Gert van der Linde, World Bank Nairobi, Kenya November 8, 2004

1. ASSURING EFFECTIVE DESIGN AND IMPLEMEMTATION OF INTEGRATED FINANCIAL MANAGEMENT INFORMATION SYSTEMS IN GOVERNMENTS Policy Issues Gert van der Linde, World Bank Nairobi, Kenya November 8, 2004

2. The need for reliable information systems • Information is the currency of accountability • Need to cover- • Revenue • Expenses • Assets • Liabilities • Characteristics • Timely • Complete • Accurate • Reliable and audited

3. Organization: Departments Branches Cost Centers Outcomes Outputs = Budget Effectiveness Type of expense: Salaries Supplies & admin Capital Economy Efficiency Policy IssuesAccountability Framework (1) How much? Quality? When? Cost? Programs “REAL” Performance Agreements

4. Policy Issues Impacting on the IFMIS (2) • Need to complement / link financial information with output and outcome information • By program • Impact on CoA and other classification requirements • Introduction of the MTEF – data history (2 years) and forecast (3 years) by program, by functional and economic classification by item of expenditure • Changes to the audit cycle • Requirement for annual reports • Established Minister’s responsibility for tabling of information in Parliament • “Govern” the basics needed to run decentralized accounting functions, e.g. month and year-end procedures.

5. Policy Issues Impacting on the IFMIS • Definition of the reporting entity • Central Ministries / Departments • Provincial / State level Ministries / Departments • Local government • Public Entities • GFS reporting requirements to be assessed • IPSAS requirements for consolidated financial statements to be assessed • IPSAS for annual financial statements of reporting entities

6. Accrual accounting or not? • As a taxpayer, do you expect of each manager in Government to ensure that all revenue, expenses, assets and liabilities (under his or her control) are managed efficiently and effectively? • Yes • Should they efficiently and effectively manage cash flow? • Yes • Can they (or you) do this reliably without accrual accounting? • No

7. Accrual accounting or not? • Without accrual accounting we compromise • the ability of managers to manage as expected; and • the system to hold them accountable for results • Little debate on the issue when the focus is on accountability arrangements………… • To be implemented when ready (processes, systems and capacity)

8. RSA – Accounting Standards • Established an Accounting Standards Board • Participate and use IFAC “IPSAS” to issue standards of “GRAP” as required in Constitution • Unresolved issues, e.g.: • Budget still on cash basis • Capitalization of physical assets • Accrual issues • Non-exchange Revenue • Social Policy Obligations • Budget Reporting • Heritage assets • GFS and IPSAS Harmonization

9. Accounting Framework • Need to cover- • Revenue • Expenses • Assets • Liabilities • Cash budget, accrual-based accounts and budget reporting • Banking and cash management arrangements • Who’s on and who’s off the budget, e.g Public Works • Integration of cross-boundary execution responsibilities, e.g. tender boards • Extent of decentralization of accounting functions