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What Canada can learn from Developing Countries on Public Financial Management sustainability, [Part 6]


June 19, 2012

Leverage “cognitive surplus” to improve public policy

Doug Hadden, VP Products

This is Part 6 of 6 parts detailing the content in my Financial Management Institute of Canada lunch presentation What can we learn about Sustainability from Developing Nation Governments?

Developing countries are adopting processes and technology designed to increase citizen trust while leveraging citizen and civil society cognitive surplus to improve public policy. If the Arab Spring, Tea Party and the Occupy movement has taught governments anything it’s crowdsource to improve public policy – or be crowdsourced.

Many define “democracy” as representative democracy rather than participatory democracy.  Indian MP Ruhal Gandhi suggested that the Anna Hazare hunger strike undermined democracy in India. Yet, it is clear that representative democracy is a thin form because citizens exercise the franchise only during elections.

Transparent and open government data enables developing nations to harness the power of citizens for audit. As I described recently in citizen audit use cases for Public Financial Management (PFM), there are compliance, fraud and performance citizen audit dimensions. Citizen audit is enabled through open data (proactive disclosure of public financial management information on the Internet) and social media collaboration (Internet enabled feedback and discussion.) I further suggested that it is the duty of citizens to leverage open government.

Auditing is expensive. Very expensive in developing countries. That’s why citizens, civil society and businesses are encouraged to help governments. For example, there is nothing better to uncover procurement fraud or poor procurement decisions than competitors.

We have world class external audit in Canada and improving internal audit, as I described in a previous post. David M. Walker, the former U.S. Comptroller General has pointed out that the US Government Accountability Office has a proven return on investment though trapping fraud, improving controls, proposing performance improvements etc. Yet, even audit agencies with proven returns are being cut back.

The Performance Problem

As I’ve pointed out before, performance management in the public sector is more complex than in the private sector. Private sector organizations have a bottom line: profit. There are established measurements like market share, and return on assets. Output measurements like the number of customer complaints handled, and outcome measurements like customer satisfaction survey ratings are factors that influence financials – profitability. If all the KPIs are green and the company is not making a profit, than the indicators are likely incorrect.

There is no bottom line in government. Outputs and outcomes are the results. Financial – in this case, budgets, is the input. This makes it very difficult to determine whether the KPIs are correct. There could be false positives and false negatives.

Social media in government, or Government 2.0, can engage citizens and civil society to report on outputs or outcomes. For example, the Ushahidi platform is used to monitor elections, disaster response and corruption.

The next stage in citizen engagement is crowdsourcing through expert groups or the public. This shows promise when managed correctly. For example, an effort at the White House generated some unexpected ideas. The principle of using citizens to propose and vet solutions reduces the burden on governments and may generate ideas to solve important problems.

Participatory Budgeting to go virtual?

Participatory budgeting is a process originally developed in Brazil to engage citizens to improve budgets. Adoption of participatory budgeting has grown particularly at local government. My sense is that the immediacy of service delivery in local government can create a critical mass of participation. The use of neighbourhood and civil society meetings and government outreach may not be sustainable in large regional governments and many national governments.

My view is that participatory budgeting will become virtual in the future. We can learn from the lessons in participatory budgeting to improve outcomes.

There is some sensitivity in governments to crowdsource policy because policy is considered the purview of political wonks. There is a notion of budget confidentiality in Canada that may restrict the kind of openness enjoyed in developing countries.

Open Government Costs

Many argue that open government, social media, crowdsourcing etc. just costs money. I’ve summarized the business case for open government in a previous entry. A recent Transparency Camp Brainstorm identified the following benefit categories for open government:

  • Revenue, primarily in the form of increased tax collection through increased economic activity
  • Efficiency, effectiveness and productivity through reduced cost per unit of work including cost avoidance
  • Outcome improvements such as achieving higher levels of service delivery or improved health statistics

David Eaves argued that open data can reduce the cost for reduce the costs of Freedom of Information processing

Social Media effects

The resistance to social media and open data in developed nation governments contrasts to the attitudes from many developing countries. I find a greater acceptance of the value proposition of open government in countries like Timor-Leste, whose transparency portal is an amazing achievement, than in G8 countries.  The commitments for the Open Government Partnership show that these countries are innovating beyond expectations. This could result in a more engaged population with a deeper form of democracy than we enjoy in Canada today.

As I’ve written before, social media will be transformational for Public Financial Management. The key driver in developing countries is the need to sustain reform. This doesn’t mean sustaining the PFM “status quo”. Or, tweaking processes. This means continuous modernization and reform. Catching up to developed countries. Leapfrogging developed countries. This effort requires citizen engagement.

Let’s hope that governments at all levels in Canada do not hold back and get leapfrogged.

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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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