You are on page 1of 20

Progress in Public Financial

Management Reform

Results of a Worldwide Survey January 2010

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.

Of the in-person and online survey respondents, approximately 74 percent
were employed by a government, 9 percent by donor organizations and other
nongovernmental organizations, 2 percent by academia and the rest by private
companies engaged in government service work. Participants represented 35
countries across Africa, East Asia and Pacific, Europe and Central Asia, Latin
America and the Caribbean, the Middle East, South Asia, and North America.

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.

Progress in Public Financial Management Reform 1
Top government officials must lead and own reform In mitigating the revenue shortfall problems exposed by
initiatives to overcome an entrenched bureaucracy that resists the current global financial crisis, governments must avoid
change. Having a highly visible champion of reform efforts is the automatic response of across-the-board budget cuts. They
necessary to manage the change initiative and create a holistic should not use an ax when they need a scalpel. To prevent future
view of reform. A champion can also keep the reform agenda economic crises, governments will need to apply proactive
as a top priority despite competing demands, especially during management and improved monitoring, forecasting and risk
an economic recession. Leaders, regardless of their level within management. Financial management leaders should also
government, must have vision, goals and objectives for both increase their involvement in planning, budgeting and program
their organization and their own positions. They must be able to management, lending their special skills and expertise to their
create a road map to reform that others can follow. nonfinancial colleagues.
Almost all respondents agreed that increased transparency Developing strong partnerships among financial
is worth the extra costs associated with it to maintain openness management leaders across government entities is a must to
with the public and encourage involvement of citizens. Ethics promote public financial management reform with respect to
and governance in financial management are also very important. credible budget preparation, execution, implementation and
Financial leaders must always remember that they are employed reporting. International forums such as ICGFM’s also enable
by the people to serve the people. financial management leaders from across the globe to connect,
collaborate, share best practices and learn.

2 Progress in Public Financial Management Reform
Progress in public financial
management reform

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%

multilateral and bilateral donors. Meet requirements of
the donor community 10%

N = 119 mentions

Progress in Public Financial Management Reform 3
Barriers to reform Nature of financial management positions. Some
We asked participants to tell us the greatest obstacles to respondents say that in their governments, the job description
implementing financial management reform in their governments of financial managers and staff must be more clear and precise,
as a whole and in the specific organization (ministry or agency) to promote professionalism and accountability. In addition,
in which they worked. The responses fell into four broad their role in the public service needs to be better understood by
categories: people, legal framework and policy, external support, nonfinancial personnel and by financial professionals themselves.
and leadership and change management. Availability of training and professional development.
Some respondents indicated a lack of universities in their
People countries that offered courses in public finance. Several say
Human capital challenges were the most-often-mentioned that they require the resources to train their professionals
barriers to public financial management reform. This result in new skills such as accrual accounting and management
comes as no surprise and may indicate that the challenges are information systems. In addition, there may not be a clear career
universal to public service around the globe. Grant Thornton path for public sector financial management professionals,
has carried out dozens of surveys of U.S. financial management making it more difficult to determine training and professional
leaders with the same result: human capital is their number one development needs.
concern.1 The nature of the problem faced by U.S. financial
leaders is much the same as that faced by their colleagues in other
nations. The paragraphs that follow discuss some of the elements
of the problem.
A lack of qualified financial and accounting professionals
trained and experienced in public sector financial
management. Respondents pointed out this problem at
every level of employment, from elected officials and financial
executives to managers to staff. Some respondents in developing
countries said that the lack of skilled accountants also affects
companies and nonprofit organizations. When competing
for a limited pool of skilled professionals, government is at a
disadvantage because of lower salaries, say several respondents.

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.

4 Progress in Public Financial Management Reform
Legal framework and policy External support
Many respondents said that their countries must do more to We asked respondents what are the most important resources
enhance the legal framework of public sector finance and related needed by their governments for financial management reform.
functions such as procurement. The framework includes both Chart 2 summarizes their responses into four categories:
laws established by elected officials and policies that interpret technical assistance, legal frameworks, automated financial
those laws, along with national standards for public sector management systems and funding in general.
accounting. Several respondents agree with one who says,
“There are inherent conflicts in our financial system that need to
be overcome by separating the accounting and audit functions,”
Chart 2: Types of support needed for public financial management reform
and go on to mention the separation of budgeting, financial
management, treasury and other functions. Requirements by Technical assistance: training,
exchange, knowledge and
donor organizations for countries to implement legal reform are
skills development 70%
good, but in some cases, countries lack the resources to do this
Legal frameworks 17%
quickly or to actually follow the requirements of new laws.
A country need not wait until a full framework of law is Automated financial
management systems 9%
established for financial management reform. At both the entity
and individual levels, a financial organization can introduce Funding: grants, loans
and other funds 4%
performance evaluation, accountability, managing for results,
and other policies and procedures during a period of transition
to new legislation.
N = 72 mentions

A country need not wait until a full
framework of law is established for financial
management reform.

Progress in Public Financial Management Reform 5
Technical assistance was the most-often-mentioned form of
Chart 3: Technical assistance needs of survey respondents
support required to implement financial management reforms.
Respondents mentioned specific training topics for financial Process: country diagnostics, budgets,
accounting, financial reporting and
management professionals, such as: financial management systems 58%

General training: subject training
Training topics and information access 21%
• Accounting
Technical and policy advice: external
• Auditing oversight and reforms at the national
• Financial reporting and subnational levels 20%

• Internal controls
• Information systems management
• Procurement
N = 132 mentions
• Treasury procedures * Total is less than 100 percent because of rounding.

Exchange programs with other countries and among levels
of government, which were mentioned by about 7 percent
of respondents, are seen as a way to enhance skills, transfer
knowledge and establish communication among professional
colleagues.
We divided the types of technical assistance that respondents General training technical assistance include the areas listed
say they need into three categories: process, general training, and earlier as training topics, plus obtaining access to information on
technical and policy advice. The results are shown in Chart 3. financial management reform, best practices, benchmarks, tools
Topics for process technical assistance include all those listed and procedures for improvement, and other related items.
above for training, along with the following: Technical and policy advice focused on developing plans
and procedures for implementing a program of public sector
• Country diagnostics and self-assessments financial management reform at various levels of government.
• Generating resources Some respondents considered external oversight by donor
• Implementing financial management information organizations of such programs to be a form of technical
systems and applications software assistance.
• Modernizing and strengthening external and
internal audit functions
• Modernizing charts of accounts
• Performance evaluation (entity and individual)
• Planning
• Public-private partnerships

6 Progress in Public Financial Management Reform
Leadership and change management Change management. Several respondents say that an
According to survey respondents, leadership and change entrenched bureaucracy will resist technical financial reforms
management go together because without leadership, there can such as accrual accounting and the use of automated versus
be no planned change. manual information processes. Having a visible, central
Leadership. Getting and maintaining top-leader support focal point for change management is important, such as the
for legal changes and reform are sometimes difficult, according “champion” discussed below in the section on the roles of the
to several respondents. Sometimes, the need for reform simply government financial leader. Another important component
gets lost among other pressing issues. How to bring financial of change is, according to one respondent, good knowledge
reform to the forefront? sharing and coordination among government entities, especially
Some respondents call on top leaders to hold government in disseminating public accounting standards to all entities at all
organizations more accountable for progress in financial levels. One vehicle for knowledge sharing is a new automated
reform, because without attention at the top, the status quo accounting system used by all entities to help them with the
will be slow in changing. Others say that donor organizations ever-growing number of financial transactions, says the same
must try harder to sell top leaders on financial management respondent.
reform, because these leaders do not understand its importance. Sustaining the changes once they are made is also important,
Top-leader acceptance will be critical for the successful say many respondents, and now is the time to work on that
implementation of financial management reforms once donor challenge. Public education on the value of financial management
funding for reforms ends. reforms will help create and sustain momentum, according to
many respondents; this is discussed in the box below.

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.

Progress in Public Financial Management Reform 7
Figure 1: Government of Hong Kong graphic novel on the 2009 budget
Titled “Tomorrow — Future for Today,” the graphic novel uses family budgeting to help citizens understand government budgeting Translation of the
panels on the right

1 ““I suggest we cut down
on our household
expenses as far as
possible, at least until
Daddy gets a new job.”

2 “That’s right! We can cut
back on eating out.”

3 “Other than eating out,
I have done an analysis
1 (statistics) on our
household expenses
and found that we have
incurred a lot of
unnecessary expenses
which definitely need to
be cut back!”

2 4 (Graph)
Transportation 10%
Mortgage payment 35%
Misc expenses 20%
Education 20%
Clothing 5%
Food and beverages 5%
Others 2%

4 3

8 Progress in Public Financial Management Reform
The many roles of the government
financial leader

Leadership may not be the most costly component of public Leadership
financial management reform—unless it is not present. So say “Our government lacks a single champion who is tasked
many of the survey respondents, who look to the top elected with seeing the implementation of public financial reforms
and appointed officials of their financial organizations for through to completion,” says a survey respondent. With this
direction, support and motivation. We asked them what it situation comes lack of coordination and support both across a
takes to be a good financial management reform leader, and national government and among different levels (for example,
their responses fell roughly into three categories: leadership, national, provincial and municipal). Continues the just-quoted
knowledge and culture. respondent, “We need a single office with responsibility for the
reform agenda. We must create a holistic view of reform because
right now it is broken up in various implementing agencies.”
Whether they are on the national or municipal level, the head
of a ministry or the chief of a division, financial leaders need to
have a vision, goals and objectives for both their organization
and their own positions. Then, say respondents, these leaders
must create a road map to reform that their people can follow.
This includes long- and short-term plans that encompass all
aspects of reform within their area of responsibility. However,
says a respondent, a good financial management leader must be
“a visionary with respect to the quality of sustainable change.”

Leadership may not be the most costly component
of public financial management reform—unless
it is not present.

Progress in Public Financial Management Reform 9
As managers, financial management leaders must be willing Knowledge
and able to set priorities; manage processes; and manage up the Public sector financial management leaders should have the
hierarchy (elected officials and top appointees), down (staff and technical knowledge needed for their work: accounting, financial
component entities) and across (other public sector entities and management, budgeting, information systems, auditing and other
levels of government). “Leaders have to be able to work as part modern finance-related knowledge. They need to be thoroughly
of a team and to delegate responsibilities to others—and hold familiar with the laws and “mega processes” of public finance,
them accountable for that work,” says a respondent. such as budgeting, procurement, reporting, treasury and others.
It is very important for financial management leaders to (Needless to say, leaders must be willing to enforce the laws and
know precisely where they stand within their governments, and adhere to the processes). Access to information on the world’s
that does not mean a box in an organizational chart. Leaders need best practices in financial management is necessary, along
to thoroughly understand their legal, political and managerial with the ability and willingness to adapt them to the leader’s
positions and the limits of their power and independence. country and organization. A country’s financial status may be
As appropriate, they need to expand their independence to strongly affected by regional and world economic trends, say
become the best stewards of state finance; in this regard, says a some respondents, so a leader who has a working knowledge of
respondent, “Leaders have to know how to say NO!” As well, international economics has an advantage.
says a respondent, “Leaders must know the exact nature of their
assignment—what they are supposed to be doing. The rules for Culture
this are not very clear in some developing countries.” Another set of knowledge relates to the ability to get things
done in a financial organization or government bureaucracy.
Therefore, new leaders must review everything about the culture
of their organizations: the history, record of achievements,
failures, official policies and procedures, and unofficial norms
and values of the personnel. When they understand these things,
they will be better able to manage daily operations and introduce
“Our government lacks a single financial management reforms.
champion who is tasked with Several respondents made it clear that financial management
leaders must set a high standard of ethics for themselves
seeing the implementation of and enforce ethical behavior by their staff and component
public financial reforms through entities. “Leaders have to understand that good management
to completion.” leads to less corruption, and that there is a clear link between
governance and corruption,” says a respondent. Most of all,
Survey respondent
says a respondent, “Financial leaders must remember that they
are employed by the people. You work for the people; the
people do not work for you.”

10 Progress in Public Financial Management Reform
Transparency

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.”

Some respondents made it clear that transparency applies to
the government financial leader’s personal situation and finances
as well.

2
George Kopits and Jon Craig, 1998, “Transparency in Government Operations,” IMF
Occasional Paper No. 158 (Washington, D.C.: International Monetary Fund), p. 1.

Progress in Public Financial Management Reform 11
Costs and benefits of transparency “With transparency, we are better able to focus all government
No business or government activity is free—everything has bureaus on a common goal and ensure that they work toward
a cost associated with it. We asked respondents to compare that goal,” says a respondent.
the value of the extra information provided by being more Several respondents said that fiscal transparency could lead
transparent with the cost of obtaining and disseminating that to increased trust between the international donor community
information. Says a respondent, “I believe that the cost of and developing countries. Says one, “Donor organizations will
running all communication systems to inform the citizens is be able to better coordinate their donations because they will be
justified; it is important to maintain those systems because they able to see how the money is being used. This helps them set up
help to create the confidence from the general public towards the right mix of assistance.”
the administration. During the first years, this investment [in Although several survey participants pointed out the high cost
transparency] is quite high, but it decreases [over time].” Says of collecting and disseminating information to the public, there
another, “I think it is not about the cost. It is about the citizens’ was very little complaint about this. The real barrier is not cost,
right to have the information and the government’s obligation to say some respondents, but instead it is psychological or political.
provide the information as part of its accountability for public “We already have all the information and reports,” says one. “It
finance management.” is more a question of political will to make things transparent. In
Investing in transparency may have a surprising return, my country’s government, it used to be that all documents were
say several respondents, because (according to one) “citizens declared confidential unless stipulated otherwise. Now, they are
will be more motivated to pay taxes if they can easily verify declared public unless otherwise stated.”
what government is doing with their money.” Other benefits Another respondent adds an important note of caution:
include a more involved citizenry that is engaged in governing. “Costs should be measured and balanced with the success of the
Such citizens can become key planners in national development government in providing transparent information to society and
programs. Transparency also improves the credibility of citizens.” In other words, like all activities, governments need to
government, making it easier to plan and provide services to evaluate how they ensure transparency, so that they deliver the
the public. information citizens want and need to play a part in managing
Interestingly, several respondents said that transparency to public money.
the public would lead to better coordination among government
entities and between these entities and nongovernmental
organizations. The sad fact is that even in developed countries,
the right hand of public service may not know what the left
hand is doing. This applies vertically as well, because
government organizations are not always transparent in their
reports to elected officials, according to some respondents.

12 Progress in Public Financial Management Reform
Dealing with global economic
uncertainty

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.

Progress in Public Financial Management Reform 13
Role of financial management in fixing the global economy Manage more effectively. Says another respondent, “For
We asked financial management leaders what is the most me, as an auditor, the thing that we can do through our audit
important thing that they can do today to mitigate or fix the work is to help the government to find ways to improve its
problems of the global financial crisis. Their responses fall into efficiency and effectiveness in performing its functions and
three major categories: adjust spending and revenue, manage delivering services to the citizens. This can be done by improving
more effectively and work together. our performance audit capabilities. Other than that, we also
Adjust spending and revenue. If government budgets need still need to fight against corruption through the investigative
to be trimmed, say several respondents, then the cutting must audit for minimizing any fraud, waste and abuse (FWA)
be done rationally. “We must analyze very carefully which actions by government officials and employees.” Strengthening
programs need to be canceled to reduce public spending,” says internal controls will help to curtail FWA, according to some
one respondent. One alternative is to allow the private sector to respondents. Financial leaders should also take part in planning
take over functions now performed by government industries, new investment programs to ensure that they are fiscally sound
says a respondent. On the revenue side, as noted in the previous and well monitored.
section, expanding the base is important, and financial managers Work together. Better partnerships among central banks,
can help evaluate new revenue sources and support collections economic ministries and financial management organizations are
in established ones, such as by streamlining the tax system. They a must, say respondents. Working together, they can promote
can also work with nonfinancial leaders to realign development public financial management reform with respect to credible
priorities with resources. budget preparation, execution, implementation and reporting. In
addition, this partnership should not neglect the need to invest in
good government practices, reforms and transparency.

14 Progress in Public Financial Management Reform
Preventing the next crisis
What can financial management leaders do to prevent future
economic crises? Be proactive, say many respondents. “Better
monitoring and forecasting could have prevented the current
crisis,” says one respondent, “as would being honest and realistic
about investment and fiscal strategies.” Many survey participants
say that financial managers must become more involved in
planning, budgeting and program management, to apply their
special skills to these processes. Several respondents emphasized
risk management as a way to reduce the chances of fiscal crisis.
Risk management can be applied to evaluating government
investments and the need for internal controls, say some.
Continued progress in all areas of financial reform discussed in
this report will form an excellent foundation for preventing—or
at least weathering—future recessions.
One other way to prepare for the future is to understand
that government financial leaders and managers have common
interests and issues, no matter what their nations. Becoming
involved in international associations is a good way to
connect with colleagues around the world, establish ties, share
knowledge, collaborate and learn. International and regional
conferences can help coordinate the work of countries,
professional associations and donor organizations, so that we
can learn from each other, build upon best practices and work to
resolve common problems.

Progress in Public Financial Management Reform 15
Conclusions

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.

16 Progress in Public Financial Management Reform
Acknowledgments

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
F 703.519.0039 Steve Clyburn
E ICGFM@icgfm.org Walter Pazos

James R. Ebbitt, President
Patricia Cornish, Executive Director
Content in this publication is not intended to answer
specific questions or suggest suitability of action in
a particular case. For additional information on
the issues discussed, consult a Grant Thornton
client-service partner.

© Grant Thornton LLP
All rights reserved
U.S. member firm of Grant Thornton International Ltd