Government 2.0 is a Logical Extension of Government
Tim O’Reilly, who coined the term “Web 2.0″ addressed the Government 2.0 in a CBS News interview. He made the case for the use of ‘collective intelligence’ in govenment. There has been a lot written that government does not have the appropriate culture for participation and collaboration. Mr. O’Reilly ponts out that “government is a vehicle for participation”.
Doug Hadden, VP Products
Phasing of Public Financial Management (PFM) “reform, through achieving gradual manageable steps (DFID 2005)” is considered a good practice. In fact, if any thing in PFM is considered a best practice – it’s the phased implementation of PFM reform and supporting information systems as we’ve pointed out before and validated at numerous conferences.
The sequence of reform depends on the country context. “Implementing public finance reforms of any kind requires an understanding of the entire public finance system in place in that country. It requires an understanding of the institutional arrangements (Rodin-Brown 2008).” As a vendor specializing in the government domain, Government Resource Planning (GRP), FreeBalance has developed a methodology called progressive activation that enables governments to modernize over time. That’s because, unlike the private sector, technology solutions like GRP need to follow reform. A company can easily change a chart of accounts to improve performance tracking or adopt secure electronic cheques with electronic signatures. Governments often need to change the law to support these “business process” improvements.
There is no established sequence of reform (Allen 2009) except at a fairly high level. David Nummy from Grant Thornton provided a good PFM framework at our FreeBalance International Steering Committee meeting in 2008.
It is rather frustrating to government PFM practitioners to determine the sequence of technology adoption to follow reform. Some technology adoption does not require legal reform. As I discovered in the Kyrgyz Republic, there is an appetite to understand the benefits of financial, budget and civil service automation to help determine priorities for legal reform. We have always identifed the three dimensions of sequencing GRP technology:
We have our first draft of a simplied scorecard to help identify the level of maturity of a government financial management software system. I’d very much like input and ideas. This will help all PFM practitioners regardless of software technology used. The items in the “modernization” column may imply the acquisition of additional modules or it could be activating functionality that already exists. Governments can utlize the scorecard to show what is current implementd and what could be implemented in the future.
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FUNCTIONALITY |
DECENTRALIZATION |
MODERNIZATION |
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PUBLIC FINANCIALS MANAGEMENT |
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GOVERNMENT TREASURY MANAGEMENT |
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PUBLIC EXPENDITURE MANAGEMENT |
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GOVERNMENT RECEIPTS MANAGEMENT |
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CIVIL SERVICE MANAGEMENT |
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GOVERNMENT PERFORMANCE MANAGEMENT |
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OBJ
FreeBalance was recently featured in the Ottawa Business Journal (original article), published on July 26, 2010. Here’s an excerpt:
FreeBalance tracks cash in Afghan government
by Elizabeth Howell
Wondering where the money goes is a common problem in Ottawa. That issue is compounded in Afghanistan, which does not yet have all the financial controls that Canada does.
Ottawa tech firm FreeBalance has been in the war-torn country since the interim government took over from the Taliban in 2001, implementing its financial tracking system province-by-province to help chart the flow of aid money through government spheres.
Just this spring, the last Afghan province – Nuristan – signed on to FreeBalance’s system, which is a small yet crucial part of a government-wide software solution designed to allow people away from central government to decide where to spend money next, said Doug Hadden, FreeBalance’s vice-president of products.
Read the FreeBalance article on the Ottawa Business Journal website >>
How Can U.S. Federal Agencies Use Social Media to Enhance Civic Participation? Yasmin Fodil and Anna York from the Harvard Kennedy School of Goverment is providing Government 2.0 guidance. The report, How Can U.S. Federal Agencies Use Social Media to Enhance Civic Participation? has applicability beyond the United States. There has been a lot of discussion about leveraging social media for citizen engagement. Most of the lessons learned are presented as anecdotes. This can be very difficult for public servants to make the connection to their context. This work provides some excellent advice beyond the obvious, in particular the Readiness Assessment and Strategy Planner. It provides an excellent overview of the social networking literature.
Doug Hadden, VP Products
The Government Accountability Office in the United States has published a statement of the use of Web 2.0 by Federal Agencies. The statement by Gregory C. Wilshusen, Director Information Security Issues, focuses on – well – information security issues. There has been an undercurrent of risk avoidance and general fear of Web 2.0 technologies in government. This statement is fair and balanced (really fair and balanced, not the tag line) with a good assessment of the privacy, access to information and records management limitations of the Government 2.0 state-of-the-art. And, Mr. Wilshusen describes some of the work taken to overcome these concerns.
The audit function in government has transformed in the past few years from compliance – making sure that rules are followed – to performance. Analyzing programs for effectiveness in meeting mandate and achieving value for money. That’s what we need here. Government decision-makers need to understand the benefits – not just the risks. Otherwise, government transformation opportunities slow.
The difficulty with most analysis of Government 2.0 is that there is little distinction made between purely internal collaboration efforts and external public-facing. There’s no question that both types of activities share some elements of benefit and risk. But, as I’ve pointed out in the past, internal Government 2.0 represents a significant opportunity for mission achievement. And, lessons from internal efforts can be used to reduce the risks associated with external Government 2.0 initiatives.
Doug Hadden, VP Products
There really seems to be no hope for Afghanistan. Select “Afghanistan corruption” in Google News and you’ll find thousands of press articles. Gives the impression that there is little progress in anti-corruption. As Newsweek reports, the Government of Afghanistan “vows to fight the Taliban harder, spend international aid money more wisely, end corruption, and promote good governance in order to win the embattled population over to his side.” AFP, like other reports, indicated that donors committed to “putting more aid money through government coffers, and applying international standards of accountability should reduce levels of corruption and embezzlement.” Integrity Watch Afghanistan has published a study showing that “Corruption is rampant and has become more entrenched in all areas of life in Afghanistan, and the Afghan government is under increased pressure to address the issue.” It doesn’t help to have bundles of money being flown out of the country even though the BBC and other press outlets reported that the Afghan Minister of Finance Omar Zakhilwal “said foreign contractors were to blame for taking the bulk of $4bn (£2.6bn) that has reportedly left the country in recent years. He said his government had little control over foreign aid money.”
Corruption is a multi-faceted and complex problem to overcome. A 2008 Study by Altai Consulting on Aid Effectiveness recognized the complexity of this “cross-cutting” issue. Some of the factors include:
The mechanisms for anti-corruption are also complex to coordinate:
It is no surprise that the recent “conference ended with the approval of a 10-page communique that restated strong support for channeling at least 50 percent of development aid through the Afghan government within two years while the government reforms, reduces corruption and strengthens its public financial management systems”, acording to the AP. Why? The use of country financial systems reduces transation and administrative costs, enables more effective budget planning by having full visibility over funding, and encourages the building of capacity. The study by Altai Consulting on Aid Effectiveness indicated that “the reasons cited for not using public financial management systems include lack of confidence by donors in system and associated corruption.” Perhaps the bundles of money leaving Afghanistan by not using the country system is a bit of wake up call.
We reported the good news about the roll-out of AFMIS to all mustafiats yesterday. We were aware of the progress made by the Government of Afghanistan in implementing financial management across the country, and the successful completion some months ago. That’s because AFMIS is the FreeBalance Accountability Suite. The remarkable achievement is that this was implemented without our assistance in the face of military conflict. This is the definition of a sustainable implementation – can be installed and managed by public servants. Sure, it is less revenue for us, but it is critical to improving governance – and that’s what we are all about.
AFMIS is a tool that improves efficiency and effectiveness in public finances. It also provides anti-corruption tools including:
The Ministry of Finance has a strong reform agenda that helps reduce corruption and increase accountability and capacity:
And, the Ministry of Finance is leading in transparency with the publication of an accounting manual and regular monthly budget reports.
It is somewhat difficult to find current information about the state of public financial management in Afghanistan. The most recent Public Expenditure and Financial Accountability (PEFA) assessment was completed in December 2007 and published in 2008. This occured during the first stages of decentralization, yet showed improvements in indicators since 2005: “Out of total 28 PFM performance indicators, 18 indicators improved and two indicators deteriorated, while eight indicators remained unchanged.” (See chart in top left). The conclusions, 18 months ago, were promising:
Comparison with other countries shows that PFM performance in Afghanistan as of December 2007 is better than that of many other comparable countries in most categories. Indicators on budget cycle (C-(i)-(iv)) outperform even average the average for those middle income countries for which PEFA assessments are available, which suggests that there have been major improvements in this area. However, the credibility of budget (A) is lower than the average for other low income countries for which PEFA assessments have been conducted, while comprehensiveness and transparency (B) is equivalent to the average of these low income countries.
Corruption is measured in numerous ways, but mainly through perception. The World Bank governance indicators show an improvement in indicators since 1998. The corruption indicator for 2008 is down from 2003, but the standard error has been reduced. And, more sources have been used in the indicator. A 2009 study for USAID provided 6 recommendations to reduce corruption in Afghanistan. We hope that AFMIS represents a foundation element to improve the anti-corruption regime in Afghanistan – especially building on success. After all, the Ministry of Finance is rarely mentioned as a source of corruption. It is also critical that measures designed with Afghanistan in mind – “the country context”, be used to help reduce corruption.
GRP systems are typically phased in. Additional modules in GRP suites are added in sequence with the government reform agenda. Additional GRP modules can assist in anti-corruption:
Of course, GRP is a tool – a critical part of the anti-corruption solution.
Doug Hadden, VP Product
I took exception to the sensational reporting on government corruption in Afghanistan last week. The Wall Street Journal broke a story about the sacks of money leaving Afghanistan in aircraft. Predictable moral indignation and blaming the Government of Afghanistan ensued. Yet, none of these funds seemed come on-budget through the government financial system. (That’s the kind of subtle fact that interfers with the media narrative). Just yesterday, the IMF PFM blog posted a report about the success of the government financial mangaement system! I wonder whether this will be analyzed on cable news channels.
The article describes the successful sequencing of the Afghanistan Financial Management Information System (AFMIS) by the Government. The system was recently completed the roll-out to all provinces or mustafiats. All national line ministries are also integrated. This means that 100% of all on-budget funds will operate through AFMIS. And, this was accomplished by the Government under difficult circumstances. The IMF article provides good insight into lessons learned, especially in sequencing PFM reform.
Of course, one factor for the success of AFMIS is that it is the FreeBalance Accountability Suite. Government Resource Planning (GRP) systems enable PFM reform. But, reform is the responsibility of the government. There are some factors of why the FreeBalance Accountability Suite enabled reform in Afghanistan – rather than inhibiting reform – one of the problems in the public sector worldwide:
It is now time to stop blaming the victim for off-budget corruption. It’s also time to recognize the Government of Afghanistan for successes.
James Elrick
Marcom Specialist
I just finished reading an interesting article on the NYT’s website titled “Digital Diplomacy“. The article describes how Jared Cohen and Alec Ross, two employees of the US State department, are using Twitter and other tools to break new ground in using social media technology in the normally staid government. The article covers a lot of material, such as how they helped set up the Text Haiti 90999 program hours after the earthquake so that people could make $10 donations which raised more than $40 million for the Red Cross, and how they worked with a major telecom company in Mexico to allow people to SMS anonymously to report crimes. But there was one section in the article that needs commenting: It’s where the two travelled on a delegation to Silicon Valley, held meetings with various companies, and also met with Eric Schmidt, the CEO of Google and dozens of Google employees. Here’s the section from the NYT’s article:
“After the fireside chat, Schmidt sat in on a meeting with Google.org (the company’s nonprofit arm) in which Ross and Cohen described the difficulty U.S. embassies have in keeping track of services and resources in countries where the U.S. hopes to spur development — tracking, for example, nongovernmental organizations in Kenya.
“It would be fascinating to transform one of our embassies,” Cohen said, “and see if we can create a virtual aspect to make it a one-stop shop for everything that’s out there.”
“NGOs keep asking for a way to be able to understand, in a country like Kenya, who’s doing clean water, who’s doing education,” one Google employee said.
Several engineers chirped back and forth about the virtues of user-generated feedback and the challenges of multilayer mapping technology, until Schmidt cut them off. “We have a big operation in Kenya,” Schmidt said. “We have the smartest guy in the country working for us. Why can’t we just do this?””
Well, you could Mr. Schmidt, but why reinvent the wheel? If you have the smartest guy in the country, hopefully he is smart enough to realize that he doesn’t have to design and develop something from scratch in order to track “who’s doing clean water, who’s doing education”. And there is much, much more to track as aid agencies and NGO’s provide numerous services to help alleviate poverty and improve economic situations.
My suggestion to “the smartest guy” is that he directs his attention to the International Aid Transparency Initiative (IATI). Why? Because the IATI brings together donors, partner countries and civil society to enhance aid effectiveness by improving transparency. The IATI also helps reduce corruption, increase cooperation and improve aid effectiveness. Aid transparency means that everyone can see how much aid is being provided, what it is being spent on (water, education), and what it aims to achieve. This helps ensure that aid is used in the most effective ways, so that each dollar, euro, pound, yen goes as far as possible in fighting poverty. And the IATI is working towards aid transparency all over the world.
So what’s most troubling to everyone at the fireside chat is that nobody knows exactly where the donor money is coming from and where it’s being distributed and used. As mentioned in a previous blog post, “in addition to using country systems, donors and recipient governments need to harmonize aid and report it. This is the goal of the NGO, Publish What You Fund, one of the most active participants in IATI.” And by quoting that text, I didn’t have to reinvent the wheel.
Doug Hadden, VP Products
The Overseas Development Institute, International Budget Partnership and Publish What You Fund has published a study that shows how aid information can be aligned and integrated with recipient country budgets.
The report authored by Samuel Mooon (pictured on the left at the recent IATI Technical Advisory Group meeting) with the assistance of Zachary Mills takes a practical approach.
The Accra Agenda for Action mandates the use of country systems by development partners. According to the authors, “the Paris Declaration and the Accra Agenda for Action emphasise and formalise the importance of aligning aid with recipient government priorities and delivering aid through government systems. Yet, a significant amount of aid, in some countries the vast majority, is not delivered through the national budget. Indeed, many recipient governments are not even aware of large amounts of the aid directed to their countries. Generic donor ‘sector’ categorisations of aid are often applied at country level, even though these do not relate meaningfully to recipient governments’ sectoral or administrative budget classifications.” The use of country Integrated Financial Management Information Systems (IFMIS) can reduce transaction costs, improve transparency and harmonize aid to improve results.
The authors also point out that “the ability of citizens to hold their government to account for the services it delivers may be weakened by the provision of aid.” Governments become more accountable to development partners rather than citizens. The use of country systems to integrate development partner and government budgets changes the transparency dynamic to focus on citizens. And, citizens participate when taxes are linked to policy and outcomes.
It is difficult to argue with the statement that ”a solution at the country level is imperative to effectively align aid with government planning and implementing cycles and to address country-specific concerns.” Integrating the aid lifecycle from donor through to outcome is the focus of the International Aid Transparency Initiative. IATI also promises to make donors accountable.
Many stakeholders seem to view the notion of aid and country integration as a theoretic exercise fraught with technical difficulties. The authors point out that “no AIMS has successfully and reliably brought aid information together in a way that interfaces with the national budget.” The study examined whether current international classification standards can be leveraged including:
There has been much effort in countries to leverage good practices in budget and accounting classifications. The study found that there is complexity associated with linking sectoral requirements and international classifications against multi-dimension Charts of Accounts (CoA). Yet, the study shows remarkable similarities in budget classifications across 14 governments. And, the study recommends how international standards can be extended to meet integration and harmonization needs. Government CoAs can accommodate standards support through inferred or side concepts that require little or no change to budget operations. Budget preparation and budget execution can operate independent of these classifications so as not to add any complexity. This is currently supported by many governments who are able to support GFS, COFOG and MDG classifications without affecting daily data entry.
The study recommends that donors should provide budget and funding information to facilitate usage by country system rather than the other way around. ”Those countries most dependent on foreign aid and countries with lower capacity will lose out if donors do not publish aid information that is easy to link with recipient government budget systems,” the study asserts. The study points out that donors have adjusted to national currencies and fiscal years. So the technical exercise can extend to supporting government budget and auditing calendars.
There remains some semantic issues in classifications that need to be overcome. There is no technical reason why development partner, aid information and country systems cannot integrate.
There is interesting observation that I don’t fully agree with: “the ease of mapping aid onto budgets may have an inverse relationship with institutional capacity levels, and lower capacity countries are likely to start at a disadvantage in the attempt to use aid information and build functioning integral AIMS.” Our anecdotal experience is that countries with lower institutional capacity level may be more receptive to supporting the standards that enables aid management integration. They are more willing to use these standards to accelerate capacity building. We see that some of these countries will often roll-out full compliance with standards in a second phase.
As a For Profit Social Enterprise (FOPSE) with numerous country Government Resource Planning (GRP) systems in emerging nations, FreeBalance has been assisting in improving aid transparency. We are active in IATI and have provided technical advice on country systems. We have integrated the FreeBalance Accountability Suite with the Development Gateway Aid Management Program (AMP). We are producing a Transparency Portal product for our customers. And, we are working with our for-profit and non-profit partners to develop an integrated aid and budget Ministerial Decision Support System.
We see multiple integration points between aid and country systems. In particular, aid management systems should be integrated with the budget preparation process. This provides full transparency on how the government and development partners expect to achieve joint goals. It should also be integrated to track expenditures throughout the lifecycle. And, it should integrate commitments so that development partners are aware of in-progress activities.
Doug Hadden, VP Products
Corruption in Afghanistan has become big news since the Wall Street Journal broke the story: Billions of Dollars of cash flying out of the country. This has lead to outrage. The Washington Post reports that its “readers have filed a long string of comments that overwhelmingly question why the United States continues to commit troops and dollars to this country.”
This makes for exciting political theatre – but does it help us learn anything? There seems to be an undercurrent of blaming the victim – the people and culture of Afghanistan.
Some media stories mention a different underlying problem: off budget funds. The BBC pointed out that “Kabul has meanwhile said that international partners should shoulder some of the blame for failing to provide oversight for contracts.” That sounds a bit like the government making excuses. The original WSJ article is more detailed:
Officials believe some of the cash, if not most, is siphoned from Western aid projects and U.S., European and NATO contracts to provide security, supplies and reconstruction work for coalition forces in Afghanistan.
Foreign aid includes on-budget and off-budget funds. On-budget funds are executed by the government through the public financial management system. Off-budget funds are executed by 3rd parties, such as NGOs and contractors, or government ministries who do not use the public financial management system.
Why does the government suspect that the majority of this money comes from off-budget aid? On-budget aid is more difficult to siphon off because of strong automated “budget execution and fiduciary controls…with the implementation of the centralized and computerized Afghanistan Financial Management Information Systems (AFMIS)” according to a 2008 report about financial management in Afghanistan. A story in June of 2010 from Outlook Afghanistan pointed out the following:
officials in the MoF believe that projects like AFMIS and VPP are very helpful in fighting corruption in Afghanistan. The beneficiaries of manual financial system in Afghanistan were the corrupt officials. But that system is no more in use and as result there is no chance of corruption in government financial transactions. Efficient financial system and proper accountability can not only improve the trust of Afghans but also increase the confidence of the donors on the government of Afghanistan.
It is clear that automated financial management systems with built-in controls make it difficult to siphon funds for personal gain. Not impossible – but difficult. And, the audit trail enables governments to identify corruption after the fact. And, improve processes to make corruption even more difficult in the future. Great – except it’s not going to help prevent corruption in off-budget funds.
The Accra Agenda for Action (AAA) states clearly that “donors agree to use country systems as the first option for aid programmes in support of activities managed by the public sector.” There is reluctance to do so because these systems – laws, processes, capacity and technology are not as robust as those in developed countries. Richard Allen has pointed out that donors have to be courageous to use these systems. But, the potential corruption in using these systems seems to cost less than transaction costs. Transaction costs are the administrative costs of managing many off-budget funds and parties – and the cost of reporting back. For example, a paper entitled Show me the money: IATI and aid traceability gives an Afghanistan example where $150M went up in smoke because of transaction costs.
The evidence in Afghanistan suggests that off-budget corruption is far higher and more dangerous that on-budget corruption. And, the media seems to be completely uninterested in the good news of how the Afghanistan Ministry of Finance is modernizing public financial management to reduce corruption. The AFMIS system “has been implemented in all central ministries located Kabul…deployed to all provinces, with the exception of Nuristan“. The Ministry of Finance continues to make progress. This is an amazing story of capacity building and resolve in unfavourable circumstances, as described in the IMF Blog. Perhaps this slow and steady progress is not exciting in our 24/7 cable news world.
What is important is the need to use country systems. Much of the technology that drives country systems has been proven in highly developed countries around the world. This is a base to improve procurement, audit and civil service processes. Donors can turn their attention from managing and auditing scores of projects executed by hundreds of third parties to helping the government improve public financial management.
The Government of Afghanistan is a convenient media target. Are donors providing the funds they commit to? Do donors use proper controls? Do third parties use off-budget funds effectively? How is corruption controlled throughout the aid lifecycle: from the point when foreign aid projects are considered by the donor until it is delivered to the recipient?
We can’t answer most of these questions because aid in not transparent. This is the aim of the International Aid Transparency Initiative (IATI). It’s ubiquitous transparency. To help reduce corruption, increase cooperation and improve aid effectiveness.
In this case, the lack of transparency means that no body knows exactly where the money came from. In addition to using country systems, donors and recipient governments need to harmonize aid and report it. This is the goal of the NGO, Publish What You Fund, one of the most active participants in IATI.
