How can, and how should, governments leverage AI for PFM?
That’s the question we asked to government attendees at the Internationale stuurgroep FreeBalance (FISC), hosted by the government of Timor-Leste in Dili. We learned that public finance professionals using the FreeBalance Accountability SuiteTM are at different stages of Artificial Intelligence adoption.
We delved into opportunities and challenges. FISC attendees discussed a path forward for effective and ethical adoption. This discussion built on the broader evolution of PFM previously discussed at FISC sessions: moving beyond basic public finance accounting to greater accountability and strategic impact.
What are the AI opportunities and threats in public finance?
We began by considering the fundamental question of the AI role in government – specifically in public finances. PFM AI opportunities include:
- Improved compliance
- Efficiency gains and enhanced service delivery
- Enhanced decision support
- More accurate forecasting
- Detection of fraud and waste
On the other hand, threats include:
- Loss of human oversight and accountability: This emphasizes the risk of relying too heavily on AI without proper human involvement.
- Data quality and bias: The effectiveness and fairness of AI depend on the quality and impartiality of the data it is trained on.
- Job displacement and capacity gaps: Integrating AI may require addressing potential workforce changes and ensuring governments have the necessary skills.
We strongly advocated for a “human augmentation” approach. This concept underscores the importance of keeping humans in the loop to leverage the strengths of both AI and human expertise. This approach aims to:
- Capitalize on what humans do better than AI.
- Increase the value of public services.
- Ensure ethical AI implementation for the public good.
- Focus on automating routine, low-value tasks, thereby elevating the role of humans.
What is the AI state-of-the-art in public finances?
We provided context on the current state of automation in public finance, noting that systems like the FreeBalance Accountability SuiteTM already incorporate automated elements like controls, compliance features, and validation rules. Rather than seeing AI as a separate and disruptive technology, we see AI as enhancing automation capabilities within public finance workflows. We provided examples of how additional analysis, forecasting, and alert functions can tie to public finance processes.
We introduced an AI roadmap focused on “public finance for good”. Key aspects of this roadmap include:
- Een open system approach, recognizing the dynamic nature of AI innovation. This includes open integration with various AI engines, supporting country-specific deployments and public cloud availability, and reducing vendor lock-in. This aligns with the idea that “there is no way to know who the winners will be” in the AI landscape and that open source innovation is a significant driver.
- The development of PFM-specific models, including small language models and tuned machine learning languages embedded within existing workflows.
- A klantgerichte innovatie process, emphasizing collaboration and the sharing of lessons learned among governments.
- Integratie met digital transformation initiatives,
What is the AI in public finance road ahead for governments?
We stressed that successful AI implementation in PFM requires readiness in several key areas:
- Integration and interoperability: Ensuring different systems can work together and maintain a “single version of the truth”.
- Reform and modernization: Aligning AI initiatives with broader government objectives and existing modernization efforts, starting with government needs rather than seeking problems for AI solutions.
- Digitale transformatie: Recognizing that AI builds upon previous digital advancements, such as the implementation of Financial Management Information Systems (FMIS), and supports the rethinking of public finance processes.
Conclusies
Our core message is that AI should be viewed as a set of building blocks to enhance public finances. By focusing on human augmentation, adopting an open platform approach, and ensuring readiness, governments can leverage AI to improve and automate public finance governance and fiscal stewardship, empower digital transformation and improve service delivery, and ultimately achieve smart and balanced prosperity through improved decision-making.Just as a previous FISC session highlighted the journey “from accounting to accountability,” this discussion suggests that AI can be a powerful tool in further advancing this journey, enabling governments to move towards even more informed, efficient, and impactful management of public resources. The emphasis remains on automating the routine and elevating the human to achieve better outcomes for citizens.