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Trends in Financial Management: Decentralization


May 15, 2009

This is section 3.2.5 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.

Countries are decentralizing decision-making and fiscal responsibilities. According to the United Nations Global Forum for Reinventing Government, “”political devolution,  de-concentration, delegation, and transfer to non-governmental organizations, promotes democracy and good governance by providing an institutional framework to bring decision-making closer to the people.” There is a significant amount of literature to support this view. However, there have been mixed results.An earlier posting called “towards a framework on legal governance” provides additional insight.

IFMIS Implications

Fiscal decentralization is a major theme in public sector reform. The decentralization of fiscal and service delivery responsibility to line minitries and sub-national governments needs to be supported by the Integrated Financial Management Information System (IFMIS). And, the implication of fiscal decentralization often includes the financial system. This is in conflict with the trend in private sector enteprise software for centralization where all systems are hosted centrally with the same configuration. Implementation challenges include:

  • Legal reform: devolution may require that information systems are separated from the central government to reflect the legal separation of governance duties among governments.This introduces system administration costs for maintenance and management. The IFMIS must optimize systems administration across multiple implementations.
  • Capacity: levels of accounting and technical capacity differ among government organizations. Line ministry and local government capacity can be lower than larger ministries. The administration of the capital city may have more capacity than some line ministries.The IFMIS must be able to support different configurations across the country that reflect local capacity and must support the ability to progressively activate as capacity improves.
  • Separation of governance duties: the needs of line ministries and sub-national governments differ from the Ministry of Finance. The concerns for these governments may not have been considered with the original IFMIS implementation. The IFMIS needs to configure to support the needs of these government organizations.
  • Network infrastructure: not all countries support high-bandwidth, always-on networks. Some countries do not have reliable access to power. The IFMIS must be able to be installed centrally, through hubs and stand-alone. Data transfers among government organization such as budget transfers or expenditure reports must support low bandwidth connections and physical media.
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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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