What are the key pillars for digital Public Finance Management ?
The 2023 International Monetary Fund (IMF) report 'Transforming Public Finance through GovTech' provides a number of helpful reflections around what is required for modern PFM. This includes a breakdown of the attributes necessary for PFM functions under the Pillars of: Functional; Architectural; and Governance.
These attributes could inform the design and planning of digital PFM within different jurisdictions and at different stages of transformation.
The core functional attributes
1. Process transformation.
PFM digital solutions should streamline processes, eliminating unnecessary steps and reducing the need for manual intervention. They should automatically apply PFM business rules for control and compliance based on the legal framework, enhancing efficiency, effectiveness, and traceability, as well as aiding the detection of potential deviations from targets and financial mismanagement.
2. Data capture.
PFM IT systems should (1) support gathering and consolidating timely, comprehensive and reliable data that are generated along with the PFM cycle and/or required from specified outside sources to support PFM functions; and (2) enable automating data gathering and data coordination across the general government.
3. Data architecture and interoperability
The data architecture embedded in the PFM IT systems should be designed to allow agile and secure exchange of data internally and externally. The data architecture should avoid the development and growth of disconnected databases or siloed systems that have difficultly inter-operating with other PFM functions or systems. Interoperability should be maintained through a clear and effective data governance program - including shared taxonomy codes, catalogues, and classifications.
4. Data storage
PFM IT system should allow storing data for historical data analysis, allowing public access to information and ensuring data integrity.
5. Information for decision-making
PFM IT systems should provide information that is useful for decision making under the different roles of the organisation, including technical day-to-day operations, managerial decision making, and oversight roles such as auditing.
6. Information transparency
PFM IT systems should support user centred transparency of the PFM processes, decisions, and output by enabling the publication of clear, reliable, frequent, timely, relevant, comprehensive, and accessible open data.
The core IT architectural attributes
Adaptive
The IT strategy should account for the ever changing nature of technology, business needs, trends, and emerging risks.
Anticipatory
Implementation and modernisation of PFM systems should be designed in a forward looking manner, prioritising adoption of new technologies before converting legacy systems. This should be accompanied by a cost-effectiveness and sustainability analysis.
Pragmatic
The collection of data should be comprehensive and granular at one entry point, avoiding duplication that could result in redundancies or inconsistencies, with a solid data architecture that promotes data accessibility, usability, reliability, and security.
Secure
PFM IT systems should be designed to meet security and privacy requirements. Embedded security and data privacy controls should guarantee that solutions, and, processed, in-transit, or stored data are adequately protected, reliable, and can be trusted. Ultimately, systems, processes, and practices should be resilient to adapt to the evolving cyber threat landscape.
User-centred
Digital solutions should be intuitive and adapted to the needs of different user roles. Access models and modes, including multichannel use, should provide flexibility for data analysis, ensure traceability and auditing, generate automated reporting, and provide advanced data analytics and raw data export.
Open architecture
The digital solutions architecture should maximise the reusability of components, as well as of data, between public institutions and other relevant stakeholders.
Core governance and management attributes
1. Legal framework.
The legal and regulatory frameworks should support the modernisation of PFM functions with digital tools. Where appropriate, laws and regulations should be clarified and updated to enable innovation, promote transparency, and prioritise interoperability.
2. Strategic vision
The organisational cuture should recognise the value of innovation and foster an enabling environment for comprehensive digitalisation reforms.
3. Project management
There should be a well designed plan and a well functioning team that can address any pratical and operational issues during the design, procurement, and implementation processes along the PFM IT system project cycle.
4. Data governance
Policies, procuredures, and mechanisms should ensure the proper management and quality of data throughout its life cycle - which is crucial for maintaining transparency, accountability, and informed decision making in public financial management.
5. Data protection
Data collected should be handled responsibly, with consideration for its ethical use and respect for privacy rights.
6. Risk management
Threats to digtal solutions and related data, which can range from system outages to data breaches and other cyber security risks, should be recognised, controlled for, and mitigated up front. While cyber security is addressed in the IT architectural principles, this principle covers its management component.
Summary
As part of the focus on 'functional' attributes, Governments should streamline PFM processes to minimise manual interventions and ensure compliance with legal frameworks. They should focus on capturing comprehensive, timely, and reliable data throughout the PFM cycle, ensuring seamless coordination and interoperability of data across systems. Data architectures should facilitate secure and agile data exchange while ensuring data is stored effectively for historical analysis and public access. PFM IT systems should provide actionable information for decision-making at all levels and promote transparency through the publication of clear and accessible open data.
In terms of architectural attributes, Governments need to adopt adaptive IT strategies that keep pace with technological advancements and changing business needs. They should prioritise new technologies over legacy systems, ensuring cost-effectiveness and sustainability. Data collection should be thorough, avoiding redundancies, and supported by a robust data architecture that enhances accessibility, usability, and security. Security and privacy must be embedded in PFM IT systems to protect data against evolving cyber threats. Digital solutions should be user-centred, offering flexibility and advanced analytical capabilities, and designed with an open architecture to facilitate component and data reusability among public institutions.
From a governance and management perspective, Governments should modernise legal and regulatory frameworks to support digital PFM innovations, promote transparency, and prioritise interoperability. They should foster an organisational culture that values innovation and supports digital transformation. Effective project management is crucial, requiring well-designed plans and competent teams to manage the PFM IT system project cycle. Robust data governance policies should ensure data quality and proper management, maintaining transparency and accountability. Data protection should be a priority, with responsible handling and respect for privacy rights. Risk management strategies must be in place to identify and mitigate potential threats, including cybersecurity risks and system outages.
Reference
Amaglobeli, D., de Mooij, R. A., Mengistu, A., Moszoro, M., Nose, M., Nunhuck, S., ... & Uña, G. (2023). Transforming Public Finance through GovTech. International Monetary Fund.
Comments