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  • 1. Technology and Corruption: The Case of FMIS Bill Dorotinsky The World Bank March 26, 2003 IACC Seoul, Korea
  • 2. Outline
    • What is an FMIS?
    • What are elements of an FMIS?
    • What is an “integrated” FMIS?
    • What constitutes a “good” IFMIS?
    • Why invest in an IFMIS?
    • IFMIS and Corruption
    • Bank Experience
    • Summary
  • 3. What is an FMIS?
    • System that:
      • tracks financial events and summarizes information
      • supports adequate management reporting, policy decisions, fiduciary responsibilities, and preparation of auditable financial statements
      • Should be designed with good relationships between software, hardware, personnel, procedures, controls and data
    • Generally, FMIS refers to automating financial operations
    Definitions
  • 4. What are core and non-core FMIS systems?
    • Core systems
      • General ledger, accounts payable and receivable. May include financial reporting, fund management and cost management.
    • Non-core systems
      • HR/payroll, budget formulation, revenue (tax & customs), procurement, inventory, property management, performance, management information
    Definitions
  • 5. What is “integrated” FMIS?
    • Can refer to core and non-core integration
    • But, generally, four characteristics*
      • Standard data classification for recording events
      • Common processes for similar transactions
      • Internal controls over data entry, transaction processing, and reporting applied consistently
      • Design that eliminates unnecessary duplication of transaction entry
    Definitions *from Core Financial System Requirement . JFMIP-SR-02-01. Joint Financial Management Improvement Program. Washington, D.C., November 2001.
  • 6. What constitutes a good system?
    • Ability to*
      • Collect accurate, timely, complete, reliable, consistent information
      • Provide adequate management reporting
      • Support government-wide and agency policy decisions
      • Support budget preparation and execution
      • Facilitate financial statement preparation
      • Provide information for central agency budgeting, analysis and government-wide reporting
      • Provide complete audit trail to facilitate audits
    Definitions *from Core Financial System Requirement . JFMIP-SR-02-01. Joint Financial Management Improvement Program. Washington, D.C., November 2001.
  • 7. Why invest in an IFMIS?
    • Reduce errors of multiple data entry
    • Accelerate reporting
    • Enable data-matching, error detection
    • Enable more analysis
    • Accelerate auditing, exception reports
    • Enable better oversight, management
  • 8. An IFMIS and Corruption Improved internal reporting Improved detection Data-matching Improved detection Improved Analysis Improved trend detection Automated Audit Trail Better follow up Improved External Reporting Higher probability of detection
  • 9. Assumptions
    • comprehensive public finance system
    • accuracy of records
    • integrity of database
    • reconciliation of bank, fiscal records
    • corruption is within FMS domain
    • other soft systems functional
  • 10. Other soft systems of import
    • Internal audit
    • External Audit
    • Timely, comprehensive reports to legislature/public
    • Internal controls
  • 11. What does Bank experience suggest?
    • Public sector corruption sources not captured fully well in public financial management
    • Soft systems are weak
      • HIPC expenditure tracking results
    • FMIS investments often fail
  • 12. Public corruption
    • Bribery
    • Bribery
    • Theft of goods, funds
    • Contract steering
    • Nepotism
    • Abuse of office
    Career Officials
    • Bribery/influence peddling/state capture
    • Theft of public goods, funds
    • contract steering
    • Nepotism
    Political Officials Non-public Assets Public Assets
  • 13. HIPC Expenditure Tracking Source: “Actions to Strengthen the Tracking of Poverty Related Public Spending in Heavily Indebted Poor Countries (HIPCs), World Bank and IMF, March 22, 2002. See http://www.worldbank.org/hipc/hipc-review/tracking.pdf 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 (Percent of countries not meeting each benchmark) Benchmark number: Note: Based on 24 countries’ Final Assessments Meets GFS definition of general government Data on donor financing Classification of budget Pov. Red. Exp. Identified Projections integrated into budg. formulation Low level of arrears Quality of internal audit (effective or not) Regular tracking Fiscal & monetary data reconciled Month reports Timely functional reporting from class system Accounts closed within two months of y/e Audited accounts to legislature within 1 year Outturn close? Extra (off) budget expend. Reporting Execution Formulation ‘soft systems are weak’
  • 14. Bank experience with FMIS
    • If success is defined as…
      • delivered as-specified ex ante
        • 43 % delivered as specified
      • delivered on-budget
        • 50 % delivered on budget
      • delivered on-time
        • 21 % delivered on-time
    • … then, only 21 % were successful
  • 15. More Bank experience with FMIS
    • But, these indicators only looks at project , not impact on over-all financial management, operations
      • Improvements to reporting? Staffing changes?
    • Generally,
        • no or weak performance indicators in projects
        • no baseline
        • broader impact assessment difficult.
    • However, in self-assessed sustainability
        • 25 % unsustainable
        • 69 % likely sustainable
        • 6 % highly likely to be sustainable
  • 16. Summary
    • IFMIS/technology enabling tool for transparency and anticorruption
    • But not substitute for
      • attention to institutional environment (‘soft systems’)
      • underlying factors (e.g. comprehensiveness)
    • May not target prime areas of corruption
    • May not be optimal investment for anticorruption