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Transparency Driving Public Financial Management Reform


December 1, 2009

FreeBalance partners, Grant Thornton and the International Consortium on Governmental Financial Management (ICGFM), have published results from a survey of public financial managers. The Progress in Public Financial Management Reform found that increasing transparency in government and engaging citizens were key motivations for improved governance. This is an important inflection point because Public Financial Management (PFM) reform has often been pushed by international organizations and development partners. Reform has become internalized as governments seek to improve results and increase citizen confidence. “Almost all respondents agreed that increased transparency is worth the extra costs associated with it to maintain openness with the public and encourage involvement of citizens.” And, only 10% of respondents found that meeting requirements of the donor community was a main reason for PFM reform.
2010 Grant Thornton ICGFM Progress in Public Financial Management Reform
PFM includes much more that Government Resource Planning (GRP) and other Information Technology initiatives. The study showed the demand for integrated financial systems, budget management and electronic procurement.

Capacity building is mission-critical for governments. The lack of “qualified financial and accounting professionals trained and experienced in public sector financial management” was identified as the leading barrier to reform. This is not unique to emerging country governments. Many Grant Thornton surveys have shown that human capacity is a barrier to reform in the United States. This was also a theme at the recent Financial Management Institute Professional Development week in Canada. Governments need to build capacity to sustain reform.  It’s no wonder that 70% of respondents believed that technical assistance to improve capacity was the more important type of needed support. Only 4% believed that funding was the most important.

“Leadership and change management go together,” according to the survey. Many respondents suggested that bureaucracy “will resist technical financial reforms such as accrual accounting and the use of automated versus manual information processes.” Culture change is difficult in large organizations – and difficult to sustain. Culture change with technology change requires strong leadership and communications skills, as we pointed out in a recent blog entry. The example of the Government of Hong Kong graphic novel to explain the 2009 budget is thought provoking. Government leaders need to communicate through channels used by citizens – whether graphic novels, social networks or mobile computing.

Transparency is dominant theme behind PFM reform. Information disclosure, freedom of information and open budgets are key drivers for reform. This might seem counter-intuitive that those in power wish for more transparency. Our experience supports the survey results. Leaders in many countries around the world recognize that maintaining power is related to proving value to citizens. Democratic governments want to be re-elected. Open, transparent and objective information enables political debate about the government record. Rather than invented scandals. Fiscal transparency leads to increased country investment. Internal transparency leads to common effort.

Informal surveys at the May 2009 ICGFM Conference found that the financial crisis was increasing the appetite for reform. The in-depth interviews with financial managers confirmed these results. PFM reform creates efficiencies and improves effectiveness – enabling governments to do more with less.

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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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