Sustainable Public Financial Management

Doug Hadden, VP Products

Nothing can generate a more heated discussion among government accountants than accrual accounting. Some argue that accrual accounting is necessary to determine the true value of government and eliminate short-term thinking in decision-making. Others argue that the complexity of accrual accounting isn’t worth the effort – and, there really isn’t an objective true value of a government.

Liabilities Problem

Full accrual accounting can expose liabilities that are off the balance sheet: contingent liabilities like natural disasters, entitlements like government pension plans, public-private partnership risks etc. It appears that accrual accounting in government exposes more red ink. Not the best thing to expose if you are a politician in government.

Government as Investment

Andy Wynne, the editor of the International Journal on Governmental Financial Management suggested that education should be capitalized. Increasing education ought to increase government and private sector management. It should increase innovation.

This got me thinking. What if we saw government as an investment? We invest on the stock market giving some companies a premium – the value of the company stock is often much higher than the equity. What factors could accrue as government assets?

1. Immigration

A recent article by Joe Friesen in the Globe and Mail suggests that Canada requires more immigration to fuel growth. Immigration represents confidence in the . Despite all the anti-immigration rhetoric in many countries, immigration is a sign of economic desirability and “good will”.

2. Governance

Many companies are valued higher because of proven managerial stewardship. Higher governance quality means that governments are more effective and better able to leverage opportunities and overcome problems. For example, the Government of Honduras may want the Government of Canada to help adminstrate a free enterprise zone, according to Joshua Keating in Foreign Policy. There are numerous governance indices that could be used to calculate governance value. The World Bank World Governance Indicators that take many factors in account could be an ideal source.

3. Foreign Direct Investment

FDI also shows confidence in country management. This generates economic activity. This investment may spur growth.

Feel free to add your ideas.

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).