Doug Hadden, VP Products
We’ve been tweeting from 27th. Annual International Consortium on Governmental Financial Management (ICGFM) conference in Miami. You’ll find the chronological “storified” version of these tweets from each presentation posted on our storify site We’ve also summarized some of the themes from the conference.
This series examines different scenarios and the impact of Government Resource Planning (GRP) to improve governance. [Framework described in more detail.]
Information and Communications Technology (ICT) initiatives such as Government Resource Planning (GRP), sometimes known as Financial Management Information Systems (FMIS) for government, are seen as an expression of PFM reform. Diamond and Khemani suggest that “the establishment of an FMIS has consequently become an important benchmark for the country’s budget reform agenda, often regarded as a precondition for achieving effective management of the budgetary resources. Although it is not a panacea, the benefits of an FMIS could be argued to be profound.”
IMPACT: General agreement that Public Financial Management and institutional reform is critical to improving governance
PROBLEM: The pace of PFM reforms often slows because of the inability for information systems to adapt to new needs
OTHER FACTORS: Sequencing of reformsdiffers because of differing country contexts
SCENARIO: Continued and sustained activation of required PFM functionality based on country governance needs
Matt Andrews has pointed out the importance of regulative, normative, cultural-cognitive mechanisms to understanding the country governance context. Richard Allen suggested that there is no consensus model for sequencing. The need for more in-depth understanding of context in government is further complicated by what Cindy Jutras describes as a lack of agility in Commercial-Off-The-Shelf (COTS) Enterprise Resource Planning (ERP) systems that are often used in government. This series demonstrates how GRP can be used to improve governance and enable governance reform.
The GRP “progressive activation” lifecycle can be described as:
The progressive activation scenario requires the ability for GRP systems to adapt to changing requirements:
There are GRP governance tools operating at every stage in the PFM reform lifecycle including:
Some governance tools augment specific parts of progressive activation lifecycle:
Institutional governance enablers that are critical to progressive activation include:
There are other institutional characteristics that are important during the lifecycle include:
It can be argued that appropriate institutional arrangements for PFM reform sequencing will have limited impact without an effective underlying technology system:
There are numerous signs that are used to measure the governance effectiveness of PFM in this scenario:
In this anti-corruption scenario:
Progressive action using GRP with tools and enablers will help to improve ratings for:
The improvement of meta governance indicators such as Government Effectives improves trust and investment in countries. Improved effectiveness improves policies, laws and regulation of those laws. These indicators are used by credit agencies and private businesses. Foreign Direct Investment (FDI) can increase.
It is true that exogenous factors and informal processes can reduce the PFM reform pace. Appropriate GRP technology can enable “small wins” and incremental improvements that enhance institutional efforts and capacity building.
PFM reform in Kosovo began with the United Nations Mission in Kosovo (UNMIK) in 1999.UNMIK created an administrative structure creating the “Central Fiscal Authority (CFA), later renamed the Ministry of Finance and Economy. The FreeBalance Accountability Suite was selected and implemented in 26 days to support a new Chart of Accounts, support budget controls and issue payments.
The GRP system in Kosovo adapted to new reforms by the UNMIK and the Government of Kosovo after independence was declared in fiscal management, public procurement, human resources, budget, decentralization, corruption, cash and debt management. PEFA assessments also improved with use of GRP functionality cited as partly responsible. Today, Kosovo has rolled out GRP software to all budget organizations are all government tiers. Budget transfer and purchasing responsibilities have been decentralized to improve decision-making and service delivery while maintaining compliance with fiscal controls.
The pace of PFM reform needs to be sustainable to have lasting governance improvements. The information systems must enable rather than prevent reform. There have been numerous failures when inappropriate software is used for government financial management. GRP software can enable reform through:
These tools and techniques are best leveraged by governments with political will, good civil service, legislative and civil society capacity with audit organizations with sufficient capacity, independence and enforcement.
Institutions and institutional characteristics such as capacity and political will are necessary to effectively leverage the governance capabilities of GRP.
PDF & Storified version of presentation made by a FreeBalance team on May 7th. and links to relevant documents discussed.
On Total Cost of Ownership (TCP) for government financial management systems
http://www.freebalance.com/whitepapers/FreeBalance%2013-01%20Good%20Practice%20GRP%20TCO.pdf
Public Financial Management Good Practice GRP TCO by FreeBalanceGRP
On the use of GRP systems for Anti-Corruption
http://www.freebalance.com/whitepapers/FreeBalance%2013-03%20Good%20Practice%20Anti-Corruption.pdf
Public Financial Management Good Practice Anti-Corruption using Financial Systems by FreeBalanceGRP
On the advantages of GRP specialization
Good Practices in Government Resource Planning Vendor Specialization by FreeBalanceGRP
Isaac Maya, Business Development Manager
I have always been intrigued by government purchasing processes and decision-making. When governments decide to take the initiative to modernize their financial system and enhance their countries Public Financial Management (PFM) system, the common objective is to create accountability, transparency and ultimately increase country revenues and provide economic growth.
e-GP systems can be a major tool to meet those objectives. Yet there are few systems in operation. What are governments waiting for? And, why are multilateral banks setting e-GP project separate from PFM initiatives?
According to the Update of Multi-Lateral Development Banks e-GP Toolkit published in 2011: The governments of Chile and Andhra Pradesh reported savings ranging from 3%-20%, and Andhra Pradesh reported reduction in tender cycle time from 130 days to 32 days. The Government of Kazakhstan also reported significant savings from its partly developed system [Kazakhstan Centre for E-Commerce, April 2011].
Shouldn’t multilateral banks be prompted to expedite e-GP funding given these results?
Ever been in a situation where you purchase a model helicopter at the beginning of the week and you been waiting for the weekend to assemble, fuel it, take it to a field and fly it around, to later find out it’s missing the ruder? An essential interconnecting piece that makes the whole thing work! Well having a stand alone e-GP system that does not connect to the budget and communicates in real time with the Integrated Financial Management Information System (IFMIS) is as rudderless.
A solid e-GP system allows governments increase competition to achieve lower prices while reducing supplier bidding costs.
To quote the handy e-GP Tool kit once more: An e-GP solution must allow government procurement to be a commercial incentive that encourages productivity and competition, increases anti-trust mechanisms, facilitates the development of SMEs (less entry barriers to government markets), and promotes local and regional trade. The e-GP system provides a business development tool for both governments and supplier communities by providing access to information and opportunities locally, regionally and internationally.
IFMIS systems that have been designed for the private sector such as Enterprise Resource Planning (ERP), require a great deal of development and customization to meet government needs. This becomes doubly difficult if IFMIS and e-GP systems are bought separately.
The governments of Timor-Leste and Suriname have taken the initiative to modernize their public financial systems. Timor enjoy of a full financial suite that is web-based and can be seenin real time. The GRP approach ensures that all purchases are linked to the budget and that all financial procedures such as internal approvals and length of tendering process are integrated. There is no manual intervention to disconnect procurement from financial procedures. This has increased productivity, revenue growth and the increased of transparency and fair competition in a natural resource exporting country.
Suriname has recently taken on a PFM modernization endeavour, and is in the proper path to further reduce investment risk and promote foreign investments in the multiple sectors of developments, such as tourism, mining and agriculture.
Now that I have briefly showed you some of the good things a proper government focused e-GP system can provide. Why are multilateral banks keeping IFMIS and e-GP projects separately, when they can and should go together? If one provider has the IFMIS and another the e-GP, this just adds a layer of unnecessary difficulty and creates opportunity for corruption and inconsistent fiscal practices. Some governments realize to late that they have overspent budgets because of the lack of integration
Doug Hadden, VP Products
Latin American countries are experiencing growth and resilience to the financial crisis. Finance Ministers from Colombia, Paraguay and Peru discussed the next wave of reforms for Latin America yesterday at the Inter-American Bank. You would think that the Ministers would be touting accomplishments and speaking, with some certainty and authority, about future plans. The Finance Ministers demonstrated a grasp of reality. And, a framework for growth that includes horizontal initiatives that support inclusive growth. To reduce income inequality. They showed a willingness to consider labour, business and tax reform that seems so unlike the rhetoric we hear in most OECD countries.
Doug Hadden, VP Products
It’s the era of PFM myth building and myth busting.
Of clichés and fashion. Cynicism and risk aversion.
But, ultimately, it’s the era of increased insight into what works in public financial management reform.
Current discussions about PFM effectiveness seem to centre about the relative merits of applied technology versus applied practice. There seems to be a view among many that proven practices can be automated via technology and so-called technical initiatives such as Governmental Financial Statistics (GFS) or International Public Sector Accounting Standards (IPSAS) will yield positive outcomes. There is an opposing view that the country context is critical: institutional capacity, macroeconomic situation and cultural norms should drive reform.
Both points of view are valid. The truth falls in a fuzzy place in-between. Where there are elements of both.
”Best practices” has become a pervasive meme in the public and private sectors. Many suspect that this a code phrase to sell software (built-in “best practices”) or consulting. Matt Andrews of the Harvard Kennedy School has described the weaknesses of adapting so-called best practices , especially migrating a reform that seemed to work in one country to another . My sense is that the ‘best practice’ myth is unfortunately alive and well in public financial management. (‘Best practices’ remains a justification for donor funding for governance initiatives.) It’s going to take a few more years for this myth to die.
The opposing myth is that PFM reform success is more of an art than a science. If not the fine art of budgeting, spending, and managing public monies . In this view, PFM reform is the craft of understanding the country context. Richard Allen has stated that complexities of the reform process are not amenable to modeling; nor are the enabling conditions, political and administrative, that are critical for success and vary so widely from country to country. This myth is particularly strong in the PFM community. The result of which seems to be contradictory advice given PFM experts to the same government. It’s staggering the number of times that government officials are told to speed up or slow down reforms. To focus on budget planning or focus on budget execution first. To create an anti-corruption commission or undergo public service reform first.
PFM reform success cannot be divined through some kind of black magic?
That’s why we look at the set of practices that have been known to work. These are good practices that enable PFM success under certain circumstances. Some practices are better based on the country context. The point here is that “county context” is not half the mystery it’s made out to be. We’ve got open data, PFM, governance and transparency assessments and macroeconomic country data. The information isn’t perfect – but enough to:
There is evidence that initiating technical reforms without other conditions tends to have limited results. Matt Andrews found that governments could improve Public Expenditure and Financial Accountability (PEFA) scores in legal reform without necessarily putting those reforms into formal practice. And, as Jack Diamond, has has argued implementing technology such as Government Resource Planning (GRP) aka Integrated Financial Management Information Systems is no “panacea”.
Yet, technical reforms are significant themes for donors. And, GRP systems are considered to be a tool to enable PFM reform.
The notion that reform is 5% technology, or possibly no more than 1% technology was part of a recent discussion at http://www.freebalance.com/blog/?p=3969 . I was tweeting during the event and was asked what my view was. My view remains that these so-called technical reforms impact governance through changes in behaviour . As we have described in our FreeBalance Governance Framework :
Some observers suggest that implementing technical reforms including the implementation of a financial management system is somewhat easy and less political. Philip Krause has suggested that these technical reforms are not of magnitude to, say, proper parliamentary accountability – which involves party systems, electoral systems, media freedom. There’s a difference between accountants tinkering with the chart of accounts and societal transformation . My comment at the time was: “I find this notion that there is a distinction between technical and political reforms to be artificial. Technical reforms represent a sub-set of political reforms.”
But there are nuances to this notion of “tinkering accountants” (and tinkering economists) that was exposed with a recent twitter exchange with Matt Andrews.
International accounting standards #ipsas or #ifrs seem solutions to global issues but are bound to be limited bit.ly/Xkodlm
— Matt Andrews (@governwell) April 3, 2013
@freebalance the issue is not whether it is complicated, but rather if it is complex.involves many people, cultural convergence, etc.
— Matt Andrews (@governwell) April 3, 2013
@freebalance I say complex because many people and value changes associated. Basic ideas like disclosure, etc. are required and often absent
— Matt Andrews (@governwell) April 3, 2013
Andrews suggests that the PFM tinkerers encounter political barriers. Our experience implementing in many countries is that this is true. However, the political disincentives and technical complexities differ for these practices:
If PFM reform were well-understood, we’d be doing it better. Observers who focus primarily on a magic bullet as the critical success factor are doing us a disservice. Governance does not improve when government PFM decisions are weighted heavily to best practices, informal processes, ICT technology, human capacity, or ‘PFM as art’. Or, through tinkering accountants and economists. Or, self-congratulating donors, for that matter.
We are on the cusp of a scientific revolution in PFM reform and country development. Open data and ‘big data’ techniques are debunking strongly held myths . And, social media provides additional avenues for discussion that has only recently been available.
Let’s persist in breaking down the myths. Of opening data and discussions. And, turning PFM reform from art to science.
Good governance solutions to help achieve sustainable growth through the progressive activation of GRP functions in line with improved public service capacity in Suriname
FreeBalance today announced that the Government of Suriname is deploying a comprehensive FreeBalance solution including software, services, support and capacity building. FreeBalance Accountability Suite software is being deployed throughout the government starting with the Ministry of Finance. The implementation will include all line ministries, sub-national governments and parastatal entities (public works and education).
The FreeBalance solution will enable the Government of Suriname to achieve its Public Financial Management (PFM) reform objective to sustain economic growth. “The highest priority for the Government of Suriname is to sustain economic growth. Sustainable growth will enable us to increase public sector development and citizen service delivery. PFM reform is considered a foundation for these objectives,” said Adelien Wijnerman, Minister of Finance of the Republic of Suriname. The Government of Suriname will be using a modified “platform” approach to PFM reform consisting of four overlapping phases. This approach ensures that there is not an overwhelming “change management” burden and recognizes the need for “small” wins to socialize change. This good practice is a key part of the FreeBalance i3+qM methodology designed for sequencing PFM reform based on the country context.
FreeBalance is also extending its operations in Suriname to include a permanent presence in Paramaribo to support the project and the Government of Suriname. “We are fully committed to supporting the PFM reform objectives of the Government of Suriname. We recognize the need for a strategic partnership is required,” said Manuel Pietra, President & CEO of FreeBalance. “This method ensures financial sustainability as information systems are adapted to the sequence of PFM reform appropriate to Suriname. “The permanent presence in Paramaribo is bolstered with the support of FreeBalance staff and resources from service, support, sales, project, and development offices around the world. This global workforce brings an additional and unique blend of experience, lessons learned, and good practices to the project.
Doug Hadden, VP Products
We released a set of Public Financial Management (PFM) documents last week following on our mandate of sharing good practices for the community.
The third released document, embedded below, describes good practices in Government Resource Planning (GRP) sequencing. This is one of the most difficult subjects in PFM. I can’t tell you how many times that I’ve heard the notion that reform sequencing is an art form rather than a science. The consensus seems to be that country contexts differ so much that there cannot be a set of principles or guidelines.
I fundamentally disagree with the notion that good practices in PFM reform sequencing cannot be formalized. We’ve had a lot of experience in developing countries going back more than a decade and have seen patterns emerge. We’ve also formalized an internal process called Governance Valuation that we’re updating thanks to the explosion in open data. I’ve embedded a presentation from last year explaining this process.
Public Financial Management Good Practice GRP Reform Sequencing by FreeBalanceGRP
Doug Hadden, VP Products
FISC 2013 is our Seventh Annual FreeBalance International Steering Committee conference. The FISC approach differs from the traditional technology user group conference in many ways – good ways, we think
For one thing, FISC is about enabling customers to influence FreeBalance, not the other way around.
And, FISC is about gathering Public Financial Management (PFM) professionals from different countries around the world to help share good practices. We often have keynote speakers. And, we share our research and experience well beyond the narrow boundaries of being a software company. That’s our mission. I looked through past public FISC presentations (and those adapted from FISC and made public) and found my 7 favourites :
David Nummy from Grant Thornton providing practical experience about PFM reform in developing countries. PFM reform sequencing is a critical concern in developing countries and was of great interest to our government customers. This resulted in a brainstorming session and spirited discussions. It was agreed that capacity building was the most critical factor for reform success for the first stages. But, the importance of capacity building never dropped below “very important” for every stage of PFM maturity.
We’ve taken lessons in PFM sequencing over the years further to provide tools to help governments decide on the most effective reform courses of action. This presentation, slightly adapted from FISC 2012, was built on many of the ideas from the brainstorming from FISC 2008.
We use FISC to help us understand the future of Public Financial Management. We also share our research with government customers. We adapted this from the presentation we gave at the first FISC in 2007. Some of the predictions did come to pass.
Leveraging technology for governance is a concern for a software company like FreeBalance. Our government customers have been leveraging technology from FreeBalance and other vendors to enable reform and transparency. This often enables these governments to “leapfrog” more developed countries. This presentation was adapted from content given by our customers at different FISC events. Ever government that attends FISC provides an overview of PFM lessons learned: challenges, solutions, achievements with an emphasis on initiatives from the past year.
Social media, open data, Government 2.0 and crowdsourcing represents significant opportunities and risks for government. We reflected on this last year at FISC in the wake of the Arab Spring, the Ushahidi platform and the Tea Party movement. And, we presented this at the ICGFM conference later that year.
Steve Symanksy, formerly at the IMF, provided insight based on his experience in fragile states. He explained that the view that PFM reform should start with proper planning is incorrect: fragile states should start with budget execution and control first.
FreeBalance has been successful implementing sustainable Government Resource Planning (GRP) systems in post-conflict countries. (This seems to be confirmed in a recent World Bank report.” We’ve also been successful in more developed countries in achieving low costs for customers and ease to adapt software to changing needs. We reflected on the post-conflict experience using some of the content from customer presentations.
Doug Hadden, VP Products
We just finished the one-day training course in London to a group of public financial management professions from Africa and Asia, held at the Crown Agents office. There was a lot of information squeezed into the course that I gave, as you can below. It had a bit of “drinking from a firehose” effect with so much information.
The primary focus of the training was on lessons-learned in implementing Government Resource Planning (GRP) systems in emerging economies. Participants in the course were from the national and regional levels of government and from donors. There was some interesting discussions about vendor governance, donor assistance and PFM sequencing that is almost universal and mostly vendor-neutral.
You can see the topics covered in the embedded document.
