Integrated Public Financial Management Systems (PFMS)

June 2006 PFMS 1

Integrated Public Financial Management Systems(PFMS)

Cem DenerECSPE

Definitions Evolution of Treasury Systems Design and Implementation Information & Communication

Technology PFMS Projects in ECA Recommendations

June 2006 PFMS 2

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.

Definitions

June 2006 PFMS 3

Public Financial Management Cycle

Asset / Inventory

Mgmt

Procurement/Purchasing

Mgmt of Budget

Authorizations

Commitment of Funds

Payments and Receipts

Mgmt

CashManagement

Debt and Aid Management

Budget Review &

Fiscal Rep.

Audit and Evaluation

Budget Preparation

1

2

3

4

5

6

7

8

Policy Development and

Review0

Budget Execution

Payroll CalcsHR Mgmt

F M I SWeb

Publishing

June 2006 PFMS 4

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

Components

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

Operational support for Spending Units

1

6

8

1

4

7

7

2

8

4

5

7

4

June 2006 PFMS 5

Evolution of Treasury Systems

Treasury development process: (Treasury Reference Model)

1. Establishment of legal and institutional frameworks

2. Definition of coverage

3. Definition of system functionality

4. Design and implementation of Information Systems

June 2006 PFMS 6


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

June 2006 PFMS 7


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

June 2006 PFMS 8

3. Definition of System FunctionalityPFMS 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 Software LDSW : Locally Developed Software ]

June 2006 PFMS 9


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)

June 2006 PFMS 10

Treasury System Project Lifecycle

A. 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

B. 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

C. System integration and implementation (18-36 months)

Design and Implementation

June 2006 PFMS 11

C. 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

Design and Implementation

June 2006 PFMS 12

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

Design and Implementation (contd.)

June 2006 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.

June 2006 PFMS 14

Technology Architecture3-Tier Web-Based

B C

C 1 2M

S

C

Local Server

Firewall

Database Server(s)

MoF / Treasury

District Offices

District Offices

Spending Units

Application Servers

WebServer

Collection Point

(city center)FR line

FRline

Spending Units

Internet

Virtual Private Network

Tunnelling

Encryption

Special DU lines for towns

PCs / Thin Clients

[ 2 ]Central Servers

[ 3 ]Field

Hardware

[ 0 ]Wide Area Network

District Offices

3

[ 4 ]Network Equipment

[ 1 ] PFMS

Application Software

PFMS DB

MSC : Main System Center BCC : Business Continuity Center

June 2006 PFMS 15

Web Based PFMS Model

User Terminals

System Center

Database Server

Application Servers

UsersWeb Server

Internal Audit

Payroll Calcs.

Asset/Invent Mgmt

Budget Preparation

Core Treasury System

• General Ledger• Purch./Commit.• Accts Pay/Rec• Cash/Fund Mgmt• Fin. Reports

HR Mgmt/Pers DB

Org/Workflow Mgm

We

b P

ort

al

COTS

LDSW

Internal + External

PFMS

Opr sup for locals

COTS DB

MoF, TDOs, Central Line Ministries

and Gov Agencies

Local finance directorates, local public

authorities, municipalities

Internal Access

External Access

LDSW DB

LDSW : Locally Developed Software

COTS : Commercial Off-The-Shelf SW

VPN

Internet

1 2 3

Interfaces

PFMS DB

June 2006 PFMS 16

PFMS Functional Modules and BeneficiariesIntegrated PFMS model proposed for Ukraine

T TransactionsP PlansC ContractsA AccountsR ReportsI InterfaceTSA Treasury Single Acct

Spending Units

Local finance directorates, public authorities,

municipalities, public institutions[ ~50,000 ]

Integrated PFMS

Ministry of Finance

Treasury IT Dept

FMIS + Business Continuity Center

MoF IT Dept

I

I

IState Property

Fund

MoE - Public Procurement Dept

Internet & Intranet

PFMSWeb Portal

External Users

Reports

Reports

T, P

T, C

T,P,C,A

Main Civil Service Department

Internal Audit I P, R

Payroll Calcs.

Asset/Invent Mgmt

Line Ministries &

Departments P, R

K R U Reports

Reports

Debt Mgmt

Budget Formul.

PFMS Mgmt. Center I

State Customs ServiceT, P

IState Tax

AdministrationT, P

Core Treasury System

• General Ledger• Purch./Commit.• Accts Pay/Rec• Cash/Fund Mgmt• Fin. Reports• Acct for localities

Macro Econ Forec

Treasury / PFMSBCC + Data Warehouse

Statistics InstituteI P, RHR Mgmt/Pers DB

National Bank of Ukraine

TSA

27 Oblast Treasury Dept

640 Rayon Treasury Div

AS Kazna

I

Other Gov Agencies/Depts

T

Financial Reports

June 2006 PFMS 17

Typical PFMS Network Infrastructure

District #n

District #2

IP Network

Countrywide VPN

Regional / DistrictTreasury Office

PoP

PoP

PoP

MoF

PSTN

TC

TC

TC

TC

Dedicated line

Backup line

F/O conn.

BackupISDN-PA

District #1

District #2

District #n

District # 1

Dedicated lines(online connections)[e.g. Frame Relay]

On demand lines (online/offline)[e.g. Dial-Up or

ADSL]

All regional offices

Internet access

Line Ministries and Gov Agencies in KievInternet

PoP

FMIS+

BusinessContinuity

Center

PoP

Treasury

PoP

Backup

Internet

F/O conn.

F/O conn.

PFMS SystemCenter

RegionalTreasury Office

MAN

KievMetropolitan Area Network

State Property Fund

MoE - Public Procurement Dept

Main Civil Service Department

State Customs Service

State Tax Administration

Statistics Institute

Line Ministries & Departments

K R U (Internal Audit)

Other Related Gov Agencies

HRMIS

BudgetProcess

Revenues

Pro

cure

-Payro

ll-IA

Data

Exc

FMIS+

BusinessContinuity

Center

PFMS SystemCenter

Treasury / PFMSFMIS / Data

Warehouse + BCC

June 2006 PFMS 18

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.


June 2006 PFMS 19


ApplicationServers

Treasury Head Office

TapeBackup

BusinessContinuity

Center

Cluster

Sys MgmtSys Admin

10/100/1000Switch

VPNRouter

Support

Call Center

Router

IP network

10/100/1000Switch

TapeBackup

FDA

Sys Mgmt Security Admin

Router

S D H

1000 Mbps

100 Mbps

100Mbps

Load Director

S D H

F/O Ring

F/ORing

LAN Backbone

WAN Backbone

F

F

F

Firewall

S D H

DBServer DBAS

S D H

FiberDiskArray

Load director

Typical System Centers and Central Servers

June 2006 PFMS 20

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.

ICT - Network

June 2006 PFMS 21


THO

IP Network

InternetRouterFirewall

Web & security serverWWW, FTP, Mail

DB and Application Servers

100 Mbps

S D H

S D H

Router

Router

AAAServer

10/100/1000Switch

Gatekeeper(VoIP)

Router

PSTN

Dial BackupServer

Router

VPNRouter

BCC

F/O Ring

PBX

Fax

Tel2 x PRI

H.323

Router

Digital Voice Router

LAN Backbone

WAN Backbone

NW management system

Network Security

VoIP System

HS Modem

MoF HO internal users

BusinessContinuity

Center

S D HS D H

Typical Central Network Equipment

June 2006 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.

June 2006 PFMS 23

PFMS Projects in ECA

June 2006 PFMS 24


June 2006 PFMS 25


June 2006 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 and management 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 and technical support units within the

MoF/Treasury for implementation and sustainability of new systems

Integrated Public Financial Management Systems (PFMS)

Documents

Transcript of Integrated Public Financial Management Systems (PFMS)