Local government finance officers should urgently review their councils’ outsourcing arrangements but resist outright rejection of private sector solutions, according to a new report.
The call comes in a paper compiled by CIPFA and the Association of International Certified Professional Accountants (AICPA), and despite events surrounding the collapse of outsourcing giant Carillion at the beginning of this year.
The report said that local government accountants increasingly work beyond their traditional roles, requiring greater commercial skills.
It added that, in the wake of Carillion’s insolvency, the role of the finance function has never been more important in assessing alternative delivery models.
“Despite its negative connotations, outsourcing should still be considered as a valid option, particularly in cases where organisations lack expertise, cannot maintain critical mass or are unable to invest fully in appropriate systems,” the report said.
However, it added that councils should review their outsourcing and PFI contracts “as a matter of urgency”.
Questions that finance officers should be asking include how long before a contract expires, how well the contract is being fulfilled, the cost-benefit calculation of terminating contracts and whether they can be renegotiated.
In January, a number of councils were hit after Carillion went into liquidation.
The CIPFA/AICPA report also called on senior council leaders to recognise the increasing importance of building skills and capabilities across their finance functions.
Skills shortages, such as the lack of in-house commercial ability, can increase cost and complexity, cause delays and impact on effective project delivery, the report said.
Andrew Harding, chief executive of management accounting at the AICPA, said: “As finance professionals, we translate numbers into relevant, understandable and actionable business insights to deliver better services and lead the way for better decision making.
“We do this by developing a broad knowledge of operations, joining the dots in the organisation and taking into account the public interest.
“Local councils need to make sure that they have the right finance teams and skills in place. It is therefore essential that they devise long-term talent strategies to create a higher performing and engaged workforce to drive organisational changes and deliver sustainable growth.”
Finance professionals also have an important role to play in supporting decision making, particularly when resources are scarce, the report concluded.
“We’ve traditionally focused on providing evidence such as financial reports, management information and analysis,” it said.
“But this has little value unless it is reviewed or put into practice – going forward, we must also consider how best to communicate and implement insights.”
Rob Whiteman, CIPFA chief executive, said: “Fiscal constraints are certainly an important incentive for transformation, the goal is doing more with less, but investment is also a challenge, which means it’s crucial that finance teams are leading these initiatives.”
