Introduction to an Information Systems Strategy for Public Financial Management PFM.

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1. The importance of Public Financial Management (PFM) in developing countries has become increasingly evident in the context of their fiscal constraints. As a consequence, both the Bank and the IMF have undertaken operations in several countries designed to improve the management of this area.

2. An important element of the PFM reform process has been the development and implementation of computerized information systems to support the associated business processes. Such initiatives have formed important components of several Bank projects (e.g., in Jamaica, Bolivia, Kenya, and Papua New Guinea).

3. Normally, a wide variety of computer-based systems support PFM. For example, computer-based information systems assist developing countries1 in:

adjusting to changing macro-economic conditions; improving the effectiveness of public expenditure programs by developing and implementing mechanisms for fiscal planning, budgeting and evaluation; managing external resources available through foreign aid programs; mobilizing domestic resources; managing the size and efficiency of the civil service; and disseminating information within government and to the private sector.

However, these systems are usually implemented as components of separate projects responding to specific needs, with little appreciation of requirements in other areas, and little thought given to critical inter-relationships. As a result, the information systems are often disparate and segmented, with little or no capacity for sharing data. They have overlapping and sometimes conflicting functionality, and provide incomplete coverage, particularly for managerial information requirements that normally span several functional areas. Developing a framework that provides an overview of the entire systems network required to support PFM and which can serve as a road map for implementation purposes, is therefore, of value in planning and implementing projects with PFM systems components.

4. This paper will attempt to develop such a framework and answer questions such as: what are the different information systems required to support the business processes associated with PFM; what are the scope, scale, and type of a particular area's system component; how do these systems interrelate; what are the major issues and options associated with the introduction of these systems; and, where do the greatest problems and opportunities lie.

5. It must, however, be pointed out at the outset that a purely computer systems-based response to the problems encountered in public financial management would be inappropriate. Implementing and streamlining computer-based information systems are normally undertaken as part of engineering or re-engineering the broader operation. First,  the business processes, procedures, the legal regulatory framework associated with the management of public expenditure, and the institutional capacities of the relevant government agencies are analyzed, inadequacies highlighted, and appropriate corrective measures identified. Computer systems are then introduced to assist in the implementation of the corrective measures. Benefits actually realized from an implementation of computer systems depends on the degree of success achieved in strengthening the basic business processes and organizational arrangements related to PFM

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