Creating confidence through better financial reporting in the public sector

In the wake of COVID, local authorities and other public sector organizations face a unique challenge when it comes to managing the future of their finances. As service demand grows and available reserves and income sources decrease, creating better plans with more accurate data is becoming more essential than ever. But achieving this is becoming more difficult than ever thanks to spiralling administrative overhead and an inability to access accurate, up to date data.

Recent research published by the Chartered Institute of Public Finance and Accountancy (CIPFA) suggests that in light of the pandemic, confidence levels around organizations’ abilities in financial planning and scenario modelling are low – particularly in lower-tier local authorities, which are unlikely to have the specialist in-house skillsets or tools required to effectively implement these processes.

What’s stopping local authorities from planning effectively?

CIPFA’s respondents identified several barriers to effective planning, including:

• A lack of clarity on social care funding
• The end of the furlough scheme in September its potential effects on staff retention, costs, and economic regeneration
• The potential effects of the fair funding review
• COVID’s indifference to financial planning and quarterly or yearly budgeting arrangements
• Inability to balance reserve funding usage with potential future instability
• Balancing short- and long- term needs in the face of both uncertainty and the need to continue transformation projects

Authorities have also identified building out multiple different scenarios – with over 30% saying this was an area of some difficulty. This likely reflects the challenge inherent in planning for different contingencies when there’s very little certainty in what either the future holds, or internal processes for creating these kinds of plans.

Respondents identified the following problems with their processes:

• Scenario planning is an activity very much consigned to the background of the organization, and it’s likely that only a “most likely” scenario will ever be placed in the political arena.
• It’s a difficult activity to do, and while in some cases the “best case” outcome can be achieved, it can’t always be, and there’s a reluctance to put such scenarios forward as a result.
• Publishing or sharing a variety of scenarios requires the modellers to both trust their colleagues to understand what to do with them, and trust them enough to be honest with them about their findings and their judgements.
• Scenario planning is still relatively new in the world of local government, and the presumptions that must be made to do it well are not always easy to communicate to stakeholders.

Beyond these very real processual factors, 99% of local authorities surveyed indicated that they’re still relying on outdated tools and processes for their financial and scenario planning needs. 99% of respondents indicate that they’re still relying on spreadsheets, with 59% using them exclusively.

Relying on spreadsheets isn’t only slow and cumbersome from the perspective of gathering data – wasting the time of skilled officers that could be put to better use elsewhere – it’s fraught with risk. Data is often inaccurate or outdated by the time a report can be compiled, which can lead to inaccurate modelling – which is often worse than having no scenario plans in the first place.

How can authorities overcome this lack of confidence in their ability to manage their own finances?

Fortunately for your organization, there is a simple solution to all of these problems – visible, accurate, trustworthy data. And while this may seem like an impossible dream from your current position, it’s well within your grasp.

Modern cloud based FP&A solutions allow your organization to overcome the siloing of data in different tools and departments by creating a unified source of truth. Turning the reporting process from a chore that can consume weeks’ worth of working time every year into a push-button exercise that delivers a reliable assessment of the organization’s current financial state.

This solid reporting foundation combines with other automation capabilities, along with AI and machine learning approaches, to allow you and your teams to rapidly build out plans for a multitude of different scenarios with complete confidence in the accuracy of the underlying figures – and thus in the robustness of plans for all manner of different future contingencies.

How can Unit4 help you boost confidence in your organization’s future?

Unit4 FP&A is a modern financial planning and analysis platform that lets your people create rock-solid reports at the touch of a button. Improving data visibility and accuracy, increasing confidence in your financial plans, and letting you build scenario plans and pivot quickly no matter what the future has in store for your organization.

To experience what Unit4 FP&A can do for you, check out our dedicated product page or click here to book a demo.