Digitalisation brings accountability and efficiency to public financial management – as well as challenges
Gavin Hinks, journalist
Digitalisation is viewed as a core element in the development of public financial management across Africa. And the continent’s accountants general (AGs) have been playing their part in embracing new technology and new skills.
It’s easy to see why. For African governments, modern hardware and software, skills and knowledge have become critical in making significant improvements to financial management.
‘For African AGs, the digital transformation presents a double-edged sword’
Pros and cons
Fredrick Riaga, chief executive of the African Association of Accountants General, says: ‘The digital revolution is reshaping every aspect of modern life, and public finance is no exception. For accountants general across Africa, this transformation presents a double-edged sword. While it offers a surge of potential benefits, it also presents itself with significant challenges.’
Benefits, he adds, include greater efficiency and transparency, strengthened risk management and better-informed decision-making. Challenges can include the investment resources required, cybersecurity threats, the standardising of systems across agencies, and the maintenance of skills.
According to Lawrence Semakula FCCA, Uganda’s AG, digitalisation has greatly improved the management of state finances. ‘We have been on this digitalisation journey close to 25 years now and we have seen very real improvements in the efficiency of how we manage the transfer of money from central to local government, in how we do budgets, in how we do audits. It has enabled us to complete most of the functions that used to be manual.’
Digital skills and resources have been identified as key to the evolution of public financial management in Africa. By automating many manual processes, digitalisation can reduce errors and provide the opportunity for greater efficiency in public spending, with more ‘reliable’ budgets and ‘robust’ forecasting, according to the Collaborative Africa Budget Reform Initiative (CABRI), an intergovernmental platform for learning and exchange in finance. More importantly, digitalisation is a reliable route to improved transparency and accountability.
‘We now have a real-time view of what is happening with revenue streams’
Complacency warning
CABRI’s views are echoed elsewhere, but with provisos. A recent ACCA report, PFM Performance in Africa, based on interviews with more than 30 AGs and auditors general, revealed concerns about outdated software and the ‘poor’ integration of existing automated systems.
The report concludes that support is needed on technology optimisation. It recommends that African governments focus on integrating technology beyond ‘silos’, take an ‘impact-focused’ rather than an ‘input-focused’ approach to tech adoption, beef up regulation for the ethical use of emerging technology, and upgrade skills among staff across government finance functions.
Leonard Mkude, AG in Tanzania, says his role has been to ‘spearhead’ the transition to new technology as the ‘process owner’. His documentation of the key technology requirements for central governments has brought significant changes for Tanzania.
‘Many years back,’ Mkude says, ‘the government did not have a real-time view of what was going on in terms of revenue collection. We designed a digital platform, a government e-payment gateway, and every government transaction has been linked to our system. We now have a real-time view of what is happening with revenue streams.’
Each department knows exactly how much it has spent and where it has spent it’
The Mauritius model
In Mauritius, revenue expenditure is managed using an off-the-shelf system from Oracle which captures all receipts and payments by all government departments. The country’s AG, Sunil Ramdeen FCCA, says his role is core to the introduction of digital solutions. ‘No one can introduce a computerised system for revenue and expenditure unless they get the authority of the accountant general.’
Digitalisation in Mauritius has brought it to the attention of other countries looking to initiate or continue similar projects. Ramdeen says: ‘This has proved to be such a success story, and on such a scale, that many people from the region visit to see how they can emulate our work back in their own countries.’
Systems in Mauritius generate a daily report of all expenditures and revenue. And there are strict controls. Budgets are managed centrally, and budget holders cannot spend beyond their allocations without an update to the system.
The system is currently going through an upgrade to add an accruals ledger to the existing cash ledger, Ramdeen says. ‘Digitalisation has helped each department know exactly where they stand in terms of the budgetary provisions, how much they have spent and where they have spent it.’
Automatic alerts for expenditure exceptions have really helped us a lot’
Scrutiny and control
Improved analysis and transparency have been beneficial in Tanzania too. Mkude says finance chiefs have gained from digitised data while national accounts, once finalised, go straight on the finance ministry’s website for public scrutiny.
But there is another advantage to digital systems. Like Mauritius, Tanzania has spending limits that are controlled by the digital system, which means the inappropriate use of cash is kept in check. ‘Before,’ says Mkude, ‘when the system was manual, it probably gave room for irregularities.’
Uganda has had a similar experience, Semakula says. Internal controls are built into digital systems. But the system can also flag ‘exceptions’ – raising an alert when expenditure is unexpected or beyond budget limits. That offers the opportunity for a second check. ‘It really has helped us a lot,’ he adds.
‘Without constant skills development, you get a big exposure to cyber risk’
Talent
Using digital systems also means a demand for skills. For all the AGs, skills and knowledge has been an issue, not just driven by the introduction of systems, but also the pace at which they update their functionality and their growing sophistication.
Mkude says digitalisation has required new training structures, initiated by the AG’s office, and the appointment of finance staff to act as ‘trainers’. Training across all finance staff happened within a year but ever since it has been a continuous effort. ‘It has been a really big challenge,’ says Mkude. ‘Systems are being developed on an agile basis.’ And without constant skills development, he says, ‘you get a big exposure to cyber risk’.
For Uganda, training has been less of an issue than the structural question of which government department would lead on the digitalisation of finance – the IT minister or the AG’s office. The question remains a live debate in Uganda’s central government.
The price tag attached to hardware and software can also be an issue as systems and security procedures are updated. Making the argument to someone unfamiliar with the needs of cybersecurity will make it harder, says Semakula. ‘Sometimes it’s very, very challenging for me in top management to justify the cost of security but it’s something that has so far received good support.’
Now powered by the development of artificial intelligence, digitalisation is an ever more important feature of financial management with vast advantages. It has become a factor AGs cannot ignore, according to Riaga. He says: ‘The AGs can do this by building a digitally skilled workforce, prioritising resources wisely and embracing innovative approaches – all crucial steps in unlocking the full potential of digital tools and platforms for a more efficient and productive future.’
