MINISTRY OF FINANCE IFMIS RE-ENGINEERING

1. MINISTRY OF FINANCE IFMIS RE-ENGINEERING REVENUE to CASH process Cash Management

2. Table ofContents 1.0 IFMIS Financial Management Operating Model 1.1 Introduction 9 1.2 Revenue to Cash Sub-processes 10 2.0 PerformBank Reconciliations 2.1 Bank Reconciliations Activity Descriptions 14 2.2 Perform Bank Reconciliations Inputs and Outputs 15 2.3 Perform Bank Reconciliations To-be Process Flow 16 2.4 Pre - requisites for Bank Reconciliations 17 3.0 Manage Cash Position 3.1 Manage Cash Position Activity Descriptions 29 3.2 Manage Cash Position To-be Process Flow 30 4.0 Perform Forecasting 4.1 Perform Forecasting Activity Descriptions 34 4.2 Perform Forecasting Inputs and Outputs 35 4.3 Perform Forecasting Process Flow 36

3. Table ofContents 5.0 Manage Bank Accounts 5.1 Manage Bank Accounts Activity Descriptions 38 5.2 Manage Bank Accounts Inputs and Outputs 39 5.3 Manage Bank Accounts To-Be Process Flow 40 6.0 Debt Management 6.1 Debt Management Activity Descriptions 45 6.2 Debt Management Inputs and Outputs 46 6.3 Debt Management To-Be Process Flow 47

4. Table of Figures Figure I Entering Bank Statement Manually (‘New’ button) 18 Figure II Manual Bank Statement Entry Screen 19 Figure III Manual Bank Statement Entry – Header details 20 Figure IV Manual Bank Statement Entry – Entering lines (‘New’ button) 21 Figure V Manual Bank Statement Entry – Lines (Un-reconciled) 22 Figure VI Querying Transactions for reconciliation – (’Available’ button) 23 Figure VII Available to Reconcile Transactions 24 Figure VIII Reconciled Bank Statement Lines 25 Figure IX Reconciled Bank Statement – Header 26 Figure X Automatic Reconciliation Process 27 Figure XI Cash Positioning 31 Figure XII Cash Position Worksheet Creation and Cash Position Parameters 32 Figure XIII Bank Creation screen 41 Figure XIV Bank Creation-bank Account 42 Figure XV Bank Account – GL Accounts Tab 43

5. List of Abbreviations A-I-A Appropriation in Aid AIE Authority to Incur Expenditure AP Accounts Payable AWP Annual Work Plans BD Budgeting Supplies Department BPG Budget Procedural Group BPR Business Process Re-Engineering BPS Budget Policy Statement BSC Budget Steering Committee BSP Budget Strategy Paper CBK Central Bank of Kenya CMM Cash Management Module CoA Chart of Accounts EFT Electronic Funds Transfer ERD External Resources Department EXU Exchequer Unit GL General Ledger GoK Government of Kenya GPAY Government Payment System ICT Information, Communication and Technology IFMIS Integrated Financial Management Information System

6. List of Abbreviations IPPD Integrated Personal Payroll Data KRA Kenya Revenue Authority MDG Millennium Development Goals MoF Ministry of Finance MPER Ministerial Public Expenditure Reviews MTC Ministerial Tender Committee MTEF Medium Term Expenditure Framework P2B Plan to Budget P2P Procure to Pay PBB Programme Based Budgeting PFM Public Financial Management PO Purchase Order PPOA Public Procurement Oversight Authority PR Purchase Requisition PS Permanent Secretary R2C Revenue to Cash R2R Record to Report RFP Request For Proposal RFQ Request For Quotation VAT Value added Tax

7. Learning Outcome After completing this component, you should be able to: • Understand the process of entering bank statements manually • Describe how to reconcile transactions automatically • Describe how to reconcile transactions manually • Describe bank reconciliation reports • Generate the Cash Position reports • Describe the Managing of Banks process

8. 1.0 IFMIS Financial Management Operating Model

9. Overview of revenue to cash Revenue to Cash involves all the activities related to revenue and cash management from generation, collection, recording of revenue to distribution of funds to the ministries. It also involves management and control of the actual and forecasted cash inflows and outflows. 1.1 Introduction

10. The Revenue to Cash end to end process comprises 8 key sub-processes: Identify Revenue Sources; Revenue Collections; Exchequer Release Process; Perform Bank Reconciliations; Manage Cash Position; Perform Forecasting; Manage Bank Accounts; Debt Management 1.2 Revenue to Cash Sub-processes

11. 2.0 Perform Bank Reconciliations This sub process involves the automated reconciliation of the bank statement received from CBK electronically and the payment transactions posted in the general ledger in the IFMIS system. After the reconciliation program is executed, updates and resolution of errors are performed to keep both CBK and the ministry records in sync. A bank statement can refer to payments, receipts, cash flows, miscellaneous transactions, open interface transactions, or journal entry lines, credit card activity, and journal entries between ministries. In the target process, automating bank reconciliation dramatically reduces the administrative time and costs and automatically updates the general ledger. The Cash Management Bank Statement Open Interface can be used to load the bank statement information supplied by CBK, or department users can manually enter the bank statement data. The system retains all bank statement information for audit and reference purposes. Once the detailed bank statement information is entered/ uploaded into the system, the reconciliation process can begin with the processed system transactions.

12. 2.0 Perform Bank Reconciliations cont.. During the reconciliation process, miscellaneous transactions can be created for bank-originated entries, such as bank charges and interest. Users can also manually enter Payables payments or Receivables receipts. The automatic reconciliation process can be set up to create miscellaneous transactions automatically.

13. 2.0.1 Bank Reconciliation Methods • The Cash Management module provides two methods of reconciliation: • Automatic Bank Reconciliation • Manual Bank Reconciliation • 2.0.1.1 Manual Bank Reconciliation • This method requires you to manually match bank statement details with transactions posted in the system. The method is ideally suited to reconciling bank accounts that have a small volume of monthly transactions. You can also use the manual reconciliation method to reconcile any bank statement details that could not be reconciled automatically • 2.0.1.2 Automatic Bank Reconciliation • Bank statement details are automatically matched and reconciled with system transactions. This method is ideally suited for bank accounts that have a high volume of transactions.

14. 2.1 Bank Reconciliations Activity Descriptions

15. 2.2 Perform Bank Reconciliations Inputs and Outputs

16. 2.3 Perform Bank Reconciliations To-be Process Flow

17. SETUP BANK SETUP BANK ACCOUNT ENTER STATEMENT 2.4 Pre - requisites for Bank Reconciliations

18. Entering Bank Statement Manually ( ‘New’ button) Figure I Entering Bank Statement Manually ( ‘New’ button)

19. Manual Bank Statement Entry Screen Figure II Manual Bank Statement Entry Screen

20. Manual Bank Statement Entry – Header details Figure III Manual Bank Statement Entry – Header details

21. Manual Bank Statement Entry – Entering lines ‘New’ button Figure IV Manual Bank Statement Entry – Entering lines ‘New’ button

22. Manual Bank Statement Entry – Lines (unreconciled) Figure V Manual Bank Statement Entry – Lines (unreconciled)

23. Querying Transactions for reconciliation – ’Available’ button Figure VI Querying Transactions for reconciliation – ’Available’ button

24. Available to Reconcile Transactions Figure VII Available to Reconcile Transactions

25. Reconciled Bank Statement Lines Figure VIII Reconciled Bank Statement Lines

26. Reconciled Bank Statement - Header Figure IX Reconciled Bank Statement - Header

27. Automatic Reconciliation Process Figure X Automatic Reconciliation Process

28. 3.0 Manage Cash Position This sub-process involves determining the current cash balances and cash flow of the ministries at any given time supporting officials in their decision making processes and enabling more efficient use of the current cash resources. Generating a cash position gives ministries direct access to daily cash flow data from the operational systems as well as those reported by banks. The department users can define reusable worksheets to easily generate daily cash positions. Users can quickly analyse the daily cash position using a number of different parameters such as currency, accounts, or cash pool. This allows projection of daily cash needs and facilitates forecasting. Determining the cash position can also be done for different departments, and for multiple accounts. The accounting department currently performs this function and will continue to do so.

29. 3.1 Manage Cash Position Activity Descriptions

30. 3.2 Manage Cash Position To-be Process Flow

31. Cash Positioning Figure XI Cash Positioning

32. Cash Position Worksheet Creation and Cash Position Parameters Figure XII Cash Position Worksheet Creation and Cash Position Parameters

33. 4.0 Perform Forecasting This sub-process involves using a planning tool that helps the users anticipate the projected cash flows out of a ministry. It allows ministries to project the cash needs and evaluate the liquidity position. In the target process, the cash forecast can be generated for any period of time based on system calculation of expected expenditure subtracted from expected revenue. This activity is currently performed by the accounting department.

34. 4.1 Perform Forecasting Activity Descriptions

35. 4.2 Perform Forecasting Inputs and Outputs

36. 4.3 Perform Forecasting Process Flow

37. 5.0 Manage Bank Accounts The sub-process Manage Bank Accounts includes create, change and delete activities of the ‘bank master’. The bank master includes the Bank Routing Number as well as the name and address of the bank. A routing transit number (RTN), routing number and account number. Manage Bank Accounts involves a single access point for defining and maintaining bank account information for payables, receivables, advanced collection and cash management Bank master data might change if a bank relocates or changes its name. If a bank is purchased or merges with another bank, their routing number might be changed. If the routing number stays intact, the bank master name or address is changed. If the routing number is retired, the bank master record is marked for deletion. The bank routing number is used as the key for the bank master record and once entered it cannot be changed. The bank master data is housed in the bank directory. This includes the bank address data and control data (RTN). The bank directory must contain the master data for all the banks that are involved in payment transactions. The bank master is required in order to populate banking information in the supplier master. The routing information is held in one place and must be in IFMIS in order to place it on the supplier master. This reduces the chance for error on the vendor master.

38. 5.1 Manage Bank Accounts Activity Descriptions

39. 5.2 Manage Bank Accounts Inputs and Outputs

40. 5.3 Manage Bank Accounts To-Be Process Flow

41. Bank Creation screen Figure XIII Bank Creation screen

42. Bank Creation-bank Account Figure XIV Bank Creation-bank Account

43. Bank Account – GL Accounts Tab Figure XV Bank Account – GL Accounts Tab

44. 6.0 Debt Management This sub-process is managed by the Debt Management Department and it involves managing the government’s new/ existing loan obligations, servicing of the loans and management of obligation and interest payments. The department is overall responsible for managing the outstanding public debts incurred for internal and external donors. They maintain all these processes in an external system known as the debt recording and management CSDRMS system. The CSDRMS is an integrated tool for recording, monitoring, analysing and reporting public debt for the government. Debt management integrates with the budgeting system as forecasting needs to be performed to determine the budget for loan repayments; it also integrates with the External Resource Department system e-Promis which manages donor projects and grants. The debt obligation will be maintained in currency incurred, and IFMIS will disburse payments in that same currency. Currently all loan and interest repayments are generated on a schedule and manually paid. In the target process, an interface will be developed between the CSDRMS and IFMIS where new/ existing loan obligations will be transmitted to IFMIS. The loan payment requests will also be processed and sent to IFMIS to reduce the outstanding loan obligation/ interest.

45. 6.1 Debt Management Activity Descriptions

46. 6.2 Debt Management Inputs and Outputs

47. 6.3 Debt Management To-Be Process Flow

48. Contacts