Sustainable Public Financial Management

Doug Hadden, VP Products

Alex Howard, Radar‘s Government 2.0 Correspondent for 
O’Reilly Media, asked some compelling questions in a recent article: Citizen Audit: Which federal agencies have published open government plans 2.0 online. It’s a bit spooky because I posted: Citizen Audit Use Cases and Public Financial Management a few days earlier. Alex was looking at transparency commitments in the US federal government while I was focused on general use cases. Nevertheless, both articles ask us whether open data makes citizen audit a civic duty.

Citizen Audit Approaches

Open data enables citizens to determine whether governments are meeting objectives. For example, Alex Howard built a spreadsheet showing which US Federal Agencies are publishing open government plans meeting the requirements of the Office of Management and Budget. My use cases focused on compliance, fraud and performance audits by citizens and civil society.

Open Data and Civil Involvement

Elections provide sporadic and light democratic involvement. Open data enables more substantial involvement between elections. It enables a virtual agora of civic discourse. And, open data informs this discourse with evidence and facts. Rather than opinion. And punditry. If we were to consider McLuhan’s tetrad of media effects to analyze open government:

• Enhances: Information access and insight – introduces data journalism
• Obsolesces: Dogmatic approaches and partisanship - particularly as practiced in talk radio or television
• Retrieves: Political agora, decisions made by the Iroquois, the New England direct democracy model etc.
• Reverses: Information overload

Marshall McLuhan Tetrad: Retrieves and Reverses

Insight about the future effects of a medium are best discovered through the retrieval and reversing phenomena. (Enhances and obsolesces tends to be easy to understand but provides little insight into the ultimate effects of any medium).

Open data will increase data available to citizens. This could create  information overload. Many observers, like Andrea di Maio suggest that the problem is not so much the volume as the usability of open data.The effect may mean that those citizens with interest or those with expertise may provide significant value to improving government programs. This might dis-intermediate traditional media and move from a broadcast model of political discourse to a 1-on-1 model.

Cognitive Surplus and Civil Duty

The fundamental difference between open government and traditional broadcast is that government operates in-network rather than out of network. It changes the social contract: transparency becomes a government mandate and citizen participation a civic duty. We can no longer complain about the lack of government effectiveness if we are part of the “network”.

It’s unclear whether tapping into the cognitive surplus of experts will be sufficient for citizen audit. Perhaps information accessibility through visualization while overcoming the digital divide will be necessary to fully tap the “wisdom of citizens.”

There are signs of the internet as virtual political agora. Participatory budgeting is a significant phenomena. In my view, open government will extend participatory budgeting to on-line collaboration. Outcomes from budgets will be analyzed by civil society to improve follow-on budgets. Therefore, citizen audit will become performance-centric. Value-based. And, a civic duty.

Power of Prediction?

Doug Hadden, VP Products

Public Financial Management is becoming increasingly social, mobile and transparent. That was the subject for my presentation at the 26th Annual International Consortium on Governmental Financial Management (ICGFM) Spring Conference today.

2011 FreeBalance International Steering Committee

By Asylbek Bolotbaev, Deputy Director of the State Personnel Service of Kyrgyzstan (SPS) and Chairman of the Supervisory Support Fund for Public Servants

The implementation of an advanced information technology system for the Government of Kyrgyzstan was an important topic of discussion at the International Steering Committee meeting hosted by FreeBalance on January 16-19, 2011 in Portugal. FreeBalance, a Canadian company, is one of the largest software vendors specializing in finance and human resource management in Government.

The International Steering Committee Meeting was well attended by government officials from Kyrgyzstan, Canada, Portugal, Kosovo, Guatemala, Liberia, Mongolia, Sierra Leone, Timor Leste, Uganda, Antigua and Barbados. Good practices in human resource management, public financial management reform sequencing and government transparency were discussed.

I later summed up the direction and development of government information systems discussed at the meeting with my closing remarks to the Steering Committee. In particular, I provided insight into the direction of public financial and human resource management in government. Some of my observations are located below.

Towards Government 2.0

An important topic of discussion was the transition to a new model of information technology, known as “e-Government 2.0.” The objective of “e-Government 2.0” is to increase the convenience and accessibility of government services and information to citizens and to ensure transparency and accountability within the government agencies. While most modern government websites serve a purely functional purpose, new government websites will incorporate web 2.0 technologies to create user-friendly interactive web portals.  In this case, state owned websites will make official government data accessible to the public through an array of charts, graphs, databases and users can contribute with their thoughts and opinions through online discussions and commentaries.

“e-Government 2.0” is currently in its implementation phase in Kyrgyzstan. The World Bank Group, through its intermediary body, the GTAC, is leading the implementation processes of this project.  Therefore, the SPS of Kyrgyzstan will implement the Human Resource Management Information System (HRMIS), and the Ministry of Finance will implement the Treasury Management Information System (TMIS). These information tools, adapted to meet the needs and legal requirements of the Government of Kyrgyzstan, will improve transparency.

Human Resources Automation

The HRMIS will provide many benefits:

• Improved efficiency  of civil servant management through modern technology
• Increased quality of decision-making  through reports and up-to-date information
• Improvement in organizational structures and automated processes
• Facilitated training of personnel for executive positions through talent management
• Improved performance through the  evaluation and certification of staff member
• Improved efficiency by  maintaining detailed  records of employees’ expenses
• Improved compliance to regulations with taxes and assets declared by employees
• Accelerated professional development through automating training and learning
• Improved transparency by providing the general public with access to official information from state agencies.

Treasury Management

The TMIS will oversee the control and execution of budgets, while speeding up the payment system and reducing the use of paper documents between the Central Treasury and its regional offices. The TMIS system will ensure the transparency of the financial processes.

Next Steps

FreeBalance, along with World Bank, has already started the development of the HRMIS and TMIS systems in the country. Currently, the FreeBalance software supports the new “e-government 2.0” platform.

It must be noted that the World Bank will consider extending this project, provided that the results are positive. The launch of the HRMIS and TMIS is planned for January 2012.

Doug Hadden VP Products

Financial transparency was the main subject of a panel earlier this week at the World Bank. I had the privilege of joining Dmitry Kachaev, Kevin Merritt and Neil Fantom on the the panel . Dmitry Kachaev is the former Director of Research and Development, Office of the Chief Technology Officer, in the D.C. Government and is a Government 2.0 thought leader. Kevin Merritt is the Founder & CEO of Socrata and is a strong advocate for open government data. (I have to admit that I like the Socraa trademarked tag line “Making Data Social”.) Neil Fantom is the Manager, Development Data Group, Development Economics Vice Presidency at the World Bank. The World Bank is a recognized leader in making aid information accessible, open and transparent.

Transparency is an opportunity for developing countries for governance ”leapfrog.” The Government of Timor-Leste will shortly be releasing an on-line budget transparency portal. This portal provides 10 years of budget execution data with interactive drill down and export to numerous machine readable formats.  There are a few important points about this move to open data in government:

• The paradigm is changing to direct engagement of citizens with current machine readable information
• Open data is enabled by open systems
• Open systems and open data have been maturing

Transparency and open data have become important components of PFM reform. This should not be seen as stand-alone “government 2.0″ initiatives, but part of an overall strategy. In the case of Timor-Leste, the strategy includes decentralization, procurement reform and performance management through manager and minister dashboards.

The embedded presentation includes the full script used at the panel – plus additional information and links.

Doug Hadden, VP Products

Almost of full house for our Financial Management Institute of Canada (FMI) presentation on methodology, IT governance, risk in the age of transparency and Government 2.0 earlier today. The presentation is embedded here, complete with full script, hyperlinks and sources.

The FMI Professional Development Week is focused on finding the balance between risk and control. We’ve been tweeting about many of the sessions (check out @freebalance to learn more).

There are still 2 more days to go. My impressions so far:

• There is great concern that governance structures to support risk mitigation and control can reduce productivity and innovation in the Government of Canada.
• Risk-based processes where IT governance processes are proportional to risk are starting to gain traction.
• Government organizations are improving planning and performance management.
• There is an increasing recognition that IT investments need to be sustainable and the Total Cost of Ownership (TCO) has become a more important measurement.

Doug Hadden, VP Products

What exactly is “government innovation’? Perhaps, like my presentation last year pointed out about “government performance”, many may see this as an oxymoron. Nada Teofilovic argues against the assumption that  ”bureaucratic administration lacks the prerequisites for innovation, namely creative thinking, idea experimentation and inventiveness.”

Innovation is an underlying theme for my upcoming presentation on Government 2.0.

Ms. Teofilovic describes  innovation using the Government of Canada as a case study:

In response to a range of economic, political and ideological demands, the structures and processes of governance are changing and modernizing. The traditional public service is developing creative ways to address fiscal restraints and citizen demands for efficient service delivery; conventional, process-oriented public administration is giving way to results-focused public management; and federal departments are collaborating and working horizontally to overcome the hegemony of central agencies. In view of these developments, innovation is becoming a reality in government.

Government 2.0 support government as an economic innovation incubator and as services modernization.

Innovation is alive and well in government and will be further transformed thanks to Government 2.0, as described in Steven Johnson’s  Where Good Ideas Come From: The Natural History of Innovation

Economic Innovator

Tim O’Reilly of O’Reilly Media, who invented the term “Web 2.0″, is a strong advocate of “government as platform“:

government is, at bottom, a mechanism for collective action. We band together, make laws, pay taxes, and build the institutions of government to manage problems that are too large for us individually and whose solution is in our common interest.

There are many who resist this notion of government as a “technology platform” or that “open data” can generate economic value. These are a bit hard to prove using legacy measurement tools. Nevertheless, there is compelling evidence of “government as platform” in the analogue world – the Internet, GPS, road and rails systems.

As Mr. O’Reilly sees it:

Government 2.0, then, is the use of technology—especially the collaborative technologies at the heart of Web 2.0—to better solve collective problems at a city, state, national, and international level.

Services Modernization

Governments are striving for services innovation. Reform of government to provide a better value to citizens has become a major political theme for the past 3 decades, according to Dr. Elaine Kamarack.

Government 2.0 promises to extend the value of citizen and business services beyond traditional e-government. E-government has focused primarily on computerizing service delivery and supporting transactions. Process-centric services. Structural. Not the services that can be enabled through collaboration, as I’ve described in a white paper about Knowledge Management 2.0 and Government 2.0.

Government 2.0 offers improved effectiveness in internal collaboration that can result in improved services.

Government application categories include:

• Internal: internal by governments
• External: external to government with government involvement
• Structural: follow government structure and mandate
• Social: enable collaboration

Our framework suggests that there are three classes of applications:

• Back-office: operational budget, financial and civil service management-transaction management
• E-Government: exposing government information and transactions
• Government 2.0: social networking whether exclusively internal or collaborating externally

Therefore, Government 2.0 has the potential to extend services innovation from back-office and e-government functions. And, it has the potential to provide innovation separate from structural applications.

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.

Grant Thornton and FreeBalance White Paper

This white paper is co-authored by Government 2.0 thought leaders Martha Batorski, Director at Grant Thornton, and Doug Hadden, Vice President of Products at FreeBalance. “Government 2.0 is driving transformation in transparency, participation and collaboration,” said Doug Hadden, Vice President of Products at FreeBalance. “Our vision is that knowledge management and collaboration are integral to Government Resource Planning.”

The FreeBalance Grant Thornton paper encapsulates the essence of a series of articles from the FreeBalance Sustainable Public Financial Management blog to respond to a growing demand among Grant Thornton clients for greater clarity on what leaders need to do different to successfully transition to Government 2.0. Articles about Government 2.0 received substantial interest and attention from social enterprises and the broader public financial management community. The white paper shows how to employ effective change management skills in the emerging Government 2.0 open environment and  describes the new skills and mindsets government leaders need to adopt to address and the many, emerging new challenges they face.

Embracing Government 2.0 Leading Trans Formative Change in the Public Sector

Martha Batorski has over 20 years experience leading business transformation initiatives in the public and private sector.  She is currently leading Grant Thornton’s Government 2.0 and Change Management 2.0 practice in the Global Public Sector. And, she was a recent speaker at the Potomac Forum February 2009 Conference on “Planning and Implementing Social Media and Open Government Strategy and Efforts: What Executives and Managers Need to Know ” in Washington DC.

Martha Batorski writes about a key difference in leading change in the Government 2.0 era.   “Traditional change management frameworks work for a mandated, roll-out of change – where change is pushed to a target audience.   Change Management in the Web 2.0 era (Change 2.0) is more peer-to-peer, viral – change is pulled by participants, constituents, employees, customers.  One key difference for leaders is in the need to engage with others, to convert value from the network into meaningful products and services and knowledge, and to quickly identify practical solutions to challenges.”

Doug Hadden has over 20 years of management, sales, marketing and product management experience. He has been instrumental in creating a vision for GRP software that incorporates Web 2.0 collaboration and content. Recently, Mr. Hadden hosted an interactive session detailing how Government 2.0 will transform the practice of government performance and public financial management. And he participated on the “Government 2.0: The Next Wave of Open Government?” panel at the ICGFM Winter 2009 conference.

by Doug Hadden

VP Products

Andrew McAfee, the originator of the term Enterprise 2.0, suggests that “overuse of the word ‘social’” is not business friendly. Presenting Web 2.0 technology for companies or government as social suggests something other than work.   I commented on the blog article. This is an extension of that comment.

True: “Social” seems to imply ‘not work’. And, we know that work cannot be fun. (Except if you work for a For Profit Social Enterprise). But, social networking and communications is an integral part of business today. This is more than discussions around the water cooler – it’s about the virtual global water cooler. 

Computing solutions have focused on the more structural and procedural aspects of work. Hence, the attraction of “Business Process Management” (BPM) and “Business Process Re-engineering” (BPR). “Structural”, another S word.  Implies hierarchy. We’ve described this notion of structural and social in our Government 2.0 Framework. The diagram implies that structural and social are entirely separate. Structural processes can benefit from collaborative technologies that we call Enterprise 2.0 – such as documenting why a procurement or hiring decision was made. .

Social processes involve creativity, brainstorming, seeking out expertise, outreach to employees amd customers etc. Most pre-Enterprise 2.0 tools to accomplish these functions were structural in context, about ‘command and control’. These have proven somewhat inflexible in driving innovation and improved customer service.  The notion of the Discipline of Market Leaders  recommends three approaches. Operational efficiency is one of those approaches. My interpretation of “operational efficiency” is that all processes need to be defined, standardized and improved. It is difficult to re-engineer innovation or creativity event though these disciplines can form part of a process.

Enterprise 2.0 in Operation: FreeBalance Scenario

There’s a reason why we advocate the use of Web 2.0 and “social networking” to governments. We used these tools in-house. We’ve witnessed the effectiveness of Web 2.0 tools. A case: software requirements management.  Traditional pre-Enterprise 2.0 tools were highly structured. Many were client/server. Most required training on the methodology advocated by the provider of the tool. Larger software development organizations were more likely to adopt these tools.

Product portal includes requriements management, bug tracking, blog, wiki, and forum

FreeBalance uses an ISO-9001certified process for the entire software development lifecycle. This process was designed specifically for the government context. We needed to implement tools that adapted to our process rather than the other way around. We have implemented a number of flexible Web 2.0 tools since mid 2006 that enables the product teams around the world to collaborate. Today, FreeBalance has product managers and business analysts in Guatemala City, Washington, Ottawa, Lisbon, Pristina and Dubai. And, these people travel. Our product development is in Ottawa, Lisbon, Bangelore and Ulaanbaatar. We have project teams in customer sites providing feedback. It’s a 24/7 world that requires the use of traditional and Web 2.0 tools to achieve improved customer support and customer innovation. I can still remember 3 years ago entering some requirements into our Drupal-based system and getting an error because we’d exceeded 100MB of content – in less than 6 months. Today, there are gigabytes of vision cases, market requirements, specifications, project reports, design documents and test cases. We use numerous plug-ins, internal blogs, forums and other tools. We have been able to leverage these tools for discussions among technical and functional experts. We’ve extended this to a customer exchange. We’ve extended the tools to show market research and provide support for our sales group.

FreeBalance  Customer Exchange

My conclusion on “S” words? Social is work that augments structure and extends beyond structure.

We received a compelling comment in November to the posting Will Government 2.0 achieve the promise of E-Government. Part of the comment was:

In the sort of changes in e-Government that you’re talking about (eg life events) it’s not yet clear what e-tools would be useful. In fact, the issue of general improvement of services is where Government 2.0 has not yet begun to demonstrate any value.

If you could specify some use cases, that would be a good start.

Here are the first 5 use cases that we’ve developed. The purpose of the following simple use cases is to show how transactions <T>, documents <D>, and collaboration <C> need to be integrated in Government Resource Planning. These use cases focus on back-office and front-office operational functions in government. These are meant to extend beyond the traditional social networking view of Government 2.0.

Use Case: Auditing

Goal in Context: Successful performance audit

Primary Actor: Auditor

Scope: Financial Management

Success Scenario:

<T> Examines financial reports to determine cost per unit of outcome and cost per unit of output in government entity

<T> Identifies programs to examine more carefully

<D> Reads narrative reporting documents

<D> Compares report documents with original performance objectives

<T> Examines set of expenditures

<C> Examines discussion of these expenditure and reasons for approval and rejection

<T> Identifies patterns of expenditures that did not appear to improve performance

<C> Compares reasons for expenditures and compares with program goals

<D> Compares expenditure reasons with documented organizational standards

<T> Compares expenditures with original budget

<T> Identifies major budget transfers during fiscal year

<C> Examines rationale in budget transfer narrative to determine whether budget changes affected performance

<D> Provides report on how performance can be improved and whether guidelines were followed and whether guidelines should change

Frequency: Quarterly

Use Case: Tendering

Goal in Context: Best value for complex procurement

Primary Actor: Procurement Officer

Scope: Financial, expenditure, purchasing, procurement and contract management

Success Scenario:

<T> Budget for major program is set by legislature

<D> Acquisition practices from similar programs examined

<C> Acquisition approach determined including type of contract and evaluation criteria

<D> Standard clauses and RFP procedures extracted

<D> RFP document created

<T> Procurement estimate checked with budget – purchase requisition created

<C> Requisition is approved, discussion about the acquisition

<T> Funds are committed or set aside

<D> Proposals received

<D> Proposals examined for compliance

<C> Review team scores technical proposals, team members justify scores

<C> Scores are calculated with the financial proposal and winner is selected

<T> Bid price is compared with the budget

<D> Contract rendered from system and signed by vendor

<T> Purchase Order created, funds are obligated

<D> Purchase Order printed

Frequency: low volume, high value procurement

Use Case: Budget Planning

Goal in Context: Produce effective government budget

Primary Actor: Manager in budget office

Scope: Budget preparation, multi-year budgets

Success Scenario:

<D> Government announces objectives for year (such as Speech from the Throne)

<D> Logic map links government objects to departmental and project objectives

<T> Previous year budgets compared

<C> Discussion on how best to budget to achieve objectives

<T> Budget line items entered

<D> Narrative added to justify budget items, ranging from simple notes to white papers

<D> Review of economic data

<D> Budget circular produced with guidance on budget maximums

<T> Scenarios run using different cost and macroeconomic models

<T> Departmental budget proposal assembled

<C> Discussion and approval by Minister

<T> Departmental budgets consolidated

<C> Approvals and changes by budget office (could result in more departmental versions)

<D> Consolidated budget prepared for legislature in the form of a document

<C> Discussion and debate in legislature, changes made, budget vote (could include earmarks, supplemental + temporary budgets)

<D> Budget law produced

<D> Budget book produced

<T> Budget expressed as controls in the financial system

Frequency: Yearly

Use Case: Civil Service Recruitment

Goal in Context: Recruit best quality professional candidate

Primary Actor: Civil service candidate

Scope: Civil service reform, movement, performance appraisal, recruitment

Success Scenario:

<T> Government “Establishment” is updated by annual budget changes creating open positions

<D> Government has created a plan for Civil Service reform designed to recruit best candidates and make government a primary choice for university graduates

<D> Government hiring regulations are documented

<C> Qualifications determined for open positions determined after discussion

<T> Civil service budget is modeled based on positions, salary scales, expected vacancies, typical travel and training costs, bonuses

<D> Open positions are advertised on web and through newspapers

<D> Resumes from candidates are received

<T> Relevant qualification data about candidates entered into recruitment system

<C> Short-list of candidates for public service exam determined

<D> Candidates complete public service exam

<T> Scores from exam and qualifications weighted to determine short-list

<C> Personnel and hiring managers interview candidates

<C> Candidate scores are compared, candidates are selected for on-boarding

<D> Offers officially presented to candidates

<D> Candidates agree to join government

<T> Recruitment data is transferred to Employee record

<T> Additional information about new Civil Servants added to Employee record

<D> Picture taken of employee, added to record and printed for pass

<T> Employee assigned to a position in the “Establishment”

<T> Position is linked to salary scale, qualifications can also affect salary