Public Sector Reform - WITH TODAY’S TOOLS WE CAN MAKE IT WORK.

Public Sector Reform, or ‘reinventing government’, has been on the daily agendas of many governing bodies since the earlier 1990s, but it's receiving today a restored emphasis.
The New Public Management (NPM) was constantly clear about:

• new approaches to responsibility at the top of public organisations;
• more flexibility and initiative and duty for city servants;
• new structures as well as institutions which are incentive rather than rule powered, many of which may be profit-making or non-governmental;
• a client or customer focus; as well as
• concentrating on quantitatively assessed outputs or outcomes.

Even though the justification for that reforms had been founded through the need

• to make the delivery of public services manageable and accountable,
• to prevent waste and lower costs,
• to inspire competition and also customer responsiveness,
• to use proven private sector methods and to concentrate on results,

The main components of the reform procedure were at that time and are still these days:

• Budgeting for outputs rather than inputs,
• separation of service delivery from advisory and regulatory functions,
• discretion for managers to spend their particular operating budgets as they consider fit,
• contract-like interactions between politics as customers of goods and services, and also departments along with other entities since suppliers,
• separation regarding audited financials and gratifaction reporting under NPM.

All this was supposed to direct towards an environment of fewer procedural constraints, more discretionary powers to managing finances in a better manner and also to performance-related pay.

In numerous countries world-wide these basic idea are enshrined within law, yet where do we really stand today and also why are these kinds of discussions still on-going?

Many political figures and public administrators state that, by 2011, it will be difficult to justify the structure associated with government and also provision of public services in the same manner which has been using since decades. This really is largely brought on by the availability associated with advanced systems and Enterprise Resource Planning-Systems (ERP) to enable a transformation of the public sector framework and to restore government’s relationships together with citizen and also business clients. Successfully transforming public policy using IT may help minimize the political as well as financial repercussions of failed implementations, meet the raising expectations associated with citizens within modern democracies, and shape the general public sector of the future.

Public Sector Reform initiatives therefore need to reinforce competitive ERP-solutions, upon which businesses more and more depend being competitive, since advanced technologies improve efficiency and also lowers expenses.

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

Generally management accounting tools, specifically cost and performance accounting, would be able to extract the necessary data from the respective ERP-System. However new public management techniques and practices are mainly utilized by the private market. Unfortunately the particular management accounting concepts in a public support environment must consider additional prerequisites than one would generally apply in the private sector. This is applicable particularly to:

• the cost structure: in a public administration controllable variable cost parts do hardly exist, almost all costs are fixed;
• the accountability for administrative overheads or internal cost proportion (e.g. from HR or Finance Department, etc.): they are hardly influenceable by the other organisational units. This fact requires a very coordinated pricing scheme coupled with the reporting system adapted for the needs of the various hierarchies.
• the personal representation: there will be special requirements for treatment and assessment of staff performance.

To sum up, management accounting for organizational units or organizations of the public administration will be designed and guided by the following principles:

• Management accounting shall be based on significant, plausible figures which require to be transferred in to coherent -- plain language - reports everybody can comprehend and use;
• There is no one-size-fits-all costing method, the public sector provides multiple usually complex nested services, which may need distinct costing approaches; however they need to integrate directly into one system;
• Avoid fixed hierarchical relationships, yet apply a process orientation permitting free cost allocations to reflect service delivery and performance linkages;
• Do not calculate yourself to death, keep it easy and focus on the economically required and relevant information for management purposes;
• Develop a reporting system to reflect the decision-making and responsibility-oriented structure of the public service environment : as they are dissimilar to the private sector;
• Ensure the transferability with other areas, in other words: do not create "management accounting islands".

All of the building blocks are usually known as well as the systems are available; now the information requirements from the public sector need to be pieced together with what an ERP-System is actually able to deliver.

Personally I have done many “Public Sector Reform”-projects at a time when ERP-Systems weren't as sophisticated as they are today. I spent quite some time in the interim to design and implement ERP-Systems for both the private and the public sector. As public sector reform receives a restored emphasis these days I combine two fields, i.e. what kind of information does the public sector require within the framework of New Public Management and also what can ERP-Systems deliver in support of it. If you like to drop me a line to exchange some ideas: www.habenicht.co.za.