Your SlideShare is downloading. ×

Free balance-wp-towards-budget-2-0


Published on

This paper proposes a budget-centric and technology-focused framework to assess the government transparency and public financial maturity. Governments leverage technology to manage public finances and …

This paper proposes a budget-centric and technology-focused framework to assess the government transparency and public financial maturity. Governments leverage technology to manage public finances and enable transparency. Most assessments of Public Financial Management (PFM) tend to be technology - neutral by providing little or no guidance about the use of Integrated Financial Management Information Systems (IFMIS), also known as Government Resource Planning (GRP). These assessments focus primarily on procedures and practices because no GRP can improve PFM quality when procedures or practices are ineffective.

Published in: Business, Technology
  • Be the first to comment

  • Be the first to like this

No Downloads
Total Views
On Slideshare
From Embeds
Number of Embeds
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

No notes for slide


  • 1. FreeBalance® Government “Budget 2.0” Government Budget 2.0 Framework:a framework for evaluating technology for government transparency and Public Financial Management reform Doug Hadden, VP Products, FreeBalance
  • 2. IntroductionThis paper proposes a budget-centric and technology-focused framework to assess the government transparency and publicfinancial maturity. Governments leverage technology to manage public finances and enable transparency. Most assessments ofPublic Financial Management (PFM) tend to be technology - neutral by providing little or no guidance about the use of IntegratedFinancial Management Information Systemsi (IFMIS), also known as Government Resource Planning (GRP) [Figure 2]. Theseassessments focus primarily on procedures and practices because no GRP can improve PFM quality when procedures or practicesare ineffective.E-government and open government technology is increasingly being leveraged by governments to enable transparency,accountability, citizen services and citizen engagement. “The real benefit of e-government lies not in the use of technology per se,but in its application to processes of transformationii.” E-government and open government frameworks tend to combinetechnology methods with procedure and practices but have little PFM guidance with the exception of managing transactions[Figure 2].Budget Centric Approach to Government Figure 1: Budget-Centric View ofTransparency Open GovernmentBudget management is the core to public financial management. Often called Government Performance Managementthe “organic budget law” or the “vote”, it is the legal embodimentiii of Data from Government Operationsgovernment policy. Budget formulation and execution traditionally “focused Expenditures Revenueprimarily on resource allocation and input controliv” is maturing “towards a Budgetfocus on resultsv” or government performance. New tools coupled with citizen formulationdemand have created a demand for more open and transparent participatorybudgeting “to extend and deepenvi" democratic processes. This trend for open Budgetgovernment, open data and Government 2.0 affects the core of government execution Humanmanagement: the budget. Treasury Resources Data from Government OperationsOpen government often includes budgetary and transactional information such Government Performance Managementas budget plans, e-procurement opportunities and financial reports. Opengovernment can also include what might seem as non-budgetary informationsuch as census statistics, economic data or health advice. The collection and publication of this information requires funding viabudgets. Budget management is core to open government [Figure 1]. And, budgets are tied to this government outputs andoutcomes. Therefore, budget management is core to government performance management, unlike in the private sector. “Inbusiness the budget is only an internal document. In governments and not-for-profits, the budget is the key fiscal document.vii”From Government 1.0 to Government 2.0Tim O’Reilly of O’Reilly media coined the term “Web 2.0”viii in 2005 to describe a technological evolution where the web hadbecome a platform for software. This differs from “Web 1.0” where data generated by client/server software was deployed throughthe Internet. Other characteristics of Web 2.0 included harnessing collective intelligence, focusing on data, supporting multipletechnology platforms and deploying rich user experiences. M.I.T. Sloan and Harvard professor Andrew McAfee extended theseconcepts to the business domain by describing Enterprise 2.0ix in 2006.This technology transition enabled observers to describe Government 2.0, Aid 2.0, Civil Society 2.0, etc. The concept ofGovernment 2.0 includes what Tim O’Reilly calls “government as platformx”. Governments build physical infrastructure likehighways and communications satellites that generate economic growth according to O’Reilly. Economic growth can also begenerated through technology by making government open. O’Reilly sees an intersection between technology open standards andopen government: “open standards spark innovation and growthxi.”This “openness” intersection is critical to understanding how open technology enables government openness in the Government2.0 world. For the purposes of this paper, the following definitions are used: 2FreeBalance®
  • 3.  Budget 1.0: Traditional mechanisms of budget management that are primarily internally-focused (often called “back- office”), where control and compliance are major concerns  Transitional: Increase of externally focused or “front-office” budget management where transparency, web transactions and government reporting are important characteristics but do not achieve “Web 2.0” characteristics  Budget 2.0: Social and Web 2.0 mechanisms that attempt to leverage the network effect to improve government performance and service delivery while leveraging the integration of front and back office systemsFigure 2: Survey of Common PFM and E-Government Assessment Methods Budget Back-Office Evaluation Method Scope Front-Office Technology Implication TechnologyPublic Expenditure and Financial Comprehensive PFM No technology guidance although PEFA assessments YesAccountability (PEFA) assessment attribute some achievements to the use of technologyCommonwealth Public Financial A3: Use of IFMIS Comprehensive PFMManagement Self-Assessment Yes B2: Use of Debt assessmentToolkit (CPFM-SAT) Management software O7: FinancialThe Chartered Institute of Public management No technology guidance for Comprehensive PFM YesFinance & Accountancy (CIPFA) information systems publishing information assessmentWhole Systems Approach Extractive IndustriesRevenue Watch Institute Index Yes transparencyParis Declaration and Accra Use of country systems for PFM and procurement Aid effectiveness YesAgenda for Action does not specify use of technology Internet publishing of Budget preparationInternational Budget Partnership budget documents gains and reporting YesOpen Budget Index (OBI) higher rating for many transparency categoriesGartner Group Open Provides open government Open government NoGovernment Maturity Model technology insightInstitute for Electronic E-Democracy No Use of e-mail systemsGovernment e-Democracy ModelAndersen & Henriksen E- E-Government NoGovernment Maturity Use of web technology Horizontal and verticalLayne and Lee Framework of E- E-Government No integration withinGovernment governmentWorld Bank World Governance Meta collection of 3rd NoIndicators party indicators No technology guidance Governance and anti-Global Integrity Report No corruptionTechnology-Enabled TransparencyThe Internet supports government transparency initiatives like open data, procurement, recruitment and grants portals.Transparency mechanisms have evolved from “freedom of information” processes to proactive publication of machine- readabledata sites. Data that was once packaged by governments to generate revenue are being offered at no cost to enhance businessopportunities. Information timeliness has also become more critical with governments releasing information without lengthy 3FreeBalance®
  • 4. publishing processes. And, many governments recognize that open government and open data can provide direct citizeninteraction, demonstrated by the recent Open Government Partnershipxii initiative.Figure 3: Technology-enabled Transition to Open Government Classification Closed: “1.0” Transition Open: “2.0”Transparency Access to information Documents Machine readableData Availability Data for sale Publish as exception Publish as normMode Publish, audit and vetted Mixed Near real-time publishingTarget Business community Civil society organizations, press CitizensTechnology Transition to Open SystemsInformation Technology is transitioning from closed to open systems. Commercial Off -The Shelf (COTS) software used forgovernment budget management was predominantly custom-developed or proprietary in the past. In this closed system era,integration within the product suite was considered paramount. Economies of scale meant that the largest vendors provided thebest extensibility and support for multiple industries. Proprietary architectural frameworks and “middleware” was necessary todevelop robust transactional software. Integration with other PFM-related subsystems was difficult until more broad adoption ofindustry standards. Open source and open standards enables more atomic-level integration and interoperability among systems.This has been further enhanced through open source software that enables reuse and repurposing of software by systemsintegrators and government organizations.Figure 4: Technology Transition to Open Systems Classification Closed: “1.0” Transition Open: “2.0”Integration Vendor Proprietary: Intra- Industry standards support with Service-Oriented Architecture provides ease suite integration generalized integration points of integrationMiddleware Vendor Proprietary: Tactical support for open Full support for open standards, broad open customer lock-in standards source adoption, availability of low cost cloud deployment servicesExtensibility Vendor proprietary Vendor eco-system adds value All vendors and all customers add valueOpen systems provide governments with broader Information Technology choices. Governments are less likely to be “locked” intoa proprietary vendor solution. And, governments can choose the most cost-effective IT components at any time whetherproprietary or open source. This enables government agility to adapt to emerging citizen demands.Historical PerspectiveInformation Technology functionality for the consumer, business and government markets have improved dramatically over thepast decades. The 1990s to early 2000s saw the rise of Enterprise Resource Planning (ERP)xiii software that replaced previousrigid business systems. These applications covered multiple horizontal and vertical markets (as defined as ERP II by GartnerGroupxiv). Many core back-office functions were automated. Intra-suite integrationxv became a competitive differentiator.The “dot com” era saw a boom and bust of e-commerce applications. The key problem for dot com providers was the need tocreate the entire transaction infrastructure. This left some winners like eBay and Amazon who were able to achieve the economiesof scale.Significant technical advantages were enjoyed through Internet deployment of consumer IT. The sharing of data centreinfrastructure optimized costs. Central management reduced systems administration costs. And, the Internet browser interface wasconsidered more intuitive. COTS vendors “web enabledxvi” software.The Consumerization of IT (CoIT) xviihas continued as government technology follows trends in Web 2.0 interactivity, deploymenton the private or public clouds and use of mobile devices. The future Government 2.0 could be characterized by social mediainteractivity and emerging CoIT such as “gamificationxviii”. 4FreeBalance®
  • 5. Figure 5: Open Systems Maturity: Environment and TechnologyOpen Gov 2.0 era Cloud CoIT era computing Webified MobileEnvironment ERP era computing ERP 2 era Web 2.0 era ERP 1 era era Client/ Server era MainframeClosed era closed technology open Back-office focused technology Hybrid traditional back-office with web front-end Web-focused front-office technology Towards “Budget 2.0” It is challenging given the Information Technology and government transparency innovation to develop a holistic Figure 6: Budget 2.0 Evaluation Framework framework covering front and back-office functionality. There are numerous overlapping classifications. The Budget 2.0 framework proposes eight evaluation classifications:  Transparency mechanisms leveraged by governments [Figure 7]  Oversight including internal government and external stakeholders such as citizen engagement [Figure 8]  Policy management including the process of building policy and aligning policy to budgets [Figure 9]  Budget formulation including the process for creating and approving budgets [Figure 10]  International standards support for public sector and transparency standards [Figure 11]  Timeliness of information provided to legislatures, civil society and citizens [Figure 12]  Budget Comprehensiveness including all government tiers, parastatal organizations and coverage of all revenue and expenditures [Figure 13]  Budget execution including accounting methods and how execution is controlled to meet budget objectives [Figure 14] 5 FreeBalance®
  • 6. Figure 7: Transparency MechanismsMaturity cycle: increased technical maturity of transparency mechanisms from documents to open data Budget 1.0 Transitional Budget 2.0 Published Documents Web Publishing  Formal documents like  Information published to the web as Open Data “budget book” printed web pages, documents  Pro-active data disclosure, near through government printing  Increasingly pro-active disclosure real-time agency  Machine-readable information Narrative-Centric Visualization-Centric supporting Application  Documents focused primarily on  Diagrams, charts, multimedia Programming Interfaces (APIs) to narrative where diagrams and and infographics as primary support information mashups photographs used to enhance communications mechanism  Increasing amounts of non-financial narrative points data including performance Citizen-Centric information  Significant effort to provide information so that it is easily understood by citizens Interactive Data  Search, drill-down, data selection and outputFigure 8: OversightMaturity cycle: increased use of technology use to improve oversight stakeholders and enable citizen engagement Budget 1.0 Transitional Budget 2.0 Parliamentary Oversight  Parliamentary budget agencies asAudit counterpoint to government Primary concern is budget budget organization compliance Audio Visual Citizen Oversight Often: Internal departmental  Hearings, debates, press  Enabled through pro-active audit organizations conferences published via TV and disclosure, access to information, Often: Independent audit web open data, machine readable data agencies within government Performance Auditing and mashups  Audits matures from budget compliance to  Rise of so-called “data journalism” performance and risk management  Mechanisms to encouragePress and NGO oversight participation including participatory Freedom of the press and freedom of assembly budgeting, crowdsourcing Access to information  Freedom of information laws to enable petitioning government for information  Formal process to manage, redact and release Cooperative Planning Expert Networks  Outreach to business, academics,  Use of collaborative networks, social media for outreach to NGOs in planning communities of experts 6FreeBalance®
  • 7. Figure 9: Policy ManagementMaturity cycle: improved alignment of policy and performance through technology and increasing engagement Budget 1.0 Transitional Budget 2.0 Macro-fiscal frameworks  Methods to collect Performance Management Participatory Policy macroeconomic information and  Analysis of policy effectiveness  Social media mechanisms to analysis to be used in developing  Results shared externally develop policy positions during policy  Adjustment of programs to elections Policy-budget Linkages better achieve policy  Social media mechanisms to  Linkage of policy objectives to objectives develop policy positions as budget inputs part of budget formulation Policy Outreach process  Leveraging external stakeholders, NGOs, business groups etc. to develop policy  Often: formal methods or public hearings usedFigure 10: Budget Formulation ModernizationMaturity cycle: improved alignment of budget and performance through technology and increasing engagement Budget 1.0 Transitional Budget 2.0Budget as ceremony Top-down, bottom-up Budget books Government formal and informal  Publication of budget plans, Performance processes resulting in government intentions, Management Participatory Budgeting budget law organic budget law  Focus on non-  Extends budget Limited stakeholder  Often: pre-budget statement financial measures, preparation to citizens, engagement outside  Often: executive budget output and outcome NGOs, businesses government & proposal results parliament  Often: use ofBudget and Commitment controls dashboards and scorecards Formalized methods of managing budget and commitment accounting  Often: performance information Matures to aggregate controls, support for decentralized published on web decision-making during budget execution  Often: includes Program budgeting accountability Accrual budgeting  Aligns budget with policy structure that  Often: scenario planning and budget assumptions  Identifies true value of enables government investments, used management  Often: first budgets with macro-fiscal frameworks liabilities discretion, within  Often: supports medium-term expenditure rules, to optimize framework performance  Often: procurement planning part of process  Often: project management part of planning 7FreeBalance®
  • 8. Figure 11: International Public Sector and Technical StandardsMaturity cycle: increased use of public sector and technical standards to facilitate comparabilityBudget 1.0 Transitional Budget 2.0 IPSAS Cash-Basis  Standardized method enablingNational Standards comparison among countries IPSAS Accrual Basis National standardization  Generally somewhat supported by  More effective government comparison tool sets stage for international developed countries  Not yet supported by governments standards support  Consistent with IFRS reporting in Some national standards private sector may be consistent with IMF GFS important characteristics of XML-Based Machine Readable  Government Financial Statistics supported by international standards Transparency Standards many developing countries that may require  IATI International Aid Transparency IMF financing Initiative Medium Term Expenditure Frameworks  EITI Extractive Industries  Methodology for developing credible budgets often across Transparency Initiative three-year window  XBRL eXtensible Business Reporting  Typically uses macro-fiscal information as input to budget Language formulationFigure 12: TimelinessMaturity cycle: increased and more rapid publication of information to make data more relevant Budget 1.0 Transitional Budget 2.0 Annual Reports  Annual budget book produced (enacted Unaudited Reports budget)  Periodic  Annual audited accounts produced reports Open Data In Year Execution published  Pro-active data disclosure, near real-  Quarterly or mid-year before audit time audited accounts produced  Machine-readable information Audit Reports supporting Application Programming  Audit findings published Interfaces (APIs) to support Pre-Budget Statement information mashups  Budget formulation intentions published in time  Increasing amounts of non-financial for parliamentary debate and for citizen data including performance engagement information Interactive Data  Search, drill-down, data selection and output  Often: visualization capabilities 8FreeBalance®
  • 9. Figure 13: Budget ComprehensivenessMaturity cycle: improved accounting of all functions across all entities of government Budget 1.0 Transitional Budget 2.0National Government Sub-National Covers all direct  Integrates all sub-national government information into departments and budget information agencies in national Parastatal government  Integrate all government-owned businesses into budget Covers all  Extend to support Public Private Partnerships expenditure and revenue Accrual Extensions: information  Asset, property, contingent liability in budget Often: includes independent and Information Comprehensiveness autonomous  Information extends to support: budget preparation, budget execution, government accounts, agencies human resources, procurement, human resources, debt and investment dataFigure 14: Budget Execution and Accounting MethodsMaturity cycle: improved fiscal discipline, performance alignment and determining the true value of government activities Budget 1.0 Transitional Budget 2.0 Modified Cash Modified Accrual Accrual AccountingCash-based Accounting  End of year accruals  Expenditure  Full accrual Cash-basis of for revenue and and revenue accounting show full accounting used expenditures accrual value of governmentBudget and Commitment controls Formalized methods of managing budget and commitment accounting Performance Discipline Internal controls includes segregation of  Often: use of dashboards and scorecards duties  Budget execution decisions including budget Matures to aggregate controls, support for transfers and virements informed by decentralized decision-making during performance information budget execution  Risk-based approaches used to makeCash, Liquidity management execution decisions Adjustment of controls based on cash forecasts including issuing warrants Often: support for Treasury Single Account Often: investment and debt planning Budget Forecasting  Forecasting surplus, deficit situations  Use of scenario tools to better predict economic effects to adjust budgets during execution 9FreeBalance®
  • 10. Conclusion: The Budget 2.0 Framework as Assessment ToolObservers may find the classifications and descriptions of elements of the Budget 2.0 framework somewhat arbitrary. It is clearthat there is significant interaction among the eight proposed classifications [Figure 15]. The positive effects of an excellentassessment in one classification, such as transparency mechanisms, could be compromised by low budget comprehensiveness orpoor controls in budget execution.Figure 15: Technology Interaction towards Budget 2.0 open data, web publish improves oversight comprehen-Transparency and enables citizen engagement on policy and siveness inmechanisms enables budget formulation budget integration of information internal (i.e., audit) and improves back and web- external scrutiny improves enables ability to front office Oversight deployed policy & budget alignment to comparisons react quickly functions increases performance among to oversight countries opportunities Policy aligns policy carries and threats improves management with budget budget policy and credibility Budget budget through formulation credibility execution Standards enables comparisons among countries Timeliness Improves ability to react improves fiscal Budget discipline for Compr. “whole of government” Budget ExecutionThis paper is the first expression of the Budget 2.0 framework. An open assessment tool is being developed from this framework.This tool will:  Benefit from feedback to improve the categorization  Align country and government characteristics to weight the eight framework classifications to help identify priorities  Integrate elements of current assessment tools [Figure 2], and is not intended to replace any of these tools  Provide a scorecard methodology to assist in reform decision-making [similar to Figure 6]  Identify positive or negative impacts of a classification score across other Budget 2.0 classifications  Provide governments with a “straw-man” PFM reform “road map”i Rodin-Brown, Edwin Integrated Financial Management Information Systems: A Practical Guide United States Agency forInternational Development, January 2008. UN E-Government Survey 2008, From E-Government to Connected Governance, United Nations, 2008. IBID Rodin-Brown 10FreeBalance®
  • 11. iv Diamond, Jack Performance Budgeting: Managing the Reform Process. International Monetary Fund, February 2003 Curristine, “Teresa Performance Information in the Budget Process: Results of the OECD 2005 Questionnaire”, OECD Journal onBudgeting, Volume 5, No 2, 2005, Organisation for Economic Co-operation and Development IBID Diamondvii Granof, Michael, Government and Not-for-Profit Accounting: Concepts and Practices, 4th Edition Wiley, January 2007 O’Reilly, Tim What is Web 2.0: Design Patterns and Business Models for the Next Generation of Software, O’Reilly Media,September 2005 McAfee, Andrew “Enterprise 2.0: The Dawn of Emergent Collaboration” MIT Sloan Management Review, April 2006 O’Reilly, Tim Government as a Platform, O’Reilly Media, 2010 IBIDxii Vanover, J. Sunshine; Shorter, Jack D .”Enterprise Resource Planning Today Issues in Information Systems, Volume VII, No.2,2006 Comport, Jeff. ERP II Technology and Architecture Trends for 2006, Gartner Group, December 2001 Gupta, Shashikant What is ERP (Enterprise Resource Planning)? ERP vs. ERP II, Cyframe Russo, Sara Consumerization of IT, Tuck School of Business, May 2011 Deterding, Sebastian; Sicard, Miguel; Nacke, Lennart; OHara, Kenton; Dixon, Dan Gamification: Using Game Design Elementsin Non-Gaming Contexts, CHI 2011, May 2011 11FreeBalance®
  • 12. About FreeBalanceFreeBalance is a For Profit Social Enterprise (FOPSE)software company that helps governments around the worldto leverage robust Government Resource Planning (GRP)technology to accelerate country growth. ProvenFreeBalance GRP products and focused methodologysupports financial reform and modernization to improvegovernance, transparency and accountability. Good Contact FreeBalancegovernance is required to improve development results. T: +1 613 236-5150 (outside North America)FreeBalance ensures high success rates for governments info@freebalance.comunder stress to those in the G8 and enables governments to www.freebalance.comimprove performance and comply with government goals.Unlike other Commercial Off-the-Shelf (COTS) vendors, CanadaFreeBalance is socially responsible as core, customer-centric FreeBalance (Headquarters)and focused 100% on government. 1101 Prince of Wales Drive Suite 210, Ottawa, OntarioThe FreeBalance Accountability Suite is a comprehensive Canada K2C 3W7fully web-based Government Resource Planning software T: (613) 236-5150suite that supports the entire budget cycle and strengthens Toll Free: 1-877-887-3733 (North America only)governance by improving budget transparency, fiscal control F: (613) 236-7785and predictability. The proven Suite integrates transactionswith content and collaboration through innovative GuatemalaGovernment 2.0 technology and links budget controls with FreeBalanceobjectives to enable governments to improve performance, EuroPlaza World Business Centertransparency and comply with government goals. Unlike Tower 1 – Suite 903 ‘A’other Commercial Off-the-Shelf (COTS) software, the 5 Avenue 5-55 Zone 14FreeBalance Accountability Suite is proven in government Guatemala City, Guatemalaimplementations around the word, programmed forgovernment and progressively activated to adapt to current Kosovoand changing government context. FreeBalance Bedri Pejani, 7AFreeBalance i3+qM is an integrated product development, 10000 Pristina, Kosovoimplementation and sustainability services methodologydesigned for Government Resource Planning to ensure long Portugalterm implementation success. FreeBalance Edificio Cyprum, Avenida 25 de AbrilAuthor No. 15-B, 2DDoug Hadden is VP Products at FreeBalance, a global Linda-a-Velha, Portugalprovider of software solutions for public financial Ugandamanagement (PFM). In that role, Mr. Hadden is responsible FreeBalance Inc.for all aspects of global marketing, business development, Plot No. 23, Soliz Houseand product management. He is also the Chief Customer Lumumba Avenue, Kampala, UgandaAdvocate, responsible for aligning FreeBalance activitieswith customer priorities. United States FreeBalanceMr. Hadden can be reached at 1001 Connecticut Avenue, Suite 720 Washington, DC. 20036 T: 1-877-887-3733 (North America Toll Free) 12FreeBalance®
  • 13. 2FreeBalance®