1. Financial Management 827 – Setting the Stage 2018
Andrew Graham
Queens University
School of Policy Studies

2. Structure of Today’s Class
Introductions
The Financial Management Context
Financial Literacy
Financial Management and the Policy Cycle
The Architecture of Financial Management

3. You had a choice. This course or…
Why would you take this course? Let’s get over the fear of finance.

4. Why Do People Fear Financial Management?
I hate numbers.
It’s a different language.
My focus is policy not money.
Bean counters don’t understand policy.
It all scares me.

5. Introduction

6. Pracademic: What That? Pracademic Federal ADM – 14 Years
Analyst
Caseworker
Director, Minimum Security
Warden, Kingston Pen
Director General Policy
Assistant Commissioner
Deputy Commissioner Ontario
Senior Deputy Commissioner
Assistant Deputy Minister Corporate
Conference Board of Canada
Queens
Federal ADM – 14 Years
President, APEX
In Jail
Pracademic: What That?
In my career I have moved among the key roles that we play in delivering public goods: front-line practitioner, operational manager, policy manager, operational executive, corporate support executive. Looked at it in another way, I have worked in the field, in a region and at headquarters – the bubble known as Ottawa. In fact, the large part of my career was in field and operational roles, all of what I enjoyed. I spent 14 years in an ADM role of some kind. I was always engaged with my community, but none more so than the executive group through my roles at APEX, which provided me with some amazing insights about executive leadership in the many and varied contests, culture and locations in which they work. Once again, as my stories will show, I experienced and came to respect the need for good financial information, but more than that - another key message - I came to need financial knowledge and insight. Not just the what but also the how and the why and, really key here, the what if.

7. Research, Teaching and Writing
Management and Leadership
First Nations Police Governance
Financial Management and Literacy
Case Study Program IPAC
Risk and Policy
Police Governance
Risk and Management
Learning and Curriculum Design
Given my background and given the fertile learning and research atmosphere of an academic environment like the Queens School of Policy Studies, I have pursued a number of research, teaching and learning areas. I bristle when someone says something like that is only an academic matter. Of course I encounter and do not play well with those academics that restrict their relationship to the real world or those with experience in it to the occasional disdainful look or request for money. But they are few and far between, especially in a professional school such as QSPS. I also disdain those practitioners who come along for a visit or interchange and just want to tell war stories without doing the intellectual work needed to translate those war stories in something more than ego-gratifying vignettes.
I have taken on the role as the National Editor of the IPAC Case Study Program for the past 10 years because I believe so strongly in bringing experiential learning not just into the classroom but also into organizations that struggle to learn from others but have few tools with which to do so except for stories of disasters. We need more stories about success for surely we successfully deliver good results, good information and sound reporting much more than the negative exceptions, which grab headlines, would suggest.

8. I write in a number of areas and really love to do it
I write in a number of areas and really love to do it. I just wanted to tell you about that Blue one – Canadian Public-Sector Financial Management. That’s a textbook on, well the title is pretty straight forward, but I wrote it when I took on the financial management course in our program almost ten years ago now. Why? Well, the simple truth was that there wasn’t a Canadian textbook on financial management for non-financial managers. That kind of shocked me at the time, but then, looking back I realized that everything that I learned about financial management was experiential, mostly through mistakes, having a really good financial advisor or being thrust into roles in finance where sink or swim appears to be the learning methodology. As I said, I am real believer in experiential learning, but with somewhat reduced levels of stress. The text was actually written with the new manager in mind, not necessarily just for the student. Many who have used it have called in avuncular rather than didactic. I am very pleased that it is used in a number of public administration programs across the country and elsewhere. It is in the second edition and there is always room to improve it and respond to the changing world of public sector financial management.
All along this ride, I have used financial information and learned how important it is to me. More significantly, I have come to understand what I need from the finance leaders I work with and to value the good ones. They did some things in a special way that I want to talk about. Because, when I became ADM Corporate, I had to do the same.

9. Financial Management and the Public Policy Context

10. “It’s all about the money.” – Tommy Douglas
“Good financial management is connected to every facet of the organization's operations – and it’s essential to success.” – Wallace Foundation

11. What are the financial challenges facing the public sector today??11

12. Governance, Bureaucratic and Resources Factors that Define Financial Management
Governance Factors
It’s not your money.
There is never enough.
No shortage of opinions.
Policy is seldom truly evidence based or objective: wishful costing, mushy results.
Multiple oversight.
Bureaucratic Factors
Someone else wants your money.
There is never enough.
Accountability can be fuzzy.
Rules mazes and timing delays.
Overlapping responsibilities.
Resource Factors
Resource allocation can be inefficient.
Delegated authorities need to be clear.
Financial information: sometimes too little, sometimes too much .
Accounting can be fuzzy.

13. public funds are managed prudently and honestly;
“Canadians expect the government to be well managed and to handle taxpayers’ money prudently and economically. To do this, the government must exercise sound financial management and control and risk management within the requirements of the Financial Administration Act and regulations. It must also follow relevant Treasury Board policies, directives, and standards, and be guided by principles of value for money, accountability, transparency, and risk management. This means that systems, practices, and resources need to be in place to ensure that
public funds are managed prudently and honestly;
assets are safeguarded;
resources are used effectively, efficiently, and economically to achieve government objectives;
accountabilities for financial management are clearly established;
financial risks are being mitigated by effective internal controls; and
the Canadian public and parliamentarians are provided with pertinent and reliable information on the use of public funds.
Significant deficiencies in these areas of financial management and control and in risk management can have detrimental effects on the level of service that Canadians receive and the government’s credibility.” - Auditor General of Canada, 2011

14. THE COURSE

15. Objectives of the Course
Focus on tools in managing public finances in order to carry out good public policy
Understanding how financial considerations fit into good policy formulation, choice of policy instruments and implementation
Public sector financial management as a policy issue itself:
accountability,
due diligence,
relationship to taxation and debt

16. Objectives of the Course
The basic elements of financial management – aware not expert
Hands-on management of financial responsibilities of any public manager
Public managers can no longer ignore core financial skills or leave them to others – vastly increased cost sensitivities, more and more emphasis on bang for buck, accountability, growth in contracting means have to understand costs

17. Objectives of the Course
To help you
Understand where financial management is an integral part in delivering public goods
Be an effective user of financial information,
Take an informed approach to your role as a financial manager and
Carry out your responsibilities as a public sector financial manager

18. What the course is not about
The politics of budgetary processes
Public finance – taxation policy, economic policy
Getting you certified as a CPA – we are doing a fly past not an accreditation process
Seeing if you can do detailed calculations or math
Balancing your own personal budget, or lack thereof.

19. Reporting and Accountability
In-Year Budget Control: Forecasting and Managing
Managerial Control and Controllership
Reallocation and Cut-backs
Budgeting: Forms and Process
Concepts of Accounting and Financial Statements
Accountability and Risk
Public Sector Financial Management

20. Structure of the Course
Format
Open Lectures – designed to invite participation and debate
PowerPoints as text
Small group work and discussions
Table drops – mini-cases and exercises
Take-homes assignments
Cash Management Exercise – the big assignment

21. Evaluation/Tests/Exams
“Test as you go” approach
Nothing during the class weeks
No final exam – final assignment is a complex case involving all aspects of the course
Take homes are due on time and failure to turn them in will affect the mark: if you are facing timing issues, let me know
Participation is rated on involvement in the various small group exercises, table drops and general engagement

22. Evaluation/Tests/Exams
Take Home Tests (2 in all) 40%
Cash Management Exercise 50%
Participation %

23. Course Material Second Edition, 2014 Note: use onQ
Lectures will be posted in advance on onQ and on my website
Tests and related readings will be posted
I will communicate through .
Second Edition, 2014

24. Remember, there is no stupid
question.

25. Individual Financial Literacy for a Policy or Program Manager and Organizational Financial Capacity

26. Having capacity in finance is key to…
Providing sound policy advice
Understanding the implication of changes to policy or programs as well as the costs of sustaining existing programs and policies
Linking budgets, planning and implementation
Managing an operation, large or small
Controlling your budget
Meeting your performance expectations

27. Why do You Need to be Financially Literate?
Right from the start of public policy process, through design to legislation to execution and accountability, it is all about the money
Financial management is not a separate part of what governments do, but integrated into the whole and you have to be able to take it in, understand it and use it
You need it to get promoted.
You will inevitably be managing a budget someday so get ready.
You will inevitably be competing for scarce resources and need all the help you can get.
You will have to explain what you do in financial terms to your staff, yourself, your boss, your stakeholders, the public.

28. What You Don’t Need to be Financially Literate
A CPA An accounting degree.

29. What is Financial Literacy?
Understand the lingo: Some core terminology, much of which is addressed in the text, is essential.
Read the Reports: This is best translated as being an intelligent user of financial information, be it costing for policy design or cash forecasts for the first quarter of the fiscal year or an organizational balance sheet.

30. What is Financial Literacy?
Understanding the Implications: Developing an analytical capacity and intuitive sense of the consequences of certain financial decisions, e.g. contracting.
Understanding cost and cost behaviours: This means that you understand what things cost (salaries, supplies, equipment) in terms of what you are delivering and what happens when circumstances change.

31. What is Financial Literacy?
Get Clarity: This may mean asking dumb questions. It may also mean pushing the point of understanding so that everyone is actually talking about the same thing.
Marry up Numbers on a Pages with What Happens at the Mission End of the Organization: A financially literate manager can see the link – or insist that it be clearly stated – between what may be for some just a bunch of numbers and the policy and operational impact.
A financially literate manager needs a financially literate organization.

32. Core FM Skills Costing Financial Condition Analysis Forecasting
Controlling
Identifying, Assessing and Managing Risk
Communicating financial and program information

33. Financial competencies grow with level and experience
At the outset:
Has some awareness of budgeting and financial regulations and process
Understands rules of careful use and protection of resources
Takes value for money into account in research and writing
Intermediate:
Monitors program expenditures and individual expenses for reporting purposes
Understands how to read, interpret and use relevant financial reports

34. Financial competencies grow with level and experience
Seasoned:
Understands the processes by which financial resources are approved, obtained, allocated, managed and accounted for.
Takes the lead or active role in the preparation of budgets, forecasts and cost reviews.
Advanced:
Ensures adequate internal control systems over financial assets, investments, liabilities, revenues and expenditures
Operates and monitors financial information systems, internal audit and evaluation
Mastery
Oversees principal planning, budgeting and implementation systems
Links and actions linkages of strategic intent with the financial systems.
Ensures adequate governance of financial processes, adequate accountability systems and the overall quality of the financial management of the organization.

35. Financial Literacy is Both Personal and Organizational
“Why bother. No one takes this financial stuff into account at the top. They are all policy wonks.” Or
“Who cares? It’s all arbitrary and no amount of good control at our level will make any difference.”

36. A Financially Literate Organization is One That:
Works hard to ensure integrated approaches to policy and delivery that take into account costs and related financial implications,
Establishes decision-making bodies that regularly review financial performance,
Develops means to communicate financial information widely throughout the organization,
Makes financial literacy a core competency in developing its staff,

37. A Financially Literate Organization is One That:
Links financial performance to overall performance on objectives,
Ensures that financial advisors are on the team, that their work is integrated and that they too are held to account for achieving the organization’s mission, and
Works hard to train managers and upcoming staff on financial issues.

38. Polcies and Governance
A Financially Literate Organization Addresses the Elements of Financial Capacity
Polcies and Governance
Regular engagement of senior management
Clear accounting policies
Skilled Personnel
See Financial Literacy
Financial skills for both program and specialists
Systems
Goldilocks Rule
Processes
Budgets
Risk and Control
Accountability
Performance Measurement

39. How Financial Management Fits in the Cycle of Public Sector Policy and Management

40. The Big Bad Public Sector…..

41. The Public Sector Challenge
Complexity
Transparency
Limited resources
Increased political context
Definition difficulties
Common activities across more than one government, department or project
Risk diversity

42. Public Sector – what is it?
Public sector larger and more complex than government in traditional sense
Course adopts an inclusive focus:
Government, all levels
Near government: agencies, crowns (to a limited extent), special entities
Greater public sector entities: health and education

44. Federal Government Revenue Sources: 2014-15 Total Revenue: $282,346,000,000
From Public Accounts of Canada

45. Federal Government Expenses 2014-15 Total: $280,435,000,000

46. Public Finances are complex – example: transfers

47. The 2011-2012 budgetary deficit of $26.2 billion compares to a
deficit of $33.4 billion in Revenues were up $8.1 bil-
lion, or 3.4 percent, from the prior year, reflecting increases in
income tax revenues and EI premium revenues, which were offset
in part by a decrease in other revenues

49. Capital and Infrastructure: From Roads to Rinks: Asset Share by Order of Government

50. Federal Government Contracting Activity 2014
All Contracts 2014
Contract Type
Number
% of Total
$ Value (Thousands)
% of Total Value
Goods
198,931 58
4,502,706 16
Services
125,700 37
22,426,317 79
Construction
16,711 5
1,351,118
Total
341,342
28,280,141
All Contracts Below $25K
315,443
1,283,239
All Contracts Above $25K
25,899
27,176,972

51. Total Government Purchasing
No one knows for sure
WTO estimates that it is 10-15% of GDP for developed countries
Leads us to $130-$200 billion annually
All governments and broader public service included
“Government purchasing typically represents between 10 and 15 per cent of national GDP in developed countries.” WTO, Trade Topics, “Government Procurement,” english/tratop_e/gproc_e/gproc_e.htm.

52. Government Flexibility: Discretionary and Non-Discretionary Spending
Entitlement Program
Spending
Flexible Driven by Budget Cycle
Built into Specific Legislation
Appropriations
Legislation

53. US Federal Budget _______________________ $1.481 Trillion
$857 Billion*
19% 9%

54. Financial Management in the Public Sector: Underlying Ideas at Play

55. Policy, Direction: The Public Good to be Achieved: the Policy Process
It’s about the money..
Accounting, Evaluating and Reporting
Resourcing the Policy Objectives: the Budget Process
Delivery the Public Good: Operations, Management and Control

56. HOLDING AND BEING HELD TO ACCOUNT FOR THE RESOURCES
RESOURCE LEVELS SET
USING THE RESOURCES
HOLDING AND BEING HELD TO ACCOUNT FOR THE RESOURCES
Otherwise, in plainer speak, Getting the Money, Spending the Money, Explaining what you did with the Money.

57. Funding Your Objectives
Plan, budget, cost, authorize
Funding Your Objectives
Report, account, audit, evaluate, recost, reallocate
Control, monitor, adjust, reallocate
Achieving Your Objectives
Measuring Performance against Objectives and Retooling

58. Pillars of Sound Financial Management
Program and policy designs that include sound and reliable costing and risk analysis
Stable budgeting systems that delivery resources in time for use
Funding that ensures both meeting immediate (in-year) resource requirements and longer-term sustainability of the program
Dependable financial systems, reports and statements that provide information needed to both manage and account

59. Pillars of Sound Financial Management
Skills and capabilities in all players: financial, policy, programmatic and management as well as oversight bodies such as boards
Systems to identify risk, monitor performance and make adjustments to changing circumstances
Governance of all the processes that is consistent
Systems of accountability that emphasize both internal accountability and public reporting

60. Public Financial Management Objectives
Cost effective service
Fiscal Discipline
Procedural Control
Fiscal Control
Efficient resource allocation
Accounting Discipline
Effective decision making

61. Building Blocks of Financial Management
Planning, Policy and Budgeting
Accounting and Reporting
Risk, Control and Adaptation
Decision Support

62. Financial management practice involves such elements as ..
Costing policies and programs
Securing resources,
Allocating resources,
Reallocating resources,
Monitoring financial and program performance,
Monitoring the use of funds within assigned budgets
Deciding on adjustments to spending or fees as a result of financial information and
Accounting for all the above

63. Gauging Financial Performance: the Questions You Will Always be Asking
What happened?
What is happening?
Why did it happen?
What will happen?
What do I want to happen?

64. The Architecture of Financial Management

65. Financial Management Financing of Programs Financial Accounting

66. Source of Funding: Budgeting Deployment of Resources: Control
Financing of Programs
Source of Funding: Budgeting
Deployment of Resources: Control
Generation of Revenue
Reallocation and Reduction

67. Accounting for Management Accounting for Financial Reporting
Financial Accounting
Accounting for Management
Accounting for Financial Reporting
Managerial Accounting
generates financial
Information for decision
making, accountability
and planning
Financial accounting
generates retrospective
information of financial
position and performance.

68. Accounting for Management
Planning
Cash Management and Control
Reporting Compliance and Performance
Future Present Past

69. Accounting for Financial Purposes
Internal Reporting
External Reporting
Audit

70. How the Course is Structured to Address These Elements
827
The Basics
Context
Risk
Accounting
Financial Statements
Budgets
Budgeting
Reallocation
Control
Cash Management
Accountability
Reporting
Audit

71. As the one Buckley’s ad says, “That is about as much as we can do
As the one Buckley’s ad says, “That is about as much as we can do. Anything more would be cruel.”