PIFRA – FMIS in Pakistan

1. PIFRA – FMIS in Pakistan Budget Execution and Implementation for Public Expenditure and Financial Accountability Course January 2003

2. Project Rationale • Serious deficiencies in financial data, systems, and staff skills • Planning, budgeting, reporting, and controls were unreliable with adverse impacts • Cash, asset, payment, and debt positions with leakage • Unknown commitments/obligations – pension, depreciation • Uneven resource allocation, spending, and revenues • Weak governance and accountability

3. The Vision • Pakistan – Improvement to Financial Reporting and Auditing Project (PIFRA) • Implement an accounting system based on modern standards, principles, skills, and IT • Implement a governance and legal framework for independent and effective audit function • Move in parallel to public sector reforms, NRB • Core Team: Lee, Subramanian, Hashim + • Partners: PREM, IMF, ADB, DFID

4. 3 Development Objectives • Improve public sector accounting and financial systems • Provide basis for enhancing public sector accountability • Support improved institutional capacity for economic policy-making and management

5. Planned Project Outputs • New financial rules & regulations • New Accounting Model and CoA • Improved auditing and accounting skills • New systems to support decision making • Accountability frameworks

6. Policy Changes • Improved accounting principles and standards for the government sector • Enhanced independence and capacity of Audit • Phased responsibilities for accounting moving from the Auditor to CGA • Enhanced skills and capacity of government finance staff plus HR and training policies

7. HR Issues • Major realignment in structured career path for accounting and auditing specialists • Job descriptions, recruitment, training, deployment • Skills, numbers, locations, roles, incentives • Staff rotations based on experience, interest • Initial and continuing training requirements • Objective and transparent evaluation • Depends on overall civil service reforms

8. Status of PIFRA I • SAP ERP package • PWC designed A&A aspects + Acceptance Tests • Siemens configured and implemented • Audit Manual, HR, Change, and Training STCs • 2 pilots are now operational • Replicate to 52 sites – although straight replication is too simplistic • Training has begun • Communication plan to disseminate benefits

9. Looking Back • Policy goals unlikely to be fully achieved • Improve public sector accounting and financial systems • Provide basis for enhancing public sector accountability • Support improved institutional capacity for economic policy-making and management • Budgetary goal limited to expenditure management • Out of scope are strategic allocation of resources • Revenues and taxation • Performance measurement/audits

10. Devolution • Moving from centralized, top-down model • Governments at 3-4 levels to have more autonomy, but must provide more services • More local control over system, but ERP design • Simpler systems may be used by local governments • Data summaries roll up to next level for consolidation • Need reports designed for local decision making

11. FMIS Issues • Moving in right direction, evolutionary • 26% of overall funds are in PIFRA scope • Not Defense, Railways, PIA, SOEs.... • 96% accounts reported to be “reconciled” and aligned with budget categories – but unreliable • Any reports would reflect same • No linkage to budget development, planning, treasury, tax, debt management

12. Emergence of PIFRA II • PIFRA II - now in preparation ($87m) • Can’t wait for systems to be rolled out under PIFRA I to begin massive training campaign • Long lead times, intensive needs in A&A, transactions • More customization and scaling than anticipated • New devolution process is underway, not envisioned • Add 75 more sites to PIFRA I’s 52 sites  127

13. PIFRA II Objectives • Jumpstart training and fill in the gaps • Increase accuracy, completeness, reliability, and timeliness of financial reports at national, provincial, district (and lower levels) • Assumes improved budget execution • Improve public financial management, accountability, transparency, credibility • Key CAS objectives, reform window is open

14. Planned PIFRA II Outputs • Delivers/builds upon PIFRA 1 outputs • Upgraded government financial system • Credible financial data to support decision makers at multiple levels of government • At a minimum, expenditure analysis • Rigorous internal controls • Fully qualified accounting and audit staff

15. Lessons Learned –1 • Difficult to resolve: • Policy Change: accountabilities, public disclosure, devolution mandated by 2006 • Legal framework slow to embrace change • Organization Change: roles and responsibilities, shifts in charter, new functions • Can control your resources, not those of others • HR Change: civil service rules, groupings, certifications, incentives, staff reductions • Civil service reforms are measured in years

16. Lessons Learned - 2 • Progress depends upon level of commitment and individualchampions • Turnover causes major rework, delays • Missions fail if reviews are not timely • Security situation adds another layer • Factor in starting point tailored to client • Timelines are local - use realism in government’s implementation capability • Small steps are necessary

17. Lessons Learned - 3 • Need much more attention to: • Change management: everyone is affected by new processes, procedures, or linkages (ERP) • Automating existing processes yields few benefits • Cross-cutting reforms help motivate, mandate • Communication: resistance can build quickly if all stakeholders don’t know proposed benefits • Training: building skills for thousands is complex • Documentation: critical, overlooked, delayed

18. Ideas for Discussion • What FMIS linkages are desired/required? • Budget planning, development, cash management, debt management, assets, revenue, tax • Critical ingredients to improve accountability? • Budget discipline leads to improved service delivery? • Decentralized systems change decision making? • What re-engineering is ideal, necessary, possible? • Other?

19. Supplemental Materials Pakistan FMIS

20. Board approval: September ’96 for $29m Effectiveness : February ’97 Closing: June ‘02 May ‘04 PIFRA I: History & Components

21. Separation of Audit and Accounts • Inherent conflict between compiling and auditing accounts • Staffing considerations and career paths • Build capacity and tools in both new functions • Legal/regulatory, administrative, and procedural issues • Experienced major delays – now on track

22. Creation of an MIS Branch • Three facets of MIS • Standards and Policies - define and review all audit and accounting implications of systems, technical aspects of hardware and software • Systems Development– develop and maintain applications and interfaces • Implementation– install, operate, and upgrade systems around the country • Need incentives to attract/retain qualified IT staff outside existing civil service mechanism

23. Technology Strategy • Open, scalable, portable, distributed architecture and RDBMS • Evolving under devolution • Processing nodes to optimize workload, fault resistance, and user control • Telecommunications links and manual data transfer mechanisms based on scale • Summary or detailed data roll-ups

24. PIFRA II Components – ($87m)

25. Devolution Impacts • Systems impacts: • Servers, communications, database administration, configuration, operations, synchronization, upgrades, recovery, maintenance, documentation, IT staff • A&A, audit tools and manuals, reports • Internal controls, processes, procedures • Communication & Change Management • Staffing, #s and location, training, HR issues