2012 04-19 governance valuation

Version 7 section

• brief discussion Public Financial Management

Governance Valuation Methodology

2012-03-19

Doug Hadden

VP Products

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• brief discussion

Where’s the Software?

not talking software today, it’s process that drives our success in

PFM and drives the product

Typical Software Vendor Viewpoint

Software

Technology

Public Financial Management

Government Modernization

Government Objectives

Reality

Government Objectives

Government Modernization


Technology

Software

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Governance Valuation

FreeBalance i3+qM Process

5 5

Country Research

A. Public Financial

Management

B. Budget 2.0

C. Performance Management

Solution Blueprint

Implementation

Product Development

Domain Research

Steering Committee

Customer Sustainability

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success

6 6

PEFA scores A. PFM-OUT-TURNS: Credibility of the budget

B. KEY CROSS-CUTTING ISSUES: Comprehensiveness andTransparency

C(i) Policy-Based Budgeting

C(ii) Predictability and Control in Budget Execution

C(iii) Accounting, Recording and Reporting

C(iv) External Scrutiny and Audit

Latest PEFA Average

ODI 2008 PEFA Study

Latest from FreeBalance Customers

Prior to Using FreeBalance

PEFA scores 1)Governments that were using FreeBalance software [in green] have

above average “accounting, recording and reporting” when compared to the latest public PEFA scores, recognizing that many countries with unfavourable assessments have not made assessments public. This average is also higher than the average calculated by the Oversees Development Institute in 2008 that included unpublished assessments

2)This reporting, enabled by FreeBalance software also has helped improve external scrutiny

3)There are 3 areas that need improved controls and process to enable our customers to exceed the average

4)Policy-based budgeting seem to be below average as well, although the prior to using FreeBalance software, is close to the current average.

In Context

Public PEFA Average PEFA Score

Average HDI Nearest HDI HDI Category

Nearest PEFA

FreeBalance Customers

2.47 0.482 Cameroon Low HDI Indonesia

*Countries do not use FreeBalance

2.35 0.569 Cape Verde Medium HDI Ghana

*Latest PEFA from countries, only national governments, not including countries that acquired FreeBalance after the last assessment. Shows that average (using ODI method) FreeBalance assessment greater than average even with low HDI – averages Cameroon while the rest averages as Cape Verde. The closest PEFA average to 2.47 is Indonesia, closest to 2.35 in Ghana

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Version 7 section COTS Market

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Governance Formula?

It is generally accepted that there

is no formula for sequencing public

financial management reform

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Current diagnostics are

not “prescriptive”

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• brief discussion PDM diagnostics rarely provide

technology

13 13

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Evaluation Methods Evaluation Method Scope Back-Office Technology Front-Office Technology

Public Expenditure and Financial Accountability (PEFA)

Comprehensive PFM assessment

No technology guidance although PEFA assessments attribute some achievements to the use of technology

Commonwealth Public Financial Management Self-Assessment Toolkit (CPFM-SAT)


A3: Use of IFMIS B2: Use of Debt Management

software No technology guidance for publishing

information The Chartered Institute of Public Finance & Accountancy (CIPFA) Whole Systems Approach


O7: Financial management information systems

Revenue Watch Institute Index Extractive Industries

transparency

Paris Declaration and Accra Agenda for Action Aid effectiveness Use of country systems for PFM and procurement does not specify use of

technology

International Budget Partnership Open Budget Index (OBI)

Budget preparation and reporting transparency

Internet publishing of budget documents gains higher rating for many categories

Gartner Group Open Government Maturity Model

Open government Provides open government technology

insight

Institute for Electronic Government e-Democracy Model

E-Democracy Use of e-mail systems

Use of web technology Andersen & Henriksen E-Government Maturity E-Government

Layne and Lee Framework of E-Government E-Government Horizontal and vertical integration

within government

World Bank World Governance Indicators Meta collection of 3rd party

indicators No technology guidance

Global Integrity Report Governance and anti-

corruption

http://www.pefa.org/

http://www.pefa.org/

http://www.thecommonwealth.org/






http://www.cipfa.org.uk/

http://www.cipfa.org.uk/

http://www.revenuewatch.org/

http://www.oecd.org/document/18/0,3746,en_2649_3236398_35401554_1_1_1_1,00.html

http://internationalbudget.org/what-we-do/open-budget-survey/

http://internationalbudget.org/what-we-do/open-budget-survey/

http://www.gartner.com/

http://www.gartner.com/

http://www-01.ibm.com/industries/government/ieg/pdf/e-democracy putting down roots.pdf



http://www.hellezinnerhenriksen.info/abstracts.html



http://www.ingentaconnect.com/content/els/0740624x/2001/00000018/00000002/art00066



http://www.globalintegrity.org/report

http://www.globalintegrity.org/report

PFM Component Map


Component Map

Performance & Commitment Management

Government Performance Management

Budget & Commitment Management

Core Government Financial Management

Public Financials Management

Government Treasury Management

Expenditure and Revenue Management

Public Expenditure Management

Government Receipts Management

Civil Service Management

Civil Service Management

Governance and Service Delivery

Transparency & Accountability

Service Delivery

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What’s changed?

Transparency, access to more information makes diagnostics

more prescriptive

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Country PFM Context

A. Public Financial

Management

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Data from Government Operations

Expenditures Revenue

Budget

formulation

Budget

execution Human

Treasury Resources



PFM Domain

A. Public Financial

Management

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Core Government Financial Management




Budget

formulation

Budget

execution Human

Treasury Resources



A. Public Financial

Management

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Expenditures & Procurement Government Performance Management



Budget

formulation

Budget

execution Human

Treasury Resources



A. Public Financial

Management

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Revenue Management Government Performance Management



Budget

formulation

Budget

execution Human

Treasury Resources



A. Public Financial

Management

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Human Resources




Budget

formulation

Budget

execution Human

Treasury Resources



A. Public Financial

Management

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Treasury Government Performance Management



Budget

formulation

Budget

execution Human

Treasury Resources



A. Public Financial

Management

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Transparency Government Performance Management



Budget

formulation

Budget

execution Human

Treasury Resources



A. Public Financial

Management

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Performance Government Performance Management



Budget

formulation

Budget

execution Human

Treasury Resources



A. Public Financial

Management

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What do we mean by Budget 2.0?

26 26

Budget 1.0 Transitional Budget 2.0

Back-office centric functions and

technology

Back-office centric functions deployed on

the web – “e-government”

Network-centric functions for citizen

interaction – “government 2.0”

B. Budget 2.0

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What do we mean by Budget 2.0?

27 27




Budget

formulation

Budget

execution Human

Treasury Resources



B. Budget 2.0

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0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

Budget execution

Budgetcomprehensiveness

Timeliness

International standards

Budget formulation

Policy management

Oversight

Transparencymechansism

Budget 1.0

Transition

Budget 2.0

“Budget 2.0”

B. Budget 2.0


Published Documents Web Publishing

Open Data Narrative Centric Visualization Centric

Citizen Centric

Interactive Data


Audit

Parliamentary Oversight

Citizen Oversight

Audio Visual

Performance Audit

Press & NGO

Access to Information

Cooperative Planning Expert Networks

Transparency Mechanisms

Oversight

B. Budget 2.0


Macro-Fiscal Frameworks Performance

Management Participatory Policy Policy-Budget Linkages

Policy Outreach


Budget as Ceremony Budget Books

Performance Management

Participatory Budgeting

Budget & Commitment Controls

Accrual Budgeting Program Budgeting

Policy Management

Budget Formulation

B. Budget 2.0


National Standards IPSAS Cash IPSAS Accrual

IMF GFS XML-based IATI, EITI, XBRL

MTEF


Annual Reports Unaudited Reports

Open Data

In-Year Execution

Audit Reports

Pre-Budget Statement

Interactive Data

Standards

Timeliness

B. Budget 2.0


National Government Sub-National

Parastatal

Accrual Extensions

Information Completeness


Cash Modified

Cash Modified Accrual Full Accrual

Budget & Commitment Controls

Performance Discipline Cash & Liquidity

Management

Budget Forecasting

Budget Comprehensiveness

Budget Execution & Accounting Methods

B. Budget 2.0

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33 33




Budget

formulation

Budget

execution Human

Treasury Resources





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Politics C. Performance Management

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Policy C. Performance Management

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Platform C. Performance Management

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planning: budget – controls - monitoring


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public service performance


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public: transparency drives accountability


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private sector: value for money and development


PEFA/PFM Alignment

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• Government employment as %, size – civil service management

• Debt and deficits – expenditure management and procurement

• Population, regional disparities, ethnic issues – decentralization

• Democracy, freedom, stability, income disparity – budget and performance transparency

Sample Factors

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Calculates?

Technology Priorities

PFM Priorities

Country Conditions

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Anchor


PFM Priorities

Country Conditions

Benchmark Priority

Gaps Sequencing

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Sequenced


PFM Priorities

Country Conditions

Benchmark Priority

Gaps Sequencing

capacity

Governance Valuation

4 visualization examples from different countries follow

Visualized Governance Opportunity

Leapfrog and good practice opportunities at a glance

High Level Blueprint

Platform approach to sequencing customized to government needs

Government Objectives Alignment 1. Build Capacity

2. Improve Budget

Execution

3. Improve

Transparency

4. Improve

Performance

National

Plan

1.Public safety

Improved civil

service capacity =

improves ability to

achieve objectives

Executing on

budget plan =

spending on

objective

Improves stability Improved

performance =

improves

effectiveness of

government

programs

2. Youth programs

3. Social Inclusion

Demonstrates

improvement

4. Employment

Improvements

5. Service Delivery Key deliverable

6. Anti-corruption Key deliverable

State Reform

1. Civil Service Reform Key deliverable

Improves

accountability,

reduces corruption

Key deliverable

2. Financial Management

Controls Key deliverable

3. Devolution Key deliverable

4. Fiscal Transparency Key deliverable

Aligned with government objectives

Performance Schedule Private sector

Change Manage-

ment program

Revenue Integration

Purchasing & Procurement

e-Procurement Open Data

Particpatory Budgeting

Public Budget

Transparency

Audit

Social Media integration

Planning Financial

Dashboards Program

Budgeting Sector Dashboards Balanced Scorecard

People Human

Resources Consolidation

Capacity Building & Training

Performance Appraisal

Talent & Succession

E-Recruitment Employee Self-Service

Foundation Infrastructure

upgrade Improved Controls

Process re-engineering

Change management Progressive Activation

For more advanced countries, sequenced use of “performance” technology

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FreeBalance i3+qM Process

52 52

Country Research

A. Public Financial

Management

B. Budget 2.0


Solution Blueprint

Implementation

Product Development

Domain Research

Steering Committee

Customer Sustainability

Key additional advantage of process: Customer implementation experience goes into product & there is an emphasis on sustainability

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Is “time on my side”?

53 53

Process requires 2-4 weeks depending

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The process is an excellent anchor, but not foolproof

54 54

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Who is FreeBalance? FreeBalance is a global provider of government resource

planning software (GRP) for public financial management (PFM) – Canadian software company ISO-9001/2008 certified

– Strong domain expertise in government financial management, 100% focus on government

– Integrated technology for budget formulation and public expenditure management: entire budget cycle

– De facto standard for fast implementations

– Global presence, 18 countries, in every World Bank region