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Automating Good Governance, A Framework

 

February 28, 2013

Manuel Pietra, President & CEO

It was a privilege earlier today to engage in a graduate class at the Harvard Kennedy School of Government. One of our mandates at FreeBalance, as a for profit social enterprise, is to build and share good practices in Public Financial Management (PFM). This is a unique labor of love for us – to share our experiences to help countries grow. We do not restrict this knowledge to only our government customers.

The FreeBalance team has been building up our methodology on reform sequencing for the past few years based on our experiences in 20 countries and the engagement with the greater PFM community. This was our first opportunity to present an new and comprehensive framework for technology-enabled governance.

Can Good Governance be Automated?

Manuel Pietra, FreeBalance President and CEO, gave a class earlier today on the uses of Government Resource Planning (GRP) to improve governance. He discussed the advantages of technology to improve transparency, accountability and development outcomes.

Storified by · Thu, Feb 28 2013 13:10:31

FreeBalance President & CEO @PietraCEO facilitating seminar at #Harvard Kennedy School on automating good #governance http://pic.twitter.com/ia29FNRnfgFreeBalance
.@PietraCEPO asks #Harvard Kennedy School students whether #PFM #reform is continuous or something that needs to restart after successFreeBalance
.@PietraCEO: we need to question to status quo to achieve institutional reform in developing countriesFreeBalance
significant problems when trying to define good #governance in government & developing country context http://pic.twitter.com/pwG8AxrCk1FreeBalance
Good #governance concept tinged with #ideology & hard to measure- @PietraCEO: measurements critical to improving development outcomesFreeBalance
cash is the grease of #corruption, hard to follow the money when it moves to cash http://pic.twitter.com/PmSeo57MmgFreeBalance
Developing countries lose estimated $20-40B annually because of #corruption http://thepost-ng.com/developing-countries-lose-estimated-40bn-to-corruption-yearly-world-bank/ http://pic.twitter.com/IPwwimnsSHFreeBalance
Government efficiency? Single UK gov transaction ranges from 5p to £700 http://digital.cabinetoffice.gov.uk/2013/01/17/gov-transaction-costs-behind-data/ http://pic.twitter.com/lVDycMuS5lFreeBalance
US public sector #productivity is over 30% lower than Private Sector http://dupress.com/articles/gov-on-the-go/?id=us:el:pr:dup223:read:dup:021913 http://pic.twitter.com/t5zy7JhA8zFreeBalance
Manuel provided a short overview of FreeBalance. FreeBalance is a technology company that produces Government Resource Planning software (exclusively) and provides Public Financial Management (PFM) services. FreeBalance is based in Ottawa.
.@PietraCEO intros FreeBalance #socent focused on #GRP government resource planning in developing countries to Kennedy School attendeesFreeBalance
Ever wanted to know what a “free balance” is? Budget –commitments – obligations – actuals gov of #Canada terminology http://pic.twitter.com/vKcXKz9082FreeBalance
Manuel presented a framework for understanding where ICT solutions for governance operate.
.@PietraCEO introduces problem of linking #ICT like #GRP to automate good #governance & why this is important http://pic.twitter.com/Jv7jlT7cPEFreeBalance
FreeBalance has developed a framework to show where #GRP, #opendata, #transparency helps automate good #governanceFreeBalance
The framework is a bit complicated but can be explained.
Our #governance framework fits on a single page with very small letters :) http://pic.twitter.com/VHUvFN3NMBFreeBalance
1 of 6: technology used to automate financial functions in government (often called #GRP or #IFMIS) http://pic.twitter.com/2c33zHTfGJFreeBalance
2 of 6: #GRP provides set of tools: controls, front-office functions, decision-making & performanceFreeBalance
3 of 6: #GRP leveraged by institutions – mature institutions leverage #governance tools more effectivelyFreeBalance
4 of 6: positive or negative impacts of #governance effectiveness seen through credit ratings and other measurementsFreeBalance
5 of 6: real gov’t situation rolls up to measures like the World Governance Indicators #governanceFreeBalance
6 of 6:#governance get expressed in development outcomes like health and educationFreeBalance
Manuel navigated through parts of the FreeBalance governance framework by identifying opportunity sizes.
Developing countries receive $684B annually in Foreign Direct Investment #FDI http://unctad.org/en/PublicationsLibrary/wir2012_embargoed_en.pdf http://pic.twitter.com/cdRZaT7afYFreeBalance
Total annual worldwide #remittances to developing countries exceed $534B figures http://blogs.worldbank.org/peoplemove/remittances-to-developing-countries-to-reach-406-billion-in-2012 http://pic.twitter.com/UCxS08CyXfFreeBalance
Official Development Assistance, #ODA from #OECD Countries is 0.32% of combined #GNI or $129B http://www.oecd.org/newsroom/developmentaidincreasesbutwithworryingtrends.htm http://pic.twitter.com/DqDpV5xKEBFreeBalance
Official Development Assistance, #ODA from #OECD Countries is 0.32% of combined #GNI or $129B http://www.oecd.org/newsroom/developmentaidincreasesbutwithworryingtrends.htm http://pic.twitter.com/Ohxbo2PWtxFreeBalance
Given the size of #FDI & #remittances with #ODA budget %, @PietraCEO points out that #foreignaid is so highly politicized b/c wasteFreeBalance
About $37B of foreign aid annually is phantom aid #aideffectiveness http://www.huffingtonpost.com/caroline-anstey/technology-anti-corruption_b_1139022.html http://pic.twitter.com/mbgI53qgXBFreeBalance
.@PietraCEO: The problem of #aideffectiveness is but one of many spending effectiveness, value for money #v4m challenges in governmentFreeBalance
Gov #tax revenue ranges from 1.4% of GDP in #UAE to almost 1/2 in #Belgium, #Sweden & #Denmark http://en.wikipedia.org/wiki/List_of_countries_by_tax_revenue_as_percentage_of_GDP http://pic.twitter.com/ICt4MKbOfyFreeBalance
.@PietraCEO: tax evasion is a critical problem for government: revenue #transparency & #EITI support requiredFreeBalance
#Nigeria has lost $35B in #oil revenue in last 10 years = 10% annual budget thru #corruption http://www.guardian.co.uk/world/2012/nov/13/nigeria-oil-corruption-ridabu http://pic.twitter.com/99VWpHKZv3FreeBalance
Gov of #Greece owned €45B taxes, loses €15B annually b/c #taxevasion http://www.nytimes.com/2012/06/06/business/global/greece-warns-of-going-broke-as-taxes-dry-up.html?pagewanted=all http://www.transparency.org.uk/corruption/statistics-and-quotes/stolen-assets-a-tax-evasion http://pic.twitter.com/umOyqV1ynMFreeBalance
#taxevasion has cost USA $3T over last decade International http://www.transparency.org.uk/corruption/statistics-and-quotes/stolen-assets-a-tax-evasion http://pic.twitter.com/du5EVxUbmTFreeBalance
#taxevation through untaxed shadow economy = 17% of world economy, well over $2.5T http://images.businessweek.com/mz/10/32/1032_econtaxes16.pdf http://pic.twitter.com/aGRjB4P2l1FreeBalance
Illicit financial flows= at least $5.9T over the past 10 years http://www.economist.com/news/special-report/21571549-offshore-financial-centres-have-taken-battering-recently-they-have-shown-remarkable http://pic.twitter.com/Q7ovYK09KmFreeBalance
.@PietraCEO: countries with improving #PFM public financial management systems hurt by off-budget enabled #corruptionFreeBalance
Donors who go outside of country systems #GRP ensure that aid is fungible while not building government capacityFreeBalance
.@PietraCEO: capacity, pol. will, independent #audit & #civilsociety = force multipliers of tools for #accountability #governanceFreeBalance
#transparency, financial systems #audit trails changes behaviour, improves #governanceFreeBalance
.@PietraCEO: automated government financial systems significantly reduce opportunities for easy #corruption http://pic.twitter.com/6auutUdjFyFreeBalance
.@PietraCEO: great resistance to #GRP systems by those who recognize that systems can easily trap, uncover #corruptionFreeBalance
Controls in #GRP government resource planning to enable good #governance in a single slide http://pic.twitter.com/9GONIukKOGFreeBalance
.@PietraCEO: unfortunate when there is donor resistance to government fiscal #transparency initiativesFreeBalance
Screen shot from #timor #transparency portal at http://www.transparency.gov.tl http://pic.twitter.com/hqxINbXDFrFreeBalance
#corruption costs 20 to 25% of government #procurement in developing countries http://www.icgfm.org/forumsDocs/2008/MarPresentation_000.ppt http://pic.twitter.com/3nVibw52XiFreeBalance
.@PietraCEO summarizes impact of #transparency on waste, #accountability as precursor to improving gov’t performance http://pic.twitter.com/B9rnUWRvVkFreeBalance
Manuel used the framework to demonstrate the scenario of how GRP and controls could reduce the opportunity for corruption through the budget cycle of a hospital acquisition. (Public investment projects last multiple years and are complex so can be manipulated through graft and collusion.)
.@PietraCEO introduces automating good #governance ie use case of public investment #procurement such as a hospital http://pic.twitter.com/Fsf1z5KDiSFreeBalance
#anticorruption scenario 1 of 8 #GRP provides a an enterprise-grade infrastructureFreeBalance
#anticorruption scenario 2 of 8 #GRP ensures users, groups and roles have been defined & leverage IT securityFreeBalance
#anticorruption scenario 3 of 8 consider public investment program defined during budget planning that has been approved by parliamentFreeBalance
#anticorruption scenario 4 of 8 #procurement cycle begins in GRP, complex public investment such as a multiple year building of a hospitalFreeBalance
#anticorruption scenario 6 of 8: #GRP supports eprocurement with multiple bidders, review criteria and contract managementFreeBalance
#anticorruption scenario 5 of 8: integration in #GRP with the #procurement & expenditure system automatically generates an #RFPFreeBalance
#anticorruption scenario 7 of 8: #GRP systems ensure that payment is provided to the winning bidder based on the contract provisionsFreeBalance
#anticorruption scenario 8 of 8: further #GRP #governance controls: entire cycle is stored in #audit trailFreeBalance
Controls are built into GRP systems to reduce the opportunity for corruption and increases the potential of trapping graft in progress.
@PietraCEO describes control tools to manage the #procurement process in #GRP http://pic.twitter.com/oUz5Y2zchYFreeBalance
Proper #GRP planning and historical data can ensure that sample hospital budget is realistic without room for graft #anticorruptionFreeBalance
He also described the other factors necessary to leverage GRP tools to help achieve government objectives.
government #procurement payment in secure fashion – typically #EFT reduces the opportunity for graft that we see with cashFreeBalance
#GRP works thru standards, human capacity, #corruption enforcement, independence to improve gov’t #governance http://pic.twitter.com/E3usalCBN7FreeBalance
#GRP & gov’t #procurement rated in #PEFA assessments http://www.pefa.org, can improve #corruption perception http://pic.twitter.com/lDtlH7ELyZFreeBalance
Improved #transparency & #corruption perception leads to improved “control of corruption” #governance rating http://pic.twitter.com/iMRAgOSyr4FreeBalance
Improved “control of #corruption” leads to business trust, investment http://pic.twitter.com/IQbSszqD9dFreeBalance
All summed up by Afra Raymond at a recent Ted talk in Trinidad on the 3 myths of #corruption http://freebalance.com/blog/?p=3810 http://pic.twitter.com/msNAkKfDMtFreeBalance
GRP includes financial and non-financial systems such as  human resources (what we call “Civil Service Management’) to improve government productivity and effectiveness.
Government Employment exceeds 450 Million people http://www.ilo.org/public/english/bureau/stat/download/wp_pse_e.pdf http://pic.twitter.com/soA5YvAPp2FreeBalance
Government Employs 40% of workers in countries in transition http://www.ilo.org/public/english/bureau/stat/download/wp_pse_e.pdf http://pic.twitter.com/X81E44QyXHFreeBalance
45K ghost workers out of 153K screened found in #Nigeria MDAs #corruption http://pic.twitter.com/mR8GFk5hRmFreeBalance
There is some evidence that early implementations of GRP systems in post-conflict countries is important. Of the countries studied, only those countries that had implemented FreeBalance for at least 2 years had shown substantial improvement. This is indicative of the power of COTS GRP, whether from FreeBalance or other vendors, to enable governance reform.
Some evidence that good #GRP systems improve #PFM reform & #governance http://pic.twitter.com/DnaapKOm4HFreeBalance
We received a question over the weekend about why improvements to the Open Budget Index in Uganda had not resulted in noticeable improvements in service delivery. Of course, the impact of fiscal transparency is unlikely to have an immediate measurable effect. We answered the question by using the framework.
Do more open budgets=better spending? http://bit.ly/XMPTgi @tkb How open is your country’s budget? http://bit.ly/Qam8TE #openbudgetindexMatt Andrews
“@freebalance: @governwell @openbudgets @globalbtap hard to pluck out causality over time” sure but we should at least have a theory…Matt Andrews
“@freebalance: @governwell @OpenBudgets @GlobalBTAP theory will be presented later this week at Harvard” will be fantastic!Matt Andrews
Q via Twitter through @governwell on why @openbudgets improvement in #Uganda hasn’t resulted in improved service deliveryFreeBalance
A 1 of 5: isn’t a direct linkage without other factors from fiscal #transparency to service delivery http://pic.twitter.com/aFvIt2Mf1hFreeBalance
A 2 of 5: gov’t might not have the objective of improving service delivery in a particular sectorFreeBalance
A 3 of 5: #transparency doesn’t enable change without institutional #capacityFreeBalance
A 4 of 5: #decentralization is critical to improving service delivery at the local levelFreeBalance
A 5 of 5, multiple factors necessary to improve service delivery, fiscal #transparency but 1 factorFreeBalance
As a technology company, FreeBalance advocates technology. But, we recognize all of the factors necessary to improve governance. Most studies show that capacity building and political will are the most important determinants of success for GRP projects. As Manuel points out, capacity and political will can only go so far without appropriate tools.
.@PietraCEO concludes on automated good #governance with #GRP government resource planning http://pic.twitter.com/ft1oodfuDuFreeBalance

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Doug Hadden

Doug Hadden

Executive Vice President, Innovation at FreeBalance
Doug is responsible for identifying new global markets, new technologies and trends, and new and enhanced internal processes. Doug leads a cross-functional international team that is responsible for developing product prototypes and innovative go-to-market strategies.

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