December 22, 2008Doug Hadden
The World Bank estimated in 2003 that only 6% of reviewed Integrated Financial Management Information Systems (IFMIS) projects were highly likely to be sustainable. 25% were considered unsustainable. Although the Bank has shied away from an update of these disappointing statistics, we have reason to believe that a more recent survey would be less discouraging—mostly as a consequence of governments’ increased capacities and improved project control mechanisms. (Of course, many governments have acquired FreeBalance software too!).
Many IFMIS implementations, even in highly developed country governments, have continually proven both expensive and difficult to sustain. Millions of dollars are spent just upgrading to new software versions.
Our experience with implementations, the advice of our FreeBalance International Steering Committee, participation in conferences and market research points to the following challenges:
- Capacity building: Many civil servants resign from public service to join the private sector, requiring continuous training cycles for replacements. And emerging nation governments often modernize processes that require further capacity building.
- Maintaining efficiencies. Legal reform may be needed to leverage the benefit of automated systems. Currently, many governments are paper-bound, requiring printed documents and physical signatures. Improved efficiencies are difficult to sustain when limited by such physical processes.
- Budget and Accounting Classification. Improving government performance often requires modifying the chart of accounts to support performance measures or international standards like Statistics. Public Financial Management systems are often difficult to adapt to these changes, and the chart of accounts may prove to be too complex for users.
- Sequenced reform. Continuous improvement often requires PFM process changes such as a move to accrual accounting or the establishment of consistent civil service promotion standards.
- Controls linked to capacity. The government budget, commitment and approval control structure often requires modifications to yield favourable results. Many governments roll out strict granular control systems that burden managers for expenditure and budget transfer approvals. As civil service capacity increases, controls should become aggregate and provide more flexibility for civil servants who are more aware of day-to-day needs.
- Decentralized capacity. Rolling out financial systems to line ministries and sub-national governments often exposes capacity challenges. The systems that are successfully in operation at the Ministry of Finance may be too complex for other government entities.
- Decentralized functionality. The functionality desired by sub-national governments and smaller line ministries may differ from what is needed by the Ministry of Finance and larger line ministries.
- Credible multi-year budgets. Government programs often take more than a single year to show results. Planning and analyzing multiple year budgets to support MTEF (Medium Term Expenditure Framework) guidelines requires more complex scenario planning and analysis than single year budgets do.
- Off-Budget Expenditures. Many donors directly fund government agencies for their projects. These funds are typically not reported within the government financial system. This reduces the credibility of the government budget.
- Performance Management. Managing for results to support government performance goals or millennium challenge goals often requires additional changes to budget classification, budget planning, analysis and devolution of powers.
Learn More from Your Colleagues
Awareness of sustainability challenges is the first step. We believe that sustainability ought to be the most important considering for the acquisition of an IFMIS. Our best advice – learn from those who have been there.
Sustainability is a major discussion point when public financial management experts meet at conferences. The International Consortium on Government Financial Management (ICGFM) and Association Internationale des Services du Trésor (AIST) are productive international forums for discussing challenges and devising good practices.
FreeBalance is a member of ICGFM. We encourage every public financial management practitioner to attend conferences and take advantage of presentations and documents on the ICGFM web site. The winter conference is being held from December 1 to 3 this year in Washington, DC. The ICGFM blog will host updated presentations and videos of the conference and beyond.
FreeBalance also participates in regional conferences. We recommend regional conferences from Centro Latinoamericano de Administración para el Desarrollo (CLAD) and the East and Southern African Association of Accountants General (ESAAG). The World Bank and various regional donors are also hosts to highly informative conferences.
Note: We have started a blog series on knowledge transfer from our participation in PFM conferences.