Public Sector Governance and Accountability Series: Budgeting and ...

Automating Public Financial Management in Developing Countries 337
financial systems up to date, are costly because they involve additional
customization and training. Often overlooked is the annual cost of maintaining
a system, which as a rule of thumb is 15 to 25 percent of the application
development cost.
To be sustainable, the recurrent costs of government operations should
not be funded by volatile foreign aid; yet these considerable and critical costs
are either overlooked or assumed to be funded by continuing concessionary
assistance. The systems are risky not just because they are complex or because
governments lack the staff to operate them, but also because governments
strapped for funds cannot afford the recurrent costs to support them.
In general, sophisticated OTS IFMISs also do not meet the necessary
conditions of effective information system development from the standpoint
of the user—governments in developing countries (although they
would appear to meet the necessary conditions of most foreign aid agencies,
given how strongly they recommend IFMISs). The necessary conditions are
trust, need, help, and urgency (Peterson 1998a). It takes time for governments
to trust the contractors and to entrust them with their financial
systems. Except for external conditionalities and the availability of concessionary
funding, the need for a new financial system is often not clear to government,
nor do governments always see how the IFMIS solution helps
(especially when compared with their legacy systems). Governments in
developing countries often do not understand IT or manage it effectively.
Finally, unlike firms in a market economy that embrace IT to obtain a competitive
edge, no urgency exists for the public sector to reform (except to
meet foreign aid conditionalities and use concessionary finance).
The Ethiopian Financial Reform: A Case Study
The Decentralization Support Activity (DSA) Project, which is implemented
by the John F. Kennedy School of Government, Harvard University, was contracted
to implement the budget, accounts, and expenditure planning
reforms under the government of Ethiopia’s Civil Service Reform Program.
The project began in January 1997 and is scheduled to end November 2007.
This case study is about the experience of the DSA Project in implementing
these reforms. 22
The Strategy of Ethiopia’s Procedural Reform
The budget, accounts, and disbursement reforms in Ethiopia were a challenge
because of the size of the country and its remoteness, poor infrastructure,