Professional Documents
Culture Documents
Management Reform
ICGFM
The International Consortium on Governmental Financial Management
About the survey Contents
In 2004, the International Consortium on Governmental Financial Management
(ICGFM) asked Grant Thornton LLP (Grant Thornton) to conduct its first international 1 Executive summary
survey of government financial executives, titled Resisting Corruption in the Public
Sector. In 2009, Grant Thornton conducted a second survey on behalf of ICGFM, 3 Progress in public financial
focused on public financial management reform. The purpose of this second management reform
survey is to provide insight into the experience of national governments engaged
in improving the management of public resources, making their finances more 9 The many roles of the
transparent and their financial information more useful for managing public sector government financial leader
operations.
11 Transparency
Survey methodology
Grant Thornton partners and staff conducted in-person interviews of national 13 Dealing with global economic
financial executives and donor organizations, using an open- and closed-ended
survey instrument. We also designed and carried out a multilingual online survey
uncertainty
of the same target audience. Member firms of Grant Thornton International Ltd
promoted this survey in their respective countries, resulting in 65 completed
16 Conclusions
surveys. Copies of the survey instruments may be viewed at www.GrantThornton.
com/publicsector under Publications.
Anonymity
Our survey does not attribute thoughts and quotations to any of the respondents,
nor do we name them, their institutions or their specific countries. These measures
were essential to gain the confidence and full cooperation of the government
officials who participated in the survey.
Executive summary
During summer 2009, 65 public sector officials from 35 Public financial management reforms now under way in the
countries representing Africa, East Asia and Pacific, Europe countries surveyed include adopting international accounting
and Central Asia, Latin America and the Caribbean, the standards, standardizing information systems, and improving
Middle East, South Asia, and North America participated in debt and deficit management. The most commonly cited reasons
the 2009 Survey on Global Financial Management Leaders for reform initiatives are increasing transparency of government
sponsored by the International Consortium of Governmental and involving citizens in public financial management. As citizen
Financial Management (ICGFM). The survey explored the confidence in government increases, say survey participants, the
reasons why countries engage in public financial management public will give more social and fiscal support to government.
reform initiatives, the obstacles they face, the support Unmet human capital needs appear to be the greatest
required for successful implementation, the role of financial obstacle to public financial management reforms. These
management leaders, the costs and benefits of transparency, needs include a lack of qualified financial management and
dealing with global economic uncertainty and preventing accounting professionals, inadequate education and training
future economic crises. programs and resources for hiring new personnel. External
Recent economic downturns have affected developed and support, especially technical assistance and training, is critical
developing countries across the globe, causing a decrease in to overcoming the human capital barrier and ensuring the
exports, taxes and general revenues, which has led to budget successful implementation of reforms. Development partners
shortfalls and growing demands for public services. These play an important role in supporting governments to conduct
problems have stimulated increased interest in public financial self-assessments, modernize and strengthen operations, and
management reform and demands for more accountability for implement performance evaluations.
government officials.
At the start of the survey, we asked participants who were Behind the push for reform
employed by governments around the world whether their Why are national governments engaged in financial management
countries were engaged in public financial management reform reform? Chart 1 shows that there are four main reasons, which
activities, and nearly all said they were. The reform activities they are related to accountability and effectiveness.
described included the following: Accountability and transparency tend to reinforce each
other, according to the majority of survey participants.
• Accounting. Adopting international accounting standards Concerning accountability, one respondent says, “There is a
and accrual accounting major interest in government to demonstrate to citizens that
• Information technology. Standardizing information public spending is being done efficiently.” One reason for the
systems, implementing integrated financial management interest is a need to increase confidence in government and
systems or enterprise resource planning (ERP) systems and to show citizens the results generated by the taxes they pay.
upgrading systems This openness makes citizens more willing to give social and
• Law and policy. Establishing legal frameworks for public fiscal support to their governments. Increased openness also
sector finance (examples: laws for government finance, encourages citizen awareness of government performance; says
treasury and supreme audit institutions) a survey respondent, “Awareness has triggered citizen demand
• Process improvement. Eliminating redundancies and for establishing a more transparent and more accountable
inefficiencies in the variety of processes that underlie public government.” One could easily go the other way around,
financial management (examples: improved accounting with citizen awareness pushing government to become more
and developing procedures manuals, such as a comptroller accountable. Either way, this is a righteous cycle in which
manual) accountability promotes more transparency that demands more
• Audits. Improving the public audit function accountability and so on. Survey respondents are quite aware of
• Budget management. Introducing outcome-based this cycle and want to promote it.
budgeting, improved debt and deficit management, laws
promoting fiscal responsibility in government, forward Chart 1: Reasons for initiating public financial management reform
planning for investment, increased participation by legislators
(for example, Members of Parliament) in budget preparation Increase transparency of
government and involvement/
and performance reviews participation of citizens 41%
• Procurement. Procurement policy reform, Web-based
Improve effectiveness of
information systems for procurement budget expenditure 29%
Improve accountability to
Several respondents said that at least part of their public government and business
financial management reform initiative receives funding from stakeholders 20%
N = 119 mentions
1
See the annual surveys of government chief financial officers and military financial executives
sponsored by the Association of Government Executives and the American Society of Military
Comptrollers, available at www.GrantThornton.com/publicsector.
• Internal controls
• Information systems management
• Procurement
N = 132 mentions
• Treasury procedures * Total is less than 100 percent because of rounding.
Educating citizens about financial management reform According to some survey respondents, this starts by ensuring that timely
audited reports of state finances are available to legislators and the public.
Citizen opinion can and should be a major driver of public financial management As representatives of the people, legislators are important communication
reform. In some cases, public opinion can be a major resource for financial targets for getting the word out on reform. Financial leaders and managers
leaders who want to convince their countries’ leaders of the importance of themselves need to carry the discussion of finance out to citizens, say
reform. Says one respondent, “We need to educate citizens because once they some respondents, through media and public meetings. Distributing citizen-
understand the need for financial reform, they can then play a stronger role in centric annual financial statement reports is another way to convey financial
overseeing the government financial management process and its accountability management and reform information (for more information on, and examples
for state finance.” of, citizen-centric financial reports, visit the U.S. Association of Government
Accountants Web site at http://www.agacgfm.org/citizen).
The problem, of course, is that the processes of budgeting and financial
management are not very interesting to the average citizen, and mass media The Government of Hong Kong has been quite creative in disseminating part
(newspapers, the Web, television and radio) tend to focus on the “bad” of its financial message to the public, getting across important information
news of government finance. That means that financial leaders have to be about the 2009 budget through a well-illustrated 130-page graphic novel titled
persistent and creative in relaying the message of financial reform Tomorrow—Future for Today (see Figure 1). The message of the graphic novel
to the public. is that “Future success is built on today’s decisions.” Each country should
determine the best communication methods for its message and culture, but
creativity is always essential.
2 4 (Graph)
Transportation 10%
Mortgage payment 35%
Misc expenses 20%
Education 20%
Clothing 5%
Food and beverages 5%
Others 2%
4 3
In many countries today, transparency is “top of mind” for We also asked survey participants to give us the definition of
financial and nonfinancial leaders alike. We asked respondents transparency they would use in their own organization. Some of
how they defined transparency and what they considered the the responses are listed below:
right mix of transparency for their governments.
“It is that characteristic in government financial management
Defining transparency that distinguishes all institutional acts so that citizens can
The International Monetary Fund defines transparency as: easily recognize the programs that are being implemented, the
investment being made to improve the country’s condition, the
“Openness toward the public at large about government structure revenues collected from taxes, as well as the projection in the
and functions, fiscal policy intentions, public sector accounts and growth of key industries.”
projections.”2
“[My definition] focuses on internal transparency. It includes
Almost all survey respondents agreed with this definition, monthly reporting on transparency to the minister regarding the
and several added to it. They want to also include the disclosure budget and weekly reporting when needed. This reporting shows
of information on auditing processes, risk assessments, sources how my ministry is going to spend the money and how it was
of resources, expenditure patterns, procurement procedures spent the previous period. This would increase our transparency
and goal achievements (and failures to gain goals)—and this and [improve] implementation of the budget.”
should be proactive disclosure when possible. Says another,
“My opinion is that openness should also include reporting the “[Transparency also means] that information published in the
performance and result of government activities or programs. official government Web site is verified, trusted and timely.”
This is important to provide an opportunity for citizens to assess
the effectiveness and efficiency of the government in delivering “[Transparency means to present] a true picture of the financial
its services to the public.” health of [my] government. Financial information must be easily
accessible, and the public must feel free to provide feedback on it.”
2
George Kopits and Jon Craig, 1998, “Transparency in Government Operations,” IMF
Occasional Paper No. 158 (Washington, D.C.: International Monetary Fund), p. 1.
There is a saying that when big companies catch a cold, the We asked survey respondents about the effects of current
smaller companies that supply them get pneumonia. This is global economics and how they are reacting to them. Most say
not exactly the case for the relationship of large, developed that the recession has decreased their exports, taxes and general
economies and those of smaller, developing nations, but it is an revenues, along with funds sent home by citizens living abroad.
apt analogy. The global economic recession has reduced demand The result has been more conservatism in public spending and
for some developing nations’ goods and services, while also in government budget practices. Countries that sought foreign
causing donor organizations to trim their grant and loan budgets. capital for development projects, including public-private
partnerships and privatization, have had to put some of these
initiatives on hold or change their funding strategies to reflect
more traditional financing practices. Then again, one respondent
thinks that the recession will accelerate the privatization of
state-owned enterprises. Several respondents reported dilemmas
regarding the use of public and donor funds for relief programs,
such as poverty reduction, versus applying these resources to
economic stimulus initiatives or to financial management reform.
There is positive news, though. The recession has started
to shift the attention of some governments to expanding their
revenue base and to transitioning away from a monoeconomy
dependent on one or a few commodity exports to a multisector
economy. In addition, despite some reduction in resources for
financial reform, interest in it appears to have increased because
of the global recession, say some respondents. “Tighter budgets
are making us better managers, because there is more scrutiny
and demand for accountability,” says one. If financial reforms
are “no cost” or if donors are funding them, then these initiatives
are proceeding, at least for now.
Around the world, survey respondents say that their Development partners will continue to play an important
governments are steadily moving along the path to public role in supporting countries’ efforts to implement reforms, but
financial management reform. The path has not always been initiatives will require ownership by high-level government
clear, and there have been obstacles along the way, yet the officials to be successful. Having a champion for reforms
financial leaders in our survey are committed to the journey. is increasingly important to stay on track amid competing
The global economic crisis that started in 2007 exposed requests for government support. Increased transparency
many flaws in financial management practices and verified the and accountability will be essential to continue to engage the
need for improvement. Citizens are becoming more intense in public in the debate on public finances. Informing them of the
their scrutiny of how governments allocate, spend and report important decisions that lie ahead will facilitate this dialogue.
on public funds, and they want to see changes. This gives Human capital is a critical problem in implementing reforms, so
governments a unique opportunity to invest in financial reforms. leaders must improve their governments’ ability to attract and
Unfortunately, the same economic problems that prompt train top talent for public financial management. This includes
demands for reform in some cases have also diverted government offering competitive compensation and developing government
leaders’ attention to other pressing needs, such as relief, health and academic training in the skills appropriate to modern
and education. financial management.
Finally, it is important for public financial leaders and
managers to increase their involvement in government planning,
budgeting and program management. Besides improving the
operations of the public sector during the good times, such
involvement will help put governments in a better position to
prevent or mitigate the effects of the next financial crisis.
ICGFM
The International Consortium on Governmental Financial Management
The International Consortium on Governmental Financial Management Grant Thornton LLP Global Public Sector
ICGFM brings together diverse governmental entities, organizations and The people in the independent firms of Grant Thornton International Ltd provide
individuals who are financial management practitioners such as accountants, personalized attention and the highest-quality service to public and private clients
auditors, comptrollers, information technology specialists, treasurers and others in more than 100 countries. Grant Thornton LLP is the U.S. member firm of
working in all levels of government. Our mission emphasizes activities to promote Grant Thornton International Ltd, one of the six global audit, tax and advisory
professional development and the exchange of information. Our programs organizations. Grant Thornton International Ltd and its member firms are not
provide activities and products to advance governmental financial management a worldwide partnership, as each member firm is a separate and distinct legal
principles and standards and promote their implementation and application. entity. Visit www.GrantThornton.com/publicsector.
Internationally, ICGFM sponsors meetings and conferences that bring together Grant Thornton LLP Global Public Sector, based in Alexandria, Va., is a global
government financial managers from around the world to share information and management consulting business with the mission of providing responsive
experiences in governmental financial management to educate members and and innovative financial, performance management and systems solutions to
others about innovations, best practices and emerging issues. We also foster governments and international organizations.
research concerning governmental financial management and disseminate
information and results to our members and the public. 333 John Carlyle Street
Alexandria, VA 22314
Working globally with governments, organizations and individuals, the International T 703.837.4400
Consortium on Governmental Financial Management is dedicated to improving F 703.837.4455
financial management so that governments may better serve their citizens. E InternationalDevelopment@gt.com
For more information on ICGFM, visit http://www.icgfm.org.
Rhoda Canter, Partner
2208 Mount Vernon Avenue David Nummy
Alexandria, VA 22301-1314 Leila Aridi Afas
T 703.562.0035 Jason Levergood
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E ICGFM@icgfm.org Walter Pazos