April 26, 2012Doug Hadden
Doug Hadden, VP Products
I’ve been having some interesting conversations about security in software for Public Financial Management software. My assumption at first was that the discussions would be about IT security: encryption, biometrics, database access, firewalls etc. It turns out that there is more to holistic GRP security than IT.
Not that IT security is unimportant. It’s just that there isn’t much difference among enterprise software vendor security capabilities whether it’s biometrics, public key infrastructure, or SSL support. And, web technology provides firewall, VPN and intrusion detection.
Budget and Appropriation Controls as Security
Software designed for the private sector like typical ERP or HRMIS software have little or no budget integration. (I am unaware of any HRMIS system, other than from FreeBalance, that integrates with budgets and commitments.) The primary mechanism to ensure compliance with regulations is through managerial approvals. Here’s where we’ve seen some problems with private sector COTS (and custom developed) software used for GRP:
- No budget or appropriation controls that results in spending over budget ceilings (i.e. organic budget law or the “vote” in some countries) in procurement and payroll
- Inability to support complex segregation of duties across multiple segments in the Chart of Accounts (COA) making for non-compliant spending
- Line-item budget controls resulting in numerous budget transfers, sometimes on a daily basis, for simple purchasing that results in poor fiscal discipline
- Lack of budget surplus or deficit forecasting based on spending trends resulting in creating arrears, particularly when running accounting on a cash basis
- Poor comprehensiveness of controls that may not support monthly controls or cash warrants resulting in liquidity problems
- Inability to properly model budgets in budget preparation software or to develop a comprehensive COA
How does FreeBalance deal with Controls?
- Budget and appropriation controls in all modules including procurement and civil service management.
- Multiple controls operating at the same time. This can include line item budget controls or warnings, multiple aggregate controls across multiple COA segments and time periods and cash controls. (And, with warnings and tolerances).
- Segregation of duties tightly integrated with the COA.
- Budget preparation software that ensures the development of credible budgets with proper controls
- Good control practices recommended by our implementation team
- Progressive activation to adjust controls based on knowledge gained from experience and analysis of the audit trail (including adapting the COA to meet this need)
The special case of Human Resources
You may be surprised to know that every Government of Canada client of a particular brand of ERP uses FreeBalance software to manage salary budgets. (And, many of the other major ERP brand despite a custom developed solution.) Why is that?
Government of Canada salary budgeting is very complex. The government negotiates with Trade Unions for collective agreements. These agreements create complex salary scales and benefit structures. Salaries represent a significant or the most significant expenditure for many Government of Canada departments and agencies. FreeBalance Performance Management software is used to model and build salary budgets. The budget is compared to actual payroll expenditures at every pay period and re-forecasted. Vacancy rates, seasonal employment, overtime, certification, training usage, natural disasters and other factors can have a material effect on expenditures. Government organizations need to know if they will exceed the vote. And you can’t do that with ERP or HRMIS software.