Building the Foundation for
e-Government in Developing Nations
Bruce Lazenby
President & CEO
[email protected]
Agenda
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E-Government and Anti-Corruption
Observations
Key Challenges
FMIS Overview
International Case Studies
Immediate Impact and Results
Lessons Learned
Critical Success Factors
Conclusions
E-Government
“E-Government refers to the use of information
and communications technologies to improve
the efficiency, effectiveness, transparency
and accountability of government.”
(The World Bank Group)
Anti-Corruption
The reduction of corruption is the result of two
underlying premises:
1.
2.
Committed desire to change
Use of appropriate tools to affect change
Observations
• Management of Funds
– Before a government can develop sustainable sources of financing, they need a
means of managing, accounting for, and reporting on the funds entrusted to the
government (build trust and confidence).
• Urgency
– Given the international economic slowdown and repeated crisis, countries have
an urgent need to better manage money in order to create and operate an
effective government
• Window of Opportunity
– Narrow window of opportunity to establish credibility in the eyes of its citizens,
donors, creditors, trading partners and foreign investors
• International Standards
– Software must meet multiple accounting and reporting needs – WB TRM, IMF
COFOG, IAS, GAAP, IFAC, best-practices, donors, creditors, unique-to-country
Key Challenges
• Complexity of System
– The complexity of the solution must be appropriate. All governments require
sophisticated government-focused functionality – nothing less – and nothing
more
• Modern System
– All government financial management solutions should be based on proven,
first-world software applications. The system must operate on-line in real time,
and be affordable, sustainable and upgradeable
• Localization and Capacity Building
– System must be delivered and localized rapidly, and be understandable and
easy to use
• Sustainability
– Customization will accelerate system obsolescence, cost and likelihood of
failure –proven audit support
– In-country support
Core FMIS Elements
Fiscal Cycle
APPROPRIATIONS MODULE
1. Budget Authorization
Management
8. Budget Preparation
Entry of allotments, original
and forecast budgets, and
commitments/obligations
2. Commitment
of Funds
7. Audit and Evaluation
GENERAL LEDGER AND
CONTROLS MODULES
3. Payments and
Receipts Management
Use of general ledger reports
and system audit trails
EXPENDITURE MODULE
Use of approvals and
account processing
6/1. Budget Review
and Fiscal Reporting
4. Cash Management
APPROPRIATIONS MODULE
Modification of revised
and forecast budgets
Use of Banks and
Cash Allocation
5. Debt and Aid
Management
System Overview
FreeBalance eFinancials™
• Public Sector Financial,
Accounting, Treasury & Material
Management System
• Budget and Manager-Centric
• Best in Class
– Government Design – Ensures
Ease of Use, Comprehension
– Proven Rapid Deployment
Methodology
– Parameterization – Reduces
Maintenance and Support Costs
– Post-Deployment Sustainability
Critical Success Factors
• Deliverable
• Understandable
• Affordable
• Sustainable
• Extensible
Case Studies
Focus on three key international projects:
• Kosovo
• East Timor
• Afghanistan
FreeBalance in Kosovo
Key Kosovo Requirements:
– Financial management system to help democratic
development and economic liberalization
– Technology to ensure sound fiscal management and
strengthen transparency and good governance
– Protect the integrity of the revenue raising and expenditure
process (donor confidence)
– User training and implementation support
– Local capacity building and sustainability
– Translation of system into Albanian and Serbian
– URGENCY
FreeBalance in Kosovo
Pictures taken in Pristina by FreeBalance in May 2001
Serbian Police Station
5 blocks from
FreeBalance offices
Restaurant in Pristina
2 blocks from
FreeBalance offices
FreeBalance in Kosovo
Rapid Deployment of FreeBalance eFinancials:
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Install the system 8 May 2000
Configure the Chart of Accounts
Configure the Financial Coding Blocks
Enter supporting table elements (vendors, bank
accounts, etc.)
Configure the management rules
Enter test transactions, produce test reports
Enter live transactions, produce live reports
Prove live system to donors on 3 June 2000
(26 days prep to proof)
FreeBalance in Kosovo
FreeBalance in East Timor
“FreeBalance’s software brings along with it
internationally approved accounting practices
and transparency, which otherwise take a
long time to develop in such economies.”
(East Timor Ministry of Finance)
FreeBalance in East Timor
Brief Background
– Decades of violence and civil
unrest due to struggle for
independence
– UNTAET was established in
October 1999 to administer the
Territory
– As of April 2002, UNTAET strength was 7,687 total uniformed
personnel, including 6,281 troops, 1,288 civilian police and 118
military observers; UNTAET also included 737 international
civilian personnel and 1,745 local civilian staff.
FreeBalance in East Timor
The UNTAET Mandate:
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Provide security and maintain law and order
Establish an effective administration
Assist in the development of civil and social services
Ensure the coordination and delivery of humanitarian
assistance, rehabilitation of humanitarian assistance,
rehabilitation and development assistance
– Support capacity-building for self-government
– Assist in the establishment of conditions for sustainable
development
FreeBalance in East Timor
FreeBalance Project:
– FreeBalance provided financial management software and related
services (Dili, East Timor)
– Funded by the World Bank and delivered to the Central Fiscal Authority
of East Timor (CFA)
– FreeBalance eFinancials implementation began in September 2000
(Foundation)
– System went live in less than 45 days
– Phase II extended the CFA project to Agencies and Departments of the
East Timor Transitional Administration
– East Timor celebrated Independence Day on May 20th 2002
– Additional modules being rolled out
FreeBalance in Afghanistan
“If FreeBalance can help bring fiscal stability
to Afghanistan’s beleaguered government,
it will have accomplished not just a
business coup, but a kind of miracle.”
(Canadian Business Magazine, December 2002)
FreeBalance in Afghanistan
– Financial management software and services
for the Transitional Islamic Government of
Afghanistan
– Arrived in Country 9 October 2002 – system
live and first check cut 24 October 2002 (15
days prep to proof)
– Project to be rolled out in two phases over the
course of five months
– FreeBalance and BearingPoint will implement
FreeBalance eFinancials and provide
associated professional services
FreeBalance in Afghanistan
Pictures taken in Kabul in October 2002
Views from Ministry of Finance office
Immediate Impact and Results
Pre-Implementation
1. System
2. Cash Management
3. Donor/Taxpayer Confidence
4. Expenditure Management
5. Integration and Connectivity
6. Capacity Building
7. Grants Management
Post-Implementation
• Microsoft Access
• FreeBalance eFinancials
• Entirely paper-based
• Modern
• None
• Proven
• Homegrown
• Supported
• Custom built
Immediate Impact and Results
Pre-Implementation
1. System
2. Cash Management
3. Donor/Taxpayer Confidence
4. Expenditure Management
5. Integration and Connectivity
6. Capacity Building
7. Grants Management
Post-Implementation
• Cash advances to
enable the procurement of
essential goods and
services.
• Alarming price variances
for common goods were
identified across the
municipalities
• Transactions executed at
the municipal level could
only be reviewed after the
fact
• Eliminated via
expenditure analysis and
reporting, the use of
commitment recording
prior to expenditures, and
oversight
• Analysis of expenditures
was extremely limited
• Reduced requirements
for cash advances
Immediate Impact and Results
Pre-Implementation
1. System
2. Cash Management
3. Donor/Taxpayer Confidence
4. Expenditure Management
5. Integration and Connectivity
6. Capacity Building
7. Grants Management
• Donors were threatening
to freeze funds and
discontinue additional
funds unless they received
credible, timely and
accurate financial reports.
Post-Implementation
• FreeBalance reports
provided donors with the
confidence that finances
were being managed
properly
• Facilitated access to
donor funding and
independent financial
reports for each donor
now available
Immediate Impact and Results
Pre-Implementation
1. System
2. Cash Management
3. Donor/Taxpayer Confidence
4. Expenditure Management
5. Integration and Connectivity
• Inability to track
payments and account for
expenditures
Post-Implementation
• Payroll system helped
administration identify
hundreds of people who
were receiving multiple
salaries (in some cases,
as many as six salaries for
the same person), as well
as hundreds of ghost
employees.
6. Capacity Building
•Full audit trail capabilities
7. Grants Management
•Minimization of cash
transactions
Immediate Impact and Results
Pre-Implementation
1. System
2. Cash Management
3. Donor/Taxpayer Confidence
4. Expenditure Management
5. Integration and Connectivity
6. Capacity Building
7. Grants Management
• De-centralized
environment
• Ministries and
municipalities existed in
isolation from the central
authority
Post-Implementation
• Access to commitment
management functionality
enabled proactive
management of finances
• Empowered employees
with a sense of control
and of being part of the
solution
• Now more accountable
for financial management
decisions
Immediate Impact and Results
Pre-Implementation
1. System
2. Cash Management
3. Donor/Taxpayer Confidence
4. Expenditure Management
5. Integration and Connectivity
6. Capacity Building
7. Grants Management
• Lack of sufficient
resources and financial
management expertise to
adequately manage public
sector finances
Post-Implementation
• Centralizing the financial
management database
enabled skilled personnel
to oversee financial
management and
accounting practices
• Able to identify areas in
which needed assistance
and training were needed
• Proper accounting and
financial management
techniques demonstrated
online for decentralized
users
Immediate Impact and Results
Pre-Implementation
1. System
2. Cash Management
3. Donor/Taxpayer Confidence
4. Expenditure Management
5. Integration and Connectivity
6. Capacity Building
7. Grants Management
Post-Implementation
• Required extensive
manual processing or
individual cash
grants/bank accounts
• Comprehensive, multidimensional FreeBalance
capabilities deployed
(multi-fund/program/project)
• Such arrangements are
not only inefficient, but
much more open to abuse
• Commitment/expenditure
processes within a framework
where funds allocated
downwards and easily
tracked/reported from the
centre
• Funds allocations, decisionmaking, and implementation
now occur at the lowest level
using standard processes
Lessons Learned
• Think big but start small
– Go live fast and scale up
• Solve problems and show progress
– Get people and systems into production quickly
• Improve donor coordination for leverage
– Success breeds success
• Parameterization is key
– Avoids costs and creates sustainability in the longer term
• Local ownership and capacity building
– What is doable for sustainability?
Critical Success Factors
• Deliverable
• Understandable
• Affordable
• Sustainable
• Extensible
Critical Success Factors
• Deliverable
– The system must scale down for a rapid start and
scale up for a complete solution to multiple
Departments and multiple levels.
– A truly integrated modular approach.
– Go live in 60 days – with a configured-for-you solution
(not “vanilla”)
Critical Success Factors
• Understandable
– Full Government functionality requires hundreds of tables
and rules, not 10 and not 10,000
– Managers must be able to understand and actually use,
maintain, and leverage its functionality to develop and
enforce sound, effective, efficient government financial
management practices across ministries and functions, at
all levels
Critical Success Factors
• Affordable
– Every customer is different and the software needs to
reflect this reality
– Parameterization is key. Not custom work.
– Downstream costs associated with customization and
unnecessary processes can be debilitating and risky
for any institution
Critical Success Factors
• Sustainable
– An enduring solution must be supported and
maintained by local solution providers for first and
second level support services
– The system must be a long-term solution
Critical Success Factors
• Extensible
– The solution must be able to grow as government
requirements evolve and new eGovernment
technologies emerge (eGrants, ePermits, eLicenses)
Critical Success Factors
• Deliverable
• Understandable
• Affordable
• Sustainable
• Extensible
Conclusion
• Both internal stakeholders (political decision-makers,
taxpayers) and external stakeholders (lending agencies,
donor nations) demand ever increasing control, audit and
reporting
• These days you cannot achieve the standard required
without some sophisticated software, but you also can’t
afford $10’s of millions and a 2-year installation schedule
• Solution must be purpose-built software that is designed
exclusively for Government
• URGENCY
Conclusion
• Not only is E-Government efficient, it is a
major contributor to anti-corruption
• Effective and modern systems, starting with
FMIS, are critical components to meet the
objectives of accountability, transparency,
and anti-corruption
Bruce Lazenby
President & CEO
FreeBalance Inc.
[email protected]