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Results of a Worldwide Survey January 2010
The International Consortium on Governmental Financial Management
About the survey
In 2004, the International Consortium on Governmental Financial Management (ICGFM) asked Grant Thornton LLP (Grant Thornton) to conduct its first international survey of government financial executives, titled Resisting Corruption in the Public Sector. In 2009, Grant Thornton conducted a second survey on behalf of ICGFM, focused on public financial management reform. The purpose of this second survey is to provide insight into the experience of national governments engaged in improving the management of public resources, making their finances more transparent and their financial information more useful for managing public sector operations. Survey methodology Grant Thornton partners and staff conducted in-person interviews of national financial executives and donor organizations, using an open- and closed-ended survey instrument. We also designed and carried out a multilingual online survey of the same target audience. Member firms of Grant Thornton International Ltd promoted this survey in their respective countries, resulting in 65 completed 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.
Contents 1 Executive summary 3 Progress in public financial management reform 9 The many roles of the government financial leader 11 Transparency 13 Dealing with global economic uncertainty 16 Conclusions
During summer 2009, 65 public sector officials from 35 countries representing Africa, East Asia and Pacific, Europe and Central Asia, Latin America and the Caribbean, the Middle East, South Asia, and North America participated in the 2009 Survey on Global Financial Management Leaders sponsored by the International Consortium of Governmental Financial Management (ICGFM). The survey explored the reasons why countries engage in public financial management reform initiatives, the obstacles they face, the support required for successful implementation, the role of financial management leaders, the costs and benefits of transparency, dealing with global economic uncertainty and preventing future economic crises. Recent economic downturns have affected developed and developing countries across the globe, causing a decrease in exports, taxes and general revenues, which has led to budget shortfalls and growing demands for public services. These problems have stimulated increased interest in public financial management reform and demands for more accountability for government officials.
Public financial management reforms now under way in the countries surveyed include adopting international accounting standards, standardizing information systems, and improving debt and deficit management. The most commonly cited reasons for reform initiatives are increasing transparency of government and involving citizens in public financial management. As citizen confidence in government increases, say survey participants, the public will give more social and fiscal support to government. Unmet human capital needs appear to be the greatest obstacle to public financial management reforms. These needs include a lack of qualified financial management and accounting professionals, inadequate education and training programs and resources for hiring new personnel. External support, especially technical assistance and training, is critical to overcoming the human capital barrier and ensuring the successful implementation of reforms. Development partners play an important role in supporting governments to conduct self-assessments, modernize and strengthen operations, and implement performance evaluations.
Progress in Public Financial Management Reform 1
Top government officials must lead and own reform initiatives to overcome an entrenched bureaucracy that resists change. Having a highly visible champion of reform efforts is necessary to manage the change initiative and create a holistic view of reform. A champion can also keep the reform agenda as a top priority despite competing demands, especially during an economic recession. Leaders, regardless of their level within government, must have vision, goals and objectives for both their organization and their own positions. They must be able to create a road map to reform that others can follow. Almost all respondents agreed that increased transparency is worth the extra costs associated with it to maintain openness with the public and encourage involvement of citizens. Ethics and governance in financial management are also very important. Financial leaders must always remember that they are employed by the people to serve the people.
In mitigating the revenue shortfall problems exposed by the current global financial crisis, governments must avoid the automatic response of across-the-board budget cuts. They should not use an ax when they need a scalpel. To prevent future economic crises, governments will need to apply proactive management and improved monitoring, forecasting and risk management. Financial management leaders should also increase their involvement in planning, budgeting and program management, lending their special skills and expertise to their nonfinancial colleagues. Developing strong partnerships among financial management leaders across government entities is a must to promote public financial management reform with respect to credible budget preparation, execution, implementation and reporting. International forums such as ICGFM’s also enable 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 employed by governments around the world whether their countries were engaged in public financial management reform activities, and nearly all said they were. The reform activities they described included the following: • Accounting. Adopting international accounting standards and accrual accounting • Information technology. Standardizing information systems, implementing integrated financial management systems or enterprise resource planning (ERP) systems and upgrading systems • Law and policy. Establishing legal frameworks for public sector finance (examples: laws for government finance, treasury and supreme audit institutions) • Process improvement. Eliminating redundancies and inefficiencies in the variety of processes that underlie public financial management (examples: improved accounting and developing procedures manuals, such as a comptroller manual) • Audits. Improving the public audit function • Budget management. Introducing outcome-based budgeting, improved debt and deficit management, laws promoting fiscal responsibility in government, forward planning for investment, increased participation by legislators (for example, Members of Parliament) in budget preparation and performance reviews • Procurement. Procurement policy reform, Web-based information systems for procurement Several respondents said that at least part of their public financial management reform initiative receives funding from multilateral and bilateral donors.
Behind the push for reform
Why are national governments engaged in financial management reform? Chart 1 shows that there are four main reasons, which are related to accountability and effectiveness. Accountability and transparency tend to reinforce each other, according to the majority of survey participants. Concerning accountability, one respondent says, “There is a major interest in government to demonstrate to citizens that public spending is being done efficiently.” One reason for the interest is a need to increase confidence in government and to show citizens the results generated by the taxes they pay. This openness makes citizens more willing to give social and fiscal support to their governments. Increased openness also encourages citizen awareness of government performance; says a survey respondent, “Awareness has triggered citizen demand for establishing a more transparent and more accountable government.” One could easily go the other way around, with citizen awareness pushing government to become more accountable. Either way, this is a righteous cycle in which accountability promotes more transparency that demands more accountability and so on. Survey respondents are quite aware of this cycle and want to promote it.
Chart 1: Reasons for initiating public financial management reform
Increase transparency of government and involvement/ participation of citizens 41% Improve effectiveness of budget expenditure 29% Improve accountability to government and business stakeholders 20% Meet requirements of the donor community 10% N = 119 mentions
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Barriers to reform
We asked participants to tell us the greatest obstacles to implementing financial management reform in their governments as a whole and in the specific organization (ministry or agency) in which they worked. The responses fell into four broad categories: people, legal framework and policy, external support, and leadership and change management. People Human capital challenges were the most-often-mentioned barriers to public financial management reform. This result comes as no surprise and may indicate that the challenges are universal to public service around the globe. Grant Thornton has carried out dozens of surveys of U.S. financial management leaders with the same result: human capital is their number one 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.
Nature of financial management positions. Some respondents say that in their governments, the job description of financial managers and staff must be more clear and precise, to promote professionalism and accountability. In addition, their role in the public service needs to be better understood by nonfinancial personnel and by financial professionals themselves. Availability of training and professional development. Some respondents indicated a lack of universities in their countries that offered courses in public finance. Several say that they require the resources to train their professionals in new skills such as accrual accounting and management information systems. In addition, there may not be a clear career path for public sector financial management professionals, making it more difficult to determine training and professional development needs.
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 Many respondents said that their countries must do more to enhance the legal framework of public sector finance and related functions such as procurement. The framework includes both laws established by elected officials and policies that interpret those laws, along with national standards for public sector 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,” and go on to mention the separation of budgeting, financial management, treasury and other functions. Requirements by donor organizations for countries to implement legal reform are good, but in some cases, countries lack the resources to do this quickly or to actually follow the requirements of new laws. A country need not wait until a full framework of law is established for financial management reform. At both the entity and individual levels, a financial organization can introduce performance evaluation, accountability, managing for results, and other policies and procedures during a period of transition to new legislation.
External support We asked respondents what are the most important resources needed by their governments for financial management reform. Chart 2 summarizes their responses into four categories: technical assistance, legal frameworks, automated financial management systems and funding in general.
Chart 2: Types of support needed for public financial management reform
Technical assistance: training, exchange, knowledge and skills development 70% Legal frameworks 17% Automated financial management systems 9% Funding: grants, loans and other funds 4%
N = 72 mentions
A country need not wait until a full framework of law is established for financial management reform.
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Technical assistance was the most-often-mentioned form of support required to implement financial management reforms. Respondents mentioned specific training topics for financial management professionals, such as: Training topics • Accounting • Auditing • Financial reporting • Internal controls • Information systems management • Procurement • Treasury procedures 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 say they need into three categories: process, general training, and technical and policy advice. The results are shown in Chart 3. Topics for process technical assistance include all those listed above for training, along with the following: • Country diagnostics and self-assessments • Generating resources • Implementing financial management information systems and applications software • Modernizing and strengthening external and internal audit functions • Modernizing charts of accounts • Performance evaluation (entity and individual) • Planning • Public-private partnerships
Chart 3: Technical assistance needs of survey respondents
Process: country diagnostics, budgets, accounting, financial reporting and financial management systems 58% General training: subject training and information access 21% Technical and policy advice: external oversight and reforms at the national and subnational levels 20%
N = 132 mentions * Total is less than 100 percent because of rounding.
General training technical assistance include the areas listed earlier as training topics, plus obtaining access to information on financial management reform, best practices, benchmarks, tools and procedures for improvement, and other related items. Technical and policy advice focused on developing plans and procedures for implementing a program of public sector financial management reform at various levels of government. Some respondents considered external oversight by donor organizations of such programs to be a form of technical assistance.
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Leadership and change management According to survey respondents, leadership and change management go together because without leadership, there can be no planned change. Leadership. Getting and maintaining top-leader support for legal changes and reform are sometimes difficult, according to several respondents. Sometimes, the need for reform simply gets lost among other pressing issues. How to bring financial reform to the forefront? Some respondents call on top leaders to hold government organizations more accountable for progress in financial reform, because without attention at the top, the status quo will be slow in changing. Others say that donor organizations must try harder to sell top leaders on financial management reform, because these leaders do not understand its importance. Top-leader acceptance will be critical for the successful implementation of financial management reforms once donor funding for reforms ends.
Change management. Several respondents say that an entrenched bureaucracy will resist technical financial reforms such as accrual accounting and the use of automated versus manual information processes. Having a visible, central focal point for change management is important, such as the “champion” discussed below in the section on the roles of the government financial leader. Another important component of change is, according to one respondent, good knowledge sharing and coordination among government entities, especially in disseminating public accounting standards to all entities at all levels. One vehicle for knowledge sharing is a new automated accounting system used by all entities to help them with the ever-growing number of financial transactions, says the same respondent. Sustaining the changes once they are made is also important, say many respondents, and now is the time to work on that challenge. Public education on the value of financial management reforms will help create and sustain momentum, according to many respondents; this is discussed in the box below.
According to some survey respondents, this starts by ensuring that timely audited reports of state finances are available to legislators and the public. As representatives of the people, legislators are important communication targets for getting the word out on reform. Financial leaders and managers themselves need to carry the discussion of finance out to citizens, say some respondents, through media and public meetings. Distributing citizencentric annual financial statement reports is another way to convey financial management and reform information (for more information on, and examples of, citizen-centric financial reports, visit the U.S. Association of Government Accountants Web site at http://www.agacgfm.org/citizen). The Government of Hong Kong has been quite creative in disseminating part of its financial message to the public, getting across important information about the 2009 budget through a well-illustrated 130-page graphic novel titled Tomorrow—Future for Today (see Figure 1). The message of the graphic novel 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.
Educating citizens about financial management reform
Citizen opinion can and should be a major driver of public financial management reform. In some cases, public opinion can be a major resource for financial leaders who want to convince their countries’ leaders of the importance of reform. Says one respondent, “We need to educate citizens because once they understand the need for financial reform, they can then play a stronger role in overseeing the government financial management process and its accountability for state finance.” The problem, of course, is that the processes of budgeting and financial management are not very interesting to the average citizen, and mass media (newspapers, the Web, television and radio) tend to focus on the “bad” news of government finance. That means that financial leaders have to be persistent and creative in relaying the message of financial reform to the public.
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 (statistics) on our household expenses and found that we have incurred a lot of unnecessary expenses which definitely need to be cut back!” 4 (Graph) Transportation 10% Mortgage payment 35% Misc expenses 20% Education 20% Clothing 5% Food and beverages 5% Others 2%
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The many roles of the government financial leader
Leadership may not be the most costly component of public financial management reform—unless it is not present. So say many of the survey respondents, who look to the top elected and appointed officials of their financial organizations for direction, support and motivation. We asked them what it takes to be a good financial management reform leader, and their responses fell roughly into three categories: leadership, knowledge and culture.
“Our government lacks a single champion who is tasked with seeing the implementation of public financial reforms through to completion,” says a survey respondent. With this situation comes lack of coordination and support both across a national government and among different levels (for example, national, provincial and municipal). Continues the just-quoted 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 and able to set priorities; manage processes; and manage up the hierarchy (elected officials and top appointees), down (staff and component entities) and across (other public sector entities and levels of government). “Leaders have to be able to work as part of a team and to delegate responsibilities to others—and hold them accountable for that work,” says a respondent. It is very important for financial management leaders to know precisely where they stand within their governments, and that does not mean a box in an organizational chart. Leaders need to thoroughly understand their legal, political and managerial positions and the limits of their power and independence. As appropriate, they need to expand their independence to become the best stewards of state finance; in this regard, says a respondent, “Leaders have to know how to say NO!” As well, says a respondent, “Leaders must know the exact nature of their assignment—what they are supposed to be doing. The rules for this are not very clear in some developing countries.”
Public sector financial management leaders should have the technical knowledge needed for their work: accounting, financial management, budgeting, information systems, auditing and other modern finance-related knowledge. They need to be thoroughly familiar with the laws and “mega processes” of public finance, such as budgeting, procurement, reporting, treasury and others. (Needless to say, leaders must be willing to enforce the laws and adhere to the processes). Access to information on the world’s best practices in financial management is necessary, along with the ability and willingness to adapt them to the leader’s country and organization. A country’s financial status may be strongly affected by regional and world economic trends, say some respondents, so a leader who has a working knowledge of international economics has an advantage.
“Our government lacks a single champion who is tasked with seeing the implementation of public financial reforms through to completion.”
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 financial management reforms. Several respondents made it clear that financial management leaders must set a high standard of ethics for themselves and enforce ethical behavior by their staff and component entities. “Leaders have to understand that good management leads to less corruption, and that there is a clear link between governance and corruption,” says a respondent. Most of all, 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
In many countries today, transparency is “top of mind” for financial and nonfinancial leaders alike. We asked respondents how they defined transparency and what they considered the right mix of transparency for their governments.
We also asked survey participants to give us the definition of transparency they would use in their own organization. Some of the responses are listed below: “It is that characteristic in government financial management that distinguishes all institutional acts so that citizens can easily recognize the programs that are being implemented, the investment being made to improve the country’s condition, the revenues collected from taxes, as well as the projection in the growth of key industries.” “[My definition] focuses on internal transparency. It includes monthly reporting on transparency to the minister regarding the budget and weekly reporting when needed. This reporting shows how my ministry is going to spend the money and how it was spent the previous period. This would increase our transparency and [improve] implementation of the budget.” “[Transparency also means] that information published in the official government Web site is verified, trusted and timely.” “[Transparency means to present] a true picture of the financial 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.
The International Monetary Fund defines transparency as: “Openness toward the public at large about government structure and functions, fiscal policy intentions, public sector accounts and projections.”2 Almost all survey respondents agreed with this definition, and several added to it. They want to also include the disclosure of information on auditing processes, risk assessments, sources of resources, expenditure patterns, procurement procedures and goal achievements (and failures to gain goals)—and this should be proactive disclosure when possible. Says another, “My opinion is that openness should also include reporting the performance and result of government activities or programs. This is important to provide an opportunity for citizens to assess the effectiveness and efficiency of the government in delivering its services to the public.”
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
No business or government activity is free—everything has a cost associated with it. We asked respondents to compare the value of the extra information provided by being more transparent with the cost of obtaining and disseminating that information. Says a respondent, “I believe that the cost of running all communication systems to inform the citizens is justified; it is important to maintain those systems because they help to create the confidence from the general public towards the administration. During the first years, this investment [in transparency] is quite high, but it decreases [over time].” Says another, “I think it is not about the cost. It is about the citizens’ right to have the information and the government’s obligation to provide the information as part of its accountability for public finance management.” Investing in transparency may have a surprising return, say several respondents, because (according to one) “citizens will be more motivated to pay taxes if they can easily verify what government is doing with their money.” Other benefits include a more involved citizenry that is engaged in governing. Such citizens can become key planners in national development programs. Transparency also improves the credibility of government, making it easier to plan and provide services to the public. Interestingly, several respondents said that transparency to 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.
“With transparency, we are better able to focus all government bureaus on a common goal and ensure that they work toward that goal,” says a respondent. Several respondents said that fiscal transparency could lead to increased trust between the international donor community and developing countries. Says one, “Donor organizations will be able to better coordinate their donations because they will be able to see how the money is being used. This helps them set up the right mix of assistance.” Although several survey participants pointed out the high cost of collecting and disseminating information to the public, there was very little complaint about this. The real barrier is not cost, say some respondents, but instead it is psychological or political. “We already have all the information and reports,” says one. “It is more a question of political will to make things transparent. In my country’s government, it used to be that all documents were declared confidential unless stipulated otherwise. Now, they are declared public unless otherwise stated.” Another respondent adds an important note of caution: “Costs should be measured and balanced with the success of the government in providing transparent information to society and citizens.” In other words, like all activities, governments need to evaluate how they ensure transparency, so that they deliver the information citizens want and need to play a part in managing public money.
12 Progress in Public Financial Management Reform
Dealing with global economic uncertainty
There is a saying that when big companies catch a cold, the smaller companies that supply them get pneumonia. This is not exactly the case for the relationship of large, developed economies and those of smaller, developing nations, but it is an apt analogy. The global economic recession has reduced demand for some developing nations’ goods and services, while also causing donor organizations to trim their grant and loan budgets.
We asked survey respondents about the effects of current global economics and how they are reacting to them. Most say that the recession has decreased their exports, taxes and general revenues, along with funds sent home by citizens living abroad. The result has been more conservatism in public spending and in government budget practices. Countries that sought foreign 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.
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Role of financial management in fixing the global economy
We asked financial management leaders what is the most important thing that they can do today to mitigate or fix the problems of the global financial crisis. Their responses fall into three major categories: adjust spending and revenue, manage more effectively and work together. Adjust spending and revenue. If government budgets need to be trimmed, say several respondents, then the cutting must be done rationally. “We must analyze very carefully which programs need to be canceled to reduce public spending,” says one respondent. One alternative is to allow the private sector to take over functions now performed by government industries, says a respondent. On the revenue side, as noted in the previous section, expanding the base is important, and financial managers can help evaluate new revenue sources and support collections in established ones, such as by streamlining the tax system. They can also work with nonfinancial leaders to realign development priorities with resources.
Manage more effectively. Says another respondent, “For me, as an auditor, the thing that we can do through our audit work is to help the government to find ways to improve its efficiency and effectiveness in performing its functions and delivering services to the citizens. This can be done by improving our performance audit capabilities. Other than that, we also still need to fight against corruption through the investigative audit for minimizing any fraud, waste and abuse (FWA) actions by government officials and employees.” Strengthening internal controls will help to curtail FWA, according to some respondents. Financial leaders should also take part in planning new investment programs to ensure that they are fiscally sound and well monitored. Work together. Better partnerships among central banks, economic ministries and financial management organizations are a must, say respondents. Working together, they can promote public financial management reform with respect to credible 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
Around the world, survey respondents say that their governments are steadily moving along the path to public financial management reform. The path has not always been clear, and there have been obstacles along the way, yet the financial leaders in our survey are committed to the journey. The global economic crisis that started in 2007 exposed many flaws in financial management practices and verified the need for improvement. Citizens are becoming more intense in their scrutiny of how governments allocate, spend and report on public funds, and they want to see changes. This gives governments a unique opportunity to invest in financial reforms. Unfortunately, the same economic problems that prompt demands for reform in some cases have also diverted government leaders’ attention to other pressing needs, such as relief, health and education.
Development partners will continue to play an important role in supporting countries’ efforts to implement reforms, but initiatives will require ownership by high-level government officials to be successful. Having a champion for reforms is increasingly important to stay on track amid competing requests for government support. Increased transparency and accountability will be essential to continue to engage the public in the debate on public finances. Informing them of the important decisions that lie ahead will facilitate this dialogue. Human capital is a critical problem in implementing reforms, so leaders must improve their governments’ ability to attract and train top talent for public financial management. This includes offering competitive compensation and developing government and academic training in the skills appropriate to modern 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
The International Consortium on Governmental Financial Management
The International Consortium on Governmental Financial Management ICGFM brings together diverse governmental entities, organizations and individuals who are financial management practitioners such as accountants, auditors, comptrollers, information technology specialists, treasurers and others working in all levels of government. Our mission emphasizes activities to promote professional development and the exchange of information. Our programs provide activities and products to advance governmental financial management principles and standards and promote their implementation and application. Internationally, ICGFM sponsors meetings and conferences that bring together government financial managers from around the world to share information and experiences in governmental financial management to educate members and others about innovations, best practices and emerging issues. We also foster research concerning governmental financial management and disseminate information and results to our members and the public. Working globally with governments, organizations and individuals, the International Consortium on Governmental Financial Management is dedicated to improving financial management so that governments may better serve their citizens. For more information on ICGFM, visit http://www.icgfm.org. 2208 Mount Vernon Avenue Alexandria, VA 22301-1314 T 703.562.0035 F 703.519.0039 E ICGFM@icgfm.org James R. Ebbitt, President Patricia Cornish, Executive Director
Grant Thornton LLP Global Public Sector The people in the independent firms of Grant Thornton International Ltd provide personalized attention and the highest-quality service to public and private clients in more than 100 countries. Grant Thornton LLP is the U.S. member firm of Grant Thornton International Ltd, one of the six global audit, tax and advisory organizations. Grant Thornton International Ltd and its member firms are not a worldwide partnership, as each member firm is a separate and distinct legal entity. Visit www.GrantThornton.com/publicsector. Grant Thornton LLP Global Public Sector, based in Alexandria, Va., is a global management consulting business with the mission of providing responsive and innovative financial, performance management and systems solutions to governments and international organizations. 333 John Carlyle Street Alexandria, VA 22314 T 703.837.4400 F 703.837.4455 E InternationalDevelopment@gt.com Rhoda Canter, Partner David Nummy Leila Aridi Afas Jason Levergood Steve Clyburn Walter Pazos
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.
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