Modern Integrated Financial Management

Information Systems

Dipankar Sengupta
Director (Tech.), NIC
 Overview of presentation
• Concept of an Integrated Financial Management
Information System (IFMIS)
• Public Financial Management (PFM)
• IFMIS in context of PFM
• IFMIS architecture
• IFMIS costs, benefits and risks
• IFMIS – The Indian Government Experience
• Lessons Learnt

Modern Integrated Financial Management Systems 27th February 2009

 What is an IFMIS?
• An IFMIS is a tool to support Public Financial Management
• National Government level
• An IFMIS is a computer software (ICT) application
– Off the shelf package or
– Custom developed
• Provides core public financial management functions, e.g.
– Budget
– Accounting
• Key feature - Integration between modules

Modern Integrated Financial Management Systems 27th February 2009

Public Financial Management

The system served by an IFMIS

Public Financial Management - National Level

Fiscal
planning &
management

External
audit and Budget
external preparation
review & enactment

Information
feedback

Budget
execution –
Transaction revenue
accounting, raising,
recording expenditure,
and reporting loans

Modern Integrated Financial Management Systems 27th February 2009

 PFM boundaries

Public sector

Financial Non financial

institutions public sector

Other public and Public

Central
private sector Corporations & Government
bank banks other entities

Union Sub-national
Government State Government

Boundaries of national
government for PFM

Modern Integrated Financial Management Systems 27th February 2009

 Six critical goals of PFM
• Fiscal Management:
– Aggregate fiscal position and risk are monitored and managed.
• Budget Realism:
– The budget is realistic and implemented as intended in a predictable
manner.
• Comprehensive, Policy-based Budget:
– The budget captures relevant fiscal transactions, and is prepared
with due regard to government policy.
• Information:
– Adequate fiscal, revenue and expenditure records and information
are produced, maintained and disseminated to meet decision-
making, control, management and reporting purposes.
• Control:
– Arrangements are in place for the exercise of control and
stewardship in the use of public funds.
• Accountability and Transparency:
– Arrangements for external transparency and scrutiny of public
finances.

Modern Integrated Financial Management Systems 27th February 2009

 PFM – from framework to IFMIS
Goals Criteria
Level 2 –
Level 1 – fiscal Level 3 – value Proper use
resource Transparency Accounta-bility
management for money resources
allocation

Comprehen- Accounta-bility
Fiscal
Budget Realism sive, Policy- Information Control and
Management
based Budget Transparency

IFMIS Budget
can preparation
within Up to date Reduce costs Use of
provide framework of information of transaction automated
sound model processing controls
& ability to
test scenarios

Modern Integrated Financial Management Systems 27th February 2009

 How IFMIS can contribute to PFM goals
Goal Benefit IFMIS
Fiscal 1. Enhanced ability to manage
management cash, debt and liabilities
2. Better management of fiscal
risk
Resource 1. Historic information on
allocation expenditures & impact
2. More realistic budget modelling
process - impact decision
alternatives can be assessed
Value for 1. Reduced financial transaction
money cost
2. Management decisions made
more efficiently
3. Comparison of costs between
units/activities and performance
targets leading to greater
efficiency
Modern Integrated Financial Management Systems
How realised
1. Up to date and predictive disaggregated
information on monitory flows and balances
2. Information on current and predicted contingent
liabilities
1. Up to date information on expenditures analysed
as required so as to link to outcomes
2. Budget prepared using a tool that realistically
models relationships, is based on reliable
information on starting points, and enables
alternative scenarios to be modelled
1. Provision to managers of up to date financial
information enables them to use resources more
efficiently
2. Disaggregated information linked to performance
targets enables improved performance
measurement and comparison between
units/activities
27th February 2009
 The IFMIS balance

Costs and risks Benefits

• Financial cost – US$12 m • Must outweigh costs/risks
• Time and effort – 5 – 9 years
• Risk –
- implementation failure
- inadequate functionality
- lack of sustainability

Modern Integrated Financial Management Systems 27th February 2009

IFMIS architecture
 Overview of IFMIS architecture
Budget preparation system
Macro Medium Term Agency
Economic Resource
ceilings Expenditure budget
Forecasts Framework preparation
Information Debt
support system management
Annual systems
budgets

Enacted
Donor support budget
Central Bank
Information systems
systems to Core financial management
manage loans & functions
grants
Budget execution
Procurement Cash collection Cash & liability
systems Payments management
Debt & grant flows
Revenue HR and
management Budget payroll
systems management & Accounting
reporting Transaction and
Fiscal/outturn balance recording
management Agency
accounting
External audit systems

Modern Integrated Financial Management Systems 27th February 2009

 What to acquire
• IFMIS could potentially embrace whole of architecture
• Wonderful vision of a totally integrated system
• BUT for most countries
– Would be unacceptably high risk and cost, take a long
time to implement
• Best to focus initially on core PFM areas
– Only add other modules if essential
– Acquire a system that can be extended to other modules
– Keep it simple
• Essential to develop clear vision of IFMIS at an early stage

Modern Integrated Financial Management Systems 27th February 2009

 Degree of integration
• Integration is fundamental to concept of an IFMIS
• IFMIS potentially comprises many
functions/modules
– All may be fully integrated, or
– Some may be integrated and others interfaced
• Need to make choice when specifying system
requirements

Modern Integrated Financial Management Systems 27th February 2009

 Integration IFMIS functions - definition
• Data:
– Data entered once, used many times
– Common data model, data naming, data dictionary
• Software application
– Shared business rules
– Sharing of code
– Derived values in one module used by other modules
• Presentation
– All modules same look and feel, common navigation rules, screen
headers and footers
• Operation
– Common security module
– Single authentication point for all modules
– Consistent external interface, e.g. with spreadsheets, XML

Modern Integrated Financial Management Systems 27th February 2009

 Conclusion on integration

• Core modules must be integrated

• Integration of other modules a matter of balance
• If separate systems
– Ensure interfaces & ability to exchange data
– Common coding and classification structure essential

Modern Integrated Financial Management Systems 27th February 2009

IFMIS – The Indian Government Experience
 Organization of the Controller General of Accounts
 Strength 9500+
 No. of PAOs 325
 Geographical spread 78 Locations
 Payments volume Rs. 583386 Crores (2006-07)
 Receipts volume Rs. 552850 Crores (2006-07)
 Mandate / Allocation of Business
 Prescribe general principles of Government Accounting relating to Union and
State Governments.
 Oversee maintenance of adequate standards of accounting.
 Consolidation of monthly accounts, preparation of annual accounts and
compilation of Union Government Finance Accounts.
 Reconciliation of cash balances of the Union Government with the RBI.
 Administration of Central Government (Receipt & Payment) Rules.
 Coordination and assistance in the introduction of management accounting
system in ministries.
 Reporting – Annual, Monthly and Flash
(provision for over 200 reports as per the Civil Accounts Manual)

Modern Integrated Financial Management Systems 27th February 2009

 Need for an IFMIS
• Non-integrated processes.
• Multiplicity of data entry.
• Data inconsistency and non-integrated.
• Limited accounting information availability.
• Rigid Reporting system.
• Decentralized information / database.
• No transparency of accounting processes.
• Disparate IT systems.
• Redundancy of output.

Modern Integrated Financial Management Systems 27th February 2009

 The Indian Approach
 Personal Database
 Web based online access
to GPF, Pension & bills
status
NON CIVIL
MINISTRIES
PRINCIPAL

e-Lekha
CONTROLLER
CONTROLLER
ACCOUNTS
OFFICE
GENERAL
GENERALOF
OF
ACCOUNTS
ACCOUNTS RESERVE
BANK OF
Monthly Consolidation
INDIA
Appropriation Accounts PRINCIPAL
Finance Accounts
Centralized Banking Database
ACCOUNTS
OFFICE

Comprehensive DDO
Package
(CDDO/DDO) PAY &
ACCOUNTS
NIC OFFICE
ACID ACCREDITED
DIV.
BANK
Centralized Long/ short term advance CTS
Outward claim Commitments capture
e-support system DDS&R broadsheet Cash Management Users
Individual
CGA users at Any
Advance Register Comprehensive Audit Trail PAO, PR
ITD AO, CGA
Ministry/
Asset, loan & guarantee register e-payment/ receipt
Department
Cheque Inventory
Classification - sub object level
SUPPORT
CPFM CCA /
GROUP/ Financial
CA of
COORD. Ministry / Advisors of
Min/
Department Ministry
Deptt.
CPAO
Development &
Support Mechanism USER Groups

Modern Integrated Financial Management Systems 27th February 2009

 IFMIS Mandate
• Automate the processes at various accounting levels.

• Maintain Chart of Accounts and other Administrative Codes.

• Enable Expenditure Control.

• Accounts Consolidation.

• Statutory Reporting Requirements.

• Management Reporting.

Modern Integrated Financial Management Systems 27th February 2009

 Strategic Planning for IFMIS
• Enable one time data capture: reducing manual work, data
redundancy and reconciliation issues – increasing data
accuracy and timeliness.
• Seamless Integration of various processes ensuring final
audited accounting data can be drilled down to lowest level /
point of capture.
• Stand Alone Processing  Centralised Processing.
• PAO-based Accounting Classification  Master Accounting
Code Directory validation.
• Reporting against Budgets  Both DDO-wise and DDG-wise
Reporting.
• Enable system for cash control and management.
Modern Integrated Financial Management Systems 27th February 2009
 Critical Areas
• Top level Management Commitment and Driving Force.
• Enhancement of Skill Level of Workforce, especially Field
Offices.
• Bringing on-board all stakeholders – field offices, users,
Banks, RBI, etc.
• User requirement based prioritisation.
• Putting in place sustainable systems – Core teams,
Development teams.
• Extensively Tested Software – certified by STQC agency.
• Change – processes and people orientation.
• Sound Internal Control System – software based and
inspections.

Modern Integrated Financial Management Systems 27th February 2009

 COMPACT - An e-governance tool for Pay and Accounts Offices

Client A

Server Client B

Client C

Client D
Server : MS Windows 2000/2003
with MS SQL Server 2000/2005 Clients : Windows 98SE & above

Modern Integrated Financial Management Systems 27th February 2009

 MAJOR MODULES OF COMPACT

• Pre-check [ Pre-audit of Bills / Valuables & Cheque Preparation ]

• Compilation [ Post Audit, Compilation & Bank Reconciliation ]

• GPF [ GPF Accounts Management of subscribers ]

• Pension [ Processing of Pension Cases of Employees]

• Budget [ Budget Management & Expenditure Control ]

• Masters [ Maintenance of Accounting and other codes ]

Modern Integrated Financial Management Systems 27th February 2009

 COMPACT (Process Flow in GoI)
Line Ministries NCDDOs

Bills/Valuables

Budget Allocation COMPACT

ECR
Passed bills / cheques

Voucher/ Valuables

Cancelled Cheques GPF Voucher, challans

TE & Challans schedules

Vouchers/ Scrolls (receipt & Monthly Accounts PPO

Challans payment)

CDDO Bank Pr. AO CPAO

NCDDO : Non Cheque Drawing & Disbursing Officer Pr. AO : Principal Accounts Office of Ministries / Deptts.
CDDO : Cheque Drawing & Disbursing Officer CPAO : Central Pension Accounting Office
ECR : Expenditure Control Register PPO : Pension Payment Order
GPF : General Provident Fund

Modern Integrated Financial Management Systems 27th February 2009

 COMPACT – Major Features
• Introductory step for e-governance in finance sector at the
basic accounting level.
• Integration of Payment and Accounting Functions.
• Generation of MIS for effective Financial control.
• Compilation & Consolidation of Accounts with speed & more
accuracy.
• Effective Budget vs Expenditure monitoring and control.
• Capture of all kinds of bills like Salary, GPF, Pension, etc.
• Automated Printing of Cheques.
• Reduction of Human Errors in processes.
• Increased Reporting & Querying Capabilities.

Modern Integrated Financial Management Systems 27th February 2009

 COMPACT :: Implementation Worm
350

300 288 288 287

278
273 270
256 259

250
254

221 206
200 213
196

166 170
150

100 102

50

0
Se p O ct No v Dec Ja n Fe b Ma r Ap r Ma y Ju n Ju l Au g Se p O ct No v Dec
2005 2005 2005 2005 2006 2006 2006 2006 2006 2006 20 06 2006 2006 2006 2006 2006

Modern Integrated Financial Management Systems 27th February 2009

 Overview: What is e-Lekha?
• Integrated web-based solution.

• Expenditure and Revenue reporting.

• Accounts processing.

• MIS reporting.

• Single source data capture ensuring data consistency –

COMPACT data (tamperproof) from Pay and Accounts
Offices.

Modern Integrated Financial Management Systems 27th February 2009

 Objectives of e-Lekha project - 1
1. Enable online submission of accounts of PAOs to Controllers.
2. Facilitate consolidation of Controller accounts.
3. Enable capability of daily accounts compilation for Civil
Ministries of the Government of India.
4. Ensure accuracy of accounts through online validation of PAO
accounts - online accounts code directory with valid code
combinations as per Detailed Demand for Grants (DDG).
5. Capture and provide online Budget information as per DDG and
DDO-wise allocations.
6. Ensure that CGA-level audited published accounts can be
tracked / rolled down to PAO accounts.
7. Enable Grant Controllers to access bookings made by other
controllers against authorisations.

Modern Integrated Financial Management Systems 27th February 2009

 Objectives of e-Lekha project - 2
8. Enable Annual Accounts (Appropriation and Finance) to be
compiled using online data submission.
9. Provide capability of MIS reports generation to Controllers using
dynamic, user-defined templates as per Ministries requirements.
10. Provide tool for scheme-wise reporting for Controllers.
11. Enable Controllers to monitor PAOs functioning through
availability of operational reports like bill pendency, pension
cases, maintenance of GPF records etc.
12. Build on existing system (hardware and software) at field offices
to consolidate skills developed and familiarity – focus
development at higher levels (Controllers and CGA) where
training and management is better possible.

Modern Integrated Financial Management Systems 27th February 2009

 e-Lekha Prudent Financial Management
Web
Web
Central
Central Database
Database Server
Server
Server
Server Updated
Updated
with
with PAO
PAO data
data
from
from COMPACT
COMPACT

INTERNET
(( Web
Web Browser
Browser Interface
Interface ))

For any Period selected Govt. of India Integration

Controller Integration
Data Access through
user authorisation.
DATA VIEW allowed only
for the particular Ministry
 Pendency of Bills,
 Compiled Payment and Receipt Data
 Major Head wise Expenditure & Receipts.
 Budget Vs Expenditure
 Summary of Instruments
 Cheque Reconciliation
 Pension Cases Processed
 GPF Credits and Debits
 Suspense figures
DATA ACCESS through User
Authorisation.
DATA VIEW allowed for the entire data
set to facilitate viewing of both
consolidated as well as Ministry wise
figures.

…
… CGA
…
…
…
CCA, CCA, CCA,
Urban Dev. Finance Agriculture

Modern Integrated Financial Management Systems 27th February 2009

 Implementation Worm :: e-Lekha
350

300 290 294

285
280

256 277 280 281 284

251 248
250

236 240 241

206
200 187
198
166

150
153
114
108
91 117
100

73
50 57 60 40 41 41 41 42 42 43
30 32 33
22
12 13
0
Jan,0 6 Feb,0 6 Ma r,0 6 Apr,0 6 Ma y,0 6 Jun,0 6 Jul,0 6 Aug ,0 6 Sep,0 6 O ct,0 6 No v,0 6 Dec,0 6 Ja n,0 7

Da ily Uplo a ds Monthly Uplo ads Co ntro llers

Modern Integrated Financial Management Systems 27th February 2009

 e-Lekha : Major Benefits
• Centralisation of all Masters – Account Code Directory, Grants,
Object Heads and Category and their relationships, Controller
Codes, Department Codes, PAO Code and DDO Code Directory.
• Improve efficiency in the compilation of monthly Union accounts
by 10-15 days.
• Rejection of erroneous and invalid data at the lowest level.
• Data Integrity – through a single database at the Controller and
CGA Level and having interoperable interface with COMPACT at
PAO level.
• Single source of all data capture and modification (at the PAO level
through COMPACT)
• Online up-to-date Budget Vs Expenditure Monitoring.
• Online MIS for better management of Pay & Accounts Offices.

Modern Integrated Financial Management Systems 27th February 2009

 Impact of Project
 Full integration of payment and accounting functions
 Timeliness of accounts preparation and submission – adhered to SDDS and annual accounts
prepared within same calendar year
 Accuracy of Accounts – online validation, no audit qualifications
 Transparency of Payment Process – bill pendency, tracking of bills, cheques
 Management and online availability of Chart of Accounts of GOI
(over 1 Lakh heads of accounts and their interrelationships, over 70 Controller Codes, Over 500
PAO codes and over 6000 DDO codes )
 Transparency in Accounts – expenditures and revenues (27 Lakh Vouchers, 8 Lakh Valuables
excluding Tax Revenue)
 Automation of Provident Fund Accounts – 5.16 Lakh GPF subscribers
 Computerisation of Pension Cases – 72000 cases in 2007-08
 Single database for all Detailed Demand for Grants of GOI - at all tiers, against over 100
Demand for Grants and associated DDO wise allocations
 Scheme monitoring – 1250 Plan Schemes of GOI
 Effective shared grants management – pension, public works etc
 Efficient Bank reconciliation – agency banks and RBI - suspense balances reduction from Rs.
972.34 Crores in 2000-01. to Rs. 338 Cr. in 2006-07.

Modern Integrated Financial Management Systems 27th February 2009

 Software Assessment
• Continuous development and certification.
• Tested for Compliance by Standardization, Test and Quality
Control (STQC), Department of Information Technology, GOI
18th May, 2008.
• COMPACT system users – Sound Internal Control System –
software based and inspections with guidelines for self
assessment.
• e-Lekha - Best IT Implementation of the year 2007 by
PCQuest Magazine, Cybermedia Group of Publications.
• Winner of the Silver Award for the National Awards for e-
governance 2008-09 in the category "Exemplary Horizontal
Transfer of ICT based Best Practice" for the project "e-Lekha
- Stride towards Core Accounting Solution".

Modern Integrated Financial Management Systems 27th February 2009

 Support and Training
• Intensive customized (week-long) programs at
training institute –INGAF
• Around 4500 staff trained
• Website provides support and FAQs
• Support group – including testing, support, training
and version planning
• Continuous development and skills enhancement

Modern Integrated Financial Management Systems 27th February 2009

 Present Focus
• Core Accounting Solution
• e-Payments
• Central Plan Scheme Monitoring System
• Interconnectivity across PAOs
• Automated reconciliation with banks
• Web-enabled GPF system for government
employees

Modern Integrated Financial Management Systems 27th February 2009

 Lessons Learnt
• Account code directories in COMPACT needed to be rectified
and frozen to prevent incorrect coding blocks at point of
origin.

• Complete involvement of field offices is an absolute MUST –

Coordinator system introduced ands weekly meetings
conducted to monitor the progress.

• Regular monitoring by Controllers is ESSENTIAL to enable

DDG certification, rectification of coding errors and adhering
to timelines.

Modern Integrated Financial Management Systems 27th February 2009

IFMIS – lessons from experiences
 IFMIS acquisition:
high risk, high cost, long time frame
• World Bank survey of experience of IFMIS
implementation in 27 countries indicates:
– Between 5 and 9 years to complete
– Average Bank funded cost US $12 million
– Only 21% delivered on time, on budget and as specified
• In general experience of procurement of large
system in public and private sectors is bad
– High failure rate, with many systems abandoned before
completion

Modern Integrated Financial Management Systems 27th February 2009

 Some comments from experience
• Keep it simple
• Time spent on detailed planning in advance reduces
costs and risks
• Acquisition must be driven by system users and
beneficiaries
– Not by IT staff, vendors, donors or consultants
– Need for organisation wide support
• Structured project management approach
• Need to ensure that sustainability issues are
addressed
– Do not leave until the end of the project

Modern Integrated Financial Management Systems 27th February 2009

 Critical success factors
• Management commitment and involvement
• Financial management users must drive the process
• Broad support and involvement by all concerned
agencies
• Suitable institutional structures
• Human resources with appropriate skills
– Capacity Building
• Strong project management team with skills and
experience

Modern Integrated Financial Management Systems 27th February 2009

End of presentation

Dipankar Sengupta
dipankar.s@nic.in