The Challenges State Leaders Face in Delivering True Fiscal Transparency

Most states have decided to list their expenses so their citizens can see where tax dollars are being spent. Listing the thousand, or millions, of individual transactions is good in theory, but these endless lists of expenditures fall dramatically short in providing the kind of transparency people yearn for as government continues to expand.

Good news: States listing expenses.

Bad news: The listing is virtually useless to regular citizens and government leadership who want to understand the numbers and measure results.

Real transparency must enable people to understand how, where, and why money is being invested in state programs and initiatives and what value was received. Just listing the “costs” associated with programs and initiatives is insufficient. State leaders are obligated to demonstrate the results of the investments being made.

When true financial transparency has been achieved, government leaders and administration staff have a means to objectively measure their progress toward meeting the goals of the specific program or initiative.

America’s largest corporations faced similar challenges over two decades ago with respect to measuring performance. The desire for real-time measurement of performance and vital metrics, in addition to financial transactions, resulted in the evolution of management systems from straight-forward accounting systems, to Enterprise Resource Planning (ERP) systems that measure and report all metrics, performance, and conditions that effect an enterprise. This has powered FORTUNE 100 companies forward at an exponential rate. It would seem obvious to use such systems in government, but here’s the catch: Corporate ERP systems cannot be transferred to government because business and government do different things. The good news is that adaptations of business ERP systems will soon permeate state and local governments as you will see in just a moment.

The benefits of true transparency are so great, then why has progress been so slow?

• State leader’s focus has been on spending

Because it has been difficult or nearly impossible to measure the outcome of taxpayer investment, elected officials (politicians) have used increases in spending as a vehicle to garner political support to either get elected or to get re-elected once in office. Less priority has been given to determining whether the mission or goals of the programs and initiatives were being achieved or at least moving in the right direction. We can longer afford this myopic focus on spending. The focus must be changed from spending to performance. Every dollar that has not been spent wisely is a dollar wasted. That wasted dollar could have been used either for other much-needed state priorities or could have been returned to taxpayers.

• Data isolation has been the rule, not the exception

There are several reasons for the inability of state government to have uniform and easy access to all data across this level of government. One reason is the type of technology used itself. State IT has always been a low funding priority. Old and new technologies work side by side but are often difficult to integrate. Many states have entire buildings dedicated to technology reflecting the glory days of the 1970s, when a number of today’s laptops have the same computing capacity.

Another reason for data isolation is the culture of state government itself. Some laws prevent state government from obtaining access to certain types of data, as is the case with medical information that is subject to HIPAA Laws. Justified concerns over hacking and security restrict the availability of data. Moreover, some in government IT see data as power and simply do not want to share.

• Program and initiative performance data is unavailable

Information necessary to indicate status and measure outcomes & performance of programs and initiatives is outside of the sphere of state information systems.

For example: The data and metrics necessary to measure the effectiveness and impact of a state program to ‘reduce teen pregnancy’ cannot be found inside of the state’s accounting system. This data rests with the hundreds of medical facilities, clinics, and urgent care facilities around the state that encounter pregnant teens. The actual ‘teen pregnancy rate’ is the performance metric that must be measured. This is a social metric not found or measurable in the state’s IT systems.

State government often tries to replicate performance measurement by using studies, questionnaires, surveys and qualitative means to determine what results are occurring around the state. But using this type of measurement can be problematic: surveys are not often objective, sample sizes are limited, or those participating are given forced choices which do not reflect the ‘on the ground’ conditions associated with spending. Moreover, these reports are dated by the time they hit the desks of those responsible. One IT expert quipped recently on measuring performance using this time-laden techniques, “it’s like trying to drive a car down the freeway only looking in the rearview mirror.” This is no way to demonstrate results in real-time.

• There is an absence of measurement tools

FORTUNE 100 companies have ERP systems to provide them with almost instantaneous performance measurement through carefully calculated Key Performance Indicators (KPIs) that measure anything necessary to accurately indicate performance. But state governments do not have these comprehensive systems. Some states have purchased ERP systems but the modules essential to success of the FORTUNE 100 have been removed since they do not apply to government. These ERP systems are in essence expensive accounting systems. But new products are coming into the market to solve this problem and provide real-time performance measurement. As they expand across the states, a day will soon come when politicians will scramble to have this technology.

It is unfair for those of us on the outside of government IT to expect those on the inside to meet these challenges and deliver on the promise of both transparency and performance measurement. Government IT professionals often lack the resources, the expertise, the right talent and the skill set to achieve these goals.

Importantly, these shortcomings are not just found in government. In fact, most of the FORTUNE 100 relies on outside support for technologies to make them more effective and efficient. Even the largest software companies in the world rely on companies that focus on specific software verticals to provide them with their key systems… even Microsoft & Apple.

The great news is that these challenges listed will be overcome, as more and more Americans want to know where their money is being spent and what results are being achieved with the investment.

David Rehr is part of the GovLoop Featured Blogger program, where we feature blog posts by government voices from all across the country (and world!). To see more Featured Blogger posts, click here.