Version 7 section

brief discussion

Lesson Learned on the Public Financial Management Front Lines

African Development Bank Group May 7, 2013

Version 7 section Agenda

Story behind FreeBalance brief discussion Lessons in: ICT-enabled good governance Lessons in: PFM reform sequencing Lessons in: FMIS delivery and sustainability Conclusion

Version 7 section FreeBalance solutions

brief discussion

for public financial management support reform and modernization to improve governance, transparency and accountability.

1984

Version 7 section free balance

brief discussion
+ = Budget Commitments Obligations Actuals Free Balance

1984+

Version 7 section
brief discussion

Ottawa: Parliament Hill

1994+

Version 7 section
Budget Controls Appropriations Budget Books

brief discussion
Budget Law
Planning

Expenditures Procurement Receipts

Forecasting
Policy Analysis

Civil Service Payroll

Treasury Materials Social Programs

Government Resource Planning (GRP)

1994+

Budget Centric

Version 7 section
Commitment Accounting

brief discussion
Modernization & Reform

Complex Performance

Not ERP

How is GRP Unique?

1994+

Version 7 section
COMMITMENT CYCLE
budget appropriations transfers commitments obligations receiving expenditures

MULTIPLE CONTROLS

brief discussion
aggregate

segregation of duties & workflow

different organizational configurations

MULTIPLE CONTROL LEVELS

detailed monthly

configured
CONTROLS
flexible strict

TOLERANCE LEVELS

yearly PERIOD

Financial Controls

1998

Version 7 section
brief discussion

Nunavut

1999

Version 7 section
brief discussion

Kosovo

2000+

Version 7 section
quickest implementation 26 days

brief discussion

average first phase 8 months

Rapid Implementation

2006

FreeBalance Public Financial Management Component Map

Comprehensive and Extensible Product Suite for Government

Version 7 section

brief discussion

FreeBalance Public Financial Management Component Map

today

Version 7 section
Countries Penetrated brief discussion Time Zones World wide Software Installations Users Civil Servants Handling annual budgets of 21 15 Over 200 Over 60,000 Almost 1.5 Million > $ Trillion

Global Impact

today

Version 7 section
Developed Countries Developing Countries Uganda, Guyana, Antigua, Suriname, Lao PDR
Panama, Jamaica, Pakistan

Post Conflict

brief discussion
National

Departmental

Canada 28 Financials 42 Budget USA 10 Financials 1 Budget Nunavut

Afghanistan, TimorKosovo, Mongolia, Leste, Iraq Sierra Leone, Kyrgyzstan Liberia, South Sudan

Sub-National Project

Namibia

Palestine

Global Impact

FreeBalance Offices and Regional Support Centres

today

Version 7 section

brief discussion
Ottawa

Ulaanbaatar
Bishkek Kabul Ramallah

Pristina
Washington Lisbon

Guatemala City St. Johns

Monrovia Freetown Paramaribo Kampala

Kolkata Bangalore
Vientiane Dili

services & support sales, business development & marketing product management & development corporate services

today

Company Summary
High Success Rate

Canadian Version 7 section Company

brief discussion
Global PFM Provider

GRP Leader

Modern Web Technology

100% Government Focus

Covers Budget Cycle

ISO9001/2008

Version 7 section Agenda

Story behind FreeBalance brief discussion Lessons in: ICT-enabled good governance Lessons in: PFM reform sequencing Lessons in: FMIS delivery and sustainability Conclusion

Version 7 section Good Governance Version 7 section

Multiple Definitions brief discussion Tinged with Ideology Multi-variant and Complex Measurement Difficulties Yet Governance Measures Critical

Version 7 section Version 7 section

brief discussion

19

Version 7 section About $37B of foreign aid brief discussion annually is phantom aid

Version 7 section Tax evasion through untaxed shadow economy brief discussion = 17% of world economy, well over $2.5T

Version 7 section
brief discussion

Foreign Direct Investment to Developing Countries at $684B

Version 7 section
brief discussion

Total worldwide remittances to developing countries exceed $534B

Version 7 section Tax Revenue

brief discussion

ranges from 1.4% of GDP in UAE to almost half in Belgium, Sweden and Denmark

What Works in Technology-Enabled Public Financial Management?

An On-Going Debate
Use PFM Best Practices applied technology Use Country Context
applied practice
Technical Reforms Ineffective

Version 7 section

brief discussionGood
Technical Reforms Effective

Practices

Its all about technology

Technical Reforms Difficult

Technical Reforms Easy

Its not about technology

Version 7 section Good Governance Mind Map v.1.0

brief discussion

Version 7 section Governance Linkages

6. shown to improve country outcomes

5. measured
4. and can be seen

brief discussion

3. whose effectiveness in improving governance is determined by institutional maturity

2. a set of Governance tools

1. back office GRP software provides

Version 7 section Consider a Scenario

brief discussion

Version 7 section
brief discussion

Total Annual Government Procurement is estimated at $9.5T

Version 7 section Developing Countries lose an estimated $20B to brief discussion $40B annually because of corruption

Version 7 section Automating the Procurement Cycle

brief discussion
ICT Platform 1. Secure Infrastructure 2.User Group Controls Government Performance 3. Budget Preparation Core Public Financials 4. Commitment Accounting Public Expenditure Management 5. Procurement 6. EProcurement 7. Payment Management Government Performance 8. Audit

Version 7 section Controls

Standards
Front-Office

IPSAS, GFS CoST, OpenC brief discussion

financial statements e-procure

Core Public Financials

Expenditure Management

Receipts Management

Treasury Management

Civil Service Management

Performance Management

EITI
revenue

IATI
aid, debt & PPP e- recruit & disclosure

GFS
gov results

budget transparency

Decision-Making Other Controls

Commitment Process Controls IT Controls

forecasts programs reporting & analytics dashboards alerts - output/outcomes KPIs economics historical data - benchmarks policy planning scenarios programs assets
accruals

secure payment & secure transactions

TSA budget commitment cash - payment chart of accounts workflow & procedures approval cycle - reconciliations data integrity data encryption IT security - integration accruals

audit

Version 7 section
Chart of Accounts

brief discussion
Segregation of Duties
ICT Platform 1. Secure Infrastructure 2.User Group Controls Data integrity Encryption IT security User management Government Performance 3. Budget Preparation Core Public Financials 4. Commitment Accounting

Dashboards

Public Expenditure Management 5. Procurement 6. EProcurement 7. Payment Management EProcurement front office Secure payments

Government Performance 8. Audit

Planning Historical data

Budget & Commitment Controls

Audit trail

Integration

Alerts

Procedure Workflow

Version 7 section IT Controls

ICT Vulnerability

briefTechnique discussion
DB Abstraction Sniffing Integration Transaction Audits Security Policy
Security Audit Data Integrity Obfuscation Encryption Biometrics

Database
Network

Audit Trail

User Identify
Interfaces

VPN

Reports Intrusion

External Transparency Intrusion Detection

FreeBalance Public Financial Management Component Map

Comprehensive and Extensible Product Suite for Government

Version 7 section

brief discussion

Version 7 section
GPM BCM PFM GTM GRM PEM CSM

Chart of Accounts
Budgets & Commitments Segregation of duties Secure Payment Integration

brief discussion

Reconciliation
Workflow & Procedures

Approvals
Accrual Asset Management

Version 7 section
Governance Enablers Matrix
Decentralization Risk Management Compliance Standards

Characteristics
Capacity

Independence

Transparency

Participation

Political Will

Informal Mechanisms

Access to Information

Accounting Procedures

Legitimacy

Efficiency

Outreach

Institutions
Executive

Legislature Judiciary

brief discussion

Internal & External Audit

Enforcement
Other Govt Oversight Public Service Civil Society & Citizens

Businesses
Election Commission Political Parties

Donors

Version 7 section
Chart of Accounts

Capacity

Political Will

brief discussion
Segregation of Duties
ICT Platform 1. Secure Infrastructure 2.User Group Controls Data integrity Encryption IT security User management Government Performance 3. Budget Preparation Core Public Financials 4. Commitment Accounting

Dashboards

Public Expenditure Management 5. Procurement 6. EProcurement 7. Payment Management EProcurement front office Transparency Civil Society Secure payments

Government Performance 8. Audit

Planning Historical data

Budget & Commitment Controls Accounting Procedures

Audit trail

Integration

Alerts

Internal Audit External Audit Independence Enforcement

Standards

Compliance

Procedure Workflow

Version 7 section Map PEFA to PFM Component

Core Public Financials & Budget Controls Expenditure Management Receipts Management Treasury Management Civil Service Management Performance Management

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

B. KEY CROSSCUTTING ISSUES: Comprehensiveness and Transparency C(i) Policy-Based Budgeting

Budget Controls

Expenditure Controls & Forecasting

Revenue Forecasting

Cash and Liquidity Forecasting

Wage Bill Forecasting

Budget Planning Processes

brief discussion
Budget Transparency E-Procurement

Budget Classifications Revenue Transparency E-Recruitment, Wage & Expense Disclosure Talent Management Results Portal Budget Planning Processes & Performance Management Audit trails & Computer Aided Audit Tools

C(ii) Predictability and Control in Budget Execution C(iii) Accounting, Recording and Reporting

Non-Salary Controls

Expenditure Controls & Forecasting, Procurement Value for Money

Taxpayer Obligations & Tax Collection

Cash and Bank Controls

Payroll Controls

Timeliness and Completeness of Statements and Reports, Support for International Public Sector Standards

Quality of Reports Audit trails & Computer Aided Audit Tools

C(iv) External Scrutiny and Audit

Version 7 section enables

Impact of Public Financial Management Improvements on brief discussion International Governance Ratings Gov
Openness, Effectiveness, Service Delivery, Growth, Anti-Corruption

improves

PFM

Transparency

Effective

results

Governance Rating

perception
behaviour

GRP Anti-Corruption Hospital Procurement Scenario

Government Resource Planning Software

Version 7 section
Governance Toolset Governance Enablers Governance Signs
Data Integrity

Governance Indicators

Governance Outcomes

chart of accounts | segregation of duties |integration | workflow & procedures | alerts & dashboards

1. Secure Infrastructure
ICT Platform

Encryption
IT Security

Improved Health Outcomes Child Health

CIESIN/YCELP

brief discussion
2.User Group Controls
User management Planning Government Performance Mgmt Core Public Financials

Reduce Child Mortality MDG

PEFA C3: Accounting, Recording, Reporting Immunization Rates WHO/UNICEF Reduce Maternal Mortality MDG Universal Access to Reproductive Health MDG

3. Budget Planning Historical data

4.Commitment Accounting Accounting Procedures

5. Procurement

Budget & Commitment Controls

PEFA C2: Predictability & Control in Budget Execution PEFA B: Transparency TI Corruption Perception

Transparency

Public Expenditure Mgmt

6. E-Procurement

E-Procurement front office Civil Society

World Bank Doing Business Index

7. Payment

Secure payments Internal & External Audit

Procurement Graft incidents

WGI Control of Corruption

Increase in Foreign Direct Investment

Government Performance Mgmt

8. Audit

Audit trail

Independence Enforcement

PEFA C4: External Scrutiny & Audit

standards | capacity | political will | compliance

Version 7 section Version 7 section

+ Public Finances brief discussion - Transparency - Accountability = Corruption

Version 7 section Lessons Learned Version 7 section

GRP Technology improves governance brief discussion Hard to see success with good PFM processes without a GRP Significant improvements in governance requires institutional changes

Version 7 section Agenda

Story behind FreeBalance brief discussion Lessons in: ICT-enabled good governance Lessons in: PFM reform sequencing Lessons in: FMIS delivery and sustainability Conclusion

What Works in Technology-Enabled Public Financial Management?

An On-Going Debate
Use PFM Best Practices applied technology Use Country Context
applied practice
Technical Reforms Ineffective

Version 7 section

brief discussionGood
Technical Reforms Effective

Practices

Its all about technology

Technical Reforms Difficult

Technical Reforms Easy

Its not about technology

Version 7 section Governance Formula?

brief discussion

Version 7 section Not prescriptive

brief discussion

Evaluation Method

Evaluation Methods Version 7 section

Scope Back-Office Technology Comprehensive PFM assessment Comprehensive PFM assessment

Front-Office Technology

Public Expenditure and Financial Accountability (PEFA) Commonwealth Public Financial Management Self-Assessment Toolkit (CPFM-SAT)

The Chartered Institute of Public Finance & Accountancy (CIPFA) Whole Systems Approach
Revenue Watch Institute Index

brief discussion

Comprehensive PFM assessment Extractive Industries transparency Aid effectiveness

No technology guidance although PEFA assessments attribute some achievements to the use of technology A3: Use of IFMIS B2: Use of Debt Management software No technology guidance for publishing O7: Financial management information information systems

Paris Declaration and Accra Agenda for Action

International Budget Partnership Open Budget Index (OBI) Gartner Group Open Government Maturity Model Institute for Electronic Government eDemocracy Model Andersen & Henriksen E-Government Maturity Layne and Lee Framework of E-Government World Bank World Governance Indicators Global Integrity Report

Budget preparation and reporting transparency Open government E-Democracy E-Government E-Government Meta collection of 3rd party indicators Governance and anticorruption

Use of country systems for PFM and procurement does not specify use of technology Internet publishing of budget documents gains higher rating for many categories Provides open government technology insight Use of e-mail systems Use of web technology Horizontal and vertical integration within government

No technology guidance

Version 7 section Whats changed?

brief discussion

101011001110010101001010101

Version 7 section Country PFM Context

brief discussion

Version 7 section PFM Domain

Government Performance Management

brief discussion Expenditures

Data from Government Operations

Revenue
Budget formulation Budget execution

Treasury

Human Resources

Data from Government Operations Government Performance Management

Version FreeBalance i +7 qMsection Methodology

3

Aligning Customer Needs with Product, Service and Sustainability Offering

Government Research & Engagement

brief discussion
Product Development Steering Committees SWAT Teams

Country Research

Governance Valuation

Customer Sustainability Project Governance Solution Blueprint

Implementation

Version 7 section Calculates?

brief discussion
Country Conditions PFM Priorities Technology Priorities

Version 7 section Anchor

brief discussion Country
Conditions PFM Priorities Technology Priorities

Benchmark

Priority Gaps

Sequencing

Version 7 section Sequenced

Country briefConditions discussion PFM Priorities Technology Priorities

Benchmark

Priority Gaps

Sequencing

capacity

Version 7 section Lessons Learned Version 7 section

PFM reform sequencing as much a science as an art brief discussion Holistic approaches that consider technology, capacity, lessons in peer countries and methodology increases success

Version 7 section Agenda

Story behind FreeBalance brief discussion Lessons in: ICT-enabled good governance Lessons in: PFM reform sequencing Lessons in: FMIS delivery and sustainability Conclusion

Version 7 section
Risk of Project Failure Higher in Government
ICT Projects
Many ICT projects fail to deliver on expectations

Enterprise Resource Planning

Government Resource Planning

Includes ICT Project Risks + most ERP risks Complex legal reform Need for continuous reform

Includes all ICT Project Risks brief discussion High customization required to achieve benefits Often requires business process re-engineering Highly complex project covers multiple organizational silos Projects often delivered late

High maintenance costs to keep lights on Complex ICT projects have higher failure rates than modest projects

Covers more lines of business than private sector enterprises Need to rationalize needs of politicians, public servants and civil society

Move to Cloud computing a reaction by customers against high ICT costs

High maintenance costs, especially upgrades leads to high Total Cost of Ownership (TCO)

58

Version 7 section COTS dilemma

brief discussion
NEEDS

governance

costs

customization
APPLICATION CONFIGURATION REUSABLE CODE

proprietary

enterprise

DEVELOPMENT ENVIRONMENT

MIDDLEWARE

Reported Enterprise Resource Planning Success Rates

Multiple Studies, Multiple Methods, All Industries
100%

Version 7 section
90% 80% 70%

Calculated Average ERP Success, Unsuccessful but not Failure and Failure

brief discussion
24% 42% 60% 50% 40%

Low, Average and High ratings from ERP studies indicating Failure, unsuccessful (including Failure) and Success

30% 34% 20%

Successful Unsuccessful but not failure Failure 10% 0%

Failure

Unsuccessful

Success

Government Resource Planning Success in Developing Countries

National Government Level Implementations
16

Version 7 section
2
2

14
12

brief discussion
4 7

0 1

10

8 11
7 0 6 6 4 2 0

Failure
Problems

Successful

3
1

FreeBalance

Tier1 ERP Oracle

Tier1 SAP ERP

Tier2 ERP Epicor

Failure = Abandoned or > 10 Years to Implement Problems = Reported issues, incomplete implementations, late Success = No exceptionally reported problems

Version 7 section
ERP 5 Year TCO compared to FreeBalance
500.00% 450.00%

Government Quotations from 2006-2012

400.00% 350.00%
300.00% 250.00% 200.00%

brief discussion
ERP Price FreeBalance

150.00%
100.00% 50.00% 0.00%

Enterprise Software Barriers to Success & Time Consuming Tasks

Information Week 2012 Enterprise Applications Survey
1. Upgrade & Optimize 60%

Version 7 section
50% 40% 2. Adapt Processes

brief discussion
7. Other

Barriers to Success Time Consuming

30%
20% 10% 0% 6. Decisions in Apps 3. New Apps

1. Changing, upgrading or optimizing existing applications 2. Changing or adapting processes as business requirements change

3. Implementing new applications 4. Automating or integrating business processes

5. Developing or improving decision-support capabilities for processes 6. Developing or improving decision-support capabilities within apps

5. Process Decisions

4. Process Automate

7. Other

Version 7 section featuritis

brief discussion

64

 Conflict between customized vs. generic solutions brief discussion More vertical capabilities creates larger footprint Government focus reduces:
Customization Technical footprint Time to implementation

Version 7 section Product Version Design and Sustainability 7 section

Version 7 section Human Capacity Version 7 section

Adaptable help brief discussion Single file translation Methodology CIPFA partnerships Evans partnership

Version 7 section FreeBalance Model Version 7 section Configuration options

Parameters brief discussion Business Rules Workflow

Progressive Activation New Custom Domain capabilities

Version 7 section FreeBalance

Accountability Suite
Configuration and Metadata Management

brief discussion

FreeBalance Accountability Suite

Country Specific Functionality (CFG) Configuration

(CFCB) Chart of Accounts Builder

(CFCD) Custom Domains

(CFPR) Parameters
(CFWF) Workflow

Version 7 section Progressive Activation

brief discussion
Modules Modernization Decentralization

Financials
Treasury Revenue Debt

Cash-based
Cash Management Modified Cash Budgetary Controls

MoF
Line Ministries Regions & States Treasuries Devolution Commissions

Budgeting Purchasing
Payroll Assets Inventory

MTEF Aggregate Controls

Modified Accrual Civil Service Reform Performance Mgmt

Govt Businesses Municipalities

HR

Accrual

69

Version 7 section
Government Entities
Government Applications Government Functions

brief discussion

Eclipse

Spring

Hibernate

Trinidad

Framework

Java EE Infrastructure

FreeBalance Web Architecture

Version 7 section
brief discussion First Strategic Generation Inflection ERP Era to Point 20072007 2010

Second Generation GRP Era 2010+

Version 7 section broken software model?

brief discussion

Government is one of many verticals

Version 7 section
Product Development
Product developers have no expertise in government financials

Product Management Product often designed with different customers in mind Consulting firms generate revenue from customization.

Sales & Marketing

Salespeople want to sell to every possible market.

brief discussion

Customer Support

Trainer Consultant User Government needs may not go into upgrades

Consultants help customers to customize code.

Typical Approach by Enterprise Software Vendors to the Government Market

73

Government Resource Planning and the Customer Centric Approach Version 7 section
Product Management Product Development Developers visit customers and are part of SWAT teams.

brief discussion User

Customers visited at least once every year. Steering Committee sets product direction.

All problems & feature requests are tracked management dashboard Local in-country support pass on needs.

Consultant Vendor consultants bring experience to write specifications.

Customer Support

Customers interact with Vendor staff and other customers on collaborative web application

Version 7 section Lessons Learned Version 7 section

Software design matters: risk of failure & cost is brief discussion proportional to distance Separate product development and implementation firms increases risks of failure African governments require vendor commitment and better project governance structures

Version 7 section Agenda

Story behind FreeBalance brief discussion Lessons in: ICT-enabled good governance Lessons in: PFM reform sequencing Lessons in: FMIS delivery and sustainability Conclusion

Version 7 section
Selection of FreeBalance Customers, National Level GRP Implementations brief discussion
from low to very high Human Development Index
Liberia .329 Timor-Leste .495 Mongolia .653
Antigua .764

Canada .908

low

medium

| high |

very high .943

.286

Version 7 section
1. Engage the PFM Community

brief discussion
Customer Experience Market Research & Events Participation

CustomerCentric Product Governance

Customers drive the FreeBalance product roadmap at the FreeBalance International Steering Committee

FreeBalance Governance Framework

FreeBalance Governance Valuation

Similarity in similar circumstances Enhancement requests from governments

Deep research in public financial management Engagement with larger PFM community at events

Framework links Government Resource Planning (GRP) to positive governance outcomes

Methodology provides PFM reform and GRP sequencing blueprints

Version 7 section FreeBalance Accountability Suite

100% Web Technology
reusable business objects leveraged as part of the ServiceOriented Architecture

brief discussion
multitier design separates presentation, business logic and data layers

Government Entities

Government Applications

Government Functions

no client/server or legacy code used

Eclipse

Spring

Hibernate

Trinidad

Framework

Java EE Infrastructure

open system runs on open source and commercial middleware

Version 7 section
brief discussion
Economy Afghanistan

Approximate starting point of current state and peace building

2001-02

Relative progress by 2010 Substantial

Cambodia Congo, Dem. Rep. Kosovo

Liberia Sierra Leone Tajikistan

1991-93 2001 1999

2003 2002 1997

Intermediate Limited Substantial

Intermediate Substantial Limited
80

West Bank & Gaza

1993-2002

Intermediate

Version 2. Possible7 to section Leapfrog

Example FreeBalance Accountability Suite Implementations
Government Performance

Budget Planning

brief discussion
Budget Books

Advanced Salary Management

Treasury Management

Transparency Portal

Performance Management

Modernization

Accrual Accounting

Advanced Chart of Accounts

Decentralization

Fixed Assets

Human Resources

Procurement

Version 7 section
brief discussion

Version 7 section 3. GRP Can Improve Assessments

Only the Most Recent Public PEFA Assessment
A. PFM-OUT-TURNS: Credibility of the budget B. KEY CROSS-CUTTING ISSUES: Comprehensiveness and Transparency

brief discussion
C(i) Policy-Based Budgeting

FB Public

Public PEFA
C(ii) Predictability and Control in Budget Execution

C(iii) Accounting, Recording and Reporting

Public PEFA
C(iv) External Scrutiny and Audit

PEFA Avg 2.47

HDI Avg 0.482

HDI Category Low

FreeBalance Customers *Countries do not use FreeBalance

2.35

0.569

Medium

Version 7 section 4. Implementation Commitment

brief discussion

5. Success Requires Vendor Implementation & LongTerm Support Version 7Commitment section
Product Management Product Development

brief discussion User

Consultant

Customer Support

Canadian Version 7 section Company High GRP More: Success Leader Rate www.freebalance.com/blog

brief discussion

Modern Web Technology

Global PFM Provider

100% Government Focus

Covers Budget Cycle

ISO9001/2008