Regulatory Environment and IFMIS A few comments to help discussions

1. Regulatory Environment and IFMISA few comments to help discussions Duncan Last Public expenditure Management Advisor East AFRITAC (IMF) Dar es Salaam, Tanzania IFMIS Workshop, 8-12 November, 2004, Nairobi, Kenya

2. The Regulatory Environment of Government • Accountability in Government goes well beyond its equivalent in a privately run company, which primarily focuses on keeping its small group of share holders satisfied • This has long been recognized and is, in principle, enshrined in Laws and regulations which constrain the government to manage public resources within a clear set of rules and procedures • One of the major weakness of many regulatory environments is the enforcement of the regulations, i.e. the provision, and application, of sanctions to deter mismanagement, corruption, and fraud. In many instances, the will to enforce them is undermined. IFMIS Workshop, 8-12 November, 2004, Nairobi, Kenya

3. The Regulatory Environment of Government (continued) • All governments have existing regulatory environments which must be respected. • However regulatory environments have often evolved piecemeal, resulting in contradictions within the regulations, lack of clarity in the actual text, and confusion at the grass roots level over which regulation applies to the particular transaction they are dealing with. • In addition, many regulations are outdated and have not been adequately and holistically revised when new processes (including computerization) have been introduced. • Most regulations were drafted for manual financial management environments and do not take advantage of the new opportunities that computerization can bring. IFMIS Workshop, 8-12 November, 2004, Nairobi, Kenya

4. Reforming the Regulatory Environment of Government • Clarity and consistency of regulations is essential for their effective application • Regulations should facilitate effective and efficient financial management, and not be an excuse for inaction. • Without continuous staff training, even the clearest regulations will not be effectively applied. • Regulations should be under routine review, implying the need for a core group of staff with the capacity to look critically at their application. • Regulations are the yardsticks by which accountability and good governance are judged and enforced. IFMIS Workshop, 8-12 November, 2004, Nairobi, Kenya

5. The Dangers of Implementing IFMIS in a Weak Regulatory Environment • All processes in IFMIS should have a basis in Law, otherwise it will remain a ‘obscure box’ to the staff that use it. • IFMIS should, as much as possible, reflect established and accepted (and understood) procedures established by the regulations. If this is not possible or appropriate, then the procedures and regulations themselves should be reviewed. • The risk of misuse and abuse under IFMIS is very real, if procedures and regulations do not provide for adequate control. • Without accompanying improvements in oversight (both internal audit and external audit), detection and correction of misuses and abuses will not occur in a timely manner. • In a weak regulatory environment, there is a serious risk that the gap between IFMIS information and ‘real’ information in paper form will grow, undetected, leading to confusion in reporting. IFMIS Workshop, 8-12 November, 2004, Nairobi, Kenya

6. The Opportunities that IFMIS offers to Improve the Regulatory Environment • With IFMIS, MoF can be better informed in a more timely and useful manner about what is actually happening at budget users: • Previously they would have to wait more than one year to learn how resources were really used (if at all) • With IFMIS, MoF can move from input control towards intervention only when problems arise, or when there are clear deviations from expected execution of the budget: • MoF can make more timely and informed decisions on budget execution, and move away from unproductive daily crisis management • Approvals processes can be streamlined, reducing the burden of bureaucratic procedures: • MoF can give approvals on-line, confident that consistency checks have been enforced by IFMIS IFMIS Workshop, 8-12 November, 2004, Nairobi, Kenya

7. The Opportunities that IFMIS offers to Improve the Regulatory Environment • With IFMIS, forms can be generated in a standardized and consistent manner: • No orders to suppliers unless accompanied by an IFMIS generated form • Assets can be recorded and inventoried at the time of delivery • IFMIS can facilitate the implementation of particular regulations: • Cash flow plans can be prepared on-line and automatically checked against actuals • Commitment control can be enforced by stopping any payment that does not have a prior commitment • Banking arrangements can be rationalized (e.g. TSA) • IFMIS offers new opportunities for introducing greater budget user managerial oversight to achieve their assigned outputs, while maintaining MoF’s overall control of fiscal resources. IFMIS Workshop, 8-12 November, 2004, Nairobi, Kenya

8. Concluding Remarks • Before implementing IFMIS, MoFs should take a close look at the regulatory environment: • Is it consistent and effectively implemented? • Will it facilitate or impede use of IFMIS? • How can they be changed to make more effective use of what IFMIS has to offer? • It is important that regulations drive IFMIS and not the other way around! IFMIS Workshop, 8-12 November, 2004, Nairobi, Kenya

9. IFMS 1 IFMS 1 Regulatory reforms and IFMS IFMIS Workshop, 8-12 November, 2004, Nairobi, Kenya