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December 12, 2007

Automating Public Financial Management Systems for Results

Posted by Bill Dorotinsky

Over the past few decades, governments and development agencies alike have invested enormous financial and human resources into automating public financial management (PFM) systems, and often the results have been less than hoped. Governments have had difficulty implementing systems, and not achieved desired functionality. And development partners have invested large sums of money, only to find systems delayed in implementation, having limited impact, and often with real challenges to the sustainability of the systems. On December 2-4, 2007, the International Consortium of Governmental Financial Management (ICGFM) held a two-day workshop entitled "Use of Financial Management Information Systems (FMIS) to Improve Financial Management and Accountability in the Public Sector".  While the conference title and topic might cause eyes to glaze over with visions of technical issues, the conference was a useful glimpse into current thinking on PFM system automation, and full of practical advice to those concerned with PFM system automation.

Conference presentations from government authorities, international organizations, and consultants covered topics such as how FMIS fits within the over-all PFM reform agenda, planning for FMIS development, FMIS design components, IT alternatives, project management, procurement, and capacity building. The conference program and all the presentations made are available on-line at the ICGFM website under Winter Conference.

A few of the interesting messages this post's author took from the conference include:

  • FMIS versus IFMIS. Much of the work in automating PFM systems has focused on implementing an integrated financial management information system, including general ledger, accounts payable, accounts receivable, procurement, payroll, asset management, debt management, budgeting, etc. This approach might be too large to implement effectively, in a timely fashion, or to achieve results. It might be better to think of automating some core part of the system, such as general ledger, and accounts payable and receivable, with an eye to adding-on or replacing the system within a few years. Other points in this regard were to start from where you are in terms of PFM system development, rather than from where you want to be, and also to recognize that not everything may need to be automated. As PFM systems evolve, the needs will change, so the scope of the automation can be expanded. Given the rapid change in technology, it may not be feasible to plan all of these potential needs or IT options in advance.
  • PFM system and reform requirements must drive automation decisions. Frequently, the IT developments drive the reform process, rather than the other way around. The business needs of the government need to be the primary factors taken into account, with IT supporting the reforms and process improvements sought. While often ill-defined, country ownership of the reforms and automation are core to any success.
  • Off-the-shelf packages versus customized packages. It is difficult to make that decision ex ante, before identifying reform objectives and scope of the project. There are numerous factors that need to be taken into account, including the extent of business process re-engineering required or desired, the capacity to support the system or afford the system once developed, among other factors.
  • Sequencing PFM reforms and automation.  More work is needed on sequencing of PFM reforms, driven by country specific needs (starting point, most pressing PFM problem, and direction of change). Automation should follow this pattern, rather than driving the change.
  • Quality assurance. Given the size of automation investments in human and capital resources, building some quality assurance steps into the process could be useful, including periodic review by external expert panels.
  • Decentralization is driving many second-generation automation efforts. Globally, countries are trying to decentralize decision-making to subnational or municipal governments, as well as deconcentrate to spending ministries and agencies. For many countries, next generation FMIS systems are being developed or implemented to support these new processes and decision-making responsibilities. Providing automation solutions that both support financial management decisions and processes at these levels, as well as enable timely and accurate reporting of revenues and spending to the central government, are core challenges in FMIS design and implementation.

Over-all, the conference presentations offered practical advice and important issues to be considered in making decisions, rather than one-size-fits-all guidance on these topics. Generally, this was a very timely and useful conference, with very practical advice to anyone embarking on PFM system automation.

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Comments

I completely agree with Mr. Dorotinsky's post.

I thought the conference was a great learning experience and opportunity to see the different country experiences in this area. Although delegates from different regions of the world presented, their lessons did not stress their differences as much as emphasize their commonality.

In regards to FMIS "success", I believe there are two areas that this can be expanded further, and perhaps incorporated into topics in future venues.

1) Project success definition. An internal perspective. Essentially an evaluation of how the project succeeded in terms of standard "project" measurements such as:
a) Within budget (capital/development and recurrent)
b) Within original timeline
c) Within original scope
d) Administrative capacity to maintain and sustain the system

There have been studies done in this area in the past but I think an updated or revised version would be good from a relevancy viewpoint.

2) FMIS contribution to PFM success definition. An external evaluation of how the project met overall PFM, economic and government objectives. In my view this is more difficult than #1 above but infinitely more important.

Thanks,
Hal

PS In the interests of transparency, and as this is my first ever post, I want to disclose that I am a (very interested!) member of a private sector concern.

Hal:

I completely agree. More work is needed to specify good performance metrics for automation projects and also for the public financial management reforms they support. The areas you identify are a very good starting point. An update of the study done at the World Bank a few years ago would be valuable.

Regards,
Bill

thanks for the information, great work.

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