Publication: The important role of a CFO

Our Spring budget briefing highlighted the challenges ahead for Scotland’s councils to deliver balanced budgets. In 2024/25, councils reported a budget gap of £585 million, estimated to increase to £780 million by 2026/27. This means councils will have to make increasingly difficult decisions about how they are run, how they can deliver services and what services may have to stop. Having an effective corporate finance function has never been more important or critical to the overall stability of each of Scotland’s 32 councils.

The Chief Financial Officer (CFO) is a critical position in any organisation.

In local government in Scotland their role is specified in the Local Government (Scotland) 1973 Act , often referred to as the Section 95 officer. They are responsible for holding the financial reins of the council, ensuring resources are directed towards priorities. More details on the CFO role in local government can be found in this CIPFA briefing.

As the challenges across the public sector intensify, the role of CFOs is increasingly in the spotlight. As CIPFA highlight, with existing frameworks on governance and decision-making being pushed to their limits, with public services becoming more complex, the CFO is expected to take an active leadership role, not just within the finance function, but across their organisation, sector and public services as a whole.

In recognition of their importance, we ask all auditors, as part of the annual audit, to highlight if they have any concerns about the capacity and skills available to local government finance teams. We want to know that the CFO has a seat at the top table. That they are invited to all key meetings, are actively involved in, and able to bring their influence to bear on all significant business decisions, so that the immediate and long-term implications on financial sustainability and stability are well understood. And we want to know they’re supported by a finance function that’s resourced to be fit for purpose. That means having the resources to provide appropriate and timely financial information to both members and officers, and to meeting deadlines for the submission of accounts for audit in a format that fully complies with all relevant codes of practice. We know this is generally the case, but there are signs some teams are stretched.

When budgets tighten, we know from our reporting that often corporate, or 'back office' functions face the hit, to avoid immediately impacting front line services. Against this background, it is important that in the pursuit of back-office efficiencies, the effectiveness of the financial function is not put at risk.

From our reporting, we know that councils need to think innovatively about how they can make the most out of the workforce they have. Recognising this, this will be the focus of our Best Value thematic work in the 2023/24 annual audit. Sharing services and professional skills offers efficiencies, helping manage recruitment pressures and skills gaps. Reassuringly, we understand local authorities recognise both the importance of the finance function as well as recruitment and retention challenges. Collectively, and alongside CIPFA (see the readout of this roundtable for a handy summary), they are working together to train and develop future finance leaders. This is key to ensuring local government can take the tough decisions and deliver the transformation we know is required. We’ll be following this work with interest and looking closely at auditors conclusions on the resourcing of the finance function as part of our consideration of the 2023/24 annual audits.