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The World Bank Brown Bag Seminar
Automating Financial Management Information Systems
in Post-Conflict Environments:
Lessons from Kosovo(12 January 2005)
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Welcome and Introductions Kosovo – The Context Specific Challenges The Goal Key FMIS Requirements Why FreeBalance Overview of Current Financial Management
Framework in Kosovo Future Plans Lessons Learned and Reasons for Success Panel Discussion / Q & A FreeBalance Demo
Agenda
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Serbia
Montenegro
Macedonia
Albania
Kosovo
•30 municipalities – 25 majority Albanian, 5 majority Serbian
•Estimated Population 1.7 million
•Ethnic mix 88% Albanian; 7% Serbian; 5% Other
•2004 Estimated GDP 1895 million euro
•Estimated 2.06 billion euro of donor investment to date since 1999
•Budget Revenues exceeding 600 million euro per year
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Centuries of Struggle
1389Serbs defeated by Turks in Kosovo. Serbia ruled by Turkey for next 500 years. Kosovo takes its place at the heart of Serbian nationalist history.
1974Kosovo established as an autonomous province of Serbia.
1989Autonomy is revoked by Serbian President Slobodan Milosevic.
1992Ethnic Albanians establish a shadow government.
1999A cease-fire is broken. NATO war planes begin an air campaign against military targets throughout Yugoslavia. UNMIK established by Resolution 1244.
2001
First election of provincial institution of self governance. Government ministries established.
2005
UN to initiate review of Kosovo’s “Standards Before Status”
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International Mandate
"The task before the international communityis to help the people in Kosovo to rebuild
their lives and heal the wounds of conflict."UN Secretary-General Kofi Annan
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Post-Conflict Physical infrastructure
badly damaged or non-existent before conflict began; further deteriorated during and post conflict
Government organizational structures, policies, and processes needed from ground up
Human capacity needed strengthening
Urgent need for process to receive, allocate, and control donor funds
Specific Kosovo Challenges
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Establish a Central Fiscal Authority to manage Kosovo’s fiscal issues, including Treasury; Budget; Fiscal Policy; Tax Administration; Customs; Macroeconomic Analysis and Reporting; Internal Audit. Form a team of experienced international advisors to
ensure best practice design and implementation Recruit, train and mentor local staff Select and implement a financial management
methodology to underpin the operations of the Central Fiscal Authority
The Goal
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Options Considered
Paper ledgers (manual system)
Excel / Access
Locally-developed software
Commercial Off-The-Shelf (COTS) software
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Financial management system to help control government financial processes
Protect the integrity of the revenue raising and expenditure process (donor confidence)
Transparency and accountability Must comply with multiple accounting and reporting
requirements – WB TRM, IMF GFS, IPSAs, best-practices, donors, creditors, local rules, and regulations
Local capacity building and sustainability Multi-language capability (Albanian, Serbian and English) URGENCY
Key FMIS Requirements
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The Early Days
Late 1999 meeting with WB and IMF about challenges in transition governments.
Early 2000 – FB arrives in Kosovo
26 days later FB Foundation installed – original configuration – six months of data captured - reports to CFA and donors
No custom code – configuration regularly modified
Procurement
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World Bank / IMF TRM - FreeBalance Alignment
Interfaces
Interfaces
Banking Systems
Payment Systems
Debt Management Systems
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The BearingPoint / FreeBalance Solution
FreeBalance is designed specifically for government
Rapid deployment
Flexible configuration
Processes not over engineered (intuitive – easy to learn)
Scaleable
Expandable solution (core system can be extended via modules)
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Process Flow
System/electronic processing of transactions Central database system with direct access
connectivity to municipalities and regional offices enabling processing of transactions, and real-time access to the information for reporting needs
Revenues collections posted to G/L Daily back-ups of the database to ensure no
data is lost
Overview of Fiscal Management Framework
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Process Flow cont. Multi-language system capabilities (in two
local languages) to support cultural and ethnic diversity and integrity in accordance with laws and regulations
System forms enable standardization of forms used by all budget spending units - helps prevent corruption and data entry mistakes
Timely processing of government payroll (70,000+)
Overview cont.
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Financial Internal Control
Central Fiscal Authority functioning as Ministry of Finance and Economy with competence in budget, treasury, and taxation; budget classification and planning system implemented; internal audit and control system implemented; and a transparent and rigorous procurement system established.
Financial Legal Framework underpinned by KFMIS by integrating key processes and decisions into KFMIS - commitments, approving and spending public monies
Overview cont.
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Financial Internal Control cont.
Enhanced internal controls within budget spending units by creating separate roles (functional classes) and groups of users (user groups) with access to the system in accordance with budget spending unit’s position hierarchy
High quality certification program for the budget spending units and their staff, to ensure the correctness of data and reduce errors during transaction processing
Overview cont.
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Capacity Building Specialized training program in budget planning and
execution and procurement processes for Cabinet of Ministers, Provincial Assembly, CFA, line ministries, and municipal staff
Help Desk is established to provide daily support and advise to all users from all budget spending units for a better transaction work flow
Extensive ongoing training and certification program – no independent certification, no access to the system
Overview cont.
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Transparency
Comprehensive public information and consultative program to disseminate information on new budget planning and execution system
Increased transparency in all areas of expenditures and revenue collection
Timely Monthly, Quarterly, and Annual Reports all produced from KFMIS
Overview cont.
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Additional Functionality
BPK interface – 95% of all payments transmitted electronically to central bank
5000 Vendors entered in and stored in system linked to unique bank accounts
Upgrade of key software and hardware –this will commence large rollout of new functions in 2005
Overview cont.
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VPN and network connections to 80 new Central Agency Users
Procurement Module to underpin new Procurement Law
Assets Module to be piloted in 2 municipalities in early 2005
Further utilization of the Revenues Module to improve cash management
Future Plans
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Automation of Bank reconciliations
Creation of multiyear commitments and appropriations to underpin MTEF implementation
Targeting MFE paperless interface with all clients
Future Plans cont.
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The Kosovo environment was unique, the fiscal management requirements were NOT
System implementation can be achieved in a matter of weeks, financial management reform takes years
Success breeds success – donor funding flows to successful projects – gov is energized by progress
Donor cooperation and coordination was essential (our thanks to World Bank, USAID, CIDA, Sida)
Donor funding is time sensitive and need driven
Ongoing buy-in from key stakeholders is critical for long-term success (there are winners and losers in change – external encouragement)
Lessons Learned
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Think big, start small, scale up
Phased implementation to allow absorption of key reforms
Achieve high-profile wins early to ensure buy-in Ownership within the government Comprehensive Training Program and mentoring of
local staff - some are still with Treasury after five years
High quality team of international budget planning and execution, procurement, and FMIS experts are necessary to ensure best-practice design and implementation
Long-term sustainability - total cost of ownership
Reasons for Success
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Automated FMIS is an early building block in creating good governance – transparency, accountability and anti-corruption.
This is a Team Effort Core of best-practices experts in the real issues and
challenges of these countries Software solutions that are effective, affordable and
understandable A few key sponsors in the government A supportive community – donors and others (WB IMF).
The right team can dramatically increase the probability of success
Conclusions
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Thank You
For more informationFor more informationPlease contact:
Mr. Bruce D. Long – Bearing Point
Email: [email protected]
Tel: +1.703.747.5564
Mr. Ken McDonald - FreeBalance Inc.
Email: [email protected]
Tel: +1.613.236.5150 ext 129
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MFE (Ministry of Finance and Economy MTEF (Medium Term Expenditure Framework) KFMIS (Kosovo Financial Management System) CFA (Central Fiscal Authority) BPK ( Bank Public Kosovo) US AID (U. S. Agency for International Development) CIDA (Canadian International Development Agency) SIDA (Swedish International Development Agency) BE (Bearing Point) FB (FreeBalance)
Acronyms in This Presentation
