Sustainable Public Financial Management

Slideshow of photos taken of Madiera Portugal during the recent FreeBalance International Steering Committee meeting.

Created with Admarket’s flickrSLiDR.

Doug Hadden, VP Products

This is an update of the presentation from the FreeBalance International Steering Committee 2011 conference in Portugal – with script. 

Highlights:

• Globalization increasing competition and pressure to improve governance
• Budget transparency is a key opportunity to improve business and citizen confidence
• Challenges can be overcome and governments can begin to operate “in network”

James Elrick
PR Specialist

There’s an article written by Nicolas Kristof, a columnist from the New York Times, that illustrates how sustainability, increasing internal capacity, and self-sufficiency applies to donated bicycles in Africa.

The title of the article is “A Boy and a Bicycle(s)”. It describes how World Bicycle Relief has donated bikes to school children in Zimbabwe. This program is known as The Bicycles for Educational Empowerment Program, and has made a positive difference for these school children as riding bicycles reduces commute times. This gives the children more time to study. An important goal for any country.

Where sustainability enters the article is that World Bicycle Relief realized it couldn’t just donate any bikes, new or used, to these children. It had to donate bikes meeting the needs of children. It had to listen to the customers. And World Bicycle Relief had to design bikes that were easy to repair. You don’t want to donate a bike that gets thrown out as soon as it breaks down. And you don’t want the bikes to require expensive bike repair experts or consultants.

When World Bicycle Relief donates bikes they train people in the community to repair the bikes. They have a ratio of 1 repair person to 50 bikes distributed. Training local people how to repair bikes increases local capacity. Local people learn valuable skills and a trade. This means an out-of-country repair person is only needed at the beginning for training. It also means the solution, bicycles, are sustainable as the community can continue to repair the bicycles. Repaired bicycles stay on the road longer. This is self-sufficiency in action.

FreeBalance believes its PFM software solutions for governments should be sustainable, leverage and increase local capacity, and be self-sufficient. Just like The Bicycles for Educational Empowerment Program.

The FreeBalance PFM solution, the FreeBalance Accountability Suite, is a commercial off-the-shelf (COTS) solution that doesn’t require extensive and expensive software changes to get started. FreeBalance is designed and structured for government rather than modified to fit government. FreeBalance solutions have a proven history of being implemented within a couple of months. A fast implementation is a requirement for post-conflict countries as the need for a stable, PFM system is mandatory by aid agencies and donors for building and reconstruction.

FreeBalance provides train-the-trainer sessions. Just like the local bicycle repair person, the in-country trainer continues to train government employees. This increases local capacity as people from that country learn the FreeBalance Accountability Suite. The FreeBalance Accountability Suite is also easy to use, another key to increasing local capacity. For example, the government of Afghanistan trained 262 government employees in 2009 to use the Afghanistan Financial Management Information System (AFMIS). Increasing local capacity increases self-sufficiency. FreeBalance believes governments should be able to operate its PFM system without constantly calling the vendor or having the vendor operate the government’s PFM system.

A recent survey of FreeBalance customers describes what FreeBalance is doing to find new ways to improve sustainability for its customers.

Sustainability and increasing local capacity are the keys for any long-term solution, whether it’s bicycles or a PFM software solution. And it doesn’t matter if the country is an emerging economy or belongs to the G20: sustainability, nurturing local capacity, and self-sufficiency should always be the goal.

 Doug Hadden, VP Products

The 2011 FreeBalance International Steering Committee (FISC) conference ended last week after a packed agenda. The content useful for Public Financial Management (PFM) practitioners or FreeBalance Accountability Suite users was posted to this blog and the FreeBalance twitter account with the #fisc2011 has tag. As we described in an earlier post, FISC delegates are presented with the current product roadmap for the next two years. Delegates add new items and vote. We think that this is a good customer-centric practice rather than the traditional “here’s what you’re going to get” user group approach favoured by many software companies.

Don’t Call it a User Group!

The Steering Committee approach differs from User Groups:

• User Groups tend to be governed directly by customers. FreeBalance selects customers who can make a difference.
• Vendors typically present product, vision & roadmap at these events. There is no formal method of changing the roadmap. There is no domain knowledge transfer. Knowledge transfer is an important FISC deliverable. The roadmap is adapted.
• Salespeople are prevalent at User Groups. There are no salespeople at FISC.
• Delegates pay their way to User Groups and pay entrance fee. FreeBalance contributes to these costs to ensure participation by thought leaders.
• Company executives are briefly accessible at User Groups. FreeBalance executives participate directly in the event, provide content and take part in domain and roadmap discussions.

• User Groups own no percentage of vendor R&D budget. FISC owns 20% of the FreeBalance R&D budget.

Roadmap Results

FISC delegates voted on 43 application ideas, 6 of which were suggestedby the group and the rest by FreeBalance. These applications do not include those that have already been delivered or are contractually committed for delivery.

Current modules, sub-modules, add-ons and components include:

• Platform: 14 applications
• Configuration: 18 applications + 1 committed
• Capacity Building: 1 application
• Government Performance Management: 11 applications + 1 committed
• Public Financials Management (core financial apps): 4 applications
• Government Treasury Management: 3 applications + 2 committed
• Public Expenditures Management: 7 applications
• Government Receipts Management: 1 application
• Civil Service Management: 14 applications + 1 committed

Delegates were able to vote on the top 5 priorities. Results were rationalized to a scale of 0 to 100. The results were:

• 2 Very High Priority Requirements (Score Range: 91 to 100)
• 3 High Requirements (Score Range: 48 to 64)
• 7 Medium Requirements (Score Range: 18 to 27)
• 10 Low Requirements (Score Range: 7 to 14)
• 21 Very Low Requirements (Score: 0)

Some interesting observations:

• 10 Government Performance Management applications scored the most points and the highest average
• 8 Capacity Building, 8 Public Financial Management and 2 Government Treasury Management applications had medium scores
• 11 Government Receipts Management applications had very low scores
• There were 0 Civil Service Management applications because the current product footprint is large
• 3 of the top 4 vote getters already have FreeBalance market requirements

About FISC

The annual FreeBalance International Steering Committee (FISC) conference runs from January 16 – 19, 2011 in Madeira, Portugal. FISC provides an interactive forum to exchange Public Financial Management (PFM) good practices among international customers and PFM thought leaders. FISC drives the FreeBalance Accountability Suite product vision to direct FreeBalance GRP solutions. Previous FISC events were held in Mt. Tremblant, Canada (2010); Prague, Czech Republic (2009); Cascais, Portugal (2008); and London, United Kingdom (2007).

Customer Presentations and Panel

FreeBalance government customers presented information about country Government Resource Planning (GRP) implementations, Public Financial Management (PFM) reform and lessons learned at the FreeBalance International Steering Committee (FISC) conference in Madeira Portugal.

PFM Challenges

Public management and reform challenges described by governments at FISC included:

• Financial Control: Liquidity and fiscal deficits
• Inefficiencies: Structural inefficiencies requiring streamlining

PFM Accomplishments

Accomplishments made by FreeBalance government customers, some leveraging the FreeBalance Accountability Suite:

• General Financial Management: improved PEFA assessments, reform plans based on PEFA assessments, clearance of backlog in annual reports, timely production of budget and statutory reports, better budget execution
• Standards: support for IPSAS, GFS, COFOG standards
• Treasury: automated cheque printing, electronic signatures, electronic funds transfer, automated bank reconciliation, better cash and liquidity forecasting
• Performance: management reporting including OLAP and dashboards with Key Performance Indicators (KPIs) and analytics, automated budget planning and budget book creation, program budgeting and performance management in the Chart of Accounts
• Civil Service: reduction in ghost employees, more rapid generation of payroll
• Receipts and Revenue: faster recognition of cash receipts
• Audit: improved audits, unqualified audits, better audit trails and fraud reduction
• Procurement: improved purchasing and payment efficiency
• Decentralization:  decentralization of accounting, purchasing and budget functionality to line ministries and sub-national governments

PFM Lessons Learned

FreeBalance international customers completed the FISC Survey prior the conference. FISC members rated “government ownership” over PFM reform as the most important lesson learned in implementing Government Resource Planning (GRP) systems.

FISC member agreed that Project Management and a project steering committee are essential to GRP implementation success. They disagreed that Information Technology personnel should manage the project.

About FISC

The annual FreeBalance International Steering Committee (FISC) conference runs from January 16 – 19, 2011 in Madeira, Portugal. FISC provides an interactive forum to exchange Public Financial Management (PFM) good practices among international customers and PFM thought leaders. FISC drives the FreeBalance Accountability Suite product vision to direct FreeBalance GRP solutions. Previous FISC events were held in Mt. Tremblant, Canada (2010); Prague, Czech Republic (2009); Cascais, Portugal (2008); and London, United Kingdom (2007).

The FreeBalance Customer Survey

The FreeBalance Customer Survey helps achieve a very important company mission: public financial management knowledge transfer, as a For Profit Social Enterprise (FOPSE). It also helps us improve customer-centric processes by gauging satisfaction and measuring trends.

More results of the FreeBalance Customer Survey will be presented on this blog during the FreeBalance International Steering Committee conference in Madeira Portugal. Many of the items on the agenda are built from the survey, so discussions here in Madeira will add more context to the survey results.

Doug Hadden, VP Products

There was an interesting tweet moment at the FreeBalance International Steering Committee meeting last week requesting a transcipt of some comments about open systems made by our President and CEO Manuel Pietra.  Manuel’s viewpoint was that developing software using open systems enables FreeBalance (and others) to more easily extend applications. That’s because the nature of software development has changed over the years from very explicit “use cases.” Software was developed with an end in mind. Workflow, rules and reports were developed to meet the articulated need. This methodology is changing to where software components could be reused for purposes beyond the imagination of the software developer. Open systems will become the norm because of this efficiency provided. It breaks the economy of scale advantage that large companies hold in the software industry.

Technology Transition to Open Systems

We are in a transition period from closed to open systems in the software industry. In the closed system era, integration within the product suite was considered paramount. Enterprise software companies competed on the basis of horizontal and vertical functionality.  Economies of scale meant that the largest vendors provided the best extensibility. Proprietary middleware was used to lock customers into the entire “stack”. Open systems were presented as risky because proprietary standards tended to be faster.

The software industry is in a transition period where proprietary systems are opening up. This is often seen as a way to extend proprietary systems by the larger vendors. There is a concerted effort to build out an eco-system of partners who add value to proprietary systems. We believe that this will transition to fully open systems. Software companies will compete on openness and customer processes rather than lock-in.

Transparency Transition to Open Systems

We also appear to be in a transition period in government transparency. Governments have begun to publish information in document or machine readable format rather than relying on access to information requests as the primary method of transparency. The press is becoming “disintermediated” thanks to transparency portals. And, more governments are realizing that publication of government data can act as an economic engine, or, as Tim O’Reilly calls it, “government as platform.”These two trends in open systems an open government are more than coincidental. It is difficult and expensive to create open data from closed systems. That’s why many open government projects run into problems.

Historical Perspective

Software systems have become more open over time. Early computing did not have the luxury of processing and memory that we have today. The environment was closed and applications were closed systems.  Applications were focused on high value elements of business processes. Software has become more open as the software footprint has grown.

1990s to early 2000s saw the rise of Enterprise Resource Planning (ERP) software replacing  previous business systems. These applications covered multiple horizontal and vertical markets (as defined as ERP II by Gartner Group). Instrasuite integration became a competitive differentiator. The “dot com” era saw a boom and bust of e-commerce applications. The key problem in for dot com providers was the need to create the entire transaction infrastructure. This left some winners like eBay and Amazon who were able to achieve the economies of scale.

We are currently in the early days of “cloud computing” and “Web 2.0″ eras. Although there remains some closed systems, the software market is moving rapidly to open systems. This includes the use of open source middleware like MySQL, Linux, Hibernate that enables organizations to develop extensible and robust transaction systems. Middleware has become commoditized.

The Future of Open Systems

Government Resource Planning (GRP), transparency portals and enterprise software are transitioning to open systems. The next era will be characterized by:

• Component-based Service-Oriented Architectures where applications can be assembled from Object Oriented components from different manufacturers.
• Machine readable systems where applications will support domain industry standards, XML/Web services as a matter of course rather than explicit interfaces on monolithic architecture (what we call Monolithic Integration Architecture).
• Deployment options for centralized, de-centralized, shared services, and hosted without compromising functional completeness or system flexibility.

Matthew Olivier, FreeBalance Director of Global Marketing, described the methods for upgrading to Version 7 of the FreeBalance Accountability Suite on Wednesday at the FreeBalance International Steering Committee (FISC) conference in Madeira Portugal. 

Version 7 represents a significant technology leap forward compared to typical enterprise software such as Enterprise Resource Planning (ERP). These software applications, initially designed for private sector business management, leverage legacy client/server code in web products. These applications have not benefited from advances in software engineering such as the effective use of object-oriented development and component Service-Oriented Architecture. And, there are translation layers between the client/server base and web enablement. This increases the software footprint requiring more servers and disk and memory storage than can be achieved with the pure-web modern architecture used by the FreeBalance Accountability Suite.

Mr. Olivier described the flexible FreeBalance approach to upgrading to the latest version. FreeBalance Government customers are able to delay any upgrade indefinitely. Government customers can acquire new Version 7 modules that are not available in Version 6 and integrate. Mr. Olivier called this the “hybrid” approach. This hybrid approach is attractive because it reduces the scope of upgrading yet customers can take advantage of the broader footprint in the Version 7 of the FreeBalance Accountability Suite. For example, FISC delegates expressed interest in Procurement, Assets, Inventory, Civil Service Management, Transparency Portal, Procurement Portal, Minister’s Dashboard, Manager’s Dashboard and OLAP products – all of which are available to integrate with Version 6.5. Mr. Olivier reiterated that Version 7 supports a single step upgrade from any version to any other subsequent version. This upgrade method improves manageability and enables FreeBalance to align upgrades based on customer fiscal years. Unlike the private sector, government organizations need to budget for any upgrade costs, including internal labour, ahead of time.  FreeBalance has government customers with 5 different fiscal years.  (FreeBalance also support dual calendars: standard Georgian calendar and alternative solar and lunar calendars simulateously.)

Mr. Olivier described the functional advantages in Version 7 such as the new multiple-year Chart of Accounts, more flexible fields (custom domains), graphical tools, export ability, increase in reports ,  help and e-learning. 

The FreeBalance Accountability Suite has been well-known for operating with an optimal software footprint. FreeBalance customers have been able to use a laptop computer as a server. Version 7 is no different and can operate effectively on a single laptop. Version 7 also supports more flexible scaling including clustering, load balancing, horizontal and vertical scaling. Therefore, no changes to the current equipment in use to support Version 6 are necessary unless the number of users or applications increases. Mr. Olivier showed typical Version 6, hybrid and Version 7 infrastructure diagrams.  Recommended practices in disaster recovery, network and firewall configuration was also presented.

Mr. Olivier recommended a planning phase when upgrading to Version 7. Version 7 has more configuration options than Version 6. These configuration options for business rules, workflow, custom fields, forms and reports do not require any software code customization. This means that additional processes can be automated and the software can be adapted to meet unique requirements.  Version 7 will require training because of these features and new web interface. Unlike most software vendors, FreeBalance will assist customers in this upgrade process.

About FISC

The annual FreeBalance International Steering Committee (FISC) conference runs from January 16 – 19, 2011 in Madeira, Portugal. FISC provides an interactive forum to exchange Public Financial Management (PFM) good practices among international customers and PFM thought leaders. FISC drives the FreeBalance Accountability Suite product vision to direct FreeBalance GRP solutions. Previous FISC events were held in Mt. Tremblant, Canada (2010); Prague, Czech Republic (2009); Cascais, Portugal (2008); and London, United Kingdom (2007).

Doug Hadden, FreeBalance Vice President Products, described how developing countries can leapfrog in Public Financial Management (PFM) reform.  He described the effects of globalization accelerated by digital technology and competition.  The financial crisis has created a “new normal” where there is significant growth in emerging countries compared to developed countries.

 Mr. Hadden pointed out that mobile technology is a “game changer” because it puts information services in the hands of citizens. It is as if governments have millions of untrained auditors.

The theory of technology leapfrog states that there are many forces holding developed countries to legacy technology.  Developing countries can bi-pass stages in technology and focus on what works.  Mr. Hadden gave the example of Thailand Connected, Mobile, Multichannel and Ubiquitous Government. In Thailand, the government expects to transform to a fully electronic basis by 2015.

Mr. Hadden suggested that business, budget, and economic pressure slows down modernization in many developed countries. He described how governments can leapfrog in international standards, budget transparency, e-procurement, and e-recruitment.

The next stage for government is to be in-network and work with social tools, according to Mr. Hadden.  This includes using collaboration internally and external outreach for participatory budgeting.

About FISC

The annual FreeBalance International Steering Committee (FISC) conference runs from January 16 – 19, 2011 in Madeira, Portugal. FISC provides an interactive forum to exchange Public Financial Management (PFM) good practices among international customers and PFM thought leaders. FISC drives the FreeBalance Accountability Suite product vision to direct FreeBalance GRP solutions. Previous FISC events were held in Mt. Tremblant, Canada (2010); Prague, Czech Republic (2009); Cascais, Portugal (2008); and London, United Kingdom (2007).

FreeBalance international customers were asked about sustainability in the recent customer survey. Sustainability is a key problem because financial systems need to be financially sustainable. We believe that vendors like FreeBalance should governments achieve self-sufficiency. The lack of sustainability in government financial management systems has been shown as a key problem in maintaining Public Financial Management (PFM) reform.  

The FreeBalance customer survey showed that:

• Vast majority of FreeBalance customers consider the FreeBalance Accountability Suite sustainable
• Most FreeBalance customers are self-sufficient for normal operations
• Most FreeBalance customers are no self-sufficient for complex operations

What are these Complex Operations?

The complex operations that many FreeBalance customers require assistance include:

• Major version upgrades
• IT infrastructure tuning
• Complex business process re-engineering
• Decentralization of software to sub-national governments

What is FreeBalance doing about sustainability?

FreeBalance is using different strategies to improve sustainability:

• Optimized and simple product footprint to reduce IT burden
• Capacity building and e-learning built into the software
• Mentoring by FreeBalance staff
• Local hiring of FreeBalance employees and local office to facilitate knowledge transfer
• Knowledge and document management solutions

The FreeBalance Customer Survey

The FreeBalance Customer Survey helps achieve a very important company mission: public financial management knowledge transfer, as a For Profit Social Enterprise (FOPSE). It also helps us improve customer-centric processes by gauging satisfaction and measuring trends.

More results of the FreeBalance Customer Survey will be presented on this blog during the FreeBalance International Steering Committee conference in Madeira Portugal. Many of the items on the agenda are built from the survey, so discussions here in Madeira will add more context to the survey results.

Aldo Segastume, FreeBalance Director of New Product Development, demonstrated the FreeBalance e-Procurement Portal at the FreeBalance International Steering Committee (FISC) conference in Madeira Portugal.

FreeBalance e-Procurement portal links automatically with the procurement module for posting opportunities, vendor status and awards. This is a unique capability because most government e-procurement sites are static. Procurement opportunities and documents are uploaded to the sites manually. The FreeBalance e-Procurement portal requires no extra effort.  Tender notices are presented on the portal when approved. Procurement documents are rendered automatically from information and rules from the system.

Vendor Features Create Competition

Mr. Segastume showed the vendor user-interfaces features including drill down by category, viewing procurement document, searching and filtering and creating automatic procurement notices. The FreeBalance e-Procurement Portal also shows other important content like documents and articles.  The advantage of this, according to Mr. Segastume, is that making it easy for vendors to increase competition. This lowers government prices.

Procurement Transparency

Mr. Segastome demonstrated how the blacklisted vendors integrate with the FreeBalance Procurement portal. This feature can ensure that no vendors that are blacklisted by the government for poor performance or the World Bank will be able to bid. And, the names of these blacklisted vendors are shown transparently.  The system can also blacklist vendors who have defaulted in taxes.

The FreeBalance e-Procurement portal enables citizens for procurement award results. Procurement award information is presented graphically. Users can search for different types of procurement awards by vendors and be able to uncover possibilities of fraud.

About FISC

The annual FreeBalance International Steering Committee (FISC) conference runs from January 16 – 19, 2011 in Madeira, Portugal. FISC provides an interactive forum to exchange Public Financial Management (PFM) good practices among international customers and PFM thought leaders. FISC drives the FreeBalance Accountability Suite product vision to direct FreeBalance GRP solutions. Previous FISC events were held in Mt. Tremblant, Canada (2010); Prague, Czech Republic (2009); Cascais, Portugal (2008); and London, United Kingdom (2007).