Posted by Alok Verma[1]
The Kingdom of Eswatini (formerly Swaziland), a small country in Southern Africa, has been struggling with a high fiscal deficit since 2016, following a prolonged drought and declining revenue from the South African Custom Union (SACU). An unrealistic budget, combined with large financing gaps and the operations of extra-budgetary entities and trading accounts have led to the rapid accumulation of expenditure arrears, amounting to 6 percent of GDP in July 2018.
To implement a comprehensive, credible and transparent strategy for the clearance of these arrears, the government needed a tool that would both control commitments and produce reliable cash flow reports. The existing government accounting system (the Treasury Accounting System, TAS) was unsuitable for this purpose. It has been operating for several decades, uses outdated technology, and does not incorporate an accounts payable module.
The government attempted to collect and consolidate information on accounts payable using an excel tool, but data consolidation was a challenge and the lack of internal controls meant that not all invoices were recorded. While the Ministry of Finance has started work on the design an Integrated Financial Management Information System (IFMIS), implementation of this system is expected to take several years to complete.
As a stopgap measure that will meet its immediate needs until the IFMIS has been introduced, the government has developed a simple but innovative online system—the Invoice Tracking System (ITS). The ITS was developed in-house in the Treasury without any significant expenditure apart from the support of an IT consultant. The system is a basic IT application which is compliant with the TAS and has the following features:
- Records invoices and payment instructions along with their accounting classification and vendor details;
- Creates batches of invoices that correspond to the batches created in the TAS for payment;
- Submits these batches online to the Treasury;
- Scrutinizes and mandatorily verifies the invoices by the checking section of the Treasury before that are approved for payment; and
- Records invoices marked as paid from specific bank accounts by the banking section in the Treasury.
The ITS portal has been deployed on the government intranet and thus does not need internet connectivity for its operations. A dedicated team of trainers in the Treasury organized sensitization sessions on the new system for government accountants. Within 20 days of its implementation, the portal had registered 800 venders and 250 users, and several thousand invoices had been processed using the easy-to-navigate interfaces and user-friendly work flows.
Implementation of the ITS brings the following benefits to the government:
- Comprehensiveness in the coverage of transactions, including those outside the existing accounting system, e.g., foreign currency payments and special accounts for capital projects.
- Real-time reporting to users of the status of invoices at each stage of the payment cycle.
- Cash outflow reports and short-term cash flow forecasts (by summarizing information contained on invoices) to support the Treasury’s Cash Management Unit.
- Data on the stock of arrears and the execution of payments.
- The detection and prevention of irregular transactions—for example, one ministry falsely executing the budget of another ministry’s trading account—and accounting classifications that are missing from payments instructions.
- An up-to-date database of accounts payable that will help the government and vendors in migrating to the new IFMIS.
- An online, real-time register of invoices for each ministry and department, and a consolidated register for the whole of central government.
- Detailed reports and the capability to download data in excel for analysis by the Treasury.
It is understood that the ITS is only a short-term stopgap arrangement pending the implementation of the IFMIS. The system has some drawbacks. For example, it requires government accountants to work on two systems (TAS and ITS) in processing payments, and there may be some differences in the accounting data and the reports available on the ITS portal which require frequent reconciliation. Nevertheless, the ITS should provide valuable information that enables the preparation of commitment plans that are better captured in the budget preparation process, the centralized approval of commitments, and more comprehensive and effective commitment controls.
[1] IMF Resident PFM Advisor to the Kingdom of Eswatini.
Note: The posts on the IMF PFM Blog should not be reported as representing the views of the IMF. The views expressed are those of the authors and do not necessarily represent those of the IMF or IMF policy.
