June 28, 2009Doug Hadden
The FreeBalance Accountability Platform architecture was designed to integrate core PFM functions within a pure web-based environment. This analysis enabled FreeBalance to identify functionality that should be re-used among applications. This is important because it makes products easier and less expense for governments to maintain.
Some of the components that were selected for re-use included core entities and standard government processes including:
- Journal and voucher functionality that handles requisitions, purchase orders, revenue, expenses, goods receipt, payroll, budget transfers and other functions.
- Ledger functionality including General Ledger and sub-ledgers, such as Accounts Payable and Payroll.
- Commitment management following standard public financial processes including budgets, appropriations (allotments, virements, warrants), commitments, obligations and transactions.
- Chart of Accounts (COA) hierarchy and controls. The COA represents the “metadata” of PFM including organization structure, responsibility and accountability, accounting classification, performance objectives, programs, projects and activities.
- Cost drivers and output assumptions used for budget preparation, output and outcome reporting.
- Forecasting to enable governments to forecast revenue and expenses based on trends. This also enables scenario planning.
- Human Resources or civil service concepts of position, assignment and salary scales.
- Other reusable accounting entities such as assets, inventory, vendors and customers
The analysis of government functions created “business component maps” that articulate the broad range of PFM requirements. The government entities described in the previous section are leveraged for the development of government applications.
Government Performance Management
Performance Management enables governments to improve results and outcomes. These components cover what is often described as budget preparation and budget execution functions including:
- Public Accounting and Budgetary Classifications: Classify accounting and budget categories to be used for budget analysis, fiscal discipline and reporting. This is also used to support international public sector accounting standards.
- Budget Preparation: Create top-down and bottom-up budgets from central government to department/agency to division to program to specific expenditure. This involves linkages to legislative and organizational constraints such as specific laws, appropriations, and warrants. It includes integrating with budget actuals from previous years.
- Collaborative Planning: Organization plans, approves, and performance analysis.
- Performance Metrics: Develop input, output and outcome performance metrics tied to departmental/agency and government mandates and goals.
- Performance Measurement: Track, aggregate and analyze performance metrics.
- Performance Improvement: Take performance reporting information for continuous improvement including changing priorities, adding or removing performance metrics.
- Performance Linkage: Link budget items from line items to aggregated items to performance objectives and metrics.
- Budget Execution: Manage and control budgets during the fiscal year.
- Budget Forecasting: Forecast budget expenditures based on budget and actual expenditures.
- Aid Management: Link and collaborate with external aid partners and support the integration of “off budget” information.
Commitment Accounting and budget management are unique to the public sector enabling budgetary and commitment controls. Commitment Accounting functions include:
- Public Accounting and Budgetary Classifications: Control based on budget classifications executed via accounting procedures.
- Budget Execution: Control expenditures based on the established legal budget and government procedures.
- Allotment and Appropriation Control: Integrate authority to spend and release funds to enable expenditures and payments.
- Commitment Accounting: Eliminate budget overspending by setting aside funds for in-progress expenditure plans (commitments, soft commitments or pre-encumbrances) and purchase activity (obligations, hard commitments or encumbrances).
- Fund Management: Control expenditure conditions based on source and type of funds to ensure fiscal discipline.
- Budget Transfers: Manage budget transfers, supplemental budgets and virements following government standards.
Government Financial Management
Government Financial Management includes standard accounting functions include:
- Journal, vouchers and Ledgers: Support traditional accounting cycle used in public and private sectors.
- Real-time Ledgers: Balance ledgers in real-time with budgets to ensure that budgets are not overspent.
- Reform and Modernization: Modernize the financial management structure such as migrating to accrual accounting.
- Project Accounting: Improve project and program monitoring.
- Fixed Assets: Manage asset accounting, depreciation and evaluation.
- Inventory: Manage government stores, transfers, inventory counts and consumption.
Treasury Management enables governments to manage debt and investments. Treasury Management functions includes:
- Cash and Liquidity Management: Predicts future cash flow requirements to ensure optimizing cash reserves.
- Treasury Single Account: Migrate many bank accounts to a single virtual account to more effectively manage reserves, investments and debt.
- Bank Reconciliation: Reconcile ledgers with cash receipts and payments at banks.
- Debt Management: Manages government debt commitments.
- Investment Management: Manage government investments in financial instruments.
Public Expenditure Management
Public Expenditure Management reflects all functions related to government spending. This exceeds typical “accounts payable” functionality common with private sector accounting because of the need for budget and commitment controls. Public Expenditure Management functions include:
- Budget and Commitment Controls: Ensure that all expenditures are approved and do not exceed budget or allotments set in the system.
- Purchase Cycle: Manage the general purchase cycle including purchase requisitions, purchase orders, goods receipt, and goods returned.
- Purchasing Methods: Develop a range of purchasing “vehicles” such as local purchase orders, petty cash purchases, open contracts, standing offers and special contracts.
- Procurement: Manage government procurement procedures including competitive tenders, tender evaluation, vendor disputes and contract management.
- Vendor Management: Manages vendors including vendor authorization, certifications, and ratings.
- Grant Management: Support government grant, loan and contributions to individuals, educational institutions, NGOs and businesses.
- Intergovernmental Transfers: Manage transfer payments among governments.
- Social Benefits: Support government pensions, health care, employment insurance and welfare payments.
- Payment Management: Manage payment cycle including approval, electronic funds transfer, cheques and secure cheques.
Government Receipts Management and Revenue Administration
Governments raise revenue and collect receipts through a number of means. Government Receipts Management function include:
- Taxation: Support income, property, custom, excise and sales taxes at national and sub-national levels.
- Government sales: Manage sales of government assets, products and services.
- Permits and licenses: Manage permit, license, certification, user fee, fines and other government processes that collect revenue.
- Collection management: Support front and back office receipts handling, collections, invoicing statements, and dunning letters.
- Customer and taxpayer management: Manage citizen and corporate information and identity across revenue systems.
Civil Service Management
Civil Service Management enables governments to manage the civil service cycle from recruitment through retirement. Civil Service Management software helps improve government capacity and results. Civil Service Management functions include:
- Civil service reform: Reform government personnel policies and reflect these reforms in the system.
- Position and establishment management: Set the establishment for the civil service, pay grades and position scales.
- Payroll and pensions: Manage payments to hourly and salary staff and pensions to former civil servants.
- Salary planning: Forecast salaries based on budget, trends, and pay to date. Ability to model changes to pay grades, vacancies and union agreements.
- Civil service workforce management: Manages recruitment, performance appraisal, dispute management and retention processes.
- Movement: Support approvals, transfers, secondments and promotions.
- Capacity management: Increase government capacity through training, capacity building programs, succession planning and pay for performance.
- Benefits management: Support insurance, bonuses, training payments and loans for civil servants.
- Payment Management: Manage payment cycle including approval, electronic funds transfer, cheques, secure cheques, pay vouchers and pay agents.
Transparency and Accountability
Transparency and accountability enables government to prove progress on goals, engage citizens and businesses and improve confidence in the government. Transparency functions include:
- Government audit: Support internal and external financial and system audits.
- Disclosure: Report on budget plans, government policies, budget actuals, program evaluations, performance dashboards and statutory requirements such as senior civil servants
- Transaction and records management: Save and retrieve information on financial transactions and supporting documentation.
- International standards: Support international public sector accounting standards for reporting including IPSAS and IMF GFS.