Sustainable Public Financial Management

Government of Canada entering the Second Generation of Public Financial Management Automation

Tweeting, meeting, talking, walking, speaking, blogging – above all – listening. A busy week at the Financial Management Institute (FMI) Professional Development Week in Gatineau, Quebec.  Presentations: product roadmap, technical deep drives, performance management and Government 2.0, the value proposition of ERP in government. Eight strategic customer meetings.  Five days of conference presentations. A Canada Export Achievement Award. What did we learn? Public Financial Management (PFM) automation is transitioning the second generation in the Government of Canada.

Here are the transition signs:

• Government Resource Planning (GRP): from integrating software systems to integral software approaches
• Government Performance Management: from compliance to impact
• E-Government: from structural to social (Government 2.0)

From Integration to Integral

(Automating the entire Budget Cycle)

We’ve spoken about this transition to the second generation of PFM automation. Software applications were developed to support operational government requirements. These applications became a collection of automation silos. Commercial Off-The-Shelf (COTS) applications entered the government market. Some were government specific like the FreeBalance Accountability Suite. Some were generic applications customized for government. As we described in our presentation, the Business Case for ERP in Government, integration has become a transitional theme: integrate the silos. Vendors have promoted the notion of single enterprise software suite across government. Why? Easier to integrate. What is really happening in PFM in Canada?

• Mission-critical applications are difficult to satisfy with generic software because of the board range of government mandates and lines of business
• Cost to integrate within generic software suites and to custom-developed applications remains difficult because of proprietary monolithic approaches
• Automation gaps are revealing as government organizations think outside the confines of traditional enterprise software categories

This second generation of PFM automation in Canada is characterized by:

• Extending application categories such as government accounting or human resources to comprehensive process automation
• Breaking the distinction between applications focused on so-called “structured” and “unstructured” data
• Recognizing what can be standardized in government and what cannot, while on the road to shared services
• Integrating budget management across all automated tools

This integral approach is holistic. Government organizations at the federal and provincial levels are pushing the limits of traditional software approaches. Financial managers focus on needs and objectives. They recognize that integration points alone do not provide effective management insight – especially when application components were not designed with budgets in mind. We found creative thinkers over the past week and a half looking for intuitive solutions. Financial managers recognize that PFM automation is much more than a collection of features or integrated features. PFM automation needs the right set of intuitive features that span transactions, documents and collaboration.

From Compliance to Impact

(Government Performance Management)

Government performance management was an important theme at the FMI Professional Development week. As we have written before, governments have moved beyond budget compliance – ensuring that money is spent according to the budget. Governments are focusing on improving results. The Canadian federal government Treasury Board Secretariat has developed numerous standards for performance management. Standards for “value for money” that aligned to risk. Performance management made easy – high business case scrutiny when risks are high. Appropriate measurements when risk is low.

From Structural to Social

(from E-Government to Government 2.0)

The Canadian public service is subject to demographic change. The millennial generation has entered the public service with advanced information technology expectations. The previous generation of PFM automation requires users to navigate through multiple tools to accomplish work. Through complex software generating visual noise. Public servants struggling through complex software rather than improving results.

Automating the structural “business process” represents the end of the first generation of PFM automation. The Canadian public service is beginning to understand the positive impact of Government 2.0.  There are skeptics whose experience with the first generation of PFM automation across the “boom, bust and echo” believes that the culture of government will never change. Yet, the focus of the Professional Development Week was “leadership.” Leadership for change. Leadership at every level of the public service.

We’ve identified six technology and five functional trends in this second generation of PFM. Three of these were important themes at FMI and customer discussions.

Imagine our surprise when we were invited to speak at the Financial Management Institute Professional Development Week about the value of ERP in government. Why? For one thing, FreeBalance is not an Enterprise Resource Planning vendor. We’re a Government Resource Planning (GRP) vendor, as we have spoken about frequently in this blog. ERP vendors operate in many vertical markets – FreeBalance provides software for governments only.

Nevertheless, we took up the challenge. The presentation was focused for Government of Canada financial managers, but it is applicable to many countries. We focused on three elements of the Treasury Board Secretariat Investment Planning Policy: value for money, total cost and project governance.

We think that we did a very good job presenting an objective viewpoint. We didn’t talk about FreeBalance and how our solutions are more applicable than generic software for governments.

Performance measurements are more difficult to determine for governments than companies. The private sector has an objective measurement for performance: profit.  FreeBalance presented the case for linking Government Performance Management with Government 2.0 at the recent Financial Management Institute Professional Development Week.

The technical discipline of “corporate performance management” provides governments with compelling planning and analytical tools. However, the “performance management” discipline is narrow focused and does not include all relevant aspects of government performance. Government 2.0 is a new trend in government transformation. Our presentation describes how Government 2.0 will transform the practice of public financial management. We describe how the government “back-office” benefits from citizen and civil society collaboration.

The practical application of performance management techniques in government has had mixed results. Unlike the private sector, Government Performance Management has no easily identifiable “bottom-line.” Government initiatives have unexpected positive and negative consequences. The selection of specific outputs and outcomes does not provide a 360 degree view of government performance.

Government 2.0 is the use of Web 2.0 techniques to enable collaboration among like-minded people in government. Government 2.0 provides the tools necessary to link government initiatives with societal impact. It also enables governments to improve performance by leveraging the wisdom of crowds.

We were excited to learn that FreeBalance won a Canada Export Achievement Award for our Government Resource Planning When you have the ability to sell a product that you know is going to improve conditions in a country, you really participate in shaping a nation. We’ve seen the transformation of countries that use our software.”

Of course, there is a little bit of hyperbole in the article in Profit Magazine. Manuel’s quote sums up what all of us at FreeBalance feel: “

There are some key points captured in the article and our press release:

• Customer-centric initiatives like the FreeBalance International Steering Committee and the FreeBalance Customer Exchange have helped us to get closer to our customer needs and set product priorities
• Re-organizing the company in 2006 to better address our International and Canadian market has resulted in high growth with new customers in Canada, Pakistan, Panama, Palestine, and Uganda
• Sustainable solutions require a local support model – that’s why FreeBalance hires locally, provides regional support and helps build government capacity
• FreeBalance built products that adapt to the country context: from post-conflict through emerging nations to the G7
• FreeBalance software avoids private sector functionality to achieve fast implementation in government

As Manuel said in the press release: ““his award is a reflection of the difference that FreeBalance is making in the world and our commitment to ensuring success and sustainability in each and every customer country. Governments around the world are undertaking significant public sector reform and modernization initiatives to support accountability, transparency and country growth. We are proud to be a part of this process.”

The past chair of the FreeBalance International Steering Committee, David Mathais, from the Government of Antigua and Barbuda, was quoted in the magazine article. “They’re well aware of the external and internal politics that impact some of the decisions that we, as business managers within government, have to deal with,” says Mathias. “It was said at a World Bank meeting that I attended once that ‘where there’s a crisis, there’s FreeBalance.’”

This is section 3.2.4of 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.

Transparency and accountability have become the dominant memes in governance – private and public sector. A favourite topic of politicians – particularly those in opposition parties.. We should not dismiss this as a fad. It’s a compelling objective for governments. It’s played a significant role in recent high-profile elections, such as the recent American presidential election

We’ve written about this before through our “knowledge sharing series” that summarizes lessons learned from conferences.

Globalization, competition and governance

Globalization generates competition among countries. Many realize that economic factors like education have become issues of national security. It’s much more than protecting an economic base – it’s about building and sustaining economic growth in a digital world. “Trust in the state can be undermined by evidence of corruption, secrecy, incompetence or lack of accountability.”

Country Gross Domestic Production (GDP) is positively associated with good governance measurements. Governance matters. There are many explanations for this phenomenon. One compelling argument links country risk with governance. Companies have choices. The private sector can expand business in many countries – build factories, set-up call centers, outsource services and provide ICT products and services. Governments that are opaque represent risk. Operating licenses could be revoked. Costs could increase through corrupt practices. Frivolous lawsuits could hamper business. According to the World Bank, “governance consists of the traditions and institutions by which authority in a country is exercised. This includes the process by which governments are selected, monitored and replaced; the capacity of the government to effectively formulate and implement sound policies; and the respect of citizens and the state for the institutions that govern economic and social interactions among them”

Governance Value Chain

• Constituents (voters, taxpayers, businesses, organizations) demand government accountability to ensure that money is spent effectively.  Constituents demand this directly to government agencies, to politicians and to specialized government agencies, particularly supreme audit organizations.
• Politicians demand accountability from agencies.  Politicians produce “compliance legislation”.
• The specialized agencies are provided some enforcement capabilities via the legislation. This provides formalized accountability.
• Civil society organization like the press and Non-Governmental Organizations leverage data to help improve governance

• Government 2.0 enables data to be used by constituents providing another layer for performance improvement

Government Challenges

• Many governments are improving transparency and accountability. Factors that slow these efforts include:
• Financial systems in use are not able to produce needed data in a reasonable time to be transparent
• Conflict between country secrets and need for openness makes it difficult to effectively support “freedom of information”
• Culture of expertise in government differs from the Web 2.0 peer culture model
• Digital divide makes it difficult to reach all citizens, especially those in the greatest need.

Setting government data free

Many experts believe that releasing government data assists in economic development. Taxpayers have paid for it already. The notion that information generates economic growth is not obscure. After all, the Rothschild fortune was said to be based on learning the results of the Battle of Waterloo faster than competitors. Data needs to be accessible and usable. It must be easy to understand and easy to leverage electronically.

Good governance measurements

Companies looking to expand in emerging economies can easily compare country governance risk thanks to so many international comparisons including:

• World Bank Doing Business “provides objective measures of business regulations and their enforcement across 183 economies and selected cities at the subnational and regional level”
• Public Expenditure & Financial Accountability (PEFA) supports “integrated and harmonized approaches to assessment and reform in the field of public expenditure, procurement and financial accountability”
• World Bank Governance Matters “reports aggregate and individual governance indicators for 212 countries and territories over the period 1996–2008, for six dimensions of governance: Voice and Accountability, Political Stability and Absence of Violence, Government Effectiveness, Regulatory Quality, Rule of Law, Control of Corruption”
• Open Budget Initiative (OBI), “a comprehensive analysis and survey that evaluates whether governments give the public access to budget information and opportunities to participate in the budget process at the national level.”
• Transparency International Corruption Perceptions Index “measures the perceived level of public-sector corruption in 180 countries and territories around the world.”
• Millennium Challenge Corporation (MCC) Country Scorecards “consolidate an individual country’s scores for each of the 17 policy indicators MCC uses to determine eligibility for its assistance programs. By using information collected from independent, third-party sources, MCC allows for an objective, comparison of all candidate countries.”

• Organisation for Economic Co-operation and Development (OECD) Development Cooperation Directorate (DAC) statistics for aid effectiveness, governance and development, and poverty reduction.  

Implication for government technology

The second generation of public financial management requires

• Fully auditable and timely financial data, including budget plans
• Comprehensive government Chart of Accounts that links funds, projects, organization, economic purpose to enable effective analysis
• Integration of transactions and electronic content
• Movement away from the document as the primary transparency metaphor to XML that can be mashed up to enable Government 2.0

FreeBalance_Cluster

Our Financial Management Institute of Canada (FMI) Professional Development Week started early with presentations to the FreeBalance Government of Canada Cluster and to our Performance Budgeting for Human Capital (PBHC) customers in Ottawa. FreeBalance has the largest cluster in the Government of Canada – 28 departments, agencies and commissions. And, PBHC has become the gold standard for civil service planning and salary planning. We’re participating in FMI as a sponsor. We’ll be talking about new product releases and describing how government performance management needs Government 2.0 in order to succeed.

The Cluster presentation was a deep dive into the technology of the FreeBalance Accountability Suite. Both presentations ended with invitations to join the on-line FreeBalance Customer Exchange. We started both presentations with a quick business update including mentioning the Uganda Civil Service Management implementation and the reduction of open support cases by 64% over the past 18 months.

This wasn’t your typical roadmap presentation: “this is what you’re going to get, this is when you’re going to get it, this is when you’re going to have to upgrade, if you don’t like it, it’s too bad.” After all, the FreeBalance roadmap is owned by customers. Our goal is to align our roadmap: government customers tell us what we are going to deliver and when we are going to deliver it.

 We described the FreeBalance Accountability Suite original design criteria. We believe that many problems experienced in the implementation of Government Resource Planning (GRP) systems originate with the design. We’ve written and presented our lesson-learned: the typical methods used by software vendors to design, develop and implement software needs to be adjusted to support Public Financial Management (PFM) needs.

Social networking capabilities, often called Government 2.0,  are required for the current generation of pure-web GRP. We showed part of our original vision case from 2005. This original vision included the fundamental integration of transactions, content and collaboration within a single system architecture.

We described:

• Use of software architecture best practices
• Component-based Service-Oriented Architecture (SOA)
• Open system and open source support
• Ability to choose open source or commercial middleware
• Support for government-specific requirements
• Configuration and progressive activation approach
• The product commitments and roadmap for the next 18 months
• Support for shared services and cloud computing
• How the FreeBalance Accountability Platform can help develop custom applications

There were many questions that we were able to clarify:

• Version 7 of the FreeBalance Accountability Suite provides comprehensive human resources and payroll functionality – full civil service management
• FreeBalance is testing  software using VMWare
• The technical infrastructure is open – we are prepared to support other operating system environments other than Linux and Windows
• How “custom domains” differs from the typical “additional fields” approach
• How the technology is scalable and the scale of recent implementations
• Exact method for multiple year chart of accounts
• How customers can customize help, documentation and e-learning
• Software deployment

We look forward to more dialog with our Government of Canada customers. We described how customers can participate to help design, adapt and test. Web 2.0 tools provide companies with the ability to support customer disruptive  innovation, as described by Clayton Christensen.  It’s a far cry from the days of “Mad Men” – creating demand when there isn’t any. The management of the Cluster has been enabling more interaction among customers and with FreeBalance. We are working together to leverage tools to enable more peer communications.

The Web 2.0 Digital Divide

The promises of Web 2.0 tools, when conceived of in advanced industrial countries, are almost unequivocally welcomed with open arms. Consider Web 2.0 in emerging countries, however, and the issue becomes a great deal murkier. What good is this web-based phenomenon when fewer than 10% of people in many emerging countries can even access the internet?

Concerns about this problem – commonly known as the ‘digital divide’ – tend to dampen enthusiasm regarding the rise of Web 2.0 as a tool for governance and sustainable development. It’s bad enough that the digital divide between rich countries and poor countries is as wide as it is. But if one takes a closer look at the statistics, it emerges that even within poor countries, the statistics reflect the usage of an elite few. The numbers, in other words, are worse than they seem. The demographic most in need of basic services is also least likely to find the tools to access them.

And even as Web 2.0 – and Government 2.0 – advances in emerging countries, can a ‘networked culture’ be more exclusionary than inclusionary? As more and more social and governmental services move online and begin to use the internet as their primary means of communication, will those beyond the digital divide be even further disadvantaged?

Mobile Telephony

The odds seemed pitted against Web 2.0 until a simple observation about the popular conception of the ‘digital divide’ turned things around. The notion of the digital divide mostly focuses on the differential access to computers and the Internet among people in a society. But as Mark Warschauer, author of Technology and Social Inclusion: Rethinking the Digital Divide points out, “this binary definition fails to do justice to the complex reality of various people’s differing access to technology.”

 Differing access to technology… A-ha! What about the cellular phone?

Bingo. A cursory internet search revealed that the prospects, suddenly, were not so bad after all. Examples of how mobile telephony is breaching the digital divide – and more importantly, providing access to once inaccessible services – abound. As observed in a recent article in the Economist, the many “anecdotal examples … illustrate the myriad unseen ways in which mobile phones are improving people’s lives across the world, and in the developing world in particular.”

We won’t burden you with these examples since they’re all public information, but here’s an especially illustrative and interesting one. An enterprising civil servant in Pakistan’s Jhang District developed a novel way (the ‘Jhang Model of Governance’, as it came to be known in the Pakistani press) to counter corruption. Zubair Bhatti directed clerks who handled land transfers to submit a daily list of transactions along with the mobile phone numbers of buyers and sellers. He explained that he would call these citizens at random to inquire whether they’d been asked to pay bribes. Once charges were brought against a clerk who made light of Mr. Bhatti’s resolve, it became clear that Mr. Bhatti meant business. A sudden improvement in service was reported. Mr. Bhatti introduced this method to other sectors within his control, and efforts are now underway in the provincial government to extend the concept elsewhere.

Yet another article argues that traditional forms of society are more conducive to collaboration and information-sharing, and that this culture can be leveraged more efficiently with the use of mobile technologies.

Emerging country development

It’s clear that utilizing mobile technologies to provide more widespread access to information and services still requires a deep and long-term commitment on the part of emerging country governments. There are still millions of people out there who don’t have access to mobile technology. But suddenly, the cost barrier isn’t quite as high. Unlike efforts at minimizing the digital divide by distributing more and more computers to the underprivileged, the incentives for stakeholders advancing mobile telephony are much better aligned. Governments can leverage an already-existent relationship between wireless service providers and the increasing number of citizens who can now afford it. And major mobile phone manufacturers have already begun catering to the large customer base in developing countries. It’s something of a win-win situation.

Granted, just as there are in advanced industrial countries, there are “cultural barriers” within government that might make the widespread advancement of mobile technologies all the more difficult. The argument, not unlike theories of globalization and the state, is premised on the notion that citizens ‘taking things into their own hands’ (literally, in the case of mobile phones) undermines the writ of government. But the fact remains that the genie is out of the bottle, and the faster it can be favourably co-opted (see ‘Jhang Model of Governance’ above), the better. According to a recent whitepaper, 80% of the world’s population is covered by GSM technology, and more than 2 billion people currently have access to mobile phones. With 1 million new subscribers every day, this number is set to reach 4 billion by the end of 2010. The math is compelling. Rather than fearing that government authority will be undermined, governments must realize that mobile technology provides new avenues to increase citizen participation and satisfaction. And as more and more citizens realize that government is not just a service for an elite few (as it once may have been), their stake in it increases.

 At FreeBalance, we take pride in developing government resource planning solutions that advance the fundamental principles of good governance and sustainable development. The quest for more efficient and cost-effective ways to increase citizen participation in government is well within our mandate. While we try to discover new ways to advance economic growth and development through mobile technology, we welcome comments and suggestions that might help us along the way.

This is section 3.1.4 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

Mobile phones have become the tool of choice in many countries. Wireless device adoption continues to grow. Computers are downsizing to netbooks. Smart phones are becoming smarter. Many experts see mobile technology closing the digital divide. In fact, wireless technology is helping countries leap frog by avoiding the expense of wired connections.

Implication

GRP software vendors need to adapt to the wireless reality through the support of simple communications methods, such as SMS, to enable notification and approvals on inexpensive mobile phones. Smart phones will enable richer applications, but competition among multiple platforms means that it is too early for widespread adoption in emerging countries. Nevertheless, GRP software vendors need to support open interface standards so that government data can be mashed up in commercial applications.

Economic Value Add

The mobile phone is ubiquitous. It was once thought that these devices were luxuries, supporting little value add. Yet, consider the plight of a teacher in rural Africa. The teacher may takes hours out of her time to go to the nearest educational depot to get supplies she ordered – only to find that they have not arrived. The cost of a single SMS message to alert her that items have been received saves time. It enables her to spend more time teaching and less time travelling.

FreeBalance and wireless government

Wireless is enabled. The FreeBalance Accountability Suite support SMS and e-mail integration. We provide a mobile application that enables notifications, alerts and approvals. The Suite supports open standards to enable exposing government data for mashup applications. The infrastructure was designed to support different presentation layers to enable smart phone support.

Durante la semana del 26 de octubre, FreeBalance participó en el XIV Congreso Internacional del CLAD sobre la Reforma del Estado y la Administración Pública. El evento tuvo lugar en el Salvador, Bahia, Brasil.  El CLAD es el Centro Latinoamericano de Administración para el Desarrollo y tiene como misión promover el análisis y el intercambio de experiencias y conocimientos en torno a la reforma del Estado y la modernización de la administración pública, mediante la organización de reuniones internacionales especializadas, la publicación de obras, la prestación de servicios de documentación e información y la realización de estudios e investigaciones.

El evento atrajo a más de 2.000 participantes, alrededor de 50 expositores y, destacados  paneles y discursos de funcionarios del Gobierno de todos los países de América Latina, España y Portugal.

 El tema central fue la Reforma del Estado y la Administración Pública.  Los 123 paneles fueron en los siguientes temas:

• Enfoque interdisciplinario y coordinación intersectorial en la gestión de una administración pública compleja
• En búsqueda de la excelencia en la administración pública mediante la gestión de la calidad y de una gestión para resultados de desarrollo
• Hacia el mérito profesional y la flexibilidad de gestión en los sistemas de función pública/servicio civil
• Una formación de directivos y funcionarios públicos que persiga el éxito de la acción de gobierno
• Valores, normas e instrumentos de la ética pública para garantizar el buen gobierno en Iberoamérica
• Gobierno electrónico para la participación popular y la gestión del desarrollo

La tendencia general de oradores y paneles fue cómo abordar las desigualdades de América Latina y mejorar la calidad de vida.  Énfasis en cómo las políticas públicas, lecciones y experiencias deben replicarse todo a través de los países de la región.  Varios paneles fueron sobre descentralización y experiencias de los gobiernos locales.

En el stand de FreeBalance tuvimos la oportunidad de presentar a cientos de asistentes nuestra recientemente anunciada Plataforma de FreeBalance.  Explicamos como FreeBalance puede combinar información de diferentes aplicaciones a través de diferentes instituciones para fomentar innovación, colaboración y transparencia.

 El evento fue muy bien organizado. La ciudad de Salvador es también conocida como capital Brasilera de la felicidad debido a su población sumamente alegre y llevadera, así como también por sus innumerables fiestas populares al aire libre, incluyendo su Carnaval callejero.  Los Brasileros son grandes en entretenimiento.  Experiencia enriquecedora.

FreeBalance participated in XIV International Congress of CLAD on State Reform and Public Administration during the week of October 26. The event took place in Salvador, Bahia, Brazil.  The Latin American Center of Administration for Development (CLAD)  mission is to promote the analysis and sharing of experiences and knowledge surrounding the State reform and the modernisation of Public Management, through specialized international meetings, publications, providing documentation and information services, studies and researches and the execution of joined technical activities between the member countries and other regions.

The event attracted more than 2,000 participants and included more than 50 exhibitors.  The XIV International Congress of CLAD on State Reform and Public Administration event featured 123 interactive panels and speeches from government officials and subject matter experts from each Latin American country, Spain and Portugal.

The theme for the event was State Reform and Public Administration.  Panel discussions focused on the following topics:

• The interdisciplinary approach and intersectorial coordination in the management of complex public administration
• The pursuit of excellence in public administration through the quality and management for results of development
• Advances towards the professional merit and the flexibility of management systems in public service management / civil service
• Training managers and Government officials operating the success of the action of Government
• Values, norms and public ethics instruments to ensure good governance in Latin America
• Electronic government for popular participation and development management

The speeches and panel discussions examined the application of public administration practices to address Latin America inequalities and improve the quality of life.  The sessions emphasized the public policies, lessons and experiences that should be replicated all across the countries in the region. The public management panels focused on the ability for governments to advance sustainable socio-economic development while strengthening government image and value. These sessions highlighted the need for citizen centric solutions for government transparency providing access to the use of public funds.  Several panels also focused on decentralization and local governments experiences in Latin America.

Conference attendees recognized FreeBalance as a leading global provider of software solutions for public financial management.  FreeBalance attracted hundreds of attendees to satellite information sessions to showcase the benefits of developing reliable custom government solutions using the recently announced FreeBalance Accountability Platform. The FreeBalance Accountability Platform is a low risk, proven, approach for developing modern public financial management solutions.  FreeBalance demonstrated how the FreeBalance Accountability Platform can be used to rapidly develop custom government solutions that integrate and mashup information from different applications across different institutions to foster innovation, collaboration, and transparency.

The event was very well organized and well attended. The city Salvador is also known as Brazil’s capital of happiness due to its easygoing population and countless popular outdoor parties, including its street carnival. Brazil’s reputed passion for entertainment and the cultural experiences of Salvador made for the perfect setting and environment for the XIV International Congress of CLAD on State Reform and Public Administration event.