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Weekly UpdatesInformation and people are the key resources that public organizations employ in their operations. As technology has evolved over the past 20 years, so too has the public organization. Today, the modern government relies heavily upon information technology such as computers, data servers, management software, Web sites, and e-mail to accomplish the business of government.
While it is often believed that these technologies improve the efficiency of government and lower the cost, many public organizations find that they struggle to realize the full range of benefits promised by advanced information technology. In many instances the failure lies not with the technologies themselves, but rather with the implementation of these technologies. The successful implementation of an IT solution depends not only on the technical installation, but also on the successful integration of that technology with business processes and the behaviors of employees and citizens. Because of the complexity of these relationships, a dedicated approach and frame work for decision making as to how technologies will be used, what technologies will be invested in, and who is responsible for realizing value from those investments is required. The approach that is in wide use among leading private and public sector organizations is called "IT governance." By adopting IT governance concepts, the best use of technology can be made and governments transformed into 21st century institutions.
WHAT IS IT GOVERNANCE?
A governance structure is a system of management tools and structures that helps to "steer" and define how an organization operates through rules of engagement, rather than to administer or manage particular functions directly. A governance structure allows those who have a stake in the organization an opportunity to influence its operations, without micro-managing them. Hence, an IT governance system gives the stakeholders ("customers") of the organization's IT operations (such as operating departments) the opportunity to be involved in the technology decisions that impact them. It also puts the IT organization in closer contact with its customers and connects the customers with each other, promoting synergies in technology use across departments. In short, the concept of IT governance is consistent with the idea that government business needs should drive technology decisions, not the other way around.
IT governance can address a host of issues and comprises a number of specific tools and techniques. Here are a few examples of some of the most common uses of IT governance and the tangible tools and structures associated with those uses.
* Identifying Technology Needs. A process to identify technology needs, including the benefits, costs, and risks associated with each potential use, helps to prioritize technology purchases. A business case is a formal method that helps departments consider their needs and document benefits, costs, and risks so that technology use can be evaluated. The GFOA has developed several resources on developing business cases. (1)
* Prioritizing Technology Investments. Funds for technology investments are limited and must be directed to the best uses. Business cases for technology projects help a cross-departmental committee evaluate and prioritize projects. The committee can then recommend a set of projects for funding.
* Assigning Accountability. Once an investment has been prioritized, there must be accountability for achieving the results and realizing the value promised by the business case for technology. For example, the King County, Washington, governance system establishes an executive committee to review the progress of projects against their original business case. If a project is not on-track, the executive committee can withhold funding. Accountability for results should rest primarily with the operating department that implements a new technology, as that department will be ultimately responsible for the business process and employee behavior changes from which benefits are realized. An IT governance structure provides the means for the operating department to be closely involved in its technology projects while still receiving the support it needs from central IT resources.
* Aligning IT Department Activities. In many cases, there is a divide between the activities of the IT department and other operating departments, where operating departments feel that their technology needs are not being met, while the IT department feels that it does not get adequate guidance from operating departments on their needs. By bringing technology and business professionals together in a joint decision-making structure, IT governance helps bridge this gap and create alignment between the organization's business objectives and technology activities.
The diagram in Exhibit 1 summarizes the concept of IT governance. At the foundation of IT governance is joint decision making between IT and operating departments; targeted involvement of key participants; and an IT department that is focused on the success of its customers. A number of supporting disciplines rest upon this foundation, including: IT strategic planning to align community goals with IT activities; business cases to specify the highest priority projects; a transparent process for identifying technology funding and determining which projects to fund; and, finally, understanding the expected value from IT and assigning accountability for realizing that value, including establishing measures of success.
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WHY IS IT GOVERNANCE IMPORTANT TO THE FINANCE OFFICER?
Upon initial consideration, it might appear that IT governance is not directly relevant to the government finance officer. However, there are many reasons why today's finance officers should take an active role in promoting good IT governance.
I--Creating Value through Technology
It is not enough for the modern finance officer to simply control costs and collect revenues. The finance officer must play an active role in helping government create public value with limited resources. Technology is an increasingly vital means to create public value, and IT governance helps to identify and develop value from IT. For example, a business case identifies the expected benefit from a project. This allows the governance structure to fund the most potentially valuable projects. The governance structure can then be used to hold people accountable for realizing value from the investment. In another example, many technologies increasingly are shared across departments, rather than residing solely within a single department. These "enterprise" systems have great potential, but some of benefits may be lost when the systems are managed from a departmental, "silo" perspective. IT governance can bring a cross-departmental perspective to the management of these systems, and thus, increase the value derived from them.
2--Managing Risk
IT projects can be risky due to the complexity of implementation. As IT applications become more pervasive, the organizational's total risk exposure increases. Management of risk and limiting government's risk exposure is integral to the finance officer's fiduciary responsibility. IT governance plays a key role in mitigating risk. A business case process can be used to identify specific risk sources. The greater level of communication between the IT department and operating departments, enabled by IT governance, creates better alignment among all parties, and reduces the potential for misunderstandings that can sabotage successful technology implementation.
3--Understanding Short- and Long-Term Costs
The cost of technology as a proportion of a government's total budget is likely to increase as providing services to the public becomes more dependent on technology Finance officers have a responsibility to understand the amount being spent on IT, both for short-term budgets and for developing long-range forecasts and plans for how government will be able to fund services critical to the continued health, safety, and welfare of the community. IT governance provides the basis for understanding both short- and long-term technology needs and costs. An annual business case process ties into shorter-term budgets, while a strategic technology plan, (2) developed and approved through the governance structure, provides insight into long-range costs.
4--Producing Information of Value to Government
The finance officer is responsible for providing broad and accurate information to decision makers, not only on costs and revenues, but also on results achieved for each dollar spent. The IT operation is responsible for the management of data that is ultimately used to produce this information. Hence, the finance officer must work closely with IT in order to fulfill his or her responsibility for providing financial performance information. IT governance can help define what data is important, who is responsible for collecting and maintaining that data, and how that data will be turned into useful information and be made accessible. For example, an IT strategic plan might include a technical architecture component that describes the in data standards and technologies to be employed. While the finance officer would not necessarily design the architecture, he or she would work closely with the IT department, through IT governance, to describe their perspective on the organization's information goals so that the technical architecture could be designed accordingly.
5--Improving Data and Transactional Transparency
All public officials, not just finance officers, are responsible to provide greater levels of transparency for their constituents and other stakeholders. Finance officers are already familiar with their particular duties to ensure transparency as it relates to annual budgets and financial reporting. However, new standards for transparency are emerging due to the passage of the Sarbanes-Oxley Act. This has increased scrutiny on how publicly traded corporations manage their assets, and will likely have spillover effects on public institutions as citizens come to expect similar levels of transparency and stewardship. IT governance increases the transparency of how the organization's technology assets are managed.
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