
resolved within their departments.
However, the relationship between CFOs and the CG
has been questioned by DHs, who feel that the CFO
needs to be a trusted member of the executive team, not
an “outsider” poised to discuss internal issues with the
centre. The effectiveness of CFOs clearly depends on
them having a relationship of trust with senior execu-
tives, and this relationship will need to be continuously
reinforced. Yet, as finance professionals with fiduciary
duties beyond the organization, on rare occasions they
may need to consult externally. Wise CFOs will use
careful judgment to balance both sides of the equation.
Changes at the Provincial Level
Provinces have been shifting their approaches to financial management in recent years,
too. Both British Columbia and Ontario have senior financial strategist positions (execu-
tive CFO [ECFO] and chief administrative officer [CAO], respectively) with broad cor-
porate responsibilities. In both cases, they have a full-time finance executive reporting
to them. In both provinces, the CAO or ECFO may report to more than one DH, and
serve two or more executive teams. Transaction processing has been centralized in
shared services organizations, and CFOs are able to focus on strategy, reporting,
control, risk management and providing information for decision-making.
In both British Columbia and Ontario, laws have been passed to bring more discipline
to the public discussion of financial issues. These two provinces have, for example, set a
specific time frame—every four years—for elections. As previously noted, British Columbia
has increased the role of ministers in making strategic financial choices and exercising
expenditure control through the B.C. Balanced Budget Ministerial Accountability Act.
Ontario has a Fiscal Transparency and Accountability Act, which fixes dates for quarterly
fiscal updates. Though the legislation does not impose a specific budget date, it does
provide for a pre-election report to be reviewed by the Auditor General. All political par-
ties have access to the same financial information prior to an election. These measures
aim to make financial management more rigorous and transparent.
Source: The Conference Board of Canada.
RECENT CHANGES IN OTHER COUNTRIES
AND THE PRIVATE SECTOR
Financial management in other countries and in the
private sector has been changing over the past decade.
The federal government of the United States, for example,
has introduced a number of changes. Passing the Chief
Financial Officers Act in 1990 has led to hiring CFOs
with extensive financial experience from the public or
private sector to work in the 16 largest government
departments. These individuals are appointed by the
10
president and confirmed by the Senate. The Act requires
departments to produce annual audited financial state-
ments. It was followed by the Government Performance
and Review Act (GPRA) of 1993 and the Federal
Financial Management Improvement Act (FFMIA) of
1996, which form a results-based reporting, perform-
ance measurement and financial integrity framework.
CFOs are not required to be certified accountants; this
allows departments to hire deputy CFOs with formal
accounting accreditation.
U.S. government departmental performance results
are posted on the Internet, giving the public access
to a report card on the government’s management
performance.
Recently, the attention of the U.S. government has
focused on improving the strategic capacities of finance.
The impetus has come from the political level through
the House Government Reform Subcommittee on
Governance, Management, Finance and Accountability.
The National Academy of Public Administration has
taken the lead in efforts to identify methods for creating
a strategic focus on financial management; facilitating
new financial management systems, training and devel-
opment needs; and making financial data more usable
to decision-makers. Departmental performance on a suite
of items (e.g., financial and capital management) is
rated annually, as part of the president’s Management
Agenda. Colour-coded results, based on reviews with
agency heads, are posted on the Internet, giving the public
access to a report card on the government’s management
performance.
In the private sector, ensuring that the CFO provides
maximum value to the organization is a pressing chal-
lenge. IBM’s 2005 Global CFO Survey, The Agile CFO,1
notes that the most important issues for CFOs all over the
world are managing enterprise performance, supporting
growth strategies, making business/process improvements,
strengthening controls and meeting fiduciary require-
ments. Providing insights into each of these areas is
vital. Nearly 900 CFOs from 74 countries participated
in this survey, which highlighted the gap between the
importance assigned to the role and the capacity of
these individuals to deliver these insights.
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AN EMERGING PROFILE OF THE
CFO IN THE PUBLIC SECTOR
Finance in the public sector extends well beyond
traditional responsibility for accounting and financial
controls. The new role of the CFO recognizes that
demands are as high in the public sector as they are
in the private sector. It also recognizes the unique
demands of an environment that includes elected offi-
cials, as well as non-financial expectations from the
executive and the public. In this model, the CFO shares
responsibility for strategic decisions with policy and
program colleagues.
The new public sector CFO needs a deep understand-
ing of the business of the department and of government.
Interpersonal and communication skills are critical. The
CFO needs to know how money is handled in the depart-
ment, how it flows over time between different parts of
the organization and how to monitor risky interfaces. A
CFO also needs to understand the government’s priorities,
who the potential partners are, and how to improve the
efficiency of operations. With program colleagues, that
person needs to keep an eye on the environment, and
understand how events—such as border closings, avian
flu or rising energy prices—may affect the department’s
financial situation, and in turn, its operations. The CFO
needs a level of trust in the relationship with the DH
(and this implies ongoing access to the DH), so that
unbiased advice can be provided on a regular basis to
support difficult choices.
Any new approach to financial management should
strengthen the financial community and ensure the ongo-
ing sustainability of the function. CFOs and finance
officers should be able to understand what their clients
need from them, and have the skills and capabilities to
provide these services.
THE CHANGING EMPHASIS OF THE
FINANCE FUNCTION
In making changes, CFOs in finance organizations
are unlikely to receive an increase in resources. This is
a serious constraint, unless approaches can be established
that would shift expenditures from lower value activities
(i.e., transaction processing) to strategy and advice.
The Conference Board of Canada
The CFO in the Private Sector
A recent publication, CFO Thought Leaders: Advancing the Frontiers of Finance, argues
that in the private sector, the model of the CFO as the chief accountant has focused
narrowly on the firm’s financial statements and capital structure.1 During the past decade,
this approach has changed radically. The 21 CFOs who were interviewed described their
work in the following terms: managing change, ensuring strategic alignment, managing
performance, identifying and managing financial and market risks, changing organiza-
tional culture, communicating with both internal and external constituencies, developing
global capital investment strategies, and helping to set long-term directions for growth.
Working closely with line managers, the CFO has become the right-hand person, and
frequently the successor, to the CEO in large firms. Sophisticated interpersonal and
leadership skills are essential to the CFO role. Financial reports are no longer a static
portrayal of the accounts, but a comprehensive review of trends and projections over
time, including environmental factors likely to affect customers, suppliers and markets,
as well as risks and opportunities facing the company.
1 Rob Norton (ed.), CFO Thought Leaders: Advancing the Frontiers of Finance (New York:
Booz-Allen and strategy + business books, 2005).
Source: The Conference Board of Canada.
The left side of the diagram presented in Exhibit 1
provides a rough sense of the proportion of finance
budgets currently allocated to different types of functions.
These functions have been defined as transactions (e.g.,
paying bills, collections, processing travel claims),
accounting and controls, and strategy. No organizations
were able to provide exact figures for these functions.
However, at the federal level, some CFOs estimated that
up to 75 per cent of the annual finance budget was con-
sumed in processing transactions. Many national-level
organizations conduct transactions at multiple locations
across the country, using a variety of regional processes
and policies. A relatively minor part of the budget (less
than 25 per cent) goes to providing analysis and infor-
mation to decision-makers.
Exhibit 1
The Changing Expenditure Profile of a Finance Organization
Source: The Conference Board of Canada.
11
 Several provinces have addressed the situation by
providing centralized transaction-processing services
(i.e., through a shared services organization). Such a
strategy frees up departmental finance organizations,
so that they can focus on more value-added activities.
Shared services organizations have achieved economies
of scale and streamlined processing to reduce overall
investment in transactions. According to a recently
published Conference Board report,2 savings on trans-
actional processes can be more than 20 per cent.
The triangle on the right side of the diagram repre-
sents the type of expenditure profile a leading-edge
organization should strive toward. Expenditures on
transaction processing are minimized through shared
services, automation of employee services, the extensive
use of credit cards, process redesign and other modern
approaches. While there will always be a residual expen-
diture (e.g., for managing the interface with a shared
services organization), in future, the great majority
of expenditures will be focused on effective controls,
analysis and strategic advice—the inverse of the profile
on the left in Exhibit 1.
DEVELOPMENT OF FINANCIAL
MANAGEMENT CAPABILITY
The organizations examined in our study proved to
be at different levels of financial management capability.
We created a continuum to illustrate how organizations
can enhance their financial management capability. The
continuum includes three levels:
• transactional management;
• control management; and
• strategic management.
Table 1
Levels of Financial Management Development
Transactional Control Strategic
Focus Bookkeeping and Accounting, control Stewardship, plus planning,
enforcement strategy, analysis
Culture Crisis management Static, low value High value-added, dynamic
Assessment Unsustainable Stable Innovative
Source: The Conference Board of Canada.
12
Our analysis indicated that a small group of organi-
zations is at the transactional level, while the majority are
in the middle of the continuum, with capability centred
around accounting and effective controls. Another small
group of organizations operates at the strategic level (i.e.,
analysis, strategy, advice) and also encompasses the capa-
bilities found in the first two levels. The model shown in
Table 1 has been developed to demonstrate how organi-
zations change as they move along this continuum.
TRANSACTIONAL LEVEL
When the focus of an organization’s financial man-
agement is at the transactional level, generally those
organizations lack a strong sense of shared mission and
objectives. Ministers and DHs are strongly focused on
policy, and management or administration is often
regarded as a “necessary evil.” Financial information is
given little weight in decisions, and the department has
a weak capacity to produce it. Branches are managed
in isolation, in a competitive rather than a collaborative
culture. Information is not shared across organizational
lines, and there are no incentives for managers to provide
accurate reports, nor are there sanctions for poor financial
performance (e.g., excessive lapsing of funds). Financial
forecasts, reports and analysis generated are often unre-
liable because of the poor quality of information.
Organizations at the transactional level lack a
strong sense of shared mission and objectives.
Transactional financial management is also typified by
large expenditures on back office functions. Technology
is outdated and its application is piecemeal. Basic reports
require manual data manipulation and are of little value
to managers, who use “black books” (informal tracking
systems) to track expenditures. The financial function is
highly decentralized; each operational unit has its own
finance officers. There are few enterprise-wide frame-
works to ensure comprehensive information. The central
finance organization has little or no functional authority.
Given the limited experience of finance officers and the
lack of transparency between branches, no one has a
broad overview of how money is being spent and whether
spending is linked to departmental priorities. There is
no ability to identify where the inefficiencies lie or how
spending patterns evolve and change over time.
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Central agencies tend to be unreceptive to funding
requests, as their business cases lack rigorous analysis
and costing. No meaningful performance measures are
in place and efforts to create them are actively resisted.
These organizations want finance to keep the books,
disburse funds, keep them out of trouble and respond
to external reporting requirements. Efforts to impose
enterprise-wide frameworks are seen as interference
in operational responsibilities.
The transactional approach is generally unsustain-
able, as these types of organizations are unable to
attest to the accuracy of departmental accounts.
The finance workforce at this level is narrow in
experience and understanding of its potential role, and
frequently has outdated skills and weak leadership.
There is little connection between finance officers in
the branches and the central finance organization; these
officers tend to have weak professional standards and
functional coherence.
The transactional approach is generally unsustainable,
as organizations with this approach are unable to attest
to the accuracy of departmental accounts for auditing.
As a result, they have difficulty demonstrating how
they are performing—in terms of efficiency, effective-
ness and probity in spending—in a highly transparent
environment. They do not have the capacity to respond
to policy and program choices because they lack inno-
vative, or even well-informed, financial strategies. This
environment does not attract high-quality finance pro-
fessionals.
CONTROL MANAGEMENT LEVEL
Ministers and DHs in this type of department support
effective administration but are strongly policy focused.
They see finance and the CFO in a service role, not as
a central player in the performance of the department.
Although the executive committee regularly reviews
spending against the annual budget, it rarely considers
longer term trend analysis, projections or the implications
of spending patterns. There is little demand for analysis
to support decision-making, and the idea of involving
finance in planning is generally an afterthought.
The Conference Board of Canada
Neither finance officers nor line executives have
a clear vision of the ways in which finance could add
value or play a constructive “challenge” role. CFOs lack
hands-on knowledge of the business of the organization.
Reports tend to be static snapshots of expenditures against
budgets. Finance may challenge expenditures from a
control perspective, but they are unlikely to question the
department’s efficiency and effectiveness. These organi-
zations are aware of the need to improve performance
measurement but do not devote the resources required
to do so.
Individual units in these organizations work more
collegially than those in transactional organizations. They
make collective decisions, but they are strongly “turf-
driven” under the surface. The predominant culture
views reallocation of funds as a negative reflection on
managers, rather than a way of achieving shared cor-
porate priorities. Information and forecasting are more
reliable than in transactional organizations, though black
books continue to be common and financial reports are
oriented to central agency demands. The reliability of
data for analysis is suspect. Risk management is often
disconnected from planning.
At the control management level, organizations
recognize the importance of accurate accounting and
enterprise-wide control systems. They manage with
probity. However, they continue to allocate most of
their resources to back office functions and control.
The financial function is decentralized, though the
central group has some functional oversight authority.
Managers see the role of finance as controlling spend-
ing and preventing wrongdoing. Finance officers are
not a central player in discussion of priorities and new
initiatives, and are consulted at the last minute, if at all.
Costing and business case analysis are weak.
The finance workforce requires training to build
analytical skills, but little attention is devoted to strength-
ening their capacity. When cutbacks are imposed, finance
is a frequent target for downsizing. As highlighted in our
interviews, morale is often low in this type of environ-
ment, as finance officers perceive that the organization
puts little value on their contributions.
13
STRATEGIC MANAGEMENT LEVEL
Leadership in these organizations has a strong sense
of shared responsibility for achieving a common mission
and objectives. The minister and DH are committed to
effective administration, and they ensure that it is a central
part of the culture and values of the organization. The
CFO plays a key role in ensuring the financial integrity
of the organization and acts as a “business partner” for
the DH. The deputies we interviewed were clear about
their needs and expectations for the new role of the CFO.
As one DH noted, “I want them to work well with
Treasury Board and Finance to ensure we know their
expectations and that there are no surprises for any of
us. The CFO should be giving me early warnings and
not wait until there is a rain cloud. Ideally, I want a
‘Mr. Fix-It’ to keep me out of trouble. They need to
understand the business we are in and not be risk-averse.
The good CFOs look forward two to three years, are
strategic at the financial and program level, and use
creativity to provide new options to me and the team.
For example, they need to be the lead on developing
new vehicles for delivering programs.”
The management team, which includes the CFO,
develops shared priorities, and important financial
decisions are made collectively by senior management
committees. Funds are reallocated across organizational
lines to support the highest priorities, as agreed to by
the management team. Managers who give up resources
are recognized as team players.
DHs demand high-quality, timely, reliable financial
analysis to support decisions and give serious weight
to this analysis in discussions. Financial reports look at
historical trends and future projections, along with risk
assessments and mitigation strategies. Finance organiza-
tions are able to generate this information with reason-
able speed and efficiency, using advanced financial
technology, which is integrated with other departmental
information systems (i.e., human resources, assets, pro-
curement and contracting, performance measurement,
business intelligence). The information is reliable because
all parts of the organization use the same financial policies
and processes, and the leaders have created incentives
to ensure accurate, timely reporting of data and risks
by line managers. Performance measures are carefully
selected to enable reporting that meets both internal
and external needs.
14
Finance officials are an integral part of policy and
program discussions from the start in the development
of financing strategies. CFOs provide reliable costing,
and in collaboration with policy and program colleagues,
develop business cases that include measurable, relevant
performance metrics and risk assessments. When com-
plex policy and program delivery questions are on the
agenda, the finance group has sophisticated analytical
skills to provide cost estimates of the options.
The CFOs in these organizations are deeply knowl-
edgeable about the business of the organization. Many
have had operational experience, which aids in their
understanding of the client base, suppliers and stake-
holders, as well as the need to respond quickly to changes
in the business environment. The CFOs are valued for
their financial expertise, judgment, deep understanding
of the business, integrity and fairness. They are also
able to bring strategic insights to discussions (e.g., an
understanding of the factors that influence risk). They
are able to challenge ongoing expenditure patterns in a
positive manner that helps clients improve performance.
This point was underlined by one deputy, who said, “We
need skilled and analytical professionals with good judg-
ment, who can accept the consequences of mistakes.
Just following the rule book is not good enough.”
At the strategic management level, CFOs provide
reliable costing, and develop business cases that
include measurable, relevant performance metrics
and risk assessments.
CFOs in these departments bring strong leadership
skills to developing and maintaining a leading-edge
financial workforce and positive relationships with col-
leagues, both within and beyond the department. They
invest resources in maintaining and improving the skill
sets of finance employees. They aim to attract high per-
formers who are willing to challenge the status quo.
They establish constructive communication with their
department’s minister that enables honest dialogue
about financial issues.
These organizations measure performance to
strengthen their ability to manage effectively. Information
from audits and evaluations is used to improve perform-
ance. An appropriate number of relevant performance
measures are identified when programs are established,
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and the right data are collected. Results on these indicators
are published annually. The finance organization, led
by the CFO, is a core part of the management team
and a key contributor to all aspects of operations. High-
performing organizations seek ways to minimize the
cost of back office functions through automation, self-
service, shared services and outsourcing.
ACHIEVING STRATEGIC MANAGEMENT
Organizations can gain a great deal from understand-
ing how they “stack up” in relation to the continuum.
An overall performance picture allows them to focus on
those characteristics that can yield the greatest improve-
ments. The following section provides details about the
characteristics of each stage.
Table 2 provides a summary of the characteristics of
organizations at each level of development. As organiz-
ations endeavour to move from the transactional stage
to the strategic level, their capability can be viewed
through three clusters: leadership and vision, the CFO
role in service delivery, and the management of the
finance function. Within each of these areas, the far
right-hand column, titled “strategic,” represents the
highest level of performance that organizations should
aim to achieve.
MEASURING WHERE YOU ARE:
MOVING TOWARD STRATEGIC
FINANCIAL MANAGEMENT
To help organizations assess how far they have pro-
gressed in achieving strategic financial management
capability, Exhibit 2 introduces a tool that arrays 12 fac-
tors that are at the heart of high-performing, or strategic,
financial management. These factors are presented within
the three clusters noted above. Each factor allows for a
rating of high, medium and low, based on self-assessment.
As organizations take stock of their position on each of
these scales, a picture emerges of the existing level of
strategic management within the organization. They will

Table 2
Continuum of Financial Management
Levels

Clusters Transactional Control Strategic

Leadership • Disinterested in financial man- • Want finance to keep them “out • Leaders are engaged; they
and Vision agement of trouble” demand and use financial infor-
mation in decision-making

CFO and Finance • Low-key, back office role for
Role in Service CFO and finance
Delivery • No challenge function
• Financial controls and informa-
tion may be unreliable
• Absence of performance measures
• Minimal reporting and analysis
• Back office role for finance and
CFO
• Controls are effective, but no
“challenge” role and weak analysis
• Moderate confidence in informa-
tion
• Some performance measures,
but not well used
• Meet central agency reporting
requirements
• CFO is core member of planning
and decision team
• Excellent controls, largely auto-
mated
• Collegial “challenge” role for
CFO
• Highly reliable, consistent infor-
mation
• High-quality performance meas-
ures that enable better manage-
ment of the organization
• High-quality, timely analysis

Managing the • Narrow focus on finance
Finance Function • Lack of depth in knowledge of
the business
• Financial function given little
value by leaders
• No support for training or career
planning and structured devel-
opment
Source: The Conference Board of Canada.
• Narrow focus on accounting and
control
• Leadership skills not developed
• Little first-hand knowledge of
business
• Low value given to finance (back
office) and little development
• Strong leaders with high-level
finance and business skills
• Function highly valued by
organizational leaders
• Ongoing skill upgrading and
careful succession and career
planning

The Conference Board of Canada 15

also gain an understanding of where greater effort needs
to be invested. The assessment should help generate
worthwhile discussion within the organization and
pinpoint areas for leverage and for improvement.
CFOs and their departments/agencies can refine the
model to ensure that the questions are relevant to their
organizations. The measurements should include verifi-
able facts and informed opinions.
Each of the following chapters provides a short
description of what one might expect to see in a high-
performing organization. Drawing on interviews with
deputies and senior executives, including those in the
CFO role, as well as on the survey of CFOs, we have
developed a short description of the capabilities in
high-performing organizations. An assessment of the
current state of financial management in government
organizations is also presented. This assessment identifies
the gap between the current and the desired situation—
in particular, some potential points of vulnerability for
organizations attempting to address a dynamic operating
environment. The description highlights the overall state
of financial management in the organizations studied and
identifies instances where specific organizations vary
significantly from the norm.

Exhibit 2
Attributes of a High-Performing Public Sector Finance Organization

Leadership and Vision

Ministers demand high-quality
financial analysis in briefings
and proposals, and demand
evidence of effective financial
administration.
Finance central agency has
strong functional leadership
role, is highly credible, and
ensures a whole-of-government
view.
Deputies create the culture
needed for accurate informa-
tion, teamwork, ensuring that
the CFO is included early in
planning.
Senior executives share a
strong commitment to organi-
zational priorities; finance
establishes enterprise frame-
works.

Hi Med Lo Hi Med Lo Hi Med Lo Hi Med Lo

CFO Role and Service Delivery

There are clear accountabilities,
supported by financial controls
that do not make it unreason-
ably difficult for clients and
government to do business.
The CFO produces reliable,
relevant, integrated information
quickly, provides broad strategic
analysis of spending and cost-
ing of proposals, and assesses
value-for-money.
A suite of well-designed per-
formance measures are tracked.
Results are integrated with
costs to provide a view of effi-
ciency and effectiveness.
The finance group has reduced
and automated transactions,
and devotes more than 75 per
cent of resources to strategic
analysis and advice; resources
meet benchmark levels.

Hi Med Lo Hi Med Lo Hi Med Lo Hi Med Lo

Managing the Finance Function

Finance executives are highly
qualified financial experts with
hands-on business experience
and strong leadership skills.
The CFO is a highly respected
executive, trusted for his or her
expertise and fairness, when
challenging and advising on
efficiency and spending.
Finance has high analytical
skills and knows how money
works in the business; finance
officers provide valued strategic
advice.
The organization develops and
renews finance and manage-
ment skills; there is structured
career development.

Hi Med Lo Hi Med Lo Hi Med Lo Hi Med Lo

Source: The Conference Board of Canada.

1 Morris Treadway, et al., The Agile CFO: Acting on Business Insight, 2005 2 The Conference Board of Canada, Implementing Shared Services in the
Global CFO Survey, IBM Institute for Business Value (Somers, New York: Public Sector: The Pillars of Success (Ottawa: The Conference Board of
IBM Global Services, 2005). Canada, March 2006).

16 The Conference Board of Canada

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CHAPTER 4
Leadership and Vision
Chapter Summary
• Based on interviews with deputy heads and CFOs,
this chapter looks at leadership and vision, which
comprises of four factors.
• The results indicate that leadership and vision are
focused primarily on financial controls, and that
some leaders are concerned about whether finance
organizations have the knowledge and experience
needed to contribute more strategically.
• At the federal level, ministers and DHs need to raise
the value they ascribe to financial management in
order to attract the highest quality candidates to
the function.
• While they believe it is important for Treasury Board
Secretariat to play an effective leadership role in
moving toward the new model of financial manage-
ment, have serious concerns among deputies and
senior executives about the Secretariat’s capacity
to do so.
T
his chapter outlines the first three clusters of
factors that shape the financial management
capacity of public sector organizations. The
most important is the extent to which government leaders
understand the vision and are committed to implement-
ing it. The leadership and vision cluster includes four
factors that influence the ability of both finance and the
chief financial officer (CFO) to deliver service at the
strategic level. These factors shape the culture in which
financial management is carried out, and determine what
is expected and valued, the services that are delivered,
how decisions are made and the role that the CFO can
play. They are:
• the extent to which ministers demand high-quality
financial information to support decisions and make
tough choices among competing priorities;
• the capacity of the functional leaders of the
government-wide finance function—normally
provided by a central agency (i.e., the federal
Treasury Board, or provincial management
boards)—which gives strong coordination and
The Conference Board of Canada
direction, timely and knowledgeable advice to
departments, and support to maintain a high-
quality finance workforce;
• the visible support and commitment of senior depart-
mental executives to high-quality strategic financial
management, which includes a positive mandate for
the CFO to carry out planning, measurement and
challenge activities; and
• the maturity of the departmental executive team,
as evidenced by its ability to work as a team and
to set broad, shared priorities.
Most leaders at the federal level believe that insti-
tuting adequate controls is a high priority.
This chapter focuses on the extent to which leadership
and vision currently aids or impedes progress toward
strategic financial management. It describes the strategic
ideal and then presents the views of deputy head (DH)
and CFO interviewees on the current state of each of
these four factors, in relation to this ideal. It concludes
that most leaders at the federal level believe that ade-
quate controls are the highest priority at present, but
that other contributions from finance would also be
helpful. There is concern about the capacity of current
finance organizations to deliver on this potential, due to
their lack of knowledge of their own business operations.
MINISTERIAL ENGAGEMENT
STRATEGIC LEVEL
In strategic organizations, ministers see high-quality
financial management as a core government responsibility
and require that briefings and proposals include credible
financial analysis and risk information, cost assessments
and funding strategies. When difficult choices among
priorities must be made, ministers are engaged. They
demand evidence of effective administration. Their focus
is at the strategic level of financial management. To avoid
conflict of interest, ministers do not participate in day-
to-day management or specific project selection.
17
 THE ASSESSMENT
At the federal level in Canada, ministerial involvement
has been sporadic, driven by such events as persistent
budget deficits and rising debt. Within departments,
public servants ensure that spending limits are respected
and propose choices when centrally driven reductions are
imposed. Lack of ministerial engagement often results in
rejection of proposals by ministers for political reasons.
The role of good financial analysis and costing appears
to be minimal. For their part, CFOs see little reason to
strengthen capacity in the absence of demand. Although
an Expenditure Review Committee of Ministers was
created in 2003, it was not a permanent body, and it
remains to be seen whether or not an institutionalized
process of regular program review by ministers will be
adopted in Canada.
Traditionally, federal ministers focus strongly on
policy. Most leave financial management matters to
the DH and executive committee, intervening only if
central reallocation exercises require changes that are
unacceptable in political terms, or if there is reason
for serious concern about mismanagement. In contrast,
British Columbia has taken steps to ensure that ministers
play a responsible role in expenditure management through
the Balanced Budget and Ministerial Accountability
Act, as noted in Chapter 1.
Political Engagement in Advancing Financial Management
Capability
Some jurisdictions have experienced strong ministerial support for the advancement
of financial management capability. In their commissioned paper, Good and Lindquist1
noted that “political engagement must complement bureaucratic innovations such as
strengthening the role of the CFO” to build a culture of reallocation, which is a corner-
stone of effective financial management. They cite approaches to reallocation in the
United Kingdom, the Netherlands, New Zealand and Australia, which underline the
role of senior ministers in the process as being an essential incentive for change. In
Australia, a culture of review has been created through the establishment of a powerful
expenditure review committee, which often includes the prime minister as a member.
The committee spends several weeks each year reviewing the expenditures and pro-
grams of departments as a normal part of the budget cycle. In the United Kingdom, The
Chancellor of the Exchequer chairs a Cabinet Committee on Public Services and Public
Expenditure, which annually identifies and oversees a number of comprehensive spend-
ing reviews, with a view to improving value-for-money and management (as opposed to
responding to expenditure restraint situations only). In each of these countries, regular
engagement of ministers in formal spending review processes and challenges ensures
the active participation of ministers in financial planning and expenditure management.
In the United States, the normal challenge process engages members of Congress.
Supported by the Congressional Budget Office, Congress challenges the President’s
proposed budget in a detailed way. The final budget is negotiated with the House of
Representatives and the Senate.
1 David A. Good and Evert Lindquist, Strengthening Resource Re-allocation in Government:
Culture, Incentives and the Chief Financial Officer, unpublished, commissioned paper
(Ottawa: The Conference Board of Canada, 2005).
18
THE ROLE AND CAPACITY OF TREASURY
AND MANAGEMENT BOARDS
Federal participants believed strongly that depart-
mental performance was influenced significantly by
the role and capacity of the central agency with respon-
sibility for oversight of the function—in their case,
the Treasury Board Secretariat (TBS). The following
benchmark reflects their comments on what they thought
TBS should be able to provide and what problems it was
experiencing. Provincial participants did not express sig-
nificant concern about central coordination and support.
Departmental performance is thought to be influ-
enced by the role and capacity of Treasury Board.
STRATEGIC LEVEL
Participants in this study believed that TBS should
take a strong functional leadership role in establishing
and monitoring government-wide financial policy (in
cooperation with the Department of Finance), as well as
in establishing standards of performance for departmental
finance units and the qualifications of CFOs. They wanted
TBS to have highly qualified employees with significant
experience in the departments they advise in order to
provide well-grounded advice. Participants said the
Secretariat should take a “whole-of-government” view,
establishing horizontal frameworks that support infor-
mation on government-wide spending by issue, rather
than by department only. Departmental representatives
wanted TBS to take a strong, though consultative, leader-
ship role in the function and to work more effectively
with other central agencies to ensure that financial mat-
ters are part of the mainstream of government operations.
Respondents said that, as the central agency with respon-
sibility for leadership of the financial function, TBS
should ensure that the workforce is well trained in the
most advanced techniques and given opportunities for
career development that would broaden their knowledge.
THE ASSESSMENT
Participants at the federal level expressed a sense of
urgency about the erosion of TBS’s capacity to be a strong
leader, coordinator and proponent of good management.
They were also concerned about the impact of unstable
staffing on the quality of analysis and advice provided
by analysts. Some attributed this to an erosion of TBS’s
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management role and capacity, as well as to frequent
changes in leadership and direction. TBS officials now
have less information about departments’ operations than
they had a decade ago. Mid-level staff lack departmental
experience and are unable to play a credible role with
departments or to work effectively with the Department of
Finance. While information quality is improving, obtain-
ing a government-wide view of spending on policy pri-
orities (e.g., water, energy) is still very labour-intensive.
Prior to the re-establishment of the Office of the
Comptroller General, TBS leadership of the finance
function within the federal government, for the most
part, reflected an expectation of a control role for the
finance community. Finance organizations were con-
sistently undervalued, both for their contributions and for
their role in departments. The recruitment and develop-
ment of the finance officer community, apart from the
Financial Officer Recruitment and Development program
for entry-level officers, has not been adequate to meet
current needs, and it certainly has not supported movement
toward a more strategic, high-value role for finance.
SENIOR EXECUTIVE INTEREST
STRATEGIC LEVEL
In leading organizations, senior executives value
financial information, analysis and advice, and take a
hands-on role in ensuring that the culture supports reli-
able, timely, consistent data. Expectations of unquestion-
able integrity and transparency in managing money are
clearly communicated and reinforced by actions. DHs,
with the senior management committee, develop shared
priorities and create incentives to support team-oriented
behaviour. Effective, innovative financial management is
rewarded. Money “belongs” to the organization (i.e., the
minister), not to individual programs. Leaders expect
finance to advise on strategic approaches to using funds
and to give an unbiased, challenging point of view on
ways to improve spending efficiency. They see the CFO
as highly knowledgeable in both finance and the busi-
ness of the department or agency, able to speak from a
position of credibility.
THE ASSESSMENT
DHs and CFOs both saw the primary responsibility
of the CFO as “keeping the department out of trouble.”
They strongly supported this risk management role and
the need for reliable accounting and controls. Integrity
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and leadership skills were highly valued. An accounting
designation at the CFO level was seen as useful but not
essential, by most DHs and nearly half of CFOs. DHs
saw the CFO as part of the senior management team.
However, in the federal government, they did not expect
the CFO to be the “second-in-command” and, of those
interviewed, none suggested that their CFO would
likely become a deputy. DHs supported a “challenge”
role for the CFO, if sensitively played and restricted to
financial areas, though several questioned whether or
not the CFO had the required business knowledge.
Only four CFOs said they saw the development of
financial strategies or advising on program efficiency
and effectiveness as part of their role. Several indicated
that such a role would not be welcomed by colleagues.
Performance measurement was seen as an operational
responsibility, although some CFOs had the opportunity
to advise on measures to be tracked.
DHs and CFOs both saw the main responsibility of
the CFO as “keeping the department out of trouble,”
with integrity and leadership skills highly valued.
It appears that finance is seen primarily as a control
function. A vicious circle is at play, in which financial
information is static, designed to meet central reporting
requirements, and used to track spending against budgets
throughout the year. Senior management committees
find this information to be of little value in policy and
program management, but they lack the financial expert-
ise to define their information needs more clearly. Most
federal DHs said they would like more timely, dynamic
financial information but were unsure about exactly what
this meant in specifics terms, and they were skeptical
about the capacity of their finance organizations to
provide it.
At the provincial level, the DHs interviewed were
more knowledgeable about finance than most of their
peers, which may reflect a greater personal experience of
finance among this group. Six DHs in British Columbia
have served as executive CFOs. Although the sample
size is too small to support definitive results, they were
more supportive of a senior strategic role for the CFO,
closely aligned to that of the DH. They also valued ana-
lytical capabilities such as costing.
19
ORGANIZATIONAL MATURITY AND TEAMWORK
STRATEGIC LEVEL
In the ideal situation, senior executives share a strong
commitment to organizational success and they collab-
orate to achieve shared priorities. The culture reinforces
team behaviour and is supported by incentives and
sanctions. Financial information is reliable and timely,
offering the potential to reallocate funds to the highest
priorities. Annual fund lapses are normally low (or
planned) and there is little risk of overspending. Finance
has the mandate to establish and enforce financial poli-
cies that ensure coherent information, and finance offi-
cials are a core part of the team that develops policy
and program plans.
THE ASSESSMENT
Most CFOs believed that their senior management
committee (SMC) expressed commitment to the priorities
of the organization, but felt that this did not translate
into a willingness to be transparent about the extent of
their financial flexibility. Provincial departments resem-
bled their federal counterparts, though serious funding
pressures are driving them to greater collaboration.
CFOs felt that until the basics are in place—
re-establishing systems after the massive
reorganization in 2003—moving to strategic
financial management would not be possible.
Despite efforts to promote horizontal management,
most departments work in financial silos. Regions and
branches compete for their “share” of funds. Leaders
struggle to build a collective sense of responsibility
for achieving the objectives of the whole organization.
Financial policies and procedures are difficult to enforce
and too rarely supported by training. Significant time is
spent correcting errors before the books can be closed,
and forecasting is unreliable.
Just under half of the CFOs interviewed described
highly decentralized finance units, struggling to put in
place frameworks that would ensure consistent account-
ing, forecasting and control processes. Many federal
departments are still dealing with the aftermath of a
20
massive reorganization in 2003, which touched a majority
of departments in the federal government, as well as
several subsequent ones. Enterprise-wide financial
frameworks have had to be re-established from the
ground up. Systems from merging departments are
often incompatible. These CFOs expressed that until
the basics are in place, moving to strategic financial
management would not be possible.
POINTS TO CONSIDER
This study found that organizations that have gone
through a transition to create separate agencies with
their own legislation and human resource regimes are
operating at or near a strategic financial management
level. Both Canada Revenue Agency (CRA) and the
Canadian Food Inspection Agency, for example, have
a detailed understanding of the cost structure of the
services they offer, display revenues on an accrual basis
and have their books audited annually by the Auditor
General (AG). To meet the requirement of reporting
individually to Parliament and certifying books to be
audited by the AG, they have imposed enterprise-wide
frameworks to ensure accuracy and consistency. CRA
has a fully integrated financial system that facilitates
analysis and automated controls. The process has changed
the role and perceived value of finance in these agencies,
which are now more confident that they are close to
achieving strategic financial management. Senior exec-
utives have significantly increased awareness of the
contributions that finance can make, and have strength-
ened support for its function in the organization.
Most government organizations are working at the
control level, in relation to leadership and vision. Senior
executives value effective control and accurate accounting,
but few understand how finance can add value strategi-
cally. Leaders are not expecting strategic performance
from finance, and some doubt that their finance organiza-
tions have the knowledge and experience to provide it.
At the federal level, ministers and DHs need to visibly
increase their expectations and the value they ascribe to
financial management, as a prerequisite for changes to
the culture and organization. Until the CFO is a signifi-
cant player at the management table, it will be difficult
to attract the highest quality candidates to the function.
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DHs are not fully committed to the actions required
to implement the new model of financial management
described by the Comptroller General. Some thought
that the model did not reflect the needs of the public
service. DHs need to be more directly engaged in
defining what is required for them to commit to leading
and investing in change. Altering the CFO’s role in the
absence of DH support will not produce real change.
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There is serious concern among those deputies and
senior executives interviewed about the capacity of TBS
to play an effective leadership role in moving federal
departments and agencies to the new model of financial
management. Several participants saw this as a major
constraint to successful progress with financial manage-
ment. Defining what specific changes need to be made to
strengthen TBS was not part of the terms of reference
of this study. However, there is no doubt that this step is
critically important to achieving broader improvements.
21
CHAPTER 5
The Strategic CFO Role
and Service Delivery
Chapter Summary
• This chapter focuses on the second cluster, examin-
ing the role that CFOs play, and the degree to which
finance units can contribute to service delivery.
• Strong leadership from DHs concerning the CFO
role and a clear vision of how finance can add value
through strategic support will be necessary to
move finance units out of the back office and into
a more strategic role.
• Public sector CFOs and their program colleagues
need to make the improvement of financial informa-
tion a top priority and use performance measure-
ment to support management.
• Systems improvements will be needed at the fed-
eral level to establish a broader view of perform-
ance and investment.
T
he role a chief financial officer (CFO) can play
is shaped by the culture of the organization,
which is strongly influenced by the expectations
of the deputy head (DH). These expectations, in large
part, can determine whether the CFO and finance provide
strategic service or are relegated to a back office role.
Strategic financial services and a strong role for the CFO
contribute to the more effective performance of client
groups and better results for the department. We found
four factors that determine the extent to which the CFO
will play a strategic role and the extent to which the
finance unit will contribute to services delivery:
• the quality of stewardship, including clear accounta-
bility, supported by balanced financial controls and
effective risk management;
• the availability of timely, relevant information and
analysis for decision-making, incorporating perform-
ance measures and using integrated systems and
technology to make value-for-money assessments
22
a viable prospect;
• the mandate and capacity of the CFO to play a
strategic role in planning, budgeting and resource
allocation and reallocation, including the CFO’s
financial challenge role and contribution to financial
strategies for new and ongoing activities; and
• the resources made available to the finance organiz-
ation and the administrative efficiency it achieves.
The chapter provides a strategic ideal for each of
these four factors and a synthesis of the virus of DHs
and CFOs on the current state of these four factors.
ACCOUNTABILITY, CONTROL AND RISK
MANAGEMENT
STRATEGIC LEVEL
Ideally, accountabilities are clearly defined, even in
matrix management structures where responsibilities
are shared by several players. They are supported by
financial control systems and a clear expectation that
high ethics and risk management will be integral to
planning and operations. Controls are highly automated.
They do not unreasonably impede the capacity to do
business nor impose excessive burdens on clients. Risk
assessment is systematically included in a well-structured
framework.
THE ASSESSMENT
DHs and most CFOs believed that financial systems
and processes have controls that are adequate to protect
against serious misuse of funds, when properly applied.
Federal participants stressed that the government response
to the Sponsorship Inquiry has been to increase controls,
making it difficult to do business and creating higher
costs and considerable frustration for clients and partners.
Almost all DHs were concerned that a requirement to
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certify departmental financial statements might lead to
even more excessive controls as executives become
even more risk-averse.
Most CFOs saw financial risk management as core
to their responsibilities. However, only two of those
interviewed indicated that they had a clear risk frame-
work and a systematic management process integrated
into their planning. The Canadian Food Inspection
Agency has had its risk management framework approved
by Treasury Board, and Canada Revenue Agency also
does systematic risk management. However, in many
departments, risk assessment is sporadic and unstructured.
Risk management—a core responsibility—continues
to be isolated from planning and generally is driven
by specific issues.
Federal departments have made efforts to integrate
risk into cyclical management processes since the pub-
lication of the Integrated Risk Management Framework
by the federal Treasury Board in 2003. All DHs and
CFOs saw risk management as a core responsibility.
However, it continues to be isolated from planning and
generally is driven by specific issues. Overall responsi-
bility for risk management is rarely identified in a single
position. Department-wide coordination of risk manage-
ment is left to the deputy minister.
INTEGRATED FINANCIAL INFORMATION
STRATEGIC LEVEL
A leading-edge finance organization has the capacity
to produce reliable, relevant information quickly, with
little manual intervention. When incentives are provided
to branches of the department for accurate reporting (e.g.,
performance accords that include financial targets), it
ensures that senior management will pay attention to
forecasts. Finance officers monitor broad expenditure
trends (e.g., overtime, capital, grants, salary spending)
and provide timely advice to branches. They deliver
realistic cost estimates of new proposals and are able
to suggest potential partners, alliances and opportunities
for services fees or royalties. Information going to the
senior management committee integrates financial and
non-financial data (e.g., human resources, performance,
assets/capital) to provide assessments of value-for-money,
or to highlight opportunities for improved efficiency.
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Financial analysis provides a year-over-year view of
spending trends, showing areas of growth or reduction
and offering projections for the future. Well-grounded
analysis gives insight into the reasons for changing pat-
terns and can more accurately develop potential future
scenarios. Financial reports note significant environ-
mental issues that may affect financial demands on the
organization, such as border closings, weather patterns,
changing demographics or new environmental regula-
tions. They reflect a deep knowledge of the economic
“system” of which the department or agency is a part,
and aim to give the organization an early view of
potential developments so that it has time to respond
appropriately.
High-quality information may be the most impor-
tant lever to strengthen service quality. Our roundtable
participants underlined that this lever is not the respon-
sibility of the CFO alone; all senior executives share this
responsibility as key custodians of program information.
However, the CFO needs a strong oversight role to ensure
good data collection, to bring the pieces together and to
develop an integrated, organization-wide picture.
THE ASSESSMENT
Most federal and some provincial DHs and CFOs
are concerned about the quality of information provided
for forecasting, analysis and decision-making. They worry
about unanticipated pressures or larger-than-expected
lapses at year-end. Most blame these difficulties on a
culture in which individual branches provide high-level
forecasts that lack the necessary detail to really give the
broad picture of risks or an accurate assessment of the
financial flexibility in different parts of the organization.
DHs and CFOs work to preserve this financial flexibility,
often until it is too late in the year to reallocate funds
to other programs. The decentralization of finance and
lack of consistent frameworks, policies and tracking
systems to flag growing risks can make forecasts unre-
liable. This, in turn, makes it difficult for managers to
make decisions on a real-time basis. Managers use black
books (informal tracking systems) to monitor their own
financial status and to obtain information for internal
decisions. Inaccuracies are bound to flourish if corpo-
rate data are not kept current.
CFOs blame the inconsistent application of policies
on unreliable information collection (e.g., how and when
data are entered and funds committed or de-committed,
the inaccurate use of coding systems, significant error
23
 rates in data entry, non-integrated HR or finance systems.
Few organizations track spending patterns or provide
dynamic risk assessments that reflect a deep under-
standing of the business environment. It is rare to find
an organization that monitors efficiency measures to
enable operational improvement.
Most DHs indicate that the financial information
they receive is adequate to prevent overspending, but
few think that it is useful in making decisions. Treasury
Board reports were viewed as time-consuming and
of little value to managers. The worth of many such
reports—even to TBS officials—was questioned.
CFOs feel that they have some, but not nearly enough,
cost-accounting and analytical capacity.
Improving Integrated Reporting: New Zealand Ministry of
Education
Like other New Zealand government ministries, the Ministry of Education has under-
gone significant reforms. The introduction of Statements of Intent (costed planning doc-
uments against which performance is measured) is an example of how results are being
increasingly linked to planning. While much has been done to produce high-quality
financial reports with the help of external independent auditors, the emphasis is on
the provision of more non-financial performance data. This is being accomplished by:
• introducing case studies in performance reports to highlight and humanize the
information;
• fully integrating financial statements into the performance section of the Annual
Report, linking them to program outputs, voted on by Parliament;
• using graphics presentations to illustrate these linkages;
• addressing external and internal risks in planning and in Statements of Intent;
• preparing Prospective Financial Statements that outline anticipated costs, levels of
expenditure and compliance with intent, based on risk and program pressures (also
useful as a precursor of anticipated performance and a benchmark for retrospective
measurement);
• directly linking expenditure changes to classes of outputs (the form that results
statements take in the New Zealand system), leading to the adjustment of the output
measure (e.g., “Ongoing development of adult and community education [$0.9 mil-
lion] with a focus on adult literacy and foundation education and a new international
survey on adult literacy and life skills”);
• creating Output Statements of Financial Performance, structured by departmental
output, including policy advice;
• using a combined narrative and financial description of the output class perform-
ance objectives to present the following information:
• overall description
• performance dimensions: quality, quantity and timeliness
• cost of output overall class
• cost of individual output categories;
• applying a common presentation and costing technique to all aspects of the depart-
ment’s activities, including policy advice as an intended output;
• fully applying indirect costs to output classes; and
• making a clear statement about financial policies, including depreciation rates on
all facilities and cost attribution (as above).1
1 Further information is available from http://www.minedu.govt.nz.
Source: Graham, Integrating Financial and Other Performance Information.
24
Most federal DHs and CFOs who participated in this
study believe the information available to them does
not meet the standard of reliability, timeliness and com-
pleteness (including human resource and performance
information, as well as financial data) they need to create
a “storyline.” Although many are trying to improve both
the quality and flow of information, they face situations
in which salary data and projections are not connected to
staffing intentions, year-over-year trends are not available,
and finance staff is disconnected from the program groups
that are the custodians of performance information.
Provinces are more confident in their data, partly
because both British Columbia and Ontario are implement-
ing a single, government-wide, integrated Enterprise
Resource Planning system and have established shared
services organizations (SSOs) that provide consistent
policies throughout the enterprise. However, they also
believe the demand for financial information tends to
be low.
In an examination of the vital role that performance
information plays, Andrew Graham, a former public
servant who teaches at Queen’s University, provides useful
pointers for those with responsibility for producing inte-
grated information.1 In Integrating Financial and Other
Performance Information: Striking the Right Balance of
Usefulness, Relevance and Cost, he underlines the impor-
tance of choosing a reasonable number of performance
measures that will be relevant to a wide range of clients,
including managers, central agencies and decision-makers.
He gives examples from organizations that have learned
valuable lessons, including the New Zealand Department
of Education and the Canada Revenue Agency. (For more
detail, see text boxes “Improving Integrated Reporting:
New Zealand Ministry of Education” and “Building
Integrated Reporting: Canada Revenue Agency.”)
A move to full accrual accounting would provide
the basis for more accurate financial information and
planning. In our interviews, several CFOs supported a
move to full accrual accounting because it spreads pro-
gram and capital costs over the life cycle of programs
and identifies long-term liabilities, leading to more
accurate planning and costing. See text box “Using
Accrual Accounting Principles” as an example.
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PERFORMANCE MEASUREMENT
STRATEGIC LEVEL
High-quality performance information enables an
organization to see areas of activity that are performing
well and flags those that require further examination.
These indicators are designed to be relevant to a wide
range of users, including managers, decision-makers
and the public. The number is large enough to allow for
a strategic view of performance, but not so detailed and
disaggregated as to render them meaningless. The indi-
cators are regularly monitored. Results are not used to
assign blame. The culture is one of continuous learning
and improvement.
THE ASSESSMENT
All DHs and CFOs who were interviewed agreed that
performance information is not adequate, but stressed
that work is underway to improve it. The Program
Activity Architecture introduced by the federal Treasury
Board requires performance measures for all activity
areas and has stimulated efforts to improve measures in
the federal government. Roundtable participants believed
that program evaluation, as a tool to assess value-for-
money, needs to be strengthened and made part of a
cyclical requirement for all programs. They agreed that
evaluations should be tabled with appropriate House
standing committees to ensure that they are given serious
consideration and acted upon.
Many departments focus on the quantity, rather
than the quality, of measures.
The discussion paper on performance information,
commissioned as part of the research, underlines that
many departments focus on the quantity, rather than the
quality, of measures,2 and produce a great deal of data
that may or may not be relevant to operational man-
agers, but are rarely of value in making higher level
decisions. Canada Revenue Agency has made significant
progress in linking results to costs.
The federal Comptroller General has made internal
auditing requirements more stringent to ensure that they
are rigorously prepared and reviewed, and that the
information is used to improve performance. While the
DHs we interviewed had concerns about the governance
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Using Accrual Accounting Principles
Veterans Affairs Canada applied accrual accounting principles to the task of costing
program amendments for the department’s programs. The discounted cash flow indi-
cated that the cost of amending the benefit would be a substantial expense for the year
in which the change was made. However, savings were identified in other areas, using
the same approach (discounted cash flow). This proves the point that using better tools
yields better quality information. By making these changes, the department was able to
limit the net expense and the changes were implemented to the benefit of clients. The
2005 Auditor General’s Report commended the department on this approach, indicating
that it promoted a better understanding of full costs and the related liability, compared
with presenting only the annual cash flow analysis.
Source: Interview with Keith Hillier, Assistant Deputy Minister, Corporate Services,
Veterans Affairs Canada.
Building Integrated Reporting: Canada Revenue Agency
Canada Revenue Agency has introduced innovative public performance reporting that
makes significant progress toward linking results to costs. Legislation requires that the
agency provide Parliament with an annual performance report that demonstrates the
agency’s achievement of results, as projected in its corporate business plan. The per-
formance report must contain an assessment by the Auditor General of Canada of the
fairness of the agency’s performance reporting, somewhat analogous to an auditor’s
report on a set of financial statements.
The importance of having a favourable assessment by the Auditor General of Canada
has been an incentive for paying attention to presenting the correct non-financial
information, as well as to quality control. Given the legislative basis for the report,
the emphasis has been on making the report suitable for demonstrating accountability
to Parliament and other external stakeholders, rather than serving internal decision-
making. The agency took a number of years to experiment and develop this reporting
vehicle and has learned some key lessons:
• Focused attention is needed from the CEO over a long period time, to “get it right.”
The CEO must recognize the importance of having sound information and balanced
reporting, and of showing poor, as well as good, performance.
• It is possible to adapt the externally focused report for internal management pur-
poses; this facilitates the introduction of performance reporting as a periodic item in
executive meetings.
Although primarily intended for an external audience, this performance report is now
being used successfully to leverage other improvements of a more internal nature:
• The agency is beginning to use activity-based costing as a way to get important diag-
nostic information to guide improvements to the process and resource allocation.
Initially, efforts were directed to full integration of performance and cost information
only in areas where it was most useful and important.
• The agency is revamping its financial coding structure to serve internal analytical
purposes, as well as the accountability and responsibility purposes for which they
are generally designed.
Source: Graham, Integrating Financial and Other Performance Information.
structure, they agreed that these tools could be better
used to improve management. The difference between
the objectives of internal audits, carried out to support
the DM in managing the department, and those done
by the Auditor General, whose work is high profile and
public, needs to be made clear; governance structures
should reflect the distinction between these objectives.
25
 Executives expressed concern about the difficulty
of developing outcome measures for many government
initiatives, which typically have long time frames and
encompass the actions of many players. Objectives
are frequently ambiguous and results, intangible (e.g.,
preservation of Canadian values, prevention of undesir-
able events). Measuring the effectiveness of actions
taken to ensure that “things don’t happen” is open
to challenge, too, when it comes to the link between
cause and effect. Many also questioned the viability of
measuring performance in areas such as policy, where
outcomes are long term and broad. Participants in this
study agreed that improvement is important and that,
with a few exceptions, the federal government is far
from strategic in this area.
THE STRATEGIC ROLE OF THE CFO:
PLANNING, RESOURCE ALLOCATION
AND REALLOCATION
STRATEGIC LEVEL
In leading organizations, the CFO is a knowledge-
able financial expert of high integrity, whose advice is
credible and unbiased. He or she plays a lead role in
planning, budgeting and resource allocation. Challenging
the information as given is expected and generally pre-
sented in a collegial manner—the focus is on identifying
ways to achieve better results, not exposing problems.
For further investigation, analysis flags areas that are
not providing the expected return on investment. Some
resource stability and predictability is assured in order
to allow learning to take place and significant results to
be achieved. The emphasis is on ongoing review, rather
than continuous reallocation. Cyclical reviews help to
incorporate information into planning and resource
allocation patterns.
Traditional analysis rarely integrates financial and
performance information, assesses value-for-money or
examines spending patterns to improve operations.
The need for some resource stability must be balanced
against the strong tendency to fund everything at the
same level on an ongoing basis. Client needs change
over time and spending patterns need to reflect this.
In the absence of the private sector’s bottom line, the
public sector must create institutional incentives for
review and reallocation.
26
CFOs are “the guardians” of the review process,
ensuring that it is regular and credible. Their advice
is valued as a contribution to decisions in the context
of assessing all the information. CFOs propose new
approaches to funding activities—approaches reflective
of a wide range of instruments (e.g., borrowing, part-
nering, asset/capital management, fees)—and they
must have strong knowledge of the business.
Financial and performance information is the raw
material for analysis and reporting. In leading organiz-
ations, financial analysts know the business and assist
clients to understand what information could be valuable
to management. Business intelligence tools produce inte-
grated dynamic reports, trend analyses and projections.
THE ASSESSMENT
Our interviews suggest that many finance officers are
not sufficiently familiar with their department’s business
operations to propose analyses that would be useful to
managers, and managers are not well enough versed in
finance to define their information needs clearly. This is
consistent with the findings of the 2005 Association of
Public Service Executives3 study of managers about
financial management. This study suggested that many
managers are fuzzy about what their legal accountabili-
ties are and they want to receive training in this area.
Traditional analysis produces static spending reports
by organization and “line item.” It rarely integrates
financial and performance information, assesses value-
for-money of results or examines specific spending
patterns (e.g., overtime, capital, task time) to improve
operations. Both DHs and CFOs thought that finance
units could add much greater value. However, CFOs
said they lack the human, technological and financial
resources to make this possible.
DHs said that their CFOs were persons of high
integrity and that they would support a challenge role for
the CFO, if this were carried out in a collegial manner.
However, more than half the CFOs believed that they
lacked the critical information required to play such a
role with confidence. Federal DHs see the CFO as one
member of a management team that collectively chal-
lenges expenditure patterns. None saw the CFO becom-
ing “the” senior member of the management team, and
several questioned whether finance officers had the
knowledge of business operations required to challenge
or advise on better approaches. DHs and CFOs felt
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strongly that finance executives, especially the CFO,
should have greater hands-on business experience. The
challenge for CFOs will be to build the credibility
needed to play a leading role in business planning
and budgeting.
The role of finance in planning activities today is
highly variable. In a few organizations, the corporate
finance group had no role, apart from administering the
resource allocation plan. With few exceptions, when
new proposals are being developed, finance is not part
of the development team. CFOs note that they are often
brought in at the last minute, before submissions go
forward, and asked to sign off costs that have not been
verified by financial analysts. Program evaluation, a
key source of performance information, has rarely been
used to support resource allocation or priority-setting.
Annual budgets are often incremental, based on the
previous year’s allocations.
Reallocating funds from lower to higher priorities
can be excessively difficult.
The Canadian Food Inspection Agency and Canada
Revenue Agency indicate that finance officers are a
valued, integral part of planning teams, recognized for
their expertise and creative thinking. They have struc-
tured review processes in place to assess efficiency and
effectiveness on a cyclical basis.
All DHs and CFOs at both levels of government
indicated that reallocating funds from lower to higher
priorities was difficult, to the point of being impossible.
In some instances, this was attributed to rigidities within
human resource management systems that make it diffi-
cult to reassign employees or reduce staff. Others saw
managers’ resistance as a major stumbling block. Other
impediments to reallocation include contractual arrange-
ments with clients, service providers or provinces;
political concern about the impact of change on local
economies; and client and stakeholder reactions.
In their discussion paper,4Good and Lindquist noted
that resource reallocation occurs internally between
programs in departments, as well as in centrally driven
exercises between departments. They found that these
activities sometimes interact in counterproductive ways.
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There is also a danger that departments that free up
resources to fund internal priorities may find that they
lose them to centrally driven exercises.
Central reallocation has generally been driven by
serious fiscal constraints or an overriding priority such
as health care. This expert paper5 notes that in Australia
and the United Kingdom, regular reviews have been
institutionalized as part of the planning and budgeting
cycle. In the Netherlands, external experts participate
with public servants and politicians as part of the review
team. According to the authors, Canada lacks a “strong
governance tradition” at the national level, where minis-
ters take an active interest in expenditure management,
as they do in Australia. Instead, Canadian managers
engage intermittently in crisis situations, according
to Good and Lindquist. For the most part, reviews in
Canadian federal departments and agencies have been
undertaken without external input. The paper suggests
improvement through coordination of central govern-
ment and departments, securing ministerial support for
changes in a visible way and building incentives that
can change the culture of “turf protection” to one of
cooperation.
Good and Lindquist concluded that while CFOs
should play an important role in promoting reallocation
of resources, they should not be the only player to make
such decisions. They believe that public policy is multi-
faceted and that many views are needed to support
decisions. To be effective, CFOs need a deep under-
standing of the department: its people, programs, soft
spots, informal information and networks—and CFOs
must know how to work with colleagues to accomplish
this difficult task. Ultimately, CFOs need to be the
“go-to” person for “the numbers.” CFOs must know
which programs and operations are inefficient and must
possess the ability to integrate financial information
with performance information.
RESOURCES AND ADMINISTRATIVE
EFFICIENCY
STRATEGIC LEVEL
Leading-edge organizations have taken steps to
reduce the cost of processing transactions, both in
dollars and in management time. There are different
approaches (e.g., outsourcing, automation, SSOs, tools)
that can reduce the number of transactions, such as those
27
that use credit cards. Government organizations span a
wide range of sizes, from fewer than 100 employees to
more than 70,000 employees in one federal department.
Small organizations may want to collaborate with others
of similar size, or choose to obtain services from larger
ones.
At the federal level, systems issues are a major
impediment to better processing and analysis.
At the provincial level, where transactions are deliv-
ered by SSOs, the executive CFO and (or) chief admin-
istrative officers often serve more than one ministry,
providing strategic services to several executive com-
mittees. Resource levels for finance reflect centrally
established benchmarks related to criteria such as budget
size and the complexity of the department’s business.
THE ASSESSMENT
Federal departments are spending a significant part of
the finance budget on back office functions, which are
often decentralized throughout the department. During
transitions, lack of resources to invest in high-value
activities is likely to be a serious constraint to better
service delivery. CFOs said coding and data errors are
time-consuming to correct. If federal finance organiza-
tions are to respond to the demand for strategic financial
management capacities, the cost and effectiveness of
transaction-processing must be improved.
Many federal participants expressed that systems
issues are a major impediment to better processing and
analysis. The technology is cumbersome, expensive to
maintain and upgrade, and does not integrate functions.
Most federal departments have taken steps to reduce the
1 Andrew Graham, Integrating Financial and Other Performance Information:
Striking the Right Balance of Usefulness, Cost and Relevance, unpublished,
commissioned paper (Ottawa: The Conference Board of Canada, 2005).
2 Andrew Graham, Integrating Financial and Other Performance Information,
p. 13.
3 “Improving Financial Management in the Government of Canada,”
Association of Professional Executives of the Public Service of Canada,
[January 2006]. Available from www.apex.gc.ca.
28
number of transactions by using credit card purchasing
and payment. As already noted, in large-budget organiz-
ations, processing transactions can still consume well
over 50 per cent of the finance budget.6
Provinces had fewer concerns about technology,
probably because they are moving to single applications
of commercial software, to be operated by the SSO.
Ontario, British Columbia and Alberta have all estab-
lished SSOs.
POINTS TO CONSIDER
In most federal departments today, the CFO and
finance have limited authority and capacity to play
a strategic, value-added role. The ambiguity of DHs’
expectations about the role of CFOs is a major con-
straint to changing this situation, as is the inadequate
level of knowledge of the business among CFOs. CFOs
felt that the resources they would need for analysis and
development are simply not in place for them to perform
an effective “challenge” role. The culture of most depart-
ments does not ensure accurate forecasting. Without
strong leadership from DHs and a clear vision of how
finance can add value through strategic support, finance
units will continue to play a back office role. Provinces
appear to be further along on this dimension, with more
reliable information available and greater acceptance of
a senior role for the CFO.
Public sector CFOs, along with their program
colleagues, need to make it a priority to improve the
quality of financial information and use performance
measurement to support management. At the federal
level, systems improvements are essential if a broad view
of performance and investment is to become the norm.
4 David A. Good and Evert Lindquist, Strengthening Resource Re-allocation
in Government, p. 14.
5 Good and Lindquist, Strengthening Resource Re-allocation in Government.
6 Exact figures for the amounts spent on back office functions were not available.
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CHAPTER 6
The Financial Workforce
Chapter Summary
• This chapter focuses on the third cluster, concern-
ing the knowledge and capacities of the financial
workforce.
• More than 60 per cent of the CFO community needs
to be replaced in the next five years—the federal
government faces a serious shortage of qualified
candidates. The low value ascribed to the CFO role
is seen as a major contributor to this shortage.
• Requiring an accounting designation for CFOs is an
important step toward making the role more attrac-
tive to high-profile candidates.
• CFOs find it difficult to attract and retain highly
qualified individuals with broad experience to the
finance function.
• The culture of financial management and the expec-
tations and attitudes of ministers and senior man-
agement toward the finance function must change
significantly.
T
he knowledge and capacity of the financial
workforce, including the chief financial officer
(CFO), finance executives and finance officers,
is the final cluster that influences an organization’s ability
to provide strategic financial management. This chapter
examines the current state of the financial workforce in
relation to four factors that define its capacity to deliver
high-quality strategic services:
• the extent to which financial officials have adequate
expertise in the finance domain and knowledge of
how the business of the organization operates—its
key objectives, the clients and stakeholders, and the
concerns of ministers;
• the leadership abilities, management and strategic
skills of the leaders of finance units, and their under-
standing of what is required from a high-performing
finance organization;
• the analytical skills and experience of the workforce,
and its ability to apply that knowledge to high-quality
advice, provided to decision-makers; and
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• the attention the government gives to structured career
planning and workforce development to develop the
desired capacities.
This chapter looks at the current state of these four
factors, as described by participants, in relation to a
strategic ideal. The chapter concludes with a general
appraisal of the current state of financial management
in the Canadian government, underlining the point that
attempts to “fix” the CFO will not improve financial
management. A major change in the culture of financial
management will involve a change in the mindset of
senior managers, deputy heads (DHs) who are the
organizational leaders, and ministers.
This chapter concludes that attempts to merely “fix”
the CFO will not improve financial management.
In examining these factors, we drew on interviews
with executives and DHs, as well as on the survey for
data, which was conducted in both federal and provin-
cial jurisdictions.
THE KNOWLEDGE BASE
STRATEGIC LEVEL
CFOs in leading-edge organizations demonstrate
financial expertise and experience—usually including a
business degree and (or) accounting designation—and
have worked for a significant period in the operational
parts of the organization. Senior finance employees
understand how the business is done, where the money
is in the organization, and its usage patterns. If the CFO
is not a certified accountant, he or she is supported at
senior levels by executives with this designation. The
accounting certification provides assurance from a self-
regulating professional organization that members have
achieved a specific standard of knowledge, receive
ongoing professional development, and are governed by
explicit ethical standards that are defined and enforced.
29
 Leading organizations also demand that CFOs have
highly developed leadership, interpersonal and commu-
nication skills. They must be persons of high integrity and
be strong team players who bring a flexible, creative
approach to financial issues and problems. For these
CFOs, the issue is not whether to abide by the rules—
it is how to achieve what needs to be done within the
rules, using creative but sound approaches.
THE ASSESSMENT
There has been significant debate about the impor-
tance of a CFO holding an accounting designation. The
governments that we examined do not demand this quali-
fication at present, although by 2008, the federal govern-
ment will require CFOs to have a formal designation.
DHs were more concerned that CFOs have leadership
and strategic skills, and a good understanding of their
departments. They expect CFOs to be experienced in
finance and expect that senior finance executives be
designated accountants.
In this survey, 31 per cent of the assistant deputy
ministers or equivalent (i.e., the first level below the DH)
reported having an accounting accreditation. Thirty-three
per cent of finance directors general (second level below
DH) were accountants, and approximately 29 per cent
of the directors (third level below DH) surveyed stated
that they hold an accounting designation. (See Chart 1.)
Chart 1
Accounting Certification for Executive Levels
(per cent)
ADM DG DIR Total
40
35
30
25
20
15
10
5 was the ability to attract employees with knowledge of
0 the business of government and, preferably, of the organi-
CPA CA CFA CCA CMA CGA Other
Notes: CPA: Certified Public Accountant; CA: Chartered
Accountant; CFA: Chartered Financial Analyst; CCA: Chartered
Certified Accountant; CMA: Certified Management Accountant;
CGA: Certified General Accountant; ADM: Assistant Deputy
Minister; DG: Director General; DIR: Director.
Source: The Conference Board of Canada.
30
All departments have some senior executives with
accounting expertise, and DHs expressed little concern
that CFOs without the designation would be unable to
carry out their functions adequately. As an assurance
of professional standards, the accounting designation is
considered to be useful. Chart 2 provides the views of
survey respondents, at the federal and provincial levels,
on whether CFOs should be required to have certification.
In our interviews, a number of CFOs believe strongly
that the accounting designation is an absolute “must”
for the CFO.
Chart 2
Should CFOs Be Required to Have Certification?
(per cent)
Yes No
100
80
60
40
20
0
Federal Provincial Total
Source: The Conference Board of Canada.
Some executives were concerned that the education
provided to accountants is private sector–oriented and
currently has little reference to the public sector envi-
ronment. Discussion is underway between federal and
provincial governments and the Canadian Institute of
Chartered Accountants, as well as several universities,
to develop public sector accounting programs with intern-
ship assignments in government departments. Partici-
pating DHs and CFOs also believed that the education
of CFOs should place greater emphasis on the “softer”
skills, which are of increasing importance.
Perhaps the most important issue for DHs and CFOs
zation in which they work. Finding finance officers with
both financial qualifications and business experience
clearly has been difficult. It was also seen as essential
that analysis be improved as part of creating a different
role for both the CFO and the financial workforce. Among
senior finance officers who responded to the survey,
over 70 per cent reported that they had experience out-
side corporate services/finance. (See Chart 3.)
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While two DHs think that their CFOs make little

Chart 3
Experience Outside of Finance by Executive Level
(per cent)
ADM DG DIR All
90
80
70
60
50
40
30
20
10
0
Outside Policy Operations Program
experience* delivery
Notes: ADM: Assistant Deputy Minister; DG: Director General;
DIR: Director.
*“Outside experience” includes policy, operations and program
delivery roles. Some respondents have experience in more than
one role, hence percentages do not add to 100.
Source: The Conference Board of Canada.
LEADERSHIP AND STRATEGIC SKILLS
STRATEGIC LEVEL
CFOs in high-performing organizations understand
that strategic thinking, leadership, communication and
building trust with colleagues are prerequisites to playing
a senior advisory role that includes challenging perform-
ance and spending patterns. Finance executives see the
big picture and understand the links between different
kinds of information from various parts of the environ-
ment. These CFOs think long term and creatively about
ways to find resources for new activities. At this level,
CFOs have well-developed negotiation capabilities, and
are skilled in managing change and building commitment
to a new direction among employees. They are not “no”
people—they see their role as helping clients to find
appropriate solutions to real problems.
THE ASSESSMENT
DHs express confidence in the integrity and finance
skills of their CFOs, but more than half have reservations
about their business knowledge as well as the strategic
capacity of the broader finance function. CFOs find that
it is difficult to attract and retain highly qualified indi-
viduals with broad experience for the finance function,
partly because it is not viewed as being at the “centre
of the action.”
effort to get to know the operations of the department,
others say they rely on their CFOs to help work through
difficult changes in the financial infrastructure of their
departments. The situation appears to be uneven, varying
with individual capabilities. The problem is that there
are no clear standards applied to assessing readiness to
assume CFO responsibilities and no structured career
development to provide the required skills and knowledge.
ANALYTICAL CAPABILITY
STRATEGIC LEVEL
Leading organizations include a significant cadre
of financial analysts with the ability to use advanced
analytical and costing techniques, such as activity-based
costing and modern financial technology. They under-
stand business operations, objectives, services, suppliers,
cost structure, partners and clients, and can help managers
to develop information that will ensure more effective
performance. The organization fosters development and
maintenance of these skills by providing training and
mentoring, as well as assignments to build the knowl-
edge base.
It is difficult to attract and retain highly qualified
individuals for the finance function, partly because
it is not viewed as being at the “centre of the action”.
THE ASSESSMENT
All CFOs say that they have individuals on staff with
excellent qualifications and analytical skills. However,
these people are often occupied with transactional activ-
ities, such as searching for information and producing
reports to respond to central agency, parliamentary and
public questions. Finance lacks the resources to hire other
individuals to carry out this work, and the technology
does not make it easy to develop comprehensive responses
without manual intervention. Most indicate that they are
short of the skills to carry out functions like activity-
based costing. Finance officers have tended not to have
the hands-on experience in line organizations; therefore,
they do not have the knowledge of the business that
might make their analysis more useful.

The Conference Board of Canada 31

CAREER AND SUCCESSION PLANNING
STRATEGIC LEVEL
High-performing organizations plan for the long term.
They have structured programs to ensure that they have
a skilled and motivated workforce at all levels, all of
the time. These organizations have programs to expose
finance officers with management potential to the busi-
ness side of the organization, starting early in their careers.
They devote significant attention to identifying and
developing tailored plans for high-potential employees
and work to ensure that, at any time, a pool of well-
prepared individuals is available to take on senior
responsibilities. Finance is recognized as a core func-
tion, critical to the well-being of the organization. It is
part of all strategic activities and is recognized for the
expertise it contributes. Finance is highly valued by
senior executives as being central to the “action” and is
seen to be an interesting and challenging place to work.
THE ASSESSMENT
The federal workforce appears close to a crisis, in
terms of the availability of qualified and experienced
individuals who are ready to assume CFO positions in
medium-size and large departments. The time required
to staff vacant CFO positions has increased and there is
concern that the feeder groups are nearing retirement
without having been given adequate leadership experi-
ence. The survey reveals that approximately 35 per cent
of those in CFO positions today plan to retire within
five years, and experience shows that many others will
move on to other positions outside finance. (See Chart 4.)
As part of this research, a rough estimate of turnover
Chart 4
Retirement Plans
(per cent)
Eligibility for retirement
Plan to retire
10+ yrs.
5–10 yrs.
1–5yrs.
Less than 1 yr.
0 5 10 15 20 25 30
Source: The Conference Board of Canada.
32
rates in the federal government was carried out in 27 core
departments and agencies. Sixty per cent of CFOs in
those departments had been appointed to their positions
during the past two years; most replaced CFOs who
moved to other positions in the public service. It is
therefore reasonable to expect that more than 60 per
cent of the CFO community will need to be replaced
in the next five years.
Attempts have been made to respond to the situation,
but innovative approaches (including external recruitment)
will be needed if the government is to meet immediate
needs and help to change the skill sets of CFOs quickly.
DHs and CFOs say that CFOs recruited from outside the
public sector have difficulty understanding the context
and culture; they will require structured development
programs and mentoring to make the transition success-
fully. Provinces are experiencing shortages as well, partly
because of the salary differences between government
and the private sector in large urban centres.
All study participants are seriously concerned
about mid-level finance officers being promoted
too rapidly, without adequate experience.
Over the past decade, with the exception of the
Financial Officer Recruitment and Development program,
which recruits new university graduates into entry-level
positions in finance, attention to succession planning or
skill development in finance positions has been sporadic
and unfocused. Raiding between departments has become
the norm. All study participants are seriously concerned
about mid-level finance officers (FI levels 2 to 4) being
promoted too rapidly, without adequate experience.
POINTS TO CONSIDER
Based on this review, the finance function in the
federal government faces serious challenges—especially
at the CFO level. The pool of candidates with accounting
designations appears to be small (33 per cent at the
Director General Finance level, the feeder group for
CFOs), and a large proportion have no experience out-
side finance. Although some organizations have adequate
analytical capacity, in general, the demands of transaction
35 40 processing overwhelm the agenda, making it difficult for
these people to make significant contributions.
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CFOs underlined that, for some time now, finance has
not been highly valued. They see some of the difficulty
in recruiting high-quality senior candidates coming from
the low esteem accorded to the function. Traditionally,
it has been seen as a control-oriented, back office activity
that is necessary for meeting accountability requirements,
but not central to the business. Related human resource
issues have been dealt with piecemeal, rather than as a
core element of a strong financial strategy. Real succes-
sion planning and long-term career development are
critical to change. CFOs must build credibility by pro-
viding strategic services that justify a change in the
value given to the function.
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Demanding an accounting certification for CFOs is
only one step toward making the position of CFO more
attractive to high-profile candidates. In addition, finance
officers need to be prepared to take on senior responsi-
bilities. By itself, “fixing” the CFO will not improve
financial management. Senior managers need a major
change in the culture of financial management and in
the expectations and attitudes of senior management
and ministers toward the finance function.
33
CHAPTER 7
Strategic Levers That
Accelerate Change
Chapter Summary
• The research finds that many federal departments
operate at the middle of the continuum, where they
are chiefly focused on accounting and standard
reporting and control systems.
• A few organizations have progressed beyond the
control level to strategic financial management
capacity, often as a result of the intensive financial
analysis required to develop legislation for separate
agency status.
• Across the board, federal departments report a
weak capacity to evaluate the efficiency of activities,
to assess value-for-money, and to provide infor-
mation that supports improved efficiency and
effectiveness.
• This chapter defines three strategic levers that
organizations can use to initiate movement: estab-
lishing common standards, and building vision
and commitment among deputy heads and CFOs;
improving financial information and performance
measurement; and building the quality and capacity
of the financial workforce.
• A set of 11 recommendations related to these
levers lays out a roadmap for progress toward the
ideal of strategic financial management.
T
his study has looked at the environment that
is driving change in financial management in
governments and the needs and expectations
that are shaping a new vision for the future. Now it will
identify the starting point for change.
The research suggests that the majority of federal
departments are operating at the middle of a continuum
that moves from a mainly transactional focus through
the stage of effective control of resources to the final
stage of fully developed strategic financial management
capability. Overall, departments are reasonably confi-
dent that accounting and standard reporting and control
systems are meeting their basic requirements. However,
34
they find that there is a weak capacity to evaluate the
efficiency of activities, to assess value-for-money and to
provide information that supports improved efficiency
and effectiveness.
This chapter presents an overview of the collective
experience of the study participants and outlines the
elements to which government should be paying more
attention. It also defines a starting point for organizations—
a point where they can move from on their journey
toward strategic financial management. As part of the
examination of each of these strategic levers, there are
specific recommendations targeted to those who are in
a position to lead change, both at the centre and in line
departments and agencies.
THE STARTING POINT FOR CHANGE
A few organizations have progressed beyond the
control level toward a strategic financial management
capacity. Canada Revenue Agency, Canadian Food
Inspection Agency, Parks Canada and the Royal
Canadian Mounted Police, among federal participants,
have developed more advanced competencies. These
agencies have reached this level as a result of intensive
financial analysis, growing out of their experience of
developing legislation for separate agency status.
A few federal participants—CRA, Parks Canada
and RCMP—have developed more advanced
competencies.
This intensive analysis encompassed approaches
such as activity-based costing that provided them with
a detailed understanding of the financial operations,
costs, efficiencies and opportunities in the organization,
including the potential for new approaches to funding. In
addition, the requirement to report directly to Parliament
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on performance and outcomes, and to have their books
audited by the Auditor General, has resulted in a greater
focus on finance in these agencies. It has also led to a
significant increase in their understanding of the ways
in which financial information can be of value. In other
instances, individual leaders have recognized the need for
improvements in financial management and made this a
high priority. One red flag is the small number of organiza-
tions showing signs of being in the transactional stage.
These signs include highly decentralized finance func-
tions; no overarching financial frameworks; a lack of
shared priorities among senior executives; and unreli-
able information.
In the federal government, the new vision of financial
management has not been fully embraced. Deputy heads
(DHs) and chief financial officers (CFOs) have not yet
fully agreed that the changes being implemented by the
Comptroller General will make it easier for them to
carry out their own responsibilities. One vital step is to
ensure that DHs articulate their collective view of what
they want from CFOs and what they would be prepared
to do to make that happen. Our interviews indicated
that the model of strategic financial management has
not yet passed the “what’s in it for me” test with DHs.
If senior leaders do not commit to a new vision of what
financial management can be, real change will be slow
and uneven.
Provinces have more reliable information because
shared services organizations (SSOs) have created
government-wide financial policies and integrated
systems. DHs value the CFO and finance functions
more highly than their federal counterparts, and are
more likely to have personal experience as a chief
administrative officer or executive CFO—experience
that is rare at the federal level.
Financial information and analysis requires great
capacity-building, as it is a prerequisite for better plan-
ning and resource allocation. The federal government
needs to reduce the resources it spends on transactions
and routine reporting in order to make investment in
strategic analysis and advice possible. While this study
did not include a detailed examination of systems
issues, many participants pointed to them as being a
serious constraint to strategic financial management.
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THE STRATEGIC CHANGE LEVERS
Given the number of areas in which improvement
is needed, setting priorities for action is essential. This
report proposes that priority be given to three areas we
have called “strategic change levers”—areas where action
can have an impact that extends beyond the immediate
scope. (For example, improving the quality of financial
information is a prerequisite for changing the role of the
CFO, as it provides the basis for credible advice and
challenge.) Action is proposed on these three levers:
• building DH and CFO vision and commitment, and
establishing common standards;
• improving the reliability of information and
strengthening performance measurement; and
• building the quality and capacity of the finance
workforce.
These three levers work together. Exhibit 3 captures
the interactions among the three strategic levers, and
between the levers and the broader operating context.
For example, making significant improvement in finan-
cial management within a reasonable time period begins
with the commitment and understanding of DHs and
CFOs. Without this driving force, financial information
is unlikely to improve and colleagues will continue to
undervalue the financial workforce and their efforts to
improve financial capacity.
The model of strategic financial management hasn’t
passed the “what’s in it for me” test with DHs.
On the other hand, the quality of information and
financial support must improve to show senior leaders
that finance is able to deliver a service worthy of being
valued at a new level. This, in turn, depends on having
a workforce capable of providing strategic financial
support.
The third point of the triangle is fundamental to the
other two: if the financial workforce is not managed in
a way that attracts and retains employees with high-level
financial and leadership skills and knowledge, leaders
will remain unconvinced of the value of finance, and
the quality of information is unlikely to improve.
35
 These levers (as shown in Exhibit 3) act within a
broader context that can also affect their impact. Key
factors to be considered include the quality of the finance
technology being used, the overall change in expecta-
tions for accountability, and the policy environment in
which the government is operating.
Exhibit 3
Leadership and Vision: DH Commitment, and Action and Standards
Source: The Conference Board of Canada.
LEADERSHIP AND VISION—THE FIRST
STRATEGIC LEVER
BUILDING VISION AND COMMITMENT
The CFO cannot move an organization to strategic
financial management alone. The role of the CFO flows
from the vision that DHs communicate to the organiza-
tion about their expectations for the CFO and finance,
and the extent to which finance contributions are
esteemed and seen to be valued.
Most DHs agreed that the status quo is far from ideal.
However, for them to really buy in, they need to have
a hands-on role in defining the requirements for CFOs
and finance. At the same time, changes must reflect the
best information, global trends and innovative options,
not just incremental changes to old models.
Recommendation 1: Build Vision and Commitment
Treasury Board should convene a group of deputy
ministers and CEOs (or their equivalents) to define their
expectations of a CFO, the CFO’s role, and the kind of
performance they want from the finance organization
36
within each department or agency. This collective state-
ment should be reviewed by experts to ensure that the
approach is based on leading-edge models and the most
advanced knowledge available. Leaders should commit
to taking the necessary actions to establish a culture
that supports more effective financial management.
These actions should include creating incentives for
accurate financial reporting, supporting the challenge
function of the CFO and ensuring that finance is engaged
at an early stage of policy and program development. All
new proposals should be required to include reasonable
costing and forecasting. Annual Performance Accords
for executives should include commitments to meeting
clear targets in financial management.
IMPLEMENTING A NEW ROLE AND VISION
FOR FINANCE AND THE CFO
For a CFO to play a strategic role, he or she needs
a clear mandate from the DH and the resources to
support strategic financial management activities. The
job mandate should define the CFO’s role in planning,
performance measurement, strategic analysis and infor-
mation integration. Given the importance of being able
to integrate costs with performance and results, finance
should lead or co-lead strategic and business planning
activities, and have sign-off for performance measures.
The CFO should ensure that cyclical performance reviews
are carried out and that the results inform resource allo-
cation. In large departments, the scope of the CFO’s role
requires his or her sole dedication to finance functions.
CFOs need a clear mandate and the resources to
support strategic financial management activities.
Recommendation 2: Establish a New Vision of
the Role of the CFO and Finance Organization
Large government departments or agencies must
ensure that the CFO’s responsibilities link the organiz-
ation’s performance to planning and resource allocation.
These responsibilities encompass the components of
finance, planning, performance measurement and
reporting—but they should also include the financial
system as a whole. During the transition to a strategic
organization, the CFO will need incremental resources
to hire individuals with the necessary skills.
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PROVIDING GOVERNMENT-WIDE
FUNCTIONAL LEADERSHIP
Strong, government-wide leadership of the finance
community is essential if progress is to be sustained.
Central agencies (particularly the Office of the Comptroller
General [OCG]) should provide this leadership. In the
federal government, Treasury Board Secretariat (TBS)
will need to rebuild its own capacity to lead.
Central agencies, along with CFOs from federal
departments, need to establish benchmarks for the
resources required for CFOs to play a strategic role,
especially in large, complex departments. Resource
standards should be linked to performance expectations,
services levels and an understanding of cost drivers.
The OCG needs to monitor and report on performance
annually to maintain the momentum. A colour-coded
rating system similar to that used by the Office of
Management and Budget in the United States report
card system (under the president’s Management Agenda)
would ensure that sustained attention is paid to per-
formance. Benchmarks could be adjusted to different
jurisdictional levels, fostering valuable comparisons.
Recommendation 3: Provide Functional Leadership
The Comptroller General should provide functional
leadership by defining the resource levels required by
finance organizations, establishing standards for the
finance workforce, and defining and reporting annually
on government-wide financial services performance.
HIGH-QUALITY INFORMATION—
THE SECOND STRATEGIC LEVER
Management must focus on the results
and performance of the organization.
Indeed, the first task of management is
to define what results and performance
are in a given organization . . . and
this, as anyone who has worked on it
can testify, is, in itself, one of the most
controversial, but also one of the most
important, tasks.
—Peter F. Drucker, “Management Challenges for the
21st Century,” Harper Collins, 1999
The Conference Board of Canada
A management adage states that “you can’t manage
what you can’t measure.” If managers were to take this
advice to an extreme, there would be little obligation
for governments to manage. In fact, much of the work
performed by governments is difficult to quantify—
results are hard to attribute to any single action, and
metrics (e.g., cost-effectiveness) are trumped by policy
objectives such as fairness and equity. Despite these
kinds of disincentives, understanding the metrics has
repeatedly proven its value in managing government
business and communicating the results to the public.
Much of governments’ work is hard to quantify—
results are not easily attributed to a single action.
High-quality information for decision-making is a
strategic lever for financial leadership and management
because it:
• makes the full cost of policy and program choices
visible, making clear choices possible;
• provides an indicator of value-for-money of programs
and services;
• drives improved measurement in non-financial
areas; and
• raises questions, identifies strengths and weaknesses,
and clarifies options for improving management and
efficiency.
CREATING THE CONDITIONS FOR
HIGH-QUALITY INFORMATION
The DHs and CFOs we interviewed were not con-
fident that financial forecasts were accurate, though
survey respondents, who tended to be from smaller
budget organizations, had higher confidence levels.
Those interviewed worry that inaccurate forecasting
leads to less optimal use of resources due to larger-than-
expected lapses at year-end. They blame non-transparent
forecasting and reporting on managers’ desire to main-
tain maximum flexibility so they can reallocate funds
for internal priorities. Weak teamwork and competition
among senior executives can exacerbate this tendency.
The use of black books (i.e., unofficial internal financial
records) to manage money in branches leads to late data
entry in corporate systems, inconsistent use of account-
ing codes, data entry errors, and a loss of reliability and
timeliness in corporate information.
37
Recommendation 4: Create the Conditions
to Generate High-Quality Information
DHs and CFOs need to provide incentives for timely,
accurate and relevant financial information and reporting
by branches. The conditions created should include:
• a shared understanding of the desired results by
the organization, the contribution expected of each
executive, and the measures that will be used to
assess performance;
• active support for a culture in which rewards are
given for contributions to the organization’s per-
formance as a whole;
• recognition of accurate reporting of significant,
unpredicted lapses or shortfalls at year-end (and
sanctions when this information is not accurately
reported); and
• enterprise-wide financial policies and frameworks,
supported by training for all financial staff.
IMPROVING THE RELEVANCE OF
PERFORMANCE MEASURES
Strengthening capacity to assess the value that
Canadians receive for their investment is critical to
rebuilding the public’s confidence in governments.
Imperfect as measures may be, they provide signposts
on the road to better overall performance. Performance
measures are never perfect; they are simply indications
of how an organization’s actual results compare to
expected outcomes. Just as information is the corner-
stone of good financial management, performance
measures are keys to good information.
Strengthening capacity to assess the value that
Canadians receive for their investment is critical to
rebuilding the public’s confidence in governments.
If we are to understand what needs to be done to
improve, indicators must be given context. While organi-
zations want to know if they are achieving the desired
outcomes, output measures are also useful. Understanding
the cost structure of the organization (i.e., cost per unit
of activity or production, expenditure trends, forecasts),
its productivity and yearly outputs can raise questions
about how business is being done. But ideally, these
metrics can help to transform an organization by stimu-
lating innovation.
38
Departments need to focus measures on issues of
strategic value to management. A limited number of
well-designed measures will provide a better basis
for decisions than a large amount of data that are disag-
gregated and not relevant to the broad priorities of the
organization. Many organizations spend significant
resources to develop measures for reports for central
agencies—reports are of little value to internal manage-
ment. As noted in Andrew Graham’s paper on perform-
ance information,1 “An excessive focus on external
reporting and achieving strategically integrated infor-
mation that has no value to the internal operations of
the organization is a distortion of the organization’s
priorities.” TBS should look for ways to link its infor-
mation demands with what managers need for internal
purposes.
Recommendation 5: Improve the Relevance
of Performance Measures
Treasury Board and CFOs should develop guidelines
for performance measures, including common approaches
to assessing the delivery of value-for-money. Measures
related to areas of shared responsibility need to be coor-
dinated. Departments should publish these performance
measures annually; performance reports should include
measures of efficiency, performance and value-for-money.
MEASURING PERFORMANCE IN DIFFICULT
AREAS: POLICY AND RISK MANAGEMENT
All governments struggle to measure performance
in policy, an important area of government activity. The
challenge is formidable: policy development is a creative
endeavour, highly dependent on inspiration and, some-
times, serendipity. Proposals are often experimental,
subject to failure or unexpected outcomes. Policy issues
vary in complexity and difficulty, and outcomes tend to
be long term and require action from many players,
including some from outside government. In general, pro-
ductivity is difficult to assess or control in these cases.
But even in this foggy domain, there is as much “per-
spiration” involved in the activity as inspiration. The
term “policy” includes a range of activities from consul-
tations, research and analysis, and option development,
to preparing Memoranda to Cabinet and presentations
for senior management. Although less comprehensive,
output measures provide a first indication of efficiency.
As policy is a core government activity that uses very
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significant resources, measures deserve to be better
understood and managed. This will require the creative
efforts of experts to identify approaches and benchmarks
that can assist in understanding how policy productivity
can be assessed and enhanced.
Some of the most challenging situations involve
assessment of results when the objective is to prevent
something from happening. Attributing a positive result
(i.e., an event does not occur) to government’s action can
be challenging, when success involves many players,
both inside and outside of government. It can be diffi-
cult to decide what the best level of investment is in
such activities, as the cause and effect links are often
hard to establish. Metrics can help by focusing on:
• the probability or risk of the event occurring;
• the impact level of damage that would result if
the event did occur;
• the success of actions taken; and
• the cost of actions taken.
The following analysis grid provides an example
of a tool that may assist decision-makers in making
difficult resource allocation choices. (See Exhibit 4.)
Information on the probability of occurence (risk) and
impact of an event (damage) is organized in four quad-
rants to provide a framework for assessing the appro-
priate level of government investment. The grid helps
determine what kind of investment is required (e.g.,
resources for prevention, mitigation). For example, if
the probability of an earthquake occurring is low but
the impact would be devastating, it may be appropriate
to invest moderately in efforts to prevent the damage
from occurring (e.g., specialized building technology),
but more substantially in activities to mitigate the damage
that would result (e.g., warning systems, appropriate
emergency response capacities). If both probability and
impact are high (e.g., terrorist attacks), significant
investment in prevention, mitigation and other activities
are required. Applying this framework requires that risk
and impacts be defined in somewhat quantifiable terms
(e.g., using a scale from one to 10); these assessments
should be based on expert views and a complex set of
weighted variables unique to each domain.
Other tools exist to provide information that assists
decision-makers in dealing with areas where it is diffi-
cult to measure performance. Finance can provide a
centre of excellence by using such tools to improve
the efficiency of outputs.
The Conference Board of Canada
Exhibit 4
Assessments of Risk/ and Impact For Decision-Makers
Probability of Occurence
High Probability High Probability
Low-impact events High-impact events
• Moderate investment in prevention • Significant investment
in prevention and mitigation
Low Probability Low Probability
Low-impact events High-impact events
• Low investment in prevention and • Moderate investment in prevention
mitigation • Significant investment in mitigation
Impact of Events
Source: The Conference Board of Canada.
Recommendation 6: Measure Performance
in Difficult Areas
Governments need new approaches to measure per-
formance in policy and risk control. Experts in organiz-
ations such as think-tanks and universities could make
valuable contributions to developing better indicators
of productivity and performance in these areas. At the
federal level, Treasury Board should take the lead.
CREATING THE DEMAND FOR
HIGH-QUALITY FINANCIAL INFORMATION
Participants in this study stressed that the lack of
demand from senior executives and ministers is an
important disincentive to better financial information.
Financial information is only one of a number of
important inputs in an equation where the public, the
local and regional impact of initiatives, and interna-
tional issues all affect decisions. Nevertheless, financial
information needs to be given appropriate and serious
consideration. The biggest single factor likely to drive
improvement in the quality of financial analysis may
be the demand from ministers and DHs, and the visible
use of that demand in planning, budgeting and resource
allocation processes.
Lack of demand from senior executives and ministers
is a disincentive to better financial information.
Recommendation 7: Demand High-Quality
Financial Information
Clearly defined quality standards for financial
information should be included in budget proposals,
Treasury Board submissions, committee presentations
39
and briefing material. This information should be a
required element of all such documents prior to any
formal budgetary consideration.
EASING INTEGRATION AND IMPROVING
EFFICIENCY
This study did not set out to investigate the systems
issues that are well known in the federal government.
Nevertheless, federal CFOs, except those in a few
agencies that run their own enterprise resource planning,
underlined that disconnected systems are a serious
stumbling block to integration of financial and perform-
ance information. They also think that the demands on
resources in order to process high volumes of transactions
overwhelm finance’s capacity to produce higher value
products such as analysis. Ontario and British Columbia
have established SSOs to process transactions and are
implementing government-wide integrated systems.
Departments should have access to systems that
integrate information smoothly from many domains.
Recommendation 8: Reduce Transactions and
Improve Systems
Governments should ensure that departments have
access to systems that integrate information smoothly
from many domains and contribute to greater produc-
tivity. Examples include shared services, outsourcing,
and self-service mechanisms such as the use of credit
cards for purchase and payment. Steps should be taken
to process financial transactions more efficiently.
A HIGH-PERFORMANCE WORKFORCE—
THE THIRD STRATEGIC LEVER
The finance workforce urgently needs attention
if expectations are to be realized. The gap assessment
discussed in Chapter 6 revealed that the number of
people expected to retire over the coming five years,
combined with extremely high turnover rates, has
already created a serious shortage of CFOs. Finance
executives have financial qualifications but narrow
experience outside of finance. Individuals with both
kinds of expertise are scarce. Lack of standards for
40
experience and qualifications of CFOs has led to wide
variation throughout the government. Some departments’
CFOs have accounting designations while others are
generalists. Urgent action is needed to provide the next
generation of CFOs with opportunities to get hands-on
experience. This crisis was identified by many survey
participants as key to changing the role of the CFO. It will
be essential to have long-term career planning to identify
strong performers and to take a structured approach to
building the range of skills required at senior levels.
ESTABLISHING CFO STANDARDS
AND COMPETENCIES
Based on our interviews, we believe that the CFO
community does not have a clear understanding of the
new role it is expected to play. Building a shared vision
requires CFO participation in defining standards and
expectations, as well as training, mentoring and assign-
ments to jobs where CFOs have the opportunity to work
with financial leaders in both the public and private
sectors.
To play a leadership role, the CFO must enjoy high
trust and credibility with DHs, colleagues and employees.
This can be achieved only by demonstrating through
experience that the CFO is expert in finance, fair and
transparent in managing people and resources, and
knowledgeable about the business. DHs prize inter-
personal and strategic skills over the accounting
designation, and are concerned that the education
of accountants does not have a strong basis in public
sector finance, according to this study. Education has
not traditionally emphasized the leadership skills valued
by DHs. Many CFOs, however, thought the accounting
designation guaranteed both ethical and professional
standards, and that this was valuable in itself.
On balance, it seems desirable to require that CFOs
have an accounting designation as a standard of finan-
cial knowledge. Efforts are currently underway in both
federal and provincial governments to strengthen the
public sector component of education by addresssing
a broader range of skills sets. Here is an opportunity
for officials in both jurisdictions to collaborate to
ensure that specialized programs for public sector
finance officials are offered.
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Recommendation 9: Establish CFO Standards
and Competencies
The key elements of a high-performing strategic
finance organization should be clearly defined. The
model presented in this report can be used as a starting
point for this discussion. A strategic finance organiza-
tion should have competency standards for CFOs that
include financial expertise, knowledge of the business
and leadership capacity. Different jurisdictions could
collaborate to identify the competencies and tools needed
for competency evaluation. All governments need struc-
tured approaches to developing competencies; these
could include assignments in non-financial areas and
importing financial leaders from the private sector. Once
identified, the competencies should be supported with
targeted training and mentoring programs, both for
newly minted and existing CFOs.
RESPONDING TO SHORT- AND
MEDIUM-TERM SHORTAGES
Governments are already experiencing a shortage of
senior finance officials. Although recruiting CFOs from
outside government may be problematic, it is likely to be
necessary. If managed carefully, recruitment of CFOs
from outside the public service, combined with special-
ized training and mentoring, can help to bring new per-
spectives to government and accelerate the rate of change.
Governments are already experiencing a shortage
of senior finance officials.
However, external recruitment can also affect the
morale of those who expect to take on senior jobs but
lack the new competencies or qualifications. As well, the
discrepancy in salaries between the public and private
sectors, especially in large cities, will make external
recruitment difficult. “Growing our own” must be part
of the plan.
Recommendation 10: Respond to Short- and
Medium-Term Shortages
Given the shortage of financial expertise in the public
sector, CFO recruitment from outside will be important.
These individuals should receive specialized training
and mentoring to help them move more easily into the
1 Graham, Integrating Financial and Other Performance Information.
The Conference Board of Canada
government culture. External recruitment of mid-level
finance officers with strong analytical capacities should
be added to the Financial Officer Recruitment and
Development (FORD) program mandate. Senior finance
executives who aspire to become CFOs should have the
opportunity to achieve the required competencies through
education, assignments and mentoring.
BUILDING LONG-TERM CAPACITY IN
THE FINANCE ORGANIZATION
Clearly, the CFO cannot carry the day all alone: the
whole finance organization must be highly qualified
and motivated. Finance officers need to understand the
vision of a high-functioning finance organization. Despite
the success of FORD, CFOs thought that mid-level
finance officers are advancing too quickly and without
adequate experience. In the long run, this will weaken
the competence of senior officers who lack important
experience. External recruitment is needed at middle
levels, as well as at the entry and CFO levels, and
should be managed in the same way—with training
and mentoring.
Finance organizations will need a new mix of skills
and education to provide strategic financial management
services. Most CFOs felt that there is a shortage of
qualified cost accountants. Analytical skills are critical,
and recruitment of economists and business graduates
as well as accountants may be an important initiative.
In some departments, well-qualified people are working
for lower value but are providing essential activities, such
as responding to public and parliamentary inquiries
with basic information. Urgency is given priority over
value. It would be useful to create an organizational
development initiative to look at how new skills should
be combined and what resource levels should be
required for strategic services.
Recommendation 11: Build Capacity in
Finance Organizations
Governments should increase the number (and type)
of human resources dedicated to financial planning and
analysis. Human resource experts should work with
CFOs and the Office of the Comptroller General to define
a “core finance organization” in terms of organization,
function and the appropriate skill mix and resources.
41
CHAPTER 8
Conclusion
Chapter Summary
• The development of strategic financial management
capability should be a top priority for public sector
organizations; it will provide leaders with the insights
they need to make decisions in a complex manage-
ment environment.
• The CFO cannot change the world alone. If CFOs
are to deliver strategic high-quality advice, there
|will need to be a sea change in the culture and
capability of financial management.
• Ministers and executives must be willing to commit
the resources to make their shared vision of the
new role for CFO and finance a reality.
O
ur research finds a serious gap in the capability
needed to deliver strategic financial manage-
ment and the current financial management
culture and capacity.
Why should organizations care? Today, as never
before, the public is demanding visible evidence that
tax dollars are being well managed and wisely spent.
In the wake of high-profile cases of mismanagement,
citizens react strongly to stories of government waste
and inefficiency.
Despite government surpluses, the needs of a diverse
population are putting governments under pressure. These
new demands are making the complex management world
of deputy heads even less predictable. These leaders
need guidance and insight to aid their decision-making.
42
Strategic financial capability can provide creative options
for doing business and financing activities with new
tools, support more cost-effective choices and ensure
better communication with the public.
But chief financial officers (CFOs) cannot change
the world alone. If they are to deliver strategic, timely,
high-quality advice, there will need to be a sea change
in the culture and capability of financial management.
This change must be supported by ministers and execu-
tives with a shared vision of the role that the CFO and
finance can play, and they must be willing to commit
the resources to make that vision a reality.
As one participant noted, what is needed is for
finance and CFOs to move “beyond the engine room
and onto the main deck of the ship,” where they can
add value at the level required.
A sea change in the culture and capability of finan-
cial management is necessary to close the gap.
In conclusion, this report’s recommendations propose
the concrete steps that are needed to move the discus-
sion from a wish to a reality. This includes actions to
strengthen the commitment of the leaders and the role
of the CFO; to build the capability to create and use
high-quality information in decision-making; and to
ensure that the financial workforce is ready and able to
lead and perform at the new level. Canadians deserve
nothing less.
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APPENDIX A

List of Participating
Organizations
ADVISORY COMMITTEE MEMBERS: Royal Canadian Mounted Police
Social Development Canada
Agriculture and Agri-food Canada Treasury Board Secretariat
Atlantic Canada Opportunities Agency
British Columbia Ministry of Finance Additional Participating Departments:
Canada Revenue Agency Department of Justice Canada
Canadian Food Inspection Agency Department of Public Safety and Emergency
Canadian Heritage Preparedness Canada
Canadian International Development Agency Transport Canada
Human Resources and Skills Development Canada Veterans Affairs Canada
Ontario Ministry of Finance

The Conference Board of Canada 43

APPENDIX B
Glossary of Key Terms
and Abbreviations
CFO: Chief financial officer—used in this study to refer
to the most senior person below the deputy minister who
has responsibility for finance, either in combination
with other domains or alone.
CG: Comptroller General
DH: Deputy head—used to cover all those in the deputy
position in departments, agencies and boards, regardless
of title (e.g., deputy minister, commissioner, secretary).
FAA: Financial Administration Act—federal legisla-
tion that governs financial management in the federal
government.
44
Policy: The activities involved in developing, imple-
menting and monitoring the framework of principles,
rules and strategic directions governing government’s
role and position in relation to an issue.
Program: An instrument or set of instruments that
implements a policy direction of government.
OCG: Office of the Comptroller General
Operations: A term used in this study to denote all
activities of the department that relate to policies,
programs and service delivery. It excludes overhead
functions such as human resources, finance, information
technology, and administration. Services: In government,
used to refer to direct services by employees who pro-
vide information, funds, products (e.g., passports) or
regulatory support (e.g., inspections) to citizens.
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APPENDIX C
Methodology
ELECTRONIC SURVEY
O
ut of 226 surveys, 67 were completed and
returned, generating a 30 per cent response
rate. Surveys were administered during
July 2005, by e-mail.
Responses were solicited from chief financial
officers (CFO), executive financial officers (British
Columbia), chief administrative officers (Ontario) and
senior financial officers in the federal government.
More than 65 per cent of the respondents were from
the federal government; 34 per cent of respondents
were from provincial governments.
The majority of provincial responses (61 per cent)
were from British Columbia. Alberta made up 13 per
cent of the survey population, and Ontario and New
Brunswick each accounted for 9 per cent. Eight per
cent were from Nova Scotia and Newfoundland.
FACE-TO-FACE INTERVIEWS
Interviews conducted during 2005, explored the
views of CFOs and deputy heads concerning their
expectations of the CFO role and the performance of
the finance organization. The research team conducted
a total of 45 face-to-face interviews.
The Conference Board of Canada
DISCUSSION PAPERS
We wanted to find out more about two issues of
special importance to the success of governments in
managing money: namely, the quality of information
available to ministers, executives and managers to sup-
port their decisions, and the capacity of governments to
change spending patterns by reallocating funds. Expert
views were sought and information was gathered on how
other jurisdictions approach these challenges. Both topics
were addressed in two commissioned discussion papers:
• Strengthening Resource Reallocation in Canada:
Culture Incentives and the Chief Financial Officer
(David A. Good and Evert Lindquist); and
• Integrating Financial and Other Performance
Information: Striking the Right Balance of
Usefulness, Relevance and Cost (Andrew Graham).
ROUNDTABLE
The roundtable discussion brought together stake-
holders who were knowledgeable about financial leader-
ship and management in the public sector. The roundtable
session included expert presentations and facilitated
discussions. These sessions also gave participants an
opportunity to review the early conclusions of the
research. Two panels stimulated the roundtable discus-
sion; panellists identified areas of consensus and con-
tention about the future of financial leadership and
management in the public sector.
45
APPENDIX D
Related Reports and Services
• 2006 Public Sector Financial Leadership
Conference: Re-inventing the Finance
Function
The Conference e-Proceedings from this event will
help you understand the chief financial officer’s
(CFO’s) new role in the organization, and the
increasing importance of strategic input and guid-
ance by finance leaders. Hear how other senior
financial executives are addressing the key chal-
lenges in delivering public services, and learn more
about the strategic dimension of the CFO function.
• Council for Public Sector Chief Financial
Officers
Senior financial officers in government departments
and agencies will benefit from the networking
opportunities, presentations from leading experts
that focus on insights and practical experiences, and
access to Conference Board research specific to the
financial leadership and management in the public
sector. The role of this Council is to examine the
changing expectations for financial management in
an increasingly complex environment and the
resulting evolution of the role of the CFO.
• National Council of Financial Executives
The National Council of Financial Executives
brings together the chief financial officers of
Canada’s leading corporations to discuss and share
their experiences in dealing with emerging issues in
the national and global arena. The mandate of the
Council is to provide a forum for senior corporate
finance executives to network with their colleagues
in other companies and to explore some of the prin-
cipal issues facing their profession in an informal
setting.
Go to www.e-library.ca to see other informative reports that would interest you.
Phone 1-866-242-0075 for information on related reports and services.
46
• 2005 CFO Challenge Conference: From
Financial Gatekeeper to Strategic Leader
The CFO role has evolved in recent years, from tra-
ditional financial manager to a much broader strate-
gic resource. At the same time, financial steward-
ship has become more complex and important. The
Conference e-Proceedings from this event provide
an opportunity for you to learn about this evolution,
with an informed perspective on the new expanded
responsibilities of the CFO. Come away with strate-
gies that will impact your organization.
• Public Sector Executives Network
The Public Sector Executives Network provides a
valuable learning and exchange forum for senior
executives in government departments and agencies.
The Network aims to improve the effectiveness of
its member organizations by promoting leadership
of transformational change in government environ-
ments and exploring best practices and strategies in
innovative management approaches.
• The Pension Plan Crisis Continues . . .
Canada’s CFOs Are Worried—With Good
Reason
Corporate pensions face a funding crisis, with the
average defined benefit plan underfunded by about
15 per cent. As this briefing notes, however, the sit-
uation is not entirely bleak: corporate Canada is
well aware of the acute nature of the problem, and
public policy-makers are asking the right questions
about how best to minimize it.
The Conference Board of Canada
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