A double warning has been issued to public-sector finance directors that they risk marginalisation and may lose their strategic roles on local authority management teams. The Audit Commission has warned FDs that do not monitor the finances of trading units – formerly direct labour organisations – that they risk managing the services in an ‘inappropriate’ and ‘unacceptable’ way. Meanwhile, CIPFA has warned, finance directors could find themselves downgraded as senior management teams are restructured to accommodate new cabinet style executives under local government reforms. The warnings come weeks before the introduction of Best Value – the largest upheaval local government has faced since Labour came to power. In a new management paper the Audit Commission said finance directors had, in some cases, become ‘peripheral’ to the financial management of trading units and were unaware of the ‘scale of deficits or reasons for those deficits’. The paper, Getting the Groundwork Right – Financial Health for Local Authority Trading Units, said: ‘This indicates that the finance director has become – and allowed himself/herself to become – marginalised in an inappropriate and unacceptable way.’ A spokesman said: ‘It’s important that finance directors and local authorities have clear internal objectives.’ The commission recommends local authorities follow guidance in CIPFA’s Statement on the Role of the Finance Director. CIPFA said it issued the statement because of fears finance directors in local authorities are losing their ‘strategic’ roles on management teams. ‘We believe very strongly that FDs in local authorities should be playing a strategic role as well as the stewardship role,’ the institute said.
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