what is a financial management information system?

8/8/2019 What is a Financial Management Information System?

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What is a Financial Management Information System?

y Is a system that tracks financial events and summarizes information

y Supports:

Adequate management reporting

Policy decisions Fiduciary responsibilities

Preparation of auditable financial

statements

y Should be designed with good relationships

between software, hardware, personnel,procedures, controls and data.

y Generally, FMIS refers to automating

financial operations

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Basic Architecture

4General edger : entral ook



Core Components

y Cash Management monitors and forecasts cash flows.

y Commitment control ensures that before a purchase is committed to,there is sufficient cash allocated for the expense and the allocation

matches the appropriated budget.y Accounts payable Processes and generates payments, with built-in

checks to ensure invoices match approved commitments.

y Accounts receivable produces bills and processes and records receipts,including all types of inflows received by government units, including

nontax revenues and fees.

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Private Enterprise Systems

Clear decision making process

y Improving efficiency

y Improving productivity

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Government Financial Management Information

System

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Context Specific and

compliance with budgetlaws Post conflict settings

Provide proper division of authorities &

responsibilities

Handle information flowsin complex structure

consists of ministeries ,agencies , local gov. etc.

Gov. FMIS



Issues Addressesy Legal framework

y Business/functional processes

y Organizational arrangements

y Budget classification structuresy Chart of accounts

y Change management

y Systems requirements/specifications

y Systems development

y Procurement/tender of software and hardwarey Configuration of software and hardware

y Data conversion/migration

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Change managementy Any systems implementation that ignores change

management flaunts with failure.y So what can be done?y As soon as an IFMIS project is conceived, a change

management strategy needs to be laid out, taking intoconsideration the change implications for:

y Overcoming resistance will happen through clearcommunication, education, training, and quick wins thatdemonstrate the benefits of change.

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STAKEHOLDERS

STAKEHOLDERS

POLITICIA NS

POLITICIA NS

SENIOR MANA GER

S

SENIOR MANA GER

S

CIVILSERVANTS

CIVILSERVANTS

ITPERSONN

EL

ITPERSONN

EL



CENTRALIZED TREASURY MANA GEMENT: THE

TREASURY SING

LE ACCOUNT

y Governments need to ensure both efficient implementation of

their budgets and good control over their financial resources.y Role of treasury operations:

1. sound management of financial assets and liabilities.

2. keep operating cash balances to a minimum.

3. the treasury department maintains central control of cash,sweeping idle balances from spending agencies accounts andconsolidating the governments cash position at the end of eachday.

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BUILD YOUR OWN: bespoke approach

y Custom-developed applications may be an effective interimsolution when transitioning from manual to computerizedrecordkeeping. They may be sufficient if the functionality of the system and the number of users is limited.

y Drawback: Bespoke systems often go over budget andseldom get delivered on time. They require established skillsets in custom software development and expertise that isoften difficult to find in less developed markets. It specialistsfail to anticipate problems or build in the necessary controlsand audit trails required of typical government financialmanagement systems.

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OFF THE SHELF OR Cots approach

y The detailed checks and balances built in to COTS systemsare critical especially for building and maintaining trust andtransparency. There is great value in taking a COTS systemthat has stood the testfor instance, one that has been used

successfully by publicly audited entities, or even one that hasbeen certified by an accounting group.

y COTS packages are usually modular and can expand incapacity and functionality to meet expanding requirements.For many developing country governments, all that will be

required in the early stages is a basic entry level systemconsisting of little more than a General Ledger applicationand basic cash management, accounting and paymentfunctions.

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y Drawbacks: COTS packages tend to impose a standardstructure on business processes, forcing the government toorganize to the application. This may not be such a bad

thing as many developing country governments couldbenefit from the discipline that COTS providers build intotheir software applications.

y The initial cost of a COTS solution can be high, themaintenance contracts and license fees a constant cost, but

experience suggests that the cost-benefit of COTScompared with the build-your-own approach is almostalways positive. The same applies to governments as it doesto the private sector.

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A PHASED APPROACH TO IFMIS

IMPLEMENTATION

y Implementing an IFMIS requires many different governmentstructures to start to work with common tools. To begin with, forthe information to be coherent, all administrative units

national as well as regional and local governments, whenapplicablehave to adopt a common language, in the form of auniform Chart of Accounts.

y Establishing uniformity across all sectors of government can be along-term process. Adopting a clearly defined, step-by-step

approach based on a detailed assessment of existing conditionsand needs can not only expedite the process of introducing asound entry-level IFMIS, but can also help donors andgovernments alike minimize the risk of project failure.

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y Defined steps might include:

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1. Preparation and delivery of the initial needsassessment

2. Requirements gathering and delivery of systems specifications

3. Design and delivery of a uniform chart of accounts

4. Preparation and delivery of accepted rulesand procedures for the new system

5. Evaluation, selection and procurement of software and hardware applications

6. Systems integration, testing andimplementation

7. Audit/evaluation of project progress and

results.



It is very hard to emulate the rapid success of the Slovak Republics IFMIS.Political will was a key driving force, but it was underpinned by a clearly defined strategy and timeframe.The first step in this process was to undertake a needs assessment. Aftercareful evaluation of available software packages and their ability to meet

these requirements, the system chosen was composed of three basic off-the-shelf packages: A General ledger application package chosen SAPClient banking software package chosen QBS W Treasury management and trading software package chosen TREMA

The Slovak IFMIS implementation succeeded because the country wanted tobecome part of the EU and was willing to make the changes required tocomply with EU directives.



KOSOVAKOSOVAThe objective was to integrate the 30 Municipalities and the future lineministries and spending agencies under one central system.Financing of the IFMIS implementation was jointly undertaken by theCanadian International Development Agency (CIDA) and the SwedishInternational Development Agency (SIDA), with contributions fromUSAID including all the administrative instructions and procedures.

The basic financial envelope was approximately 11,000,000 Euros.The IFMIS assistance included an E-Government software system,

Free Balance, produced by aCanadian firm and also used by theCanadian Government.

The program for the Kosovo roll out included:y Systems demonstrations to show the functionality to future Users;

y Training workshops for both senior administrators and managers andfor general staff; and

y Change management workshops



Kazakhstans IFMIS implementation faced many hurdles,chief among which was the choice of software. The softwareselected for the core applications was Oracle Financialsanexcellent package, but a system that requires a fullcommunications backbone since all data are processed

centrally.To begin with, CoA development took longer than planned,delaying many other phases of system development. Secondly,the Government made the decision not to implement variouskey modules of the software, most notably payroll, due to lack

of financial resources.Third, the Government failed to ensure full sustainablesupport to the expansion of the system beyond the initialinstallation.



UGANDAUGANDA

Uganda offers an example of a country where introduction of a government IFMIShas moved in fits and starts.

The main design problem lies around the CoA. The Uganda IFMIS has limpedalong ever since, under performing its potential, with patches and

workarounds that only serve to decrease the efficiency of what could have beenan excellent system. Various other problems were encountered, most of them common to IFMIS

projects around the world. These included:y Inadequate planning;y Poor communications between implementers, donors, and Government;y Shortage of management capacity and resources;

y Changes in systems design documents without full agreement;y Poorly implemented trainings; andy Unnecessary and spurious project expenditures.



IRAQ IRAQ An October 2007 audit by the Special Inspector General for Iraq

Reconstruction (SIGIR) highlights some of the critical problems withthe IFMIS implementation process. Among these was

y A lack of understanding of the existing Iraqi financial systems and

processes before and during installation of the new system.y The Iraqi government has a distinctive accounting system, a unique

combination of cash and accrual accounting methods, that is not easily adapted into the IFMIS system.

y The report indicates that user requirements were not adequately identified and incorporated into the systems development.

The problems with interagency coordination have not only led tosuboptimal outcomes, but also to missed opportunities. After more than $20 million of investment from USAID and considerable

additional investments from other agencies, the Iraq IFMIS project hasbeen halted pending decisions on a strategy for the future.



VIETNAMVIETNAMThe Socialist Republic of Vietnam has been working on

introducing a new IFMIS since 2001. IFMIS development andimplementation has been funded by the W orld Bank,

administered directly by the Vietnamese Government but usingthe Banks procurement guidelines and tender process.

Vietnam offers an interesting example of too much, too fast. The Vietnamese administrative structure is complex, not only in thecenter, but also in the 64 provinces that comprise the mainstructure. The plan for the new IFMIS system is to cover the bothcentral administration as well as the 64 provincialadministrations. The scale is monumental, especially considering where Vietnam is starting. This is where the conceptof an entry level system comes into perspective .



Best practice steps to successful IFMIS

implementation

Change management

Capacity building and Training

Legacy systems and Data Migration

Step 1

The Needs Assessment

Strategic Plan

Covering immediate, medium- and long-termtasks and objectives of the IFMIS project

Step 2

Create a Road Map

Basic components

Intellectual input

Software and Hardware

Training

Support

STEP 3

The Modified Tender Approach

Implementation Team

SteeringCommittee

Testing the system

STEP 4Implementation



STEP 1 THE NEEDS ASSESSMENTy A serious and comprehensive assessment of the

current institutional conditions, what is needed,

and what can be reasonably achieved.

y The assessment team should collect and analyzepast years spending budgets, planned and

executed



y A number of questions should be addressedlike,

y W hat are the political priorities of stakeholders?

y W hat is the existing legal framework, and how does itfunction?

y How does the current fiscal system work?

y How is the information being used?

y C

an the legal framework be used to support the publicfinancial reform process?

y W hat human capacity and technical know-how areavailable, both at the central and at subnational levelsof government?



CHANGE MANAGEMENTy If change management is not addressed, then the project

will constantly be faced with resistance and obstacles fromexecutive staff and elected officials who use the system

most regularly.

y The best way to overcome resistance is to sell the changes,relying on credible national resources to deliver themessage.

y W orkshops, seminars, training sessions, a website,conferences, or newsletters can be used for selling.



CAPACITY BUILDING AND TRAINING y During need assessment

y The different user groups have to be identified

y Their levels of knowledge determined

y Recruiting needs established

y Training curricula explored

y Capacity building is a never-ending process

y This requires, therefore, establishment of a soundpermanent authority within government, empowered tocarry these functions forward.



LEGACY SYSTEMS AND DATA MIGRATIONy Existing or legacy systems must be addressed as part of

the needs assessment.

y It is also important to establish if the data can be recoveredand transferred into the future system.

y Various degrees of data migration are there, all dependingon the volumes and costs needed to undertake the exercise.

y Creative approach



STEP

2 CR

EA

TEA

R

OA

DMAP

y A strategic plan mapping

out

y how to transform the

needs into a coherentsolution

y the steps involved

y how to address eachstep

y setting out clearobjectives andmilestones for each stepof the way.



STEP 3 THE MODIFIED TENDER

APPR

OA

CHy Project team should know the approximate size of the

user base and the various profile types that will be

required

y The amount, types of training required, and the timeframe required should be known

y It would help in establishing what needs to be done forIFMIS success, setting local standards to meet themultiplicity of the objectives



STEP 4 IMPLEMENTATIONy Implementation team

needs to be capable of bringing to the project the

right skills and talents

y Not only beprofessionally qualified,but also culturally aware

y A regular SteeringCommittee should overseeprogress from the highestlevel



y START SMA LL, THINK BIG

y It may start from an entry-level system, limited to acontrolled environment, the system can then be rolled

out in phases once it has been tested and proven.y W hat government IFMIS projects often overlook are the

inherent conditions on the ground: the politicalstructure, existing systems, human capital, and otherforces that come into play when attempting any major

institutional change.

y TESTING THE SYSTEM

y Effectiveness of IFMIS as a financial management tool

is dependent on the technologythe software andhardware

y Pre testing the working model with real data foravoiding wasted money, time and credibility.



CONCLUSIONy This paper proposes a series of best practice steps for introducing

IFMIS based on experiences and knowledge of past successesand pitfalls.

y W hat is presented here is not a recipe for instant IFMIS success,for this is impossible. Instead, it highlights the key features thatmust not be overlooked, the key techniques that have beencommon in successful installations.

y Starting with these as a basis, IFMIS projects can be betterdesigned and managed to produce the financial managementand governance results that they are intended to have.



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what is a financial management information system?

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