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Public Financial Management – 5 Years of Progress?

 

July 22, 2013

Doug Hadden, VP Products

Do we need time-lapse photography to track the slow progress of global Public Financial Management (PFM)? Or, is PFM cyclical where we see the reforms come and go over time? Fortunately, the Internet provides a “way-back machine” – here, turned back 5 years to a June 2008 ICGFM presentation by Bill Dorotinksy. Dorotinsky is a co-author of Financial Management Information Systems from 2011.


 

Dorotinsky explored the current, as of 2008, PFM trends. He analyzed trends and the success of reforms in context of strategic planning, management control and operational control. 

My observations, 5 years on:

  • Accrual accounting seems to be no longer a fad – although there has only been limited progress in implementing accrual. More governments aspire to accrual than in 2008. Maybe that makes it a fashion rather than a fad.
  • The lesson to not try too many reforms at once seems to be slipping – based on many of the RFPs that we have received in the past five years. There seems to be a bit of an arms’ race in reforms among governments where countries try to appear better than peers.
  • The Treasury Single Account (TSA) remains the most effective low-hanging fruit for PFM reform.
  • Budget preparation capabilities have not improved significantly since 2008 despite so much MTEF “capacity building.”
  • Less developed countries continue to focus on payroll as an important element of civil service reform although in greater numbers than in 2008. More developed countries have more of focus on human resources management through improving salary scales, improving recruitment and talent management. What is different is that lower developed countries are implementing capacity building and training programs within human resources software.

We’ve turned the corner on Integrated Financial Management Information Systems (IFMIS) and capacity building. At least we have at FreeBalance.

Dorotinsky spoke in 2008 about the notion that the “I” in IFMIS was considered among some circles as somewhat unnecessary. This has changed significantly beyond the general need for system interoperability. Integration ensures controls and compliance across systems. It reduces corruption opportunities. And, it enables transparency and management information.

Is PFM reform sequencing still more of an art form than a science? PEFA assessments have become more common. We’ve developed tools that are more prescriptive.

Dorotinsky pointed out that governments should not try to create the perfect Chart of Accounts (COA) to support management reporting and performance management. He suggests that governments can change their COA when they change IFMIS systems. It’s true that changing the COA is very difficult and complex in Enterprise Resource Planning (ERP) systems, but not so in Government Resource Planning (GRP) systems like the FreeBalance Accountability Suite that support a multiple year COA.

Public Financial Management Good Practices Multiple Year Chart of Accounts by FreeBalanceGRP

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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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