pifra – fmis in pakistan budget execution and implementation for public expenditure and financial...

PIFRA – FMIS in Pakistan

Budget Execution and Implementation for Public Expenditure and Financial Accountability Course

January 2003

Project Rationale

Serious deficiencies in financial data, systems, and staff skillsPlanning, budgeting, reporting, and controls were unreliable with adverse impacts– Cash, asset, payment, and debt positions with leakage

• Unknown commitments/obligations – pension, depreciation

– Uneven resource allocation, spending, and revenues– Weak governance and accountability

The Vision

Pakistan – Improvement to Financial Reporting and Auditing Project (PIFRA)– Implement an accounting system based on modern

standards, principles, skills, and IT– Implement a governance and legal framework for

independent and effective audit function– Move in parallel to public sector reforms, NRB

Core Team: Lee, Subramanian, Hashim +Partners: PREM, IMF, ADB, DFID

3 Development Objectives

Improve public sector accounting and financial systems

Provide basis for enhancing public sector accountability

Support improved institutional capacity for economic policy-making and management

Planned Project Outputs

New financial rules & regulationsNew Accounting Model and CoAImproved auditing and accounting skillsNew systems to support decision makingAccountability frameworks

Policy Changes

Improved accounting principles and standards for the government sectorEnhanced independence and capacity of Audit– Phased responsibilities for accounting moving from

the Auditor to CGA

Enhanced skills and capacity of government finance staff plus HR and training policies

HR Issues

Major realignment in structured career path for accounting and auditing specialists – Job descriptions, recruitment, training, deployment – Skills, numbers, locations, roles, incentives– Staff rotations based on experience, interest

Initial and continuing training requirementsObjective and transparent evaluation– Depends on overall civil service reforms

Status of PIFRA I

SAP ERP package – PWC designed A&A aspects + Acceptance Tests– Siemens configured and implemented – Audit Manual, HR, Change, and Training STCs

2 pilots are now operational – Replicate to 52 sites – although straight replication is

too simplistic– Training has begun– Communication plan to disseminate benefits

Looking Back

Policy goals unlikely to be fully achieved– Improve public sector accounting and financial systems – Provide basis for enhancing public sector accountability– Support improved institutional capacity for economic policy-

making and management

Budgetary goal limited to expenditure management• Out of scope are strategic allocation of resources• Revenues and taxation• Performance measurement/audits

Devolution

Moving from centralized, top-down modelGovernments at 3-4 levels to have more autonomy, but must provide more servicesMore local control over system, but ERP design – Simpler systems may be used by local governments– Data summaries roll up to next level for consolidation– Need reports designed for local decision making

FMIS Issues

Moving in right direction, evolutionary26% of overall funds are in PIFRA scope– Not Defense, Railways, PIA, SOEs....

96% accounts reported to be “reconciled” and aligned with budget categories – but unreliable– Any reports would reflect same

No linkage to budget development, planning, treasury, tax, debt management

Emergence of PIFRA II

PIFRA II - now in preparation ($87m) Can’t wait for systems to be rolled out under PIFRA I to begin massive training campaign– Long lead times, intensive needs in A&A, transactions – More customization and scaling than anticipated– New devolution process is underway, not envisioned

Add 75 more sites to PIFRA I’s 52 sites 127

PIFRA II Objectives

Jumpstart training and fill in the gapsIncrease accuracy, completeness, reliability, and timeliness of financial reports at national, provincial, district (and lower levels) – Assumes improved budget execution

Improve public financial management, accountability, transparency, credibility– Key CAS objectives, reform window is open

Planned PIFRA II Outputs

Delivers/builds upon PIFRA 1 outputsUpgraded government financial system– Credible financial data to support decision

makers at multiple levels of government• At a minimum, expenditure analysis

Rigorous internal controlsFully qualified accounting and audit staff

Lessons Learned –1Difficult to resolve:– Policy Change: accountabilities, public disclosure,

devolution mandated by 2006• Legal framework slow to embrace change

– Organization Change: roles and responsibilities, shifts in charter, new functions

• Can control your resources, not those of others– HR Change: civil service rules, groupings,

certifications, incentives, staff reductions• Civil service reforms are measured in years

Lessons Learned - 2Progress depends upon level of commitment and individual champions– Turnover causes major rework, delays– Missions fail if reviews are not timely– Security situation adds another layer

Factor in starting point tailored to client– Timelines are local - use realism in government’s

implementation capability– Small steps are necessary

Lessons Learned - 3

Need much more attention to: – Change management: everyone is affected by new

processes, procedures, or linkages (ERP)• Automating existing processes yields few benefits• Cross-cutting reforms help motivate, mandate

– Communication: resistance can build quickly if all stakeholders don’t know proposed benefits

– Training: building skills for thousands is complex– Documentation: critical, overlooked, delayed

Ideas for Discussion

What FMIS linkages are desired/required?– Budget planning, development, cash management, debt

management, assets, revenue, tax

Critical ingredients to improve accountability?Budget discipline leads to improved service delivery?Decentralized systems change decision making?What re-engineering is ideal, necessary, possible?Other?

Supplemental Materials

Pakistan FMIS

PIFRA I: History & ComponentsBoard approval: September ’96 for $29mEffectiveness : February ’97Closing: June ‘02 May ‘04

Auditing31%

Training27%

Admin28%

Policy8%

HR6%

Separation of Audit and Accounts

Inherent conflict between compiling and auditing accounts– Staffing considerations and career paths

Build capacity and tools in both new functions Legal/regulatory, administrative, and procedural issuesExperienced major delays – now on track

Creation of an MIS BranchThree facets of MIS– Standards and Policies - define and review all audit

and accounting implications of systems, technical aspects of hardware and software

– Systems Development – develop and maintain applications and interfaces

– Implementation – install, operate, and upgrade systems around the country

Need incentives to attract/retain qualified IT staff outside existing civil service mechanism

Technology Strategy

Open, scalable, portable, distributed architecture and RDBMS– Evolving under devolution

Processing nodes to optimize workload, fault resistance, and user controlTelecommunications links and manual data transfer mechanisms based on scale– Summary or detailed data roll-ups

PIFRA II Components – ($87m)

Audit47%

Accounting26%

System18%

Change7%

PM2%

Devolution Impacts

Systems impacts:– Servers, communications, database administration,

configuration, operations, synchronization, upgrades, recovery, maintenance, documentation, IT staff

A&A, audit tools and manuals, reports– Internal controls, processes, procedures

Communication & Change ManagementStaffing, #s and location, training, HR issues