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March 14, 2011

Who is “driving” the IFMIS?

Posted by Peter Murphy

An Integrated Financial Management System (or IFMIS) usually comprises a range of PFM functionalities and processes that cut across both organizational boundaries and technical disciplines. The question arises then who within government, or in practice within the Ministry of Finance (MOF), is best placed to take responsibility for the overall management of such a system?

The technical complexity of the information and communications technology involved in such systems may lead some to conclude the answer is the Information Technology directorate or support unit. Others however may take the view that this is equivalent to suggesting the mechanics should manage the car. Given it is usually the driver or the passengers who determine the cars destination, the route it takes and at what speed, they argue, it is the responsible user who should manage the car. This is despite the fact that often, neither the driver nor the passengers have much of a clue about either the mechanics of the vehicle or the maintenance of the road network upon which it operates.

Understanding core aspects of technical complexity is clearly an important element in securing sustainable operation of any enterprise whether a car, something more complex such as an aircraft, or a complex Information and Communications Technology (ICT) platform for an IFMIS. However, when it comes to determining and managing the functionality (or outputs) of the system, then a clear understanding of underlying PFM principles and processes is of critical importance. These are not typically the key strengths of the ICT staff. Essentially it is suggested that the PFM managers should be regarded as the principals and the ICT staff as one of the key agents in an IFMIS task environment.

Implementation evidence from a number of countries supports this view, ICT led IFMIS implementations often suffer from a lack of user engagement in the development of the system, a poor understanding by users of the operation and scope of the system and difficulties in user-acceptance. Much of the reason for this is the lack of a sense of responsibility and accountability by the PFM principals for management of the system. In practice data centers are established, networks set-up, application and data base software installed and systems configured, only to find that core elements of PFM processes are absent, partially implemented or dysfunctional. This can result in the IFMIS development being perceived to be costly failures, even when the functionality does exist within the application.

Examples of poor IFMIS outcomes resulting from lack of engagement include inadequate fiscal and management reporting, dysfunctional commitment control and cash management, limited consolidation capability, and inadequate budget and analytical tools. In each of these cases it is not necessarily an ICT failure, but rather inadequate understanding of the PFM requirements that has been the major causal factor.

The conclusion must be that managing an IFMIS requires inputs from those responsible for both the design and management of the PFM framework (the Principals) as well as those who establish and support the ICT platform (the Agents). In organizational terms this question usually translates into who should manage the system, the MoF or one of its key departments (usually Treasury or Accountant Generals Dept), a stakeholder committee, or the ICT function.

While any solution must depend in part on the historical and organizational context, experience suggests that successful management of an IFMIS depends on leadership from those with the responsibility for the core PFM processes combined with active co-operation from the responsible ICT Unit. Committees while useful for consultation, policy formulation and advice are generally poor vehicles for active management.

From a functional or application perspective: the business owner should therefore manage the system. This will usually mean the Ministry of Finance and typically the Treasury or the Accountant Generals Department, given that the accounting system lies at the heart of any IFMIS. In this context managing the functionality means coordinating the establishment and administration of the PFM principles and processes, authorizing user roles and rights, facilitating the PFM dialogue with the users, the supplier and other parties (i.e., those responsible for : Revenue, Administration, Payroll, Debt Management, Asset Management, Banking, Audit etc) and coordinating with the ICT platform provider.

An interesting model for functional management is the one deployed in Tanzania and Uganda, where the authorities have established and trained specific Financial Systems Units (FSU) in the Treasury/Accountant Generals Department. These units perform the functional systems administrator roles and act as internal functional consultants supporting the users. Other users themselves also have supervisory roles (Budget, Procurement, GL, AP, AR, Bank Reconciliation etc) as far as particular modules are concerned, within the framework of the policies and access rites determined by the centre (Treasury/AGD). The model separates the Functional and ICT management responsibilities and aligns the functional responsibilities with those responsible for the core PFM framework.

The FSU provides the first line application support, resolving all issues except those requiring higher order application or ICT skills. This provides a more dedicated financial systems management group than typically provided by nominated super-users or module managers. The FSU also supports the maintenance and development of new business processes in the system as well as providing training to the functional and ICT users of the system in line ministries. A support contract and support hierarchy has been developed to escalate application issues from the FSU to the local application support supplier or to the package supplier where necessary.

The FSU was established and developed in these countries through a combination of formal training and experiential learning by involving the staff, together with consultants and contractor personnel, at each stage of the IFMIS design and implementation process. By the time the staff had been repeatedly exposed to IFMIS issues at the specification, procurement, evaluation, design, configuration, testing and implementation they had gained substantial skills required to manage the system. This enabled the staff to evolve their skills and rapidly move towards progressive implementation of the live system.

From an ICT platform perspective a number of options or combinations of options are available; (i) establishment of a specialist ICT Unit working for the responsible PFM function; (ii) management of the ICT platform by the central ICT directorate; and (iii) contracting out the role of ICT platform provider.

From the point of view of ensuring a dedicated IFMIS ICT function the first option appears attractive, however this also brings the problems associated with management by non-technical managers of a complex ICT function, retention and remuneration challenges for specialist ICT staff, the lack of career development for IT staff and vulnerability to sudden staff turnover. In-house management through a semi–autonomous ICT Directorate or Agency is often perceived to address these issues but again may suffer from classic public sector problems of retaining specialist ICT staff, under investment in both capital and human resource development and limited capacity through competition from other mission critical systems. This option also often leads to a lack of direction in system development with the ICT Directorate trying to facilitate all user requirements at the detriment of system coherence. Contracting out only helps to eliminate some of these issues. It also leaves the need for a client side technical capacity to manage the contracting process and provide for quality assurance. To the extent that all or part of these functions are contracted out, then clear rules should be in place on who is responsible for what

Clearly principals and agents (or PFM and ICT management arrangements) need to interact to achieve a workable system. This is best achieved through a combination of (i) formal and regular meetings on the IFMIS system covering, management, operational and development issues supported by a performance agreement which specifies the tasks and deliverables from each party; (ii) regular operational contact back-up by between the assigned functional and technical staff to secure on-going operations and resolve any emerging issues together; (iii) periodic external reviews to evaluate systems performance; and (iv) a user forum where the broader range of stakeholders have an opportunity to register their concerns or development needs.

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Comments

Peter,

You have identified a key issue in IFMIS success. The reporting structure of ICT for the IFMIS implementation plays a role in success because of different incentives. It is also important to recognize where ICT professionals should provide a significant advisory role: software middleware and technical infrastructure.

Another failing in many IFMIS implementations is overcomplicated technology that adds risk. This is as much a middleware (databases, application servers, integration hubs) as it is with the IFMIS software itself. So there is often a high ICT cost to maintain underlying systems regardless of the complexity of the IFMIS. Sometimes the complication comes through excessive customization of the software.

Prime contractors for IFMIS software do not often have the incentive for capacity building because of the long-term revenue potential. That's why performance criteria for capacity building is critical. As you say: "progressive implementation". There are many cases in which governments have been able to take over the roll-out of IFMIS software to line ministries or sub-national governments without any external assistance.

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