Financial and Accountancy Competences Framework:

Report by Working Group

This paper sets out the conclusions of a working group on cross-Government financial and accountancy competences.

The working group has looked only at finance and accountancy. However, we must emphasise that competence in these areas is not enough to
ensure effective performance, even for finance specialists. Finance and accountancy is a "specialist" area of competence. Anyone working on financial matters will also need, like all other staff, general skills and knowledge, which departments have tended to set out separately in a "core" or "generalist" skills framework. So these competences must be considered alongside other competence areas: for example those relating to
management and communication skills.

Background

A small working group was established in November 1996, made up from members of the Finance Training Network. This Network was established earlier in 1996 following Principal Finance Officers' agreement to the proposals in the paper "Finance Training in the Civil Service". The Network asked the group to set out, as far as possible, a service-wide "model" for financial and accountancy competences to which departments could, if they wished, relate their existing competences or use to help draw up their own. The aim would be to help those departments without competences frameworks to avoid reinventing the wheel; to make it easier for all departments to benchmark performance and monitor progress; and to enable staff to relate their financial competences to a service-wide model should they wish to move within the public sector. The working group has members from Ministry of Defence, Department of Transport, Department of Social Security, Inland Revenue, Home Office, OFSTED and HM Treasury. The full remit of the group and a list of members is at Annex A.

Competences are a description of the skills, knowledge and behaviour which lead to successful performance. As such, they should ideally cover both skills which are needed to perform a function, and areas of knowledge which a postholder needs. But critically they should be expressed as far as possible in terms of outputs and behaviour and be easily linked to departments' outputs and outcomes, and not simply to activities which might otherwise be seen as an end in themselves. Levels of competence should not necessarily be linked directly to particular grades/paybands: there will be many instances where a postholder will require a higher level of competence than his/her superior officer, and other cases where people in the same pay band need widely differing competences due to the nature of their work.

Departments' Experience

Most of the departments represented on the working group already have "core" or "generalist" competences, although many of these are being
reviewed in the light of changes to pay and grading. Work on "functional" or "specialist" financial competences has just been completed in three of the departments but in the others it is either in progress or still to be done. This work is closely linked to the introduction of Resource Accounting and Budgeting (RAB), although departments are also addressing other finance topics in producing their own frameworks. A number of issues have emerged:

(a) Departments with a high level of delegation and/or large agencies are having to consider the extent to which competence frameworks should be consistent throughout the department, and/or how they should be tailored to individual business units. Service-wide "model" financial competences could be particularly useful in such cases, making it possible for staff in agencies and departments to relate their organisation's specific competences to each others'.

(b) Some departments are undertaking specific initiatives for staff to gain qualifications and these departments welcome a direct link between
competence levels and qualifications: both NVQs, and professional qualifications. This link can have several advantages both for the staff who are achieving various competence levels, through providing recognition, improving mobility and creating a sense of professionalism; and for the
departments, which can more easily identify the skills needed by new entrants.

(c) Some departments are seeking to improve the training of significant numbers of staff in the techniques and procedures necessary for handling
Government finance. Bespoke, targeted training will continue to play a very important role in meeting this need. Qualifications-based courses will be a useful supplement to this subject to their resource implications.

(d) Some departments have already reached the stage where they are linking financial and accountancy competences to particular grades and posts
and those that had had found that this very helpful, for example, in internal and external recruitment and when identifying training needs. Others are
some way behind, and some are experiencing difficulties in matching existing competence frameworks, which are grade based, to new pay and grading structures.

(e) There is considerable scope for departments to learn from one another both in setting up competence frameworks and meeting training needs. But frameworks should nevertheless reflect the specific needs of each organisation, or part of an organisation, which vary considerably depending on the nature of the work. A service-wide model would therefore be useful but it should be for guidance only and not a substitute for drawing up specific competences for each organisation.

(f) Experience in the use of external training providers varies, and there are several interesting departmental initiatives, knowledge of which could be usefully shared. All departments recognise the need to boost training, including training in the workplace, especially in the light of RAB. Competence frameworks make it far easier to identify training needs and to ensure that training and qualifications are linked to real business needs, not pursued for their own sake.

(g) As a result of increased contractorisation, staff in departments need a different range of finance-related skills (eg tender evaluation, project
management and monitoring) from those which were required when a function was performed in-house.

Conclusions of the Working Group

We consider that the need for skills in, and knowledge of finance and accountancy is not limited to those who work in pure finance functions. It is also our view that the range of financial and accountancy skills in this area, and the number of people who require those skills, will increase markedly with the introduction of RAB. The list of areas of work and posts at Annex E shows both the range of functions which involve finance and accountancy, and of the posts where knowledge or skills is considered to be essential.

7. As stated at 5(d) above, we do not consider that the competences required in one organisation will be the same as another. However, there are many aspects which will be common to departments and agencies. The attached annexes are intended to identify these common areas in ways which may be helpful, as follows:

Annex B sets out five levels of competence. It also gives examples of the sort of jobs these levels relate to, and the specific knowledge and skills which would be valuable; but clearly the precise details will depend on each organisation and departments and agencies may need to adapt the levels to suit their own needs. It should be noted that there may be some posts in finance where people may not need even the level of competence at level 1, although they will need basic core competences required of all civil servants - eg in numeracy. The second part of this annex shows how competence levels could be limited to national qualifications. As the note in the Annex points out, achievement of these national qualification is not in any sense mandatory, and may not be the most suitable means of achieving competences in some departments,

Annex C shows the link between these competences and the main outcomes of financial activities in Government, showing the outcomes sought and giving examples of the types of jobs and areas of knowledge and skills required to achieve them (frequently as part of a team). The difference between this and Annex B is that Annex B shows levels of competence, Annex C shows areas or types of competence broken down into outcomes, knowledge and skills. The level of expertise required will vary in any work, knowledge or skill area, depending on the job. But it is also true that those working in a particular area will need similar knowledge and skills, albeit at different levels.

Annex D sets out in a list those areas of financial and accountancy knowledge and skill which are relevant in Government. These areas appear in
Annexes B and C;

Annex E lists the type of work in which financial and accountancy competences will be relevant.

Annex F shows a model for how competences can be drawn up and used by organisations, although clearly how this is done is very much up to
departments

Competences Working Group

March 1997

Remit of the Working Group

As far as is possible and useful, to help define in simple and general terms the financial and accountancy competences required across Government - in all areas of work and at every level - so that they can be used, as appropriate, in:

Matching people to posts (internal resource management and external recruitment);

Matching competences to posts;

The training and development of staff; and

The definition and reward of good performance.

Ideally, it should be possible to link competences to the professional standards.

Aim of the work

It is recognised that Departments should draw up their own specific competences in a form that best fits their particular work, culture and personnel systems. The aim is to help by:

i. Spreading good practice so as to help those Government organisations which have not yet identified competences to avoid having to reinvent the
wheel;

ii. Encouraging some consistency to make it easier to benchmark performance against others and to monitor improvements service-wide;

iii. Facilitating mobility, because it ought to be possible for individuals to relate their own specific departmental competences to the service wide model.

Timing

It is hoped that the Group can produce a first draft by early January, drawing on existing and the competence based approach. The aim would be for the Group to finalise the draft in February after it has been considered by PFOs (if it is agreed that it will be on the agenda) and HOAPs at their January conferences.

Membership of Group

Marion Nuttall - Ministry of Defence

John Kirkpatrick - Department for Education and Employment

Rachel Below - Home Office

Harold Candappa - OFSTED

Phil Butlin - Department for Social Security

Tony Allum - Department of Transport

Roger Jones - Inland Revenue

Duncan Slaughter - HM Treasury

Caroline Slocock - HM Treasury

Kevin Ross - HM Treasury

FINANCIAL AND ACCOUNTANCY COMPETENCES

NB The competences are normally cumulative eg someone at level 3 should normally also be proficient at levels 1 and 2.

Level 1: Handles financial resources with regularity, propriety and efficiency and/or maintains accurate and up-to-date financial records, and/or provides clear and accurate financial information and basic analysis.

Examples of relevant work: a clerk making payments, handling receipts, and entering transactions on to accounting system. Junior procurement staff. Staff in generalist posts who have contact with financial systems and information.

Examples of relevant knowledge: how the organisation's financial information and control systems work; how the relevant financial control systems operate and for what purpose; the purpose of accounts, internal audit and management services.

May need to be able to: use the organisation's financial systems to provide basic financial information; use financial systems to account for payments and receipts; work within the rules and controls laid down to ensure regularity and propriety of expenditure; apply numeracy skills to provide basic financial analysis; present figures clearly; basic costing.

Level 2: Ensures financial resources are allocated, controlled and deployed cost-effectively, with regularity, propriety and efficiency.

Examples of relevant work: managers and budget holders responsible for the use of resources. Junior management services and internal audit staff. Staff responsible for negotiating contracts for services. Staff in the finance area who monitor expenditure and supervise clerical staff. Staff who advise on spending options. Expenditure team staff in HM Treasury. Chief Executives and Accounting Officers.

Examples of relevant knowledge: government financial framework; principles of regularity and propriety; role of NAO and other auditors; asset
management techniques; principles of budgetary control.

May need to be able to: understand and interpret accruals and other accounts; explain financial principles behind a policy or action to others; supervise accounts staff at clerical level; monitor financial performance of organisations using accruals accounts; assess in a basic way the cost-benefits of alternative ways of spending resources.

Level 3: Maximises the use of financial resource by providing accurate and relevant financial analysis and financial information or by providing specialist advice on the procurement of services to decision-makers and/or by understanding and deploying specialist financial, accountancy, economics and procurement advice offered by appropriate professionals; or ensures through effective auditing and controls that the expenditure of an organisation is made with due regularity and propriety.

Examples of relevant work: Policy staff in finance departments including principal and senior finance officers. Staff involved in designing, costing, implementing and monitoring new policies or programmes. Staff advising on the drawing up of and monitoring of contracts and framework documents. Senior procurement staff. Internal audit managers. Heads of accounts sections. Staff helping to design financial control and information systems.

Examples of relevant knowledge: full range of accounts produced by organisation; advanced estimating and forecasting techniques; output and
performance measurement techniques; main principles of taxation; priority and zero-based budgeting; design of accounting systems; fraud prevention techniques; accounting standards.

May need to be able to: advise others on financial implications of policy decisions; manage an accounting system; understand complex financial
information provided by others; advise on and design specialised reports using information from the organisation's accounting system; use standard techniques (eg variance analysis, investment appraisal) to analyse data.

Level 4: Finds better or new ways of securing and deploying significant amounts of financial resource so as to meet the organisation's aims and objectives cost-effectively and/or is responsible for preparing sound and clear financial statements for external bodies eg Treasury, Parliament, EC; provides high level and authoritative professional accountancy advice.

Examples of relevant work: Accountancy adviser in a department; heads of finance departments or finance directors of organisations with major
operations raising particularly complex financial issues.

Examples of relevant knowledge: complex accounting techniques; alternative financing methods; working capital management; design of accounting systems; complex public finance issues; wide range of commercial finance operational issues.

May need to be able to: give authoritative advise on the financial implications on ground-breaking policy decisions or those having a major impact; advise on accounting policies for an organisation; manage relationship with external and other auditors.

Level 5: Applies complex financial techniques and depth of specialist knowledge to make wide-ranging and/or fundamental improvements in the way in which significant amounts of financial resource are used.

Examples of relevant work: Senior accountancy adviser in large department; senior member of Treasury Central Accountancy team, Government
representative on national level accountancy and auditing bodies etc.

Examples of relevant knowledge: international accounting standards and practices; impact of changes in accounting standards on government; impact of advanced accounting techniques.

May need to be able to: represent government and/or major department on national/international accountancy bodies; advise professional accountants and other practitioners on technical accountancy matters; lead a team introducing major change to accounting practices; lead team responsible for implementing new accounting system.

COMPETENCE LEVELS AND QUALIFICATIONS

Levels of competence can be attained through a variety of means - for example, on the job training; experience; in-house bespoke training; or through formal qualifications. Some formal qualifications (such as AAT and NVQ) put emphasis on work-based experience as measured through work-based assessments.

Some departments have decided to link their financial and accountancy competence levels to formal qualifications, particularly at levels 3-5. The
pyramid below illustrates how the main qualifications could be linked to the 5 levels. This is intended as a guide, and there is no intention that the
attainment of these qualifications should be mandatory. However those departments which do want to link competences to qualifications may find the pyramid useful. The pyramid can also be used when recruiting from outside the department, when departments may want to map qualifications held by applicants to the competence levels required for particular posts. There is a glossary of qualifications on the next page.

QUALIFICATIONS/COMPETENCES PYRAMID

LEVEL

5

4

3

2

1

* may be one level higher, depending on syllabus

Glossary of qualifications etc

CCAB - Consultative Committee of Accountancy Bodies.

It comprises:

ICAEW - The Institute of Chartered Accountants in England and Wales

ACCA - The Association of Chartered Certified Accountants

ICAS - The Institute of Chartered Accountants of Scotland

CIMA - The Chartered Institute of Management Accountants

CIPFA - The Chartered Institute of Public Finance Accountants.

ICAI - The Institute of Chartered Accountants in Ireland

IIA - Institute of Internal Auditors

AAT - Association of Accounting Technicians

NVQ - National Vocational Qualification

FINANCE AND ACCOUNTANCY : AREAS OF KNOWLEDGE AND SKILLS

1. Preparing, understanding and interpreting financial statements could include

- commercial accounts (P&L, balance sheet, cash flow)

- Appropriation Accounts

- Resource Accounts

- Supply Estimates

- Resource Estimates

- Agency Accounts, NDPB Accounts, internal management accounts

- ratio analysis

- variance analysis

2. Government Financial Framework could include

- Public Expenditure Survey

- Appropriation Accounts

- Resource Accounts

- Supply Estimates

- Resource Estimates

- Role of the Treasury

- The Government's cash handling and management systems

3. Principles of Control and the Role of Audit could include

- roles of NAO (certification audit and VFM)

- the Public Accounts Committee

- role of internal audit

- principles of propriety and regularity

4. Technical Issues could include

- cash vs accruals - main principles

- basic terminology: assets, liabilities, capital structure, fixed and variable costs, cost of capital

- fixed asset management

- methods of depreciation

- calculation of cost of capital, and return on capital

- working capital management

- full and marginal cost

- cash flow analysis; for planning and forecasting

- direct and indirect taxation

- accounting for inflation

- principles and techniques of purchasing practice

- UK and international accounting standards

- audit techniques

5. Output and Performance

- performance measurement

- output and performance analysis

6. Making the most of accounting and other IT systems could include

- understanding the figures which are being produced

- knowing how to extract basic management accounting information/reports, and how to manipulate data (for
managers/budget holders)

- inputting data (for finance staff)

- setting up new accounting systems

- development and use of accounting systems, and production of reports

- running the accounting systems

7. Financial elements in Decision Making could include

- investment appraisal

- costing principles

- risk and sensitivity analysis

- forecasting techniques

- activity costing

8. Principles of Budgeting could include

- principles of resource budgeting

- zero-based budgeting

- priority budgeting

- aims and techniques of budgetary control

9. Other

- numeracy

- PFI

- corporate governance

- accountability within the department & to Parliament

- fraud prevention

- EU finance

- actuarial techniques

AREAS OF GOVERNMENT WORK WHICH REQUIRE A LEVEL OF COMPETENCE IN FINANCE AND/OR ACCOUNTANCY

Those involved in:

- planning and budgeting (inc PES)

- financial control

- internal financial management

- budgetary control

- budget setting

- decision making

- financial reporting

- performance and output analysis

- objective setting

- financial analysis

- policy making

- EU financial issues

- audit

- financial accounting

- reporting to Parliament

- performance monitoring

- NDPB sponsorship

- project management

- option appraisal

- procurement

These could include people at all levels of an organisation, for example:

- Accounting Officers

- Agency Chief Executives

- Principal Finance Officers

- Finance Directors

- Other Directors

- Policy advisers

- Project Managers

- Budget Holders

- Managers of Teams/Functions/Areas etc

- Accountants

- Actuaries

- Staff in Finance areas

- Trainers

- Procurement Staff

- Contract Managers

- Treasury Expenditure team staff