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Wednesday, May 14, 2008

Notes from the December 2007 ICGFM Conference

from Doug Hadden, VP Products, FreeBalance.

The December 2007 ICGFM (the International Consortium on Government Financial Management) conference in Washington DC provided insight into the implementation of public financial management systems. The main theme for this event was IFMIS (Integrated Financial Management Information Systems).

I have collected my notes based on themes and I have included some items that I do not necessarily agree with. (I have indicated who presented the information. There is a link to presentations at the end of this piece).
The acquisition of an IFMIS was deemed as being at the forefront of reform (Osler). The thematic areas of interest to me were:

  • Benefits of IFMIS
  • Acquisition practices or how to prepare and manage the acquisition of an IFMIS.
  • Implementation practices including sequenced roll-outs.
  • Capacity building.

Benefits of IFMIS
The objective of implementing a computerized IFMIS system is to increase the effectiveness and efficiency of state financial management and facilitate the adoption of modern public expenditure management practices in keeping with international standards and benchmarks. (Points)

Enable Government Reform
Government institutions are restructuring to: (Points)

  • Improve services to citizens
  • Improve strategic and day-to-day decision making
  • Reduces bureaucracy and improve efficiency
  • Reduce cost of operations
  • Increase public accountability
  • Ensure adequate controls to minimize fraud and corruptions
  • Provide citizens with better access to information.

Improve Efficiency and Controls

  • Better control over budget (Osler) through full integration of budget and budget execution data. (Myers)
  • Enhanced efficiency (Osler)
  • Ability to decentralize functions and processes yet maintain overall control by Ministry of Finance (Osler)
  • Forces financial discipline (Osler)
  • Reduction of operating costs by reducing administrative tasks. (Acosta)
  • More available resources to facilitate management control and the development of new activities that add value. (Acosta)
  • Strengthen the monitoring and evaluation capacity. (Kamaray)
  • Improve service delivery. (Kamaray)
  • Facilitates improvement of customer service. (Van der Linde)
  • Control over fraud and corruption. (Van der Linde)

Improve Confidence through Transparency

  • Credibility of the budget. (Osler)
  • Transparency of information (Osler)
  • Comprehensiveness and transparency. (Osler)
  • Predictability and control in budget execution. (Osler)
  • External Scrutiny and Audit (Osler)
  • Foundation of performance-based budgeting (PBB) and Monitoring & Evaluation (M&E) and broader reform on corruption, transparency and e-government. (Myers)

Increase Government Revenue

  • Improved revenue collection. (Prasueth)

Reduce Costs

  • Expenditure control – mentioned by many.
  • Debt cancellation. (Minthambala)
  • Sourcing of goods and services from pre-qualified suppliers eliminates “brief-case” suppliers [not real companies]. (Minthambala)
  • Use of the Treasury Single Account to reduce borrowing. (Minthambala)

Improve Development Results

  • Credibility of the budget. (Osler)
  • Policy-based budgeting. (Osler)
  • More realistic ands standardized budget formulation. (Van der Linde)
  • Enables political stability. (Prasueth)

Improve Decision Making and Planning

  • Close monitoring of outstanding bills, cash in bank accounts and improved cash planning. (Myers)
  • Provision of timely and accurate data for management and budget decision making. (Myers)
  • Access to reliable and timely information to support decision making. (Van der Linde)
  • Accounting, Recording and Reporting. (Osler)
  • Critical for decision-making (Osler)
  • Forces financial discipline (Osler)
  • Reduces costs to report to donors. (Symansky)

Acquisition Practices


  • Functional specification should be down as part of the RFP, after re-engineering. (Farooq)
  • Best predictor of implementation success is good procurement practices. (Vickland)
  • Need to define success at the beginning. What is the desired outcome? (Vickland)
  • Should invite vendors to present ahead of time. (Vickland)
  • Must not tell vendors “how” to do the work. (Vickland)

Feasibility Study

  • Need to define the current and desired states and the “concept of operations”. (Vickland)
  • Need to calculate all design, development and on-going costs. (Osler)
  • Should determine the roll out schedule. (Osler)
  • Take the time for a conceptual framework, strategy, cost estimates for initial training etc. ore sweat now less blood later. (Myers)
  • Need to define what is mandatory for vendors. (Vickland)

Build or Buy?
There was considerable debate over this point. Most governments buy rather than build (Osler)

Advantages of Buy

  • Government accounting is similar among countries. (Osler)
  • High degree of success in post-conflict countries. (Symansky)

Disadvantage of Buy

  • Examples of failed large ERP projects in government were cited.
  • Customization of code makes ERP implementations as complex or more complex as build. (Dorsey)
  • Commercial-off-the-shelf (COTS) software requires a big IT infrastructure. (Dorsey)
  • View in Africa that most COTS projects have failed. (Peterson)
  • Accrual accounting functions in the COTS software should not drive introduction of accrual accounting. (Peterson)
  • Rarely, if ever, is a pure COTS – requires customization. (Peterson)
  • “Innocent are fired and the guilty are promoted and rewarded.” (Vickland)

Advantages of Build

  • Interim functionality, small number of users with limited functionality is a candidate for build. (Osler)

Disadvantage of Build

  • Building a solution is usually more expensive. (Osler)
  • Build projects are often over budget and not on time. (Osler)
  • Understanding of government functions by the technology staff in developing the solution is limited. (Osler)
  • Limited controls built into build systems. (Osler)
  • Future requirements not or ill considered so system has limited capability to expand, accommodate needed changes or integrate with other systems. (Osler)
  • Testing not always adequate so many problems upon implementation. (Osler)
  • Can have weak design and poor controls. (Kamaray)

Implementation Practices
Project Management
Project Management and people management was mentioned by many speakers and key to success. There was much discussion about the political nature of these projects and the need for government commitment.

Government should control to reduce risks

  • Do not have the view that it is the World Bank’s money. (Osler)
  • Consultants will sell you stuff, the government needs to be in control. (Osler)
  • Need to have dedicated people from the government on the project. (Osler)
  • Can reduce the costs of the implementation from suppliers if you guarantee 100% dedicated resources from the government. (Vickland)

Planning and benchmarks

  • Need to develop a common mission, project mission and vision. (Osler)
  • Project charter showing risks is needed. (Farooq)
  • Should adhere to the plan with benchmarks, but flexibility, with approval by project governance structure, for adjustments. (Myers)
  • Objectives can minimize objectives, set expectations and determine what will be achieved. (Osler)
  • Anticipate change management. (Myers)
  • Need for periodic reviews of project and plan. (Myers)
  • Execute the project with clear priorities, opportune decisions, fast resolution, eliminated barriers, fast execution, orderly and clear process flow. (Acosta)
  • Need to manage expectations. (Seed)


  • The human dimension is the most difficult. (Farooq)
  • Need to have a governance structure to monitor business benefits. (Farooq)
  • Requirements for project team may change during project. (Seed)
  • Project manager should be a senior official from the functional side with stature within bureaucracy with adequate financial and administrative powers. (Myers)
  • Project cannot be down “operationally” by people who have standard responsibilities. Needs to be project-based. (Farooq)
  • Core team should be trained professionals and representatives of major stakeholders. (Myers)
  • Project secretariat would have specialist IT staff. (Myers)
  • Need to align human resources policies (career, rewards) with the project. (Farooq)
  • Experienced providers are needed – not just people who know the software, but have gone through IFMIS projects before. (Osler)
  • Consultants should be used to supplements skills and should have: (Seed)
    - Extensive PFM experience
    - Government accounting, budgetary and financial management systems and computerization
    - Country context
    - Management and operations of computerized government systems
    - HR, organizational and project management
    - Specific technical area such as security

Role of Information Technology (IT)

  • This is a user project and users should control it, not IT. (Osler)
  • IT and IT solutions cannot overcome problems in human capacity. (Dorotinsky)
    IT should follow, not lead. (Peterson)

Phased roll-out

  • Virtue to sequencing. (Dorotinsky)
  • Implementation strategy must be phased so that benefits occur over time and have to ensure interim arrangements facilities financial continuity, control and reporting. (Seed)
  • The entire FMIS does not need to be acquired at once. (Osler)
  • Need to “think smart” and not acquire all functions are once. (Osler)
  • Many times, it is better to begin reform with a manual system before computerizing. (Osler)
  • Should start with core modules first. (Osler)
  • Start with the implementation of foundation infrastructure and undertaken at a pace that will ensure that users effectively cope with new technologies, methods and processes. (Points)
  • Sequencing (core first) required. (Myers)
  • Core system is the backbone for additional modules like HR, Debt and Audit. (Myers)
    Should implement at pilot sites, institute change management, training end users then replicate to other sites. (Myers)
  • Use a gradual and flexible process. (Acosta)
  • Should reform core applications first then work on civil service reform. (Myers)
  • With a high degree of technical complexity – should focus on specific functionality at once. (Dorotinksy)
  • High risk to implement too many components at once. (Dorotinksy)
  • All of the major work and most of the problems happen in the first site. (Farooq)
  • Ideas of 6 month cycles for functionality rollout. (Dorotinsky)
  • Should start with Budget Execution and Reporting – not Budget Planning – especially is there no benchmark. (Symansky)

Roll Out Stages (Points)

1. Assess Current Environment

  • Review current processes
  • Review current systems
  • Identify opportunities for improvement

2. Develop Target Design

  • Development conceptual framework for target design
  • Develop detailed target design
    i. Processes
    ii. Systems
    iii. Organization
    iv. Cluster
    v. People
  • Develop target design implementation approach

3. Implement Technology

  • Define technical infrastructure
  • Identify Infrastructure requirements
  • Define functional requirements
  • Define technical requirements
  • Evaluate software
  • Procure hardware and software to support infrastructure
  • Establish infrastructure
    i. Development
    ii. Testing
    iii. Production
  • Package implementation
    i. Identify modifications to package
    ii. Identify modifications in legacy systems
    iii. Define interfaces with legacy systems
    iv. Prototype screens, reports and processes
    v. Define data model
  • Prepare detailed design specification
  • Plan data conversion
  • Code and Unit test
  • Conduct system test
  • Convert data
  • Implement software
  • Conduct User acceptance test

4. Prepare for change

  • Identify training needs
  • Assess Organizational impact
  • Develop training materials
  • Develop policies and procedures
  • Train users
  • Transition

5. Develop transition plan

  • Develop continuous improvement framework
  • Transition to new environment

Needs analysis

  • Many projects focus on the needs of the Ministry of Finance. It should also focus on the needs of line ministries in order to be successful. (Osler)
  • Need to collect: (Myers)
    - status of budget/treasury functions,
    - roles and responsibilities,
    - IT adequacy, management, experience
    - Chart of Accounts – does it meet international standards
    - Public contracting
    - Data reliability and integration
    - Public Expenditure Financial Accountability (PEFA) information

Business Process Re-engineering
There was some debate to the extent of BPR required.

  • BPR = Blood Pressure Reduction (Peterson)
  • Not an IT or accounting reform. Should be in support of comprehensive (BPR) reforms. (Myers)
  • Harder to repair an existing system than a “green field”, so there is a need for BPR. (Myers)

Chart of Accounts

  • The Chart of Accounts (Transaction Coding) and business processes are the most important starting point. Once ingrained, it is hard to change the COA. (Osler)
  • Should meet international standards. (Myers)
  • COA the most important thing. It must support standards and roll-up to GFS, MDG and PRSP. “Sierra Leone has one of the most beautiful charts of accounts” (Kamaray)

Legal Reform

  • Need to understand the legal and institutional framework. (Myers)

Post Implementation Changes

Need for the financial system to adapt over time such as: (Peterson)
Step One

  • Line item budgeting
  • Single entry bookkeeping
  • Cash accounting
  • IT (Spreadsheets)

Step Two

  • Cost center budget
  • Double entry bookkeeping
  • Modified cash accounting
  • IT (Relational databases, LAN)

Step Three

  • Multi-year budget planning
  • Performance budgeting frameworks
  • Financial statements
  • Management accounting
  • IT (international standards, LAN/WAN)

Capacity Building

  • Sustainability is always the problem. (Peterson)
  • Expect to need a lot of training. (Myers)
  • Training program needs to be structured to need. (Myers)
  • Need to support civil service rotation. (Prasueth)
  • Training should be coordinated to implementation plans: (Myers)
    - Focused to specific requirements of a given site
    - Imparted just before site implementation
    - Should have a help desk
    - Should have hand-holding clinics
    - Create an intermediate layer of power users who support all of other users. (Farooq)

Capacity Development (Murphy)
1. Recognition and willingness to change:

  • develop a vision
  • strategic management
    i. Always opposing and supporting forces
  • PFM perspective
  • Environmental scan
  • Gap analysis

2. Change capacity: understand change

  • Strategy structures
    i. Create structures for management and capacity building
  • Staffing
    i. Provide incentives
    ii. Enhance salary schemes
  • Skills
  • Management
  • Leadership
    i. Identify owners and champions
    ii. Supplement
    iii. Restructure if necessary
    iv. Strengthen/train
    v. Change leadership
  • Culture Power

3. Transition capacity: Manage the transition

  • Specify
  • Acquire
  • Solution design
  • Build/setup
  • Train
    i. Communicate the entire lifecycle because it is an integrated system
    ii. End-users, application managers and ICT people have different training needs
    iii. Implementation cycle has different training requirements
  • Populate
  • Pilot
  • Implementation
  • Refine

4. Capacity to sustain operation: facilitate sustainable operation of the new system.

Staffing and Skills (Murphy)
Implementation Cycle requires different roles and responsibilities.

1. Preparation and Acquisition

  • FMIS
  • Transition structures
  • Specifications
  • Procurement/Evaluation
  • Preparatory Training

2. Design, Testing and Setup

  • Core training
  • BPR
  • Solution Design
  • Setup
  • Data collection/migration
  • ICT architecture setup
  • User training
  • Production testing/Parallel runs
  • Production acceptance

3. Pilot Implementation

  • Application support
  • ICT support
  • Problem resolution
  • Evaluation

4. Rollout

  • Expansion/deepening
  • Application Support
  • ICT Support

Standards/practices mentioned by speakers

  • World Bank Treasury Reference Model
  • Government Financial Statistics
  • Treasury Single Account


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