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? Definitions 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

4. What are core and non-core FMIS systems?
Definitions
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

5. What is “integrated” FMIS?
Definitions
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
*from Core Financial System Requirement. JFMIP-SR Joint Financial Management Improvement Program. Washington, D.C., November 2001.

6. What constitutes a good system?
Definitions
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
*from Core Financial System Requirement. JFMIP-SR 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 Public Assets Non-public Assets Political Officials
Theft of public goods, funds
contract steering
Nepotism
Bribery/influence peddling/state capture
Career Officials
Theft of goods, funds
Contract steering
Abuse of office
Bribery

13. HIPC Expenditure Tracking
‘soft systems are weak’
(Percent of countries not meeting each benchmark)
100%
Note: Based on 24 countries’ Final Assessments
90%
80%
70%
60%
50%
Meets GFS definition of general government
40%
Timely functional reporting from class system
Audited accounts to legislature within 1 year
Projections integrated into budg. formulation
Quality of internal audit (effective or not)
Accounts closed within two months of y/e
30%
Fiscal & monetary data reconciled
20%
Extra (off) budget expend.
Data on donor financing
Pov. Red. Exp. Identified
Classification of budget
Low level of arrears
Regular tracking
Month reports
10%
Outturn close? 0%
Benchmark number: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Formulation
Execution
Reporting
Source: “Actions to Strengthen the Tracking of Poverty Related Public Spending in Heavily Indebted Poor Countries (HIPCs), World Bank and IMF, March 22, See

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