FINANCE BY DAVID WALKER ACCOUNTANT & DATABASE EXPERT
Internationally, governments are extending the range of reports that they make available to stakeholders, especially online, at a frenetic pace. Many countries have also been moving rapidly to enact the decision to apply Accruals based accounting principles not just to Financial Recording, but also to Financial Reporting. It is inevitable that Caribbean countries will follow these trends.
There is little doubt about the push by Caribbean governments to follow in the slipstream of our developed neighbours. Furthermore, crises in the world economy have highlighted the need for a more consistent and interlocking financial regulatory framework that must inevitably mean more consistent and standardized financial reporting among participating countries. This latter fact, more than anything emanating from within the Caribbean will determine the pace of development of modern, IT-based Financial Reporting across the region.
Our work has led us to an assessment of the major challenges facing those who deliver Financial Reporting in the Public Sector in the Caribbean. Many of those challenges are shared with the Public sector in every other nation, while some are unique to developing states, particularly in the Caribbean. Listed in this section are the most notable of those challenges that emerged from our work.
Besides the key findings as stated below, there emerged a somewhat unconventional solution to meeting the challenges that are unique to small developing countries. This presents an opportunity and a challenge that is documented in the final section of this paper.
Here are the major challenges faced today in Financial Reporting in the Public Sector in the Caribbean:
Cash vs. Accruals
Moving from Cash to Accruals based Financial Recording and Reporting is a monumental task. Making the switch will take time and the more forward-looking governments have adopted an incremental approach in order to reduce the stress on the workers who have to implement new systems while still operating the old one.
With a desire to conform to internationally agreed standards, most governments are pressing ahead with the necessary changes both with and without an IT element. This is a daunting task, where they are attempting to match the reporting standards of countries that have been using IT for this purpose for more than a decade.
Improved Recording to match reporting imperatives
It must be understood that Financial Reporting can only be as good as the Financial Recording systems that gather the data upon which the reports are based. If for example, financial data is recorded only for Cash Accounting purposes, it is impossible to retroactively fit an Accruals based report system onto it.
Financial Recording defines the boundaries of what is possible in Financial Reporting. Considerable attention must be paid to it if governments are to ensure that they are able to meet the myriad reporting demands described earlier.
“Developed Country” solutions not appropriate
Almost every government in the Caribbean has selected Financial Recording and Reporting systems based on what works in developed countries. What has been found is that in many cases these solutions are not appropriate for a number of reasons.
Most of the solutions are “big ticket” items designed for large organizations. For the most part, they dictate the way functions are to be performed and therefore drive a transformation process of the Public Sector based not on what’s best for each country but rather on how the software product works. They frequently dictate process flows that in no way reflect the work practices of the host country.
There is now an imperative to find or build solutions that are more reflective of the host country. Consideration is now being given to the notion of letting the local transformation process drive software selection and development to a much greater degree. This will not be easy with the existing propensity for consultants from developed countries who naturally recommend systems that they already know.
It’s uncertain whether Caribbean states have the local expertise to design and develop their unique systems. In the short term, the best option looks like being a “marriage” of foreign consultants and local process experts, working together to design and deliver the unique solutions that would achieve the reporting standards that stakeholders demand in a way that reflects local peculiarities.
Need for improved local technological expertise
It was suggested above that a lack of local expertise might stymie efforts to deliver world-class Financial Reporting in the Public sector in the Caribbean. It is therefore high on the agenda of local governments to increase the pool of expertise at their disposal. The expertise to be acquired falls into three main categories –
• Documentation and Training
Technical experts design, build and maintain systems. Process experts work with the technical experts to map existing or idealized processes to software solutions. Documentation and Training experts develop the material to support workers in using the systems and deliver training to develop their competence in the use of those systems.
Having recognised that Financial Reporting in the Public Sector in the Caribbean lags a few years behind that which exists in the developed world, and that experience tells us repeatedly that their solutions are expensive misfits in our context, we should now recognise an opportunity to do something truly novel in the developing world.
Our challenge is to develop a radical alternative to the wholesale reproduction of systems designed several years ago in very different circumstances. Our challenge is to develop systems from the ground up that cater to the peculiar circumstances of small post-Colonial, developing states. Our challenge is to innovate and to lead.
The Caribbean diaspora boasts many eminent, highly regarded IT professionals. Largely, these people work at the cutting edge of IT development in the developed world. The challenge and the opportunity have now been defined that would offer a platform to these citizens of our nations to bring their expertise home to the benefit of their mother countries. Of course, such an ambitious project should also embrace the best minds that the Caribbean can afford, regardless of nationality.
But the opportunity does not end there. Around the world, there are many nations who bear similar characteristics to us. They are also struggling with the cost and complexity of implementing inappropriate solutions to their Financial Reporting needs. There is the promise of a wide global market if we can successfully develop and deploy idealized solutions for small, post-Colonial states or any developing states that seek modern Public Sector recording and reporting tools at moderate cost with less complex implementation procedures than that which is offered by developed countries presently.
We also face a challenge to monitor the design, delivery and operation of these new systems more effectively than in the past. Towards that end, we propose that parliamentary oversight of the financial reported regime be included as a key part of that regime.
The challenges are daunting but offer an opportunity to innovate and lead.
They also herald the prospect of better utilization of the regions limited financial resources through more timely and accurate access to financial reports.