Best in Class Finance Functions For Police Forces
Police funding has risen by £4.8 billion and 77 percent (39 percent in real terms) since 1997. However, the days where forces have enjoyed such levels of funding are over.
Chief Constables and senior management recognize that the annual cycle of looking for efficiencies year-on-year is not sustainable and will not address the cash shortfall in years to come.
Facing slower funding growth and actual cash deficits in their budgets, the Police Service must adopt innovative strategies which generate the productivity and efficiency gains needed to deliver high-quality policing to the public.
The step-change in performance required to meet this challenge will only be achieved if the police service fully embraces effective resource management and makes efficient and productive use of its technology, partnerships, and people.
The finance function has an essential role in addressing these challenges and supporting the Forces’ objectives economically and efficiently.
Police Forces tend to nurture a divisional and departmental culture rather than a corporate one, with individual procurement activities that do not exploit economies of scale. This is the result of over a decade of devolving functions from the center to the. Divisions.
To reduce costs, improve efficiency and mitigate against the threat of “top-down” mandatory, centrally-driven initiatives, Police Forces need to set up a corporate back office and induce behavioral change. This change must involve compliance with a corporate culture rather than a series of silos running through the organization.
Developing a Best in Class Finance Function
Traditionally finance functions within Police Forces have focused on transactional processing with only limited support for management information and business decision support. With a renewed focus on efficiencies, there is now a pressing need for finance departments to transform to add more excellent value to the Force but with minimal costs.
1) Aligning to Force Strategy
As Police Forces need finance to function, finance and operations must be closely aligned. This collaboration can be compelling and help deliver significant improvements to a Force, but many barriers are overcome to achieve this model. Finance Directors must look at whether their Force is ready for this collaboration, but more importantly, they must consider whether the Force itself can survive without it.
Finance requires a clear vision that centers around its role as a balanced business partner. However, to achieve this vision, a massive effort is needed from the bottom up to understand the significant complexity in underlying systems and processes and to devise a way forward that can work for that particular organization.
The success of any change management program is dependent on its execution. Change is difficult and costly to execute correctly, and often, Police Forces lack the relevant experience to achieve such change. Although finance directors are required to hold appropriate professional qualifications (as opposed to being former police officers, as was the case a few years ago), many have progressed within the Public Sector with limited opportunities for learning from and interaction with best-in-class methodologies. In addition, cultural issues around self-preservation can present barriers to change.
While it is relatively easy to get the message of finance transformation across, securing commitment to embark on bold change can be challenging. Business cases often lack the quality required to drive through change, and even where they are of exceptional quality, senior police officers often lack the commercial awareness to trust them.
2) Supporting Force Decisions
Many Finance Directors are keen to develop their finance functions. The challenge they face is convincing the rest of the Force that the finance function can add value – by devoting more time and effort to financial analysis and providing senior management with the tools to understand the financial implications of major strategic decisions.
Maintaining Financial Controls and Managing Risk
Sarbanes Oxley, International Financial Reporting Standards (IFRS), Basel II, and Individual Capital Assessments (ICA) have all put financial controls and reporting under the spotlight in the private sector. This, in turn, is increasing the spotlight on financial management in the public sector.
A ‘Best in Class’ Police Force finance function will not just have the minimum controls to meet the regulatory requirements but will evaluate how the legislation and regulations that the finance function are required to comply with can be leveraged to provide value to the organization. Providing strategic information to enable the Force to meet its objectives is crucial for a leading finance function.
3) Value to the Force
The drive for development over the last decade has moved decision-making to the Divisions and has led to an increase in costs in the finance function. By utilizing some initiatives in a program of transformation, a Force can leverage up to 40% of savings on the cost of finance and improve the responsiveness of finance teams and the quality of financial information. These initiatives include:
By centralizing the finance function, a Police Force can create centers of excellence where industry best practices can be developed and shared. This will re-empower the department, creating greater independence and objectivity in assessing projects and performance and leading to more consistent management information and a higher degree of control. A Police Force can also develop a business partner group to act as strategic liaisons to departments and divisions. The business partners would, for example, advise on how the departmental and divisional commanders can meet the budget in future months instead of merely advising that the budget has been missed for the previous month.
With the mundane number crunching being performed in a shared service center, finance professionals will find they now have time to act as business partners to divisions and departments and focus on the strategic issues.
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