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GRP and Public Investment Management

Why Is Public Investment Management Important?

There is rising interest in improving public investment planning and public investment management. The management of long-term capital public expenditures is seen as a critical contribution to sustainable growth. Public investments are highlighted in the United Nations Sustainable Development Goal 9, Industries, Innovation, and Infrastructure. An example of how public investments are integral to sustainable development is highlighted by the World Green Building Council.

World Green Building Council: Sustainable Development Goals

Numerous studies have shown the positive correlation between high quality public infrastructure and economic growth. Indeed, the International Monetary Fund (IMF) found that a 1% increase in infrastructure investment leads to a 1.2% increase in GDP growth within four years. There is no doubt that government infrastructure spending has one of the highest fiscal multipliers among all types of fiscal stimulus measures. 

However, there is a significant infrastructure gap. An estimated $57 trillion in infrastructure investment would be required between now and 2030 just to keep up with projected global GDP growth. And that does not factor in the investment requirements needed to meet the Sustainable Development Goals. 

What is the Public Investment Solution?

The solution to the gap lies, at least partly, in improving the quality of infrastructure investments – particularly around governance. The IMF estimates that countries lose over one-third of potential benefits from infrastructure investment due to inefficiencies and corruption. Strong infrastructure governance can reduce more than half of these inefficiencies. 

Quality Over Quantity

There is increasing focus on public investment quality with initiatives such as the Quality Infrastructure Investment (QII) Partnership led by the World Bank and the Government of Japan, and the IMF’s Public Investment Management Assessment (PIMA) Framework.

Public Investment Management Framework
Public Investment Management Framework

How to Improve Public Investment Management?

This rising interest in public investment management includes finding better automation and management solutions through the use of government budgeting software such as (GTM) Government Treasury Management software from the FreeBalance Accountability Suite™

Government Treasury Management

What is the Role of Software in Quality Public Investment Management?

Effective software supports scenario planning, investment prioritization, project management, and results management. FreeBalance’s Government Resource Planning (GRP) software automates public investment planning, allocation, and implementation elements.

Why is Unified Software Needed for Quality Infrastructure Investments?

Many governments leverage enterprise software in a piecemeal fashion with bespoke software designed for the ministry or agency managing public investments. Manual information from budget preparation, financial management, procurement and asset management systems are entered into these systems. This is a recipe for disaster rather than quality public investment management.

FreeBalance believes that a unified software solution such as the FreeBalance Accountability Suite™  is required for quality infrastructure investment. No public investment management system can be effective unless it provides a fully integrated, whole-of-government, governance and management solution.

FreeBalance Public Investment Management

Fiscal Metadata Integration ensures common budget classifications, performance and value-for-money structures, fiscal rules, controls and process compliance throughout the entire budget cycle.

Budget Cycle Integration with common fiscal metadata aligns budget preparation with execution with a multiple year view, while automating many stages.

Performance Management Integration with national development strategies across the budget cycle provides monitoring and evaluation and enables audit.

Government Transparency Integration across the budget cycle support budget and public investment results transparency including procurement.

FreeBalance Accountability Suite

How Does the FreeBalance Accountability Suite™ support Quality Public Investment Management?

PIMA Framework

FreeBalance’s GRP solution contributes to all 15 elements of the PIMA Framework as follows:

1. Fiscal Targets and Rules

Budget Preparation Software

Budget Preparation Software such as (GPM) Government Performance Management:

  • Enforces capital budget planning rules through workflow tied to budget circulars and budget calendars
  • Enforces fiscal rules in budget preparation
  • Supports for medium-term frameworks to align with policy
  • Supports public investment predictability through the use of cost drivers tied to established pricing
  • Leverages scenario planning to identify effects of variables such as exchange rates or fuel prices on public investments

Budget Execution Software

Budget Execution Software such as (PFM) Public Financials Management and (PEM) Public Expenditure Management:

  • Enforces budget transfer rules to ensure adequate funds available for public investments
  • Adjusts spending based on trends for re-forecasting
  • Provides contract management solutions
  • Tracks spending and physical execution for decision-makers

2. National and Sectoral Plans

Core Software Metadata

Core Software Metadata such as the FreeBalance Accountability Suite™:

  • Supports cross Ministerial planning in support of government and sectoral goals through program classifications
  • Embeds government and sector classifications in program structures in Charts of Accounts
  • Embeds performance management structures and desired outputs and outcomes in a Chart of Goals integrated with the Chart of Accounts

Budget Preparation Software

Budget Preparation Software such as (GPM) Government Performance Management:

  • Ties performance and program structures to capital planning
  • Adds narrative, documents, comments and approval mechanism to document how investment proposals meet government and sectoral goals

Contract Management Software

Contract Management Software such as (PEM) Public Expenditure Management:

  • Tracks actual physical execution to track public investment outputs that update forecasts and cost drivers

Performance Management Software

Performance Management Software such as (GPM) Government Performance Management :

  • Provides public investment monitoring scorecards and evaluate outputs and outcomes to improve public investment outcomes

Results Transparency Software

Results Transparency Software such as (GPM) Government Performance Management:

  • Publishes national development and sectoral strategies
  • Enables searching through public investment projects based on the Chart of Accounts structure

3. Coordination Between Entities

Core Software Metadata

Core Software Metadata such as the FreeBalance Accountability Suite™:

  • Enables coordination among government entities through program management structures in the Charts of Accounts
  • Supports financial consolidation through consolidated Chart of Accounts structures
  • Supports planning and execution coordination with local government

Budget Preparation Software

Budget Preparation Software such as (GPM) Government Performance Management:

  • Provides certainty of budget support to line ministries and local governments through scenario planning and cost drivers
  • Embeds rules for capital budget funding for subnational governments

Treasury Management Software

Treasury Management Software such as (GTM) Government Treasury Management:

  • Manages cash, debt, revenue and expenditure forecasting to improve funding certainty
  • Treasury software at local and regional governments can impose fiscal rules to ensure sustainable levels of subnational borrowing

4. Project Appraisal

Budget Preparation Software

Budget Preparation Software such as (GPM) Government Performance Management

  • Multiple versions of capital budget submissions following the budget circular aligned with program structures integrate project documentation, comments, ratings, and decisions
  • Embedded rules for public investment methodologies such as project analytical classifications, risk factors, and outcome expectations

Performance Management Software

Performance Management Software such as (GPM) Government Performance Management:

  • Monitors public investment results to better inform future project selection

Budget Execution Software

Budget Execution Software such as (PFM) Public Financials Management:

  • Supports entering subnational government contingent liabilities in financial statements

5. Alternative Infrastructure Financing

Budget Preparation Software

Budget Preparation Software such as (GPM) Government Performance Management:

  • Supports scenario planning for infrastructure investments that can include different financing schemes including classic and alternative financing such as PPPs, user fees, green and blue bonds
  • Identifies multiple year implications on revenue and expenditures for alternative financing to better manage long-term liabilities
  • Provides the ability to support oversight of public corporation public investments

Debt Management Software

Debt Management Software such as (GTM) Government Treasury Management:

  • Models alternative debt instruments

Procurement Software

Procurement Software such as (PEM) Public Expenditure Management:

  • Embeds PPPs in front and back office systems to improve budget and liability visibility

Contract Management Software

Contract Management Software such as (PEM) Public Expenditure Management :

  • Ensures that revenue and expenditure flows for alternative financing adhere to contract rules

Results Transparency Software

Results Transparency Software such as (GPM) Government Performance Management:

  • Publishes project plans and actual physical execution including output and outcome information
  • Supports public corporation output and outcome information

6. Multi-Year Budgeting

Core Software Metadata

Core Software Metadata such as the FreeBalance Accountability Suite™:

  • Supports for program management structures with programs, projects and activities in Charts of Accounts supports detailed public investment fiscal management

Budget Preparation Software

Budget Preparation Software such as (GPM) Government Performance Management:

  • Supports for multiple year planning workflow including modelling infrastructure projects
  • Provides project transparency within governments for investments by ministries, programs and projects
  • Sets multi-year capital expenditure ceilings by ministry, sector, and program

Budget Transparency Software

Budget Transparency Software such as (GPM) Government Performance Management:

  • Publishes budget plans, estimates and actual budget execution

7. Budget Comprehensiveness and Unity

Core Software Metadata

Core Software Metadata such as the FreeBalance Accountability Suite™:

  • Uses the fund source in the Chart of Accounts to track public investments financing

Budget Planning Software

Budget Planning Software such as (GPM) Government Performance Management:

  • Integrates development, capital, public investment, operating and salary budgets that are often different in many countries to provide decision-makers with the full budget picture
  • Provides visibility for all sources of funding
  • Supports reports, analysis, checklists, comments and other forms of documentation for project justification to support effective decision-making

Budget Transparency Software

Budget Transparency Software such as (GPM) Government Performance Management:

  • Publishes budget plans

8. Budgeting for Investment

Budget Planning Software

Budget Planning Software such as (GPM) Government Performance Management:

  • Ensures that all costs presented to legislature for approval through comprehensive infrastructure project planning
  • Provides visibility for ongoing projects and forecasted completions to help prioritize project completion over new projects

Budget Execution Software

Budget Execution Software such as (PFM) Public Financials Management:

  • Supports multiple year commitments for infrastructure projects
  • Prevents in-year transfers from capital to operating budgets

9. Maintenance Funding

Core Software Metadata

Core Software Metadata such as the FreeBalance Accountability Suite™:

  • Uses budget and accounting classifications within the Chart of Accounts to categorize maintenance funding linked to completed project classifications

Budget Planning Software

Budget Planning Software such as (GPM) Government Performance Management:

  • Uses maintenance cost drivers in budget planning based on established costs
  • Categorizes major improvement on existing assets

Budget Execution Software

Budget Execution Software such as (PFM) Public Financials Management:

  • Tracks maintenance costs and inform changes to cost drivers

Asset Management Software

Asset Management Software such as (PFM) Public Financials Management:

  • Embeds maintenance contracts associated with infrastructure assets
  • Leverages lifespan rules to forecast needed maintenance based on type of infrastructure asset

10. Project Selection

Budget Preparation Software such as (GPM) Government Performance Management:

  • Embeds standard criteria into public investment budget approvals
  • Stores the pipeline of public investment proposals that have not yet been completed or been approved

Performance Management Software

Performance Management Software such as (GPM) Government Performance Management:

  • Provides monitoring and evaluation material enabling project review to support infrastructure budget decisions

11. Procurement

Core Software Metadata

Core Software Metadata such as the FreeBalance Accountability Suite™:

  • Uses budget and accounting classifications linked to national development goals to inform criteria for value-for-money procurement

Procurement Software

Procurement Software such as (PEM) Public Expenditure Management:

  • Support posting of tenders to e-procurement sites which increases competition, improves value-for-money, and reduces costs
  • Automatically links back-office commitments to e-procurement including embedding contract provisions based on public investment rules
  • Automates procurement processes for compliance, ensuring that tenders are available for particular periods of time, and factors for encouraging local or small businesses are built in
  • Automates procurement workflows including multiple stage procurement, clarifications, tender extensions, and disputes

12. Availability of Funding

Treasury Management Software

Treasury Management Software such as (GTM) Government Treasury Management:

  • Supports effective cash planning to plan and commit for capital projects and enable borrowing decisions
  • Supports Treasury Single Accounts to maximize use of available cash and reduce borrowing
  • Integrates donor funding in cash forecasting

Budget Execution Software

Budget Execution Software such as (PFM) Public Financials Management:

  • Supports warrants for monthly allocations based on cash availability to reduce need for cash rationing
  • Integrates donor funded projects and donor conditionality into financial management

13. Portfolio Management and Oversight

Contract Management Software

Contract Management Software such as (PEM) Public Expenditure Management:

  • Enables monitoring of capital project outlays based on contract milestones and payments

Performance Management Software

Performance Management Software such as (GPM) Government Performance Management:

  • Integrates contract information with outputs and outcomes for monitoring and evaluation

Budget Execution Software

Budget Execution Software such as (PFM) Public Financials Management:

  • Enables budget re-allocations among investment projects based on results that are compliant to budget transfer rules

14. Management Project Implementation

Budget Execution Software

Budget Execution Software such as (PFM) Public Financials Management:

  • Supports project accounting to support project management procedures

Procurement Software

Procurement Software such as (PEM) Public Expenditure Management:

  • Automatically embeds rules, procedures, and guidelines to tenders based on public investment categories

Contract Management Software

Contract Management Software such as (PEM) Public Expenditure Management:

  • Applies project guidelines automatically based on contract types

Audit Management Software

Audit Management Software such as (GPM) Government Performance Management:

  • Automates audit workflows
  • Identifies audit candidates automatically
  • Supports computer-aided audit mechanisms to full projects that used many vendors, across many years

15. Monitoring of Public Assets

Asset Management Software

Asset Management Software such as (PFM) Public Financials Management:

  • Manages non-financial asset registries including capital assets and fixed assets
  • Enables asset depreciation based on asset types
  • Supports accrual accounting for assets in financial statements
FreeBalance Accountability Suite

For more information on how FreeBalance could help public investment management in your country, please get in touch.

 

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