March 24, 2009Doug Hadden
This is section 2.6 of a series of blog entries creating a Government IFMIS Technology Evaluation Guide. This includes information to assist in evaluating IFMIS options and the technology requirements for FreeBalance IFMIS implementations. These series will be combined with feedback to produce a comprehensive Technology Evaluation Guide to be published on our web site.
Integrated Financial Management Information Systems (IFMIS) can be installed in all government entities in a country. Should IFMIS software be standardized within the same level of government or across all government tiers? Many ICT experts believe that the key to effective Public Financial Management (PFM) can be accomplished with a single system with a standardized configuration. This approach can simplify the support and management of the system. Country experiences show that this approach has not often been effective.
What are the characteristics of “whole of government” requirements?
Financial management needs can differ within countries. This can differ among levels of government and within each level. A system that operates well for the Ministry of Finance for the National Government may not satisfy the needs of all government organizations.
Some considerations include:
- Specialized functions: some government organizations provide highly specialized functions that need to be accounted for. System configurations may not provide the level of information granularity required for financial discipline for some government organizations. And, standardized functions may prove to be ineffective with some government organizations.
- Materiality: the level of detail required to effectively manage day-to-day operations in a local government can be materially irrelevant to the national government. Highly detailed information flowing across tiers of government provides visual “noise” making it difficult to leverage to improve decision-making.
- Project accounting: some government organizations focus on the execution of important government projects and need rich program, project and activity functionality.
- Human resources: some government organizations are labour-intensive where salary planning and civil service management are critical.
- Central concerns do not translate: some critical functions are often missing when the national government IFMIS is provided to sub-national governments. For example, revenue collection in the form of property taxes may not be satisfied by the national government system.
Capacity Building Differs
Civil service capacity can differ among government organizations. For example, civil servants in the Ministry of Finance may be able to operate on accrual accounting with performance planning and a complex Chart of Accounts (COA). Local governments may not have civil servants with these skills. Sometimes, the civil servants in the capital city local government have more capacity than some line ministries at the national level.
Some governments address this “capacity gap” by rolling out complex functionality at the national level first. These governments attempt to add more government entities through training. This often results in hitting the capacity gap at some point where the system cannot be used across all government organizations.
Some governments implement with a more simple configuration at the national level and roll out over time. This has proven to be somewhat successful in implementing a whole of government solution. There is often a “performance gap” where the tools for the civil servants with high functional knowledge do not have the tools that they can use to improve decision-making. This method can enable broad capacity building over time so that all users can move to more progressive systems.
The implementation of government financial management in developed countries was more organic. Many of these countries have different financial systems across their governments. This recognizes the needs difference among government organizations. However, they have standardized on a consolidated COA and processes.
The lesson for emerging countries is that the system configuration should match organizational capacities. For example, the national government can operate on an accrual basis of accounting while local governments operate on a cash basis. Budget allocations from transfer payments can be controlled and reporting from local governments can be on an modified cash or modified accrual basis.
Modern IFMIS software is often implemented in always-on, highly available networks with good bandwidth. This system requirements often require large servers and is designed on the notion of central management and control. Many countries do not have reliable power or available bandwidth. For example, in Canada, the Territory of Nunavut has four sites that can only connect via VSAT satellite technology.
Technology considerations for whole of government solutions include:
- Bandwidth limitations – data moving on the network may need to be at a summary level because detailed information cannot be reliably transfered. Detailed information is often not material.
- Power limitations – power issues across the network may require that local or regional centres are created to ensure that data can be captured regardless of the state of the network. This requires a hybrid centralized/de-centralized implementation.
- System costs – emerging country governments should not expected to acquire the latest computer technology to operate IFMIS software. The technology “footprint” of computers and equipment often requires more power.
Towards an Integrated Approach
Many PFM experts say that “one size does not fit all.” This is most often said when comparing the needs among countries. This is also true when comparing needs and capacity within a country. Recognizing these needs and articulating technology limitations will result in effective requirements. In particular, this approach can determine an effective strategy to address needs and build capacity.