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Introducing Financial Management Information Systems in Developing Countries

Author: J Diamond and P Khemani
Date: 2005
Size: 33 pages (448 KB)

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Summary

Computerising government accounting and payment operations by introducing government financial management information systems (FMIS) has been a popular reform measure over the past decade. Why have such projects almost universally failed? This paper from the International Monetary Fund reviews the "received wisdom" in implementing FMIS, and analyses problems in its application in developing country contexts. With specific reference to Tanzania, Ghana, Uganda, Malawi and Kenya, it identifies key factors to explain why FMIS projects have been so problematic. It concludes that FMIS success needs strong commitment from top manages and that the implementation strategy needs to be phased.

The establishment of an FMIS project has become an important benchmark for a country’s budget reform agenda. It is often regarded as a precondition for achieving the effective management of budgetary resources. FMIS essentially means the computerisation of public expenditure management processes, encompassing budget formulation, execution and accounting through a fully integrated system. It is a management tool, and should provide a wide range of non-financial and financial information.

There are extensive requirements for the successful implementation of FMIS projects, and this explains why they have proved particularly demanding on developing country administrations. The following issues have contributed to the limited success of FMIS projects in developing countries:

Lack of clarity in ownership and unclear authority to implement
Failure to clearly specify the basic functionality
Failure to spend enough time on the design phase
Failure to reengineer procedures
Failure to undertake parallel reforms required by the FMIS
Neglect to sell the system to agencies
Overestimation of the information to be included in the system
Unrealistically short project timetables
Underestimation of the level of management input required
Lack of incentives for reform

Reforms are often introduced in an organisation with neither the willingness to accept reform nor the technical ability to understand, implement and maintain it. Reforms therefore do not succeed or are abandoned. In order avoid problems and improve the projects:

It is important that the FMISs allow for the problem of filling gaps during an interim period of two to three years prior full implementation. Existing accounting and reporting systems must still be maintained.
The Ministry of Finance must adjust its business practices and the design of the FMIS must incorporate all desired functions.
A rigorous risk assessment should be undertaken to ensure the preconditions for success exist.
There should be a well-defined exit point for external assistance. Most value is added at the initial design and testing stages. There should be a conscious effort to ensure local capacity exists to complete the implementation phase.
There must be concurrent reform of working practices. There must be assurances that the FMIS is not simply computerising existing procedures and that the accounting core will generate the information required for management and fiscal analysis.
The general functions must be comprehensive enough to accommodate present and future needs and the timetable must be realistic.

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Source: Diamond, J. and Khemani, P., 2005, 'Introducing Financial Management Information Systems in Developing Countries', Working Paper no. 5, Fiscal Affairs Department, International Monetary Fund, Washington
Author: International Monetary Fund, http://www.imf.org