Sustainable Public Financial Management

FreeBalance to Share Government Resource Planning (GRP) Good Practices in Crown Agents Training Course

Sutton, Surrey, UK (September 10, 2012) – FreeBalance, a leading vendor of Government Resource Planning (GRP) software, is pleased to announce participation in a Crown Agents international training course. FreeBalance Vice President of Products, Doug Hadden, will be training participants from Africa and Asia on good practices in GRP.

Crown Agents is an international development specialist, working with leaders across the world to make profound changes to systems, organizations and society. Crown Agents is a socially responsible firm owned by the Crown Agents Foundation, a non-profit-distributing company limited by guarantee. “We share the Crown Agents commitment to building international good governance capacity as a social enterprise,” said Manuel Pietra, FreeBalance President and CEO. “We’re thankful for this opportunity to share our experiences in emerging countries to government financial management professionals.”

FreeBalance has a GRP certification program for employees, partners and customers. The vendor-neutral training session will cover many of the good practice elements of the certification programming including:

• Introduction to GRP good practices and Public Financial Management (PFM)
• Transparency and GRP technology leapfrog opportunities for emerging economies
• Government Performance Management in PFM
• Good practices for sequencing PFM reform and GRP technology
• Financially sustainable GRP including goverance structures, calculating the Total Cost of Ownership (TCO) and lessons learned in emerging economies
• Using GRP to reduce anti-corruption
• The future of GRP technology

About Crown Agents
Crown Agents is an international development specialist, working with leaders across the world to make profound changes to systems, organisations and society. Crown Agents works with with governments, companies and NGOs across four continents in more than 100 countries. Crown Agents has offices in more than 33 countries and operates in more than 50 languages. The Crown Agents expertise in public finance, banking, investment, institutional development, supply chain and training enables governments to increase prosperity, reduce poverty and improve health.

About FreeBalance
FreeBalance helps governments around the world leverage robust Government Resource Planning (GRP) technology to accelerate country growth. FreeBalance is a recognized as leader in fast, adaptable and successful GRP implementations. FreeBalance software manages a global civil service workforce of 1,500,000, and a quarter trillion ($US) annual budgets worldwide. FreeBalance provides software solutions for public financial and human resource management, and supports reform and modernization to improve governance, transparency and accountability. Good governance is required to improve development results. For more information, visit www.freebalance.com.

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FreeBalance Media Contact:

Matthew Olivier, FreeBalance
Mobile: +1 (613) 301-9653
molivier@FreeBalance.com
www.FreeBalance.com

This weekly news update provides the Government Resource Planning (GRP) community with a brief overview of recent FreeBalance developments and relevant industry news.

Meet FreeBalance in Miami at the Annual ICGFM Conference

FreeBalance continues to attend and participate in conferences and events around the world including the upcoming 26th Annual International Consortium on Governmental Financial Management (ICGFM) International Conference on April 29-May 4, 2012 in Miami, Florida. The theme for this year’s ICGFM Annual Conference is “PFM in the 21st Century – The PFM Architecture, Institutions, and Tools to Meet the Challenges of the Modern Worlds.”
Find out more >>

Timor-Leste Launches Government Results Portal

FreeBalance worked with the Government of Timor-Leste to launch the Government Results Portal last month. The Government Results Portal displays outcome information for the most important Government targets, projects and programs. Different information is displayed for each target including: purpose, physical and financial progress, photos and more. Content and structure of the results information is based on the Timor-Leste Strategic Development Plan.
Visit Government Results Portal>>

Is Government Performance an Oxymoron?

New governments talk about improving performance. The American federal government has experienced waves of performance management initiatives. Yet, there is the meme of “big inefficient government” in the United States. This seems to be a common theme in the press, among think tanks and opposition politicians. It makes for good copy.
Read More on the FreeBalance blog >>

Going Broke? Why Pension Reforms Are Needed in Emerging Economies?

We’re all getting older, and there’s no doubt that pension reform is a hot topic in the advanced economies. But it’s also critical in emerging economies. Our analysis here at the IMF shows that across emerging economies pension spending is projected to rise as the population ages. On average, these spending increases are not that large. But reforms are needed to increase coverage of the system without making pension systems financially unsustainable over the long term.
Read More >>

Assessing Debt Levels in Poorer Countries

Following a comprehensive review, the IMF and World Bank are introducing improvements to their joint Debt Sustainability Framework (DSF) developed to assess borrowing levels in low-income countries. In response to feedback from a range of stakeholders, the IMF and World Bank have determined that some enhancements are necessary to ensure that the framework adapts to changing circumstances in borrowing countries. The framework is used by borrowing countries, lenders, and donors to assess how much debt is sustainable and to balance it against a country’s development needs.
Read More >>

Is Bank Competition a Threat to Financial Stability?

The global financial crisis reignited the interest of policymakers and academics in assessing the impact of bank competition on stability and rethinking the role of the state in shaping competition policies. Competition in the financial sector has a long list of obvious benefits: greater efficiency in the production of financial services, higher quality financial products and more innovation. When financial systems become more open and contestable, generally this results in greater product differentiation, a lowering of the cost of financial intermediation and more access to financial services.
Read More >>

Similarities between Government Performance and Canadian Culture?

Doug Hadden, VP Products

New governments talk about improving performance.  The American federal government has experienced waves of performance management initiatives. Yet, there is the meme of “big inefficient government” in the United States. This seems to be a common theme in the press, among thinktanks and opposition politicians. It makes for good copy.

Examples:

• Annual Teddy Awards in Canada for government waste
• Recent GAO spending scandal in the U.S.
• Call from the House of Lords in the UK to scrap the foreign aid target.

Should we be cynical?

Should “government performance” be added to the litany of oxymorons like “military intelligence”, “business ethics”,  “British cuisine” or “Canadian culture”?

After all, if businesses can improve performance, why not government? It’s a popular sentiment – as this scene from the 1993 movie “Dave” shows.

Government isn’t business

Dave manages to cut the budget.  But did these cuts improve effectiveness? That’s the rub: in business we have a bottom line: profit. Key Performance Indicators can align with this bottom line. And, you know that the KPIs are incorrect if the indicators are good but the business is showing a loss. (Or, vice versa.)

The performance calculation differs.  Business: outcomes drive financials (profit). Government: financials (budget) drives outcomes. Government performance is more complex than business performance:

1. Outcomes are much more difficult to validate in government because is not aligned to an objective bottom line like profit
2. Budgets impose more controls on spending in government including restricted flexibility for managers to optimize performance whereas companies can increase spending to generate more revenue or cut costs to reduce expenditures
3. Politics drives input-focused (i.e. spending in the politician’s district) decisions that are imposed on public servants
4. Financials in the public sector is rarely operating on full accrual accounting, so standard private sector financial measurements like Return on Investment that could help determine effectiveness are difficult to calculate

Government Performance Tools

Corporate Performance Management (CPM) is a category of tools including reporting, dashboard, budget and data mining. These are useful tools. Yet, commercial CPM tools designed for the private sector are often missing needed government functionality:

1. Budget preparation where performance information is directly tied to the creation of financial budgets and controls
2. Forecasting where expenditures are compared with outcomes during the fiscal year to enable performance improvements while ensuring that budgets are not overspent
3. Macroeconomic data where key economic information is aligned to the “macro-fiscal” framework and KPIs
4. Transparency where government objectives and results are transparently provided to civil society – the kind of information that even publicly-held companies consider business secrets

By James Elrick, FreeBalance

FreeBalance uses a balanced scorecard methodology that aligns customer measurements with financial, internal process and learning metrics. The balanced scorecard is evaluated quarterly and presented as part of the President’s Report to the Board of Directors.

As part of the Marketing team, I assemble our numbers for balanced scorecard using website statistics, Twitter, and more, including the number of views our white papers and presentations on Scribd and SlideShare gather. 

The presentations and white papers have proved popular, all are consistently up in numbers last quarter, but a few made notable gains, including an ICGFM presentation titled “Government Performance Management 2.0” at the 2009 ICGFM Winter Conference. I’ll write about the other documents that jumped in number of views at a later date.

This presentation delivered by Doug Hadden, VP Products at FreeBalance jumped from 733 views in the 2^nd quarter to 1776 views in the 3^rd quarter.

So why the jump? Why the major interest? You tell me because in the first quarter of 2011 it was at 594. It’s now at 1776 and growing.

Have a read and submit a comment at the bottom of this page. We’re curious to know.

Doug Hadden, VP Products

I’ve been working on a paper for the Association of Budgeting and Financial Management (ABFM) conference in October. I’ll be on a panel discussion on October 15th on Online Expenditure & Performance Reporting. There is growing evidence that government budget management is maturing.

Budget preparation is transitioning from an internal expert/technocrat to a community model through the use of social media.  Government organizations have leveraged outside experts, civil society and businesses for input for many years. But, new technology tools and citizen demand is creating the demand for more open and transparent participatory budgeting. Hence: Budget 2.0.

Towards a Budget 2.0 Roadmap

The difficulty in mapping out this modernization because there are so many overlapping avenues. And, modernization is inconsistent among governments where some governments are showing significant reform on some budget avenues but not others. The modernization to Government performance management, open data, accrual accounting and participatory budgeting appear to be consistent – part of a virtuous circle. For example, accrual accounting enables government performance management. Open data enables participatory budgeting that can improve government performance. Performance information improves open data.

My preliminary work is shown as a mind map below. (The paper and accompanying presentation will be easier to consume. I’ll provide links when completed.)

Avenues of Budget Modernization

Some of these budget modernization avenues include:

• Budget Preparation including the process for creating and approving budgets
• Oversight including internal government and external stakeholders
• Citizen Engagement includes methods of communicating to external stakeholders
• Transparency Mechanisms leveraged by governments
• Budget Comprehensiveness including all government tiers, parastatal organizations and coverage of all revenue and expenditures
• Accounting Methods from cash through accrual accounting
• International Standards Support for public sector and transparency standards
• Policy Formulation including the process of building policy and aligning policy to budgets
• Budget execution including how execution is controlled to meet budget objectives
• Government Communications Medium from published documents through to open data
• Timeliness on information provided to parliaments and citizens

There are significant barriers to modernization including:

• Governments that operate on a federal model can be legally prevented from providing comprehensive budgets across all tiers of government
• Budget confidentiality embedded in law prevent open interaction and participatory budgeting
• Transparency generates political concerns as does forms of performance management and accrual accounting that show the “true value” of the government
• Data quality concerns can prevent the timeliness of information publication restricting the ability to support citizen participation
• Culture of experts in government restricts engagement with external stakeholders

From Budget 1.0 to Budget 2.0

My assessment is that the modernization avenues can be categorized as:

• Budget 1.0: Traditional mechanisms of budget management that are primarily internally focused where control and compliance are major concerns
• Transitional: Increase of externally focused budget management where holistic budget management, transparency and government performance are major concerns
• Budget 2.0: Social mechanisms that attempt to leverage the network effect to improve government performance and service delivery

Doug Hadden, VP Products

Technology columnist and blogger Josh Greenbaum reflected on a question: which of the two leading Enterprise Resource Planning (ERP) vendors is the most innovative.  My view, as captured in my comment to the post, is that neither of these software vendors is particularly innovative. Any recent innovation seems to come from company acquisitions, not generated from internal research and development.

Theory of Technology Innovation

Harvard professor Clayton Christiensen has written the book on technology innovation. More specifically, many books on innovation. Christiensen describes the differences between disruptive innovation and sustaining innovation. Successful leaders in any category become unlikely to challenge the status quo through disruptive innovation because it disrupts business models.

Where is ERP Innovation?

[Note: we don't consider FreeBalance to be an ERP vendor. We've been ERP-free for almost 30 years focused exclusively on government.]

This seems to be a trend in the consolidating ERP market where acquisitions become the primary tactic to achieve growth to support the strategy of building a large maintenance annuity.

My view is that the current “innovations” touted by major ERP vendors come via acquisitions or aren’t innovations at all – just market following to maintain market share (and the maintenance revenue business model).

Analysis of recent ERP “Innovations”

Government CIOs and public financial management professionals should be wary of these so-called  innovations.

Innovation: Cloud services: major ERP vendors provide software on the “cloud”

Assessment: Slow Follower

• ERP vendors have fallen behind the major CRM, ERP and HCM cloud vendors with little uptake. One of the major vendors seems to have gone back to the drawing board so many times that it’s hard to keep up.
• There has been a lot of noise about which vendor has the best technology for cloud deployment. As analyst Ray Wang pointed out in a recent tweet, even the cloud leaders are using rather old technology. That’s the rub. Get under the facade and what do you find? Legacy client/server technology – 15 to 30 years old.
• The use of legacy technology makes it more expensive to deploy: maintaining old code, translation between legacy and web, shoe-horning something not meant for the purpose, adapting to meet customer requirements, larger technical footprint requiring more equipment resulting in power consumption etc.

FreeBalance Approach

• We took the approach of re-writing software in a completely web-native FreeBalance Accountability Suite. We used good software design practices to develop a technology built for the government domain.
• At the time of design, particularly in late 2006 and early 2007, we didn’t think that this was a particularly innovative approach. We’d tried the traditional approach of wrapping legacy technology and realized that it wasn’t sufficiently extensible and that the costs of maintaining this “kludge” would need to be passed on to customers. So, we thought that it was only a matter of time before the large ERP vendors introduced web-native applications. We hoped for a temporary “leapfrog” window of opportunity that would end by about mid 2011. And, we thought that we were taking our time!

What does this mean for government?

• Government organizations are accused of holding on too long to “rust”. Legacy systems require more maintenance over time. These systems become resilient to change – hold governments back from leveraging technology change. The web facade not withstanding, many government organizations are investing in the new rust.
• Governments who are looking at doing more with less. Creating efficiency, saving money. One technique for public financial management is IT shared services deployed as a government private cloud. The premise is that economies of scale can be achieved in this method. But, governments are finding that technology not designed for this purpose does not generate the expected efficiency – often adds complexity, reduces agility – all at a high cost to migrate and maintain.
• That’s why FreeBalance developed the technology from scratch to support shared services and shared services migration to standards

Innovation: Business Layer Middleware to enable intra-suite integration

Assessment: Laggard

• This is a bit of a variation on the above. Many ERP vendors have created or announced technology that enables integrating software packages from acquisitions. The notion is that it can provide implementation and maintenance benefits.
• Yet, the realization of these projects (and some of these projects seem to have disappeared) provides no particular innovation. It’s just a better way to get parts to work together. And, there seems to be a challenge to get all the parts working together to get the best possible solution across the vendor product suite.

FreeBalance Approach

• As described above, we used modern technology. We support web services. Reuse of business objects that we call government entities. Granular access to these objects. Designed to integrate with modern technology.

What does this mean for government?

• Integration is becoming an increasing opportunity in government. Government organizations need to “act as one”. Software vendor focus on intra-suite integration and use of legacy technology limits government agility to integrate technology to provide better value to people and better citizen services.

Innovation: Corporate performance management, real-time analytics and dashboards, in-memory databases

Assessment: Fast Follower

• Don’t get me wrong, there are some compelling performance management technology coming from ERP vendors. However, these all seem to mainly come from acquisitions: the three largest Business Intelligence companies were acquired by larger firms. As were in-memory databases. (Not that there haven’t been embedded databases for at least 20 years).

FreeBalance Approach

• We’ve worked with our government customers to understand what is needed in government performance management. Although we do not innovate on the “bells and whistles” and integrate with reporting and analytical tools, we’ve come up with a government-specific approach.
• Government performance is different. It’s budget-centric because the budget is the legal embodiment of government policy. Outcomes and outputs are not inputs to performance, as in the private sector – rather the results. This is much more difficult to conceive.
• Transparency and open data have become key government needs. Although many of the ERP vendors provide some toolkits, few are integrating front and back office transparency for 10 years of budget transparency like our customer, the Government of Timor-Leste.

What does this mean for government?

• Government CIOs can distinguish between the visualization tools and the performance integration tools.

Innovation: Vertical market “quick starts”, change management software, BPM integration, call-outs, upgrade kits

Assessment: Laggard

• There are significant costs to customize ERP and maintain those customizations in ERP software. Methods to mitigate these high cost problems are somewhat commendable, but this seems to be overcoming a design flaw.

FreeBalance Approach

• Our software was well-known for the ability to configure to meet most government requirements. We customized the software to meet government requirements. This meant that the new code became part of the main line and was fully supported by FreeBalance. No need to maintain BPM scripts, call-outs, custom code when upgrading.
• We recognized in 2006 that this configuration ability was a core differentiator. So, we extended it further to provide more flexibility and adaptability without the need for our government customers to write a single line of code.

What does this mean for government?

• Governments cannot accomplish “business process re-engineering” and adapt to many “best practices” without changes in legislation. Mandates change frequently. And, there are new demands for reform that requires future changes. Hence, an approach of low-cost progressive activation significantly reduces the Total Cost of Ownership (TCO) – even relative to these ERP work-around techniques.
• For added measure, Version 7 enables upgrading from any version from version 7.0 to any subsequent version with a single step.
• Oh, and we don’t force upgrades and support many more versions than industry standards (kudos to Infor for having a similar policy).

Doug Hadden, VP Products

Charles Grodin remarks in the movie Dave, “If I ran my business like this…” It’s a standard view – if only governments ran like businesses. As many former businessmen have discovered (and not a few enterprise software vendors), it’s not as easy as it sounds. And, aid effectiveness is perhaps an order of magnitude more complex.

Corporate Performance Management

Corporate performance management uses techniques like key performance indicators (measure what is important) and balanced scorecards (show what is important) to improve performance. Government organizations use many of these same techniques.

Don’t let it fool you, it isn’t simple in government.

Private sector organizations have a bottom line: profit. There are established measurements like market share, and return on assets. Output measurements like the number of customer complaints handled, and outcome measurements like customer satisfaction survey ratings are factors that influence financials – profitability. If all the KPIs are green and the company is not making a profit, than the indicators are incorrect.

There is no bottom line in government. Outputs and outcomes are the results. Financial – in this case, budgets, is the input. This makes it very difficult to determine whether the KPIs are correct.

(On an aside, performance management links to accountability. Accountability has generally hurt government stakeholders more than the private sector, as CEO salaries show. The NewsCorp/News of the World hacking scandal is the exception that proves the rule.)

Aid Effectiveness and Performance Management

Does aid work? Some like Dambiso Moyo in Dead Aid, claim it doesn’t. Hans Rosling provides compelling visualization in gapminder.org that aid does work. Owen Barder of the Center for Global Development suggest that we need to consider what type of aid works.

Despite information overload, we don’t have enough data to overcome the narrative that aid is a waste of money. That’s because the aid environment is not a closed system. There’s foreign direct investment, climate and geography (droughts, floods) and many other factors that conspire to make aid appear more or less effective than it is. And, yet there is enough information for interpretation – to act as confirmation bias.

Need for Aid Transparency

Aid donors have performance criteria. Performance information is often not shared. There is often no consistency among donors. And, the contribution of governments to a shared goal with donors is rarely measured. That’s why aid transparency is so critical to determining how aid can be improved.

That’s why you need to sign up to making aid transparent. Over 5,000 people have done so. More is needed.

What could aid transparency accomplish?

1. Better key performance indicators for aid effectiveness
2. Alignment of many small initiatives at the micro level to more macro measurements
3. More effective coordination of donors with governments
4. More understanding of the sequence of aid initiatives based on the country context
5. Value of foreign aid for international security

A year-end look at the “big picture” on technology-driven transformation of government

Doug Hadden, VP Products

Technology transforms the nature of government. From the phonetic alphabet through Web 2.0. From ‘yellow journalism‘ to Wikileaks. Transcending short-term news-worthy fads.

It’s an era of seemingly different and overhyped stories about government.  So many technologies over such long periods that we fail to notice the transformation.  Or the pattern of technology-induced transformation.

(For those of you unfamiliar with this notion of technology changing the nature of government, consult the work of Harold Innis, who described how the medium used for writing determined the nature of ancient empires, and Marshall McLuhan, who described the effects of technology on society.)

2010 exposed three interrelated government transformation trends:

1. Change of the government to citizen power relationship though increasing mobile, Internet and social networking usage
2. Global re-alignment, known as the “new normal” enabled through improved automated governance tools and ICT for Development (ICT4D)
3. Devolution of the nation state partly as a consequence of social networking and DIY content 

1. Government – Citizen power relationship

Key concepts:  privacy, transparency, data-based journalism, governance, surveillance

Key technologies:  Government 2.0, mobile, social media, encryption

Key stories:

• Wikileaks releases US government secret information
• Mark Zuckerberg of Facebook becomes Time person of the Year
• Perennial Internet transparency and privacy debates
• Research in Motion and encryption in India, and the UAE
• Bloggers take on governments in the Middle East
• Use of mobile technology to monitor elections in Sudan
• Impact of social media on the 2010 US Mid-Term elections
• Little Brother is Watching: Government 2.0 and Transparency

As the Las Vegas Sun reported, 2010 was a very digital year: “Ecuador’s president announced a state of emergency because of civil unrest via a tweet… People were engaged through social media, connecting to politicians, charities and causes. The American Red Cross raised nearly $33 million for the earthquake relief effort in Haiti via text messaging.”

Will Social Networking Transform Government?

What this means

1. Citizens can band together for social change or monitoring governments using untethered mobile technology leveraging existing civil society networks or self-organizing through social networking. Citizens can track even opaque governments meaning that transparency becomes the only way to present the government view: the emperor has no clothes.
2. Surveillance technology has become affordable and is starting to bridge a different digital divide. The gap between government and citizen surveillance capabilities will continue to narrow especially as citizens gain asymmetrical advantages. This will create more focus on performance in government. Long-term prediction: the debate over government size and cost will transition to the value of government. Dogma and opinion will be replaced by data and facts.
3. Technology generates more concerns over balancing privacy, surveillance, security and transparency. Should anonymity be promoted to encourage freedom of expression or should radical transparency, following the Facebook ethos, be used to encourage thoughtful debate? Is Julian Assange a hero for transparency or a criminal?
4. Slow migration from the “command and control” efficiencies from the analog world to improved efficiencies and effectiveness of the network model. Government organizations will continue to adopt Government 2.0 technology to improve internal processes and engage external citizens.

2.  Global Re-Alignment of the “New Normal”

Key concepts: technology leapfrog, governance risk & compliance, financial crisis, currency wars, aid effectiveness, ICT4D, globalization, competitiveness

Key technologies: mobile, aid management, government resource planning, transparency portals, government 2.0, government performance management

Key stories:

• Explosion of social networking in Africa
• Investment in technology clusters, particularly in the European Union
• Increasing impact of BRIC and emerging countries in international organization governance
• Recognition of the impact of ICT for Development
• Technology leapfrog in developing countries
• Increased focus on technology for transparency in developing countries
• Transparency and the “new normal” driving public financial management reform in developing countries
• Emerging economies driving global growth
• Push for aid effectiveness through aid transparency
• Government 2.0 as driver for economic innovation
• Currency wars as countries attempt to pump domestic growth
• World Bank opens up development information

Governance Matters

What are the incentives for government transformation? Globalization. Competition. Good governance. Transparency and accountability have become a competitive value. It’s part of the Global Competitiveness Report. Governance  and ease of business indicators are published by the World Bank. Transparency International Corruption Perceptions Index is highly publicized. The Millennium Challenge Corporation uses indicators to track effectiveness at meeting the Millennium Development Goals.

What this means

1. International organizations will be further re-aligned to reflect the growth in developing countries. (And, the ability for business to rapidly support the global market will be a competitive advantage.)
2. Governments will continue to focus on technology incubation to improve economies.  At the same time, governments will increasingly release government information to encourage economic activity as described by Tim O’Reilly as “government as platform”.  The impact of releasing government collected data to economic development cannot be understated. O’Reilly has pointed out the impact of GPS as an incubator for private sector innovation. There will be a gradual move away from traditional manufacturing incubation in developed countries.
3. Governments will become more transparent. There will be a higher adoption of budget plans, budget execution, civil service spending, civil service recruitment and procurement portals. Governments will leverage more transparency and accountability to become more efficient and effective. This will improve stability.
4. Technology will begin to bridge the information gap between producer and speculator. The farmer in the field will have the same commodity price information that the trader has.
5. There will be increased use of using country systems by donors in order to improve aid effectiveness. The pressure for transparency will increase on donors and citizens demand better results.
6. Government performance management will become a competitive advantage. The ability to achieve desired results, not just spend money on programs, will become a key element in political debate. This will transcend the dogmatic cleavages we see in many countries.
7. Information systems used by government will change to something that works rather than what vendors say works.  Governments will increasingly recognize where government-specific solutions should be used.

3. Evolution of the Nation State

Key concepts:  devolution, sovereignty, global village, corporate social responsibility, zombieconomy, old media

Key technologies:  Web 2.0, international public sector accounting standards, IPSAS, XBRL

Key stories:

• Eurozone crisis, yet Estonia joins Eurozone
• Croatia close to EU Accession
• Tea party impact on US Midterm elections
• Support of XBRL by governments like around the world
• Rise of the networked non-profit
• Trends in decentralization continue
• Kosovo declares independence
• Increasing importance of sustainability to consumer buying decisions
• Backlash to bonuses in the financial sector and to high CEO pay
• Maturing of Corporate Social Responsibility
• IPSASpalooza at the ICGFM Winter Conference

How Far Will Government Transform?

What this means

1. Continued evolution of the nation state

Marshall McLuhan predicted a global village created through an always present electronic age.

The printing press enabled mass production of books and newspapers in national languages. Languages were standardized. This technology led to the creation of the nation state. Radio, a “hot media”, enabled radical nationalism. Digital technology enables self-organizing. It enables political devolution and decentralization. It also provides the ability to manage at the supranational level. This supports the economies of scale for freer trade and regional organizations. Despite the current Eurozone crisis, countries continue to move towards EU accession and adoption of the Euro.

This global village with DIY organization will change the nature of government and the nation state. It’s still early days. Perhaps government become a competitive provider of services in the physical and virtual worlds as envisioned in the science fiction classic Snow Crash.

2.       More rapid impact on business and non-profit

The impact on the for-profit and non-profit world is more apparent. Non-profit NGOs with hierarchical structures are getting dis-intermediated. Networked non-profits and methods for direct donation from individuals to recipients are rises. Meanwhile, the concept that “the business of business is business” has been wildly refuted.  Business has come to recognize the need to have sustainable customers to have a sustainable business. Business also has become to understand the impact of practices on society. (Kind of a corollary to the impact that government has on business.)  New business models that focus on sustainability and real value, rather than what Umair Haque calls the “zombieconomy”.

Red Herrings

These represent a few elements of discourse that can distract us from what is really going on.

1. Outsourcing. Outsourcing could be a seen as an expression of the centre-periphery model in operation. Yet, effective use of outsourcing has been shown to have economic advantages in the short term to developed countries. In the long run, outsourcing increases stability in developing countries, raises living standards and, ultimately, will provide a more equitable environment. Salaries will increase in developing countries.
2. Globalization radicals. There is some validity that developed countries have exploited trade negotiations. Technology and transportation has created a global environment. The cat is out of the bag.
3. Tablets. Tablet, eReader, netbook and smart phone wars are unimportant in the big picture. These technologies reduce costs, reduce the digital divide and make citizens more agile. (In some ways, the real takeaway is that usability can dramatically improve adoption.)
4. Cable News. The increasing sensationalism of cable news is indicative of the loss of television impact on citizens. It’s the last desperate moves of an industry in decline.
5. Cloud Computing. Cloud computing is about deployment, agility and does not appear to have any material impact except as an enabler of citizen surveillance and Government 2.0.
6. Government will never Change. Lack of apparent Government 2.0 uptake and prevailing view that government culture  will never change suffers from a very short term
7. CSR Backlash. This backlash to CSR with the notion that it reduces profit or a scam are criticisms of the early days of a broad trend.
8. Donors and Country Systems. Donors will transition from thinking country systems are, as Richard Allen calls “courageous”, to realizing that this will reduce high transaction costs and encourage capacity building and anti-corruption. Also, many of the country systems have better use of public financial management good practices than donor systems.

Government of Canada entering the Second Generation of Public Financial Management Automation

Tweeting, meeting, talking, walking, speaking, blogging – above all – listening. A busy week at the Financial Management Institute (FMI) Professional Development Week in Gatineau, Quebec.  Presentations: product roadmap, technical deep drives, performance management and Government 2.0, the value proposition of ERP in government. Eight strategic customer meetings.  Five days of conference presentations. A Canada Export Achievement Award. What did we learn? Public Financial Management (PFM) automation is transitioning the second generation in the Government of Canada.

Here are the transition signs:

• Government Resource Planning (GRP): from integrating software systems to integral software approaches
• Government Performance Management: from compliance to impact
• E-Government: from structural to social (Government 2.0)

From Integration to Integral

(Automating the entire Budget Cycle)

We’ve spoken about this transition to the second generation of PFM automation. Software applications were developed to support operational government requirements. These applications became a collection of automation silos. Commercial Off-The-Shelf (COTS) applications entered the government market. Some were government specific like the FreeBalance Accountability Suite. Some were generic applications customized for government. As we described in our presentation, the Business Case for ERP in Government, integration has become a transitional theme: integrate the silos. Vendors have promoted the notion of single enterprise software suite across government. Why? Easier to integrate. What is really happening in PFM in Canada?

• Mission-critical applications are difficult to satisfy with generic software because of the board range of government mandates and lines of business
• Cost to integrate within generic software suites and to custom-developed applications remains difficult because of proprietary monolithic approaches
• Automation gaps are revealing as government organizations think outside the confines of traditional enterprise software categories

This second generation of PFM automation in Canada is characterized by:

• Extending application categories such as government accounting or human resources to comprehensive process automation
• Breaking the distinction between applications focused on so-called “structured” and “unstructured” data
• Recognizing what can be standardized in government and what cannot, while on the road to shared services
• Integrating budget management across all automated tools

This integral approach is holistic. Government organizations at the federal and provincial levels are pushing the limits of traditional software approaches. Financial managers focus on needs and objectives. They recognize that integration points alone do not provide effective management insight – especially when application components were not designed with budgets in mind. We found creative thinkers over the past week and a half looking for intuitive solutions. Financial managers recognize that PFM automation is much more than a collection of features or integrated features. PFM automation needs the right set of intuitive features that span transactions, documents and collaboration.

From Compliance to Impact

(Government Performance Management)

Government performance management was an important theme at the FMI Professional Development week. As we have written before, governments have moved beyond budget compliance – ensuring that money is spent according to the budget. Governments are focusing on improving results. The Canadian federal government Treasury Board Secretariat has developed numerous standards for performance management. Standards for “value for money” that aligned to risk. Performance management made easy – high business case scrutiny when risks are high. Appropriate measurements when risk is low.

From Structural to Social

(from E-Government to Government 2.0)

The Canadian public service is subject to demographic change. The millennial generation has entered the public service with advanced information technology expectations. The previous generation of PFM automation requires users to navigate through multiple tools to accomplish work. Through complex software generating visual noise. Public servants struggling through complex software rather than improving results.

Automating the structural “business process” represents the end of the first generation of PFM automation. The Canadian public service is beginning to understand the positive impact of Government 2.0.  There are skeptics whose experience with the first generation of PFM automation across the “boom, bust and echo” believes that the culture of government will never change. Yet, the focus of the Professional Development Week was “leadership.” Leadership for change. Leadership at every level of the public service.

We’ve identified six technology and five functional trends in this second generation of PFM. Three of these were important themes at FMI and customer discussions.

Performance measurements are more difficult to determine for governments than companies. The private sector has an objective measurement for performance: profit.  FreeBalance presented the case for linking Government Performance Management with Government 2.0 at the recent Financial Management Institute Professional Development Week.

The technical discipline of “corporate performance management” provides governments with compelling planning and analytical tools. However, the “performance management” discipline is narrow focused and does not include all relevant aspects of government performance. Government 2.0 is a new trend in government transformation. Our presentation describes how Government 2.0 will transform the practice of public financial management. We describe how the government “back-office” benefits from citizen and civil society collaboration.

The practical application of performance management techniques in government has had mixed results. Unlike the private sector, Government Performance Management has no easily identifiable “bottom-line.” Government initiatives have unexpected positive and negative consequences. The selection of specific outputs and outcomes does not provide a 360 degree view of government performance.

Government 2.0 is the use of Web 2.0 techniques to enable collaboration among like-minded people in government. Government 2.0 provides the tools necessary to link government initiatives with societal impact. It also enables governments to improve performance by leveraging the wisdom of crowds.