Trends in Public Financial Management: Sequencing and Modernization
This is section 3.2.1 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.
Experts in Public Financial Management agree – there are no PFM “best practices”. There are good practices. If there is an exception, it is sequencing and modernization. Phasing in technology and processes to support reform and modernization is almost universally accepted as the most effective approach.
Technology Follows Reform
All governments are modernizing and reforming public financial management. There is no perfect “end state” because governments focus on continuous improvements.
- Government objectives change
- Governments reform and modernize to support these changing objectives
- Improvements to public financial management are a result of modernization
- An Integrated Financial Management Information System (IFMIS) is used to facilitate PFM modernization
- Technology including software tools, middleware, networking and computing hardware supports the IFMIS software
Computer technology is important as an enabler of reform. Technology is not modernization. And, technology can often prevent effective modernization. This constant change is one of the reasons why systems should be phased in over time.
IFMIS Implementation Success
Many governments implement new IFMIS software. IFMIS software provided for government typically includes many modules and can roll out to many ministries and sub-national entities. The “big bang” approach is considered risky because of high complexity.
The benefits of the phased approach, as described in our PFM Knowledge Sharing blog series includes:
- Reduced complexity increases opportunities for success
- Quick wins generates more acceptance and reduces resistance
- Experiences in phased implementations results in insights about future phases
- Focused on what is core to the government generates benefits quickly
- Sequenced implementation can be phased with training and capacity building
IFMIS sequencing depends on the country context. The implementation phases should follow the government objectives and economic needs. For example, governments with a large civil service that represents a significant amount of budget expenditures and country employment may need Civil Service Management functions in the first phase.
IFMIS sequencing depends on the country context. The implementation phases should follow the government objectives and economic needs. For example, governments with a large civil service that represents a significant amount of budget expenditures and country employment may need Civil Service Management functions in a first phase.
The World Bank Treasury Diagnostic Toolkit is an excellent tool to benchmark sequencing and country requirements. This toolkit was designed based on analysis in Eastern Europe and Central Asia but can be applied to many countries around the world.
There are three main dimensions of sequencing:
- Modules: Reflects components that can be added over time.
- Modernization: Reflects changes in configuration to support modernization such as moving to accrual accounting.
- Decentralization: Reflects the roll-out to ministries and sub-national governments.
IFMIS software needs to support progressive activation. Modules need to be added and configurations changed in an easy manner. Governments require the software to modernize at the correct pace. Implementations can begin with core features and adapt over time.
Decentralizing the IFMIS implementation requires the support of different configurations to support capacity. For example, a sub-national government may need to run on a cash basis of accounting while the national government runs on modified accrual.
Warnings about Sequencing
Some observers believe that sequencing and “quick wins” is “consultant speak”. The notion of quick wins appeals to many governments. This appeal can be exploited by consultants and software vendors.
Governments should be wary of solutions that promise quick wins but have no sustained progressive activation. And, many vendors propose very large phases that resemble medium “bangs”. This approach is often risky.