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Government Financial System Underutilized – Root Cause: change, software, leadership or technology?


October 7, 2013

Doug Hadden, VP Products

Many financial management systems remain underutilized in governments. There is significant evidence in developing countries where there can be significant gaps between the "system as designed" and the "system as used." This is manifested across the spectrum of financial management including budget planning, controls, treasury, debt, accounting, revenue, expenditure and payroll systems. In many governments some of the financial sub-systems are well utilized while others are not This includes custom developed software and Commercial Off-the-Shelf (COTS). 

There are many theories for this gap. Studies often point a lack of "political will" by government leadership. Many studies often point to poor project management, particularly in organizational and technical "change management". It's generally accepted that technology is not the problem. My view is that a "root cause" analysis shows that technology: the software solution used and the underlying technology infrastructure adds significant burden to change and leadership. I've gone through a root cause exercise based on issues encountered in the literature and based on feedback at conferences.

1. The Systems is Too Complex to Use

Systems that are too complex can be introduced because of poor change management practices. The "product" chosen can introduce significant problems, particularly if the product is complex in the first place. What if the product is configured to meet the needs of government and has been used effectively in a similar context?

2. Lack of Human Capacity

Solutions that work in governments with similar human capacity and government accounting background (i.e. lower Human Development Index, post-conflict, British Commonwealth) are generally not to "complex to use" unless public servants have not been trained. It's true that capacity building cannot overcome problems using highly complex solutions – but these solutions should not be used. The challenge of using an appropriate financial management solution is change management. The typical problem here is thinking that capacity building is all about training. And, trying to reduce the cost of training. Capacity building also includes mentoring and certification. And, the capacity problems can be different depending on the context – for example, there could be IT capacity or accounting capacity issues. 

Assuming that the systems are appropriate and there has been a good capacity building program, what could explain not using the system properly?

3. Lack of Incentives

There may not be effective incentives to use the system. This is a leadership and a change problem.

Leaders need to "walk the walk" and "talk the talk" about compliance with using the financial systems. There must be an environment of proportional accountability and reward. This is one of the most difficult change challenges: socializing the change on one hand (because many public servants will not understand the benefits of that change) and providing benefits through performance management or certification programs.

Assuming that there are proper incentives, what could explain not using the system properly?

4. Lack of Trust

Public servants can distrust the financial system. This brings in a number of issues. 

  1. Change: suspicion that the system was designed to replace people or implicate people unfairly for corruption. There is often distrust of foreign vendors.
  2. Product: poor quality and high cost makes systems less trustworthy
  3. Leadership: poor governance of the vendor and the running of a project as if it was a generic IT implementation has disastrous consequences
  4. Technology: poor infrastructure or security can lead many public servants to distrust the efficacy of the financial system – many will resort to paper and other workarounds

Assuming that there is an environment of trust, what could explain not using the system properly?

5. No Way to Ensure Compliance

Public servants can resort to old ways if the system is not set up for compliance. This could be a project deficiency by not using functionality within the system properly. Or, it could be product limitations. It should be noted that, in many countries, a significant amount of spending is "off budget", and not part of the financial system at all.

Summary of Root Cause Categories

It's clear that failure to use financial management software effectively in government is not all about change and leadership. Traditional project methodologies can be severely challenged based on product and technology constraints. The notion that Government Resource Planning (GRP) failure is "not about the technology" (i.e. all about people) is a misnomer.

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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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