2012 09-10 fmis-training_at_crown_agents
DESCRIPTION
Training course on Government Resource Planning/Government Integrated Financial Management systems given at Crown Agents training courseTRANSCRIPT
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Version 7 section
• brief discussion 0. IFMIS ~ GRP Training &
Introduction to Good Practices
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Version 7 section
• brief discussion
Agenda
1. Intro to FreeBalance – 15 minutes
2. FMIS/GRP Introduction – 90 minutes
3. Technology Leapfrog
– 45 minutes
4. Performance Management in PFM – 60 minutes
5. Sequencing PFM technology - Governance Valuations – 90 minutes
6. Financially sustainable GRP, governance structures, lessons learned – 45 minutes
7. GRP and Anti-Corruption – 30 minutes
8. Future of PFM technology
– 30 Minutes
9. “Parking Lot”
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Version 7 section
• brief discussion
Version 7 section 1. Valuable learning experience
2. Contrast public and private sector accounting & management
3. Training course, not a demonstration
4. Breadth of financial management in government
5. Strategic, tactical, futures
6. Vendor-neutral “good practices”
7. Share lessons among group
8. Voice lasts until end of day
9. Address specific ideas, concerns
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Version 7 section
• brief discussion
Version 7 section
4 4
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Version 7 section
• brief discussion
1. Introduction to FreeBalance
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Version 7 section
• brief discussion
Agenda
1. Intro to FreeBalance – 15 minutes
2. FMIS/GRP Introduction – 90 minutes
3. Technology Leapfrog
– 45 minutes
4. Performance Management in PFM – 60 minutes
5. Sequencing PFM technology - Governance Valuations – 90 minutes
6. Financially sustainable GRP, governance structures, lessons learned – 45 minutes
7. GRP and Anti-Corruption – 30 minutes
8. Future of PFM technology
– 30 Minutes
9. “Parking Lot”
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“free balance”
+ Budget
- Commitments
- Obligations
- Actuals
= Free Balance
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Version 7 section
• brief discussion
for public financial management support reform and modernization to improve
governance, transparency and accountability.
FreeBalance solutions
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Version 7 section
• brief discussion
Version 7 section FreeBalance in a Nutshell
How
• For Profit Social Enterprise focused on governance
• Customer-centric to ensure customer sustainability
• Laser focus on the public sector in products and processes
• Configuration approach rather than customization
Why
• Help governments around the accelerate country growth, improve stability and reduce poverty through improved governance
What
• Comprehensive Government Resource Planning software • Implementation participation to improve success • Capacity building to achieve government self-sufficiency • Steering Committee to ensure alignment with customers
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Version 7 section
• brief discussion
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• brief discussion
FreeBalance Offices and Regional Support Centres
• services & support • sales, business development & marketing • product management & development • corporate services
Dili
Ulaanbaatar
Bishkek Ottawa
Guatemala City
Washington
St. Johns
Lisbon
Monrovia
Freetown Kampala
Pristina
Ramallah
Kolkata
Kabul
Bangalore
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Version 7 section
PLEASE EXCUSE THE ANY BIAS…
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Version 7 section
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Version 7 section
BIAS 1: “GRP” VS “ERP”
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Version 7 section
BIAS 2: INTEGRATIVE APPROACH VS “SYSTEMS INTEGRATION”
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BIAS 3: PHASED APPROACH VS “BIG BANG”
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BIAS 5: PERSPECTIVE ON CORRUPTION AND DEVELOPMENT ~ “GOOD PRACTICES” VS “BEST PRACTICES”
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First Generation “ERP Era” to
2007
Strategic Inflection
Point 2007-2010
Second Generation “GRP Era”
2010+
BIAS 5: MARKET IS CHANGING VS STAYING SAME
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Global PFM
Provider
Canadian Company
GRP Leader
100% Government
Focus
ISO-9001/2008
Covers Budget Cycle
Modern Web
Technology
High Success
Rate
Company Summary
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Version 7 section
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2. FMIS/GRP Introduction
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Version 7 section
• brief discussion
Agenda
1. Intro to FreeBalance – 15 minutes
2. FMIS/GRP Introduction – 90 minutes
3. Technology Leapfrog
– 45 minutes
4. Performance Management in PFM
– 60 minutes
5. Sequencing PFM technology - Governance Valuations
– 90 minutes
6. Financially sustainable GRP, governance structures, lessons learned
– 45 minutes
7. GRP and Anti-Corruption – 30 minutes
8. Future of PFM technology
– 30 Minutes
9. “Parking Lot”
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What's special in Government?
Reality Check
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Stakeholders
Shareholders
Citizens
hu
nd
red
s
millions Reality Check
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Ownership?1
• By definition, [public sector organizations] do not 'own
themselves' in the way that commercial organisations do,
and so cannot, for example, switch from producing widgets
to making jam if they so choose. Indeed, the concept of
'successful' public sector organisations is itself elusive, for
this reason. The common currency of profit and
shareholder value that defines the private sector
clearly does not apply to public organisations, and
attainment of other goals gives no guarantees for their
future. As the requirements of public service and political
imperatives change, public sector organisations are often
reorganised, reformed or even eliminated, regardless of
their past level of achievement or recognition
1. Better Management.com
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Lines of Business?
One of the most
successful and
largest business
conglomerates
across many lines of
business
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Lines of Business? Agriculture and Agri-Food Canada , Atlantic Canada Opportunities Agency , Atlantic Pilotage Authority Canada , Atomic Energy of Canada Limited , Auditor General of Canada, Office of the , Bank of
Canada , Business Development Bank of Canada , Cadets Canada , Canada Border Services Agency (CBSA) , Canada Business Network , Canada Council for the Arts , Canada Deposit Insurance
Corporation , Canada Economic Development for Quebec Regions , Canada Firearms Centre , Canada Industrial Relations Board , C anada Lands Company Limited, Canada Mortgage and Housing
Corporation , Canada Pension Plan Investment Board , Canada Post Corporation , Canada Revenue Agency (CRA), Canada School of Public Service , Canada Science and Technology Museum
Corporation , Canada Transportation Act Review , Canada-Nova Scotia Offshore Petroleum Board , Canadian Air Transport Security Authority (CATSA) , Canadian Artists and Producers Professional
Relations Tribunal , Canadian Broadcasting Corporation , Canadian Centre for Occupational Health and Safety , Canadian Centre on Substance Abuse , Canadian Coast Guard , Canadian Commercial
Corporation , Canadian Dairy Commission , Canadian Environmental Assessment Agency , Canadian Food Inspection Agency , Canadi an Forces Grievance Board , Canadian Grain Commission ,
Canadian Heritage , Canadian Human Rights Commission , Canadian Human Rights Tribunal , Canadian Institutes of Health Research , Canadian Intellectual Property Office (CIPO) , Canadian
Intergovernmental Conference Secretariat , Canadian International Development Agency , Canadian International Trade Tribunal , Canadian Judicial Council , Canadian Museum of Civilization Corporation
, Canadian Museum of Nature , Canadian Nuclear Safety Commission , Canadian Pari-Mutuel Agency , Canadian Polar Commission , Canadian Police College , Canadian Race Relations Foundation ,
Canadian Radio-television and Telecommunications Commission , Canadian Space Agency , Canadian Tourism Commission , Canadian Transportation Agency , Canadian Wheat Board , Cape Breton
Development Corporation , Cape Breton Growth Fund (CBGF) , Citizenship and Immigration Canada , Climate Change (Government of Canada) , Commissioner for Federal Judicial Affairs, Office of the ,
Commissioner of Official Languages, Office of the , Commissioner of Review Tribunals CPP/OAS, Office of the , Commissioner of the Environment and Sustainable Development , Communications
Security Establishment , Communications Security Establishment Commissioner, Office of the , Competition Bureau , Competition Tribunal , Copyright Board Canada , Correctional Service Canada (CSC)
, Courts Administration Service , Defence Construction Canada , Defence Research and Development Canada (Defence R&D Canada) , Elections Canada , Employment Insurance Board of Referees,
Enterprise Cape Breton Corporation , Environment Canada , Environmental Protection Review Canada , Ethics Commissioner, Office of the , Export Development Canada , Farm Credit Canada , Federal
Bridge Corporation Limited , Federal Court , Federal Court of Appeal , Federal Labour Standards Review , Finance Canada, Depa rtment of , Financial Consumer Agency of Canada (FCAC) , Financial
Transaction and Reports Analysis Centre of Canada (FINTRAC) , Fisheries and Oceans Canada , Foreign Affairs Canada (FAC) , Freshwater Fish Marketing Corporation , Functional Communities of the
Government of Canada , Governor General of Canada , Great Lakes Pilotage Authority Canada , Hazardous Materials Information Review Commission, Health Canada , House of Commons , Human
Resources and Skills Development Canada (HRSDC), Immigration and Refugee Board of Canada , Indian and Northern Affairs Canada , Indian Claims Commission , Indian Residential Schools Resolution
Canada , Industry Canada , Information Commissioner of Canada, Office of the , Infrastructure Canada , Inspector General of the Canadian Security Intelligence Service , Interagency Advisory Panel on
Research Ethics , International Centre for Human Rights and Democratic Development , International Development Research Centre , International Joint Commission , International Trade Canada (ITCan),
Justice Canada, Department of , Law Commission of Canada , Leadership Network, The , Library and Archives Canada, Marine Atla ntic , Military Police Complaints Commission , NAFTA Secretariat -
Canadian Section , National Advisory Council on Aging , National Arts Centre , National Battlefields Commission , National Ca pital Commission (NCC) , National Crime Prevention Strategy , National
Defence, National Energy Board , National Farm Products Council , National Film Board of Canada , National Gallery of Canada , National Joint Council , National Literacy Secretariat , National Research
Council Canada , National Round Table on the Environment and the Economy , National Search and Rescue Secretariat , Natural R esources Canada , Natural Sciences and Engineering Research Council
of Canada , Networks of Centres of Excellence, Office of the Secretary to the Governor General , Pacific Pilotage Authority Canada , Parks Canada , Parliament of Canada , Passport Canada , Patented
Medicine Prices Review Board , Pension Appeals Board , Policy Research Initiative , Prime Minister of Canada, Office of the , Privacy Commissioner of Canada , Privy Council Office, Public Health Agency
of Canada , Public Safety and Emergency Preparedness Canada, Public Sector Pension Investment Board , Public Service Commissi on of Canada , Public Service Human Resources Management Agency,
of Canada , Public Service Integrity Office , Public Service Labour Relations Board , Public Service Staffing Tribunal , Publ ic Works and Government Services Canada , Queens Quay West Land
Corporation , Rebuilding Afghanistan , Receiver General for Canada , Review Tribunal (Agriculture and Agri -food) , Royal Canadian Mint , Royal Canadian Mounted Police (RCMP), Security Intelligence
Review Committee , Senate of Canada , Service Canada , Social Development Canada (SD), Social Sciences and Humanities Researc h Council of Canada , Species at Risk Act Public Registry , Standards
Council of Canada , Statistics Canada , Status of Women Canada , Superintendent of Financial Institutions, Office of the , Su preme Court of Canada , Tax Court of Canada , Team Canada inc , Technology
Partnerships Canada , Telefilm Canada , Transport Canada, Transportation Appeal Tribunal of Canada , Transportation Safety Board of Canada , Treasury Board of Canada Secretariat, Veterans Affairs
Canada , Veterans Review and Appeal Board Canada , VIA Rail Canada Inc. , Voluntary Sector Initiative , Western Economic Dive rsification Canada.
Defence
Agriculture
Research
Health
Transportation
Legal Post Office
Environment
Industry
Banking Export Taxation
Legislature
Commissions
Granting
Foreign Affairs
Welfare
Broadcasting
Museums
Regulatory Boards
Natural Resources
Police and Security
Insurance
Mint
Prisons
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Comparing Strategy1 1. Arvenson
Best Management Practices
Sameness
Standardized Technology
Growth Rate, Earnings,
Market Share, Uniqueness,
Advanced Technology
Key success factors
National Security Protection of intellectual
capital, Proprietary
Knowledge
Justification for secrecy:
Leadership, Legislators,
Planners
Customer Demand Budget priorities set by:
Taxpayers, Inspectors,
Legislators
Stockholders, Owners,
Market
Stakeholders
Customer satisfaction Customer satisfaction Desired Outcome
Accountability to public,
Integrity, Fairness
Innovation, Creativity,
Goodwill, Recognition
Values
Cost Reduction, Efficiency Profit, Growth, Market Share General Financial Goal
Mission effectiveness Competitiveness General Strategic Goal
Public Sector Private Sector Strategic Feature
Citizen
& protection of
citizen rights
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Government Financial Management Goals1 1. Parry
To implement best international
standards of fiscal transparency and
accountability.
4. Best Practice in Transparency and
Accountability
Timely and relevant information to better
manage allocated resources to achieve
efficiency, economy, effectiveness and
value for money.
3. Management of Resources to Achieve
Value for Money
To ensure that Government priorities are
identified and articulated as budgetary
objectives, and at all levels of
government reflected in the allocation of
resources.
2. Allocation of Resources In
Accordance with Government Priorities
Management of fiscal flows, balances
and risk
1. Effective Fiscal Management
Explanation Goal
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The objective of implementing
a computerized IGFMIS system:
Increase the effectiveness and efficiency of state
financial management and facilitate the adoption
of modern public expenditure management
practices in keeping with international standards
and benchmarks1.
1. Points
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Definitions
Integrated Financial Management System (IFMS) or
Integrated Public Financial Management System (IPFMS) or
Integrated Financial Management Information System (IFMIS)
IFMS is a common information and communication technology (ICT) platform which
integrates core public financial management (PFM) functions (e.g. budgeting, treasury
operations, accounting, cash/debt management, auditing/reporting) to ensure
efficient management of public resources.
IFMS is usually a centralized system which supports distributed (countrywide)
operations of PFM organizations on a unique central database containing all financial
information.
Reliable databases, enhanced business processes and consistent information flows
between various PFM modules increase overall operational efficiency, improves
planning and decision making process, and enhances transparency.
1. Dener
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Technology in Context
Technology
IFMIS
Public Financial Management
Modernization and Reform
Government Objectives
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Technology Vendor Viewpoint
Technology
IFMIS
Public Financial Management
Modernization and Reform
Government Objectives
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Public Financial Management • Typical term: Integrated Financial Management
Information System (IFMIS)
– Our term: Government Resource Planning
(GRP)
• IFMIS in context of PFM
– Technology foundation for implementing PFM reform
through political reform
– IFMIS implementations must be sequenced to the
unique country context
– IFMIS systems must be flexible to adapt to changes
and budget reform evolution
– IFMIS implementations must be sustainable
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Reality
• Reform comes first
• An IFMIS must support on-going PFM
modernization
• Technology enables the GRP
• Technology is not government
modernization
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Public Sector requires different approach
• Several governmental agencies in the US,
Germany, Australia, and Malaysia have
reported that the integration of agencies
and systems in the public sector can be
quite different from the private sector,
requiring the use of a different approach
and model.
1. Wagner, Antonucci
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Profit
(Loss)
Private Sector The key financial concept is:
Public Sector The key financial concept is:
Budget
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Profit
(Loss)
Private Sector The key control is:
Public Sector The key control is:
Budget
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Bottom Line?
Private
Sector
Public
Sector
profit free balance
Reality check:
Governments are more concerned
about whether money was spent
where it was planned to be spent
rather than whether it did any good.
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The Budget is THE LAW
• Approved by legislature and executive
often described as the “organic budget
law”
• In many countries, the budget is the
expression of parliamentary
“confidence”
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Commercial Financial Management1
• Input decision driven by need to maximize profit
• Clear concept of business entity
• Funding directly linked to business process
• Legal requirement to value entity’s assets and liabilities
1. Parry
Inputs (measured in $)
Business
Process Outputs
(measured in $)
Difference = Profit
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Key Private Sector Reports and Concepts
Profit and Loss
Statement
Earnings before
depreciation, interest, taxes
Shareholder’s Equity
Balance Sheet
Goodwill
Weighted Average Cost
Shareholder’s Equity
Statement of Cash Flow
Equity Investments
Borrowing
Working Capital Debt to Equity Ratio
Return on equity
Return on sales
Return on equity
Earnings per share
Net days outstanding
Price earnings ratio
Net present value
Future value
Weighted average cost of
Capital
Gross Profit Margin
Reality check:
How many of these concepts
are important in government?
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Government Financial Management Process1
1. Parry Planning
Resource
ceiling
Policy
objectives
Programs & projects
Budgeting
Reporting &
Monitoring
Accounting
Budget Execution
Feedback for monitoring & control
Medium
term budget
Annual
budgets
Budgeted performance
targets
Fund release
Cash& Debt
Management
General
ledger
Performance
recording
Asset
management
HRM &
Payroll
Financial & performance
reports to managers
Financial statements
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1. Rodin-Brown
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1. Rodin-Brown
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Asset / Inventory Mgmt
Procurement/ Purchasing
Mgmt of Budget
Authorizations
Commitment of Funds
Payments and Receipts Mgmt
Cash
Management
Debt and Aid Management
Fiscal Reports & Budget Review
Audit and
Evaluation
Budget
Preparation
Policy Development
and Review
Definitions
Budget Execution [ Treasury System ]
Payroll Calcs
HR Mgmt
F M I S Web Portal
Public Financial
Management Cycle
1. Dener
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Government Resource Planning (GRP)
Appropriations
Expenditures
Procurement
Treasury
Materials
Civil Service
Receipts
Payroll
Social Programs
Budget Controls
Planning
Analysis
Budget Law
Policy
Forecasting
Budget Books
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Government Financial Management1
• Input decisions driven by budget as the legal
embodiment of public policy
• Definition of government entity difficult,
boundaries different for fiscal and business
management
• Funding not linked to business process
• No legal requirement to identify assets and
liabilities
1. Parry
Inputs (measured in $)
Business
Process Outputs
(service delivery)
Comparison = Value for Money
Inputs = Appropriations
Seeing change in the
last 2 points.
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Government Financial Management Software1
• Features required for government financial management software – System driven by budget as legal authority to raise taxes
and spend money
– Manage multi level fund release against budget authorisation – warranting and commitment accounting
– Able to provide complex expenditure analysis to meet internal and international requirements = complex chart of accounts structure
– Accounting systems typically still cash based so must be able to record transactions initiated by cash
– If accrual accounting used must also be able to provide cash flow information
– Comply with IPSAS and IMF requirements
1. Parry
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Example of the Public Sector Difference1
• Commercial Entity Perspective
– Excess revenue = sales success
– Excess costs = necessary costs
– Results = success
• Government Perspective
– Surplus to Consolidated
Fund
– Excess spending =
budget overrun
– Result = problem
1. Parry
Financial Statement
Budget
for 2005
Actual
for 2005
Difference
Revenue $500 $800 +$300
Cost $300 $480 +$180
Surplus $200 $320 +$120
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What are governments trying to achieve?
• General: efficiency and effectiveness
through automation
• Reduced fraud and corruption through
controls & audit
• Improved cash management, decision-
making, value for money through
reporting & analysis
• Improved decision-making through
decentralization
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Simplified World Bank Treasury Reference Model: Organization
Ministry of Finance
Spending Agencies
Revenue Agencies
Central Bank Audit Organization
Planning / Budget
Budget Preparation
Ledgers, Controls Financial Reports
Procurement Purchasing , Procurement
Treasury Cash, Debt, Bank
Foreign Exchange
Public Service Payroll, Pensions
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Simplified World Bank Treasury Reference Model: Organization
Ministry of Finance
Spending Agencies
Revenue Agencies
Central Bank Audit Organization
Planning / Budget
Budget Preparation
Ledgers, Controls Financial Reports
Procurement Purchasing , Procurement
Treasury Cash, Debt, Bank
Foreign Exchange
Public Service Payroll, Pensions
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Accounting 101
• Assets, Liabilities, Equity
• Debit, Credits
• Journals and Ledgers
• Financial Reports
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“Commitment Accounting is...”
where spending controls
are enacted that ensure
that no budget executor
can exceed their annual
appropriations .
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Four Types of Accounting
• Financial Accounting: reporting results to external stakeholders consistent with G.A.A.P.
• Tax Accounting: reporting results to government consistent with the laws of that nation.
• Cost or Managerial Accounting: providing actionable information
• Fund or Commitment Accounting: accounting method used for not for profits, educational institutions and governments
– Budgetary Control
– Keeping track of in-progress expenditures
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Key Advantages of Commitment Accounting
• Ensures sufficient funds will be reserved
against a budget to meet contractual
obligations.
• Guarantees that budget funds will not be
spent inadvertently on unauthorized
costs.
• Helps in planning for anticipated and
future costs.
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What is a commitment?
• It is the stage between the establishment of
an agreement between parties (whether that
be signing a contract or passing legislation)
and the fulfillment of the requirements of the
agreement by one or more parties.
• The reservation of funds for a specific
purpose and its formal entry into agency's
accounting system so recording the
reservation.
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Types of Commitments
• Planned/Intended Expenditures or Travel
Plans
– Soft Commitments/Pre-encumbrances
– Requisitions For Goods or Services
• Purchase Orders or Contractual
Obligations
– Hard Commitments/Obligations/
Encumberances
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Commitment Accounting Practices
• Requirement to commit funds for
anticipated or contracted future
spending
• Delegation of authority to commit funds
(commitment thresholds)
• Monthly review of commitments
(monitory discharge and de-commitment
of committed funds)
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Financial Accountability - Commitments in the System
• Commitments indicate what budget
funds are required to pay for future
purchases & labour costs.
• When commitments are paid they
become actual expenditures –
“actuals”
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Above and Below
Above the line Budget
Below the line Actual
Fiscal space
Accounting
•Ledgers
•Accruals
•Financial Statements
•Legal obligations
•Who and how much due
•Control arrears
•Budget execution
•Budget control
•Management and forecasting
Reality check:
Private sector applications
focus “below the line”
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Simplified Example
Budget:
100 Commitment:
25
Available:
100
free balance:
75
Approve
General
Ledger:
25
Commitment:
0
free balance:
75
Obligation:
25
General
Ledger:
25
Budget:
100
free balance:
75
Accounts Payable, Liabilities, Expenses, etc.
Obligation:
0
General
Ledger:
0
General
Ledger:
0
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Commitment Accounting benefits
1. Track actual expenditures
2. Predict future expenditures based on
commitments
3. Ensure that the budget is not overspent
4. Ensure that the budget meets the law
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Simplified World Bank Treasury Reference Model: Organization
Ministry of Finance
Spending Agencies
Revenue Agencies
Central Bank Audit Organization
Planning / Budget
Budget Preparation
Ledgers, Controls Financial Reports
Procurement Purchasing , Procurement
Treasury Cash, Debt, Bank
Foreign Exchange
Public Service Payroll, Pensions
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Transaction Data Flow
Journal V. G. Ledger
AP
Budgets
Allotment 2
Allotment 1
C
Commit
Requisition
Purchase O.
GRN/GRTN
Payment Expense V.
Sales Invoice
Cash Sale Cash Receipt
B
B
AR B
balance - integrity
adjustment
A
A
A
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Transaction Data Flow
Journal V. G. Ledger
AP
AR
Budgets
Allotment 2
Allotment 1
C
Commit
Requisition
Purchase O.
GRN/GRTN
Payment Expense V.
Cash Receipt
Sales Invoice
Cash Sale
B
B
B
A
A
A
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What is the Chart of Accounts?
• Defines how accounting information is:
– Categorized
– Collected
– Reported
• COA issues include:
– Best way to roll up granular information to
summary
– Best way to enable security
– Best way to manage controls
– Appropriate level of granularity required
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Chart of Accounts
Fund
Organization
Program
Location
Object
Project
Chart of Account Groups (Example)
This is a SAMPLE
Object Code is the only mandatory
element for FreeBalance.
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COA Purpose
Organization
Location
Approve
Responsibility
Tier
Fund
Objective
Performance
ReportGFSMDG
Program
Project
Activities
Economic Code
Accounting
Code
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COA Arrangement
Fund Organization
Location
Approve
Responsibility
Tier
Objective
Performance
ReportGFSMDG
Economic Code
Program
Project
Activities
Accounting
Code
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Sample Chart of Accounts
Organization Fund Program/ Project Location Object
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Organization
Organization Fund Program/ Project Location Object
Organization Type
(1)
Councils
(3)
Sector
(1)
Reporting Groups
(2)
Divisions
(5)
Cost Centres
(7)
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Fund
Organization Fund Program/ Project Location Object
All Fund
(1)
General Gov.
(1)
Source Type
(1)
Donor Type
(1)
Fund Table
(1)
Fund Source
(3)
Donor Table
(3)
Source Group
(3)
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Project/Program
Organization Fund Program/ Project Location Object
Project
(3)
Component
(4)
Sub Group
(1)
GFS Function 2
(4)
Sub Component
(6)
Activities
(8)
GFS Function 3
(5)
Activity Group
(3)
Project Type
(1)
GFS Function 1
(3)
Pillars
(1)
Objectives
(1)
MDG
(2)
Themes
(2)
Priority
(1)
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Location
Organization Fund Program/ Project Location Object
Province
(1)
Districts
(3)
Divisions
(4)
Ward
(5)
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Object
Organization Fund Program/ Project Location Object
Account Type
(1)
Main Category
(1)
Sub Category
(2)
Item Group
(2)
Object Group
(3)
Object Code
(4)
Expenditure Type
(1)
Sub Type
(2)
GFS L1
(1)
GFS L2
(2)
GFS L3
(3)
GFS L4
(2)
GFS L5
(5)
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Typical Scenario Government Commitment Accounting
• Guideline amounts selected
• At the detail level: general ledger coding block
• Typically no controls at the “financial budget”
– Too granular to be “material:
– Restricts managers from making decisions
they are authorized to make
Financial Budget
It is all about the chart of accounts
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Typical Scenario Government Commitment Accounting
• Amount approved by legislature or Ministry of Finance
• Is at a summary level
• May represent money to be released for the entire year
to a high level of authority (lots of scenarios possible)
• Act as budget control
• Often called “Allotment”
Financial Budget
Appropriation
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Typical Scenario Government Commitment Accounting
• Amount released for use
• Controls, but typically not at the granular level
• Often represents money to be spent during a fiscal
period
• Usually at the decision manager level
Financial Budget
Appropriation
Warrant
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Version 7 section
• brief discussion different
organizational configurations
MULTIPLE
CONTROLS
aggregate
detailed
MULTIPLE
CONTROL
LEVELS
configured
CONTROLS
bu
dg
et
ap
pro
pri
atio
ns
tra
nsfe
rs
co
mm
itm
en
ts
ob
liga
tio
ns
rece
ivin
g
exp
en
ditu
res
COMMITMENT CYCLE
segregation of
duties & workflow
monthly
PERIOD
yearly
TOLERANCE
LEVELS
flexible
strict
Financial Controls
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COA Example
Fund Organization Locations Object Fund Type Project
Fund
(1) Ministry/Agency
(4)
Ministry/Agency
(4)
Ministry/Agency
(4)
Atoll
(3)
Location
(3)
Indicator
Economic Type
(2)
Economic Type
(2)
Economic Item
(5)
Economic Item
(5)
Economic Item
(5)
Economic Item
(5)
Fund Source
(2)
Project
Status
(1)
Cash Indicator
(1)
Allotment 2
Allotment 1
Budget
Commit/
Obligation
Fund
(1)
Fund
(1)
Fund
(1)
Fund
(1)
Fund
(1)
Ministry/Agency
(4)
Ministry/Agency
(4)
Ministry/Agency
(4)
Location
(3)
Location
(3)
Location
(3)
Fund Source
(2)
Fund Source
(2)
Fund Source
(2)
Project ID
(4)
Project ID
(4)
Project ID
(4)
Project ID
(4)
Cash Indicator
(1)
Economic Group
(2)
Economic Type
(2)
Category (1)
Main Category
(1)
Account Type
(1)
Asset/ Liability / Revenue / Expenses / Retained Earnings
Asset / Liability / Revenue / Expenses / Equity
Income Statement / Balance Sheet
Financial / Statistical
EXP. CS, SI, SV,
CR, DN, CN
General Ledger
G/L Offset Code
Journal Voucher
GFS Code
(5)
Allow to Exceed:
[Y/N]: Yes’,’No’,
[W]: ‘With Warning’
[T]: Tolerance Allowed
[M]: Message if Overspent
T
Y/N, W, T
Y/N, W
M
Coding Block
1. May be up to 50 characters
in length
2. May consist up to 10
segments
3. Can be up to 12 characters
long
4. Each segment can have an
unlimited number of roll
up tables
GoM Functions
(2)
COFOG1 Sector (3)
COFOG2 Sector (4)
COFOG3 Sector (5)
Cash Indicator
(1)
Cash Indicator
(1)
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Typical Scenario Government Commitment Accounting
• Two levels of “commitments”:
– Soft commitment or commitment
– Hard commitment or obligation
• Not all governments utilize two levels
– Is a best practice
– Provides a better view for the status of the commitment
– In our experience, customers who implement purchasing or procurement have two levels
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Obligations vs. Commitments
Commitment or Soft Commit Obligation or Hard Commit
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What is accrual?
• Transaction and events are recognized when they occur rather than when cash is paid or received
• Cash accounting is not always representative of what is really going on
• Assets, liabilities, net assets, revenues and expenses recognized
• All assets and liabilities are measured on the historical cost basis, sometimes with the re-measurement to the fair value of certain assets and liabilities
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Why is this a problem in government?
• Corporations with shareholders and auditors
must operate on an accrual basis
• Accrual determines the real value of a company
• There is no “real value” of a government entity
• Accrual accounting is an order of magnitude
more difficult than cash bookkeeping
• Accounting capacity issues in Developing
Nations
• Hence, the notion of a hybrid approach
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Good-bye Accrual World1?
• Cash accounting reports cash transactions when received or paid. Consequently, financial statement items such as amounts owed to or by the government or other non cash items are not recorded.
• Modified cash accounting follows cash accounting principles, but at year-end adjustments are made recognizing some non-cash items such as AR and AP
• Modified accrual follows full accrual principles with one significant departure — not recognizing capital assets on the statement of financial position. Instead they are recognized fully as expenditures when bought.
1. CA Magazine
Modified
Cash
Cash
Modified
Accrual
Methods of
modified accrual
differ among
governments.
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State of the Art
• Most governments in hybrid state.
– Canada is modified accrual (mostly).
– New Zealand in accrual.
– Developing Nations tend to be cash or modified cash.
• Slow move towards accrual.
• Private Sector is almost always accrual.
– Presents challenges for private sector financial software.
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Simplified World Bank Treasury Reference Model: Organization
Ministry of Finance
Spending Agencies
Revenue Agencies
Central Bank Audit Organization
Planning / Budget
Budget Preparation
Ledgers, Controls Financial Reports
Procurement Purchasing , Procurement
Treasury Cash, Debt, Bank
Foreign Exchange
Public Service Payroll, Pensions
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Version
Version
Version
Government What If Scenarios,
Iterative Versions and Approvals
Approve
Budget Book
Budget Law
Budgetary Controls
PFM
International
Financial
Standards
Government Fiscal
Regulations
Budget Office
Government Objectives
Legislature and Executive
Historical
Information
10%10%10%10%10%
10%10%10%10%10%
Budget
Circular
Cost Assumptions
Revenue
Assumptions
Previous Plans
100% 90% 80%
Macro-Economic Analysis
International Organizations
Version
Version
VersionVersion
Version
Version
Divisional What If Scenarios, Iterative
Versions and Approvals
Ministry What If Scenarios, Iterative
Versions and Approvals
Approve
Approve
Line Ministry
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Across fiscal periods
Budget Transfers
• Budget transfer (virements) depend on authority and are different from one government to another
• Often legal constraints on transfers
• Can tighten or loosen controls during the fiscal year
• Can move money to sub-nationals or other departments
Account
Account
from one account to another
from one type segment to another
Budget
from budget to allotment
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Some comments
• Adoption of “proper” MTEF limited
success
– MTMF (macroeconomic framework)
– MTFF (fiscal framework)
– MTBF (budget framework)
– MTSS (sectoral strategies)
– MTPF (performance framework)
• Program Budgeting preceded
Performance Budgeting [typically]
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Budget Ceremony
• +/- %
• View that budget = outcomes
• Lack of zero-based budgeting concepts
• Few tools that enable end-to-end budget
preparation for government
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Simplified World Bank Treasury Reference Model: Organization
Ministry of Finance
Spending Agencies
Revenue Agencies
Central Bank Audit Organization
Planning / Budget
Budget Preparation
Ledgers, Controls Financial Reports
Procurement Purchasing , Procurement
Treasury Cash, Debt, Bank
Foreign Exchange
Public Service Payroll, Pensions
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“Treasury” Function
Debt Management
Predict Cash Requirements
Optimize Bank Accounts
Investment Management
Treasury Single
Account
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Why TSA?
• Corruption
• Liquidity
• Predictability
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Simplified World Bank Treasury Reference Model: Organization
Ministry of Finance
Spending Agencies
Revenue Agencies
Central Bank Audit Organization
Planning / Budget
Budget Preparation
Ledgers, Controls Financial Reports
Procurement Purchasing , Procurement
Treasury Cash, Debt, Bank
Foreign Exchange
Public Service Payroll, Pensions
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0 10 20 30 40 50 60 70 80 90 100
1. Iraq
9. Hungary
17. Qatar
25. Austria
33. Yemen
41. Germany
49. Ghana
57. Namibia
65. West Bank/Gaza
73. Burundi
81. Rwanda
89. South Africa
97. Senegal
105. Morocco
113. Burkina Faso
121. Honduras
129. Congo, Dem. Rep. of
137. Taiwan
145. Cameroon
153. Costa Rica
Government Spending as % of GDP http://anepigone.blogspot.com/2008/03/government-spending-as-
percentage-of.html
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0 10 20 30 40 50 60
Czech Republic
Armenia
Slovak Republic
Angola
Hungary
Congo, Republic of
Ukraine
Slovenia
Australia
Mongolia
Ireland
Argentina
Malta
Afghanistan
St. Kitts and Nevis
Thailand
Jordan
Bahrain, Kingdom of
Government Wage Bill as % of Expenditures World Bank 2000-2008 Average
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Payroll and PFM
• Wage bill is material to government
expenditures
• Corruption opportunity
• Variability in payroll
– Seasonal, emergency employment
– Training, travel & other costs
• Significant cash management implication
• Requires planning, forecasting and
controls
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Simplified World Bank Treasury Reference Model: Organization
Ministry of Finance
Spending Agencies
Revenue Agencies
Central Bank Audit Organization
Planning / Budget
Budget Preparation
Ledgers, Controls Financial Reports
Procurement Purchasing , Procurement
Treasury Cash, Debt, Bank
Foreign Exchange
Public Service Payroll, Pensions
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Audit
• Internal Audit
• External Audit “Supreme Audit
Organization”
• Maturing
– Compliance
– Risk Management
– Performance
• CAAT
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International Standards
• World Bank Treasury Reference Model
• International Monetary Fund Code of Good Practice on Fiscal Transparency
• International Monetary Fund Government Finance Statistics (GFS)
• International Federation of Accountants International Public Sector Accounting Standards Board International Public Sector Accounting Standards (IPSASs)
• UN Common Functions of Government
• Medium Term Expenditure Frameworks (MTEF)
• Generally Accepted Accounting Principles (GAAP)
• International Aid Transparency Initiative (IATI)
• eXtensible Business Reporting Language (XBRL)
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World Bank Treasury Reference Model
• Purpose
– Development tool for fiscal managers and system developers, intended to help implement good practices in fiscal accounting and expenditure control
• Key Principles
– Facilitating the process of designing a treasury system project and preparing technical specifications for a tender document that will meet World Bank procurement standards.
– Improved analytical standards for fiscal reporting
• Implications
– Guidelines to identify completeness
http://devportal/files/Additional%20Treasury%20Reference%20Model.ppt
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IMF Code of Good Practice on Fiscal Transparency
• Purpose
– Method to assess government fiscal transparency with
practical advice for improvement
• Key principles:
– Roles and responsibilities of and within government
should be clear
– Comprehensive reliable information of fiscal activities
should be available to the public
– The processes of budget preparation, execution, and
reporting should be open
– Integrity of information should be assured
• implications:
– Controls and transparency
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IMF Government Finance Statistics Manual
• Purpose:
– Provide a comprehensive conceptual and accounting
framework suitable for analyzing and evaluating fiscal policy
and performance of the general government sector and
broader public sector of any country.
• Key Drivers:
– Improve government accounting and transparency in
operations
– Need for ways to assess the effectiveness of spending on
government and/or donor funded programs (e.g. poverty
reduction, sustainability of fiscal policies etc.)
• Implications:
– Chart Of Accounts design that incorporates both
GFS classifications and countries specific needs
– General capabilities and GFS based reporting
http://devportal/files/Additional%20GFS.pdf
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IFAC IPSASs
• Purpose
– Report requirements for government and public sector
organizations
• Key principles:
– Transition from cash-basis to accrual accounting
– 21 Reporting Standards
– Sets preliminary benchmarks
• Product implications:
– Ability to transition customers from cash to full accrual
– Support specific reports
http://devportal/files/Additional%20IPSAS.ppt
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Medium Term Expenditure Frameworks
• Purpose
– Rational planning and budget formulation process within which the government establishes a credible and transparent criteria for allocating public resources to strategic priorities while ensuring overall fiscal discipline
• Key principles:
– 3 Year planning.
– Sector Effectiveness and Efficiency Review process.
– Performance Indicator Framework for measuring agency performance against committed deliverables
• Implications:
– Budget management software operates with 3+ years cycle, need for a strong fiscal framework, performance planning and performance reporting
http://devportal/files/Additional%20MTEF.ppt
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UN Classification of the Functions of Government • Purpose
– Functional classification to report government statistics to the IMF
– "Functional" classifications identify the "functions" -- in the sense of "purposes" or "objectives" -- for which groups of transactors engage in certain transactions
• Key principles: • "Functional" classifications identify the "functions"
-- in the sense of "purposes" or "objectives" -- for which groups of transactors engage in certain transactions
• Product implications:
– COA Set Up
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Generally Accepted Accounting Practices (GAAP)
• Purpose
– A collection of rules and procedures and conventions that define accepted accounting practice; includes broad guidelines as well as detailed procedures.
– Somewhat different among countries.
– Focused on “financial accounting” not managerial or fund accounting
• Key principles:
– Many accounting practices that cover public and private sector.
• implications:
– Support standard accounting principles, support auditable data. Much of GAAP does not apply to the public sector.
– US GAAP burdensome, International Financial Reporting Standards (IFRS) may be more applicable.
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International Aid Transparency Initiative (IATI)
• Purpose
– IATI aims to make information about aid spending easier
to access, use and understand.
– Its purpose is to help implement the transparency
commitments made at the Accra Agenda for Action in
the most consistent and coherent ways. The Accra
Agenda for Action arose from the March 2005 Paris
Declaration on Aid Effectiveness.
• Key principles:
– Aid transparency & move to using country systems.
• Product implications:
– Reporting and integration standard.
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eXtensible Business Reporting Language (XBRL)
• Purpose
– Global standard for reporting and exchanging business
information.
– Simplifies by providing 1 type of output for all
stakeholders
– Primarily method for business to report to government,
but being considered in government
• Key principles:
– metadata set out in XBRL taxonomies, which capture the definition of individual reporting concepts as well as the relationships between concepts and other semantic meaning. Information being communicated or exchanged is provided within an XBRL instance.
Product implications:
– Reporting and integration standard, XML support
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Typical Challenges1
• Lack of Engagement and Political/ Management Support.
• Inadequate Preparation (Vision, Policies, Capacity)
• Weak Governance Arrangements.
• Over Complicated Expensive Systems
• Inadequate acquisition and contract management.
• Unrealistic action plans.
• Non participation, lack of dedicated teams.
• Inadequate training
• Weak, contractor with technical/commercial focus
1 Murphy
Also lack of knowledge
transfer from consultants.
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Developing Nation Issues
• No luxury for massive technology footprint – The Complexity Trap
• Functional and technical capacity challenges – The Capacity Trap
• Cost and upkeep of commercial infrastructures and vendor lock-in
• Bandwidth and digital divide limitations
• Sustainability and knowledge transfer
• However: little technical and functional baggage holding back change
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GRP Practices
Best?
• Double Entry Bookkeeping
• Commitment Accounting
• Treasury Single Account
Maybe
• Modified Cash
Good
• 2 – Phased Commit
• Aggregate Controls
• Decentralization
• Program Budgeting
• International Standards
• Multiple Year COA
Maybe
• Accrual Accounting
• Performance Management
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Version 7 section
• brief discussion 3. Technology & Transparency
Leapfrog
& Case Study
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Version 7 section
• brief discussion
Agenda
1. Intro to FreeBalance – 15 minutes
2. FMIS/GRP Introduction – 90 minutes
3. Technology Leapfrog
– 45 minutes
4. Performance Management in PFM
– 60 minutes
5. Sequencing PFM technology - Governance Valuations
– 90 minutes
6. Financially sustainable GRP, governance structures, lessons learned
– 45 minutes
7. GRP and Anti-Corruption – 30 minutes
8. Future of PFM technology
– 30 Minutes
9. “Parking Lot”
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Confusion?
3
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Congress cuts transparency funding
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How can Timor-Leste afford government transparency?
5
Timor-Leste United States Comparison
Independence 2002 1776 3.4%
GDP Per Capita $2,600 $47,400 5.5%
GDP Growth 8% 2.7% 338%
Unemployment 20% 9.7% 206%
Below poverty line 42% 12% 350%
Life Expectancy 67.95 78.92 86%
Literacy 58.6% 99% 59%
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globalization
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= competition
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choice
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citizens are watching
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empowered
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Democratic Republic of Timor-Leste
(RDTL) Transparency
Objectives
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build civil society
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build infrastructure
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build capacity
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build citizen involvement in government
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improve government performance
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?
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GDP Per Capita (PPP, logs)
UG
AN
DA
PA
PU
A N
EW
GU
INE
A
AU
ST
RA
LIA
-3
-2
-1
0
1
2
3
209 Countries
No
rma
lize
d G
ove
rnm
en
t E
ffe
ctive
ne
ss I
nd
ex
HIGH
LOW
Benefits of Transparency Government Effectiveness and GDP*
* At purchasing power parity
Source: The World
Bank
Higher the government
effectiveness = higher the
country GDP Per Capita
Strengthening Public Financial Management in Timor-Leste
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GDP Per Capita (PPP, logs)
UG
AN
DA
PA
PU
A N
EW
GU
INE
A A
US
TR
AL
IA
-3
-2
-1
0
1
2
3
207 Countries
No
rma
lize
d V
oic
e a
nd
Acco
un
tab
ility
Ind
ex
.
HIGH
LOW
Benefits of Transparency Voice and Accountability and GDP*
* At purchasing power parity
Source: The World
Bank
Higher the government
accountability = higher the
country GDP Per Capita
Strengthening Public Financial Management in Timor-Leste
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GDP Per Capita (PPP, logs)
UG
AN
DA
PA
PU
A N
EW
GU
INE
A
AU
ST
RA
LIA
-3
-2
-1
0
1
2
3
204 Countries
No
rma
lize
d C
on
tro
l o
f C
orr
up
tio
n I
nd
ex
HIGH
LOW
Benefits of Transparency Control of Corruption and GDP*
* At purchasing power parity
Source: The World
Bank
Higher the control of
corruption = higher the
country GDP Per Capita
Strengthening Public Financial Management in Timor-Leste
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= stability
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= investor confidence
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avoid the resource curse
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technology leapfrog
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Version 7 section
• brief discussion
leapfrog theory…
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Version 7 section
• brief discussion
entrenched technology
26 26
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use what works
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skip what doesn’t work
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skip stages
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modernize
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rapidly
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review
Transparency and Accountability
The next generation of public financial management technology will allow the public to
track the budget live, to see where every dollar is being spent, and to gain renewed confidence in
the process
Democratic Republic of Timor-Leste Vision
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sequenced
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Public Financial Management – Foundation for Country Growth
FMIS (software and
hardware)
Human Resource
Development
Capacity Building
(Training)
GoTL LAWS
Procurement Commission
Autonomous Agencies
Ministries
Decentralization
Public Financial Management
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PFM in Overdrive?
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1. International Standards
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IPSAS International Public Sector Accounting
Standards
Strengthening Public Financial Management in Timor-Leste
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2. Document Management
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manages correspondence with
senior managers
repository for freedom of information
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3. e-Procurement
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review
Strengthening Public Financial Management in Timor-Leste 45
integrated with back-office procurement & commitment
accounting within IFMIS
vendor alerts
tender results published
government tenders published
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Version 7 section
• brief discussion
front/back office integration
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4. Transparency Portal
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review
Strengthening Public Financial Management in Timor-Leste 48
www.transparency.gov.tl
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subscribe
drill down
articles
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Expenditures, Transparency Portal
10 years of data
drill through the chart of accounts
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Expenditures, Transparency Portal
export to xls, doc, pdf, html, xml
track commitments
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5. Performance Management
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review
Strengthening Public Financial Management in Timor-Leste 55
integration with macro-economic data
examines budget execution data
integrated with back-office procurement & commitment
accounting within IFMIS
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Strengthening Public Financial Management in Timor-Leste
56
simple classifications
transparent presentation of public investment programs
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physical & financial progress
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drill down
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narrative
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progress
proof
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Lessons Learned
Strengthening Public Financial Management in Timor-Leste
61
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1. Transparency
is not an Option
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0
20
40
60
80
100
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Mobile cellular telephone subscribers Per 100 inhabitants
YouTube Facebook
Twitter SMS
citizen auditors
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2. Transparency = Performance > Embarrassment
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Role of Civil Society
• NGO’s can help organise literacy groups and provide
materials. They can provide private education and
education for the blind. They can provide school
materials for students, and assist with school equipment
chairs and books
• NGO’s can help us organise and run technical training
courses in our villages
Timor-Leste National Vision
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3. Sequenced Holistic Multiple-Year PFM Strategy
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Improve
budget
execution
Improve
government
capacity
Improve
transparency
&
accountability
Improve
government
performance
review
Public Financial Management – Foundation for Country Growth
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4. Build Capacity
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review
• Training beyond software
– IT capacity
– Project management
– Government accounting
• Beyond training
– Adaptable help
– E-Learning
– Knowledge management
• Intuitive systems
– Translation including terminology
– Simple & goal-oriented interfaces
• Mentoring
PFM Modernization Alignment with Capacity Building
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5. Require Sustainability in Partner Performance
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6. Leverage Open Systems
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Transition to Open Environment: Transparency
Domain Closed Transition Open
Transparency Access to
Information Document Machine Readable
Data Availability Data for Sale Publish as Exception Do not Publish as
Exception
Mode Publish, Audited &
Vetted Mixed
Near Real-Time Publishing
ROI Reason Revenue Generation What are they going to
do with the data? Government as
Platform
Target Business Community Civil Society & Press Citizens
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Transition to Open Systems: Technology
Domain Closed Transition Open
Integration Proprietary within
Suite Support for Industry
Standards Service Oriented
Architecture
Middleware Proprietary =
Customer Lock Proprietary/Open Tactical approach
Open Standards = Customer Choice
Viewpoint Open Systems reduce system performance
Open Systems extend value
Open Systems = Extensibility
Extensibility High Costs Need for vendor
Ecosystem Low Cost Application
Assembly
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Leapfrog is possible
Timor-Leste United States Comparison
1. Standards GFS, IPSAS, EITI, IATI,
MTEF EITI, OGP Leaped
2. Document Management
Manager Document Management
Various Records & Correspondence
Catching Up
3. Performance Management
Manager’s Dashboards, Results
Portal
Various tools across government
Leaping
4. Transparency Transparency Portal Data.gov & others -
underfunding Leaping
5. e-Procurement August 15 FedBizOpps To leap
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How? Timor-Leste United States
Strategic Vision Holistic 1 Year Budgets, complex
election cycles
Government Structure Unitary Federal
Civil Society & Media Seen as Improving Results Seen as “Special Interests”
Government Intervention Seen as Good Seen Suspiciously
1. Standards Ease to Move to
International Standards Long History of Entrenched
National Standards
2. Document Management
Single system data source Multiple entrenched
systems
3. Performance Management
4. Transparency
5. e-Procurement
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Version 7 section
• brief discussion
Lessons Learned
Technology
• Re-purpose open systems rapidly to support portal functionality
• Optimal product footprint
• Rapid implementation
• Broad choice in middleware
Transparency
• Good practices in budget classifications
• Holistic whole-of-country
• Ministry of Finance and Planning leadership
• Civil society enablement
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Goodbye Conflict, Welcome Development
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Version 7 section
• brief discussion 4. Performance Management in
PFM
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Version 7 section
• brief discussion
Agenda
1. Intro to FreeBalance – 15 minutes
2. FMIS/GRP Introduction – 90 minutes
3. Technology Leapfrog
– 45 minutes
4. Performance Management in PFM
– 60 minutes
5. Sequencing PFM technology - Governance Valuations
– 90 minutes
6. Financially sustainable GRP, governance structures, lessons learned
– 45 minutes
7. GRP and Anti-Corruption – 30 minutes
8. Future of PFM technology
– 30 Minutes
9. “Parking Lot”
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military
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intelligence military
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business
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ethics business
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British
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cuisine British
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Government
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performance Government
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What is Corporate Performance Management?
Reporting
OLAP Data Mining Scorecarding
Budget
Planning
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Drivers for Corporate Performance Management
• Too much information
• Business Intelligence tools such as
reporting are not prescriptive
• Not all indicators are relevant
• Financial information is after the fact – you
cannot change the past
• Many non-integrated Business
Intelligence (BI) tools
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Corporate Performance Objectives
• “Key Performance Indicators” (KPIs) and
“scorecards” are simple to understand
• KPIs measure in progress
• Aggregates measurements from many
sources
• Utilizes capabilities of many tools
• Provides clarity for what is important
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Government Performance Management
Business
• “Bottom Line” is clear: profitability
• Measured on quarterly profitability
• “Bottom Line” is financial
• Budget is a guideline
• Simple financial measurements: revenue, expenditures, cost centres…
Government
• Government mandates require many objectives
• Measured on long-term outcomes
• “Bottom Line” is outcomes
• Budget is the law
• Difficult financial measurements: objectives, funds, projects…
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Performance and Budget
Budget
Execution
Budget
Planning
Government
Objectives
Scenario
Planning
Budget
Forecasting
Performance
Monitoring
Budget
Review
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Inputs, Outputs, Outcomes
• Objective
– Government development goal
• Input
– The money in the budget
• Outturn
– The money spent
– The items purchased
• Output
– Number of citizens reached, kms of road built etc.
• Outcomes
– Non-financial measurements of results
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Remember?
• MBA Harvard, 1973
• President’s
Management Agenda
• Program Assessment
Rating Tool (PART)
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Current Situation
• Mixed
– Capacity issues
– Improvements in MTEF
– Remains output focused
– Better results in projects yet…
• Commercial performance management
software not budget centric
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Corporate Performance Management
input
outturn output
outcome
profit
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Government Performance Management
input
outturn output
mandate
budget
outcome
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Maturing of Government Performance
• Budget is executed based on budget law
• Was the money spent where it was
intended?
• Were all fiscal discipline processes
followed?
budget
compliance
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Maturing of Government Performance
• Budget is tied to objectives
• Was the budget developed based on
government objectives?
• Were the results from one year used in
budget preparation?
budget
compliance
managing for
results
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Maturing of Government Performance
• Budget is tied to results
• Can results be tied to outputs and
outcomes? (cost per unit of outcome)
• Are processes improved to improve
value for money?
budget
compliance
managing for
results
value for
money
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Unintended consequences
• False positive:
– Measurements show success, but impact is negative
• False negative:
– Measurements show failure, but impact is positive
• Why?
– No objective measurement like profit
Measured
Outcomes
Outcomes
not
measured
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Version 7 section
• brief discussion
We can Measure Lots of Things
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Version 7 section
• brief discussion
Information Overload
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Version 7 section
• brief discussion
Important?
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Version 7 section
• brief discussion
Hidden?
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Version 7 section
• brief discussion
Performance
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Version 7 section
• brief discussion
Key Performance Indicators (KPIs)
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Version 7 section
• brief discussion
Information Overload
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Version 7 section
• brief discussion
Scorecard
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Version 7 section
• brief discussion
Traffic Lights
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Version 7 section
• brief discussion
Information Overload
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Version 7 section
• brief discussion
Balanced Scorecard
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Version 7 section
• brief discussion
Version 7 section 1. Citizens
• How do we look to citizens?
–Government: Citizens
–Private Sector: Customers
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Version 7 section
• brief discussion
Version 7 section 2. Financial
• How effective are we planning and executing our budget?
–Government: Budget
–Private Sector: Profit
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Version 7 section
• brief discussion
Version 7 section 3. Internal Processes
• What must we excel at?
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Version 7 section
• brief discussion
Version 7 section 4. Learning and Growth
• What do we need to do to continuously improve?
–Government: Capacity Building
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Version 7 section
• brief discussion
Complexity in Government
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Version 7 section
• brief discussion
1. No ‘bottom line’ ~ Profit
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• Objective • Government
development goal • Input
• The money in the budget
• Outturn • The money spent • The items
purchased
Inputs, Outputs, Outcomes
• Output • Number of citizens
reached, kms of road built etc.
• Outcomes • Non-financial
measurements of results
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Version 7 section
• brief discussion
Government: Financial (budget) leads to Outcomes
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Version 7 section
• brief discussion
Private Sector: Outcomes Lead to Financial (profit and loss)
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Version 7 section
• brief discussion
2. Aligned to the Budget
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Version 7 section
• brief discussion
Count
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Strong Alignment
StrategyFinancial
Customer
Learning & Growth
Internal Process
Mission
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Strategy Map Government Strategy Map
Cit
izen
Fi
nan
cial
In
tern
al
Pro
cess
Le
arn
ing
& G
row
th
1 2 3 4
1 2 3 4
1 2 3 4
1 2 3 4
Measurement Measurement Measurement
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FreeBalance Example Government Strategy Map
Cu
sto
me
r Fi
nan
cial
In
tern
al
Pro
cess
Le
arn
ing
& G
row
th
1 2 3 4
1 2 3 4
1 2 3
1 2 3 4
P3 Customer-Centric Development
C3 Improve Support Case Metrics
C2 Improve Customer Satisfaction
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Some priorities
1. Smooth government payment processing
Complete accountability & reporting on gov. finances
Minimized cost of debt service & banking fees
Improve governance and administrative capacity
Reduce corruption
2. Achieve liquidity (cash
management) Avoid fiscal
deficits Improve efficiency Promote transparency
Promote good governance
3. Economic
growth Social Cohesion
(inter-ethnic) Good
governance Promoting private
sector development Creating strong, transparent
public institutions Strengthen
Infrastructure
4. Reduce corruption
perception Real-time financial
reporting Reduction in labour costs, increase in
efficiency Create a professional
public service
5. Build strong stage
institutions Poverty
reduction Improve peace and
security Facilitate pro-poor
growth Rehabilitate infrastructure
6. improve fiscal sustainability in a mineral-based economy
protect poor and vulnerable
encourage transparent and prudent mining investments
competitive and stable medium-term business investment climate
7. Achieve stability Institutional coordination
Improve transparency Improve citizen services Promote business
sector
8. Agricultural
growth Good governance
Transportation infrastructure
Improved healthcare Energy growth
Prudent use of natural resources
9. Sustainable national
capacity Short term
stabilization Transparent and effective
public financial management Improve security
Develop non-oil sustainable development
10. Eliminate wage bill overruns, controls
Improve governance
On-time payments Accurate payroll
records Eliminate “quiet” corruption
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Government Strategy Map
Cit
izen
Fi
nan
cial
In
tern
al
Pro
cess
Le
arn
ing
&
Gro
wth
Infrastructure Development
Private Sector Development
Good Governance Service Delivery
Poverty Reduction Health
Education
Agriculture
Energy
Fiscal Sustainability
Capital Projects Investment
Revenue Collection
Transparency
Audit & Oversight
Anti-Corruption Decentralization
Procurement Processes
Sustainable National Capacity
Professional Skills Development
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Version 7 section
• brief discussion
Version 7 section Lesson Learned • Performance Management harder in government than
private sector
• All objectives must be aligned to budget
• Balanced Scorecard is good tool to develop performance management
• Opportunity to leapfrog more developed countries
• Technology, alone, won’t provide performance metrics
53 53
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Version 7 section
• brief discussion 5. Governance Valuation:
Sequencing PFM Reforms (& GRP)
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Version 7 section
• brief discussion
Agenda
1. Intro to FreeBalance – 15 minutes
2. FMIS/GRP Introduction – 90 minutes
3. Technology Leapfrog
– 45 minutes
4. Performance Management in PFM – 60 minutes
5. Sequencing PFM technology - Governance Valuations – 90 minutes
6. Financially sustainable GRP, governance structures, lessons learned – 45 minutes
7. GRP and Anti-Corruption – 30 minutes
8. Future of PFM technology
– 30 Minutes
9. “Parking Lot”
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Version 7 section
• brief discussion
Governance Formula?
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Version 7 section
• brief discussion
Not “prescriptive”
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Version 7 section
• brief discussion
Technology
5 5
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Version 7 section
• brief discussion
Evaluation Methods Evaluation Method Scope Back-Office Technology Front-Office Technology
Public Expenditure and Financial Accountability (PEFA)
Comprehensive PFM assessment
No technology guidance although PEFA assessments attribute some achievements to the use of technology
Commonwealth Public Financial Management Self-Assessment Toolkit (CPFM-SAT)
Comprehensive PFM assessment
A3: Use of IFMIS B2: Use of Debt Management
software No technology guidance for publishing
information The Chartered Institute of Public Finance & Accountancy (CIPFA) Whole Systems Approach
Comprehensive PFM assessment
O7: Financial management information systems
Revenue Watch Institute Index Extractive Industries
transparency
Paris Declaration and Accra Agenda for Action Aid effectiveness Use of country systems for PFM and procurement does not specify use of
technology
International Budget Partnership Open Budget Index (OBI)
Budget preparation and reporting transparency
Internet publishing of budget documents gains higher rating for many categories
Gartner Group Open Government Maturity Model
Open government Provides open government technology
insight
Institute for Electronic Government e-Democracy Model
E-Democracy Use of e-mail systems
Use of web technology Andersen & Henriksen E-Government Maturity E-Government
Layne and Lee Framework of E-Government E-Government Horizontal and vertical integration
within government
World Bank World Governance Indicators Meta collection of 3rd party
indicators No technology guidance
Global Integrity Report Governance and anti-
corruption
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PFM Component Map
Public Financial Management
Component Map
Performance & Commitment Management
Government Performance Management
Budget & Commitment Management
Core Government Financial Management
Public Financials Management
Government Treasury Management
Expenditure and Revenue Management
Public Expenditure Management
Government Receipts Management
Civil Service Management
Civil Service Management
Governance and Service Delivery
Transparency & Accountability
Service Delivery
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Version 7 section
• brief discussion
What’s changed?
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Version 7 section
• brief discussion
Country PFM Context
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Version 7 section
• brief discussion
Government Performance Management
Data from Government Operations
Expenditures Revenue
Budget
formulation
Budget
execution Human
Treasury Resources
Data from Government Operations
Government Performance Management
PFM Domain
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Version 7 section
• brief discussion
Core Government Financial Management
Government Performance Management
Data from Government Operations
Expenditures Revenue
Budget
formulation
Budget
execution Human
Treasury Resources
Data from Government Operations
Government Performance Management
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Version 7 section
• brief discussion
Expenditures & Procurement Government Performance Management
Data from Government Operations
Expenditures Revenue
Budget
formulation
Budget
execution Human
Treasury Resources
Data from Government Operations
Government Performance Management
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Version 7 section
• brief discussion
Revenue Management Government Performance Management
Data from Government Operations
Expenditures Revenue
Budget
formulation
Budget
execution Human
Treasury Resources
Data from Government Operations
Government Performance Management
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Version 7 section
• brief discussion
Human Resources
Government Performance Management
Data from Government Operations
Expenditures Revenue
Budget
formulation
Budget
execution Human
Treasury Resources
Data from Government Operations
Government Performance Management
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Version 7 section
• brief discussion
Treasury Government Performance Management
Data from Government Operations
Expenditures Revenue
Budget
formulation
Budget
execution Human
Treasury Resources
Data from Government Operations
Government Performance Management
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Version 7 section
• brief discussion
Transparency Government Performance Management
Data from Government Operations
Expenditures Revenue
Budget
formulation
Budget
execution Human
Treasury Resources
Data from Government Operations
Government Performance Management
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Version 7 section
• brief discussion
Performance Government Performance Management
Data from Government Operations
Expenditures Revenue
Budget
formulation
Budget
execution Human
Treasury Resources
Data from Government Operations
Government Performance Management
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Version 7 section
• brief discussion
What do we mean by Budget 2.0?
18 18
Budget 1.0 Transitional Budget 2.0
Back-office centric functions and
technology
Back-office centric functions deployed on
the web – “e-government”
Network-centric functions for citizen
interaction – “government 2.0”
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Version 7 section
• brief discussion
What do we mean by Budget 2.0?
19 19
Government Performance Management
Data from Government Operations
Expenditures Revenue
Budget
formulation
Budget
execution Human
Treasury Resources
Data from Government Operations
Government Performance Management
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Version 7 section
• brief discussion
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
Budget execution
Budgetcomprehensiveness
Timeliness
International standards
Budget formulation
Policy management
Oversight
Transparencymechansism
Budget 1.0
Transition
Budget 2.0
“Budget 2.0”
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Budget 1.0 Transitional Budget 2.0
Published Documents Web Publishing
Open Data Narrative Centric Visualization Centric
Citizen Centric
Interactive Data
Budget 1.0 Transitional Budget 2.0
Audit
Parliamentary Oversight
Citizen Oversight
Audio Visual
Performance Audit
Press & NGO
Access to Information
Cooperative Planning Expert Networks
Transparency Mechanisms
Oversight
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Budget 1.0 Transitional Budget 2.0
Macro-Fiscal Frameworks Performance
Management Participatory Policy Policy-Budget Linkages
Policy Outreach
Budget 1.0 Transitional Budget 2.0
Budget as Ceremony Budget Books
Performance Management
Participatory Budgeting
Budget & Commitment Controls
Accrual Budgeting Program Budgeting
Policy Management
Budget Formulation
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Budget 1.0 Transitional Budget 2.0
National Standards IPSAS Cash IPSAS Accrual
IMF GFS XML-based IATI, EITI, XBRL
MTEF
Budget 1.0 Transitional Budget 2.0
Annual Reports Unaudited Reports
Open Data
In-Year Execution
Audit Reports
Pre-Budget Statement
Interactive Data
Standards
Timeliness
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Budget 1.0 Transitional Budget 2.0
National Government Sub-National
Parastatal
Accrual Extensions
Information Completeness
Budget 1.0 Transitional Budget 2.0
Cash Modified
Cash Modified Accrual Full Accrual
Budget & Commitment Controls
Performance Discipline Cash & Liquidity
Management
Budget Forecasting
Budget Comprehensiveness
Budget Execution & Accounting Methods
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Version 7 section
• brief discussion
Government Performance Management
Government Performance Management
Data from Government Operations
Expenditures Revenue
Budget
formulation
Budget
execution Human
Treasury Resources
Data from Government Operations
Government Performance Management
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Version 7 section
• brief discussion
Politics
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Version 7 section
• brief discussion
Policy
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Version 7 section
• brief discussion
Platform
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Version 7 section
• brief discussion
planning: budget – controls - monitoring
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Version 7 section
• brief discussion
public service performance
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Version 7 section
• brief discussion
public: transparency drives accountability
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Version 7 section
• brief discussion
private sector: value for money and development
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PEFA/PFM Alignment
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Version 7 section
• brief discussion
Base Data Sources
• World Governance Indicators
• PEFA Assessments
• Open Budget Index
• Revenue Watch
• Corruption Perception Index
• Human Development Index
• Leger Global Happiness Index
• Gini Coeficient
• Debt Ratings (multiple)
• Doing Business Index
• Government Spending data
• Remittances data
• Government employment data
• OECD ODA
• Legatum Prosperity Index
• Earth Institute World Happiness Report
• Global Integrity Report
35 35
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Version 7 section
• brief discussion
Version 7 section • Resource dependency – revenue management & revenue transparency
• Government employment as %, size – civil service management
• Debt and deficits – expenditure management and procurement
• Population, regional disparities, ethnic issues – decentralization
• Democracy, freedom, stability, income disparity – budget and performance transparency
Sample Factors
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Version 7 section
• brief discussion
Calculates?
Technology Priorities
PFM Priorities
Country Conditions
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Version 7 section
• brief discussion
Anchor
Technology Priorities
PFM Priorities
Country Conditions
Benchmark Priority
Gaps Sequencing
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Version 7 section
• brief discussion
Sequenced
Technology Priorities
PFM Priorities
Country Conditions
Benchmark Priority
Gaps Sequencing
capacity
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Version 7 section
• brief discussion
40 40
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Version 7 section
• brief discussion
Test…
41 41
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Version 7 section
• brief discussion
6. Financially Sustainable GRP
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Version 7 section
• brief discussion
Agenda
1. Intro to FreeBalance – 15 minutes
2. FMIS/GRP Introduction – 90 minutes
3. Technology Leapfrog
– 45 minutes
4. Performance Management in PFM
– 60 minutes
5. Sequencing PFM technology - Governance Valuations
– 90 minutes
6. Financially sustainable GRP, governance structures, lessons learned
– 45 minutes
7. GRP and Anti-Corruption – 30 minutes
8. Future of PFM technology
– 30 Minutes
9. “Parking Lot”
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The Sad Truth
Majority of government financial management information systems
implementations in developing countries do not meet expectations
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over-budget
4
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late
5
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unsustainable
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minimal improvement
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yet FreeBalance has a very high success rate
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Version 7 section
• brief discussion
Version 7 section
1. Perfection is the enemy of Good
2. Sustainability = adapting to reform and capacity growth
3. Traditional software model is not working in emerging economies
Lessons Learned
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Version 7 section
• brief discussion
What is Success? 1. On budget
2. On time
3. Addresses local capacity
4. Is financially sustainable
5. Is sustained by the government organization
6. Requires a minimum of foreign consultants
7. Modernizes with the government
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1. Perfection is the Enemy of Good
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Make it as simple as possible.
But no Simpler
Albert Einstein
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Overwhelming Feature list
• “Featuritis”
• Benefits incorrectly tied to features
• Increasing the capacity gap everywhere
• More features, the better?
– Unconsumed features
– Infrastructure bloat
– ITC-generated costs
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Software Capacity Gap
Time
Usability Feature Gap
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Version 7 section • Typical Project Management methodologies
– Lack of focus on what’s important in the context
• Focus on “best-practices”
– Focus on what is theoretically best vs. what is important now
– Extends the capacity gap
What’s Wrong?
15
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who’s on first?
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Capacity Balance
Capacity
Simple Financial
Management
ICT Solution
Financial
Management
ICT Solution
Matches Capacity
Typical Commercial
Financial
Management ICT
Solution
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• Cash-basis
• Pragmatic
• Limited budgetary controls
• National standards
• Specialized
• Personal-class tools and
middleware
• Underwhelming
• Accrual basis
• Best practices
• Complex budgetary controls
• International standards
• Comprehensive
• Enterprise-class tools and
middleware
• Overwhelming
Simple Financial
Management
ICT Solution
Typical Commercial
Financial
Management Solution
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Capacity Foundations
Capacity
Food Health Education IT
Capacity
Accounting
Capacity
Rule of Law
Energy Availability
Capital Availability
Security ICT Infrastructure
Transport Power
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In Context
Capacity
Build
Capacity
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the plan was foolproof
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project management
Project Management 101
Integration Management
Cost Management
Scope Management
Quality Management
Time Management
HR Management
Risk Management
Communications Management
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1) Human resources & capacity more thought
and more risk
2) Communications is highly political, cross-
cultural
3) Scope creep directly related to “reputation”
4) Flexibility in change management needed
• known knowns, known unknowns, unknown
unknowns
Beyond Project Management
101
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Version 7 section
• brief discussion
Weakness of typical Project Approaches
• Business Process Reengineering
• Train the trainer as key capacity building approach
• Focus on the politicians
• Long implementation cycles: curb enthusiasm
• Macroeconomic planning and budget preparation
• Many process changes require legal reform
• Train the cadre, give them tools
• Politicians change
• Builds opposition momentum
• What budget?
24 24
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Governance Underbelly
• Software manufacturers at “arm’s length”
• Consulting firms – incentives for over-budget
• Software manufacturers – consulting firms as make stakeholder
• Manufacturer commitment?
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Version 7 section
• brief discussion
1.Perfection is Enemy of the Good
• Need to focus on the country context
– Civil service capacity
– Ease of use is critical
– Needs for improved governance: quick wins
• Holistic project management
– IT, software & PFM capacity
– Good practices, not “best” practices
– Vendor governance is critical (pig and the hen)
26 26
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2. Sustainability
27
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the operation was a success 28
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however, the patient died
29
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Example Implementation
$23.6M IFMIS ERP implementation
Consultancy 36%
Capacity Building 4%
Recurrent 10% Software
13%
LAN/WAN 12%
Hardware 25%
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Concerns about Sustainability
• the complexity of the system, structure and vocabulary
alienates and further hampers participation.
• concern has been that the system itself might be too advanced and complex,
• will become underutilized and that the costs involved won’t pay off.
• concerns that budget experts of the consultant implementing
the system may not fully have understood the procedures in place
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Version 7 section • Often have an “IT” definition of success
– Measure now and assume everything will be fine
• Unknown unknowns
• Changes to country context
– Rapid and almost unprecedented in public financial management reform
What’s Wrong?
32
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• Significant internal resistance to massive change
• Customization costs
• Political will dissipates
• Civil service and consultant turnover
• More opportunity for opposition to kill project
Capacity Balance • Laws need to be modernized
to accommodate software (accrual, electronic cheques, automated budgets)
• Infrastructure upgrade
• Significant functional and technical training
Capacity
Years
Customization
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What’s Needed
• A realistic start point
• Configuration
• ICT follows reform
• Small wins through phases
• Rapid return on investment
• Grows to support best practices and international standards
Capacity
Systems
Follow
Capacity
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Progressive Activation
Functions Modernization
Financials
Treasury
Property Tax
Purchasing
Water & Sewage
Purchasing
Payroll
Utilities
Inventory
Assets and Fleet
Cash-based
Cash Management
Modified Cash
Budgetary Controls
MTEF
Aggregate Controls
Modified Accrual
Civil Service Reform
Performance Mgmt
Accrual
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Modernization
Expenditure
Controls
Compliance
Capacity
Legal Reform
Multi-Fund
Controls
Procurement
Controls
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Version 7 section
• brief discussion
Version 7 section Enterprise Software Costs by Category Averages from Multiple Sources
22%
20%
36%
22% software
computer hardware &networking
consulting forimplementation
internal costs
Does not include many
long-term costs
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Version 7 section
• brief discussion
38 38
Actual Use of Requested Features Successful Endeavours
7%
13%
16%
19%
45%
Always
Often
Sometimes
Rarely
Never
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Version 7 section
• brief discussion
Total Cost of Ownership (TCO)
Easy to Calculate
• Software Licenses
• Computer Hardware
• Implementation Services
• Training (software)
• Software Maintenance
Hidden, Partially Hidden
• Network, bandwidth
• Costs for additional customization
• Foreign consultants after implementation
• Upgrade (and forced upgrades) cost for application software and middleware
• Continuous training and certification (including IT and PFM)
• Employee retention
• Electricity
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Version 7 section
• brief discussion
Version 7 section • Financial sustainability is about TCO
• PFM sustainability is about government self-reliance
– Capacity
– Reduce need for foreign consultants
• Sustainability is about reform and modernization
– IFMIS as a foundation for adaptation
2. Sustainability
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3. The traditional software model is not working
for developing nation governments
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PFM casino?
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Product
Management
Sales &
Marketing
User
Trainer
Consultant
Customer
Support
Product
Development
Typical Approach
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Product
Management
Sales &
Marketing
User
Trainer
Consultant
Customer
Support
Product
Development
Product often designed
with different
customers in mind
Product developers
have no expertise in
government financials Salespeople want to
sell to every possible
market.
Consultants help
customers to
customize code.
Government needs
may not go into
upgrades
Consulting firms
generate revenue from
customization.
Government is one of
many “verticals”
Typical
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Version 7 section
• brief discussion
Version 7 section • When all you have a nail….
• Specialization across the value chain
– Loss of holistic understanding of customer needs
– Incentives for making solutions not sustainable
– Focus on “technology” rather than customer
– Ability to “blame the victim”
What’s Wrong?
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Version 7 section
• brief discussion
Blaming the Victim? • Customer didn’t articulate
business processes properly
• Customer had unrealistic expectations for delivery
• Customer changed requirements after the first phase
• Customer did not dedicate enough staff to manage project
• Customer did not train enough staff
Vendor should understand the government domain.
Product should be designed for rapid implementation.
Product should be designed for progressive activation.
Product should not place a significant burden on the government.
Vendor should know how to build capacity
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Version 7 section
• brief discussion
Version 7 section
3.Technology Lessons Learned
Software design, implementation and support methodology critical to ensuring success
Fully open systems are less expensive to implement and sustain: “future proofing”
Adaptable systems inexpensively conform to reform
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Version 7 section
• brief discussion
7. GRP and Anti-Corruption
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Version 7 section
• brief discussion
Agenda
1. Intro to FreeBalance – 15 minutes
2. FMIS/GRP Introduction – 90 minutes
3. Technology Leapfrog
– 45 minutes
4. Performance Management in PFM – 60 minutes
5. Sequencing PFM technology - Governance Valuations – 90 minutes
6. Financially sustainable GRP, governance structures, lessons learned – 45 minutes
7. GRP and Anti-Corruption – 30 minutes
8. Future of PFM technology
– 30 Minutes
9. “Parking Lot”
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Version 7 section
• brief discussion
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
0.000 0.100 0.200 0.300 0.400 0.500 0.600 0.700 0.800 0.900 1.000
Corruption Linkage with Human Development Human Development Index compared to Corruption Perception
Human Development Index: UNDP
Corruption Perception: Transparency International
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Version 7 section
• brief discussion
-2.5
-2
-1.5
-1
-0.5
0
0.5
1
1.5
2
2.5
0 20 40 60 80 100 120
Corruption Linkage with Prosperity Low Control of Corruption reduces Country Prosperity
World Governance Indicators: Control of Corruption
Legatum Prosperity Index
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Version 7 section
• brief discussion
Version 7 section
GRP IS NOT A CORRUPTION CURE-ALL
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Version 7 section
• brief discussion
Version 7 section
COUNTRIES WITH BETTER-PERFORMING PFM SYSTEMS HAVE LOWER CORRUPTION PERCEPTION INDEXES BECAUSE ROBUST PFM SYSTEMS RAISE THE RISK OF DETECTION AND THE COST FOR BAD BEHAVIOR
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Version 7 section
• brief discussion
38%
30%
12%
8%
6% 5% 1%
Executive
Police
Financial institutions
Legilslature
Foreign and Domestic Investors
Judiciary
Foreign Donors
Corruption Sources in Developing Countries World Bank Study, 2000
significant impact of GRP
on anti-corruption
GRP as a tool to reduce corruption
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Version 7 section
• brief discussion
Version 7 section • Governance: the manner in which the acquires and exercises its authority to provide public goods & services
• Corruption: the use of public office for private gain and is an outcome – a consequence of the failure of accountability relationships in the governance system
8 8
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Version 7 section
• brief discussion
Version 7 section PFM Exposures
Budget Preparation Lower Budget priority manipulation
Budget Execution High Largest opportunity for corruption including:
• Extra-Budgetary High Off-budget, cash fungibility
• Payments Medium Withholding of payments
• Procurement High Bid rigging, collusion, bribery
• Public Investment Projects High Significant political manipulation
Payroll Medium Ghost employees, bribes for pay
Tax Administration High Tax avoidance
Treasury Medium Bank account manipulation
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Version 7 section
• brief discussion
Version 7 section GRP as Anti-Corruption
• Prevents certain types of corruption
– Automation
– Behaviour Change
• Detects corruption though reporting and audit
• Requires other factors for enforcement, comprehensiveness and proper configuration
10 10
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Version 7 section
• brief discussion
Version 7 section
different organizational configurations
MULTIPLE
CONTROLS
aggregate
detailed
MULTIPLE
CONTROL
LEVELS
configured
CONTROLS
bu
dg
et
ap
pro
pri
atio
ns
tra
nsfe
rs
co
mm
itm
en
ts
ob
liga
tio
ns
rece
ivin
g
exp
en
ditu
res
COMMITMENT CYCLE
segregation of
duties & workflow
monthly
PERIOD
yearly
TOLERANCE
LEVELS
flexible
strict
• Automated controls including segregation of duties, follow government laws
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Version 7 section
• brief discussion
Version 7 section Other control factors
• Electronic payments – removes “cash” fungibility
• Decentralization – reduces opportunity for centralized corruption
• Behaviour – knowing that “under the microscope”
• Asset Management – tracking assets
• Human Resources – “ghost” employees
12 12
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Version 7 section
• brief discussion
Version 7 section Audit
• All transactions + approvals logged, date, time, user n audit trail
• All vendor, employee, taxpayer information for cross reference
• Fraud detection patterns
– Payments, addresses, “under limits”, procurement to tax, civil service financial disclosure
• On-line reporting
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Version 7 section
• brief discussion
Version 7 section
USING COUNTRY SYSTEMS - DISCUSSION
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Version 7 section
• brief discussion
Version 7 section Food for Thought
• The “corruption” narrative
• Quality of donor financial management systems?
• Donor incentives?
• Historical perspective on corruption
• Contribution of “Western” Companies
• Lack of “enforcement” by Western Governments
• Institutionalized corruption: earmarks, Super PACs
15 15
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Version 7 section
• brief discussion
8. Future of GRP/IFMIS
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Version 7 section
• brief discussion
Agenda
1. Intro to FreeBalance – 15 minutes
2. FMIS/GRP Introduction – 90 minutes
3. Technology Leapfrog
– 45 minutes
4. Performance Management in PFM
– 60 minutes
5. Sequencing PFM technology - Governance Valuations
– 90 minutes
6. Financially sustainable GRP, governance structures, lessons learned
– 45 minutes
7. GRP and Anti-Corruption – 30 minutes
8. Future of PFM technology
– 30 Minutes
9. “Parking Lot”
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Government Resource Planning Systems
of Tomorrow
How computer technology trends
today are defining
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Agenda
• Market and technology forces affecting Public Financial Management (PFM)
• Technology and PFM reform
– The role of the Integrated Financial Management Information System (IFMIS)
• 10 key market trends
• Conclusions: What will the government IFMIS of 2010 look like?
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Government IFMIS of tomorrow…
The four market technology forces
of today that are defining
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1. Consolidation
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2. Disintegration
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3. Innovation
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4. Integration
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10 Market Trends Consolidation
1. Enterprise software consolidation
2. Open source software
Disintegration
3. Decentralization
4. Sequencing implementation
5. Software as a service (SaaS) and shared services
Innovation
6. Government as Platform: Government 2.0
7. Mobile government
8. Usability
Integration
9. Corporate Performance Management (& Government Performance Management)
10. Service Oriented Architectures (SOA)
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with government and development trends
Not all technology and market
trends are consistent
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ERP systems have become bloated
‘understructures’ that have become
too expensive to maintain.
Bruce Richardson, AMR
Research August 2006
1. Market consolidation
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What is Enterprise Software?
• Many acronyms:
– ERP (Enterprise Resource Planning)
– SCM (Supply Chain Management)
– CRM (Customer Relationship Management)
– CM (Content Management)
– CPM (Corporate Performance Management)
– BPM (Business Process Management)
– and many others
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Microsoft
SAP
Infor
Oracle
Sage
Lawson Epicor
Chinadotcom
Siebel
Retek
PeopleSoft
JDEdwards
Vantive
Triversity
SSAGlobal
Baan
Marcam
E-piphany
Ironside
Mapics
Lilly
Geac
JDA
Extensity
Comshare
Datastream
FRX
GreatPlains
Navision
Damgaard
Axapta
Soloman
Scala
Intentia
Ross
Pivotal
Accpac
Best
Mas 90/200
Peachtree
Timerline
Siebel
Retek
PeopleSoft
JDEdwards
Vantive
Triversity
SSAGlobal
Baan
Marcam
E-piphany
Ironside
Mapics
Lilly
Geac
JDA
Extensity
Comshare
Datastream
FRX
GreatPlains
Navision
Damgaard
Axapta
Soloman
Scala
Intentia
Ross
Pivotal
Accpac
Best
Mas 90/200
Peachtree
Timerline
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Drivers for Consolidation
• Lack of organic growth
• Shareholders want companies to invest in
more growth
• ‘free markets’ monopolies
• Perception that big = winning
• Maintenance business model
• Buy customers
• Own customers: barriers to entry
• Lack of value for upgrading
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Current Situation
• Survival of the fittest?
• Pressure to enter new horizontal and vertical markets
– New technology stack wars
– ‘SME’ market
– Emerging markets interest
• Overlapping technology portfolio
• Consolidators attempting economies of scale
• Customer satisfaction?
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The growth of free, open-source software
presents developing countries with an
opportunity to escape from technological
dependence on developed
countries, but also a challenge to
build up local expertise…
Dr. Mike Reed, UNU International
Institute for Software
Technology March 2006
2. Open Source Software
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Drivers for Open Source
• Software commoditization - lack of
incremental benefits in commercial
infrastructure software
• Government self-reliance – reduce
national technological dependence
• Cost and choice - cost for license
compliance
• Future proofing
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Current Situation
• Rapid uptake in emerging countries
• New procurement regulations
• Proven performance and reliability
• Infrastructure middleware success
– Java EE, Apache, MySQL, Linux, JBoss,
Tomcat, OpenOffice
• Some assembly required
– Usability issues
– Market volatility
• Not established in business applications
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including political devolution,
de-concentration,
delegation, and transfer
to non-governmental organizations,
promotes democracy and
good governance by providing an
institutional framework to bring
decision-making closer to the people
Shabir Cheema United Nations Global Forum
for Reinventing Government November 2006
3. De-centralization,
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Devolution
Delegation
De-concentration
Divestment
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Budgets
Ministry 1
Municipal
Gov’t
Municipal
Gov’t
Virements
Information
Virements
Information
Virements
Information
Municipal
Gov’t
Provincial
Gov’t
National
Government
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National
Government
Provincial
Gov’t
Ministry 1
Municipal
Gov’t
Municipal
Gov’t
Municipal
Gov’t
Reporting
Outturn Expenditure
Information
Outturn Expenditure
Information
Outturn Expenditure
Information
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Drivers for De-centralization
Administrative Decentralization
• Improve government efficiency and effectiveness = improve outcomes
• Large % of government budgets deployed locally
• Local and cultural autonomy
Fiscal Decentralization
• Improves participation = more stable countries
• Reduce waste and corruption
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Current Situation
• Conflicts with computing trend to
integration (centralization)
• Clear trend: devolution on every
continent
• Local capacity and sustainability issues
• Difficulties in extending governance with
existing solutions
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Start with the implementation of foundation
infrastructure and undertaken at a pace
that will ensure that users effectively cope
with new technologies, methods and processes
Ron Points December 2007
4. Sequencing Implementation
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Why Sequencing?
• Small wins overcome internal resistance
to change
• Results influence politicians and donors
• Sequence in any country differs based on
country priorities
• Transition plan and change management
• Capacity building in steps improves
sustainability of solution by the
government
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Current Situation
• Some countries trying more at once:
creating long implementation cycles
– Functional experts want phases
– IT experts want elegant technology
• Irony: more success in post-conflict:
– Need for quick implementations
– Focus on capacity
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SaaS benefits are crystallizing,
but chaos still abounds
Robert Bois,Aberdeen Group
June 2006
5. Software as a Service (SaaS) &
Cloud Computing
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What is Software as a Service (SaaS)?
• Applications are hosted externally: e.g.
Salesforce
• Also called “Cloud Computing”
• Typically priced on a subscription basis
• Typically provides some customization
• Also:
– IaaS
– PaaS
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Drivers for SaaS • High cost to maintain complex software and
infrastructure [Death of IT]
– Licenses
– Upgrades
– Networks
– Databases
• SaaS supports fast growth
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Current Situation
• Significant increase in market penetration
• Uneven adoption: high in customer relationship management, HR
• Exposes limitations in legacy technology
• Caused more consolidation as ERP companies acquire
• Rarely used in government back-office applications – why?
• Similar technology used for shared services, yet…
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No matter how you brand the hype,
get ready for a quantum leap in the way
the Web works and —
more importantly —
how it works for you and your business.
Wayne Gomes, Rich Internet
Group November 2005
6. The Web as a Platform - Gov 2.0
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What is Web 2.0? • An umbrella term for second wave of internet
innovation
– Web as platform + diversity of platforms
– Mash-ups + syndication
– Social software + community + crowdsourcing
– Open source + rapid development
– Rich web interfaces
– Distributed documentation & data
• YouTube + Facebook + Flickr + Twitter + Blogging
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Drivers for Government 2.0
• Government as Platform– open data to
spurn economic activity
• Drive for Transparency
• Increased expectation of participation:
crowdsource or be croudsourced [Arab
Spring]
• Infrastructure is available
• The Network Effect
• The Long Tail
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Current Situation
• OGP – rapid expansion of Gov 2.0 and
open data sets
• Emergence of standards
• Recognition of citizen force multiplier
• Citizen tools like Ushahidi
• Barriers: cost and culture
• Culture change is in progress
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New wireless technology is resulting in
innovative business models
and holds the promise of connecting poor users,
extending competition to all market segments,
and accelerating development of broadband
infrastructure and access.
World Bank April 2006
7. Mobile Government
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What is mGovernment?
• Light e-government using mobile telephone
technology
– Mobile telephone as kiosk
• Citizens and Businesses
– Finding government services
– Notifications and alerts
• Civil Service
– Requisitions and receiving
– Approvals
– Time & Attendance
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Drivers for mGovernment
• Proven voice and text technologies
• Mobile telephone is the tool of choice for
small transactions
• Growth in emerging countries – theme of
“ICT4D”
• Introduction of new products aimed to
overcome the digital divide
• Citizen and civil servant usable and
inexpensive
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Current Situation
• Early adoption in government
• Exposing GRP capabilities via tablets
ideal, less so on small form factors
• Remains differences among devices
• Most e-government needs computers
and the Internet
• Practical for life events
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Agencies are addressing goals of decreasing
administrative burdens, lowering costs, enabling
better informed decision making, and ensuring
tmeliness in responding to sector needs.
Aberdeen Group March 2004
8. Corporate Performance and
Government Performance Management
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Current Situation
• Mixed
– Capacity issues
– Improvements in MTEF
– Remains output focused
– Better results in projects yet…
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66% of all IT projects either fail
outright or take much longer to install
than expected because of their complexity.
9. Usability – “UX”
The Economist October 2004
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Features
•“Featuritis”
• Benefits incorrectly tied to features
• Increasing the capacity gap everywhere
• More features, the better?
– Unconsumed features
– Infrastructure bloat
– ITC-generated costs
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Featurities
Time
Usability
Feature Gap
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The Secret of Success
• Realistic view of capacity and infrastructure
• Focus on what is important
– Vehicle for your road
• Why complexity?
– Engineers and not people too
– “Apologists”
• Usability & Simplicity
• Capacity enhancement
– Not personnel reduction
• Sustainable
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Current Situation
• Re-thinking “windows”
• Recognition of usability as a problem for
everyone – regardless of capacity
• Movement from “functional” design to
“user-centric” design
• Leverage of some Web 2.0 user-interface
concepts in commercial software
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SOA will make today’s ERP systems
look like yesterday’s mainframe apps.
Bruce Richardson, AMR
Research August 2006
10. Service-Oriented Architecture (SOA)
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SOA Drivers
• Many applications in use
• Promise of re-use: write once, use many
times
• Component-based architectures –
promise of assembling applications from
parts
• Mix programming language, operating
system and middleware
• Pick best-of-breed applications
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Web Services
register discover
bind
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Current Situation
• Proven practical in Web 2.0
• Enterprise software momentum
• Difficulties with monolithic / monopoly
approach
• Technology plumbing has been mostly
resolved
• Revolutionizing enterprise software
– Therefore…
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Conclusions:
GRP of the Future
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Modular
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and Modular
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modular, de-centralized & integrated
non-monolithic & multiple vendors
wired & wireless
commodity & innovative
The Government IFMIS/GRP of
tomorrow will be:
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core
IFMIS decentralize
extend
measure
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Citizen Centric
citizen
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Version 7 section
• brief discussion
9. Parking Lot
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Version 7 section
• brief discussion
Agenda
1. Intro to FreeBalance – 15 minutes
2. FMIS/GRP Introduction – 90 minutes
3. Technology Leapfrog
– 45 minutes
4. Performance Management in PFM – 60 minutes
5. Sequencing PFM technology - Governance Valuations – 90 minutes
6. Financially sustainable GRP, governance structures, lessons learned – 45 minutes
7. GRP and Anti-Corruption – 30 minutes
8. Future of PFM technology
– 30 Minutes
9. “Parking Lot”
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Version 7 section
• brief discussion
Version 7 section 1. Valuable learning experience
2. Contrast public and private sector accounting & management
3. Training course, not a demonstration
4. Breadth of financial management in government
5. Strategic, tactical, futures
6. Vendor-neutral “good practices”
7. Share lessons among group
8. Voice lasts until end of day
9. Address specific ideas, concerns