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KPMG study : Financial pressure on public sector sharpens

Concerns over global financial conditions, research demonstrating government willingness to change strategies, and openness among citizens to address their country's financial health, all point to an overwhelming need to redefine the role of the public sector, research by KPMG's Global Government practice has found.

In a report The Future of the Public Sector: Tough Choices Ahead, KPMG proposes a three stage approach to transforming the public sector: short-term cost reduction; efficiency improvement; and, strategic transformation. The report, based on 17 in-depth interviews with public sector leaders from Australia, Canada, Germany, Netherlands, UK and the USA, notes that cutting expenses, delaying major projects, and improving financial management and management of external advisors, are not of themselves measures likely to have the financial impact required. The strain on public finances faced by many countries in the post-Recession environment demands deeper more fundamental change in public services.

To achieve strategic transformation of the public sector, many governments will need to seek public support and overcome continuing barriers to transformational change, such as resistance from staff and trade unions. Transformational change should therefore take place against the backdrop of a debate between public sector policy and decision makers and the public about the role of the state.

Daniela Nemoianu, Partner, Nemoianu Attorneys at Law - the Romanian law firm associated with KPMG in Romania - and Head of Advisory KPMG in Romania, says, 'In the first stage, the Romanian government has to adopt short-term measures to save money very quickly to buy time to focus on the longer-term issues. The long-term focus should be on the role of the public sector: what it should be doing and what it should stop doing because it is no longer affordable.'

She adds, 'At this stage, government is facing tough political choices which are likely to be controversial. They should explore the issues around spending, funding and the role of the private and not-for-profit sectors in the transformation of public services.'Much can be achieved with short term measures. Cutting expenses, reducing employment costs, and delaying major projects can all produce some immediate savings and rapid results.

Improving efficiency through better financial management, sharing resources by forging closer relationships between public organizations using similar resources and delivering similar services, ensuring a better return on investment from external advisors, and revisiting performance incentives can also deliver significant savings.

But radical change requires real political bravery, and many of those interviewed are skeptical that it can be achieved. Making radical amendments to the scope of existing services is difficult when they had been previously recognized as necessities. Reassessing spending priorities and finding new sources of funding is always likely to be controversial. But with tax revenues plummeting, public sector organizations have little alternative but to look for new sources of finance.

Governments around the world have turned increasingly to public private partnerships (PPPs) and private finance initiatives (PFIs). The use of 'user-pays' schemes is increasingly common in the areas of transportation, education, pension reform and health. Some governments are looking again at the sale of state assets, and the use of outsourcing is set to rise.

In spite of the political dangers inherent in striving for fundamental transformation of the public sector, KPMG believes the outlook for significant and long-lasting change is good. Many public sector leaders interviewed do not foresee organizational rethink as the most challenging area for improvement. Instead, the public sector officials KPMG talked to cite their main challenge as productivity – against a backdrop of low morale, reduced budgets, growing complexity and underlying change.

A positive appetite for rethinking organizational design suggests there is broader acknowledgement of what needs to be done and that strategic transformation is on the agenda. The public debate now needs to center on how this can be achieved.

Sursa: http://www.actmedia.eu

Tags: public sector should transformation change kpmg financial

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