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October 27, 2010

Replace or Integrate: FMIS Architectures in France and Germany

Posted by Sebastian Eckardt, World Bank.

Financial Management Information Systems (FMIS) have been a core component—and in some cases driver—of public financial management reforms in developing countries, typically in conjunction with major legislative and process changes. While the experience with such IT-enabled reform strategies in developing countries has been reviewed (most recently in The World Bank's Experience with Treasury and Financial Management Information Systems (1984—2010), forthcoming World Bank Technical Report), much less is known about the implementation of financial management IT systems in OECD countries. Interestingly, both France and Germany have recently begun to plan and implement comprehensive IT modernization programs as levers for modernizing and rationalizing budget and accounting processes. The two cases, while at different stages of implementation, might offer relevant lessons on possible design options for FMIS architectures especially for middle income countries intending to move to second generation reforms and systems.

France is in the process of revamping the IT environment for public financial management to strengthen operational support and compliance with the organic budget law LOLF (Loi Organique Relative aux Lois de Finances) passed in August 2001. The program is called CHORUS and aims to provide every French government agency, at both central and local levels, with a shared, integrated application for finance, budget management, accounting, and reporting. In the past ministries deployed several different information systems to manage public funds. The CHORUS project will integrate all systems involved in state expenditures, non-tax receipts and accounting into a single, unified IT landscape based on a commercial enterprise resource planning (ERP) platform which will replace 80 existing inter-ministerial and ministerial applications and deliver core functions currently performed by each ministry’s internal management applications. CHORUS will ultimately reach about 25,000 users. As such, CHORUS is one of the largest inter-ministerial IT investment programs ever undertaken in France and one of the largest ERP roll-outs in the world. The four-year project was launched in April 2007 with an estimated cost of approximately EUR 0.5 Billion. The budget bill for fiscal year 2011 assessed the overall actual cost of the project at EUR 1 Billion from 2006 to 2015. Initial deployment has begun in 2009 with a roll-out to all government budget and accounting departments currently underway.

In Germany, major IT investments were planned to support the move to product (program) based budgeting and accounting that was initiated in 2006. The project is currently on hold since the Parliamentary budget commission recently required a strategic realignment of the project from the federal MOF. The project, which is called "Modernization of the Budget and Accounting framework" is closely linked to Federal budget reforms that aim to convert the federal budget to focus on performance and resources by introducing the product budget, integrated cost accounting processes, and a capital account. Needs for additional IT capabilities have been identified in particular to support a central business intelligence (BI) system to be added to the central processes for planning, managing funds, and rendering accounts. A detailed concept, including options for the IT architecture, has been developed. The chosen IT architecture is planned to integrate existing central and decentralized components, rather than replacing the current components with a central ERP system. To attain system integration, uniform data exchange standards will be introduced to the existing decentralized budgeting, and accounting systems and a certified architecture for ministry-level systems will be developed centrally.

In sum, the chosen IT architectures in the two countries represent two different approaches. France is replacing decentralized applications with a shared IT platform upon which unified budget planning and accounting functions will be delivered across government. This has clear advantages in terms of moving to a fully integrated system and will also enable efficient future system upgrades but it does entail significant upfront investment costs. Unlike France, the chosen IT architecture in Germany is envisaged to integrate existing central and decentralized components and to introduce interoperability standards to the existing decentralized budgeting and accounting systems to ensure efficient data exchange. This will safeguard IT investments already made and recover existing licenses thereby minimizing costs associated with the implementation of new technical requirements. At the same time it will likely make future upgrades in the decentralized IT landscape more complex. In any country context, the choice of the adequate IT architecture will need be driven by cost-effectiveness considerations, the capacity to handle hugely complex change management issues, the timetable to implement a new PFM framework, the state of existing IT systems and infrastructure and desired functional requirements of the new systems.


Le Forum de la Performance

Bundesministerium der Finanzen

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Thanks for this interesting piece. I wonder whether anyone can update us on the state of play with Chorus implementation. Some months ago there was a piece in Le Monde indicating that massive problems were being experienced in the transition, with suppliers remaining unpaid for months and a range of other difficulties. These types of problems are obviously much more likely when one goes for a new completely integrated system. Has France now resolved these problems?

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