Sustainable Public Financial Management

Doug Hadden, VP Products

Is the journey to good governance paved with good intentions? Yearly snapshots of governance indicators are effective benchmarks. Causality? That seems to be more difficult to determine. How does a government effectively sequence reform to achieve improved governance indicators? How can we predict that a government will achieve improvements in the future? I think that Public Expenditure and Financial Accountability (PEFA) assessments are the best vehicle at hand. PEFA assessments characterize the Public Financial Management (PFM) environment in government. We’ve pointed out how the Government of Kosovo has improved results from the 2007 to the 2009 PEFA assessment. And these results are superior, on average, to other PEFA assessments.

How does this compare to with other countries in South Eastern Europe? Published PEFA assessments include:

• Albania 2006
• Kosovo 2007 and 2009
• Macedonia 2007
• Serbia 2007

Only Kosovo has published two PEFA reports. Kosovo is the only South Eastern European country to have published a recent PEFA report. So, there is a rather small sample size for comparison. Kosovo has shown good results, particularly in budget execution and budget transparency.

The landmark study by Paolo de Renzio, Taking Stock What do PEFA Assessments tell us about PFM systems across countries,  for the Oversees Development Institute identified some patterns for improved PEFA assessments:

population size… results seem to indicate that larger country size is generally associated with better PFM system performance

higher level of income perform better in terms of the quality of their PFM systems

Yet, Kosovo has a lower population than all South Eastern European countries except Montenegro and has the lowest GDP per capita

The Kosovo PEFA results are remarkable. It takes time for country governance mechanism improvements to show in governance indicators. For example, World Bank indicators for Control of Corruption and Government Effectiveness are lower than the peer group.

My sense is that many of the elements in the PEFA assessment represent dependencies that result in improved governance outcomes.  There is some anecdotal evidence to support this view:

• “I am particularly pleased with the commitment of the Kosovar authorities to further strengthening the sustainability of their policy framework.” IMF Managing Director Dominique Strauss-Kahn
• “Transparency of the Budget was improved with detailed supporting documentation” USAID
• “The greatest strength of the Kosovo PFM is its treasury system” 2007 PEFA Assessment
• “the internal control structure has been established in Kosovo. The basic legal framework is sound, with clear structures of accountability.” EU SIGMA
• “Other strengths are found in the areas of internal audit and control and external audit where the process is in place and capacity is being built up for effective implementation” 2009 PEFA Assessment

by Doug Hadden, VP Products

The United States Financial Management Line of Business (FMLoB) moving to the “cloud”? Gartner Group concluding that “shared services” is on the descent to the trough of disillusionment? To say nothing of analysis like:

a disturbing feature of the current debate on shared services has been the absence of a well-articulated economic and political rationale for this form of service delivery, a lack of analysis of alternative models of shared service provision and a neglect of available empirical evidence.

Yet, there seems to be an overwhelming set of evidence that centrally hosting budget, financial, grant and human resource management has significant cost savings. In an era of “doing more with less”, why have shared services run into so many difficulties?

FreeBalance Point of View

Just to be clear – FreeBalance supports shared services. Our Government of Canada Cluster is a shared service. Canadian government organizations work together to reduce support costs, and set FreeBalance product direction. (Along with the FreeBalance International Steering Committee.) Most of our international customers operate on a government hosted centralized system or shared service.

Cost-Benefit of “One Size Fits All”

It’s  difficult to find anything but unbridled enthusiasm about shared services on the Internet. Of course, much of the content is fashioned by large vendors and consulting companies who benefit from shared services approaches. There are many compelling arguments that many processes in government organizations are identical or similar and should be standardized. Standardization simplifies support, enables personnel movement without re-training and facilitates product upgrades. It eliminates duplication. Gains economies of scale.

Yet, many government agencies have unique requirements. Some are legally mandated. There are often many systems in place to manage the entire budget cycle. Many governments find it difficult to support this legitimate variability in need. Many hosted shared services implementations host completely different instances of the same software. According to Jeff Steinhoff, formerly with the US Government and now with KPMG:

when people started going to huge ERP solutions, for which they were dumping hundreds of millions of dollars, in some cases in excess of $1 billion, they were over-engineered, not well designed, everybody invented their own wheel. There was just problem after problem.

That’s why most ERP vendors recommend that government shared services use “vanilla” implementations with zero code customization. Which is a bit of challenge. Especially using software designed for the private sector. Especially when there is constant reform and modernization in government. It’s not “one size fits all”, rather it is more a “lowest common denominator” for those government agencies with modest needs.

Shared Services Today: Square Pegs and Round Holes?

Maybe it’s time to consider that the problem isn’t the shared services round hole. Maybe the problem is the software square peg. That wasn’t designed to fit into the round hole. We need to round these square pegs to make shared services work.

Yes, the FreeBalance Accountability Suite Version 7 meets these needs. But, it’s not a big secret: it’s just software architecture best practices.

Governance: Tail wags dog?

Gartner Group has predicted:

By 2013, more than 60 per cent of existing IT shared services that do not revise their current governance model will not be able to achieve the benefits expected in the business case.

The software industry seems to work like this: vendors tell customers what they are going to get. Central shared services agencies decide how to overcome the software limitations. Departments and agency users are frustrated by software limitations. These users blame the central agency.

Most of the shared services governance literature describes how to manage decision-making within the government. The problem is that governments are not setting software product directions.

The big  dog needs to wag the tail.  Software companies must commit to meet government requirements. These companies should not be “hands-off” operating through consulting organizations. Software companies providing software for shared services – whose annual Total Cost of Ownership (TCO) for large governments is in the hundreds of millions of dollars – must devote resources to meet government needs. There must be steering committees that obligate vendors to meet government goals.  That’s governance.

Annual workshop to explore “Cresting the Wave – Innovations in Accountability” theme

Ottawa, Canada (June 10, 2010) – FreeBalance, a global Government Resource Planning software company, will be demonstrating the latest advance in GRP technology, the FreeBalance Accountability Suite Version 7, at the Financial Management Institute (FMI) of Canada Public Sector Management Workshop (PSMW) 2010. The workshop will be held at the Marriott Halifax Harbourfront, Halifax, Nova Scotia, June 13-15, 2010. The FMI of Canada has been providing PSMW participants with educational opportunities, information exchange platforms and incomparable chances to network with colleagues, industry leaders and corporate suppliers for over 20 years.

The theme of the workshop is “Cresting The Wave – Innovations in Accountability”. Attendees will explore the issue that the public sector has been riding a wave of change, responding to pressures that have resulted from financial scandal, environmental issues and economic instability. The PSMW session complements the FMI national development program and emphasizes local and regional themes with a hands-on approach. Experts in public sector management will share innovations and identify challenges and issues in the financial management community.

“The PSMW 2010 theme is well aligned with the FreeBalance vision for achieving aggregate fiscal control and better management of public funds,” said Manuel Pietra, President & CEO of FreeBalance. “The FreeBalance Accountability Suite Version 7 has been designed specifically for public financial management to facilitate government transparency and accountability. This innovative technology covers the entire budget cycle including budget preparation, budget execution and civil service management.”

FreeBalance recently announced that its Departmental Individual Standing Offer (DISO) for the Government of Canada has been renewed and updated to support the FreeBalance Accountability Suite Version 7. Effective May 1, 2010, the FreeBalance DISO (E60ET-9-0010/001/ET) is a standing offer for software products negotiated with Public Works and Government Services Canada (PWGSC). FreeBalance worked closely with the FreeBalance Government of Canada Cluster (GCC) to ensure that the updated DISO provides the necessary pricing and deployment flexibility.

FreeBalance Version 7 supports the unique and evolving requirements of government, including GRP, Government Performance Management, Government 2.0, Shared Services and Service Oriented Architectures (SOA). FreeBalance Version 7 covers the entire budget cycle and provides fiscal control over fund allocations, expenditures, appropriations, revenue administration, and human resources. FreeBalance Version 7 is a fully compliant J2EE solution. The n-tier architecture allows departments and agencies to leverage existing web, application and database clusters. Unlike traditional software solutions, the FreeBalance Accountability is fully web based and has no hidden client/server technologies.

The FreeBalance Accountability Suite is one of the most widely deployed financial management systems inside the Government of Canada. More than 50 government departments and agencies use FreeBalance software for enhanced public financial management.

by Doug Hadden

VP Products

It’s the spam that never dies. Persistent. E-mail marketers have figured out that I might be in charge of marketing at FreeBalance. It is really easy to find out what our business is all about. We have a website. We blog. We tweet. Yet, I receive numerous offers for e-mail lists. That manage to evade the spam filter. Two today, so far.

Have I got a list for you

E-mail marketers promise lists of important decision-makers in business in the United States. Notwithstanding the fact that FreeBalance sells exclusively to government. This is not a closely guarded secret. And, our focus in Canada and emerging nations is not hidden.

FreeBalance is a For Profit Social Enterprise (FOPSE). This means that Corporate Social Responsibility (CSR) is core to our company values. So, we avoid ethically suspect marketing activities. Especially spam.

FreeBalance is also a Canadian company. We must comply to Canadian privacy laws – PIPEDA, the Personal Information Protection and Electronic Documents Act.  This means that we cannot send e-mails to people unless they wish to receive them. Including non-Canadians.

How good are these lists?

You would think that e-mail marketing companies would now about PIPEDA. They should know something about the companies that are one their lists. Yet, they persist in sending e-mails to FreeBalance, a company that is clearly not the proper target. How accurate is their data? It is so easy to fix.

The last time I received a call about a “list”, I pointed out that our web site is very clear. “Why not check out web sites before calling,” I asked. “You can avoid calling non prospects and you can target your message better.” Her boss was interested in achieving the most phone calls, not the most effective calls. It’s no wonder that corporate performance management techniques have not been effectively leveraged in government – they’re not doing too well in business!

Towards a Manifesto on Ethical E-Mailing?

Most companies provide some form of privacy policy to customers. Written by lawyers. And, there is a lot of controversy over the privacy policies and changes to policies for many companies. Credit card numbers have been stolen. Private information has become public. Maybe we need a manifesto. A CSR standard for ethical e-mailing. At this point, we just saying “no”.

From now on, I will reply to this primitive form of marketing with a link to this page. I’m curiously tempted to list the names of these companies. Is this ethical? Have they not given up any rights for privacy?

There was a time when spam was amusing, not it’s a digital blight

Configuration? Customization?

There is some confusion in the Government Resource Planning (GRP) market. Vendors like FreeBalance promote software configuration as an advantage. Other vendors promote customization. Generic software vendors tend to promote a broad array of options. This can be confusing – particularly when some of these options can be very expensive. It can also be misleading governments into thinking that requirements can only be satisfied through the code customization approach. It’s high time for someone to score configuration and customization options provided by enterprise and government vendors.

Configuration Methods

Parameters

• Description: Use of parameters or settings in software set-up pages.
• Implication: No change in source code. Parameters supported in upgrade to new versions.
• Generic Software Approach: Tends to support general system and basic set-up. Not intended to be comprehensive because of support for many markets.
• FreeBalance Approach:  All functions parameter driven. Intended to be comprehensive for governments (with other configuration methods). Supports progressive activation of features and functions over time.

Graphical Drag and Drop

• Description: Ability to configure complex concept through drag and drop methods with rich interface.
• Implication: No change in source code. Designed to facilitate complex configuration
• Generic Software Approach: Sometimes provides “wizards” to enable configuration.
• FreeBalance Approach:  Support of rich graphical drag and drop for complex design for Chart of Accounts, Logic Maps and Organizational Charts.

Rule and Workflow Parameters

• Description: Use of table-driven parameters to adjust business rules and workflow.
• Implication: No change in source code. Simple method of defining processes. Easy to adjust these to support progressive activation.
• Generic Software Approach:Generic vendors unable to provide simple table-driven methods because of the breadth of markets supported. Workflow often requires more complex Business Process Management approach (see below).
• FreeBalance Approach:  Uses table-driven parameters for workflow and rules. Supports progressive activation.

Adding Fields

• Description: Ability to add fields of information to support unique requirements.
• Implication: No change in source code.
• Generic Software Approach: Enables additional fields. Many are treated as generic text. Often not able to affect business rules or reports without code customization.
• FreeBalance Approach:  Full support of custom domains that enable adding tables, fields, field rules and validation. Used in reports and workflows.

Language and Localization

• Description: Methods used to support different languages and character sets to enable translation.
• Implication: Ease of translation and adjustment of terminology important for capacity building.
• Generic Software Approach: Support of many i18n methods. Requirement to localize large portions of software that may not be leveraged in public sector. Multiple entry points for translation – help, labels, documentation etc. Difficult and expensive to support and maintain.
• FreeBalance Approach:  Multi-lingual software. Unique translation method uses spreadsheet and uploads method. Easy to support and maintain. Ideal for countries with unique national language. Single entry point to translate help, documentation and e-learning.

Accelerators

• Description: Pre-configured set of default modules and default values for one of many vertical markets.
• Implication: No change in source code. Public sector often one of many verticals.
• Generic Software Approach: Accelerates implementation relative to other generic applications. Often includes so-called “best practices” from other markets. Some customization is typically required.
• FreeBalance Approach:  By definition, the FreeBalance Accountability Suite supports a single market – government. Rich out-of-the-box government functionality. Support of XML enables importing parameters and migrating data from existing systems to accelerate data migration.

Configuration Scorecard

Generic Software Approach:

FreeBalance Approach:

Customization Approaches

Call-Outs

• Description: Ability to augment processes with call-out or exit to additional code.
• Implication: No change in original source code. Ability to add custom software code linked to existing code. Adds new source code that needs to be maintained.
• Generic Software Approach:Typical approach. Most enterprise software does not support atomic Service Oriented Architecture (SOA), so call-out is limited to what is exposed by the vendor. Approach often uses proprietary APIs. Sometimes requires the use of the vendor’s technical platform.
• FreeBalance Approach:  Support for component SOA. Atomic-level integration with augmented code is available. However, the focus on public financial management reduces the need for this approach because primarily handled via configuration.

Business Process Management

• Description: Use of workflow-based authoring tools to develop and adapt business processes.
• Implication: Like Call-Outs, can augment existing code. Creates new source but does not affect original source code. Workflow tools tend to be generic and require some programming or scripting. Approach can reduce the burden of upgrading, however, provides ability to change workflow to support poor practices.
• Generic Software Approach: Used by some generic software vendors in order to adapt processes and integrate with acquired software companies. (There has been a debate about this approach between the two leading ERP vendors.)
• FreeBalance Approach:  Table-driven workflow provided rather than complex because of FreeBalance single market focus. The workflow engine in FreeBalance software supports the WfML standard, so generic BPM suites are compatible. The call-out support can call-out to BPM workflow.

Code Customization

• Description: Adjust existing software code to meet unique requirements.
• Implication: Modifications change the software code making it difficult to development, test, maintain and upgrade.
• Generic Software Approach: Code customization is the typical approach to meet unique government requirements. Code is customized by system integrators or by the government.
• FreeBalance Approach:  Code customization rarely required. FreeBalance typically provides the code and exposes code as parameters for long term support. Nevertheless, code customization is available.

Custom Development

• Description: Develop software components using an Integrated Development Environment (IDE).
• Implication: Creation of new source code. Complex to develop requirements, design architecture, write code, maintain quality, and handle changes.
• Generic Software Approach: Technical platforms provide comprehensive tools for software development. COTS vendors with Financial Management applications view this option to be used for highly specialized applications that integrate with COTS. Governments looking to develop software in-house tend to start with generic technical development platforms.
• FreeBalance Approach:  Government-specific platform includes technical platform and set of reusable Government Entities to accelerate development and facilitate maintenance. Governments can acquire this platform to develop applications from “scratch”.

Customization Scorecard

Generic Software Approach:

FreeBalance Approach:

FreeBalance helps governments around the world leverage robust Government Resource Planning (GRP) technology to accelerate country growth. FreeBalance software solutions for public financial and human resource management support reform and modernization to improve governance, transparency and accountability. Good governance is required to improve development results.

Founded in 1984, FreeBalance is a for-profit-social-enterprise (FOPSE) company headquartered in Ottawa, Canada, with international sales, support and development. FreeBalance solutions have been implemented in countries across the globe, including Canada, United States, Sierra Leone, Guyana, Pakistan, Mongolia, Afghanistan, Antigua & Barbuda, Timor-Leste, Republic of Kosovo, Palestine, Panama, and Uganda.

FreeBalance is currently seeking 2 Interns in Washington for a period of 3 months during June – September 2010.

The interns will work closely with the Marketing department to support FreeBalance activities.  During this internship you will participate and support the following activities.

· Update position and branding

· Web 2.0 social networking (blog, wikis, Slideshare, YouTube etc)

· New web collateral

· Proposal responses and updating response templates

· Regional and country research for business development

· Product requirement gathering

· Conference and event support

· Product documentation

· Market, technology and customer research

· Translation

Requirements:

· 3rd year students enrolled or recent graduates in a discipline of either Political Science, Economics/Finance, or a related field

· Excellent writing and editing skills in English

To apply for this position, please send us an email with your cover letter and resume.