PFM Digitalization: Technology Reform or Governance Reform?

[Albani]

HI everyone - after quite some time away from being active in PFM Board discussions, I wanted to provide some thoughts and question marks regarding an increasingly important topic in Public Finance Management (PFM):  digitalization and its relationship with governance and PFM performance.

Digitalization is now becoming a central priority in Governance and PFM.  Governments are investing heavily in:

• IFMIS platforms
• e-procurement systems
• AI tools
• interoperability frameworks
• digital reporting, and
• data analytics

At the same time, frameworks such as PEFA continue to assess core dimensions of PFM performance:

• Budget reliability
• Transparency
• Asset and liability management
• Policy based fiscal strategy and budgeting
• Accounting and reporting
• External scrutiny and audit

This raises an important question:

Are current digitalization reforms actually strengthening PFM performance, or are they mainly modernizing administrative processes?

Some questions worth discussing:

• Should PFM digitalization be designed around technology architecture or around governance outcomes?
• Are interoperability and data governance recieving enough attention?
• Can AI-based tools function effectively where financial data structures are inconsistent?
• Should PEFA assessments place greater focus on digital maturity and system integration
• Are digital reforms helping institutions make better decisions, or mainly improving reporting interfaces?
• Are government investing sufficiently in institutional processes before investing in technology?
• Can digitalization improve accountability if underlying controls and data quality remain weak
• Are donor-supported digital projects sometimes creating parallel systems instead of integrated public financial governance

Përhaps the broader issue is this:

Can public finance management truly become "digital" without first becomming institutionally integrated?

Interested to hear perspectives from colleagues working in:

• PFM
• treasury
• budgeting
• audit
• procurement
• Governance Technology, and
• PEFA-related reforms

Looking forward to hearing different perspectives and practical experiences from colleagues across institutions and countries.

[John Short]

Albani

There is no doubt that the application of suitable software relating to budget execution - accounting etc though the application of IFMIS (or other names/acronyms) has improved the relevant PEFA scores over time.  There are two factors that are important.  Does the software reflect the business practices in the country of the full budgetary processes? This does not mean that it has to be a fully integrated all singing and dancing system but one that feeds into the relevant information into the budget from debt, taxation, procurement, investment (capital and recurrent implications) etc. that allows the budget to be fully comprehensive and be managed in its implementation with key elements such as commitment control.  These separate elements now tend to have their own software which provides the financial data for the base for the IFMIS.  One thing that has been noticeable has been the improvement in the coverage of non financial and financial assets in the financial statements. 

The other element that is essential is the quality of the data particularly with respect to non financial data covering Key Performance Indicators (KPIs) but also with the financial data.  With regards to the first it is likely that this will be outside the IFMIS and generated from sector strategies but will be important in linking cost to KPI delivery and therefore the unit cost of the KPIs.  However if the quality of the data, both financial and non financial) is not good then the adoption of digitization is meaningless!