October 7, 2009Doug Hadden
We’ve started to distinguish FreeBalance software as Government Resource Planning. GRP is much more than a variation of generic software: it’s a unique tool for financial and information management.
We’ve talked about some of these unique characteristics in the past. It’s now time to provide a comprehensive definition of GRP.
GRP is software designed for the unique requirements of public financial management. GRP software is budget-driven through the use of Commitment Accounting, where the budget is the legal embodiment of government objectives. Commitment Accounting is used only in government and other forms of public financial management.
GRP is designed to cover the entire government budget cycle, including Budget Preparation and Budget Execution. Budget Preparation is the key mechanism for governments to determine how objectives will be met and how to improve government performance. Government revenue and expenditures are managed during Budget Execution using Commitment Accounting. Funds are set aside during procurement and hiring cycles to ensure that the budget is not exceeded. Changes in the government financial situation result in budget transfers to ensure fiscal discipline.
Government Performance Management, Government Services and Accountability
Governments carry complex mandates. Improving results requires mechanisms in GRP software for planning and analysis throughout the Budget Cycle with an emphasis on improving government services.
Governments don’t have shareholders. They report to citizens, and citizens demand transparent and open government. Citizen reports focus on planned budgets versus actual expenditures. Governments use governance mechanisms to describe how objectives will be met, and then assess whether objectives were or were not met. Many governments follow international public sector accounting standards for these reports. Releasing this information to citizens makes governments more accountable.
Reform and Modernization
Managing and reporting on government performance requires a complex Chart of Accounts (COA) design. COAs change as governments find new ways to improve services and performance. These changes need to be integrated into the fundamental building blocks of Commitment Accounting to ensure that budgets are executed properly.
There’s more to on-going government reform. The state-of-the-art in Enterprise Resource Planning (ERP) for the private sector focuses on Business Process Re-engineering (BPR). Businesses develop the most efficient processes and leverage best practices. Software is customized to achieve industry best practices, improved efficiency and unique business models. Once implemented, the software undergoes minor modifications.
There’s really no such thing as industry “best practices” in government, although there are numerous good practices. (Practices must be related to the government context – what is important to the government and the human capacity of the government.) And, governments cannot adopt better practices without legal changes. Digital signatures on cheques, for example, or accrual accounting procedures and de-centralized decision making, are all considered good practices. But these practices require legal reform and are adopted over time.
Government Resource Planning software must adapt to government reform and change. Unlike enterprise software, GRP is not predicated on the notion that the implementation requires business re-engineering in order to achieve a pre-determined “end-state”. Nor is the quest for reform confined to emerging government – G8 governments constantly look for ways to modernize their processes. Since there’s no such thing as an “end state” in government, there is never an “end state” in GRP.