Sustainable Development Goals and Public Financial Management class=

Sustainable Development Goals and Public Financial Management

The International Budget Partnership has published new paper, Tracking Spending on the Sustainable Development Goals: What have we learned from the Millennium Development Goals? The paper describes the need to track SDG spending by governments for transparency and accountability.
Budget classifications within Government Resource Planning (GRP) systems adapted for SDGs are required to track spending and providing accountability. The paper describes the good practice of using program classifications to track goals across the government organizational structure.
There are some case studies from countries to show whether the MDGs were effectively tracked. The International Budget Partnership suggests that publishing budgets is the first step to SDG transparency and accountability. Citizen budgets provide, at the very least, some narrative on government goals and spending relative to those goals.
The white paper also identifies the difficulties related to embedding SDGs in budget classifications.

How can budget classification effectively track SDGs?

FreeBalance has experience integrating performance criteria, including MDGs within budget classifications. There are ways to reduce some of the difficulties associated with tracking complex spending against objectives:

  • Program segment: as identified in the white paper, the use of a program segment enables tracking programs, subprograms and activities across multiple government entities
  • Performance reporting tables: the linkage from program to any performance criteria, such as SDGs, can be inferred through side reporting tables that identify ranges of budget classifications that relate to a performance concept to simplify data entry
  • Valid code combinations: errors can be reduced by identifying valid budget classification combinations such as defining which government organizations can spend against a program and limiting the type of spending using budget classification ranges
  • Multiple year budget classification: financial systems in government should enable changing budget classification easily, such as adding a new program segment or creating new performance structures to support the SDGs – this is often called a “multi-year chart of accounts” facility
  • Public investment narrative: the budget preparation functionality of any government financial system should support the addition of narrative to explain the relationship between important spending and government goals to enable the preparation of budget documents
  • Outputs and outcomes: the expected results for government programs should be identified, including non-financial, in a structured manner and then compared with actual results
  • Off budget: off-budget activities such as public-private partnerships and donor funding should be assigned the same budget classifications to create more comprehensive plans, ideally presented as consolidated budget plans and execution
  • Integrated budgeting: the use of SDGs within budget classifications should not be limited to capital budgets because much of government spending in pursuit of goals are operational in nature including infrastructure maintenance, school and hospital staffing, and rental costs

What is the value of Government Resource Planning (GRP) systems to support SDGs in budget classifications?

Governments use GRP, custom-developed and ERP systems to manage public finances. It is typical for governments to modify budget classifications, or the “chart of accounts”, prior to the implementation of any new financial system. Part of the reason behind this approach is to reform financial practices and provide decision-makers with more effective fiscal information. It is also true that many custom software systems have hard-coded budget classifications. Many enterprise systems originally designed for the private sector like ERP, do not easily support budget classification changes.
Many governments who wish to embed SDGs within financial systems are encountering the technical debt that makes changes difficult. GRP systems, on the other hand, have been developed with government needs in mind. These systems enable more complex chart of accounts designs with support for multiple year changes to reflect reform and modernization.