Posts Tagged ‘MDG’

The $1 Poverty Narrative – Marketing or Good Policy?

Thursday, October 10th, 2013

Doug Hadden, VP Products

Graphs and charts showing the number of people living below a poverty line of $1 a day ($1.25 today, thanks to inflation) are everywhere. It’s been used to mobile global development effort. But is the notion of eradicating ‘extreme poverty’ realistic? Is the $1.25 an arbitrary value that has no reality to poor people. For example, will earning $1.33 a day make live easier, more secure and enable planning for the future?

These are difficult questions that major development agencies are trying to address. Poverty is a complex problem that is unlikely to be solved by simple technical solutions. Donors like the World Bank are re-organizing to take on this poverty challenge.

“MDG Idol” or “MDG Survivor”?

Thursday, September 23rd, 2010

Excitement over Millennium Development Goals can Hide what Works!

Doug Hadden, VP Products

Bright lights and big stars in New York this week. Speeches at the United Nations. Explosion in social media discussion. Today is #socialgood day, so make sure your view is heard on this Millenium Development Goal - “MDG Idol”. What goal is best for you?  In the smorgasbord of causes. Advocates press their case for their chosen cause. And, it is hard to determine which cause to pick with such celebrities as Bono, Bill Clinton, Ed Norton and Gina Davis sharing stages. You can’t disagree with any of these points of view.

This where the lesson gets lost. For all the improvement in MDGs, there remains a group of survivors with limited improvements to date. “MDG Survivor.” So, we should be less concerned about what the G7 will do in aid and more about what the G7+ needs. Who is the G7+?  Burundi, Chad, Republic Democratic of Congo, Nepal, Salomon Islands, Sierra Leona, South of Sudan and Timor-Leste. What do these fragile states need?

Statebuilding and Governance and MDGs

‘”Aid is given based on MDG criteria, and from our experience we have found out that before we can get the MDGs, we have to do a few things first. We have to have peace and stability,” Timor Leste Minister of Finance Emilia Pires told IPS in Dili ”It means that you have to build peace and then you have to build a state to manage the whole thing. Peacebuilding and statebuilding must come before the MDGs and if you look at all the literature of the MDGs, it doesn’t talk about that.”‘ That’s why the G7+ have the Dili Declaration that states:

 ”Conflict and fragility are major obstacles for achieving the Millennium Development Goals (MDGs). We recognize that it will be extremely difficult to achieve the MDGs in most fragile and conflict-affected states by 2015. We urgently need to address conflict and fragility by supporting country-led peacebuilding and statebuilding processes. To improve the impact of our efforts we will take immediate actions and develop an International Action Plan on peacebuilding and statebuilding.”

As Daniel Kauffman of the Brookings observes: “there are many explanations for slow and uneven progress on the MDGs, ranging from insufficient donor commitments to the choice of indicators. But, as we have written about before a big part of the answer lies in the highly variable quality of governance across countries.” Good Governance is required to advance MDGs. The Dili Declaration shows “governance” as a key priority.

Transparency for Aid Effectiveness

As our friends at Publish What You Fund emphasize, aid effectiveness is as much about donor transparency as it is recipient government governance. Aid transparency improves aid effectiveness through improved aid harmonization and citizen oversight. That’s the intent behind the International Aid Transparency Initiative (IATI). That’s also why there will be a significant positive impact from the World Bank decision to provide open data at http://data.worldbank.org/.

What is FreeBalance doing about it?

As a For Profit Social Enterprise (FOPSE) whose mission is to bring tools for good governance around the world, the MDGs are critically important. Of course, it helps to have Government Resource Planning software that can be implemented and operated successfully in fragile states like Sierra Leone, Timor-Leste, Liberia, Afghanistan and South of Sudan. We remain active in IATI pushing for improved budget integration. And, we try to share lessons learned.

 

Tracking Stimulus Money: Fad, Fashion or Trend?

Thursday, June 4th, 2009

Doug Hadden, VP Products

“Follow the money.” Great advice from the movie, All the President’s Men.  And, this has become all the rage with the American stimulus package.  Conferences, blogs, tweets, CNN – all a-buzz.  Software vendors are announcing products to track the stimulus.

Is this an important trend?

The reaction by software vendors is reminiscent of the “compliance” industry. Topical. Possibly lucrative for vendors. Essentially recasting existing software products to do new things.  Business intelligence and grant management software repositioned as stimulus tracking. Magic? No.

Accountability in government is much more than stimulus tracking. Governments around the world will be spending unprecedented amounts to stimulate economic development. Yet, these expenditures are far less than government procurement and human resources. Transparent and accountable government is the trend. Stimulus transparency is the fad.

There are ideological discussions about the size of government in the United States and elsewhere. Most citizens can support the notion that governments should be more effective.  More effective every day of the year. Not just for the stimulus package. And, citizens are interested in results, not just how much money was spent in a particular region.

Much of the discussion about tracking the stimulus program relates to where the money is going rather than whether it will have positive economic benefits. This is where the developed world can learn from emerging countries. Emerging country governments report project expenditures and provide monitoring and evaluation data to donors.

What is the technical problem that needs to be overcome to enable stimulus tracking?

Certainly not reporting. There are established commercial and open source reporting, analysis and dashboard software. And, grant management software is also available. The problem is classification. More than the traditional classification problem in data warehousing. Why? Data warehousing taxonomy is oriented for internal purposes.  For people who understand the business or government domain. Not for the public.

Transparent government means accessible government. Citizens are not familiar with the complexities of government charts of accounts. Performance classification codes can differ among government organizations.  Stimulus fund classifications may be different among federal departments. Funds transfered from a federal to State department can change classification.

Emerging country governments leverage international standards for statistical tracking (IMF Government Financial Statistics), government functions (UN Common Functions of Government) and performance objectives (typically following Millennium Development Goals).  And, the American Federal Government developed a performance classification in the previous administration known as the President’s Management Agenda.  Governments need to track the economic purpose and objective for each stimulus expenditure.  Consistently.

Classification is the first step. Explanation is the second. Transparent government requires clarity. Classifications must be explained and accessible.

Where is this leading?

Transparent and accountable government is a worldwide trend. Citizens want to participate in making government work. This is particularly evident in Latin America where participatory budgeting has been widely adopted.

Many observers believe that the stimulus money will not be spent quickly enough or executed by recipients for the purpose intended. So they should. This is more than compliance. (Or Compliance 2.0). This is about Government 2.0. About citizens participating to improve government results. Imagine how effective the American stimulus package will be if it is accessible and leverages the social network energy used in the most recent election.

Government Technology Implications: The Chart of Accounts

Monday, March 9th, 2009

This is section 2.2 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.

Note: this has been updated to add comments about IPSAS and the COA

It starts with the Chart of Accounts. Fiscal discipline, controls, reporting and performance are enabled through the proper creation and modernization of a government Chart of Accounts (COA). The COA describes government objectives. It can provide effective decision-making. 

Technologists understand the the COA represents the metadata of government financial management. The COA provides a logical hierarchy of fiscal management. The government COA tends to be more complex than in the private sector because it can include all government entities and a broader set of considerations.

Elements of a COA

segments

Example of COA Elements

The Chart of Accounts can include many important elements such as:

  • Object, Accounting or  Transaction Code that corresponds to standard accounting practice including codes for assets, liabilities, revenue and expenses.
  • Organization Code that describes the organization hierarchy including ministries, agencies and divisions.
  • Responsibility Centre that describes approval responsibilities. Sometimes the approval structure differs from the organizational hierarchy.
  • Location Code that describes the physical location of the organizational unit.
  • Tier that describes the organizational tier in unitary governments such as provinces or municipality.
  • Fund Code that describes the source types of revenue. Many emerging countries have fund codes for donors. Most countries keep track of different revenue sources and treat expenditures differently based on revenue types.
  • Economic Code that describes the purpose of any expenditure or program. For example, other ministries, other than the Ministry of Education, expend money for educational purposes.
  • Programs that describes government programs that could be shared across multiple ministries. Programs often last more than one year and represents an important commitment on behalf of the government.
  • Projects that describe important government projects.
  • Activities that describe the functions being performed for any expenditure.
  • Objectives that describes the objective of any expenditure.
  • Performance that describes the measurement for any initiative.
  • Support of International reporting standards such as Government Financial Statistics (GFS).

A Most Beautiful Chart of Accounts

The Accountant General of Sierra Leone,  Cyprian Kamaray, describes his COA as ‘beautiful’. There are a number of ways to design an elegant chart of accounts. Good practices include:

  • Identifying shared information in the COA to reduce the number of characters. For example, the “project” element could be part of the “program” element. The COA in Sierra Leone uses 27 characters yet provides full GFS reporting.
  • Simple is always better. Government should err on making the COA as small and simple as possible. This reduces data entry errors.
  • Inferring important reporting information. Users should not be expected to understand Government Financial Statistics. GFS can be inferred from normal accounting codes.
  • Valid coding combinations. Programs and projects often fall under one or two ministries. The COA should be designed to prevent incorrect data entry in these situations.
  • Adapt over time. The COA should be designed for current conditions. Adding complexity to the COA can result in errors. It is best to match updating the COA with capacity building.
  • Simplify double-entry bookkeeping. Many data entry personnel are not fully familiar with debits and credits. The context of the data entry can define the debits and credits for users. 

samplecoa

Example of a simplified COA hierarchy

Performance Management Linkage

Government Performance Management is a critical subject in Public Financial Management. Governments want to improve development results. Sometimes these improvements are tied to international objectives like the Millennium Challenge. Performance characteristics need to be integrated within the Chart of Accounts to facilitate performance reporting and analysis.

slcoa3objectives

The beautiful Sierra Leone Program segment is an excellent example of organizing objectives with other critical elements. The characteristics of the segment include:

 

  • Objectives managed through pillars, and objectives linked to project components.
  • Themes, priorities and Millennium Development Goals linked to objectives reducing the data entry complexity.
  • Project hierarchy built on a number of tiers down to the activity level.
  • GFS inferred from the project elements.

 

Other COA Considerations

Government organizations update the COA to meet new objectives. This may include adding of an additional segment or revising the economic codes. Governments are constantly modernizing the financial management system. 

coamap

A multi-year Chart of Accounts

Details within the COA that are important to a government entity may not be material to the Ministry of Finance. For example, details coming from local governments may not be important. Country-wide COAs where every government entity shares the same complex coding structure can add complexity. Summarizing unimportant details and inferring parts of the COA can simplify the consolidation of financial information.

coasimplification

Simplifying the roll-up to a consolidated Chart of Accounts

Implication of IPSAS

The Institute for International Public Sector Accounting Standards (IPSAS) published 26 standards. . This has many implications for public financial management in general. IPSAS provides guidance on COA objectives, reporting needs and supporting accrual accounting including creating classifications for:

  • Calculating financial position and cash flow to enable the creation of financial statements
  • Organization units or segments that can relate to geographic or service entity to enable comprehensive reporting for any organizational unit
  • Depreciation and amortization 
  • Revenue and expense types to classify revenue streams and expense types
  • Salary and benefits recognition
  • Finance and borrowing costs
  • Any long term contractual agreement like leases
  • Contingent liabilities and assets
  • Statistical reporting
  • Inventories including costs and changing in value including write-downs
  • Foreign exchange including accounting for realized and unrealized foreign exchange gains and losses

Summary

The Sierra Leone COA is attractive. There is no perfect COA for every government. It depends on the country context – particularly government objectives and human capacity. 

There is important internal political capital that can be generated from an effective design of the Chart of Accounts. One Latin American civil servant complained that the President of his country could not tell people how much money had been spent on education in a province. That is because there was no element that covered the “economic purpose” of expenditures.