I attended the book launch earlier this afternoon at the IMF in Washington. The “Spring Meetings” are in progress with large banners, TV projectors and party tents off Pennsylvania Avenue. So, a good time to launch a new book with a panel discussion. There’s 14 chapters written by numerous PFM experts in 4 parts. I hope to review the book in the coming weeks.
There seems to be some persistent tension between ideas in Public Financial Management that includes:
Those who see real progress in reforms to date vs. those who see little improvement
Those who believe that there are objective “best practices” in PFM vs. those who believe PFM is more art than science
Those who think that reform has been too fast vs. those who think that reform can be accelerated
Those who believe that technology enables reform vs. those who think reform is all about people and institutions
The first two issues were discussed at length with some disagreements among panel members. Panelists seemed to agree that reform momentum has been too fast and that people and politicians are key to reform success.
The third released document, embedded below, describes good practices in Government Resource Planning (GRP) sequencing. This is one of the most difficult subjects in PFM. I can’t tell you how many times that I’ve heard the notion that reform sequencing is an art form rather than a science. The consensus seems to be that country contexts differ so much that there cannot be a set of principles or guidelines.
I fundamentally disagree with the notion that good practices in PFM reform sequencing cannot be formalized. We’ve had a lot of experience in developing countries going back more than a decade and have seen patterns emerge. We’ve also formalized an internal process called Governance Valuation that we’re updating thanks to the explosion in open data. I’ve embedded a presentation from last year explaining this process.
National Post (Canada) journalist Jane Armstrong’s The campaign for civility in Afghanistan provides a good portrayal of Alhaj Mohammad Aqa, the Director of Treasury at the Ministry of Finance. Ms. Armstrong describes his approach approach to corruption:
“He carries on by keeping his nose clean and trying to provide an example to a young generation of Afghan public servants. His integrity and skill have paid off. The Finance Ministry is viewed as one of the country’s most efficient departments.”
Capacity Building and Public Financial Management
Ms. Armstrong gets to the heart of success in PFM reform success: capacity building. Foreign consultants often provide operational financial management in post-conflict countries. The key factor to making reform sustainable is to build human capacity. This reduces costs and makes government self-reliant. And, less reliant on vendors like FreeBalance.
The National Post article could give the impression that the Budget Office is part of the Treasury Department. It is not. This might explain the different approach and success rates in capacity building between the two departments.
FreeBalance Contribution
We’d like to think that the use of the FreeBalance Accountability Suite is crucial in PFM reform. After all, all the countries listed by the World Bank as having achieved substantial PFM success have been using our software (including Kosovo and Sierra Leone). None of the countries who did not achieve this level of success were using our software at the time. (Liberia subsequently acquired the FreeBalance Accountability Suite.)
The reality is that our software is a tool to enable reform. It implements faster and enables change better than competing tools. But that doesn’t mean that anyone is actually going to leverage financial controls or modernize processes to improve efficiency. That requires leadership in the government.
Many have remarked that FreeBalance is the de facto standard for post-conflict government financial management. And, the de facto standard for fast implementations. (Kosovo: 26 days, South Sudan: 30 days).
These remarkable successes can give a false impression about FreeBalance. Many observers wonder about the ability of FreeBalance software to operate in more advanced economies. Here are some interesting facts:
FreeBalance software is used by more Government of Canada departments than any other financial management vendor.
The ability to work under stressful conditions makes FreeBalance a low-risk solution in any emerging economy.
FreeBalance software is progressively activated – without the need for expensive software code customization to meet government needs.
Unlike enterprise ERP vendors, the latest version of FreeBalance software is fully web-based: no client/server.
Prognosis for Government Resource Planning (GRP) in South Sudan
Like many countries, development in South Sudan should follow increasing government capacity and be based on country-specific needs. PFM modernization is enabled through the FreeBalance Accountability Suite through the addition of functional modules, activation of more advanced functions and decentralization. The experiences in Timor-Leste and Kosovo bode well:
Modules: Kosovo expanded into Revenue and Purchasing, Timor-Leste to Human Resources, Budget Management, Dashboards, Procurement, Assets and Transparency Portals
Progressive Activation: Kosovo and Timor-Leste have advanced functionality to support international standards and improve decision-making
Decentralization: Kosovo has rolled out FreeBalance software to all government entities and decentralized decision-making. Timor-Leste is moving forward with decentrlization.
That’s the interesting conclusion from the 2010 International Consortium on Governmental Financial Management (ICGFM) and Grant Thornton annual survey: Public Financial Management Responses to an Economically Challenging World. This appetite for reform was confirmed at the recent ICGFM Winter Conference [blog].
While developed country governments descend into melancholy, 76% of respondents indicated a commitment for Public Financial Management reform. 80% of governments are adopting international standards.
The financial crisis was cited as a motivation for reform. Transparency and PFM reform were part of many stimulus packages. Transparency was considered infrastructure by many.
The report concludes:
Public financial managers face some of the most challenging times in decades in meeting their responsibilties, but they have faced them not only with a variety of policy measures but with an unprecedented commitment to transparency.
Why is there such an appetite for reform?
Good public financial management lessons learned in previous crisis have made many developing countries more resilient to the current crisis
Another busy conference at the International Consortium on Governmental Financial Management in Washington this week. Lots of content uploaded to the ICGFM Blog – as my “second job” as VP Communications for the organization. International accounting standards in the public sector might not be top of mind for everyone. Yet, I wonder whether using the International Public Sector Accounting Standards (IPSAS) could provide the context we need to understand the debt crisis in Greece, Ireland or the United States. For one thing, government transparency is opaque if everyone is using different standards.
IPSAS was a major focus on the conference and the International Journal on Governmental Financial Management Volume 2 issue:
Many of the attendees at the conference came from developing countries. Many are adopting the cash-based IPSAS. Those from aid-dependent countries were vocal about the need for aid transparency and aid harmonization. There was some very interesting discussion from the presentation on the International Aid Transparency Initiative with takeaways from Malawi and Rwanda. Aid remains inefficient because of the lack of harmonization to country needs, high transaction costs and duplication. Panelists agreed that getting timely data was more important than full accuracy in data. Otherwise, budget planning and budget execution are interrupted.
The ability to provide transparent data via the web was selected in the ICGFM poll as having the greatest impact. This is reflective of the appetite for transparency in developing countries.
Developing country governments are seeing economic and stability benefits to transparency. And, many are leaping ahead of developed countries through the use of E-Government technology, budget/procurement/human resources transparency and adoption of international standards. (This is the crux of my argument from my article in the November Cutter IT Journal, E-Government Development and Public Sector Transparency Trends in Emerging and Developing Countries )
As one participant pointed out, many governments in developed countries do not want to change national standards for sovereignty reasons or because they feel their standards are superior. This makes it difficult to compare national debt across multiple countries. We may see a leap forward as countries like Georgia and Honduras move ahead of the G7 in support of standards – then move ahead in accural accounting and performance management.
We’re seeing this trend with many of our customers. The sophistication of the Chart of Accounts in Sierra Leone remains a wonder – in my opinion, much better than the COA used by most donors. Timor-Leste continues to advance transparency with a portal from FreeBalance and is forging ahead with performance management functionality for managers and ministers. Kosovo has rapidly adopted International and European standards.
There is uncertainty in life. Confusion. You can’t always trust what you see or what you hear. This was how it was a little over a week ago in Bishkek Kyrgyzstan. A few hundred meters from my hotel and the Ministry of Finance. I could hear explosions and some gunfire.
Local people were not panicked. The Ministry of Finance staff operated as if there was a fire drill – with confidence. And, the hotel operated normally while mounted police waited near the entrance. However, the television news from the BBC spoke of chaos and crisis.
History was unfolding hundreds of meters away in a very tranquil way. There seemed to be a sense of cautious optimism that does not make for sensational news!
This may make some people think that the Government lacks interest in Public Financial Management Reform and transparency. This was not the impression that I got meeting stakeholders with the Government of the Kyrgyz Republic. Senior public servants emphasized to me that they have a significant appetite for reform. They want more effective and transparent government. They want to learn more good practices from other countries.
FreeBalance in Kyrgyzstan
FreeBalance is implementing the FreeBalance Accountability Suite for the Government of the Kyrgyz Republic. The first phase is ambitious covering budget preparation, commitment accounting, budget controls, treasury management, human resources, payroll and financial disclosure. The project is operating on time and within budget. I think that the main reasons for the success to date comes from the commitment of public servants in the Government. This project is “owned” by the government and is seen as a critical factor to improving development in Kyrgyzstan. There is joint management of risk factors. Public servants are quick to provide details of the current processes and needs. And, all stakeholders are focused on ensuring that there are no delays in the project plan.
La reforma de la gestión financiera pública es sin duda, un aspecto importante para lograr la mejora en la calidad del gasto, lo cual impacta positivamente en la mejora de la calidad de vida de los ciudadanos, que dicho sea de paso, es el objetivo más importante de los Estados. ICGFM Survey of Government Finance Managers, Spanish
Es interesante observar a través de la encuesta realizada por Grant Thornton, que los problemas y acciones recomendadas respecto del tema, son compartidos en forma global por los líderes de finanzas gubernamentales. Al respecto es importante resaltar que es bueno implementar buenas prácticas y aprender de experiencias de otros países, analizando y definiendo la estrategia para aplicarlas al País en particular, toda vez que las mismas, no son recetas que se pueden copiar, sino más bien la estrategia debe tomar en cuenta las necesidades particulares y adoptar las medidas necesarias para que dicha reforma sea irreversible y sostenible en el largo plazo. Al respecto se consideran importantes el liderazgo (al mas alto nivel posible), una clara hoja de ruta con objetivos claramente establecidos en el corto, mediano y largo plazo, así como los marcos conceptuales y jurídicos, procedimientos y normas, que constituyen la base de las reformas gubernamentales. La estrategia debe incluir el blindaje necesario para evitar que el cambio de corrientes políticas la desvíe de sus objetivos en el largo plazo. Al respecto es importante convertir el proceso en una política de Estado a fin de institucionalizarla.
La coordinación inter-gubernamental tanto horizontal como vertical (con los diferentes niveles de gobierno) es fundamental para llevar a cabo la reforma de la gestión financiera pública, toda vez que cada Institución debe hacerse responsable no solo de realizar su función conforme los límites y ámbito establecidos por la Ley, sino también de colaborar y coordinarse en forma eficaz con el resto de Instituciones según corresponda.
Como parte de las herramientas fundamentales para hacer sostenible la reforma, se considera el papel que la tecnología juega a través de los Sistemas de Gestión y Administración Financiera Pública, toda vez que los mismos permiten incorporar e implementar los procedimientos, controles, análisis, evaluaciones en tiempo real y apoyo a la toma de decisiones así como proveer de los insumos que permiten mejorar la transparencia.
Il y a sans doute eu des progrès qui ont été accomplis par les gouvernements au cours des dernières années dans la gestion de leurs finances publiques. Malheureusement, ce n’est pas le cas pour tous et ceux qui ont réussi se doivent partager leurs expériences avec les autres gouvernements afin qu’ils puissent éviter de faire les mêmes erreurs de parcours. L’assistance technique est représentée à sa juste valeur car la capacité interne à supporter une telle reforme est souvent impossible sans elle. Comme cette enquête l’indique, un des problèmes les plus couramment observés est l’habileté à diriger ainsi qu’à gérer le changement. Les anciennes méthodes et processus de gestion financière sont bien souvent ancrées dans la culture d’une organisation et ces habitudes sont très difficiles à changer. Même des modifications législatives ne sont parfois pas suffisantes pour modifier ces méthodes. Les dirigeants financiers des gouvernements doivent s’assurer que leurs finances publiques soient gérées de façon correcte tout en suivant les normes comptables internationales. Cela mènera inévitablement à une amélioration des connaissances, une meilleure adaptation aux fluctuations économiques et une plus grande transparence face a son public.
قام شركاء شركة FreeBalance الإتحاد الدولي للإدارة المالية الحكومية و Grant Thornton بنشر نتائج إستطلاع الرأي الدولي للمسؤولين التنفيذين الماليين الحكوميين. و قد بين الإستطلاع تقدما في إصلاح الإدارة المالية العامة ، و تبين أن زيادة الشفافية في الحكومة و إشراك المواطنين يعتبر حافزا مهما لتحسين الحوكمة. هذا يعتبر تقدما مهما حيث كانت في السابق المنظمات العالمية تحث الحكومات على إصلاح الإدارة المالية العامة. و تم الآن تدويل فكرة الإصلاح و أصبحت الحكومات تبحث عن فرص تحسين النتائج و كسب ثقة المواطنين. “أجاب معظم المشاركين بالإستطلاع بأن زيادة الشفافية تستحق التكلفة الزائدة المتعلقة بها لضمان إستمرارية الإنفتاح و تشجيع إشتراك المواطنين”. و 10% فقط من المشاركين بالإستطلاع أجاب بأن إصلاح الإدارة المالية العامة هو فقط لهدف إرضاء الجهات المانحة.
إن إصلاح الإدارة المالية العامة يتضمن أكثر من مجرد أنظمة إدارة الموارد الحكومية ، لقد أظهرت الدراسة وجود طلب على الربط بين الأنظمة و على أنظمة إدارة الموازنة و إدارة المشتريات.
إن تطوير الموارد البشرية يعتبر من العوامل المهمة بالنسبة للحكومات. و يعتبر عدم توفر مهنيين ماليين و محاسبيين مؤهلين من العوائق الأساسية في طريق الإصلاح المالي. و هذا لا يقتصر فقط على الدول النامية ، فقد أظهرت عدة إستطلاعات قامت بها Grant Thornton بأن عدم توفر الموارد البشرية المؤهلة يعتبر عائقا للإصلاح المالي في الولايات المتحدة الأمريكية، و كان هذا أيضا الحديث الشائع خلال أسبوع تطوير المؤهليين الذي عقد مؤخرا من قبل معهد الإدارة المالية في كندا.
إن لدى الحكومات حاجة ملحة لتطوير الموارد البشرية و ذلك لضمان إستمرارية الإصلاح المالي، و إنه من غير المستغرب أن 70% من المشاركين في الإستطلاع يؤمنون بأن وجود الدعم التقني لتطوير مواردهم البشرية يعتبر من أهم الدعم المطلوب، و 4% فقط يعتبرون الدعم المالي و التمويل هو الأهم.
وفقا للمشاركين في إستطلاع الرأي، تجتمع القيادة و إدارة التغيير معا لأنه بدون القيادة لن يكون هناك تغيير مقترح. و أفاد العديد من المشاركين بأن البيروقراطية تعترض الإصلاح المالي التقني مثل تطبيق نظام محاسبة الإستحقاق و أتمتتة الإجراءات المحاسبية. و يعتبر التغيير صعبا في المنظمات الكبيرة ، و من الصعب أيضا إستمرارية التغيير، و إن مثل هذا التغيير متضمنا التغيير التقني يتطلب قيادة قوية و مهارات إتصال، و على القيادات في الحكومة التواصل مع المواطنين بواسطة كافة قنوات الإتصال.
تعتبر الشفافية الموضوع المهيمن المتعلق بإصلاح الإدارة المالية العامة، و يعبر الكشف عن البيانات المالية و الموازنات و حرية نشرها عاملا رئيسيا لدعم الإصلاح المالي، و إن خبراتنا في هذا المجال تدعم نتائج الإستطلاع.
يدرك قادة العديد من الدول بأن توفير قيم أكبر للمواطنين يقوي مراكزهم، ففي الدول الديموقراطية تسعى الحكومات لإعادة إنتخابها من خلال توفير الشفافية على إنجازاتها. فإن الشفافية المالية تؤدي إلى زيادة الإستثمار و زيادة الجهود المشتركة.
إن الإستطلاعات غير الرسمية التي قام بها الإتحاد الدولي للإدارة المالية الحكومية خلال المؤتمر الذي إنعقد في مايو 2009 ، أبرزت أن الأزمة الإقتصادية زادت من الحاجة إلى الإصلاح المالي. و المقابلات التي أجريت مع المدراء الماليين أكدت نتائج الإستطلاع. إن إصلاح الإدارة المالية العامة يزيد من فعالية الأداء العام و يمكن الحكومات من إنجاز المزيد و بتكلفة أقل.
There is uncertainty in life. Confusion. You can’t always trust what you see or what you hear. This was how it was a little over a week ago in Bishkek Kyrgyzstan. A few hundred meters from my hotel and the Ministry of Finance. I could hear explosions and some gunfire.