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Integrated Public Financial Management Systems (PFMS) Cem Dener ECSPE

Integrated Public Financial Management Systems (PFMS) Cem Dener ECSPE. Definitions Evolution of Treasury Systems Design and Implementation Information & Communication Technology PFMS Projects in ECA Recommendations. Definitions.

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Integrated Public Financial Management Systems (PFMS) Cem Dener ECSPE

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  1. Integrated Public Financial Management Systems (PFMS) Cem Dener ECSPE • Definitions • Evolution of Treasury Systems • Design and Implementation • Information & Communication Technology • PFMS Projects in ECA • Recommendations PFMS

  2. Definitions • Public Financial Management System (PFMS) is designed to • support all financial operations, • collect accurate, timely, complete, reliable and consistent information on all public financial events, • provide adequate management reporting, • support government-wide and agency policy decisions, • produce auditable financial statements. PFMS

  3. PFMS DB Public Financial Management Cycle Policy Development and Review Budget Preparation Budget Execution 0 1 Audit and Evaluation Mgmt of Budget Authorizations 8 2 Budget Review & Fiscal Rep. Commitment of Funds 3 7 F M I S Web Publishing Procurement/ Purchasing Debt and Aid Management Payments and Receipts Mgmt 6 4 Asset / Inventory Mgmt 5 Payroll Calcs HR Mgmt Cash Management PFMS

  4. 2 4 5 7 8 4 1 1 6 4 8 7 7 Components • Core Treasury System includes the following components: • Budget Execution and Monitoring • Accounting (general ledger, management of payments and receipts) • Cash Management • Financial Reporting • Purchasing / Commitment • Asset / Inventory Management • Operational support for Spending Units • Other Public Financial Management System components: • Macro Economic Forecasting • Budget Preparation and Approval • Debt and Aid Management • HR Management /Payroll Calculations • Support for Financial Control and Auditing • Web publishing • Financial Management Information System The combination of above components is referred to as integrated PFMS PFMS

  5. Evolution of Treasury Systems Treasury development process: (Treasury Reference Model) Establishment of legal and institutional frameworks Definition of coverage Definition of system functionality Design and implementation of Information Systems PFMS

  6. Evolution of Treasury Systems • 1. Establishment of legal and institutional frameworks • Legal : Approval and implementation of the organic budget law • Organization : Establishment of a countrywide MoF / Treasury organization • Personnel : Allocation of adequate qualified staff for MoF / Treasury management and operations PFMS

  7. Evolution of Treasury Systems • 2. Definition of coverage • Treasury control over government financial resources (Treasury Single Account) • Coverage of central budget (all government transactions are routed through treasury) • Coverage of extra budgetary funds and off-budget funds • Coverage of local (sub-national) governments PFMS

  8. 3. Definition of System Functionality PFMS Module Common Implementation Options • Macroeconomic Forecasting Existing Models / LDSW • Budget Preparation LDSW / COTS • Core Treasury System COTS + General Ledger + Management of payments Interface with banking system (TSA) + Management of receipts Interface with revenue collection + Purchasing / Commitment Interface with procurement agency + Cash / Fund Management Interface with banking system (TSA) + Financial reports + Asset / Inventory Management • Operational support for SUs Interface for spending units (LDSW) • Internal Debt management LDSW / Interface with Debt Mgmt System • External Debt and Aid mgmt. Interface with Debt Mgmt System • Personnel database (HR mgmt) LDSW / COTS • Payroll calculations LDSW / COTS • Support for Auditing Locally developed reports • Management Information System COTS [ COTS :Commercial Off-The-Shelf SoftwareLDSW :Locally Developed Software ] PFMS

  9. Evolution of Treasury Systems • 4. Design and implementation of information systems • Secure countrywide network infrastructure • Development of web-based application software • Central servers and data storage/backup units • Standard field hardware • System and network management tools • Technical maintenance and support systems • System safety / security and business continuity solutions • Web publishing (web portal) PFMS

  10. Design and Implementation • Treasury System Project Lifecycle • Design phase (9-18 months) • High Level Functional Design: Legal and institutional framework • Detailed Functional Design: Coverage, functionality, scope, budget execution, budget classification, chart of accounts, reporting • Technical System Design: Technical architecture, software, hardware and networking requirements, implementation plan • Component sizing and preparation of procurement specifications • Procurement phase (9-18 months) • International Competitive Bidding (ICB) for the development of application software (usually two-stage) • ICB for the installation of hardware and network equipment • System integration and implementation (18-36 months) PFMS

  11. Design and Implementation • System integration and implementation (18-36 months) • Application Software (SW) design to meet functional requirements • SW customization and parameterization + locally developed SW • Communication infrastructure • Network (NW) equipment, and cabling • Hardware (HW) installations – central and field offices • Security solutions (incl. support for digital signature) • Pilot implementation • Training • Countrywide implementation (replication) • Data entry and migration • Backup and recovery solutions • Business continuity solution • Technical support and maintenance • Call Center / Help Desk operations • Documentation and manuals + web publishing PFMS

  12. Design and Implementation (contd.) • Technical Assistance (TA) requirements vary depending on the existing institutional capacity • Development of the legal, regulatory and operational framework • Review/revision of existing budget classification and chart of accounts • Development of GFS / IPSAS compliant financial reports • Development of PFMS functional requirements • Design of technological architecture • Preparation of the technical specifications and bidding documents • Technical support during the implementation of Treasury/PFM system • Data conversion and interfaces with other systems • Training • Project management PFMS

  13. Information and Communication Technology • Modern integrated PFM systems are designed and implemented as web-based applications • Implementation of the PFMS includes the following ICT components: [0] Establishment of countrywide network connections (communications lines) as Government contribution [1] Development of web-based Application Software (ASW) as a combination of customized package + locally developed software [2] Installation of central servers (database & application servers) and data storage units (fiber disk arrays) at the main system center & business continuity center [3] Installation of standard field hardware (domain servers, user workstations and peripherals) in central and field offices [4] Installation of network equipment, system and user management and engineering support solutions • Completion of countrywide network (physical) connections [0] by the Government is a precondition for signing the contracts with suppliers. PFMS

  14. B C C 2 1 M S C 3 Technology Architecture 3-Tier Web-Based [ 0 ] Wide Area Network [ 2 ] Central Servers [ 1 ] PFMS Application Software Application Servers Database Server(s) Internet Web Server Firewall PFMS DB MoF / Treasury District Offices [ 3 ] Field Hardware Collection Point (city center) FR line Special DU lines for towns FR line Virtual Private Network Encryption Local Server Tunnelling [ 4 ] Network Equipment District Offices PCs / Thin Clients District Offices Spending Units Spending Units MSC : Main System Center BCC : Business Continuity Center PFMS

  15. Web Based PFMS Model Application Servers 3 1 2 User Terminals Database Server Web Server Users System Center PFMS COTS Internal Access Budget Preparation • Core Treasury System • General Ledger • Purch./Commit. • Accts Pay/Rec • Cash/Fund Mgmt • Fin. Reports VPN COTS DB MoF, TDOs, Central Line Ministries and Gov Agencies Asset/Invent Mgmt PFMS DB Org/Workflow Mgm External Access LDSW Opr sup for locals Internet Web Portal HR Mgmt/Pers DB Local finance directorates, local public authorities, municipalities LDSW DB Payroll Calcs. Internal Audit Interfaces Internal + External LDSW : Locally Developed Software COTS : Commercial Off-The-Shelf SW PFMS

  16. PFMS Functional Modules and Beneficiaries Integrated PFMS model proposed for Ukraine Integrated PFMS External Users Line Ministries & Departments Ministry of Finance P, R T, P State Tax Administration Treasury IT Dept MoF IT Dept I Reports K R U Reports PFMS Mgmt. Center FMIS + Business Continuity Center T, P State Customs Service I Internet & Intranet Treasury / PFMS BCC + Data Warehouse Reports T, P State Property Fund I PFMS Web Portal T Main Civil Service Department • Core Treasury System • General Ledger • Purch./Commit. • Accts Pay/Rec • Cash/Fund Mgmt • Fin. Reports • Acct for localities Macro Econ Forec I Budget Formul. T, C MoE - Public Procurement Dept Debt Mgmt I Reports Asset/Invent Mgmt National Bank of Ukraine TSA P, R Statistics Institute HR Mgmt/Pers DB I Payroll Calcs. Spending Units 27 Oblast Treasury Dept P, R Other Gov Agencies/Depts Internal Audit I Local finance directorates, public authorities, municipalities, public institutions [ ~50,000 ] T,P,C,A I Financial Reports 640 Rayon Treasury Div T Transactions P Plans C Contracts A Accounts R Reports I Interface TSA Treasury Single Acct AS Kazna PFMS

  17. Typical PFMS Network Infrastructure Treasury / PFMS FMIS / Data Warehouse + BCC FMIS + Business Continuity Center PFMS System Center Line Ministries & Departments Budget Process Treasury MoF State Tax Administration MAN Kiev Metropolitan Area Network State Customs Service F/Oconn. Revenues FMIS + Business Continuity Center State Property Fund PFMS System Center Internet access Internet K R U (Internal Audit) Backup ISDN-PA Backup F/Oconn. F/Oconn. Main Civil Service Department HRMIS Procure-Payroll-IA PoP PoP MoE - Public Procurement Dept IP Network Countrywide VPN Line Ministries and Gov Agencies in Kiev PoP Internet Statistics Institute Data Exc Dedicated line Other Related Gov Agencies PoP PoP PoP Backup line Dedicated lines (online connections) [e.g. Frame Relay] District #1 District # 1 TC PSTN District #2 District #2 On demand lines (online/offline) [e.g. Dial-Up or ADSL] TC TC All regional offices District #n TC Regional / District Treasury Office Regional Treasury Office District #n PFMS

  18. Information and Communication Technology • Central Servers and Field Hardware • Central servers (database and application servers) and main networking equipment located at System Center (SC). • A disaster recovery solution is highly recommended. Treasury head office (system center) can be connected to the Business Continuity Center (BCC) through a separate fiber optic line. • BCC servers can be used to host the Data Warehouse (FMIS) to avoid overloading of operational servers at system center. • Central network and system management tools. • Workstations, servers and peripherals for treasury district offices. PFMS

  19. Information and Communication Technology Typical System Centers and Central Servers Business Continuity Center Treasury Head Office FDA 1000 Mbps Fiber Disk Array Sys Mgmt Security Admin DB Server Application Servers Tape Backup AS DB 10/100/1000 Switch Cluster Tape Backup 100 Mbps F Firewall Sys Mgmt Support Sys Admin Router Load director Load Director S D H F/O Ring Call Center F 10/100/1000 Switch LAN Backbone 100 Mbps F/O Ring S D H F WAN Backbone S D H S D H Router IP network VPN Router PFMS

  20. ICT - Network • Treasury/PFM System Network Infrastructure Network solution for a web-based system [on-line operation] • All Treasury District Offices (TDOs) are connected to the central Treasury office located at the center (usually within the MoF). • A Virtual Private Network (VPN) is established to form a secure intranet in which all public financial data can be transmitted in encrypted format. • This VPN is also used as the main communication platform of the Treasury/MoF offices by providing e-mail services, internet access and other utilities. • Voice over IP (VoIP) services can be utilized to reduce internal telecommunication costs of the Treasury/MoF offices. Solution for the spending units of line ministries and local gov [off-line / on-demand] • Selected spending units and local gov units can be connected to nearest TDO through off-line or on-demand [e.g. Dial-Up (DU) or Asymmetric Digital Subscriber Line (ADSL)] connections to enter transactions and to get their financial reports. PFMS

  21. Information and Communication Technology Typical Central Network Equipment 100 Mbps NW management system DB and Application Servers MoF HO internal users LAN Backbone VoIP System 10/100/1000 Switch Gatekeeper (VoIP) Web & security server WWW, FTP, Mail H.323 WAN Backbone PBX Router Dial Backup Server Router 2 x PRI Tel VPN Router Router AAA Server Digital Voice Router HS Modem Fax Internet Router Firewall Network Security S D H Router THO F/O Ring Business Continuity Center PSTN S D H BCC IP Network S D H S D H Router PFMS

  22. Observations • Development of the core treasury system is an important milestone for the implementation of a countrywide Public Financial Management System (PFMS), which enables integration and exchange of information available in various systems (e.g. Treasury, Tax, Customs, Central Bank) developed by different agencies. • The Financial Management Information System (FMIS), as the main decision support and monitoring system for public finance, is based on centrally available information gathered from all important components of the PFMS. • Development time for a fully functional treasury system in some transition economies and developing countries varies between 3 to 5 years. Large scale implementations of the treasury systems may take even longer. • Total cost of ownership of treasury system implementation depends on a number of factors, such as institutional capacity, scope, desired functionality, number of users and implementation method. PFMS

  23. PFMS Projects in ECA PFMS

  24. PFMS Projects in ECA PFMS

  25. PFMS Projects in ECA PFMS

  26. Recommendations Development of modern integrated PFMS according to the best practices is a complex task, which should be designed as a separate project. Implementation of such wide spread changes would require: • Government commitment andmanagement support at the highest levels to ensure that the change process is completed smoothly • Inter-agency coordination and user involvement in system design • Building institutional capacity and technical skills starting from the preparation phase • Development of project management andtechnical support units within the MoF/Treasury for implementation and sustainability of new systems PFMS

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