The nature of services provided by local authorities make it particularly important that decisions are based on detailed evidence, as well as an understanding of human impact.

“Understanding what is happening in their communities and the needs they are trying to meet for their citizens, means that finance professionals can do the best possible job with the finite resources they have available,” explains Iain Murray, Director of Public Financial Management at CIPFA.

Rikin Tailor, Director of Finance at Westminster City Council, agrees: “It is important to remember that financial pressures are a consequence of underlying trends within different service areas. Reducing overspend in a service area is not simply a case of bringing that pound figure down, it's about understanding what needs to be done to reduce the underlying numbers. That’s where data is really powerful and important. It tells you what is happening behind the financials, in the community.”

Tailor cites the example of rising costs in temporary accommodation over the past year in Westminster. “Going forward, we need to understand how the number of people needing these services will change and the key reasons underpinning these trends. In turn, that will help us understand what we can do to manage the financial pressures,” he says.

“We therefore need detailed data, not just the number of people needing temporary accommodation, but how many are staying in overnight accommodation? How many are in private sector leased properties? What is the split between families and single people? Better understanding of that more detailed data enables us to devise a strategy for reducing demand.” 

Identifying the right data 

Identifying the right data to use can be challenging. “The starting point is narrowing it down to the questions you are trying to answer and understanding the outcome that you want to achieve,” notes Murray. “Public sector bodies are sat on huge amounts of data, not all of which is going to be relevant, so having that focus is really important.” 

“Often you won't have the perfect answer or exactly the data you need,” he adds. “However, painting a picture by pulling three or four different bits of information together to get as close as you can to that evidence is a key skill for finance teams to employ. For example, a number of local authorities have been seeking to understand where the pockets of deprivation are in their boroughs. While there is publicly available data, such as ONS and census data, they have identified other information at their fingertips, such as those in receipt of council tax support, in rent arrears, or council tax arrears, that can also give them some good indications.” 

Working in partnership

For effective data and evidence-led decision-making in local authorities, Murray notes that “it's got to be a multi-disciplinary, ‘whole organisation’ effort; making sure that finance teams aren’t operating in a bubble, but are creating genuine partnerships with people in different service areas.”

Tailor underlines the challenges created by the variations that can exist across teams. “Finance teams can be dealing with different individuals using different systems that each have different levels of interaction with a council’s corporate systems. You’ve almost got to take a case-by-case approach to understand how to get the data, how it flows through information systems, and then how that data can be used to make informed decisions,” he says.

“Finance professionals are very good at putting systems, structures and processes around collecting information,” adds Murray. “Therefore, one of the key roles that finance teams can play is applying their professional skills and disciplines to the data gathering process, helping non-finance professionals understand how to put the same rigorous processes and control around their data and information gathering.” 

Clear communication and messaging

Finance professionals also play a key role in driving understanding and engagement among decision makers who have varying levels of financial knowledge.

“In a local authority setting, with elected members who have varied professional or personal backgrounds, it needs to be as easy as possible for people to join the dots between performance and spend,” says Murray. “For example, if a local authority is spending a lot of money, but not delivering the expected outcomes, that's really important to understand. Yet quite often, the two are reported separately. Instead, reporting should enable people to see finance and activity together.”

Technology is important in presenting a compelling narrative, as well as enabling a more integrated approach between finance and the different service areas. 

“Local government is still on a journey in terms of understanding the available tools and the best ones to use,” says Tailor. “However, it is important to remember that it's not just about creating fancy graphs, it's about presenting data in a way that clearly delivers your key messages so that people can understand, scrutinise and act on it.”

Finance professionals, therefore, need to be adept at negotiation, persuasion, and storytelling to ensure their insights are heard and understood. Building strong relationships with elected officials and other stakeholders is a crucial part of their role.

“Local authority finance professionals have to be able to deliver uncomfortable messages, particularly given the political dimension and the tensions that can exist between councillor manifestos and public finances,” explains Tailor.

Murray agrees: “One of the big challenges for our members is that quite often they have to speak truth to power. They have to help the organisation deal with what can be difficult and unpalatable decisions, particularly given the current state of public finances.”

AI and ML potential

Looking to the future, advances in technology, such as artificial intelligence (AI) and machine learning (ML) have the potential to transform data analysis and improve decision-making. “We see a huge opportunity for ML and AI to tackle the complicated modelling behind demand forecasting. It can also help with the difficult task of making the case for prevention. With the Health Foundation, for example, we are currently using powerful tools and analytics to examine the case for more upfront investment in certain areas of public service provision, such as leisure, education, and housing - predeterminants of healthy populations – to reduce future demand in acute care settings,” says Murray.

However, these technology advances also place an additional emphasis on the changing skill set required for practitioners. “We want finance professionals to see themselves as leaders,” concludes Murray. “They should feel empowered and proud about what the profession has to offer, and how they can help public sector organisations achieve their objectives and meet the needs of their communities.”