What Return on Investment Can Be Expected From the Implementation of a Government Resource Planning System?
Our previous blog on making Integrated Financial Management Information Systems (IFMIS) more affordable over the long term generated some interesting ideas of how to leverage the Return on Investment (ROI) concept to make government financial software, what we call Government Resource Planning (GRP), financially sustainable for countries.
ROI Benefits of GRP Systems
The potential financial benefits of the implementation of government financial management software such as the FreeBalance Accountability Suite™ includes:
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 – see (GTM) Government Treasury Management
Arrears: improved controls for government expenditures to reduce or eliminate arrears to reduce debt and reduce government procurement prices through prompt payment – see (PFM) Public Financials Management
Spend: improved procurement management to reduce government costs through increased competition and bulk purchases – see (PEM) Public Expenditure Management
Tax Compliance: improved tax administration systems improve tax compliance while online integration achieves faster tax payments – see (GRM) Government Receipts Management
Government Transparency: budget, procurement and results portals shows citizens, donors and other stakeholders how taxes are spent wisely – see (GPM) Government Performance Management
Budget Credibility: improved financial information can make budgets more credible and predictable to reduce arrears and the need for supplemental budgets
How to Determine the ROI of a GRP
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 – which is also why selecting a system that can be easily sustained by internal resources is important.
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.
The potential ROI for GRP systems such as the FreeBalance Accountability Suite™ includes improved use of cash resources, reduced or eliminated arrears, reduced procurement costs, increased tax compliance, and improved government transparency.