The Integrated Financial Management Systems (IFMS)

Background:

Reforms to Government's financial management systems and processes are becoming critical in response to increasing demands for greater transparency and accountability in the management of the public's finances. The current financial management systems in Government are not providing timely and accurate financial information for statutory reporting requirements and for decision making in such critical areas as budget planning and management, procurement and asset management.

In the past few years, a number of stand-alone computerised systems have been installed in various Government Ministries, Agencies and Local Governments in an attempt to plug these deficiencies. Key stakeholders, especially donors who need to get some assurance that their financial assistance is properly accounted for, have mainly facilitated these acquisitions. In a situation where donors cannot rely on Government's financial systems, they obviously have no choice but to bring in their own. Although this has been done with the best intent, fragmented and uncoordinated computerisation has resulted in a plethora of systems that have increased the variations in how financial information is processed and presented, thereby increasing the already difficult task of meeting Government's statutory obligations for financial reporting. Another outcome of this uncoordinated effort is duplicated systems that have a negative implication on the efficiency and optimality in the use of scarce Government resources. It should however be noted that despite these efforts, the majority of Government processes are still largely manual due to lack of adequate computing hardware and application software.

Government's Response

In order to improve financial information processing and reporting systems, the Government of Uganda (GOU), through the EFMP II project is implementing an Integrated Financial Management System (IFMS) that will eventually cover all the major Government business processes including Budgeting, Accounting and Reporting, Purchasing, Payments / Payables, Revenue management, Commitment Accounting, Cash Management, Debt Management, Fixed Assets and Fleet Management, and Inventory/Stock Control.

An IFMS is a fiscal and financial management information system for Government that bundles all financial management functions into one suite of applications. In simple terms, it is an IT-based budgeting and accounting system that will assist GOU entities to initiate, spend and monitor their budgets, initiate and process their payments, and manage and report on their financial activities. The IFMS can streamline all fiscal and financial management processes throughout Government and provide GOU with a modern budgeting and accounting system with state of the art functionality on which to undertake its national and public sector accounting and financial management. The IFMS will interface with other systems such as the Integrated Personnel and Payroll system (IPPS), URA Revenue systems and Bank of Uganda systems

Activities complementing the IFMS implementation

In order to ensure that GOU has the capacity to sustain the operation of the IFMS, a number of initiatives have been embarked on as summarised below:

• Professional Accountancy Training ' In order to create a culture of continuous improvement in public sector financial management through building capacity, GOU staff responsible for financial management have been sponsored under the EFMP II project to study for professional accountancy qualifications.
• Capacity building , Additionally, key resources with financial management expertise have been recruited to support GOU financial management reforms. These include professional financial management specialists with national and international expertise. In addition, 20 fresh graduates from our leading Universities have been recruited to breath new life into the Public Sector culture, which is going to be affected by these reforms. These resources are expected to transfer knowledge to GOU staff to ensure the sustainability of the IFMS and other fiscal reforms.
• Improving the capacity of Uganda Computer Services (UCS) 'The EFMP II project is facilitating the enhancement of capacity at UCS in order to ensure the availability of a strong IT resource base that can appropriately support the implementation of the IFMS across GOU as well as creating a basis for supporting future IT development in Uganda.
• Capacity in Internal Audit and Office of the Auditor General ' It is critical that these offices continue to carry out their statutory responsibilities even in a computerised environment. The EFMP II project is therefore enhancing capacity in these offices through provision of specialised training and the recruitment of specialists who are tasked to transfer knowledge to GOU staff.

Public Finance and Accountability Act (PFAA) 2003

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This is an Act to provide for the development of an economic and fiscal policy framework for Uganda; to regulate the financial management of the Government; to prescribe the responsibilities of persons entrusted with financial management in the Government; to regulate the borrowing of money by Government; to provide for the audit of Government, state enterprises and other authorities of the State; and to provide for other connected matters. PFAA 2003

The Public Finance and Accountability Bill (PFAB)

Background One of the pillars of strengthening financial management in the public sector is a legislation that provides the legal framework, and prescribes the controls and administrative structures for the management and accounting for public funds. Management and accountability for public funds involves the whole process including: macroeconomic and fiscal policy, budgeting, utilisation of resources, accounting and reporting, auditing by the Auditor General, reporting to Parliament, and feedback from Parliament. It is, therefore, important that there is a legal infrastructure that harmonises the process.

The current legal and administrative infrastructure for financial management practices in Government is enshrined in the 1995 Constitution and the Public Finance Act, 1964; with the accompanying detailed procedures in the Treasury Financial Instructions, 1963, the Treasury Accounting Instructions (Finance), 1991, and the Treasury Accounting Instructions (Stores), 1968. Whereas the Constitution is fairly up to date (though requiring amendments in certain areas), the Public Finance Act that was enacted in 1964 is outdated and requires updating to be brought in line with the Constitution and more recent legislation such as the Budget Act, 2001 and the Local Governments Act, 1997. In addition, significant advances in budgeting and financial management practices have occurred and it is necessary for the legislation to incorporate these changes

The Solution

To address this matter, a Public Finance and Accountability Bill was drafted and approved by Cabinet in May 2002. This Bill has now been gazetted and has been laid before Parliament for discussion. When enacted, this legislation will repeal the Public Finance Act, 1964, and facilitate the management of public resources in line with international practice. It will also repeal the Local Loans Act (Cap 154), the External Loans Act (Cap 159), the Loans (Guarantee) Act 1958 and the Contingencies Fund Act (Cap 150).

The Bill introduces new standards for public sector financial management in Uganda and offers an opportunity for the use of international best practices in public sector budgeting and financial management. Some of the significant features of the Bill include:

• Empowerment of the Minister responsible for finance to develop and implement a macroeconomic and fiscal policy framework for Uganda; advise Government on the available resources and the appropriate level of resources to be allocated to each sector and individual programmes; supervise and monitor the use of public resources; and co-ordinate the international and inter-governmental financial and fiscal relations of the Country. The Minister will also be required to keep Parliament informed of the current and projected state of the economy, finances of the country, and fiscal policy of the Government. This is a constitutional duty of the President that is delegated to the Minister in the PFAB.
• Empowering the Secretary to the Treasury to have access to all information both in central and local government pertinent to the purpose of the Act (specifically for purposes of development of economic policy and to enable the Minister perform his or her duties as described above).

IFMS

• Making Accounting officers personally accountable to parliament in respect of the public resources entrusted to them.
• Clarifying the role of an Accountant General (to head the Directorate of Accounts) to, among other things, set accounting standards, be responsible for compilation and management of Government accounts, provide custody and safety for public resources, and provide an overall framework for control of public resources and expenditure.
• Provision that funds cannot be withdrawn from the Consolidated fund or spent for non-statutory expenditure without the prior approval of Parliament. This will rectify the practice where approval for supplementary expenditure is sought after the resources are already committed or otherwise spent.
• Provision for all borrowings to be coordinated. Only the Minister responsible for finance is authorised to borrow, on approval of Parliament; and all money from such borrowing must be paid into the Consolidated Fund.
• Powers of the Auditor General to audit (including value for money audits) all government accounts, and access all information as considered necessary.
• All grants from foreign governments to be received centrally (by the Minister responsible for finance) and form part of the Consolidated Fund.
• Provision for accounting officers to be transparent and avail information to the public including the overall budget strategy, the nature and objective of each main programme, assessment of output and performance against objectives, a summary of financial results, plans for the following year (as approved by parliament), and provisional plans for the following two years.
• Provisions for offences and penalties in respect of any losses and mismanagement of public resources. Accounting officers are to be personally liable for mismanagement of public funds under the proposed law.

These provisions are aimed at increasing transparency and accountability in the management of public resources. Therefore, the new legislation will provide for transparency in the management of public resources, and also accord Parliament a better mechanism for controlling public expenditure.