The Chartered Institute of Public Finance and Accountancy (CIPFA) has said that blockchain technologies could support secure information sharing and collaboration networks across the public sector.
It has published a report on the issue, Exploring blockchain technologies for collaboration and partnerships, saying that key features such as immutability, decentralisation and programmability allow for the creation of networks that can be used to support collaboration.
The report has been compiled with the Government Outcomes Lab at the University of Oxford and draws on interviews with experts, a survey of practitioners and stakeholders and case studies.
It acknowledges the slow progress of blockchain – otherwise known as distributed ledger technology – in public services, saying this has been due to an overreliance on technical jargon and developments relating to cryptocurrencies having tarnished its image.
Tamper proof
But it is considered ‘tamper proof’ and can significantly improve accountability and transparency, which are both key to good public financial management.
This can make it valuable in creating networks with three key advantages, says the report. One is to support relationships and foster trust by enhancing data security, enabling the sharing of information, creating smart contracts and reducing costs.
Second is to facilitate coordination in areas with multiple reporting mechanisms. Blockchain offers a new way to ensure that information used in project management is consistent, to eliminate manual reconciliation in financial and sustainability reporting and enhance coordination.
Third is the potential to enhance transparency and accountability by enabling the tracking of funding sources and outcomes.
Among the areas in which the technology could provide benefits for the sector are procurement, financial management, outcome based contracting, risk management and sustainability reporting.
Limitations
But the report also points out limitations that have to be considered, including that once a transaction is recorded on a blockchain it cannot be changed or deleted, which will limit flexibility. Also, as the technology is decentralised, it can lead to ‘power dynamics’ within a network in which some participants have more influence or control than others.
In addition, there will still be a heavy reliance on trust among a network’s participants, despite blockchain being touted as a way to eliminate the need for trust.
The report makes a series of recommendations for policy makers, including that they should approach the use of blockchain with caution and use evidence based decision frameworks.
They should also invest in research and development to better understand its potential applications and how it can be effectively integrated into existing systems. This relates to a need to improve interoperability between different blockchain systems and existing technology.
It also sets out a decision framework and checklist for adopting blockchain in partnerships, including steps such as looking at any trust deficit between partners, who owns any data that is shared, and the risk of misaligned incentives.
Improve outcomes
Jeffrey Matsu, CIPFA’s chief economist, said: “Wider adoption of blockchain has the potential to improve public policy outcomes in more collaborative ways.
“Digital ledgers can enable innovative ways of managing contracts and relationships that enhance transparency and confidence – delivering longer term value.”
The organisation’s CEO, Rob Whiteman, commented: “The public sector is currently under severe strain. There is increasing demand for public services and budgets are being stretched extremely thin. Because of this, we need to work smarter.
“I encourage the sector to explore new technologies, like blockchain, that will enable it to be more effective and efficient, while maintaining accountability and transparency.”
