Accountants in the public sector and public services are well positioned to support countries’ path to recovery post-pandemic, and the pandemic is a prime opportunity to use creative strategies to solve problems and improve performance measurement, said Nick Jackson, FCMA, CGMA, the immediate past president of CIMA, in a recent webinar.
“We will face undoubted economic challenges as we come out of COVID and start to rebuild the global economy and put it on a footing for ongoing growth and success,” Jackson said at the “Performance Measurement and Evaluation for Senior Accountants in the Public Sector” webinar, jointly organised by CIMA and the Institute of Chartered Accountants of the Maldives.
COVID-19 as opportunity to improve, embrace technology
The ongoing pandemic can be a catalyst for better performance measurement and evaluation. Aida Lim Abdullah, ACMA, CGMA, the CEO of Penang Halal International, a Malaysian government agency responsible for the promotion of the halal sector, said that management accountants can demonstrate their leadership during this time.
“We take charge, we lead, we manage in times of crisis,” she said on a panel discussion in the webinar. The pandemic has been a very big wakeup call. An accountant who knows how to be quick and agile in a crisis is able to respond well to crisis.”
“We need to learn from COVID,” Hussain Niyazy, ACMA, CGMA, assistant auditor general of the Maldives, said on the same panel. He said that the pandemic has provided accountants and finance professionals an opportunity to rethink processes.
“We need to be more creative. We need to see how we can embrace technology,” he added.
Opportunities that the speakers see to improve performance measurement and evaluation include:
Cloud technology. Niyazy said that during lockdown, his team was unable to access supporting documents to continue its assurance work. Digitising documents and moving them to the cloud are the basics of what needs to be done going forward. He added that his team will also look at how services can be provided online in the future.
Willingness to embrace more creativity and risk. “Necessity is the mother of invention; when you’re in a crisis, you create,” Jackson said. He said that there’s a recognition that finance teams can be more creative in solving problems and increase speed of delivery. During the pandemic, he realised that stakeholders who in pre-pandemic times would not agree to certain ways of doing things were suddenly more willing to try new methods. “Let’s not design a 100% perfect solution. Let’s go with the 80/20 rule or 90/10 rule,” he said, where a solution can be 80% or 90% ready in order to go live.
Data and analytics. The public sector is awash with data, but it hasn’t always taken advantage of the information available for better decision-making. Evidence drives prioritisation, said Jackson, who has worked in UK government departments including the Treasury, the Ministry of Justice, and the Office for Standards in Education, Children’s Services and Skills (Ofsted), before his current role as the sales development leader at Oracle. There is now technology to capture, clean, analyse, and present data that enable decision-makers to better understand a situation and the options available to them.
Growing remit of finance. Finance leaders are increasingly responsible for IT, HR, and, most recently, environmental, social, and governance (ESG) issues where they are tasked to ensure the delivery of good governance on issues that impact the environment and society, Jackson said. For instance, in Maldives, where 99% of the country is ocean, climate-related issues have been a focus of the government, and mobilising the right financing to adapt and mitigate negative impacts of climate change will become increasingly more important. “There’s more opportunity for us to try to bring more value to our organisations by making better use of financial and nonfinancial data,” Jackson said.
The challenge of consistent measurement
However, unlike the private sector where financial indicators are often the most important, accountants in the public sector need to keep in mind myriad other factors, Jackson said.
“In the public sector, we’re not just worried about the financial side of things, we are also worried about the health of our population, educational achievements … so there’s a range of other goals and measurements that come into play,” he said.
Secondly, the public sector is typically more complex than the private sector in the metrics and definitions used.
“In the private sector, most businesses have a clear focus, a single vision and clarity around the nature of the services or products that they provide,” he added. “But in government, we often have lots of different departments with overlapping responsibilities.” Such complexity means that each government department or agency may have different definitions for the same word, and it makes measurement more challenging.
The time dimension is another difficulty. For instance, investments in the education of young children might not see returns until later in the children’s life. The ability to track outcomes of such investments over a long period and conduct longitudinal studies is very important, Jackson said.
Lessons from the ground
In Maldives, where more than a third of government revenue derives from the tourism sector, COVID-19 and the resulting steep decline in income from foreign tourists meant that the government has had to find alternative ways to fund its programmes, Niyazy said. Managing competing priorities and needs has been the focus of the government.
When deciding on cost-cutting measures, the government’s priority goes beyond financial considerations. Niyazy gave the example of the priority to pay wages of its civil service, which employs more than 26,000 people, or almost 5% of the country’s population, and in maintaining its education system.
“It’s quite a big civil service sector. Even if the revenue shortfall is there, we have to pay the wage bill. We have to fund basic health care and the education system,” he said.
He added that the country is moving towards programme-based budgeting where the public sector will have to demonstrate how it adds value for taxpayers’ money. In this process, management accountants’ professional judgement will be crucial in determining KPIs used and how KPIs are interpreted to show the effectiveness of programmes.
In Sri Lanka, what’s needed to improve performance and evaluation across the public sector is meritocracy, Manjula De Silva, FCMA, CGMA, the CEO and secretary-general of the Ceylon Chamber of Commerce, said on the same panel.
“I think that’s what we really need to bring back trust, and I’m sure that talents will also follow,” he said.
He elaborated that implementing a merit-based system will require a robust performance management system and link employee rewards to it.
“Increments, bonuses, or prospects of promotion in the public service are not always linked to performance,” de Silva added. “If you are able to link this to a robust performance management system, you’re going to create an environment where professionals will thrive.”
Secondly, de Silva warns of confusing output with outcome in performance measurement. In his previous work with Sri Lanka’s now-defunct Ministry of Public Enterprise Development as a consultant, one challenge is in setting the right KPIs to track outcomes rather than outputs alone. Nonfinancial KPIs in the public sector are key, as its mission is serving the public rather than earning profits. But it requires more effort to identify the right nonfinancial indicators.
For instance, it’s easier for a public service to measure the number of training programmes and promotional videos it produced compared to the outcome of these activities, such as new jobs created, he said.
“To attempt to introduce some form of performance management system, even with all of these challenges and issues, is definitely the way to go than not having it,” he said.
— Alexis See Tho (Alexis.SeeTho@aicpa-cima.com) is an FM magazine associate editor.