Digital transformation has become a central focus in public finance modernization efforts globally. However, empirical evidence from numerous implementations reveals a persistent challenge: advanced technological solutions frequently fail to deliver expected outcomes when deployed without adequate foundational infrastructure. This disconnect between technological capability and operational effectiveness raises fundamental questions about sequencing and prioritization in public financial management (PFM) reforms.
Recent assessments, including the World Bank's GovTech Maturity Index 2022, underscore the importance of core government functions as prerequisite elements for successful digital transformation. As governments worldwide pursue digital transformation initiatives, the success of Integrated Financial Management Information Systems (IFMIS) implementations depends critically on establishing robust foundational elements, particularly the Chart of Accounts (CoA) and Treasury Single Account (TSA). These core functions must precede technological investments to ensure effective public financial management.
The architecture of effective Public Financial Management
Chart of Accounts: The structural framework
The CoA serves as the fundamental classification system for all government financial transactions. It provides the structure through which revenues, expenditures, assets, and liabilities are systematically recorded, enabling coherent reporting to stakeholders including ministers, parliaments, auditors, and citizens.
When inadequately designed or implemented, the CoA creates systemic inefficiencies: financial reports become difficult to interpret, maintaining data integrity becomes a challenge, reconciliation processes experience significant delays, and institutional trust deteriorates. These challenges persist regardless of the sophistication of overlying technological systems.
Treasury Single Account: Centralized cash management
A well stablished TSA consolidates government cash holdings into a unified account structure, replacing fragmented arrangements across multiple banking institutions. This consolidation delivers several critical benefits, notably:
- Enhanced financial control and oversight;
- Reduced borrowing requirements through improved cash visibility;
- Optimized liquidity management; and
- Streamlined integration with IFMIS platforms.
The combination of a well-designed, budget-linked CoA and an operational TSA creates the essential foundation for effective IFMIS deployment.
Evidence from Implementation Experience
Analysis of over 80 World Bank supported FMIS projects globally—representing investments exceeding $2 billion—reveals consistent patterns distinguishing successful from unsuccessful deployments.
Successful implementation characteristics
Effective implementations demonstrate several common characteristics:
- Comprehensive CoA revision and integration with budget classification, ensuring consistent coding from planning through execution.
- TSA establishment enabling centralized cash management and reporting.
- Phased IFMIS deployment, beginning with basic controls and cash management before advancing to performance reporting.
Common Implementation Failures
Unsuccessful implementations typically exhibit predictable shortcomings:
- Program-based budgeting and reporting systems fail without unified CoA structures and operational TSAs.
- IFMIS projects experience extended delays when foundational elements remain incomplete.
- Overemphasis on technological solutions while underinvesting in process redesign, capacity building, and change management.
Despite substantial investments in IFMIS platforms, many ministries continue exporting data for reconstruction in spreadsheet applications, indicating fundamental system design failures rather than technological limitations.
The interoperability challenge
System interoperability represents a common aspiration in PFM modernization. However, meaningful interoperability requires standardized data structures and definitions. A disciplined, unified CoA enables payroll, procurement, and debt management systems to exchange meaningful information rather than merely transferring files. Without this foundation, IFMIS platforms cannot reliably interpret or align the data they receive, resulting in inconsistent and inaccurate information exchanges.
A Framework for reform implementation
Based on extensive implementation experience, the following sequenced approach enhances the probability of success:
- Establish core classifications: Develop a unified, simplified CoA directly linked to budget structures before systems development.
- Implement treasury controls: Establish TSA infrastructure with associated cash forecasting and commitment control mechanisms.
- Build institutional capacity: Invest substantially in training personnel responsible for transaction posting, reconciliation, and reporting.
- Phase system deployment: Begin implementation with high-risk, high-value areas such as treasury operations and payment systems, subsequently expanding to other areas, while gradually improving the institutional coverage.
- Embed change management: Implement a structured change-management plan, including communication, stakeholder engagement, process re-design, and ongoing support, to ensure adoption and sustained use of new practices across institutions.
Implications for future modernization efforts
As governments move toward real-time reporting and begin using artificial intelligence in public finance, these basic foundations become even more important. Advanced tools need reliable, well-structured data, and without a solid CoA and TSA, even the most sophisticated systems will produce weak or unreliable results.
While new technologies in PFM attract attention, lasting improvements rely on strong core systems. Before focusing on software, reform leaders should confirm that the CoA is aligned with the budget, the TSA provides real-time cash information, and staff understand upcoming process changes. With these basics in place, technology will enhance good practices rather than compensating for underlying weaknesses. Sustainable PFM reform begins with fundamentals, not tools.
