Affordable Financial Management Software for Latin American and Caribbean Governments, Part 2 class=

Affordable Financial Management Software for Latin American and Caribbean Governments, Part 2

My entry last week on making Integrated Financial Management Information Systems (IFMIS) affordable over the long term generated some discussion. My colleagues from the region had some interesting ideas of how to leverage the Return on Investment (ROI) to make what we call Government Resource Planning (GRP) software for financially sustainable for countries.

The potential returns for GRP software in Latin America and the Caribbean include:

  • Cash Management: improved use of cash resources through the Treasury Single Account (TSA) to reduce the need for short-term debt and to better predict the need long-term debt instruments

  • Arrears: improved controls for government expenditures to reduce or eliminate arrears to reduce debt and reduce government procurement prices through prompt payment

  • Spend: improved procurement management to reduce government costs through increased competition and bulk purchases

  • Tax Compliance: improved tax administration systems improve tax compliance while on-line integration achieves faster tax payments and government transparency through budget, procurement and results portals shows citizens how taxes are spent wisely

  • Budget Credibility: improved financial information can make budgets more credible and predictable to reduce arrears and the need for supplemental budgets

Harvest GRP Returns

Governments who implement full GRP systems or subsystems, like tax administration, can calculate ROI. The necessary information may be in legacy systems or can be inferred. For example, surveys can determine tax compliance while increases in revenue can be tracked. Variances from budget to actual can usually be calculated in legacy systems. The average number of bidders for procurement could be sampled. Debt information is usually available and credit ratings are known.

Governments can baseline critical return factors with the expectation that a part of the return is set aside for managing the software and improving government capacity. Improvements can be tracked. For example, governments tend to implement the TSA over time so that the returns of bank account consolidation can be tracked. Costs for categories of goods and services can be compared over time and rationalized with inflation. Debt reduction and the improvement of credit ratings can also be tracked.