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Government Audit & Transparency Return on Investment

 

March 14, 2016

Trust. The notion of government trust and legitimacy was explored last week at the FreeBalance International Steering Committee (FISC) conference in Managua, Nicaragua. Public Financial Management (PFM) practitioners from around the globe spent four days in intense workshops sharing reform, IT and change management lessons.

Many of the public servants at FISC had recently seen changes in ministries through elections and coalition changes. This brought the advantages of government trust to the top of mind. It wasn’t so much an affiliation with any political party as witnessing the effects of the lack of trust. Elections are often the only demonstrably peaceful method of expressing the lack of trust in government.

Value of Transparency

There is a persistent narrative government resists transparency because of potential embarrassment. Like many generalizations of complex situations, this is partly true. There can be a negative return on trust when transparency exposes mismanagement, inefficiencies or corruption.

1 Value

Internal government transparency in the form of audit can have significant returns. The Government Accountability Office in the United States estimates a return of $100 for every dollar spent. This is an important lesson for countries with strong internal and external audit. Most governments do not have the capacity or funding for such strong internal audit processes or “supreme audit organizations.”

This is where the power of transparency comes into play.

The important change over the past decade has been the shift of power from institutions to communities and individuals. This has been powered by the rapid adoption of social and mobile technologies.

4 Power

The value of transparency in most countries is to mobilize civil society as an audit layer.  More eyes on the efficiency and effectiveness of spending. This is the type of “crowdsourcing” that many governments need – low-cost audit.

But, the Data…

FreeBalance government customers were enthusiastic about improved transparency. They expressed concern about data accessibility. The need to make “open data” accessible to civil society and the general public is a challenge acknowledged by many in the PFM community.

Oddly, the ability to provide consistent transparent data from information systems is rarely explored. It’s as if PFM experts believe any data sitting in a database is easily massaged. As if data was some kind of plumbing. One important exception to the rule is a 2013 landmark study on budget transparency via financial management systems published by the World Bank.

That study found that many governments do not make data from financial management systems available to the public. This is often attributed to government “incentives.” Almost as if fiscal transparency was a trivial technology exercise.

Not so.

The state of integration and consistent metadata among government financial systems is poor. This isn’t something common only to developing countries. I’ve had numerous discussions with representatives from G8 and OECD countries who have expressed frustration with the state of integration and “metadata management.” Could it be coincidental that all of these governments are running private sector software adapted for government, otherwise known as ERP?

It has always struck me as odd major ERP manufacturers require metadata and identify management solutions for intra-suite integration. This seems to be widely accepted in the enterprise software industry. It’s mindboggling to me – as it is to many of our customers who demand a unified structure to enable audit and transparency.

5 Integration

 

 

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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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