A HANDBOOK ON FINANCIAL MANAGEMENT INFORMATION SYSTEMS FOR GOVERNMENT
Figure 5: TSA Decentralized Model – Spending Units have Direct Access to ZBA
TSA—Zero Balance Accounts Model:
The Central Bank operates through a Fiscal Agent-Commercial Banks
Spending Units are directly connected to Treasury System which ensures budgetary
control and makes payments through—ZBA
Central Bank Commercial bank
informs Treasury recoups expenses and
of daily receipts transfers deposits to
Treasury and payments TSA Head Qtr of
Central Bank
HQ Commercial
20 TSA Bank ZBA
Commercial
Spending Bank
Unit Spending unit processes payment request using Branch ZBA
the system. The system checks for controls. It then
instructs Commercial Bank to pay from ZBA
Treasury System Tax payer deposits tax
Spending Units are directly at commercial bank
connected to the system and
process transactions/payment
requests on the system Government
Tax Payer
Creditor
of the event including the date, time, amount involved, and the name of the authorizing
officer. This would ensure adherence to the controls prescribed for budget execution.
The ex-ante adherence to these controls would not automatically be possible in a manual sys-
tem. Where spending agency finance personnel are functionally and administratively respon-
sible to the head of the spending agency, they may be subject to pressures to process payment
transactions that do not comply with specified procedures. It may therefore become more dif-
ficult to ensure that prescribed controls and procedures are adhered to in a decentralized system
as compared to a Treasury-based central system.
Other Legislation and Frameworks that Regulate the Operation of
Automated Systems
As the basic functional processes associated with government fiscal management would be
supported by automated information systems, the subject of this handbook, it is necessary to
mention that, in addition to the legislation and policy frameworks associated with the func-
tional processes, these systems also need to adhere to some further standards and legislation.
These are: E-Government National Enterprise Architecture and Interoperability Framework
which determines the standards for specification, deployment and operation of Information
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and Communications Technology (ICT) in the public sector; and governance-related: (i) Right to
information legislation; and (ii) Privacy and confidentiality legislation.
Requirement for Setting up an IT Capability
In addition to the institutional arrangements for banking government funds and for processing
payment transactions discussed above, if an IFMIS type system will be used to support govern-
ment budgeting and accounting processes, the setting up and staffing of a supporting technical
organization with sufficient capacity to operate and maintain a mission-critical, countrywide
system and provide end user support is critical for the operational sustainability of the system
and the continuity of Government’s budget management and financial management operations.
The agency responsible for systems maintenance and operation may need to develop/upgrade/
21
augment its in-house data processing staff and facilities to maintain and operate the system. Ade-
quate budget provisions should be made to meet on going expenses. These issues are discussed
in greater detail later in this handbook.
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IV. Development of
an Information
Architecture for
Government Fiscal
Management 23
Functional Processes in Government Fiscal Management (GFM)
The main functional processes involved in Government Fiscal Management are:
Macro-Economic Forecasting
This process assists expenditure and resource planning by developing a macroeconomic frame-
work linking the growth of national income, savings, investment, and balance of payments to
public expenditures and revenues. It enables the development of: aggregates of the government
budget, notably revenues, expenditures, and the overall fiscal deficit and its financing; the bal-
ance between the capital and recurrent components of the budget; composition of expendi-
tures by the main sector spending agencies; revenue forecasts consistent with macro-economic
assumptions; forecasts of non-tax revenues based on macroeconomic projections; estimates of
resources available from domestic and external borrowings; projections of current expenditure.
Budget Preparation
Budget preparation starts with the development of a circular indicating economic prospects, broad
policy objectives, how the budget is expected to attain ,them, and sectoral allocations and ceil-
ings consistent with the macroeconomic framework. Next comes the preparation and analysis of
line agency expenditure proposals and revenue forecasts and their consolidation into an annual
budget document after a series of discussions—at cabinet level, between line ministries, the MOF,
the budgetary committees of parliament—and approval by the legislature. These discussions focus
on how the budget proposals would meet the policy objectives outlined in the budget circular,
on priorities among the various proposals, the validity of the resource requirements contained
in these proposals and how they can best be accommodated in the overall budgetary envelope.
Budget Execution, Accounting and Fiscal Reporting
These functions are associated with implementing the budget, and cover the procurement of
goods and services in accordance with budget estimates, the recording and accounting of all
government transactions, and development of periodic reports to monitor the overall flow of
spending or use of appropriations, over the course of the year, highlighting major deviations from
the planned budget and suggesting corrective measures.
A HANDBOOK ON FINANCIAL MANAGEMENT INFORMATION SYSTEMS FOR GOVERNMENT
Cash Management
This entails developing agency and central cash flow forecasts, the release of funds to spending
agencies, the monitoring of inward and outward cash flows and expected cash requirements,
and the issue and redemption of government securities for financing government programs.
Position, Payroll and Bene ts/ Pensions Management for Govt. Retirees
The activities here are associated with the development and maintenance of government’s
human resource policies such as manpower planning, complement control, civil service pay
and pension policies, the fiscal impact of these policies and their administration.
24 Debt Management
This defines the tasks associated with maintenance of records on all contracted public debt on
an individual loan basis, classified according to source and type of loan. It assists economic and
policy analysis by determining, for example, the debt implications of different fiscal and defi-
cit financing options by preparing projections of debt service commitments under existing and
anticipated contracts.
Revenue Administration (Customs, Tax and Excise and Internally Generated Revenues)
The formulation and administration of tax policies and covers the actual levy and collection of
revenues including taxes and duties as laid down in these policies, and the valuation and collec-
tion of non-tax revenues, such as stamp duties, user fees, charges for services etc.
Auditing
This deals with the analysis and scrutiny of public, financial, and other transactions to ensure
compliance with government policies and procedures, and to ensure cost-effective use of public
funds in accordance with overall government priorities.
Information Systems Architecture for Government Fiscal
Management
Each of these processes requires specialized systems to support them. As described in Chapter
II, the design of a system or systems that can support all these processes and share information
must start with an Information Systems Planning (ISP) exercise that results in the information
architecture for GFM systems. This architecture would address questions such as:
• What are the different information systems modules that are required to support GFM func-
tional processes?
• What is the function, scope, scale, and type of a particular systems component?; and
• What are the primary interfaces of the modules with each other, i.e., how do these modules
exchange and share information and what are the characteristics of the primary information
flows?
The results of such an exercise for GFM systems are shown in Figure 6. The first column shows
the main functional processes for GFM in the order in which they occur during the fiscal man-
agement cycle. The second column shows the organizational entities involved in these processes
and the main body of the diagram shows the systems modules that are required and the primary
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data flows and linkages between the various systems modules. A simplified version is shown in
Figure 7.
It is important to note that since the required systems modules and the primary linkages are
based on functional processes rather than specific organization structures, these modules and
their inter linkages —the systems architecture—remain stable even though specific organiza-
tional responsibilities within different government settings may change.
In an actual systems development exercise, each box presented in the information systems archi-
tecture diagram has to be analyzed further in terms of the processes it covers and the information
flows associated with those processes as well as linkages with other systems to determine the
specific requirements of these modules.
25
The functionality of the individual modules, the data flows, and inter-relationships between the
various systems modules are described below.
Systems for Government Fiscal Management
Following are descriptions of different types of Systems and how they are related.
Systems for Macro-Economic Forecasting: These provide the information that is required by the
MOF in preparing the budget call circular for the coming fiscal year. Line ministries and spend-
ing units respond with budget proposals formulated in line with the guidance provided in this
circular. The systems then help in the development of budget aggregates, including:
• Estimates of revenues, expenditures, and the overall fiscal deficit and its financing.
• The balance between the capital and recurrent components of the budget; composition of
expenditures by the main sector spending agencies.
• Revenue forecasts; forecasts of non-tax revenues based on macroeconomic projections.
• Estimates of resources available from domestic and external borrowings; projections of cur-
rent expenditure.
Budget preparation system: The MOF uses the budget preparation system, the previous year’s
data on actuals, and the new funding proposals received to compile the overall draft budget
which, after several iterations between the MOF and the sector ministries and after approval by
Parliament, becomes the annual approved Government budget for the year. The Budget prepara-
tion system transfers data on the approved annual budget for the year to the Treasury system.
Treasury system: This uses data received from the budget preparation system to control budget exe-
cution. It supports the functional processes associated with implementing the budget, for example:
• The procurement of goods and services in accordance with budget estimates.
• The recording and accounting of all government transactions.
• Periodic reports to monitor the overall flow of spending over the course of the year.
• Highlight major deviations from the planned budget and suggesting corrective measures.
• The release of funds to spending agencies.
• The monitoring of cash flows and expected cash requirements.
• The issue and redemption of government securities for financing government programs.
All in-year changes to the budget need to be made in the Treasury Budget execution system. If
the budget preparation module forms an integral part of the application software package that is
26
Figure 6: Functional Processes and Information Systems Architecture for Government Fiscal Management
Functional Processes for Government Fiscal Management and Information Systems Architecture
GFM Functional Information Systems to
Agency Functions External Entities
Processes Macro support GFM Functions
Economic
Macro Economic MOF issues Budget Framework Systems for Macro
Forecasting Guidelines Call circular Economic Forecasting
Line Ministries Budget Preparation Systems Vendors Employees
Budget Preparation
submit Budget proposals Capital—Recurrent-Personnel Complement Pensioners
MOF / Line Ministries Enter Approved Treasury System
Budget Previous years Actuals Payments
Apportionments Allotments,
Releases Transfers Budget Management
Monitor Budget Execution General Ledger Central Bank TSA
& Fiscal Reporting
Line Ministries/SUs
Budget Execution Enter Commitments , Payments
Procurement Commitment Taxes Duties
Accounting Cash POs/Contracts Vendor Management
Management and Invoices, Goods Receipts
Fiscal Reporting Payment requests Receipts
Fixed Assets Management Tax Payers
Treasury (CAG) reviews/enters Debt service
payments
paymentre quests and releases
Debt servicing Cash Bank
for payment, Monitors receipts
commitments Management Reconcilliation
Bank reconciliation, Payroll
Cash Management Pension payments Loan/aid
Receipts
Payroll and Pensions Line Ministries/Treasury (CAG) Loan Receipts
Payroll & Pensions Systems Information
Management enter payroll/pension transactions
Loan Agreements
A HANDBOOK ON FINANCIAL MANAGEMENT INFORMATION SYSTEMS FOR GOVERNMENT
Debt Management Dept
Debt Management enters Loan agreements Debt/Aid Management System Donors
Repayment requests Tax
Assesments Revenue Receipts Information
Revenue Adm. Depts.
Revenue Administration Assess Tax, Receive Revenue Receipt Revenue Administration
(Tax and Customs ) Information from Treasury and (Taxes and Customs) Systems
Reconcile with assessments
Audit Organization
Auditing Performs Audit of Auditing Systems
Government Transactions
Figure 7: Information Systems Architecture (Simplified Version)
Functional Processes for Government Fiscal Management and Information Systems Architecture
MOF issues Budget Macro Economic Framework Systems for Macro
Guidelines, Call Circular Economic Forecasting Previous years Actuals
Budget Preparation Line Ministries
Budget Preparation Systems
submit Budget proposals MOF Capital—Recurrent-Personnel Complement
reviews and compiles budget Vendors Employees
MOF/ Treasury uses System for Budget Treasury System Approved Budget Payments
Execution, Accounting, Cash
Management and Fiscal Reporting Budget Management
General Ledger Central Bank TSA
& Fiscal Reporting
MOF/ Establishment division uses
systems to manage Establishment; Payments Taxes Duties
Accountant General uses payroll Procurement Commitment Receipts
Management Management
pension system to calculate payroll
and pensions Tax Payers
Cash Bank
Fixed Assets
Management Reconciliation
Debt Management Dept,
maintains debt records in DMS, Payroll
Pension Loan/aid
enters debt service commitments payments Debt service Receipts
Payroll & Pensions Systems
& payments in Treasury system. commitments
& payments
Debt/Aid Management System Donors
Revenue Depts. Assess Tax, Tax Assessments
Loan Agreements
Receive Revenue Receipt Information Revenue Administration
from Treasury and Reconcile with (Taxes and Customs) Systems
assessments
Revenue Receipts Information
Audit Organization Performs Audit
Auditing Systems
of Government Transactions
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27
