Presentation at CIPFA on lessons learned in government financial management implementation and sustainability

1. Achieving Government Financial Management Implementation Success Doug Hadden FreeBalance

2. The Sad Truth Majority of government financial management information systems implementations in developing countries do not meet expectations 2

3. over-budget 3

4. late 4

5. unsustainable 5

6. minimal improvement 6

7. yet FreeBalance has a very high success rate

8. reveal corporate secrets

9. Perfection is the enemy of Good Sustainability = adapting to reform and capacity growth Traditional software model is not working Lessons Learned

10. NUNAVUT MONGOLIA CANADA KYRGYZSTAN KOSOVO AFGHANISTAN USA WESTBANK IRAQ JAMAICA ANTIGUA PAKISTAN LIBERIA SOUTH SUDAN SIERRA LEONE PANAMA GUYANA UGANDA NATIONAL & WHOLE GOV’TS TIMOR-LESTE NAMIBIA DEPARTMENTAL, & SUB-NATIONAL Who is FreeBalance? 10

11. What is Success? On budget On time Addresses local capacity Is financially sustainable Is sustained by the government organization Requires a minimum of foreign consultants Modernizes with the government

12. Kosovo PEFA Assessments

13. 1. Perfection is the Enemy of Good 13

14. Make it as simple as possible. But no Simpler Albert Einstein

15. Overwhelming Feature list “Featuritis” Benefits incorrectly tied to features Increasing the capacity gap everywhere More features, the better? Unconsumed features Infrastructure bloat ITC-generated costs

16. Software Capacity Gap Usability Feature Gap Ability to Consume Software Features Capacity Gap Time

17. Typical Project Management methodologies Lack of focus on what’s important in the context Focus on “best-practices” Focus on what is theoretically best vs. what is important now Extends the capacity gap What’s Wrong? 17

18. who’s on first?

19. Financial Management ICT Solution Matches Capacity Typical Commercial Financial Management ICT Solution Simple Financial Management ICT Solution Capacity Balance Capacity

20. Typical Commercial Financial Management Solution Simple Financial Management ICT Solution Accrual basis Best practices Complex budgetary controls International standards Comprehensive Enterprise-class tools and middleware Overwhelming Cash-basis Pragmatic Limited budgetary controls National standards Specialized Personal-class tools and middleware Underwhelming

21. Capacity Foundations Food Health Education IT Capacity Accounting Capacity Rule of Law Energy Availability Capital Availability Security ICT Infrastructure Transport Power Capacity

22. In Context Build Capacity Capacity

23. the plan was foolproof

24. Human resources & capacity more thought and more risk Communications is highly political, cross-cultural Scope creep directly related to “reputation” Flexibility in change management needed known knowns, known unknowns, unknown unknowns Beyond Project Management 101

25. Weakness of typical Project Approaches Business Process Reengineering Train the trainer as key capacity building approach Focus on the politicians Long implementation cycles: curb enthusiasm Macroeconomic planning and budget preparation Many process changes require legal reform Train the cadre, give them tools Politicians change Builds opposition momentum What budget? 25 25

26. Need to focus on the country context Civil service capacity Ease of use is critical Needs for improved governance: quick wins Holistic project management IT, software & PFM capacity Good practices, not “best” practices 1.Perfection is Enemy of the Good 26 26

27. 2. Sustainability 27

28. the operation was a success 28

29. however, the patient died 29

30. Example Implementation Recurrent Software 10% 13% Capacity Building 4% Hardware 25% LAN/WAN Consultancy 12% 36% $23.6M IFMIS ERP implementation

31. Concerns about Sustainability the complexity of the system, structure and vocabulary alienates and further hampers participation. concern has been that the system itself might be too advanced and complex, will become underutilized and that the costs involved won’t pay off. concerns that budget experts of the consultant implementing the system may not fully have understood the procedures in place

32. What’s Wrong? Often have an “IT” definition of success Measure now and assume everything will be fine Unknown unknowns Changes to country context Rapid and almost unprecedented in public financial management reform 32

34. Customization costs

35. Political will dissipates

36. Civil service and consultant turnover

37. More opportunity for opposition to kill projectCapacity

39. Configuration

40. ICT follows reform

41. Small wins through phases

42. Rapid return on investment

43. Grows to support best practices and international standardsCapacity

44. Progressive Activation

45. Modernization Capacity Compliance Expenditure Controls Multi-Fund Controls Procurement Controls Legal Reform

46. Unprecedented Reform Momentum? PFM Reform tied to Country Context Resource rich Full IPSAS, GFS, COFOG support in COA Support for program budget Ministerial (including sector-specific) dashboards Development of Key Performance Indicators Transparency portal 10 years of budget information E-Procurement portal

47. Timor LesteEast Asia & Pacific DILI

48. PFM – Foundation for Country Growth 39 Public Financial Management GoTL LAWS Human Resource Development Decentralization FMIS (software and hardware) Autonomous Agencies Procurement Commission Capacity Building (Training) Ministries

49. Improve government performance Improve transparency & accountability Improve budget execution Improve government capacity Phased Approach 40

50. Financial sustainability is about TCO PFM sustainability is about government self-reliance Capacity Reduce need for foreign consultants Sustainability is about reform and modernization IFMIS as a foundation for adaptation Sustainability 41 41

51. 3. The traditional software model is not workingfor developing nation governments 42

52. PFM casino?

53. Product Development Sales & Marketing Product Management Customer Support Trainer Consultant User Typical Approach

54. Government is one of many “verticals” Product developers have no expertise in government financials Salespeople want to sell to every possible market. Product Development Sales & Marketing Product Management Customer Support Product often designed with different customers in mind Consulting firms generate revenue from customization. Trainer Consultant User Government needs may not go into upgrades Consultants help customers to customize code. Typical

55. Typical Result COTS software 46 private sector public sector

56. When all you have a nail…. Specialization across the value chain Loss of holistic understanding of customer needs Incentives for making solutions not sustainable Focus on “technology” rather than customer Ability to “blame the victim” What’s Wrong? 47

57. Developers visit customers and are part of “SWAT” teams. Customers visited at least once every year. All problems & feature requests are tracked – management dashboard Vendor consultants bring experience to write specifications. Steering Committee sets product direction. Local in-country support pass on needs. User Customers interact with Vendor staff and other customers on collaborative plafrom Solution: Customer Centric Approach Product Development Product Management Consultant Customer Support

58. Need to Focus on the Domain

60. Fully open systems are less expensive to implement and sustain: “future proofing”

61. Adaptable systems inexpensively conform to reformTechnology Lessons Learned

62. Thank you www.freebalance.com/blog 51

64. Product should be designed for rapid implementation.

65. Product should be designed for progressive activation.

66. Product should not place a significant burden on the government.

68. review Strengthening Public Financial Management in Timor-Leste 54

69. review Strengthening Public Financial Management in Timor-Leste 55

70. review 56