Version 7 section• brief discussion   0. IFMIS ~ GRP Training &Introduction to Good Practices
Version 7 section1. Intro to FreeBalance       5. Sequencing PFM technology -  –   15 minutes                 Governance V...
. Valuable learning experience section                    Version 7. Contrast public and private 7 section                ...
Version 7 section        Version 7 section• brief discussion                            4
Version 7 section• brief discussion1. Introduction to FreeBalance
Version 7 section1. Intro to FreeBalance       5. Sequencing PFM technology -  –   15 minutes                 Governance V...
“free balance”+   Budget-   Commitments-   Obligations-   Actuals=   Free Balance
Version 7 sectionFreeBalance solutions   • brief discussion   for public financial management support     reform and moder...
Version 7 section   FreeBalance7 section                      in a Nutshell       Version around the accelerate country   ...
Version 7 section• brief discussion
FreeBalance Offices and Regional Support Centres                                Version 7 section              • brief dis...
Version 7 section           Version 7 section   • brief discussionPLEASE EXCUSE THE ANY BIAS…
Version 7 section           Version 7 section   • brief discussionBIAS 1:“GRP”VS“ERP”
Version 7 section          Version 7 section  • brief discussionBIAS 2:INTEGRATIVE APPROACHVS“SYSTEMS INTEGRATION”
Version 7 section          Version 7 section  • brief discussionBIAS 3:PHASED APPROACHVS“BIG BANG”
Version 7 section          Version 7 section  • brief discussionBIAS 5:PERSPECTIVE ON CORRUPTION ANDDEVELOPMENT ~ “GOOD PR...
Version 7 section    • brief discussion     First            Strategic    Second  Generation         Inflection   Generati...
Company Summary   Version 7 section                        Canadian                        Company            High        ...
Version 7 section• brief discussion  2. FMIS/GRP Introduction
Version 7 section1. Intro to FreeBalance       5. Sequencing PFM technology -  –   15 minutes                 Governance V...
Whats special in Government?              Reality Check
Stakeholders  Shareholders     hundreds  Reality Check              Citizens                  millions
Ownership?1• By definition, [public sector organizations] do not own  themselves in the way that commercial organisations ...
Lines of Business?   One of the most   successful and  largest business   conglomeratesacross many lines of      business
Lines of Business?   Agriculture and Agri-Food Canada , Atlantic Canada Opportunities Agency , Atlantic Pilotage Authority...
1. Arvenson         Comparing             Strategy1Strategic Feature            Private Sector                 Public Sect...
Government Financial Management    Goals1                     Parry                             1.Goal                    ...
The objective of implementing    a computerized IGFMIS system:Increase the effectiveness and efficiency of statefinancial ...
Definitions                  Integrated Financial Management System (IFMS)                                          or    ...
Technology in Context           Government Objectives          Modernization and Reform         Public Financial Managemen...
Government Objectives        Modernization and Reform       Public Financial Management                 IFMIS             ...
Public Financial Management• Typical term: Integrated Financial Management  Information System (IFMIS)   – Our term: Gover...
Reality• Reform comes first• An IFMIS must support on-going PFM  modernization• Technology enables the GRP• Technology is ...
Public Sector requires differentapproach• Several governmental agencies in the US,  Germany, Australia, and Malaysia have ...
Private SectorThe key financial concept is:                        Profit                        (Loss)Public SectorThe ke...
Private SectorThe key control is:                      Profit                      (Loss)Public SectorThe key control is: ...
Bottom Line?   Reality check:                  Governments are more concerned                  about whether money was spe...
The Budget is THE LAW• Approved by legislature and executive  often described as the “organic budget  law”• In many countr...
Commercial Financial Management1     Inputs            Business             Outputs (measured in $)       Process         ...
Key Private Sector Reports and   Concepts                                          Future value            Net days outsta...
Government Financial ManagementProcess1       Planning                                Budgeting              1.   ParryRes...
1.   Rodin-Brown
1.   Rodin-Brown
Definitions                                     Public Financial                                               Management ...
Version 7 section                                   Budget Controls                                           Appropriat...
Government Financial Management1            Inputs                 Business                 OutputsInputs = Appropriations...
Government Financial ManagementSoftware1• Features required for government financial  management software   – System drive...
Example of the Public Sector          Difference1                                1.   ParryFinancial Statement            ...
What are governments trying toachieve?• General: efficiency and effectiveness  through automation• Reduced fraud and corru...
Simplified World Bank Treasury           Reference Model: Organization              Ministry of    Spending   Revenue    C...
Simplified World Bank Treasury           Reference Model: Organization              Ministry of    Spending   Revenue    C...
Accounting 101•   Assets, Liabilities, Equity•   Debit, Credits•   Journals and Ledgers•   Financial Reports
“Commitment Accounting is...”            where spending controls            are enacted that ensure            that no bud...
Four Types of Accounting• Financial Accounting: reporting results to  external stakeholders consistent with G.A.A.P.• Tax ...
Key Advantagesof Commitment Accounting• Ensures sufficient funds will be reserved  against a budget to meet contractual  o...
What is a commitment?• It is the stage between the establishment of  an agreement between parties (whether that  be signin...
Types of Commitments• Planned/Intended Expenditures or Travel  Plans  – Soft Commitments/Pre-encumbrances  – Requisitions ...
Commitment AccountingPractices• Requirement to commit funds for  anticipated or contracted future  spending• Delegation of...
Financial Accountability -  Commitments in the System• Commitments indicate what budget  funds are required to pay for fut...
Above and Below                                        Fiscal spaceAbove the line  Budget                  •Control arrea...
Simplified ExampleBudget:                                                                           Budget:100            ...
Commitment Accounting benefits 1. Track actual expenditures 2. Predict future expenditures based on    commitments 3. Ensu...
Simplified World Bank Treasury           Reference Model: Organization              Ministry of    Spending   Revenue    C...
A        Requisition        Allotment 1                                                        Transaction Data           ...
A        Requisition        Allotment 1                                                   Transaction Data                ...
What is the Chart of Accounts?• Defines how accounting information is:   – Categorized   – Collected   – Reported• COA iss...
Chart of Accounts         This is a SAMPLEChart of Account Groups (Example)Fund Organization Program Project Location Obje...
COA Purpose                                    Fund                 Economic CodeOrganization                             ...
COA Arrangement        Fund        Organization                                    Objective                    Accounting...
Sample Chart of AccountsOrganization   Fund   Program/ Project   Location   Object
OrganizationOrganization            Fund          Program/ Project   Location   Object               Organization Type    ...
Fund Organization          Fund                Program/ Project        Location   Object                               All...
Project/ProgramOrganization       Fund         Program/ Project      Location        Object                   MDG         ...
LocationOrganization   Fund   Program/ Project   Location    Object                                         Province      ...
ObjectOrganization   Fund   Program/ Project     Location           Object                                         Account...
Typical Scenario Government     Commitment AccountingFinancial Budget• Guideline amounts selected• At the detail level: ge...
Typical Scenario Government     Commitment AccountingFinancial BudgetAppropriation• Amount approved by legislature or Mini...
Typical Scenario Government     Commitment AccountingFinancial BudgetAppropriationWarrant• Amount released for use• Contro...
COMMITMENT CYCLE  MULTIPLE       Version 7 section                            appropriations                            co...
Fund Type           Fund                  Indicator             Locations      Object             Organization            ...
Typical Scenario Government  Commitment Accounting• Two levels of “commitments”:   – Soft commitment or commitment   – Har...
Obligations vs. CommitmentsCommitment or Soft Commit   Obligation or Hard Commit
What is accrual?• Transaction and events are recognized  when they occur rather than when cash  is paid or received• Cash ...
Why is this a problem ingovernment?• Corporations with shareholders and auditors  must operate on an accrual basis• Accrua...
Good-bye Accrual World1? Cash       • Cash accounting reports cash transactions              when received or paid. Conseq...
State of the Art• Most governments in hybrid state.  – Canada is modified accrual (mostly).  – New Zealand in accrual.  – ...
Simplified World Bank Treasury           Reference Model: Organization              Ministry of    Spending   Revenue    C...
100%    90%                                                     80%                                                      ...
Budget Transfers                                     Budget                                                           from...
Some comments• Adoption of “proper” MTEF limited  success   – MTMF (macroeconomic framework)   – MTFF (fiscal framework)  ...
Budget Ceremony•   +/- %•   View that budget = outcomes•   Lack of zero-based budgeting concepts•   Few tools that enable ...
Simplified World Bank Treasury           Reference Model: Organization              Ministry of    Spending   Revenue    C...
“Treasury” Function                   Investment        Debt                  Management      Management                  ...
• CorruptionWhy TSA?   • Liquidity           • Predictability
Simplified World Bank Treasury           Reference Model: Organization              Ministry of    Spending   Revenue    C...
Government Spending as % of GDP          http://anepigone.blogspot.com/2008/03/government-spending-as-                    ...
Government Wage Bill as % of Expenditures                             World Bank 2000-2008 AverageBahrain, Kingdom of     ...
Payroll and PFM• Wage bill is material to government  expenditures• Corruption opportunity• Variability in payroll   – Sea...
Simplified World Bank Treasury           Reference Model: Organization              Ministry of    Spending   Revenue    C...
Audit• Internal Audit• External Audit “Supreme Audit  Organization”• Maturing   – Compliance   – Risk Management   – Perfo...
International Standards• World Bank Treasury Reference Model• International Monetary Fund Code of Good Practice on  Fiscal...
World Bank Treasury ReferenceModel http://devportal/files/Additional%20Treasury%20Reference%20Model.ppt• Purpose   – Devel...
IMF Code of Good Practice onFiscal Transparency• Purpose   – Method to assess government fiscal transparency with     prac...
IMF Government Finance Statistics Manual• Purpose:                   http://devportal/files/Additional%20GFS.pdf   – Provi...
IFAC IPSASs                          http://devportal/files/Additional%20IPSAS.ppt• Purpose   – Report requirements for go...
Medium Term Expenditure  Frameworks http://devportal/files/Additional%20MTEF.ppt• Purpose   – Rational planning and budget...
UN Classification of the Functionsof Government• Purpose   – Functional classification to report government     statistics...
Generally Accepted Accounting    Practices (GAAP)•    Purpose     – A collection of rules and procedures and conventions  ...
International Aid Transparency    Initiative (IATI)•    Purpose     – IATI aims to make information about aid spending eas...
eXtensible Business Reporting    Language (XBRL)•    Purpose     – Global standard for reporting and exchanging business  ...
Typical Challenges1• Lack of Engagement and Political/ Management  Support.• Inadequate Preparation (Vision, Policies,  Ca...
Developing Nation Issues• No luxury for massive technology footprint – The  Complexity Trap• Functional and technical capa...
GRP PracticesBest?                        Good• Double Entry Bookkeeping   • 2 – Phased Commit• Commitment Accounting     ...
Version 7 section• brief discussion3. Technology & Transparency          Leapfrog              & Case Study
Version 7 section1. Intro to FreeBalance       5. Sequencing PFM technology -  –   15 minutes                 Governance V...
Confusion?             3
Congress cuts transparency funding
How can Timor-Leste affordgovernment transparency?                     Timor-Leste   United States   ComparisonIndependenc...
globalization
= competition
choice
citizens are watching
empowered
Democratic Republic of Timor-Leste   (RDTL)Transparency  Objectives
build civil society
build infrastructure
build capacity
build citizen involvement     in government
improve government performance
?
3                                                          Benefits of Transparency                                       ...
3         HIGH                                                         Benefits of Transparency                           ...
3                                                       Benefits of Transparency                                          ...
= stability
= investor confidence
avoid theresource curse
technology leapfrog
Version 7 section        leapfrog theory…• brief discussion
Version 7 section    entrenched technology• brief discussion                            26
use what works
skip whatdoesn’t work
skip stages
modernize
rapidly
reviewTransparency and Accountability      The next generation of public financial management technology will allow the pu...
sequenced
Public Financial Management –                     Foundation for Country Growth                                Public Fina...
PFM inOverdrive?
1. International Standards
IPSASInternational Public Sector Accounting              Standards           Strengthening Public Financial Management    ...
EITI  Extractive  IndustriesTransparency   Initiative
GFSGovernment Financial Statistics
MTEF     Medium TermExpenditure Frameworks
IATI   International AidTransparency Initiative
2. Document Management
managescorrespondence with  senior managers       repository for freedom of information
3. e-Procurement
review           government tenders published                                                                          ven...
Version 7 sectionfront/back office integration• brief discussion
4. Transparency Portal
reviewwww.transparency.gov.tl                   Strengthening Public Financial Management in Timor-Leste   48
articles                        subscribe           drill down
Expenditures, Transparency Portal            10 years of data     drill through the chart of accounts
Expenditures, Transparency Portal                             export to xls, doc, pdf, html, xml                          ...
5. Performance Management
review                                                               examines budget execution data                       ...
transparent presentation of public investment programs        simple classifications       Strengthening Public Financial ...
physical & financial progress
drill down
narrative
proofprogress
Lessons Learned  Strengthening Public Financial Management                                              61                ...
1.Transparency    is not an      Option
Mobile cellular telephone subscribers                                  Per 100 inhabitants100                             ...
2. Transparency =Performance > Embarrassment
Role of Civil Society • NGO’s can help organise literacy groups and provide   materials. They can provide private educatio...
3. Sequenced Holistic Multiple-      Year PFM Strategy
reviewPublic Financial Management –             Foundation for Country Growth                                             ...
4. Build Capacity
review               PFM Modernization               Alignment with Capacity Building• Training beyond            • Intuit...
5. Require Sustainability in Partner           Performance
6. Leverage Open Systems
Transition to Open Environment:                   TransparencyDomain                    Closed               Transition   ...
Transition to Open Systems:                         TechnologyDomain                Closed              Transition        ...
Leapfrog is possible                       Timor-Leste              United States       Comparison                   GFS, ...
www.revenuewatch.org
How?                                Timor-Leste                 United States                                             ...
Version 7 section                  Lessons LearnedTechnology                     Transparency      • brief discussion• Re-...
Goodbye Conflict, Welcome     Development
Version 7 section • brief discussion4. Performance Management in             PFM
Version 7 section1. Intro to FreeBalance       5. Sequencing PFM technology -  –   15 minutes                 Governance V...
military
military intelligence
business
business ethics
British
British cuisine
Government
Government performance
What is Corporate PerformanceManagement?                  Reporting     Data Mining Scorecarding   OLAP                  B...
Drivers for Corporate PerformanceManagement• Too much information• Business Intelligence tools such as  reporting are not ...
Corporate Performance Objectives    • “Key Performance Indicators” (KPIs) and      “scorecards” are simple to understand  ...
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2012 09-10 fmis-training_at_crown_agents

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Training course on Government Resource Planning/Government Integrated Financial Management systems given at Crown Agents training course

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2012 09-10 fmis-training_at_crown_agents

  1. 1. Version 7 section• brief discussion 0. IFMIS ~ GRP Training &Introduction to Good Practices
  2. 2. Version 7 section1. Intro to FreeBalance 5. Sequencing PFM technology - – 15 minutes Governance Valuations – 90 minutes2. FMIS/GRP Introduction 6. Financially sustainable GRP, – • brief discussion 90 minutes governance structures, lessons3. Technology Leapfrog learned – 45 minutes – 45 minutes4. Performance Management in 7. GRP and Anti-Corruption PFM – 30 minutes – 60 minutes 8. Future of PFM technology Agenda – 30 Minutes 9. “Parking Lot”
  3. 3. . Valuable learning experience section Version 7. Contrast public and private 7 section Version sector accounting & management. Training course, not a • brief discussion demonstration. Breadth of financial management in government. Strategic, tactical, futures. Vendor-neutral “good practices”. Share lessons among group. Voice lasts until end of day. Address specific ideas, concerns
  4. 4. Version 7 section Version 7 section• brief discussion 4
  5. 5. Version 7 section• brief discussion1. Introduction to FreeBalance
  6. 6. Version 7 section1. Intro to FreeBalance 5. Sequencing PFM technology - – 15 minutes Governance Valuations – 90 minutes2. FMIS/GRP Introduction 6. Financially sustainable GRP, – • brief discussion 90 minutes governance structures, lessons3. Technology Leapfrog learned – 45 minutes – 45 minutes4. Performance Management in 7. GRP and Anti-Corruption PFM – 30 minutes – 60 minutes 8. Future of PFM technology Agenda – 30 Minutes 9. “Parking Lot”
  7. 7. “free balance”+ Budget- Commitments- Obligations- Actuals= Free Balance
  8. 8. Version 7 sectionFreeBalance solutions • brief discussion for public financial management support reform and modernization to improve governance, transparency and accountability.
  9. 9. Version 7 section FreeBalance7 section in a Nutshell Version around the accelerate country • Help governments growth, improve stability and reduce poverty through improved governance• brief discussion • For Profit Social Enterprise focused on governance Why • Customer-centric to ensure customer sustainability • Laser focus on the public sector in products and How processes What • Configuration approach rather than customization • Comprehensive Government Resource Planning software • Implementation participation to improve success • Capacity building to achieve government self-sufficiency • Steering Committee to ensure alignment with customers
  10. 10. Version 7 section• brief discussion
  11. 11. FreeBalance Offices and Regional Support Centres Version 7 section • brief discussion Ulaanbaatar Ottawa Bishkek Pristina Washington Kabul Lisbon Ramallah Guatemala City Monrovia Kolkata St. Johns Bangalore Freetown Kampala Dili• services & support• sales, business development & marketing• product management & development• corporate services
  12. 12. Version 7 section Version 7 section • brief discussionPLEASE EXCUSE THE ANY BIAS…
  13. 13. Version 7 section Version 7 section • brief discussionBIAS 1:“GRP”VS“ERP”
  14. 14. Version 7 section Version 7 section • brief discussionBIAS 2:INTEGRATIVE APPROACHVS“SYSTEMS INTEGRATION”
  15. 15. Version 7 section Version 7 section • brief discussionBIAS 3:PHASED APPROACHVS“BIG BANG”
  16. 16. Version 7 section Version 7 section • brief discussionBIAS 5:PERSPECTIVE ON CORRUPTION ANDDEVELOPMENT ~ “GOOD PRACTICES”VS“BEST PRACTICES”
  17. 17. Version 7 section • brief discussion First Strategic Second Generation Inflection Generation “ERP Era” to Point 2007- “GRP Era” 2007 2010 2010+BIAS 5: MARKET IS CHANGING VSSTAYING SAME
  18. 18. Company Summary Version 7 section Canadian Company High GRP Success Rate Leader • brief discussion Global PFM Modern Provider 100% Web Government Technology Focus Covers ISO- Budget 9001/2008 Cycle
  19. 19. Version 7 section• brief discussion 2. FMIS/GRP Introduction
  20. 20. Version 7 section1. Intro to FreeBalance 5. Sequencing PFM technology - – 15 minutes Governance Valuations – 90 minutes2. FMIS/GRP Introduction 6. Financially sustainable GRP, – • brief discussion 90 minutes governance structures, lessons3. Technology Leapfrog learned – 45 minutes – 45 minutes4. Performance Management in 7. GRP and Anti-Corruption PFM – 30 minutes – 60 minutes 8. Future of PFM technology Agenda – 30 Minutes 9. “Parking Lot”
  21. 21. Whats special in Government? Reality Check
  22. 22. Stakeholders Shareholders hundreds Reality Check Citizens millions
  23. 23. Ownership?1• By definition, [public sector organizations] do not own themselves in the way that commercial organisations do, and so cannot, for example, switch from producing widgets to making jam if they so choose. Indeed, the concept of successful public sector organisations is itself elusive, for this reason. The common currency of profit and shareholder value that defines the private sector clearly does not apply to public organisations, and attainment of other goals gives no guarantees for their future. As the requirements of public service and political imperatives change, public sector organisations are often reorganised, reformed or even eliminated, regardless of their past level of achievement or recognition 1. Better Management.com
  24. 24. Lines of Business? One of the most successful and largest business conglomeratesacross many lines of business
  25. 25. Lines of Business? Agriculture and Agri-Food Canada , Atlantic Canada Opportunities Agency , Atlantic Pilotage Authority Canada , Atomic Energy of Canada Limited , Auditor General of Canada, Office of the , Bank of Canada , Business Development Bank of Canada , Cadets Canada , Canada Border Services Agency (CBSA) , Canada Business Network , Canada Council for the Arts , Canada Deposit Insurance Defence Corporation , Canada Economic Development for Quebec Regions , Canada Firearms Centre , Canada Industrial Relations Board , C anada Lands Company Limited, Canada Mortgage and Housing Commissions Welfare Corporation , Canada Pension Plan Investment Board , Canada Post Corporation , Canada Revenue Agency (CRA), Canada School of Public Service , Canada Science and Technology Museum Corporation , Canada Transportation Act Review , Canada-Nova Scotia Offshore Petroleum Board , Canadian Air Transport Security Authority (CATSA) , Canadian Artists and Producers Professional Legislature Relations Tribunal , Canadian Broadcasting Corporation , Canadian Centre for Occupational Health and Safety , Canadian Centre on Substance Abuse , Canadian Coast Guard , Canadian Commercial Corporation , Canadian Dairy Commission , Canadian Environmental Assessment Agency , Canadian Food Inspection Agency , Canadi an Forces Grievance Board , Canadian Grain Commission , Museums Canadian Heritage , Canadian Human Rights Commission , Canadian Human Rights Tribunal , Canadian Institutes of Health Research , Canadian Intellectual Property Office (CIPO) , Canadian AgricultureIntergovernmental Conference Secretariat , Canadian International Development Agency , Canadian International Trade Tribunal , Canadian Judicial Council , Canadian Museum of Civilization Corporation , Canadian Museum of Nature , Canadian Nuclear Safety Commission , Canadian Pari-Mutuel Agency , Canadian Polar Commission , Canadian Police College , Canadian Race Relations Foundation , Health Canadian Radio-television and Telecommunications Commission , Canadian Space Agency , Canadian Tourism Commission , Canadian Transportation Agency , Canadian Wheat Board , Cape Breton Mint Industry Police and Security Development Corporation , Cape Breton Growth Fund (CBGF) , Citizenship and Immigration Canada , Climate Change (Government of Canada) , Commissioner for Federal Judicial Affairs, Office of the , Commissioner of Official Languages, Office of the , Commissioner of Review Tribunals CPP/OAS, Office of the , Commissioner of the Environment and Sustainable Development , CommunicationsSecurity Establishment , Communications Security Establishment Commissioner, Office of the , Competition Bureau , Competition Tribunal , Copyright Board Canada , Correctional Service Canada (CSC) , Courts Administration Service , Defence Construction Canada , Defence Research and Development Canada (Defence R&D Canada) , Elections Canada , Employment Insurance Board of Referees, Research Natural Resources Enterprise Cape Breton Corporation , Environment Canada , Environmental Protection Review Canada , Ethics Commissioner, Office of the , Export Development Canada , Farm Credit Canada , Federal Export Banking Bridge Corporation Limited , Federal Court , Federal Court of Appeal , Federal Labour Standards Review , Finance Canada, Depa rtment of , Financial Consumer Agency of Canada (FCAC) , Financial Transaction and Reports Analysis Centre of Canada (FINTRAC) , Fisheries and Oceans Canada , Foreign Affairs Canada (FAC) , Freshwater Fish Marketing Corporation , Functional Communities of the Taxation Government of Canada , Governor General of Canada , Great Lakes Pilotage Authority Canada , Hazardous Materials Information R eview Commission, Health Canada , House of Commons , Human Resources and Skills Development Canada (HRSDC), Immigration and Refugee Board of Canada , Indian and Northern Affairs Canada , Indian Claims Commission , Indian Residential Schools Resolution Canada , Industry Canada , Information Commissioner of Canada, Office of the , Infrastructure Canada , Inspector General of the Canadian Security Intelligence Service , Interagency Advisory Panel on Legal Prisons Research Ethics , International Centre for Human Rights and Democratic Development , International Development Research Centr e , International Joint Commission , International Trade Canada (ITCan), Post Office Granting Justice Canada, Department of , Law Commission of Canada , Leadership Network, The , Library and Archives Canada, Marine Atla ntic , Military Police Complaints Commission , NAFTA Secretariat - Canadian Section , National Advisory Council on Aging , National Arts Centre , National Battlefields Commission , National Ca pital Commission (NCC) , National Crime Prevention Strategy , National Defence, National Energy Board , National Farm Products Council , National Film Board of Canada , National Gallery of Canada , National Joint Council , National Literacy Secretariat , National Research Environment Foreign Affairs Council Canada , National Round Table on the Environment and the Economy , National Search and Rescue Secretariat , Natural R esources Canada , Natural Sciences and Engineering Research Council Broadcasting of Canada , Networks of Centres of Excellence, Office of the Secretary to the Governor General , Pacific Pilotage Authority C anada , Parks Canada , Parliament of Canada , Passport Canada , PatentedMedicine Prices Review Board , Pension Appeals Board , Policy Research Initiative , Prime Minister of Canada, Office of the , Privacy Commissioner of Canada , Privy Council Office, Public Health Agencyof Canada , Public Safety and Emergency Preparedness Canada, Public Sector Pension Investment Board , Public Service Commissi on of Canada , Public Service Human Resources Management Agency, of Canada , Public Service Integrity Office , Public Service Labour Relations Board , Public Service Staffing Tribunal , Publ ic Works and Government Services Canada , Queens Quay West Land Corporation , Rebuilding Afghanistan , Receiver General for Canada , Review Tribunal (Agriculture and Agri-food) , Royal Canadian Mint , Royal Canadian Mounted Police (RCMP), Security Intelligence Regulatory Boards Review Committee , Senate of Canada , Service Canada , Social Development Canada (SD), Social Sciences and Humanities Researc h Council of Canada , Species at Risk Act Public Registry , Standards Transportation Insurance Council of Canada , Statistics Canada , Status of Women Canada , Superintendent of Financial Institutions, Office of the , Su preme Court of Canada , Tax Court of Canada , Team Canada inc , Technology Partnerships Canada , Telefilm Canada , Transport Canada, Transportation Appeal Tribunal of Canada , Transportation Safety Bo ard of Canada , Treasury Board of Canada Secretariat, Veterans Affairs Canada , Veterans Review and Appeal Board Canada , VIA Rail Canada Inc. , Voluntary Sector Initiative , Western Economic Dive rsification Canada.
  26. 26. 1. Arvenson Comparing Strategy1Strategic Feature Private Sector Public SectorGeneral Strategic Goal Competitiveness Mission effectivenessGeneral Financial Goal Profit, Growth, Market Share Cost Reduction, EfficiencyValues Innovation, Creativity, Accountability to public, Goodwill, Recognition Integrity, FairnessDesired Outcome Customer satisfaction Citizen Customer satisfactionStakeholders Stockholders, Owners, Taxpayers, Inspectors, Market LegislatorsBudget priorities set by: Customer Demand Leadership, Legislators, PlannersJustification for secrecy: Protection of intellectual Nationalprotection of & Security capital, Proprietary citizen rights KnowledgeKey success factors Growth Rate, Earnings, Best Management Practices Market Share, Uniqueness, Sameness Advanced Technology Standardized Technology
  27. 27. Government Financial Management Goals1 Parry 1.Goal Explanation1. Effective Fiscal Management Management of fiscal flows, balances and risk2. Allocation of Resources In To ensure that Government priorities areAccordance with Government Priorities identified and articulated as budgetary objectives, and at all levels of government reflected in the allocation of resources.3. Management of Resources to Achieve Timely and relevant information to betterValue for Money manage allocated resources to achieve efficiency, economy, effectiveness and value for money.4. Best Practice in Transparency and To implement best internationalAccountability standards of fiscal transparency and accountability.
  28. 28. The objective of implementing a computerized IGFMIS system:Increase the effectiveness and efficiency of statefinancial management and facilitate the adoptionof modern public expenditure managementpractices in keeping with international standardsand benchmarks1. 1. Points
  29. 29. Definitions Integrated Financial Management System (IFMS) or 1. Dener Integrated Public Financial Management System (IPFMS) or Integrated Financial Management Information System (IFMIS)IFMS is a common information and communication technology (ICT) platform whichintegrates core public financial management (PFM) functions (e.g. budgeting, treasuryoperations, accounting, cash/debt management, auditing/reporting) to ensureefficient management of public resources.IFMS is usually a centralized system which supports distributed (countrywide)operations of PFM organizations on a unique central database containing all financialinformation.Reliable databases, enhanced business processes and consistent information flowsbetween various PFM modules increase overall operational efficiency, improvesplanning and decision making process, and enhances transparency.
  30. 30. Technology in Context Government Objectives Modernization and Reform Public Financial Management IFMIS Technology
  31. 31. Government Objectives Modernization and Reform Public Financial Management IFMIS TechnologyTechnology Vendor Viewpoint
  32. 32. Public Financial Management• Typical term: Integrated Financial Management Information System (IFMIS) – Our term: Government Resource Planning (GRP)• IFMIS in context of PFM – Technology foundation for implementing PFM reform through political reform – IFMIS implementations must be sequenced to the unique country context – IFMIS systems must be flexible to adapt to changes and budget reform evolution – IFMIS implementations must be sustainable
  33. 33. Reality• Reform comes first• An IFMIS must support on-going PFM modernization• Technology enables the GRP• Technology is not government modernization
  34. 34. Public Sector requires differentapproach• Several governmental agencies in the US, Germany, Australia, and Malaysia have reported that the integration of agencies and systems in the public sector can be quite different from the private sector, requiring the use of a different approach and model. 1. Wagner, Antonucci
  35. 35. Private SectorThe key financial concept is: Profit (Loss)Public SectorThe key financial concept is: Budget
  36. 36. Private SectorThe key control is: Profit (Loss)Public SectorThe key control is: Budget
  37. 37. Bottom Line? Reality check: Governments are more concerned about whether money was spent where it was planned to be spent rather than whether it did any good.Private PublicSector Sectorprofit free balance
  38. 38. The Budget is THE LAW• Approved by legislature and executive often described as the “organic budget law”• In many countries, the budget is the expression of parliamentary “confidence”
  39. 39. Commercial Financial Management1 Inputs Business Outputs (measured in $) Process (measured in $) Difference = Profit• Input decision driven by need to maximize profit• Clear concept of business entity• Funding directly linked to business process• Legal requirement to value entity’s assets and liabilities 1. Parry
  40. 40. Key Private Sector Reports and Concepts Future value Net days outstanding Profit and Loss Price earnings ratio Statement Balance Sheet Net present value Weighted Average Cost Gross Profit Margin Goodwill Statement of Cash Flow Earnings beforedepreciation, interest, taxes Shareholder’s Equity Reality check: Equity Investments Shareholder’s Equity How many of these concepts Return on equity are important in government? Borrowing Debt to Equity Ratio Return on sales Working Capital Return on equity Weighted average cost of Earnings per share Capital
  41. 41. Government Financial ManagementProcess1 Planning Budgeting 1. ParryResource Policy Medium Annual ceiling objectives term budget budgets Programs & projects Budgeted performance targets Budget Execution Cash& Debt Feedback for monitoring & control Management Reporting & Accounting Fund release Monitoring General Performance Financial statements ledger recording Financial & performance Asset HRM & reports to managers management Payroll
  42. 42. 1. Rodin-Brown
  43. 43. 1. Rodin-Brown
  44. 44. Definitions Public Financial Management CyclePolicy Development Budget Budget Execution and Review Preparation [ Treasury System ] Audit and Mgmt of Budget Evaluation Authorizations 1. Dener Fiscal Reports & Commitment of Budget Review Funds FMIS Procurement/Web Portal Purchasing Debt and Aid Payments and Management Receipts Mgmt Asset / Inventory Mgmt Cash Payroll Calcs Management HR Mgmt
  45. 45. Version 7 section  Budget Controls  Appropriations• brief discussion  Budget Books  Expenditures Budget Law  Procurement Planning  Receipts  Civil Service  Forecasting  Payroll Policy  Treasury Analysis  Materials  Social Programs Government Resource Planning (GRP)
  46. 46. Government Financial Management1 Inputs Business OutputsInputs = Appropriations (measured in $) Process (service delivery) Comparison = Value for Money • Input decisions driven by budget as the legal embodiment of public policy • Definition of government entity difficult, boundaries different for fiscal and business management • Funding not linked to business process • No legal requirement to identify assets and liabilities Seeing change in the 1. Parry last 2 points.
  47. 47. Government Financial ManagementSoftware1• Features required for government financial management software – System driven by budget as legal authority to raise taxes and spend money – Manage multi level fund release against budget authorisation – warranting and commitment accounting – Able to provide complex expenditure analysis to meet internal and international requirements = complex chart of accounts structure – Accounting systems typically still cash based so must be able to record transactions initiated by cash – If accrual accounting used must also be able to provide cash flow information – Comply with IPSAS and IMF requirements 1. Parry
  48. 48. Example of the Public Sector Difference1 1. ParryFinancial Statement Budget • Government Perspective Actual Difference for 2005 for 2005 – Surplus to ConsolidatedRevenue $500 $800 +$300 FundCost $300 $480 +$180 – Excess spending =Surplus $200 $320 +$120 budget overrun – Result = problem • Commercial Entity Perspective – Excess revenue = sales success – Excess costs = necessary costs – Results = success
  49. 49. What are governments trying toachieve?• General: efficiency and effectiveness through automation• Reduced fraud and corruption through controls & audit• Improved cash management, decision- making, value for money through reporting & analysis• Improved decision-making through decentralization
  50. 50. Simplified World Bank Treasury Reference Model: Organization Ministry of Spending Revenue Central Bank Audit Finance Agencies Agencies OrganizationPlanning / BudgetBudget Preparation Ledgers, Controls Financial ReportsProcurement Purchasing , ProcurementTreasury Cash, Debt, Foreign Bank ExchangePublic Service Payroll, Pensions
  51. 51. Simplified World Bank Treasury Reference Model: Organization Ministry of Spending Revenue Central Bank Audit Finance Agencies Agencies OrganizationPlanning / BudgetBudget Preparation Ledgers, Controls Financial ReportsProcurement Purchasing , ProcurementTreasury Cash, Debt, Foreign Bank ExchangePublic Service Payroll, Pensions
  52. 52. Accounting 101• Assets, Liabilities, Equity• Debit, Credits• Journals and Ledgers• Financial Reports
  53. 53. “Commitment Accounting is...” where spending controls are enacted that ensure that no budget executor can exceed their annual appropriations .
  54. 54. Four Types of Accounting• Financial Accounting: reporting results to external stakeholders consistent with G.A.A.P.• Tax Accounting: reporting results to government consistent with the laws of that nation.• Cost or Managerial Accounting: providing actionable information• Fund or Commitment Accounting: accounting method used for not for profits, educational institutions and governments  – Budgetary Control – Keeping track of in-progress expenditures
  55. 55. Key Advantagesof Commitment Accounting• Ensures sufficient funds will be reserved against a budget to meet contractual obligations.• Guarantees that budget funds will not be spent inadvertently on unauthorized costs.• Helps in planning for anticipated and future costs.
  56. 56. What is a commitment?• It is the stage between the establishment of an agreement between parties (whether that be signing a contract or passing legislation) and the fulfillment of the requirements of the agreement by one or more parties.• The reservation of funds for a specific purpose and its formal entry into agencys accounting system so recording the reservation.
  57. 57. Types of Commitments• Planned/Intended Expenditures or Travel Plans – Soft Commitments/Pre-encumbrances – Requisitions For Goods or Services• Purchase Orders or Contractual Obligations – Hard Commitments/Obligations/ Encumberances
  58. 58. Commitment AccountingPractices• Requirement to commit funds for anticipated or contracted future spending• Delegation of authority to commit funds (commitment thresholds)• Monthly review of commitments (monitory discharge and de-commitment of committed funds)
  59. 59. Financial Accountability - Commitments in the System• Commitments indicate what budget funds are required to pay for future purchases & labour costs.• When commitments are paid they become actual expenditures – “actuals”
  60. 60. Above and Below Fiscal spaceAbove the line  Budget •Control arrears •Budget execution •Budget control •Management and forecastingBelow the line  Actual Accounting Reality check: •Ledgers Private sector applications •Accruals focus “below the line” •Financial Statements •Legal obligations •Who and how much due
  61. 61. Simplified ExampleBudget: Budget:100 100 Commitment: Commitment: 25 0 Obligation: Obligation: 0 25Available: free balance: free balance: free balance:100 75 75 75 Approve General General General General Ledger: Ledger: Ledger: Ledger: 0 0 25 25 Accounts Payable, Liabilities, Expenses, etc.
  62. 62. Commitment Accounting benefits 1. Track actual expenditures 2. Predict future expenditures based on commitments 3. Ensure that the budget is not overspent 4. Ensure that the budget meets the law
  63. 63. Simplified World Bank Treasury Reference Model: Organization Ministry of Spending Revenue Central Bank Audit Finance Agencies Agencies OrganizationPlanning / BudgetBudget Preparation Ledgers, Controls Financial ReportsProcurement Purchasing , ProcurementTreasury Cash, Debt, Foreign Bank ExchangePublic Service Payroll, Pensions
  64. 64. A Requisition Allotment 1 Transaction Data A Purchase O. Allotment 2 Flow GRN/GRTNBudgets C Commit Expense V. Payment B A B APG. Ledger Journal V. Sales Invoice B AR adjustment Cash Sale Cash Receipt balance - integrity
  65. 65. A Requisition Allotment 1 Transaction Data A Purchase O. Allotment 2 Flow GRN/GRTNBudgets C Commit Expense V. Payment B A B APG. Ledger Journal V. Sales Invoice B AR Cash Sale Cash Receipt
  66. 66. What is the Chart of Accounts?• Defines how accounting information is: – Categorized – Collected – Reported• COA issues include: – Best way to roll up granular information to summary – Best way to enable security – Best way to manage controls – Appropriate level of granularity required
  67. 67. Chart of Accounts This is a SAMPLEChart of Account Groups (Example)Fund Organization Program Project Location Object Object Code is the only mandatory element for FreeBalance.
  68. 68. COA Purpose Fund Economic CodeOrganization Accounting CodeApprove ObjectiveResponsibility Program Project Performance Location Report GFS MDG Tier Activities
  69. 69. COA Arrangement Fund Organization Objective Accounting Program Code Tier Approve Performance Project Responsibility Activities Economic Code Location Report GFS MDG
  70. 70. Sample Chart of AccountsOrganization Fund Program/ Project Location Object
  71. 71. OrganizationOrganization Fund Program/ Project Location Object Organization Type (1)Sector Councils Reporting Groups (1) (3) (2) Divisions (5) Cost Centres (7)
  72. 72. Fund Organization Fund Program/ Project Location Object All Fund (1) General Gov. (1)Source Type Fund Table Donor Type (1) (1) (1) Source Group Fund Source Donor Table (3) (3) (3)
  73. 73. Project/ProgramOrganization Fund Program/ Project Location Object MDG Pillars Project Project Type (2) (1) (3) (1) Themes (2) Objectives Component GFS Function 1 (1) (4) (3) Priority (1) Sub Group Sub Component GFS Function 2 (1) (6) (4) Activity Group Activities GFS Function 3 (3) (8) (5)
  74. 74. LocationOrganization Fund Program/ Project Location Object Province (1) Districts (3) Divisions (4) Ward (5)
  75. 75. ObjectOrganization Fund Program/ Project Location Object Account Type (1) GFS L1 Main Category (1) (1) GFS L2 Sub Category (2) (2) GFS L3 Item Group Expenditure Type (3) (2) (1) GFS L4 Object Group Sub Type (2) (3) (2) GFS L5 Object Code (5) (4)
  76. 76. Typical Scenario Government Commitment AccountingFinancial Budget• Guideline amounts selected• At the detail level: general ledger coding block• Typically no controls at the “financial budget” – Too granular to be “material: – Restricts managers from making decisions they are authorized to make It is all about the chart of accounts
  77. 77. Typical Scenario Government Commitment AccountingFinancial BudgetAppropriation• Amount approved by legislature or Ministry of Finance• Is at a summary level• May represent money to be released for the entire year to a high level of authority (lots of scenarios possible)• Act as budget control• Often called “Allotment”
  78. 78. Typical Scenario Government Commitment AccountingFinancial BudgetAppropriationWarrant• Amount released for use• Controls, but typically not at the granular level• Often represents money to be spent during a fiscal period• Usually at the decision manager level
  79. 79. COMMITMENT CYCLE MULTIPLE Version 7 section appropriations commitments expenditures CONTROLS obligations receiving transfers budget different • brief discussion of segregation organizational configurations duties & workflow aggregate configuredMULTIPLECONTROL CONTROLS LEVELS flexible detailed TOLERANCE strict LEVELS monthly yearly PERIOD Financial Controls
  80. 80. Fund Type Fund Indicator Locations Object Organization Project COFOG1 Sector (3) COA Example GoM Functions COFOG2 Sector (4) (2) COFOG3 Sector (5) FundAllotment 2 Economic Type Ministry/Agency (1) (2) (4) Y/N, W, T GFS Code (5) Project StatusAllotment 1 Fund Atoll Economic Type Ministry/Agency (1) (1) (3) (2) (4)Budget Fund Source Fund Cash Indicator Location (2) Economic Item Ministry/Agency Project ID Y/N, W (1) (1) (3) (5) (4) (4)Commit/ Fund Source Fund Cash Indicator Location Economic Item Project ID Ministry/AgencyObligation (2) (1) (1) (3) (5) (4) T (4)EXP. CS, SI, SV, Fund Source Fund Cash Indicator Location Economic Item Ministry/Agency Project IDCR, DN, CN (2) (1) (1) (3) (5) (4) (4) MJournal VoucherGeneral Ledger Fund Source Fund Cash Indicator Location Economic Item Ministry/Agency Project IDG/L Offset Code (2) (1) (1) (3) (5) (4) (4)Allow to Exceed: Economic Group Coding Block[Y/N]: Yes’,’No’, (2) 1. May be up to 50 characters[W]: ‘With Warning’ in length[T]: Tolerance Allowed Economic Type 2. May consist up to 10 Asset/ Liability / Revenue / Expenses / Retained Earnings[M]: Message if Overspent (2) segments 3. Can be up to 12 characters Asset / Liability / Revenue / Expenses / Equity Category (1) long 4. Each segment can have an Income Statement / Balance Sheet Main Category unlimited number of roll (1) up tables Financial / Statistical Account Type (1)
  81. 81. Typical Scenario Government Commitment Accounting• Two levels of “commitments”: – Soft commitment or commitment – Hard commitment or obligation• Not all governments utilize two levels – Is a best practice – Provides a better view for the status of the commitment – In our experience, customers who implement purchasing or procurement have two levels
  82. 82. Obligations vs. CommitmentsCommitment or Soft Commit Obligation or Hard Commit
  83. 83. What is accrual?• Transaction and events are recognized when they occur rather than when cash is paid or received• Cash accounting is not always representative of what is really going on• Assets, liabilities, net assets, revenues and expenses recognized• All assets and liabilities are measured on the historical cost basis, sometimes with the re-measurement to the fair value of certain assets and liabilities
  84. 84. Why is this a problem ingovernment?• Corporations with shareholders and auditors must operate on an accrual basis• Accrual determines the real value of a company• There is no “real value” of a government entity• Accrual accounting is an order of magnitude more difficult than cash bookkeeping• Accounting capacity issues in Developing Nations• Hence, the notion of a hybrid approach
  85. 85. Good-bye Accrual World1? Cash • Cash accounting reports cash transactions when received or paid. Consequently, financial statement items such as amounts owed to or by the government or other non cash items are not recorded.Modified • Modified cash accounting follows cash Cash accounting principles, but at year-end adjustments are made recognizing some non- Methods of cash items such as AR and AP modified accrualModified • Modified accrual follows full accrual principles differ amongAccrual governments. with one significant departure — not recognizing capital assets on the statement of financial position. Instead they are recognized fully as expenditures when bought. 1. CA Magazine
  86. 86. State of the Art• Most governments in hybrid state. – Canada is modified accrual (mostly). – New Zealand in accrual. – Developing Nations tend to be cash or modified cash.• Slow move towards accrual.• Private Sector is almost always accrual. – Presents challenges for private sector financial software.
  87. 87. Simplified World Bank Treasury Reference Model: Organization Ministry of Spending Revenue Central Bank Audit Finance Agencies Agencies OrganizationPlanning / BudgetBudget Preparation Ledgers, Controls Financial ReportsProcurement Purchasing , ProcurementTreasury Cash, Debt, Foreign Bank ExchangePublic Service Payroll, Pensions
  88. 88. 100% 90%  80%  Macro-Economic Analysis  Legislature and Executive Budget Law  International Organizations Government Objectives  Budget Book  Previous Plans Budget Office  Historical   Information   Version Version 10% 10% 10% Version  10% 10% Approve Budgetary Controls Government Fiscal Revenue 10% 10% Regulations International 10% 10% 10% Assumptions Financial Government What If Scenarios, Standards Budget Cost Assumptions Iterative Versions and Approvals  Circular   PFM  Line Ministry Version Version Approve Version Version Approve Version Version  Ministry What If Scenarios, Iterative Versions and Approvals Divisional What If Scenarios, Iterative Versions and Approvals
  89. 89. Budget Transfers Budget from budget to allotment Account Account Across fiscal periods from one account to another from one type segment to another• Budget transfer (virements) depend on authority and are different from one government to another• Often legal constraints on transfers• Can tighten or loosen controls during the fiscal year• Can move money to sub-nationals or other departments
  90. 90. Some comments• Adoption of “proper” MTEF limited success – MTMF (macroeconomic framework) – MTFF (fiscal framework) – MTBF (budget framework) – MTSS (sectoral strategies) – MTPF (performance framework)• Program Budgeting preceded Performance Budgeting [typically]
  91. 91. Budget Ceremony• +/- %• View that budget = outcomes• Lack of zero-based budgeting concepts• Few tools that enable end-to-end budget preparation for government
  92. 92. Simplified World Bank Treasury Reference Model: Organization Ministry of Spending Revenue Central Bank Audit Finance Agencies Agencies OrganizationPlanning / BudgetBudget Preparation Ledgers, Controls Financial ReportsProcurement Purchasing , ProcurementTreasury Cash, Debt, Foreign Bank ExchangePublic Service Payroll, Pensions
  93. 93. “Treasury” Function Investment Debt Management Management Optimize Bank Predict Cash Accounts RequirementsTreasury Single Account
  94. 94. • CorruptionWhy TSA? • Liquidity • Predictability
  95. 95. Simplified World Bank Treasury Reference Model: Organization Ministry of Spending Revenue Central Bank Audit Finance Agencies Agencies OrganizationPlanning / BudgetBudget Preparation Ledgers, Controls Financial ReportsProcurement Purchasing , ProcurementTreasury Cash, Debt, Foreign Bank ExchangePublic Service Payroll, Pensions
  96. 96. Government Spending as % of GDP http://anepigone.blogspot.com/2008/03/government-spending-as- percentage-of.html 0 10 20 30 40 50 60 70 80 90 100 1. Iraq 9. Hungary 17. Qatar 25. Austria 33. Yemen 41. Germany 49. Ghana 57. Namibia 65. West Bank/Gaza 73. Burundi 81. Rwanda 89. South Africa 97. Senegal 105. Morocco 113. Burkina Faso 121. Honduras129. Congo, Dem. Rep. of 137. Taiwan 145. Cameroon 153. Costa Rica
  97. 97. Government Wage Bill as % of Expenditures World Bank 2000-2008 AverageBahrain, Kingdom of Jordan Thailand St. Kitts and Nevis Afghanistan Malta Argentina Ireland Mongolia Australia Slovenia Ukraine Congo, Republic of Hungary Angola Slovak Republic Armenia Czech Republic 0 10 20 30 40 50 60
  98. 98. Payroll and PFM• Wage bill is material to government expenditures• Corruption opportunity• Variability in payroll – Seasonal, emergency employment – Training, travel & other costs• Significant cash management implication• Requires planning, forecasting and controls
  99. 99. Simplified World Bank Treasury Reference Model: Organization Ministry of Spending Revenue Central Bank Audit Finance Agencies Agencies OrganizationPlanning / BudgetBudget Preparation Ledgers, Controls Financial ReportsProcurement Purchasing , ProcurementTreasury Cash, Debt, Foreign Bank ExchangePublic Service Payroll, Pensions
  100. 100. Audit• Internal Audit• External Audit “Supreme Audit Organization”• Maturing – Compliance – Risk Management – Performance• CAAT
  101. 101. International Standards• World Bank Treasury Reference Model• International Monetary Fund Code of Good Practice on Fiscal Transparency• International Monetary Fund Government Finance Statistics (GFS)• International Federation of Accountants International Public Sector Accounting Standards Board International Public Sector Accounting Standards (IPSASs)• UN Common Functions of Government• Medium Term Expenditure Frameworks (MTEF)• Generally Accepted Accounting Principles (GAAP)• International Aid Transparency Initiative (IATI)• eXtensible Business Reporting Language (XBRL)
  102. 102. World Bank Treasury ReferenceModel http://devportal/files/Additional%20Treasury%20Reference%20Model.ppt• Purpose – Development tool for fiscal managers and system developers, intended to help implement good practices in fiscal accounting and expenditure control• Key Principles – Facilitating the process of designing a treasury system project and preparing technical specifications for a tender document that will meet World Bank procurement standards. – Improved analytical standards for fiscal reporting• Implications – Guidelines to identify completeness
  103. 103. IMF Code of Good Practice onFiscal Transparency• Purpose – Method to assess government fiscal transparency with practical advice for improvement• Key principles: – Roles and responsibilities of and within government should be clear – Comprehensive reliable information of fiscal activities should be available to the public – The processes of budget preparation, execution, and reporting should be open – Integrity of information should be assured• implications: – Controls and transparency
  104. 104. IMF Government Finance Statistics Manual• Purpose: http://devportal/files/Additional%20GFS.pdf – Provide a comprehensive conceptual and accounting framework suitable for analyzing and evaluating fiscal policy and performance of the general government sector and broader public sector of any country.• Key Drivers: – Improve government accounting and transparency in operations – Need for ways to assess the effectiveness of spending on government and/or donor funded programs (e.g. poverty reduction, sustainability of fiscal policies etc.)• Implications: – Chart Of Accounts design that incorporates both GFS classifications and countries specific needs – General capabilities and GFS based reporting
  105. 105. IFAC IPSASs http://devportal/files/Additional%20IPSAS.ppt• Purpose – Report requirements for government and public sector organizations• Key principles: – Transition from cash-basis to accrual accounting – 21 Reporting Standards – Sets preliminary benchmarks• Product implications: – Ability to transition customers from cash to full accrual – Support specific reports
  106. 106. Medium Term Expenditure Frameworks http://devportal/files/Additional%20MTEF.ppt• Purpose – Rational planning and budget formulation process within which the government establishes a credible and transparent criteria for allocating public resources to strategic priorities while ensuring overall fiscal discipline• Key principles: – 3 Year planning. – Sector Effectiveness and Efficiency Review process. – Performance Indicator Framework for measuring agency performance against committed deliverables• Implications: – Budget management software operates with 3+ years cycle, need for a strong fiscal framework, performance planning and performance reporting
  107. 107. UN Classification of the Functionsof Government• Purpose – Functional classification to report government statistics to the IMF – "Functional" classifications identify the "functions" -- in the sense of "purposes" or "objectives" -- for which groups of transactors engage in certain transactions• Key principles: • "Functional" classifications identify the "functions" -- in the sense of "purposes" or "objectives" -- for which groups of transactors engage in certain transactions• Product implications: – COA Set Up
  108. 108. Generally Accepted Accounting Practices (GAAP)• Purpose – A collection of rules and procedures and conventions that define accepted accounting practice; includes broad guidelines as well as detailed procedures. – Somewhat different among countries. – Focused on “financial accounting” not managerial or fund accounting• Key principles: – Many accounting practices that cover public and private sector.• implications: – Support standard accounting principles, support auditable data. Much of GAAP does not apply to the public sector. – US GAAP burdensome, International Financial Reporting Standards (IFRS) may be more applicable.
  109. 109. International Aid Transparency Initiative (IATI)• Purpose – IATI aims to make information about aid spending easier to access, use and understand. – Its purpose is to help implement the transparency commitments made at the Accra Agenda for Action in the most consistent and coherent ways. The Accra Agenda for Action arose from the March 2005 Paris Declaration on Aid Effectiveness.• Key principles: – Aid transparency & move to using country systems.• Product implications: – Reporting and integration standard.
  110. 110. eXtensible Business Reporting Language (XBRL)• Purpose – Global standard for reporting and exchanging business information. – Simplifies by providing 1 type of output for all stakeholders – Primarily method for business to report to government, but being considered in government• Key principles: – metadata set out in XBRL taxonomies, which capture the definition of individual reporting concepts as well as the relationships between concepts and other semantic meaning. Information being communicated or exchanged is provided within an XBRL instance. Product implications: – Reporting and integration standard, XML support
  111. 111. Typical Challenges1• Lack of Engagement and Political/ Management Support.• Inadequate Preparation (Vision, Policies, Capacity)• Weak Governance Arrangements.• Over Complicated Expensive Systems• Inadequate acquisition and contract management. 1 Murphy• Unrealistic action plans. Also lack of knowledge• Non participation, lack of dedicated teams. transfer from consultants.• Inadequate training• Weak, contractor with technical/commercial focus
  112. 112. Developing Nation Issues• No luxury for massive technology footprint – The Complexity Trap• Functional and technical capacity challenges – The Capacity Trap• Cost and upkeep of commercial infrastructures and vendor lock-in• Bandwidth and digital divide limitations• Sustainability and knowledge transfer• However: little technical and functional baggage holding back change
  113. 113. GRP PracticesBest? Good• Double Entry Bookkeeping • 2 – Phased Commit• Commitment Accounting • Aggregate Controls• Treasury Single Account • DecentralizationMaybe • Program Budgeting• Modified Cash • International Standards • Multiple Year COA Maybe • Accrual Accounting • Performance Management
  114. 114. Version 7 section• brief discussion3. Technology & Transparency Leapfrog & Case Study
  115. 115. Version 7 section1. Intro to FreeBalance 5. Sequencing PFM technology - – 15 minutes Governance Valuations – 90 minutes2. FMIS/GRP Introduction 6. Financially sustainable GRP, – • brief discussion 90 minutes governance structures, lessons3. Technology Leapfrog learned – 45 minutes – 45 minutes4. Performance Management in 7. GRP and Anti-Corruption PFM – 30 minutes – 60 minutes 8. Future of PFM technology Agenda – 30 Minutes 9. “Parking Lot”
  116. 116. Confusion? 3
  117. 117. Congress cuts transparency funding
  118. 118. How can Timor-Leste affordgovernment transparency? Timor-Leste United States ComparisonIndependence 2002 1776 3.4%GDP Per Capita $2,600 $47,400 5.5%GDP Growth 8% 2.7% 338%Unemployment 20% 9.7% 206%Below poverty line 42% 12% 350%Life Expectancy 67.95 78.92 86%Literacy 58.6% 99% 59% 5
  119. 119. globalization
  120. 120. = competition
  121. 121. choice
  122. 122. citizens are watching
  123. 123. empowered
  124. 124. Democratic Republic of Timor-Leste (RDTL)Transparency Objectives
  125. 125. build civil society
  126. 126. build infrastructure
  127. 127. build capacity
  128. 128. build citizen involvement in government
  129. 129. improve government performance
  130. 130. ?
  131. 131. 3 Benefits of Transparency AUSTRALIA HIGH 2 Government Effectiveness and GDP*Normalized Government Effectiveness Index 1 PAPUA NEW GUINEA UGANDA 0 -1 Higher the government -2 effectiveness = higher the LOW 209 Countries country GDP Per Capita -3 GDP Per Capita (PPP, logs) Source: The World Bank * At purchasing power parity Strengthening Public Financial Management in Timor-Leste
  132. 132. 3 HIGH Benefits of Transparency Voice and Accountability and GDP* AUSTRALIA 2Normalized Voice and Accountability Index PAPUA NEW GUINEA 1 UGANDA 0 -1 Higher the government -2 accountability = higher the country GDP Per Capita LOW 207 Countries . -3 GDP Per Capita (PPP, logs) Source: The World Bank * At purchasing power parity Strengthening Public Financial Management in Timor-Leste
  133. 133. 3 Benefits of Transparency AUSTRALIA HIGH 2 Control of Corruption and GDP*Normalized Control of Corruption Index 1 PAPUA NEW GUINEA 0 UGANDA -1 Higher the control of corruption = higher the -2 204 Countries country GDP Per Capita LOW -3 GDP Per Capita (PPP, logs) Source: The World Bank * At purchasing power parity Strengthening Public Financial Management in Timor-Leste
  134. 134. = stability
  135. 135. = investor confidence
  136. 136. avoid theresource curse
  137. 137. technology leapfrog
  138. 138. Version 7 section leapfrog theory…• brief discussion
  139. 139. Version 7 section entrenched technology• brief discussion 26
  140. 140. use what works
  141. 141. skip whatdoesn’t work
  142. 142. skip stages
  143. 143. modernize
  144. 144. rapidly
  145. 145. reviewTransparency and Accountability The next generation of public financial management technology will allow the public totrack the budget live, to see where every dollar is being spent, and to gain renewed confidence in the process Democratic Republic of Timor-Leste Vision
  146. 146. sequenced
  147. 147. Public Financial Management – Foundation for Country Growth Public Financial ManagementDecentralization Human GoTL LAWS Resource Autonomous FMIS Development Agencies (software and hardware) Procurement Capacity Ministries Commission Building (Training)
  148. 148. PFM inOverdrive?
  149. 149. 1. International Standards
  150. 150. IPSASInternational Public Sector Accounting Standards Strengthening Public Financial Management in Timor-Leste
  151. 151. EITI Extractive IndustriesTransparency Initiative
  152. 152. GFSGovernment Financial Statistics
  153. 153. MTEF Medium TermExpenditure Frameworks
  154. 154. IATI International AidTransparency Initiative
  155. 155. 2. Document Management
  156. 156. managescorrespondence with senior managers repository for freedom of information
  157. 157. 3. e-Procurement
  158. 158. review government tenders published vendor alerts integrated with back-office procurement & commitment accounting within IFMIS tender results publishedStrengthening Public Financial Management in Timor-Leste 45
  159. 159. Version 7 sectionfront/back office integration• brief discussion
  160. 160. 4. Transparency Portal
  161. 161. reviewwww.transparency.gov.tl Strengthening Public Financial Management in Timor-Leste 48
  162. 162. articles subscribe drill down
  163. 163. Expenditures, Transparency Portal 10 years of data drill through the chart of accounts
  164. 164. Expenditures, Transparency Portal export to xls, doc, pdf, html, xml track commitments
  165. 165. 5. Performance Management
  166. 166. review examines budget execution data integration with macro-economic data integrated with back-officeprocurement & commitment accounting within IFMIS Strengthening Public Financial Management in Timor-Leste 55
  167. 167. transparent presentation of public investment programs simple classifications Strengthening Public Financial Management 56 in Timor-Leste
  168. 168. physical & financial progress
  169. 169. drill down
  170. 170. narrative
  171. 171. proofprogress
  172. 172. Lessons Learned Strengthening Public Financial Management 61 in Timor-Leste
  173. 173. 1.Transparency is not an Option
  174. 174. Mobile cellular telephone subscribers Per 100 inhabitants100 citizen 80 auditors 60 YouTube 40 Facebook Twitter SMS 20 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
  175. 175. 2. Transparency =Performance > Embarrassment
  176. 176. Role of Civil Society • NGO’s can help organise literacy groups and provide materials. They can provide private education and education for the blind. They can provide schoolmaterials for students, and assist with school equipment chairs and books• NGO’s can help us organise and run technical training courses in our villages Timor-Leste National Vision
  177. 177. 3. Sequenced Holistic Multiple- Year PFM Strategy
  178. 178. reviewPublic Financial Management – Foundation for Country Growth Improve government performance Improve transparency & accountability Improve budget executionImprovegovernmentcapacity
  179. 179. 4. Build Capacity
  180. 180. review PFM Modernization Alignment with Capacity Building• Training beyond • Intuitive systems software – Translation including – IT capacity terminology – Project management – Simple & goal-oriented – Government accounting interfaces• Beyond training • Mentoring – Adaptable help – E-Learning – Knowledge management
  181. 181. 5. Require Sustainability in Partner Performance
  182. 182. 6. Leverage Open Systems
  183. 183. Transition to Open Environment: TransparencyDomain Closed Transition Open Access toTransparency Document Machine Readable Information Do not Publish asData Availability Data for Sale Publish as Exception Exception Publish, Audited & Near Real-TimeMode Mixed Vetted Publishing What are they going to Government asROI Reason Revenue Generation do with the data? Platform CitizensTarget Business Community Civil Society & Press
  184. 184. Transition to Open Systems: TechnologyDomain Closed Transition Open Proprietary within Support for Industry Service OrientedIntegration Suite Standards Architecture Proprietary = Proprietary/Open Open Standards =Middleware Customer Lock Tactical approach Customer Choice Open Systems Open Systems extend Open Systems =Viewpoint reduce system value Extensibility performance Need for vendor Low Cost ApplicationExtensibility High Costs Ecosystem Assembly
  185. 185. Leapfrog is possible Timor-Leste United States Comparison GFS, IPSAS, EITI, IATI,1. Standards EITI, OGP Leaped MTEF2. Document Manager Document Various Records & Catching UpManagement Management Correspondence Manager’s3. Performance Various tools across Dashboards, Results LeapingManagement government Portal Data.gov & others -4. Transparency Transparency Portal Leaping underfunding5. e-Procurement August 15 FedBizOpps To leap
  186. 186. www.revenuewatch.org
  187. 187. How? Timor-Leste United States 1 Year Budgets, complexStrategic Vision Holistic election cyclesGovernment Structure Unitary FederalCivil Society & Media Seen as Improving Results Seen as “Special Interests”Government Intervention Seen as Good Seen Suspiciously Ease to Move to Long History of Entrenched1. Standards International Standards National Standards2. Document Management3. Performance Multiple entrenchedManagement Single system data source systems4. Transparency5. e-Procurement
  188. 188. Version 7 section Lessons LearnedTechnology Transparency • brief discussion• Re-purpose open systems • Good practices in budget rapidly to support portal classifications functionality • Holistic whole-of-country• Optimal product footprint • Ministry of Finance and• Rapid implementation Planning leadership• Broad choice in middleware • Civil society enablement
  189. 189. Goodbye Conflict, Welcome Development
  190. 190. Version 7 section • brief discussion4. Performance Management in PFM
  191. 191. Version 7 section1. Intro to FreeBalance 5. Sequencing PFM technology - – 15 minutes Governance Valuations – 90 minutes2. FMIS/GRP Introduction 6. Financially sustainable GRP, – • brief discussion 90 minutes governance structures, lessons3. Technology Leapfrog learned – 45 minutes – 45 minutes4. Performance Management in 7. GRP and Anti-Corruption PFM – 30 minutes – 60 minutes 8. Future of PFM technology Agenda – 30 Minutes 9. “Parking Lot”
  192. 192. military
  193. 193. military intelligence
  194. 194. business
  195. 195. business ethics
  196. 196. British
  197. 197. British cuisine
  198. 198. Government
  199. 199. Government performance
  200. 200. What is Corporate PerformanceManagement? Reporting Data Mining Scorecarding OLAP Budget Planning
  201. 201. Drivers for Corporate PerformanceManagement• Too much information• Business Intelligence tools such as reporting are not prescriptive• Not all indicators are relevant• Financial information is after the fact – you cannot change the past• Many non-integrated Business Intelligence (BI) tools
  202. 202. Corporate Performance Objectives • “Key Performance Indicators” (KPIs) and “scorecards” are simple to understand • KPIs measure in progress • Aggregates measurements from many sources • Utilizes capabilities of many tools • Provides clarity for what is important

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