eGovernment for Development

eTransparency Case Study No.10

Web-Based Access to User-Friendly Government Financial Statements in Sri Lanka

Case Study Authors

Mr A.M.S.K. Chandrasena (sisirac@sad.gov.lk)

Application

Sri Lanka's State Accounts Department (SAD) has begun making government financial statements available via a Web site, with a pilot project in 2003 that aims to lead to institutionalised publication in 2004.

Application Description

The State Accounts Department (part of the Ministry of Finance) is leading a government-wide effort to progressively adopt International Public Sector Accounting Standards (IPSAS) for the reporting of government accounts (revenue and expenditure). The financial statements (i.e. accounts) for 2002 were prepared for the first time in accordance with the IPSAS cash accounting formats and have received a clean audit opinion from the Auditor General (except for an historical reconciliation issue). The previous 198-page dense financial report has been drastically reduced to just nine pages of well laid-out information (a one-page consolidated statement of cash receipts and payments with eight pages of supporting notes) designed to be read and understood by non-accountants.

The SAD Web site now publicly displays the 2002 financial statements. The Web site is designed to enable the public, as well as the line agency accountants, to review the year-end results on-line. Contact names within the SAD and an e-mail address are provided on the Web site for those wishing to raise direct questions. It is hoped that this increased transparency of accounting information might lead to the enhancement of political and administrative accountability.

Role of ICT

The data used for the 2002 financial statements was assimilated electronically by drawing from a number of different databases within the Ministry of Finance: primarily the Treasury Accounting System and the Commonwealth Secretariat Debt Reporting and Management System, but also single user accounting systems in various departments of the Ministry. The financial statements themselves use a Foxpro application for calculations and MS Excel for presentation. The procedures and software used in March 2003 were documented and are intended to be replicable in 2004 when the exercise will be facilitated by an inter-departmental local area network installed in mid-2003. The SAD Web site, based on SQL server and Java technology, is the chosen mechanism for the widest possible dissemination of the accounting reports after they are formally published in the Official Gazette.

Application Drivers/Purpose

Throughout the 1990s, Sri Lanka's financial statements regularly received only qualified audit opinions from the Auditor General, i.e. they were passed but areas were identified where information was lacking or where issues remained to be resolved. Even this level of opinion was only achieved after two to three years of attempted reconciliation and verification of the figures for each set of accounts. The financial community in Sri Lanka and international financing institutions abroad (including donor agencies) thus tended to view the financial statements as a late and unreliable report on the government's financial activities. As a result, there was a perceived need to improve national accounting data and procedures. After discussions between the Ministry of Finance and international financing institutions, a public expenditure reform project was agreed and funded by the Asian Development Bank, beginning in 2002. Within this, the advice and assistance of an international technical adviser provided the opportunity to address the national accounting system.

Stakeholders

The Ministry of Finance - particularly its State Accounts Department - and the Auditor General are the primary stakeholders for the project. Other stakeholder groups include the line agency budget holders, the donor-funded consultant, and the international financing institutions. With the dissemination of the financial statements through the SAD Web site, there are potentially three further stakeholder user groups (parliamentarians, civil society organisations, and overseas investors). The international financing institutions will also be a user group for the system.

Transparency and the Poor

There has been no direct support for transparency to the poor. However, Sri Lanka's National Development and Poverty Reduction Strategy defines the role of the government in poverty reduction and lays out the medium-term macro-economic scenario in which it expects to be operating. The financial statements are the definitive historical account of how the government has raised and spent its funds. They can therefore be utilised on behalf of the poor, within a feedback loop arrangement, to check development planning assumptions and inform future poverty reduction policies.

Impact: Costs and Benefits

The technical assistance project funded by the Asian Development Bank has provided the international good practice functional expertise to guide the adoption of the IPSAS cash accounting format. This assistance was grant funded at no cost to the Government of Sri Lanka. The cost of developing the overall information systems that underlie this project has been significant - recent costs for consultancy inputs, training and overall Website construction alone (excluding hardware costs and earlier construction of information systems) totals some US$150,000. However, construction of the financial statements and directly-related Web outputs has cost much less: just a few thousands of US dollars.

The project is only at a pilot stage, but it has already led to improvements in the quality of national accounts. The Country Financial Accountability Assessment published by the World Bank in July 2003 noted: "The state accounts for 2002 were prepared within three months and audited and published within six months, which is a good standard. The statements are relevant and understandable to users. Accounts are believed to be fairly reliable and complete." This is in contrast to previous assessments, which criticised "delayed and inaccurate reports that diluted the scope and impact of parliamentary and public scrutiny of the financial condition of the state."

The improved quality and accessibility of accounts should in themselves have a positive knock-on for transparency and accountability. Expected gains in this regard include but are not limited to: informed parliamentary debate, media coverage based on financial facts, and increased reliance on government financial reports by international investors. Such non-quantifiable benefits will take some time to accrue and perhaps the greatest benefit in quantifiable terms might be the willingness of the international financing institutions to commit additional aid funds on the basis of increased transparency and accountability in government financial management.

Evaluation: Failure or Success?

There has been no specific evaluation yet of the e-transparency elements of this project. The Asian Development Bank is scheduling a formal evaluation of the overall technical assistance project in 2004 and the consulting firm is currently carrying out a corporate evaluation exercise that is showing a mixed success/failure profile for the overall project. The success has been achieved at an operational level where there is strong departmental ownership of the project and its objectives. The failure lies in the inability, to date, to raise the profile of the project and to gain a senior (political) champion.

Enablers/Critical Success Factors

1. Hybrid expertise . Financial e-transparency projects require both finance and IT skills. This project brought both skill sets together within a single 'hybrid' individual - the SAD Director - who had many years of accounting and of computing experience. He was therefore able to act as a key nodal point between other players, either facilitating their work, or personally undertaking development activities.
2. Marrying international and local expertise . eTransparency projects that rely on foreign consultants often suffer where those consultants fail to understand local realities. Projects that rely on local staff may unnecessarily 'reinvent wheels'. This project was facilitated by the long-term presence of an overseas consultant who brought in ideas about data gathering, processing and reporting. However, those ideas were localised effectively because the consultant worked participatively with local staff, and had as a direct internal counterpart the hybrid manager identified above.
3. Stakeholder participation . eTransparency projects inevitably involve a number of stakeholders other than the core development team. In this project, the Auditor General's Department was recognised as a key stakeholder. The project team thus mounted a concerted, long-term interaction with the Auditor General and his staff. This included not only a set of discussion seminars but also one-to-one meetings during which opinions and ideas were gathered from these stakeholders. As a result, support of the Auditor General for system design was obtained.

Constraints/Challenges

1. Staff shortages and turnover . National/international consulting inputs can help the development of e-transparency projects, but they do not represent a sustainable basis for long-term operation: local, internal staff are needed for that. The project has faced two challenges on this front. First, there are basic shortages of staff with the necessary financial or information systems competencies. Second, there has been sizeable turnover of staff who are transferred to what they perceive as more attractive jobs in other parts of government. Such problems can only be addressed by broad-ranging human resource development initiatives.
2. Inter-departmental barriers . Government departments traditionally operate as a set of disconnected 'silos'. Where, as in this case, an e-transparency projects needs to get information flowing across departmental boundaries, there will be a series of procedural and political barriers that have to be overcome.
3. Procedural inertia . Government financial statements have been produced in the same way for more than fifty years in Sri Lanka. Changing such procedures to facilitate greater financial transparency is not easy. For some officials, this was a matter of plain inertia: wishing to keep life easy by continuing to work as they always had done. For others, though, there was an inertia born of fear: for example, a fear that their failure to keep debt/accounting figures up-to-date would be exposed.

Recommendations

• Adopt international accounting standards . Fiscal transparency involves providing ready access to complete, accurate, relevant, timely and appropriately-presented (CARTA) information. If such information is prepared using internationally-agreed classification standards, then such CARTA characteristics are more readily achieved. Recipients can, for example, more easily make comparisons between their own country and other countries. Standardisation can also greatly reduce the amount of data that needs to be produced.
• Adopt a pilot, incremental approach . Piloting new e-transparency initiatives and introducing them only step-by-step helps the various stakeholders adjust more easily than going for a 'big bang' approach.
• Cultivate stakeholder buy-in . eTransparency projects will typically only work if they develop and sustain buy-in from the various key stakeholder groups involved. On this project, it was important to create a cross-stakeholder working group. However, the use rather than mere presence of such a group is important. The group was facilitated rather than led by the external consultant, and outputs from the group were clearly incorporated into system design (e.g. the decision to adopt the IPSAS reporting format), demonstrating to members that it was more than just a 'talking shop'. As noted above, the project also used seminars and one-to-one consultations to get buy-in. Again, these were effective because they were two-way interactions, not one-way communication channels. Finally, effective use was made of public events, such as presentations about the project at public conferences and seminars that received press coverage, to help maintain momentum and motivation.

Further Information

www.sad.gov.lk

Case Details

Case Editor : Richard Heeks.
Author Data Sources/Role : Project Management Role.
Centrality of Transparency : Mixed. Type : Reporting. Audience : Mixed. Content : Financial. Sector : Economic Services.
Outcome : Too Early to Evaluate.
Region : South Asia. Start Date : 2003. Submission Date : December 2003.