Building the Foundation for e-Government in Developing Nations
Bruce Lazenby
President & CEO blazenby@FreeBalance.com

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

“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)

The reduction of corruption is the result of two underlying premises:
1. Committed desire to change
2. Use of appropriate tools to affect change

• 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

• 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

8. Budget Preparation
7. Audit and Evaluation
GENERAL LEDGER AND
CONTROLS MODULES
Use of general ledger reports and system audit trails
1. Budget Authorization
Management
APPROPRIATIONS MODULE
Entry of allotments, original and forecast budgets, and commitments/obligations
2. Commitment of Funds
3. Payments and
Receipts Management
EXPENDITURE MODULE
Use of approvals and account processing
6/1. Budget Review and Fiscal Reporting
APPROPRIATIONS MODULE
Modification of revised and forecast budgets
5. Debt and Aid
Management
4. Cash Management
Use of Banks and
Cash Allocation

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

Critical Success Factors
• Deliverable
• Understandable
• Affordable
• Sustainable
• Extensible

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

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

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)

FreeBalance in Kosovo

FreeBalance in East Timor
“FreeBalance’s 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)

FreeBalance in East Timor
– 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.

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

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 20 th 2002
– Additional modules being rolled out

FreeBalance in Afghanistan
“If FreeBalance can help bring fiscal stability to Afghanistan’s beleaguered government, it will have accomplished not just a business coup, but a kind of miracle.”
(Canadian Business Magazine, December 2002)

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

FreeBalance in Afghanistan
Pictures taken in Kabul in October 2002
Views from Ministry of Finance office

Immediate Impact and Results
1. System
2. Cash Management
3. Donor/Taxpayer Confidence
4. Expenditure Management
5. Integration and Connectivity
6. Capacity Building
7. Grants Management
Pre-Implementation Post-Implementation
• Microsoft Access
• Entirely paper-based
• None
• Homegrown
• Custom built
• FreeBalance eFinancials
• Modern
• Proven
• Supported

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

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

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

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

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

Immediate Impact and Results
1. System
2. Cash Management
3. Donor/Taxpayer Confidence
4. Expenditure Management
5. Integration and Connectivity
6. Capacity Building
7. Grants Management
Pre-Implementation Post-Implementation
• Required extensive manual processing or individual cash grants/bank accounts
• Such arrangements are not only inefficient, but much more open to abuse
• Comprehensive, multidimensional 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, decisionmaking, and implementation now occur at the lowest level using standard processes

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?

Critical Success Factors
• Deliverable
• Understandable
• Affordable
• Sustainable
• Extensible

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”)

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

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

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

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

Critical Success Factors
• Deliverable
• Understandable
• Affordable
• Sustainable
• Extensible

• 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 can’t afford $10’s of millions and a 2-year installation schedule
• Solution must be purpose-built software that is designed exclusively for Government
• URGENCY

• 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

Bruce Lazenby
President & CEO
FreeBalance Inc.
blazenby@FreeBalance.com