In the public sector, financial and risk oversight goes deeper than just cutting costs and maximising revenue. Every decision has a ripple effect – on service delivery, on classrooms, on communities. And the money is not growing either; budget cuts and shifting priorities are challenges every financial year. On top of this all, transparency is not a nice-to-have; it’s a requirement.
Recently, Diligent hosted a webinar on financial and risk oversight in public sector organisations. Moderated by Kristin Karel, director of sales for the public sector at Diligent, this conversation centred around how proactive oversight is crucial for public sector financial governance – and to manage growing risks in today’s times. After all, services cannot stop when risks arise or budgets get tight.
Below are some major topics of discussion in the webinar.
1. Vigilance Is the Secret to Mitigating Risk
Boards and councils must have a constant view of risks that lay ahead, which means building risk assessment and planning into the entity’s ongoing work. Risks can range from natural disasters to changing regulations, but they all require a nimble response.
Terry Spradlin, executive director of the Indiana School Boards Association, noted several types of risks local school boards face. “In Indiana, we’re prone to tornadoes and floods, so there’s that element of risk to facilities,” he said. “We have cybersecurity risk and have to protect the business operations of our school districts. Then there’s the unfortunate circumstance of fraud or mismanagement. If the board’s doing its work and providing financial oversight, we can be proactive and prevent fiscal mismanagement or fraud because we’re being diligent about doing the work and providing appropriate financial oversight.”
Stephen Powell, assistant city administrator for the City of Leawood, Kansas, addressed different concerns: “If we can’t make our bond payments, that’s huge. So we’re looking at some of those funds that we use that are not our general fund, making sure our funds are healthy and that if something happens, whether it be through the state legislature changing a law or a downturn in the economy, we have a game plan to fill in the hole it might create in our budget so that our financial risks can be mitigated as much as possible.”
2. Transparency Needs to Be in All Your Work
A policy of transparency continues to reap rewards for financial governance in the public sector. Organisations that want to build trust and diminish risk in their communities have to be equipped with a policy that tackles all aspects of transparency. After all, stakeholder transparency is one of the five essentials of financial oversight.
As Spradlin notes, transparency exists from the top down, and many key contributors have a role to play: “The administration will be having conversations with personnel, including the teachers’ union about salary benefits and the collective bargaining process. The CFO will be advising the superintendent and the board on financial conditions. The transportation director will be informing the board and the administration about transportation costs. The administrative team working well together to provide the right information to the school board is such a critical part of transparency and accountability.”
The right tools also matter. Powell describes how a new solution helped with budget transparency: “In the last year or two, we’ve made some pretty significant investments in new budgeting and finance software, and that has allowed us to not only access our data more seamlessly than we were able to before, but it is also going to allow us to put our checkbook online so that anybody can see where the money’s going. Putting more of our information online in a format that allows residents to drill down is a lot more transparent than just putting a 600-page PDF of the budget document.”
3. Be Prepared to Pivot
Having an eye on the horizon for changes, whether big or small, keeps your team ready to adjust. Powell shares a couple of different ways his municipal team watches for change: “We look for sales tax collection trends as we go through the year and use that data to adjust our projections, either up or down. For instance, right now we’re looking like we’re about a half-percent lower than what we projected, so we’re starting to adjust those projections down a little bit to make sure that we can live within a realistic budget assumption.”
He adds, “There are more risks that we’re looking into, particularly with the possibility that the state may limit our property tax collections. We’re really trying to educate the governing body. ‘If this were to happen, here’s what to expect.’ And a lot of those expectations, they may not have ever had to deal with before in the budget process. It’s taking this time to educate our council on things getting ready to change for us as they’re going to change for probably everybody in Kansas.”
4. Financial and Risk Oversight Means Asking the Right Questions
Every board or council should be an active assessor of the information they review for meetings and beyond and know the right questions to ask. This can require coaching, as Spradlin explains.
“Before the meeting, they should be receiving a board packet, maybe that’s online through a paperless management system,” he says. “They need to review the materials and then ask themselves, ‘What information don’t we have that we need?’ We guide them on key questions to ask about the use of resources and the strategic plan:
- “‘Are fund balances easily identified and monitored?’
- “‘How much does the municipality spend each month?’
- “‘Are expenditures within the budget or over budget?’ ‘
- “How are revenues tracking?’
5. Continuous Education is the Way to Go
Board and council roles are complex. Good financial oversight and risk management can demand a lot of the elected and appointed officials and the staff who support them. Strengthen the team’s performance with ongoing training and opportunities to learn.
Spradlin says, “We provide a lot of different training through our conferences and seminars. Just last week we launched a new micro-credentialing program on school finance and budgeting oversight. That’s how important this issue is. There are a lot of calendars and mandates we have to comply with, and we really need to be focused on the right things that are aligned to the vision and mission of the school district and the strategic plan.”
Training and education can take alternative forms. Powell describes his team’s work: “We also offer them office hours. If they have a budget question that they may not feel comfortable asking in a meeting, or maybe they just want to have a better understanding about something going on with the budget, they can come in with our finance director and me, and we’ll spend as much time as they need getting them comfortable. Because our budget – and I’m sure Terry’s is the same way – is really complex.”
Watch the full webinar for more tips and insight on financial and risk oversight from these experts.
