Sustainable Public Financial Management

Doug Hadden, VP Products

We’ve discussed the current state-of-the-art in government shared services. There’s some discontent among government users for technology shared services. Despite a rather obvious set of benefits from standardization and consolidation of similar GRP functions such as budget, financial and human capital management. Gartner Group concluding that “shared services” is on the descent to the trough of disillusionment.

Process standardization is a key benefit experienced in the private sector. Standardization reduces cost for training, support and upgrading software. Private sector companies can benefit from best practices. They adjust their processes to achieve greater efficiency. Government doesn’t work that way. Adjusting processes to achieve greater efficiency or standardization often requires changes to the law. Privacy,agency  independence, de-centralization and other problems can make standardization exercises difficult. Shared services initiatives begin with analysis of the current situation. There can be significant commonality among government organizations.

The pattern of dissimilar processes expands based on the number of organizations compared. Even small government agencies can have significant differences in mandate. Problems encountered with standardization include:

• Disjointed processeswhere only parts of shared processes are standardized. The comprehensive “line of business” cannot be fully automated leaving government ministries, departments and agencies with the option of manual processes or creating special purpose tools. This has been a general problem in government IT that standardization can worsen rather than aleve.
• Diminishing returns where adapting organizational processes to the standard reduces efficiency or service delivery.
• Legal and processbarriers where standardization cannot be implemented by some organizations. This can dramatically reduce the return on investment for setting up an expensive shared services infrastructure if it cannot be leveraged by all government organizations.

The primary difficulty in achieving government shared services for “lines of business” isn’t standardization – it’s the technology tools used. Many shared services initiative use Enterprise Resource Planning (ERP) software developed for the private sector. This software has some unfortunate characteristics:

• Customization: the use of code customization to achieve government needs that increases the Total Cost of Ownership (TCO). This makes it difficult to transition sets of customized code to standard processes.
• Single instance: the design of private sector software expects a single entity operating standard processes. Many government shared services initiatives requires hosting multiple different instances, which defeats the purpose of shared services in the first place.
• Reliance of industry practices: this use of so-called “best practices” makes it difficult to standardize a complete process across multiple organizations. And, very difficult to support legal reform and modernization of financial processes.

We have been very adamant that software technology can be designed specifically for government. We’ve developed an innovative shared services technology approach. This approach is based on three important “non functional requirements” for the design of Version 7 of the FreeBalance Accountability Suite:

• Configuration where the broad spectrum of government processes can be easily configured and requires no customization.
• Multiple configurations where a single hosted system can support different configurations.
• Reliance of government good practices proven around the world to support change and modernization.

The FreeBalance approach to shared services supports a different deployment model:

• Standardization of many processes facilitated through the configuration approach. These processes will be standard and identical.
• Semi-standardization through a configuration rangewhere government organizations can select processes within a narrow approved range. Once again, this approach is supported through parameters in the FreeBalance Accountability Suite. Semi-standardization enables governments to achieve the benefits of consolidation by broadening the shared services footprint without significantly increasing costs.
• Local or central hostingof functions unique to the government organization. These functions may need to be separate from shared services because of legal requirements. Or, the processes are so unique as to make central hosting cost ineffective. The FreeBalance Accountability Suite supports this approach through hybrid deployment where processes can be hosted in more than one location.
• Phased migration of configurations where government organizations can move to compliant and mandated standard processes over time. This reduces the training costs and lack of productivity associated with switching solutions abruptly.

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:

1. Modules or functionality that is implemented by governments. We’ve created a PFM component map that provides an overview of general modules used in government GRP.
2. Decentralization or the rolling out of functionality to other government entities.
3. Modernization or reconfiguration of existing modules to support reform.

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.

“Web 2.0 at Work Inside Government” was the topic of the Association For Federal Information Resources Management (AFFIRM) luncheon earlier today in Washington DC.  “Web 2.0 at Work” is an important distinction. Many wonder whether Government 2.0 will be adopted despite cultural and security issues. Yet, 3 of the 4 speakers were representing in production successful Government 2.0 initiatives.  And, 3 of the 4 speakers were from the security establishment.

We covered the panel discussion on twitter. Government 2.0 is not a question of “if” or “when”. It’s now.

Lessons Learned

The panel confirmed many emerging Government 2.0 best practices:

1. Data security is more a human than technology factor
2. Information security and transparency requires guidelines
3. Internal Government 2.0 collaboration should leverage existing teams and social networks
4. Constant communications and engagement is necessary for widespread adoption
5. Users need to understand how the initiative helps them
6. Continuous beta – need to adapt to needs of the community
7. Leverage the right tools to achieve goals
8. Top-down will hit resistance in middle management
9. Social networking is not a toy – social networking is work outside of the hierarchy
10. Need to balance “wisdom of crowds” with wisdom of experts

Is There a Generation Y Effect?

Stephen O’Keeffe, the moderator and founder of MeriTalk pointed out that younger civil servants are more likely to be using social networking tools, quoting Forrester Researchstudies. The panelists suggested that this might be a myth when applied to work social networks.  Government 2.0 isn’t waiting for the ascendancy of the new generation of public servants. Jack Holt of DoD warned: “don’t underestimate the impact of grumpy old men with something to say.”

Panelists

• Emma Antunes, Center Web Manager and Project Manager, Spacebook, NASA Goddard Space Flight Center
• Tina Cariola, Program Manager, IdeaFactory, Transportation Security Administration, Dept. of Homeland Security
• Carolyn Collins, Chief, Army Sexual Harassment / Assault Response and Prevention (SHARP) Policy and Program, G-1, Headquarters (HQs), Department of the Army, Pentagon, Virginia
•  Jack Holt, Senior Strategist, Emerging Media, Defense Media Activity, Department of Defense