New Zealand’s government agencies are caught between a rock and a hard place. Rising public expectations, tight budgets and growing demand for transparency have created an environment where agencies need to not only explain where every dollar of taxpayer money is spent – but prove that it has delivered value for money.
But providing that information quickly is no easy task. Public service delivery can be highly complex. Hundreds of flows of public funds snake their way between departments, delivery partners and their sub-contractors – nearly all of them using different, and often manual, reporting systems.
It’s not that agencies can’t track exactly where public money goes. But it’s often a herculean and thankless task. Distribution chains can be many layers deep. If reporting is manual, getting data from one layer can take a month. By the time agencies receive and consolidate meaningful data, it might be five months out of date. Program managers and agency leaders are doing the equivalent of driving using the rear-view mirror.
When decision-makers have to work with incomplete and outdated data, it takes time to identify both underperforming programs – and those that are doing brilliantly – as well as where there may be under or over-spend. This means agencies experience delays and uncertainties as they try to reallocate resources where they are needed most and may miss opportunities to improve services. Delayed, manual and fragmented reporting also makes it extremely difficult for agencies to respond swiftly to changing needs or emerging risks.
What’s the fastest way to real-time reporting?
In an ideal world, agencies would receive synchronised, near-real-time transaction and performance data from each one of the organisations involved in public service delivery. One way to achieve this would be if public service providers all shared a single system that seamlessly reported to agencies in real time. But retrofitting this type of bespoke system now would be a multi-million-dollar, multi-year, high-risk project.
Many governments wouldn’t have the appetite for this type of expenditure – a wise position. Because we don’t need a wholesale overhaul of existing systems. We just need to take advantage of the latest public finance management technology, which is providing decision-making authorities around the world with a consolidated view of funds along public service distribution chains in real time.
The EY Public Finance Manager (PFM) can gather data from any system in real time. This capability means the Manager can act as an overlay, standardising, integrating, and aggregating structured and unstructured data from multiple sources to answer the questions at the heart of effective government spending.
1. Where are we spending public funds?
PFM provides a single, unified view of financial data across programs, delivery partners and their sub-contractors, no matter what systems or data gathering methods are being used. This consolidated view gives finance teams, program managers and agency leaders an up-to-date picture of where public funds are going. By giving all stakeholder a single view of the truth, PFM shines a light on where funds are flowing in previously opaque delivery systems.
2. How and when were these funds spent?
Beyond static reporting, PFM enables real-time tracking of funds as they flow through the delivery chain. This capability allows agencies to predict inflow and outflow cycles, anticipate bottlenecks and reduce the risk of funding gaps – or over- or under-spending. As well as dramatically improving accountability, timely insights into cash flow help agencies to manage budgetary pressures more effectively and smooth disbursements to service providers.
3. What benefits is New Zealand receiving?
Perhaps most importantly, PFM brings clarity to the relationship between public spending and policy outcomes. Current reporting still focuses heavily on inputs – what was spent – without linking those expenditures to performance. In contrast, PFM tracks both: consumption-level management objectives, providing operational managers with the data they need to monitor day-to-day spending; and budget-level program performance, so leaders can see how funds are tracking against strategic goals. By integrating financial and performance data in this way, PFM enables agencies to measure policy outcomes with confidence.
This powerful ability to surface previously hidden insights is why the Manager is currently being used by one of the world’s largest aid and development finance institutions. Generally, government clients begin by testing PFM on one program, with a pilot up and running in 12 weeks. Once agencies have confidence in the real-time data being reported, they can move all programs and disbursements onto the system, scaling easily via a managed service.