Bruce Lazenby President

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Bruce LazenbyPresident CEOblazenby_at_FreeBalance
.com
Building the Foundation for e-Government in
Developing Nations
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Agenda

• E-Government and Anti-Corruption
• Observations
• Key Challenges
• FMIS Overview
• International Case Studies
• Immediate Impact and Results
• Lessons Learned
• Critical Success Factors
• Conclusions

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E-Government

• E-Government refers to the use of information
  and communications technologies to improve the
  efficiency, effectiveness, transparency and
  accountability of government.
• (The World Bank Group)

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Anti-Corruption
The reduction of corruption is the result of two
underlying premises

• Committed desire to change
• Use of appropriate tools to affect change

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Observations

• Management of Funds
• Before a government can develop sustainable
  sources of financing, they need a means of
  managing, accounting for, and reporting on the
  funds entrusted to the government (build trust
  and confidence).
• Urgency
• Given the international economic slowdown and
  repeated crisis, countries have an urgent need to
  better manage money in order to create and
  operate an effective government
• Window of Opportunity
• Narrow window of opportunity to establish
  credibility in the eyes of its citizens, donors,
  creditors, trading partners and foreign investors
• International Standards
• Software must meet multiple accounting and
  reporting needs WB TRM, IMF COFOG, IAS, GAAP,
  IFAC, best-practices, donors, creditors,
  unique-to-country

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Key Challenges

• Complexity of System
• The complexity of the solution must be
  appropriate. All governments require
  sophisticated government-focused functionality
  nothing less and nothing more
• Modern System
• All government financial management solutions
  should be based on proven, first-world software
  applications. The system must operate on-line in
  real time, and be affordable, sustainable and
  upgradeable
• Localization and Capacity Building
• System must be delivered and localized rapidly,
  and be understandable and easy to use
• Sustainability
• Customization will accelerate system
  obsolescence, cost and likelihood of failure
  proven audit support
• In-country support

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Core FMIS Elements
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Fiscal Cycle
APPROPRIATIONS MODULEEntry of allotments,
original and forecast budgets, and
commitments/obligations
1. Budget Authorization Management
8. Budget Preparation
2. Commitment of Funds
7. Audit and Evaluation
GENERAL LEDGER ANDCONTROLS MODULESUse of
general ledger reportsand system audit trails
3. Payments and Receipts Management
EXPENDITURE MODULEUse of approvals and account
processing
6/1. Budget Reviewand Fiscal Reporting
4. Cash Management
APPROPRIATIONS MODULEModification of revised
and forecast budgets
Use of Banks andCash Allocation
5. Debt and AidManagement
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System Overview
FreeBalance eFinancials

• Public Sector Financial, Accounting, Treasury
  Material Management System
• Budget and Manager-Centric
• Best in Class
• Government Design Ensures Ease of Use,
  Comprehension
• Proven Rapid Deployment Methodology
• Parameterization Reduces Maintenance and
  Support Costs
• Post-Deployment Sustainability

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Critical Success Factors

• Deliverable
• Understandable
• Affordable
• Sustainable
• Extensible

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Case Studies

• Focus on three key international projects

• Kosovo
• East Timor
• Afghanistan

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Setting the Stage
"The task before the international communityis
to help the people in Kosovo to rebuildtheir
lives and heal the wounds of conflict."UN
Secretary-General Kofi Annan
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FreeBalance in Kosovo

• Key Kosovo Requirements
• Financial management system to help democratic
  development and economic liberalization
• Technology to ensure sound fiscal management and
  strengthen transparency and good governance
• Protect the integrity of the revenue raising and
  expenditure process (donor confidence)
• User training and implementation support
• Local capacity building and sustainability
• Translation of system into Albanian and Serbian
• URGENCY

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FreeBalance in Kosovo
Pictures taken in Pristina by FreeBalance in May
2001
Serbian Police Station 5 blocks from FreeBalance
offices
Restaurant in Pristina 2 blocks from FreeBalance
offices
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FreeBalance in Kosovo

• Rapid Deployment of FreeBalance eFinancials
• Install the system 8 May 2000
• Configure the Chart of Accounts
• Configure the Financial Coding Blocks
• Enter supporting table elements (vendors, bank
  accounts, etc.)
• Configure the management rules
• Enter test transactions, produce test reports
• Enter live transactions, produce live reports
• Prove live system to donors on 3 June 2000
  (26 days prep to proof)

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FreeBalance in Kosovo
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FreeBalance in East Timor

• FreeBalances software brings along with it
  internationally approved accounting practices and
  transparency, which otherwise take a long time to
  develop in such economies.

(East Timor Ministry of Finance)
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FreeBalance in East Timor

• Brief Background
• Decades of violence and civil unrest due to
  struggle for independence
• UNTAET was established in October 1999 to
  administer the Territory

• As of April 2002, UNTAET strength was 7,687 total
  uniformed personnel, including 6,281 troops,
  1,288 civilian police and 118 military observers
  UNTAET also included 737 international civilian
  personnel and 1,745 local civilian staff.

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FreeBalance in East Timor

• The UNTAET Mandate
• Provide security and maintain law and order
• Establish an effective administration
• Assist in the development of civil and social
  services
• Ensure the coordination and delivery of
  humanitarian assistance, rehabilitation of
  humanitarian assistance, rehabilitation and
  development assistance
• Support capacity-building for self-government
• Assist in the establishment of conditions for
  sustainable development

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FreeBalance in East Timor

• FreeBalance Project
• FreeBalance provided financial management
  software and related services (Dili, East Timor)
• Funded by the World Bank and delivered to the
  Central Fiscal Authority of East Timor (CFA)
• FreeBalance eFinancials implementation began in
  September 2000 (Foundation)
• System went live in less than 45 days
• Phase II extended the CFA project to Agencies and
  Departments of the East Timor Transitional
  Administration
• East Timor celebrated Independence Day on May
  20th 2002
• Additional modules being rolled out

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FreeBalance in Afghanistan

• If FreeBalance can help bring fiscal stability
  to Afghanistans beleaguered government, it will
  have accomplished not just a business coup, but a
  kind of miracle.

(Canadian Business Magazine, December 2002)
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FreeBalance in Afghanistan

• Financial management software and services for
  the Transitional Islamic Government of
  Afghanistan
• Arrived in Country 9 October 2002 system live
  and first check cut 24 October 2002 (15 days prep
  to proof)
• Project to be rolled out in two phases over the
  course of five months
• FreeBalance and BearingPoint will implement
  FreeBalance eFinancials and provide associated
  professional services

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FreeBalance in Afghanistan
Pictures taken in Kabul in October 2002
Views from Ministry of Finance office
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Immediate Impact and Results
Pre-Implementation
Post-Implementation
1. System

• Microsoft Access
• Entirely paper-based
• None
• Homegrown
• Custom built

• FreeBalance eFinancials
• Modern
• Proven
• Supported

2. Cash Management
3. Donor/Taxpayer Confidence
4. Expenditure Management
5. Integration and Connectivity
6. Capacity Building
7. Grants Management
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Immediate Impact and Results
Pre-Implementation
Post-Implementation
1. System

• Cash advances to enable the procurement of
  essential goods and services.
• Transactions executed at the municipal level
  could only be reviewed after the fact
• Analysis of expenditures was extremely limited

• Alarming price variances for common goods were
  identified across the municipalities
• Eliminated via expenditure analysis and
  reporting, the use of commitment recording prior
  to expenditures, and oversight
• Reduced requirements for cash advances

2. Cash Management
3. Donor/Taxpayer Confidence
4. Expenditure Management
5. Integration and Connectivity
6. Capacity Building
7. Grants Management
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Immediate Impact and Results
Pre-Implementation
Post-Implementation
1. System

• Donors were threatening to freeze funds and
  discontinue additional funds unless they received
  credible, timely and accurate financial reports.

• FreeBalance reports provided donors with the
  confidence that finances were being managed
  properly
• Facilitated access to donor funding and
  independent financial reports for each donor now
  available

2. Cash Management
3. Donor/Taxpayer Confidence
4. Expenditure Management
5. Integration and Connectivity
6. Capacity Building
7. Grants Management
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Immediate Impact and Results
Pre-Implementation
Post-Implementation
1. System

• Inability to track payments and account for
  expenditures

• Payroll system helped administration identify
  hundreds of people who were receiving multiple
  salaries (in some cases, as many as six salaries
  for the same person), as well as hundreds of
  ghost employees.
• Full audit trail capabilities
• Minimization of cash transactions

2. Cash Management
3. Donor/Taxpayer Confidence
4. Expenditure Management
5. Integration and Connectivity
6. Capacity Building
7. Grants Management
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Immediate Impact and Results
Pre-Implementation
Post-Implementation
1. System

• De-centralized environment
• Ministries and municipalities existed in
  isolation from the central authority

• Access to commitment management functionality
  enabled proactive management of finances
• Empowered employees with a sense of control and
  of being part of the solution
• Now more accountable for financial management
  decisions

2. Cash Management
3. Donor/Taxpayer Confidence
4. Expenditure Management
5. Integration and Connectivity
6. Capacity Building
7. Grants Management
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Immediate Impact and Results
Pre-Implementation
Post-Implementation
1. System

• Lack of sufficient resources and financial
  management expertise to adequately manage public
  sector finances

• Centralizing the financial management database
  enabled skilled personnel to oversee financial
  management and accounting practices
• Able to identify areas in which needed
  assistance and training were needed
• Proper accounting and financial management
  techniques demonstrated online for decentralized
  users

2. Cash Management
3. Donor/Taxpayer Confidence
4. Expenditure Management
5. Integration and Connectivity
6. Capacity Building
7. Grants Management
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Immediate Impact and Results
Pre-Implementation
Post-Implementation
1. System

• Required extensive manual processing or
  individual cash grants/bank accounts
• Such arrangements are not only inefficient, but
  much more open to abuse

• Comprehensive, multi-dimensional FreeBalance
  capabilities deployed (multi-fund/program/project
  )
• Commitment/expenditure processes within a
  framework where funds allocated downwards and
  easily tracked/reported from the centre
• Funds allocations, decision-making, and
  implementation now occur at the lowest level
  using standard processes

2. Cash Management
3. Donor/Taxpayer Confidence
4. Expenditure Management
5. Integration and Connectivity
6. Capacity Building
7. Grants Management
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Lessons Learned

• Think big but start small
• Go live fast and scale up
• Solve problems and show progress
• Get people and systems into production quickly
• Improve donor coordination for leverage
• Success breeds success
• Parameterization is key
• Avoids costs and creates sustainability in the
  longer term
• Local ownership and capacity building
• What is doable for sustainability?

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Critical Success Factors

• Deliverable
• Understandable
• Affordable
• Sustainable
• Extensible

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Critical Success Factors

• Deliverable
• The system must scale down for a rapid start and
  scale up for a complete solution to multiple
  Departments and multiple levels.
• A truly integrated modular approach.
• Go live in 60 days with a configured-for-you
  solution (not vanilla)

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Critical Success Factors

• Understandable
• Full Government functionality requires hundreds
  of tables and rules, not 10 and not 10,000
• Managers must be able to understand and actually
  use, maintain, and leverage its functionality to
  develop and enforce sound, effective, efficient
  government financial management practices across
  ministries and functions, at all levels

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Critical Success Factors

• Affordable
• Every customer is different and the software
  needs to reflect this reality
• Parameterization is key. Not custom work.
• Downstream costs associated with customization
  and unnecessary processes can be debilitating and
  risky for any institution

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Critical Success Factors

• Sustainable
• An enduring solution must be supported and
  maintained by local solution providers for first
  and second level support services
• The system must be a long-term solution

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Critical Success Factors

• Extensible
• The solution must be able to grow as government
  requirements evolve and new eGovernment
  technologies emerge (eGrants, ePermits,
  eLicenses)

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Critical Success Factors

• Deliverable
• Understandable
• Affordable
• Sustainable
• Extensible

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Conclusion

• Both internal stakeholders (political
  decision-makers, taxpayers) and external
  stakeholders (lending agencies, donor nations)
  demand ever increasing control, audit and
  reporting
• These days you cannot achieve the standard
  required without some sophisticated software, but
  you also cant afford 10s of millions and a
  2-year installation schedule
• Solution must be purpose-built software that is
  designed exclusively for Government
• URGENCY

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Conclusion

• Not only is E-Government efficient, it is a major
  contributor to anti-corruption
• Effective and modern systems, starting with FMIS,
  are critical components to meet the objectives of
  accountability, transparency, and anti-corruption

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Bruce LazenbyPresident CEOFreeBalance
Inc.blazenby_at_FreeBalance.com