2010 Grant Thornton ICGFM Progress in Public Financial Management Reform

8/14/2019 2010 Grant Thornton ICGFM Progress in Public Financial Management Reform

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Results of a Worldwide Survey January 2010

Progress in Public FinancialManagement Reform

ICGFMThe International Consortium on Governmental Financial Management


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Contents

1 Executive summary

3 Progress in public financialmanagement reform

9 The many roles of thegovernment financial leader

11 Transparency

13 Dealing with global economicuncertainty

16 Conclusions

About the survey

In 2004, the International Consortium on Governmental Financial Management(ICGFM) asked Grant Thornton LLP (Grant Thornton) to conduct its first international

survey of government financial executives, titled Resisting Corruption in the Public

Sector. In 2009, Grant Thornton conducted a second survey on behalf of ICGFM,

focused on public financial management reform. The purpose of this second

survey is to provide insight into the experience of national governments engaged

in improving the management of public resources, making their finances more

transparent and their financial information more useful for managing public sector

operations.

Survey methodology

Grant Thornton partners and staff conducted in-person interviews of national

financial executives and donor organizations, using an open- and closed-ended

survey instrument. We also designed and carried out a multilingual online survey

of the same target audience. Member firms of Grant Thornton International Ltd

promoted this survey in their respective countries, resulting in 65 completedsurveys. Copies of the survey instruments may be viewed at www.GrantThornton.

com/publicsector under Publications.

Of the in-person and online survey respondents, approximately 74 percent

were employed by a government, 9 percent by donor organizations and other

nongovernmental organizations, 2 percent by academia and the rest by private

companies engaged in government service work. Participants represented 35

countries across Africa, East Asia and Pacific, Europe and Central Asia, Latin

America and the Caribbean, the Middle East, South Asia, and North America.

Anonymity

Our survey does not attribute thoughts and quotations to any of the respondents,

nor do we name them, their institutions or their specific countries. These measures

were essential to gain the confidence and full cooperation of the government

officials who participated in the survey.


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Progress in Public Financial Management Reform 1

Executive summary

During summer 2009, 65 public sector officials from 35

countries representing Africa, East Asia and Pacific, Europeand Central Asia, Latin America and the Caribbean, the

Middle East, South Asia, and North America participated in

the 2009 Survey on Global Financial Management Leaders

sponsored by the International Consortium of Governmental

Financial Management (ICGFM). The survey explored the

reasons why countries engage in public financial management

reform initiatives, the obstacles they face, the support

required for successful implementation, the role of financial

management leaders, the costs and benefits of transparency,

dealing with global economic uncertainty and preventing

future economic crises.

Recent economic downturns have affected developed anddeveloping countries across the globe, causing a decrease in

exports, taxes and general revenues, which has led to budget

shortfalls and growing demands for public services. These

problems have stimulated increased interest in public financial

management reform and demands for more accountability for

government officials.

Public financial management reforms now under way in the

countries surveyed include adopting international accountingstandards, standardizing information systems, and improving

debt and deficit management. The most commonly cited reasons

for reform initiatives are increasing transparency of government

and involving citizens in public financial management. As citizen

confidence in government increases, say survey participants, the

public will give more social and fiscal support to government.

Unmet human capital needs appear to be the greatest

obstacle to public financial management reforms. These

needs include a lack of qualified financial management and

accounting professionals, inadequate education and training

programs and resources for hiring new personnel. External

support, especially technical assistance and training, is criticalto overcoming the human capital barrier and ensuring the

successful implementation of reforms. Development partners

play an important role in supporting governments to conduct

self-assessments, modernize and strengthen operations, and

implement performance evaluations.


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2 Progress in Public Financial Management Reform

Top government officials must lead and own reform

initiatives to overcome an entrenched bureaucracy that resistschange. Having a highly visible champion of reform efforts is

necessary to manage the change initiative and create a holistic

view of reform. A champion can also keep the reform agenda

as a top priority despite competing demands, especially during

an economic recession. Leaders, regardless of their level within

government, must have vision, goals and objectives for both

their organization and their own positions. They must be able to

create a road map to reform that others can follow.

Almost all respondents agreed that increased transparency

is worth the extra costs associated with it to maintain openness

with the public and encourage involvement of citizens. Ethics

and governance in financial management are also very important.Financial leaders must always remember that they are employed

by the people to serve the people.

In mitigating the revenue shortfall problems exposed by

the current global financial crisis, governments must avoidthe automatic response of across-the-board budget cuts. They

should not use an ax when they need a scalpel. To prevent future

economic crises, governments will need to apply proactive

management and improved monitoring, forecasting and risk

management. Financial management leaders should also

increase their involvement in planning, budgeting and program

management, lending their special skills and expertise to their

nonfinancial colleagues.

Developing strong partnerships among financial

management leaders across government entities is a must to

promote public financial management reform with respect to

credible budget preparation, execution, implementation andreporting. International forums such as ICGFMs also enable

financial management leaders from across the globe to connect,

collaborate, share best practices and learn.


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Progress in public financialmanagement reform

At the start of the survey, we asked participants who were

employed by governments around the world whether theircountries were engaged in public financial management reform

activities, and nearly all said they were. The reform activities they

described included the following:

Accounting. Adopting international accounting standards

and accrual accounting

Information technology. Standardizing information

systems, implementing integrated financial management

systems or enterprise resource planning (ERP) systems and

upgrading systems

Law and policy. Establishing legal frameworks for public

sector finance (examples: laws for government finance,treasury and supreme audit institutions)

Process improvement. Eliminating redundancies and

inefficiencies in the variety of processes that underlie public

financial management (examples: improved accounting

and developing procedures manuals, such as a comptroller

manual)

Audits. Improving the public audit function

Budget management. Introducing outcome-based

budgeting, improved debt and deficit management, laws

promoting fiscal responsibility in government, forward

planning for investment, increased participation by legislators

(for example, Members of Parliament) in budget preparationand performance reviews

Procurement. Procurement policy reform, Web-based

information systems for procurement

Several respondents said that at least part of their public

financial management reform initiative receives funding from

multilateral and bilateral donors.

Behind the push for reform

Why are national governments engaged in financial managementreform? Chart 1 shows that there are four main reasons, which

are related to accountability and effectiveness.

Accountability and transparency tend to reinforce each

other, according to the majority of survey participants.

Concerning accountability, one respondent says, There is a

major interest in government to demonstrate to citizens that

public spending is being done efficiently. One reason for the

interest is a need to increase confidence in government and

to show citizens the results generated by the taxes they pay.

This openness makes citizens more willing to give social and

fiscal support to their governments. Increased openness also

encourages citizen awareness of government performance; saysa survey respondent, Awareness has triggered citizen demand

for establishing a more transparent and more accountable

government. One could easily go the other way around,

with citizen awareness pushing government to become more

accountable. Either way, this is a righteous cycle in which

accountability promotes more transparency that demands more

accountability and so on. Survey respondents are quite aware of

this cycle and want to promote it.

Chart 1: Reasons for initiating public financial management reform

N = 119 mentions

Increase transparency ofgovernment and involvement/

participation of citizens 41%

Improve effectiveness of

budget expenditure 29%

Improve accountability to

government and business

stakeholders 20%

Meet requirements of

the donor community 10%


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Nature of financial management positions. Some

respondents say that in their governments, the job descriptionof financial managers and staff must be more clear and precise,

to promote professionalism and accountability. In addition,

their role in the public service needs to be better understood by

nonfinancial personnel and by financial professionals themselves.

Availability of training and professional development.

Some respondents indicated a lack of universities in their

countries that offered courses in public finance. Several say

that they require the resources to train their professionals

in new skills such as accrual accounting and management

information systems. In addition, there may not be a clear career

path for public sector financial management professionals,

making it more difficult to determine training and professionaldevelopment needs.

Barriers to reform

We asked participants to tell us the greatest obstacles toimplementing financial management reform in their governments

as a whole and in the specific organization (ministry or agency)

in which they worked. The responses fell into four broad

categories: people, legal framework and policy, external support,

and leadership and change management.

People

Human capital challenges were the most-often-mentioned

barriers to public financial management reform. This result

comes as no surprise and may indicate that the challenges are

universal to public service around the globe. Grant Thornton

has carried out dozens of surveys of U.S. financial managementleaders with the same result: human capital is their number one

concern.1 The nature of the problem faced by U.S. financial

leaders is much the same as that faced by their colleagues in other

nations. The paragraphs that follow discuss some of the elements

of the problem.

A lack of qualified financial and accounting professionals

trained and experienced in public sector financial

management. Respondents pointed out this problem at

every level of employment, from elected officials and financial

executives to managers to staff. Some respondents in developing

countries said that the lack of skilled accountants also affects

companies and nonprofit organizations. When competingfor a limited pool of skilled professionals, government is at a

disadvantage because of lower salaries, say several respondents.

1 See the annual surveys of government chief financial officers and military financial executives

sponsored by the Association of Government Executives and the American Society of Military

Comptrollers, available at www.GrantThornton.com/publicsector.


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Technical assistance: training,

exchange, knowledge and

skills development 70%

Legal frameworks 17%

Automated financial

management systems 9%

Funding: grants, loans

and other funds 4%


External support

We asked respondents what are the most important resourcesneeded by their governments for financial management reform.

Chart 2 summarizes their responses into four categories:

technical assistance, legal frameworks, automated financial

management systems and funding in general.

Legal framework and policy

Many respondents said that their countries must do more toenhance the legal framework of public sector finance and related

functions such as procurement. The framework includes both

laws established by elected officials and policies that interpret

those laws, along with national standards for public sector

accounting. Several respondents agree with one who says,

There are inherent conflicts in our financial system that need to

be overcome by separating the accounting and audit functions,

and go on to mention the separation of budgeting, financial

management, treasury and other functions. Requirements by

donor organizations for countries to implement legal reform are

good, but in some cases, countries lack the resources to do this

quickly or to actually follow the requirements of new laws.A country need not wait until a full framework of law is

established for financial management reform. At both the entity

and individual levels, a financial organization can introduce

performance evaluation, accountability, managing for results,

and other policies and procedures during a period of transition

to new legislation.

A country need not wait until a fullframework of law is established for financialmanagement reform.

Chart 2: Types of support needed for public financial management reform

N = 72 mentions


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General training technical assistance include the areas listed

earlier as training topics, plus obtaining access to information on

financial management reform, best practices, benchmarks, tools

and procedures for improvement, and other related items.

Technical and policy advice focused on developing plans

and procedures for implementing a program of public sector

financial management reform at various levels of government.Some respondents considered external oversight by donor

organizations of such programs to be a form of technical

assistance.


Technical assistance was the most-often-mentioned form of

support required to implement financial management reforms.Respondents mentioned specific training topics for financial

management professionals, such as:

Training topics

Accounting

Auditing

Financial reporting

Internal controls

Information systems management

Procurement

Treasury procedures

Exchange programs with other countries and among levels

of government, which were mentioned by about 7 percent

of respondents, are seen as a way to enhance skills, transfer

knowledge and establish communication among professional

colleagues.

We divided the types of technical assistance that respondents

say they need into three categories: process, general training, and

technical and policy advice. The results are shown in Chart 3.

Topics for process technical assistance include all those listed

above for training, along with the following:

Country diagnostics and self-assessments Generating resources

Implementing financial management information

systems and applications software

Modernizing and strengthening external and

internal audit functions

Modernizing charts of accounts

Performance evaluation (entity and individual)

Planning

Public-private partnerships

Chart 3: Technical assistance needs of survey respondents

N = 132 mentions

* Total is less than 100 percent because of rounding.

Process: country diagnostics, budgets,

accounting, financial reporting and

financial management systems 58%

General training: subject training

and information access 21%

Technical and policy advice: external

oversight and reforms at the national

and subnational levels 20%


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Change management. Several respondents say that an

entrenched bureaucracy will resist technical financial reformssuch as accrual accounting and the use of automated versus

manual information processes. Having a visible, central

focal point for change management is important, such as the

champion discussed below in the section on the roles of the

government financial leader. Another important component

of change is, according to one respondent, good knowledge

sharing and coordination among government entities, especially

in disseminating public accounting standards to all entities at all

levels. One vehicle for knowledge sharing is a new automated

accounting system used by all entities to help them with the

ever-growing number of financial transactions, says the same

respondent.Sustaining the changes once they are made is also important,

say many respondents, and now is the time to work on that

challenge. Public education on the value of financial management

reforms will help create and sustain momentum, according to

many respondents; this is discussed in the box below.

Leadership and change management

According to survey respondents, leadership and changemanagement go together because without leadership, there can

be no planned change.

Leadership. Getting and maintaining top-leader support

for legal changes and reform are sometimes difficult, according

to several respondents. Sometimes, the need for reform simply

gets lost among other pressing issues. How to bring financial

reform to the forefront?

Some respondents call on top leaders to hold government

organizations more accountable for progress in financial

reform, because without attention at the top, the status quo

will be slow in changing. Others say that donor organizations

must try harder to sell top leaders on financial managementreform, because these leaders do not understand its importance.

Top-leader acceptance will be critical for the successful

implementation of financial management reforms once donor

funding for reforms ends.

Educating citizens about financial management reform

Citizen opinion can and should be a major driver of public financial management

reform. In some cases, public opinion can be a major resource for financial

leaders who want to convince their countries leaders of the importance of

reform. Says one respondent, We need to educate citizens because once they

understand the need for financial reform, they can then play a stronger role in

overseeing the government financial management process and its accountability

for state finance.

The problem, of course, is that the processes of budgeting and financial

management are not very interesting to the average citizen, and mass media

(newspapers, the Web, television and radio) tend to focus on the bad

news of government finance. That means that financial leaders have to be

persistent and creative in relaying the message of financial reform

to the public.

According to some survey respondents, this starts by ensuring that timely

audited reports of state finances are available to legislators and the public.

As representatives of the people, legislators are important communication

targets for getting the word out on reform. Financial leaders and managers

themselves need to carry the discussion of finance out to citizens, say

some respondents, through media and public meetings. Distributing citizen-

centric annual financial statement reports is another way to convey financialmanagement and reform information (for more information on, and examples

of, citizen-centric financial reports, visit the U.S. Association of Government

Accountants Web site at http://www.agacgfm.org/citizen).

The Government of Hong Kong has been quite creative in disseminating part

of its financial message to the public, getting across important information

about the 2009 budget through a well-illustrated 130-page graphic novel titled

TomorrowFuture for Today (see Figure 1). The message of the graphic novel

is that Future success is built on todays decisions. Each country should

determine the best communication methods for its message and culture, but

creativity is always essential.


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Translation of the

panels on the right

I suggest we cut down

on our household

expenses as far as

possible, at least until

Daddy gets a new job.

Thats right! We can cut

back on eating out.

Other than eating out,

I have done an analysis

(statistics) on our

household expenses

and found that we have

incurred a lot of

unnecessary expenses

which definitely need tobe cut back!

(Graph)

Transportation 10%

Mortgage payment 35%

Misc expenses 20%

Education 20%

Clothing 5%

Food and beverages 5%

Others 2%

Figure 1: Government of Hong Kong graphic novel on the 2009 budget

Titled Tomorrow Future for Today, the graphic novel uses family budgeting to help citizens understand government budgeting

1

1

2

34

2

3

4


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Leadership

Our government lacks a single champion who is taskedwith seeing the implementation of public financial reforms

through to completion, says a survey respondent. With this

situation comes lack of coordination and support both across a

national government and among different levels (for example,

national, provincial and municipal). Continues the just-quoted

respondent, We need a single office with responsibility for the

reform agenda. We must create a holistic view of reform because

right now it is broken up in various implementing agencies.

Whether they are on the national or municipal level, the head

of a ministry or the chief of a division, financial leaders need to

have a vision, goals and objectives for both their organization

and their own positions. Then, say respondents, these leadersmust create a road map to reform that their people can follow.

This includes long- and short-term plans that encompass all

aspects of reform within their area of responsibility. However,

says a respondent, a good financial management leader must be

a visionary with respect to the quality ofsustainable change.

Leadership may not be the most costly component of public

financial management reformunless it is not present. So saymany of the survey respondents, who look to the top elected

and appointed officials of their financial organizations for

direction, support and motivation. We asked them what it

takes to be a good financial management reform leader, and

their responses fell roughly into three categories: leadership,

knowledge and culture.

The many roles of the governmentfinancial leader

Leadership may not be the most costly componentof public financial management reformunlessit is not present.


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As managers, financial management leaders must be willing

and able to set priorities; manage processes; and manage up thehierarchy (elected officials and top appointees), down (staff and

component entities) and across (other public sector entities and

levels of government). Leaders have to be able to work as part

of a team and to delegate responsibilities to othersand hold

them accountable for that work, says a respondent.

It is very important for financial management leaders to

know precisely where they stand within their governments, and

that does not mean a box in an organizational chart. Leaders need

to thoroughly understand their legal, political and managerial

positions and the limits of their power and independence.

As appropriate, they need to expand their independence to

become the best stewards of state finance; in this regard, says arespondent, Leaders have to know how to say NO! As well,

says a respondent, Leaders must know the exact nature of their

assignmentwhat they are supposed to be doing. The rules for

this are not very clear in some developing countries.

Our government lacks a single

champion who is tasked withseeing the implementation ofpublic financial reforms throughto completion.Survey respondent

Knowledge

Public sector financial management leaders should have thetechnical knowledge needed for their work: accounting, financial

management, budgeting, information systems, auditing and other

modern finance-related knowledge. They need to be thoroughly

familiar with the laws and mega processes of public finance,

such as budgeting, procurement, reporting, treasury and others.

(Needless to say, leaders must be willing to enforce the laws and

adhere to the processes). Access to information on the worlds

best practices in financial management is necessary, along

with the ability and willingness to adapt them to the leaders

country and organization. A countrys financial status may be

strongly affected by regional and world economic trends, say

some respondents, so a leader who has a working knowledge ofinternational economics has an advantage.

Culture

Another set of knowledge relates to the ability to get things

done in a financial organization or government bureaucracy.

Therefore, new leaders must review everything about the culture

of their organizations: the history, record of achievements,

failures, official policies and procedures, and unofficial norms

and values of the personnel. When they understand these things,

they will be better able to manage daily operations and introduce

financial management reforms.

Several respondents made it clear that financial managementleaders must set a high standard of ethics for themselves

and enforce ethical behavior by their staff and component

entities. Leaders have to understand that good management

leads to less corruption, and that there is a clear link between

governance and corruption, says a respondent. Most of all,

says a respondent, Financial leaders must remember that they

are employed by the people. You work for the people; the

people do not work for you.


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We also asked survey participants to give us the definition of

transparency they would use in their own organization. Some ofthe responses are listed below:

It is that characteristic in government financial management

that distinguishes all institutional acts so that citizens can

easily recognize the programs that are being implemented, the

investment being made to improve the countrys condition, the

revenues collected from taxes, as well as the projection in the

growth of key industries.

[My definition] focuses on internal transparency. It includes

monthly reporting on transparency to the minister regarding the

budget and weekly reporting when needed. This reporting showshow my ministry is going to spend the money and how it was

spent the previous period. This would increase our transparency

and [improve] implementation of the budget.

[Transparency also means] that information published in the

official government Web site is verified, trusted and timely.

[Transparency means to present] a true picture of the financial

health of [my] government. Financial information must be easily

accessible, and the public must feel free to provide feedback on it.

Some respondents made it clear that transparency applies tothe government financial leaders personal situation and finances

as well.

In many countries today, transparency is top of mind for

financial and nonfinancial leaders alike. We asked respondentshow they defined transparency and what they considered the

right mix of transparency for their governments.

Defining transparency

The International Monetary Fund defines transparency as:

Openness toward the public at large about government structure

and functions, fiscal policy intentions, public sector accounts and

projections.2

Almost all survey respondents agreed with this definition,

and several added to it. They want to also include the disclosureof information on auditing processes, risk assessments, sources

of resources, expenditure patterns, procurement procedures

and goal achievements (and failures to gain goals)and this

should be proactive disclosure when possible. Says another,

My opinion is that openness should also include reporting the

performance and result of government activities or programs.

This is important to provide an opportunity for citizens to assess

the effectiveness and efficiency of the government in delivering

its services to the public.

Transparency

2 George Kopits and Jon Craig, 1998, Transparency in Government Operations, IMF

Occasional Paper No. 158 (Washington, D.C.: International Monetary Fund), p. 1.


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With transparency, we are better able to focus all government

bureaus on a common goal and ensure that they work towardthat goal, says a respondent.

Several respondents said that fiscal transparency could lead

to increased trust between the international donor community

and developing countries. Says one, Donor organizations will

be able to better coordinate their donations because they will be

able to see how the money is being used. This helps them set up

the right mix of assistance.

Although several survey participants pointed out the high cost

of collecting and disseminating information to the public, there

was very little complaint about this. The real barrier is not cost,

say some respondents, but instead it is psychological or political.

We already have all the information and reports, says one. Itis more a question of political will to make things transparent. In

my countrys government, it used to be that all documents were

declared confidential unless stipulated otherwise. Now, they are

declared public unless otherwise stated.

Another respondent adds an important note of caution:

Costs should be measured and balanced with the success of the

government in providing transparent information to society and

citizens. In other words, like all activities, governments need to

evaluate how they ensure transparency, so that they deliver the

information citizens want and need to play a part in managing

public money.

Costs and benefits of transparency

No business or government activity is freeeverything hasa cost associated with it. We asked respondents to compare

the value of the extra information provided by being more

transparent with the cost of obtaining and disseminating that

information. Says a respondent, I believe that the cost of

running all communication systems to inform the citizens is

justified; it is important to maintain those systems because they

help to create the confidence from the general public towards

the administration. During the first years, this investment [in

transparency] is quite high, but it decreases [over time]. Says

another, I think it is not about the cost. It is about the citizens

right to have the information and the governments obligation to

provide the information as part of its accountability for publicfinance management.

Investing in transparency may have a surprising return,

say several respondents, because (according to one) citizens

will be more motivated to pay taxes if they can easily verify

what government is doing with their money. Other benefits

include a more involved citizenry that is engaged in governing.

Such citizens can become key planners in national development

programs. Transparency also improves the credibility of

government, making it easier to plan and provide services to

the public.

Interestingly, several respondents said that transparency to

the public would lead to better coordination among governmententities and between these entities and nongovernmental

organizations. The sad fact is that even in developed countries,

the right hand of public service may not know what the left

hand is doing. This applies vertically as well, because

government organizations are not always transparent in their

reports to elected officials, according to some respondents.


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We asked survey respondents about the effects of current

global economics and how they are reacting to them. Most saythat the recession has decreased their exports, taxes and general

revenues, along with funds sent home by citizens living abroad.

The result has been more conservatism in public spending and

in government budget practices. Countries that sought foreign

capital for development projects, including public-private

partnerships and privatization, have had to put some of these

initiatives on hold or change their funding strategies to reflect

more traditional financing practices. Then again, one respondent

thinks that the recession will accelerate the privatization of

state-owned enterprises. Several respondents reported dilemmas

regarding the use of public and donor funds for relief programs,

such as poverty reduction, versus applying these resources toeconomic stimulus initiatives or to financial management reform.

There is positive news, though. The recession has started

to shift the attention of some governments to expanding their

revenue base and to transitioning away from a monoeconomy

dependent on one or a few commodity exports to a multisector

economy. In addition, despite some reduction in resources for

financial reform, interest in it appears to have increased because

of the global recession, say some respondents. Tighter budgets

are making us better managers, because there is more scrutiny

and demand for accountability, says one. If financial reforms

are no cost or if donors are funding them, then these initiatives

are proceeding, at least for now.

There is a saying that when big companies catch a cold, the

smaller companies that supply them get pneumonia. This isnot exactly the case for the relationship of large, developed

economies and those of smaller, developing nations, but it is an

apt analogy. The global economic recession has reduced demand

for some developing nations goods and services, while also

causing donor organizations to trim their grant and loan budgets.

Dealing with global economicuncertainty


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Manage more effectively. Says another respondent, For

me, as an auditor, the thing that we can do through our auditwork is to help the government to find ways to improve its

efficiency and effectiveness in performing its functions and

delivering services to the citizens. This can be done by improving

our performance audit capabilities. Other than that, we also

still need to fight against corruption through the investigative

audit for minimizing any fraud, waste and abuse (FWA)

actions by government officials and employees. Strengthening

internal controls will help to curtail FWA, according to some

respondents. Financial leaders should also take part in planning

new investment programs to ensure that they are fiscally sound

and well monitored.

Work together. Better partnerships among central banks,economic ministries and financial management organizations are

a must, say respondents. Working together, they can promote

public financial management reform with respect to credible

budget preparation, execution, implementation and reporting. In

addition, this partnership should not neglect the need to invest in

good government practices, reforms and transparency.

Role of financial management in fixing the global economy

We asked financial management leaders what is the mostimportant thing that they can do today to mitigate or fix the

problems of the global financial crisis. Their responses fall into

three major categories: adjust spending and revenue, manage

more effectively and work together.

Adjust spending and revenue. If government budgets need

to be trimmed, say several respondents, then the cutting must

be done rationally. We must analyze very carefully which

programs need to be canceled to reduce public spending, says

one respondent. One alternative is to allow the private sector to

take over functions now performed by government industries,

says a respondent. On the revenue side, as noted in the previous

section, expanding the base is important, and financial managerscan help evaluate new revenue sources and support collections

in established ones, such as by streamlining the tax system. They

can also work with nonfinancial leaders to realign development

priorities with resources.


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Preventing the next crisis

What can financial management leaders do to prevent futureeconomic crises? Be proactive, say many respondents. Better

monitoring and forecasting could have prevented the current

crisis, says one respondent, as would being honest and realistic

about investment and fiscal strategies. Many survey participants

say that financial managers must become more involved in

planning, budgeting and program management, to apply their

special skills to these processes. Several respondents emphasized

risk management as a way to reduce the chances of fiscal crisis.

Risk management can be applied to evaluating government

investments and the need for internal controls, say some.

Continued progress in all areas of financial reform discussed in

this report will form an excellent foundation for preventingorat least weatheringfuture recessions.

One other way to prepare for the future is to understand

that government financial leaders and managers have common

interests and issues, no matter what their nations. Becoming

involved in international associations is a good way to

connect with colleagues around the world, establish ties, share

knowledge, collaborate and learn. International and regional

conferences can help coordinate the work of countries,

professional associations and donor organizations, so that we

can learn from each other, build upon best practices and work to

resolve common problems.


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Development partners will continue to play an important

role in supporting countries efforts to implement reforms, butinitiatives will require ownership by high-level government

officials to be successful. Having a champion for reforms

is increasingly important to stay on track amid competing

requests for government support. Increased transparency

and accountability will be essential to continue to engage the

public in the debate on public finances. Informing them of the

important decisions that lie ahead will facilitate this dialogue.

Human capital is a critical problem in implementing reforms, so

leaders must improve their governments ability to attract and

train top talent for public financial management. This includes

offering competitive compensation and developing government

and academic training in the skills appropriate to modernfinancial management.

Finally, it is important for public financial leaders and

managers to increase their involvement in government planning,

budgeting and program management. Besides improving the

operations of the public sector during the good times, such

involvement will help put governments in a better position to

prevent or mitigate the effects of the next financial crisis.


Conclusions

Around the world, survey respondents say that their

governments are steadily moving along the path to publicfinancial management reform. The path has not always been

clear, and there have been obstacles along the way, yet the

financial leaders in our survey are committed to the journey.

The global economic crisis that started in 2007 exposed

many flaws in financial management practices and verified the

need for improvement. Citizens are becoming more intense in

their scrutiny of how governments allocate, spend and report

on public funds, and they want to see changes. This gives

governments a unique opportunity to invest in financial reforms.

Unfortunately, the same economic problems that prompt

demands for reform in some cases have also diverted government

leaders attention to other pressing needs, such as relief, healthand education.


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David Nummy

Leila Aridi Afas

Jason Levergood

Steve Clyburn

Walter Pazos

The International Consortium on Governmental Financial Management

ICGFM brings together diverse governmental entities, organizations and

individuals who are financial management practitioners such as accountants,

auditors, comptrollers, information technology specialists, treasurers and others

working in all levels of government. Our mission emphasizes activities to promote

professional development and the exchange of information. Our programs

provide activities and products to advance governmental financial management

principles and standards and promote their implementation and application.

Internationally, ICGFM sponsors meetings and conferences that bring together

government financial managers from around the world to share information and

experiences in governmental financial management to educate members and

others about innovations, best practices and emerging issues. We also foster

research concerning governmental financial management and disseminate

information and results to our members and the public.

Working globally with governments, organizations and individuals, the International

Consortium on Governmental Financial Management is dedicated to improving

financial management so that governments may better serve their citizens.

For more information on ICGFM, visit http://www.icgfm.org.

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James R. Ebbitt, President

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Acknowledgments

ICGFMThe International Consortium on Governmental Financial Management


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Documents

2010 Grant Thornton ICGFM Progress in Public Financial Management Reform