Systems Architecture for Public Financial Management

Systems Architecture for Public Financial Management

11. Figure 2 shows the systems architecture, which is based on the information architecture for PFM described above. Each box of this diagram may be seen as a potential business support system that may comprise a number of subsystems. Each group of systems uses information from a number of different databases. The information flow between the systems modules and the PFM information areas are also shown in the diagram. The major groups of information systems required to support the PFM business processes are discussed below.

(i) Systems to Support Macro-Fiscal Planning

This group of systems assists the MOF and the Planning Agency in the business processes associated with macro-fiscal planning including the development of the macro-economic targets, the PSIP and the fiscal plan which form the basis of the government's fiscal policy. These in turn are used by the MOF to set aggregate budget parameters and guidelines for spending agencies to submit budget estimates.

The business processes associated with macro-fiscal planning requires, inter alia:

economic data from external economic databases; information on programs and projects that the governmnent intends to implement over the period of the program, including program status and sources of financing; data on tax and non-tax revenues; data on domestic and external borrowings including information on debt servicing liabilities and loan disbursements; data on the civil service complement, etc.

This means that the group of systems supporting macro-fiscal planning need to interface with the systems and the subject area databases that maintain the information specified above. These interfaces are shown schematically in Figure 2.

(ii) Systems to Assist in Budget Preparation, Implementation, Monitoring and Evaluation

This group of systems forms the core systems support for the budget preparation, implementation, monitoring, and evaluation processes and is required by both the line agencies and the core ministries (MOF, Planning, etc.). Five type of systems are involved:

(a) Systems to Assist in Budget Preparation. At the start of the budget preparation phase, these systems receive submissions from the various line agencies containing details of their proposed programs and projects, consolidate them, and produce the documents that form the basis of the negotiations with the line agencies. After finalization of the budget, the systems produce the approved budget estimates.

(b) Systems to Monitor Budget Implementation. These systems are the primary repositories of data on: budgeted allocations (both capital and recurrent) and sources of financing for programs and projects; budget transfers and supplementary allocations; fund releases (warrants) against budgetary allocations during the course of the year; and, summary data on commitments and actual expenditures against budgeted allocations derived from the accounting databases. This data is used to monitor the budget implementation process.

(c) Systems for Fiscal Reporting and Budget Evaluation. These systems use data maintained in their local databases along with that maintained by the group of systems responsible for maintaining information on revenue collections, public debt, accounting and human resources, to monitor and evaluate the overall budget implementation processes and prepare budget reviews and fiscal reports. This provides the feedback loop to the fiscal planning and policy area and provide the information required to make adjustments as the need arises.

(d) Systems for Cash Management. These systems maintain an up-to-date picture of the government's liquidity position and cash requirements. By comparing data from cash flow forecasts and fiscal reports with data on cash balances, government bonds, treasury bills, and cash deposit maturities, this group of systems helps the government decide on the amount of fund releases and issues, and redemption of government securities to provide short-term financing for shortfalls in cash.

(e) Systems for Monitoring Public Enterprises. In situations where a substantial part of the PSWP is carried through Public Enterprises, a separate module is required to monitor key indicators of Public Enterprise performance.

(iii) Systems for PSWP Management

These systems are mainly used by the line agencies to keep track of the physical and financial progress on programs and projects included in their work programs. They maintain detailed data on these programs and projects and provide summaries of this information to the central systems. In addition, information maintained by these systems is used to prepare cash flow forecasts on the basis of the plans and schedules of programs and projects and to track progress on procurement related to these programs and projects.

In a technologically advanced environment, the MOF's budget monitoring systems would directly tap into the agency systems for information on programs and projects. The line agencies, on the other hand, would obtain information on the status of their budgetary allocations, budget transfers, and warrant releases by tapping into the central system. However, it is more likely that the central system will depend on submissions from other agencies for its data input and provide periodic output to be used by line agency systems.

(iv) Systems for Debt Management

This group of systems maintains the information on all government loans and assist in the business processes associated with debt management including the servicing and accounting of all existing loan liabilities. They provide important information required in the formulation of fiscal policy (for example, the debt implications of different fiscal and deficit financing policies). The debt management system is one of the subsidiary accounting systems and, therefore, provides input to the overall receipt and payment systems. Systems for debt management are normally operated by the Treasury or the Central Bank.

(v) Systems for Foreign Aid Management

This group of systems forms a subset of the group of systems responsible for debt management and maintain information on external borrowings, grants, grants-in-aid, etc. They track loan disbursements against specific projects and programs and relate these to the progress of work on the projects and programs. These systems are normally operated by the MOF and the Planning Agency.

(vi) Systems for Revenue Administration

This group of systems assists government tax collection agencies and the agencies responsible for the collection of non-tax revenues. A number of separate systems are involved in this group: for example, those supporting the administration and collection of income taxes, customs duties or VAT, and those supporting  the collection of the various types of non-taxation revenues such as stamp duties. They account for all receipts and provide feedback information on actual collections. They also provide summary information on revenue collections to the central government accounting systems and form an important module of the government's overall receipts systems.

(vii) Systems for Human Resource Management

This group of systems is responsible for maintaining the data on the government's civil service policies, the authorized civil service complement for various programs and agencies, civil servants on roll, and the personnel actions related to these civil servants. This group of systems would consist of several interrelated modules. Among these would be:

modules for staff planning and complement control, which would keep a record of the authorized complement and skills requirements for various agencies; the personnel information system that maintains the personal data for all civil servants on roll and all personnel actions related to these civil servants; career planning and training modules that assist in these aspects of HR management; a payroll system that administers the pay and benefits package for the civil servants on roll; and a pension system that administers the retiree benefits.

The payroll and pension systems are, in fact, subsidiary modules of the government's overall payment systems. The HR systems interface with the systems responsible for managing the public sector work program and the accounting systems. Since the business processes associated with HR management are still quite centralized in a large number of countries, these systems are often located at the government agency primarily responsible for managing the civil service. The central system provides periodic output for the use of other agencies.

(viii) Accounting Systems

This group of systems are required for processing the government's payments and receipts and for maintaining the government's books of account. A description of these systems has been given by Allan and Woolley (1992). Normally, the following systems are maintained: General Ledger, Budget Ledger, Commitment Ledger, Accounts Payable System, Accounts Receivable System, Fixed Asset Accounting System, Inventory Control System, and Cost Accounting System.

The General and Subsidiary Ledgers are implemented at two major levels, at least: First, a General Ledger System (GLS) at the Treasury or another division of the MOF as the official record of the aggregate budgetary, and asset and liability accounts; Second, a GLS and associated subsidiary system catering to the payments and receipts and other accounting transactions, maintained at the line agencies concurrently with the central system. These systems interface with the central system to post summary data. The receipt and payment systems at both levels should incorporate the capacity to handle receivables and payables in addition to simple receipts and payments.

Systems for the administration and maintenance of various forms of tax and non-tax revenues need to be linked to the main receipts system at the center. Similarly, receipts and payments related to government borrowing and foreign aid handled by subsidiary systems for debt and foreign aid need to be posted to the central systems. The payroll, pension, and employee advances systems also post summaries to the central system periodically.

Systems for fixed-asset accounting maintain records of all government assets and makes provisions for the annual valuation and eventual disposal of assets. These systems are useful for agencies (such as the Public Works Department) that are responsible for a large stock of assets.

Systems for cost accounting provide facilities for accumulation of costs for products and/or services. They are useful for agencies where cost recovery is required for services and products. The inventory accounting systems maintain the inventory and stores accounts for government.

(ix) Systems to Support Auditing

These systems assist in the business processes associated with auditing of government expenditures and processes. They also keep a record of audit observations/queries and track progress and follow-up actions.