Public Financial Management is budget driven. The budget represents the legal embodiment of government intentions. Government organizations utilize software applications to satisfy many or all of the steps in the budget cycle. Governments are moving to support and integrate the entire budget cycle within an Integrated Financial Management Information System (IFMIS).
Supporting the entire budget cycle enables more effective public financial management through:
The budget cycle consists of three main stages:
Some elements of the budget cycle are typically not automated or fully supported in government systems. These include:
Government organizations are moving to the full support of the entire budget cycle. Full automation of the budget cycle provides necessary information to decision-makers. It enables comparing across multiple years and among governments. It dramatically improves budget execution to enable meeting government objectives and improving results.
This is section 3.2.3 of a series of blog entries creating a Government IFMIS Technology Evaluation Guide. This includes information to assist in evaluating IFMIS options and the technology requirements for FreeBalance IFMIS implementations. These series will be combined with feedback to produce a comprehensive Technology Evaluation Guide to be published on our web site.
To paraphrase Lily Tomlin, ”I’m concerned that the person who invented the term ‘performance management” thought that if you didn’t manage it, performance would just get out of hand.” Many today think that “government performance management” is an oxymoron like “military intelligence” or “business ethics”.
Government Performance Management has been a topic of concern in the public sector for many years. Some view it as a fad – soon to be replaced with something else. Yet, the move to improve government results has taken hold. There are compelling drivers for improving results:
Organizations in both the public and private sector are attempting to improve results. Both public and private sector organizations attempt to increase performance by selecting Key Performance Indicators (KPI) and using techniques such as the Balanced Scorecard. Nevertheless there are important differences in performance management that distinguish government from private sector organizations:
The software category for reporting and analytical tools was primarily known as “Business Intelligence” (BI). This market has matured further to become known as Corporate Performance Management (CPM). CPM is distinguished from BI in that tools focus on KPIs and exception reporting. Many of the CPM techniques are useful for governments including:
Many government organizations wish to adopt performance management quickly. There are no “short-cuts” to effective Government Performance Management. Civil servants can develop methods and structures to improve performance management through a series of steps. The phases of Government Performance Management include:
Government performance management will continue to change over time because:
“Government should be run like a business.” James Chan examines this myth in “A Comparison of Government Accounting and Business Accounting” in the International Journal on Governmental Financial Management. Chan focuses on the American experience from the days of Thomas Jefferson who wanted the “finances of the Union as clear and intelligble as a merchant’s book.”
Unlike business accounting, public financial management is budget driven. “Budget specialists tend to view accounting as part of financial management, and financial management as part of budget execution. ..(T)he budget serves as the basis of management control and legislative oversight,” according to Chan. He points out the conflicting objectives of budget specialists and accountants in government. His chart, “Contrasting Views of Two Financial Specialists,” provides an excellent synopsis. This need to satisfy budget and accounting requirements results in more complex charts of accounts and control mechanisms in the public sector.
Chan points out the benefits of many accounting practices that derive from the private sector including double-entry bookkeeping. However, as described by Norvald Monsen in the same publication, there is a single-entry bookkeeping method in operation in German speaking countries called “cameral accounting.” Cameral accounting is a single-entry system that provides accrual reporting capabilities.
There is significant debate about the need for accrual accounting in government. This controversy increases when considering accrual budgeting . “Government budget specialists greet the introduction of accrual into budgeting with considerable skepticism, ” asserts Chan. The costs to adopt accrual accounting in government can be significant. For example, valuing property and assessing contingent liabilities can be onerous. And, the benefits of accrual accounting can be a disincentive for politicians. Politicians are keen to present budget “inputs” – the amount spent in their districts, not the value of the investment. The true value of government initiatives, including long term liabilities like pension plans, are not of interest to politicians looking for re-election.
Chan attempts a big picture view showing how elements of both business and government accounting are similar or converging. The need for transparency is an important trend in both the public and private sectors. This is a very interesting point given the complexity of business reporting requirements, particularly for publicly-traded companies in the United States. Unlike accrual accounting, there are incentives for politicians to support transparency. Transparent and financial facts show whether governments have executed on promises. Without these facts, opponents or the press are free to present misleading information.
by Doug Hadden VP Products
I was surprised. ”I’ve heard that FreeBalance has poor customer support, ” said an expert in public financial management. “You don’t leave anyone in country after the implementation.” It was particularly surprising given our improvements in customer support. And, that we have been leaving people in countries after implementation for the past two years. And, we received ISO-9001/2000 certification for these processes in November of 2007!
It has been challenging to transform a company to provide global support. One of our first blog entries described some of the changes made in the road to a customer-centric company. FreeBalance has made important strives in improving the sustainability of Integrated Financial Management Information Systems. In particular, we have been able to improve support by recognizing the unique challenges in our global market. It is clearly time to share results, actions and lessons learned.
FreeBalance uses a dashboard to monitor open cases. We began to use this dashboard in March of 2008. Every executive has real-time access to the dashboard. And, the dashboard is e-mailed every Monday morning. I’ve taken the data related to open cases to demonstrate improvements.
Orange line reflects one year of using support metrics dashboard
We have reduced the number of open cases since March of 2008 by over 56%. The number of emergency open cases, this morning, was zero. FreeBalance tracks software defects, data problems, service, sales and enhancement requests as open cases. Less than half of the cases reported are software defects. Many of these cases are often not software defects. The number of open cases has begun to stabilize over the past few months. Recreating problems often requires significant time and effort.
FreeBalance has retained the ISO-9001 certification in November of 2008. The processes continue to improve.
The Move to Customer-Centric
Manuel Schiappa Pietra, our President and CEO, joined FreeBalance in March of 2006. In the Spring of that year, Mr. Pietra mandated changes to support a customer-centric model. These organization changes included:
I can say that we’ve had six SWAT teams since that time. We’ve resolved all of these issues. I am personally involved in every SWAT team.
In Country Support
FreeBalance did usually keep staff in countries after implementation in the past. The thinking at the time was that the software was focused and simple. Governments could easily sustain these implementations. However, we encountered some difficulties. As a result, we leave small teams in countries or regions to support our customers. The current in-country support includes:
Canada (full support centre), the United States, Guatemala (covering Central America), Antigua (also covering Guyana), Kosovo (full support centre), Sierra Leone, Mongolia and Timor-Leste.
Other support initiatives
There have been numerous customer-centric initiatives since 2006 including:
The challenge for FreeBalance was significant – support government customers around the globe. With varying degrees of financial management and information technology capacity.
Some headquarters locations supported by FreeBalance
Companies can only improve that which is measured. Measuring cases and satisfaction rates has made a big impact to FreeBalance. Many of our customers have commented on how open and responsive we have become.
Some important lessons learned include:
FreeBalance created a Customer Exchange portal to foster collaboration among FreeBalance customers and staff. The portal is located at http://www.freebalancecustomerexchange.com and is limited to FreeBalance staff, customers, users, partners and PFM experts. This is still early days with about 100 members, of which 2/3 come from outside FreeBalance. We’ve seen some interesting discussions generated. (The shared photo album is global.) I hope that this portal will build on the Customer Exchange program.
We created the Customer Engagement program because so much of our in-depth management-level discussions with customers were specific to sales or support. Or, the discussions were in groups with other customers like the FreeBalance International Steering Committee and the FreeBalance Government of Canada Cluster.
We created a set of standard materials and questions for our customers. Sales, support and services staff visit customers to determine issues, product ideas and better ways for support. We are still in progress. Most of our Canadian customers have been visited. American customer meetings are scheduled this week. We also have meetings this week and next with important international customers. This program has proved to provide important insight:
But, this remains a journey of continuous improvement. Companies can become too satisfied with improvement and not maintain the discipline. We discovered that the most important discipline is to question conventional thinking. Just because software companies do something in a particular way does not make it right!