March 9, 2013Doug Hadden
Doug Hadden, VP Products
I’ve been working with a small team at FreeBalance to create a “Governance Framework” to understand how Government Resource Planning (GRP) systems are used to improve governance for governments in developing countries. Our President and CEO, Manuel Pietra, has been very active in this work and recently gave a presentation at the Harvard Kennedy School on the subject .
The motivation behind this work is to clearly articulate what GRP can do. And, what it can’t do. This has not been a marketing exercise to hoodwink potential customers into thinking that we have a magic bullet.
Our plan is to work through different governance scenarios using this Framework. And, to adapt our Framework based on discussions
The Governance Issue
There remains debate on the definition and impact of governance in the public sector. Numerous governance indicators are used by civil society, international financial institutions and standards organizations. These indicators operate at different levels of governance abstraction. Ideology and theory play significant roles in the determination of indicators. And, governance concepts are notoriously difficult to measure, are rarely current and use many substitutes or proxies.
The quest to identify the most important characteristics suffers from the multivariate nature of governance and what Francis Fukuyama calls the “ tainting of output measures by exogenous factors”. And, numerous observers, like former British Prime Minister Tony Blair, recognize that there are no easy governance answers: “ By governance, I don’t just mean transparency, as important as that is, but also the ability of governments in developing countries to get things done.”
Despite this environment, there is significant evidence that governments with better governance ratings provide improved outcomes and citizen services. Kaufmann, Kraay, and Mastruzzi, Massimo through an analysis of the World Governance Indicators have demonstrated statistical relationship between governance and outcome.
The Governance Reality
The set of available, yet imperfect, governance indicators are the reality for evidence-based decisions, particularly in developing countries. Matt Andrews has pointed out that reforms in developing countries are often “ directly shaped by indicator scores and their underlying ‘best practice’ dimensions, with countries apparently buying into the implied story that ‘this is what good government looks like’” and are “fixtures in global public sector reform programs.”
The desire to fashion governance indicators to outcomes has created an institutional focus. This focus on institutions like anti-corruption commissions and institutional characteristics such as capacity and political will have been critical to governance reform efforts in developing countries.
There seems to be a general distrust of so-called “technical reforms” in which laws are changed or new procedures introduced. There is strong evidence that these reforms fail to meet objectives unless there are certain institutional characteristics. Yet, as pointed out by Wild, Chambers, King and Harris, “ concepts like ‘political will’ or the existence of ‘weak incentives’ are often referred to but rarely further developed in terms of the specific institutional and governance arrangements, ” so a broader understanding of governance dependencies are required.
Public Financial Management reform is acknowledged to be a mechanism to improve good governance. De Renzio and Dorotinsky suggest that “ the quality of public financial management (PFM) systems is a key determinant of government effectiveness. The capacity to direct, manage and track public spending allows governments to pursue their national objectives and account for the use of public resources and donor funds.”
Information and Communications Technology (ICT) initiatives such as Government Resource Planning (GRP), sometimes known as Financial Management Information Systems (FMIS) for government, are seen as an expression of PFM reform. Diamond and Khemani suggest that “ the establishment of an FMIS has consequently become an important benchmark for the country’s budget reform agenda, often regarded as a precondition for achieving effective management of the budgetary resources. Although it is not a panacea, the benefits of an FMIS could be argued to be profound. ”
Towards GRP to Governance Framework
Fukuyama suggests that “ governance is about the performance of agents in carrying out the wishes of principals, and not about the goals that principals set. The government is an organization which can do its functions better or worse; governance is thus about execution, or what has traditionally fallen within the domain of public administration, as opposed to politics.”
Governance is about money: the effectiveness and efficiency of leveraging government revenue for government outcomes. PFM is about budget management, financial and associated non-financial management. GRP is about the control and automation of PFM processes.
The ability to identify actions that governments can take to improve governance can help overcome what Daniel Kaufmann calls “ the silent crisis plaguing the governance and anticorruption movement” of not effectively making “ the transition from the awareness-raising stage to the concrete action-oriented stage. ”
The FreeBalance Governance Framework, in the next entry, examines the contribution of GRP to improving governance and the factors necessary to better leverage systems. This is not an attempt to promote any so-called ‘best practices’ because better practices are related to government contexts. Matt Andrews has pointed out that “ ‘good governments’ are not found to be more likely to adopt a ‘better practice’ PFM characteristic than other governments.”