Public Sector Reform - USING TODAY’S TOOLS WE EASILY MAKE IT WORK.

Public Sector Reform, or ‘reinventing government’, may be on the agendas of many government authorities since the earlier 1990s, however it is receiving these days a renewed emphasis.
The particular New Public Management (NPM) was always clear about:

• new approaches to accountability at the top of open public organisations;
• more flexibility and motivation and responsibility for municipal servants;
• new structures and also institutions which can be incentive as opposed to rule powered, many of which could be profit-making or non-governmental;
• a client or client focus; as well as
• concentrating on quantitatively assessed outputs or outcomes.

As the justification for that reforms was founded by the need

• to make the delivery associated with public services manageable and accountable,
• to avoid waste and reduce costs,
• to encourage competition and customer responsiveness,
• to use proven private sector practices and to give attention to results,

The main components of the particular reform procedure were during the time and are still these days:

• Budgeting for outputs rather than inputs,
• separation of service delivery from advisory and also regulatory functions,
• discretion for administrators to spend their particular operating budgets as they consider fit,
• contract-like associations between politics as consumers of goods and services, and also departments and other entities as suppliers,
• separation of audited financials and performance reporting under NPM.

All this has been supposed to lead towards an atmosphere of fewer procedural restrictions, more discretionary powers to managing costs in a better manner also to performance-related pay.

In many countries world-wide these basic notion are enshrined in law, yet where do we really stand today and why are these types of discussions nonetheless on-going?

Many people in politics and public administrators state that, by the year 2011, it will be challenging to justify the structure of government and provision of public services in the same manner that is using since decades. This can be largely brought on by the availability of advanced technologies and Enterprise Resource Planning-Systems (ERP) make it possible for a change of the public sector framework and to restore government’s relationships together with citizen and also business clients. Successfully transforming public policy using IT will help minimize the particular political as well as financial consequences of unsuccessful implementations, meet the increasing expectations associated with citizens within modern democracies, and also shape the public sector of the future.

Public Sector Reform initiatives therefore need to enhance competitive ERP-solutions, upon which businesses more and more depend to be competitive, since advanced technologies improve efficiency and lowers costs.

However, if the ERP-System has not been set-up with the objective to deliver management information tightly related to a public service environments, even very sophisticated ERP-System cannot deliver the needed answers.

Generally management accounting tools, particularly cost and performance accounting, would be able to extract the necessary data from the respective ERP-System. However new public management methods and procedures are mainly utilized by the private market. Unfortunately the particular management accounting concepts in the public services environment need to consider some other prerequisites than one would usually apply in the private sector. This is applicable in particular to:

• the cost structure: in a public administration controllable variable cost elements do barely exist, almost all costs are fixed;
• the responsibility with regard to administrative expenses or internal cost proportion (e.g. from Human resources or Finance Department, etc.): they are hardly influenceable by the other organisational units. This fact needs a very harmonized pricing scheme combined with a reporting method adapted to the needs of the different hierarchies.
• the personal representation: there can be special requirements for treatment and assessment of staff performance.

In conclusion, management accounting for organizational units or institutions of the public administration will be designed and also guided by the following rules:

• Management accounting will be based on meaningful, plausible statistics which require to be transferred in to coherent - plain vocabulary - reports everybody can comprehend and utilize;
• There is no one-size-fits-all costing method, the public sector provides multiple frequently complex nested services, which may need distinct costing procedures; however they must integrate directly into one system;
• Avoid fixed hierarchical relationships, but apply a procedure orientation permitting free expense allocations to reflect service delivery and performance linkages;
• Do not calculate yourself to death, ensure that it stays easy and concentrate on the economically essential and appropriate information for management purposes;
• Develop a reporting system to mirror the decision-making as well as responsibility-oriented structure of the public service environment -- as they are different to the private sector;
• Ensure the transferability to other areas, quite simply: do not generate "management accounting islands".

All the building blocks are known and the systems are available; now the information requirements from the public sector need to be pieced together with what an ERP-System is really able to provide.

Personally I've done numerous “Public Sector Reform”-projects at a time when ERP-Systems were not as developed as they are these days. I put in quite some time in the interim to build and implement ERP-Systems for both the private and the public sector. Because public sector reform receives a restored emphasis today I combine two fields, i.e. what kind of information does the public sector require within the framework of New Public Management and what can ERP-Systems supply in support of it. If you like to drop me a line to exchange some ideas: www.habenicht.co.za.