April 29, 2014Doug Hadden
We’ve encountered a lot of discussion about how to demonstrate “government results” in a Government Resource Planning (GRP) system. Ideas about how to classify and manage government performance – outputs and outcomes – has progressed to the realm of transparency. The critical question is how can governments demonstrate budget plans designed for citizen services and follow through to show the actual results. Many ask us how we have managed to support government results transparency for Timor-Leste.
Government Performance Management Starts with the Budget
Showing government results is more than putting together a web site. It’s not something that can be generated from a spreadsheet. Government financial and performance management begins with the budget. Budgets are guidelines in the private sector. In government – it’s the law. Government budgets encapsulates policy, economics and objectives. Results need to be traced back to objectives in the budget. This enables improving spending to achieve better results.
Unified Approach Need for 360 Degree Government Results
Government performance management is not something that can be sustained by using stand-alone software. Or, software designed for the private sector. A unified approach across the budget cycle is required. This consists of transparency, back-office and metadata layers that need to be more than integrated – tightly unified to ensure proper controls and full automation.
- Planning requires integrated government policy and objectives into budget plans and documents. These plans need to be presented to the public in a timely manner following open budget good practices. Process automation takes planning information to render budget books and reports into a budget transparency portal. Budget classifications are used to describe programs and government entities.
- Public investment planning is a critical part of government planning that needs to be traced back to objectives. A performance classification system is required for traceability that augments the budget classification system.
- Budget execution requires automated budget controls based on the budget law. Budget transfers and supplemental budgets can occur but ought to be linked to government objectives. Therefore, a unified chart of accounts that includes accounting, budget and objectives/performance codes is required. Financial reports from the back-office accounting system are used to create statutory and transparency reports that can be updated on a budget transparency portal.
- Procurement in aid of public investment needs to be integrated with budgets for controls. Complex procurement tends to include value as part of tendering. The value structure should be integrated with government objectives through the unified chart of accounts. Procurement rules also need to be automated. Government tenders should be posted on e-procurement portals once approved where contractual and value requirements (procurement documents) are automatically rendered by the system without human intervention. Of course, procurement winners should be posted automatically at the point when contracts are awarded.
- Results from public investment need to include spending and milestone information. This includes percent spent and percent complete for on-going projects. Physical information such as pictures and diagrams are also captured by contract management software. This can be automated by posting to transparency portals. Classification integration enables citizens to navigate based on objectives, years, regions, economic codes and any other metadata stored in the chart of accounts.
Many who advocate the use of stand-alone software are only aware of the “happy path” of managing the budget cycle. They are often unaware of the realities of government performance management that can only be handled through unified systems. Some points of failure through stand-alone systems include:
- Inability to track objectives and projects across multiple fiscal years
- Errors in reports associated to year-to-year budget rollovers and multiple year commitments
- Loss of controls within the procurement system whereby budget can be exceeded
- Breakdown in managing contracts across multiple years including milestone payments, hold backs, warranties and penalties
- Inability to effectively plan for multiple years as with Medium Term Expenditure Frameworks (MTEF)
No Magic Bullet
A unified approach is required in order to effectively control and manage for government results. Manual reconciliation of objectives with programs, projects and contracts is fraught with error. At the risk of a mixed metaphor, there is no magic bullet, but there is a silver lining. Government objectives change. As does government organizations. Any change to objective, budget and accounting classifications can break the integration among stand-alone systems. That’s why many governments attempt to create a “best practice” set of classifications that are often too complex for those planning and executing. This should not deter any government using a unified GRP system because classifications are shared among modules. These governments are able to change classifications in step with capacity improvements. And, these governments are able to start showing results very quickly.
Day to Day Performance Management
Government performance is not just about tracking results at the end of the fiscal year. Government leaders need day-to-day access to performance information. This requires the same integration across the budget cycle used for effective transparency.
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