1

INTEGRATED FINANCIAL MANAGEMENT SYSTEMS AND FINANCIAL

MANAGEMENT IN PUBLIC SERVICE: THE CASE OF UGANDA’S

MINISTRY OF FINANCE, PLANNING AND ECONOMIC DEVELOPMENT

AND ELECTORAL COMMISSION

LABOKE NOAH

11/U/909/BAK/PS

A RESEARCH REPORT SUBMITTED IN PARTIAL FULFILLMENT OF THE

REQUIREMENTS FOR THE AWARD OF BACHELOR OF BUSINESS

ADMINISTRATION DEGREE OF

GULU UNIVERSITY

JUNE, 2015

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DECLARATION This is to declare that this research proposal is my original work and has not been submitted to

any institution for academic or any other award before.

Laboke Noah ……………………………… ……………………………..

Researcher Signature Date

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APPROVAL

This is to certify that this research work has been under my supervision and ready for approval to

the next stage.

Paul Onyango – Delewa …………………........... ...........…………………..

Supervisor Signature Date

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DEDICATION

I dedicate this research work first and fore most to Mrs. Traci Radigan who met all my tuition

fees for the entire 3 year course and then to my father Mr. Peter Oyaro, mother Mrs Helen Adur

Oyaro, my wife Mrs Esther Ageno Laboke and children Benjamin, Gerald and Emily. To my

sisters Anyadwe Rhoda, Naome Ayot Oyaro, Deborah Lanyero, Brothers Ogaba Daniel and

Amos Labeja, for their timely, moral and financial roles played in supporting my academic

endeavours.

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ACKNOWLEDGEMENTS The production of this dissertation would not have been possible without the support and

encouragement of several people. With much pleasure and honor, may i express my sincere

gratitude to Mrs Traci Radigan and my father Mr. Peter Oyaro, for their timely moral and

financial roles played in supporting my academic endeavors. My sincere gratitude goes to my

supervisor Mr. Onyango Paul Delewa who stood in a gap that had become too big to fill, for his

full support and having spared and dedicated all the time needed in guiding me throughout the

entire research work. Traci, you made a very big difference. God Bless you immensely.

The research work could not have been possible without my faithful and beautiful wife Ageno

Esther for her handy support both materially, emotionally, financially and spiritual heart. She

stood in my shoes for the whole family, took bold decisions towards the production of this work

and always consoled me during the hard times when I was looking for data, writing and printing

the report. Together with my sister Rhoda Anyadwe, I want to recognize your input here. Bless

you all.

I acknowledge the help given to me by the employers and employees of the headquarters of the

Ministry of Internal Affairs and the Electoral Commission especially Mr. Oundo James

Mwangalase for having accorded me that warm welcome and allowing me carry out my research

work in his office, Mr. Ogwang Quinto and Mr. Okot Tonny Conno for their candid advice

during the study. I wouldn't have made it without your help and support.

I wish to extend my thanks to the department of Development studies and Business

Administration for taking me up as their own, and also for the administrative support it has

provided to see to it that my proposal and dissertation are forwarded to the required levels of

assessment. I also recognize the company of my great friends at campus Mr. Christopher Ociti,

Oketayot Jean Thomas, Hon. Atwal Robert okello, Proffesor Balmoi Francis and the entire BBA

class, 2011-2014.

God bless you all. The struggle continues.

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TABLE OF CONTENTS DECLARATION....................................................................................................... i

APPROVAL............................................................................................................. ii

DEDICATION........................................................................................................ iii

ACKNOWLEDGEMENT....................................................................................... iv

TABLE OF CONTENTS......................................................................................... v

LIST OF TABLES.................................................................................................viii

LIST OF FIGURES..................................................................................................ix

LIST OF ABBREVIATIONS AND ACRONYMS..................................................x

ABSTRACT….........................................................................................................xi CHAPTER ONE: INTRODUCTION AND BACK GROUND................................................ 1 1.1 Introduction......................................................................................................................... 1 1.2 Back ground of the Problem............................................................................................... 1 1.3 Problem statement............................................................................................................... 4 1.4 Purpose of the study............................................................................................................ 5 1.4.1 Specific objectives.............................................................................................................. 5 1.5 Research questions..............…............................................................................................ 5 1.6 The Conceptual Framework................................................................................................ 5 1.6.1 Notes to the conceptual framework.................................................................................... 6 1.7 Scope of the study...............…............................................................................................ 6 1.8 Significance of the Study....…............................................................................................ 6 CHAPTER TWO: LITERATURE REVIEW............................................................................ 7 2.1 Introduction................................................................................................…..................... 7 2.2 Financial Management in the public service...................................................................... 7 2.2.1 The Budget system...............................................................................................................7

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2.2.2 Internal Control..................................................................................................................10 2.2.3 Monitoring and Evaluation................................................................................................10 2.3. Integrated Financial Management System.........................................................................11 2.3.1 General Ledger...................................................................................................................13 2.3.2 Cash Management..............................................................................................................13 2.3.3 Commitment Control.........................................................................................................14 2.4 The Management Policy................................................................................................... 15 CHAPTER THREE: METHODOLOGY................................................................................ 17 3.1 Introduction....................................................................................................................... 17

3.2 Research Design................................................................................................................ 17 3.3 Study Population............................................................................................................... 18 3.4 Sample selection…........................................................................................................... 18 3.5 Sampling procedure .......................………...................................................................... 19 3.6 Data Collection ..............….............................................................................................. 20 3.6.1 Structured Questionnaire….............................................................................................. 20 3.6.2 Observation....................................................................................................................... 20 3.7 Data Analysis.................................................................................................................... 21 3.8 Limitations to the study.................................................................................................... 21 CHAPTER FOUR: DATA PRESENTATION, ANALYSIS AND INTERPRETATION... 22 4.1 Introduction....................................................................................................................... 22

4.2 Respondent biographical information............................................................................... 22 4.3 Variable correlation statistics............................................................................................ 26 4.4 Variable predictions.......................................................................................................... 28 CHAPTER FIVE: FINDINGS, DISCUSSIONS, CONCLUSSIONS AND RECOMMENDATIONS............................................................................................................ 30

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5.1 Introduction....................................................................................................................... 30

5.2 Findings............................................................................................................................ 30 5.3 Discussions....................................................................................................................... 31 5.4 Conclusions..…................................................................................................................. 33 5.5 Recommendations ..........................………...................................................................... 34 REFERENCES ..........................…....................................................................... 36 APPENDICES......................………...................................................................... 40 Appendix A: Questionnaire.....................................................................................40 Appendix B: Observation guide..............................................................................42

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LIST OF TABLES Pages Table 3.1 Study population................................................................................................... 18 Table 3.2 Sample size……................................................................................................... 19 Table 4.1 Gender of respondents.......................................................................................... 22 Table 4.2 Age distribution………………............................................................................ 23 Table 4.3 Educational qualification...................................................................................... 24 Table 4.4 Period served…..................................................................................................... 24 Table 4.5 Departments.......................................................................................................... 24 Table 4.6 Ranks…………..................................................................................................... 25 Table 4.7 Pearson’s correlation............................................................................................. 26 Table 4.8 Regression model summary.................................................................................. 28

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LIST OF FIGURES Pages Figure 1.1 Conceptual framework............................................................................................ 5 Figure 2.1 The budget formulation process.............................................................................. 8 Figure 2.2 Components of a typical IFMS............................................................................. 12 Figure 4.1 Age distribution………………............................................................................ 23 Figure 4.2 Departments…………………….......................................................................... 25 Figure 5.1 IFMS General set up………………………………..……………………………43 Figure 5.2 Transaction Process……………………………………………………...………44 Figure 5.3 Responsibility Window…………………………………………………………..45 Figure 5.4 Reconciliation Window……………………………………………….…………46 Figure 5.5 Project definitions Reconciled……………………………………..…………….47

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LIST OF ABBREVIATIONS AND ACRONYMS

GOU Government of Uganda

ICT Information and Communication Technologies

BOU Bank of Uganda

IFMS Integrated Financial Management Systems

MFPED Ministry of Finance, Planning and Economic Development

PFM Public Financial Management

RCDF Rural Communications Development Fund

UCS Uganda Computer Services

URA Uganda Revenue Authority

IFAC International Federation of Accountants

GAVI The Global Alliance for Vaccination Initiative

IPPS Integrated Personnel and Payroll system

M&E Monitoring and Evaluation

HP UNIX Hewlett-Packard's UNIX Operating System V (initially System III)

TSA Treasury Single Account

COMESA Common Market for East and Southern Africa

PFAA Performance and Fine Art Academy

SPSS Scientific Package for Social Sciences

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ABSTRACT

This study was carried out on Uganda’s IFMS project as a critical part of financial management

reforms in the public service over the last 10 years. The intention of IFMS is to automate the full budget

cycle across all units of government. The implementation of the IFMS has enabled the government

to address many of the fiduciary issues faced prior to 2003 like greater expenditure control and

discipline in budget management as a result of improved oversight and enforcement of internal

controls. In addition, a reduction in the time taken to process payments, improvement in account

reconciliation, and more accurate and reliable financial reporting.

The objective of the study was to examine the relationship between IFMS and financial

management in the public service with critical emphasis on the IFMS general ledger operations,

cash management, commitment control and its influence towards the efficient and effective

service delivery. The researcher used the structured questionnaire design for collecting both

qualitative and quantitative data from respondents for analysis.

Drawing the conclusions from a broad analysis, a number of literature reviews was consulted and

a comprehensive list was compiled as enclosed in the references. Using the multiple regression

analysis, the variable research findings indicated that there was a very close and positive

relationship between IFMS use and the effective performance of financial management at 75%

valid percentage as per the adjusted r-square. 98% of the respondents responded of which 54%

were males and 44% were females employed in accounts (36%), Finance (31%), Treasury

(12%), Audit (12%) and Procurement (11%).

There is broad agreement from the findings that a fully functioning IFMS can improve

governance by providing real-time financial information that financial and other managers can

use to administer programs effectively, formulate budgets, and manage resources. Sound IFMS

systems, coupled with the adoption of centralized treasury operations, can not only help the

government gain effective control over its finances, but also enhance transparency and

accountability, reducing political discretion and acting as a deterrent to corruption and fraud.

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CHAPTER ONE

INTRODUCTION AND BACKGROUND

1.1 - Introduction

This study analysis’s the linkages between the components of Integrated Financial Management

System (IFMS) towards increasing the efficiency and effectiveness of Financial Management

indicators in public service of the government ministries of Ministry of Finance, planning and

Economic Development (MFPED) and the Electoral Commission to ensure that money is not

lost as a result of inefficiency and corruption. According to Pokar (2008), Sound systems, strong

legal and regulatory frameworks as well as a competent and productive civil service are the

cornerstones of an efficient component of Financial Management in the public service. Asselin &

Srivastava (2009) stated that, financial management in public service focuses on the

prioritization and use of scarce resources, on ensuring effective ‘stewardship’ over public money

and assets, and on achieving value for money in meeting the objectives of Government, i.e.

rendering the best possible services as the drivers to efficient public service delivery and creation

of wealth and employment.

The chapter comprises of a number of Sub-themes which guides this study seeking to

evaluate the application of the Integrated Financial Management System (IFMS) as used in the

Uganda Ministries to influence Public Financial Management (PFM), Chene M. (2009). It works

by influencing the allocation and use of public resources through the budget and the fiscal policy,

in general, (Chene 2009 & Turley 1996). This chapter comprises of the back ground to the study,

Problem statement and the Research objectives, research questions, scope of the study and

significance of the study.

1.2 - Background of the Problem

An Integrated Financial Management System (IFMS) is an information system that tracks

financial events and summarizes financial information according to Dorotinsky (2003). It

supports adequate management reporting, policy decisions, fiduciary responsibilities and the

preparation of auditable financial statements. In its basic form, an IFMS is little more than an

accounting system configured to operate according to the needs and specifications of the

environment in which it is installed, Jack Diamond and Pokar Khemani (2005)

Therefore, an Integrated Financial Management System (IFMS) is an IT based budgeting

and accounting system that manages spending, payment processing, budgeting and reporting for

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governments and other entities, Peterson (1998). An IFMS bundles many essential financial

management functions into one software suite, Lerner (2006).

According to Pokar and Diamond (2005), Financial Management in the public service

(Public Financial Management - PFM) on the other hand refers to the procedures established by

law or regulation, for management of public monies through the budget process which includes

formulation, execution, reporting, and analysis. IFAC (2012) noted that Public financial

management (PFM) regulate financial management in the national government and provincial

governments to ensure that all revenue, expenditure, assets and liabilities of those governments

are managed efficiently and effectively. Stolowy (1998) also explains that PFM provides for the

responsibilities of persons entrusted with financial management in those governments and

matters connected therewith. In general terms, Governments need control over public resources

for funding national priorities. Jones & Rowans (1992) noted that States need resources for

providing public services which include security, water and sanitation, education, health and they

also have to fulfill their fiscal commitments such as paying staff salaries.

Today, Roscoe (2007) pointed out that Financial Management in public service has

become the focus of attention of international financial institutions as well as other bilateral aid

agencies and in many cases drives the financial support provided by key donors. It is frequently a

key pillar in reforms to build more capable and accountable states in post-conflict environments,

Dorotinsky (2003). Financial Management in public service contribute to the wider state-

building goals that tantamounts to a more transparent management of public finances, regular

payment of salaries of civil servants, better service delivery, and better allocation of resources in

support of reconstruction priorities, (Richard Allen and Daniel Tommasi, 2001).

One of the main pillars of a Public Financial Management system is that all government money

should flow into a single holding source, a government account held in the central bank, Chene

(2009). No public revenue collecting agency or individual should retain the money beyond a

certain period and most countries have rules about remitting public monies within a certain time

into the government account, hence, the establishment of a single treasury account as a central

feature of almost developed economies. In a weak PFM system, these fundamentals are not

observed and while a single treasury account or a consolidated fund for government monies may

exist, it is not enforced and the systems have multiple agencies and individuals operating

multiple bank accounts, outside the government. As a result, resources were used for purposes

other than those authorized by law.

Another symptom of a weak PFM system was arrears of payment. As a rule, an agency or

individual is not authorized to commit the government to any expenditure unless it is provided

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for in the budget or other fiscal legislation. Such authorizations follow established procedures

and are supported by supply of cash. Arrears arise when such expenditure commitments are

made without proper authorization and without any availability of cash. In the absence of checks

and balance of PFM systems, such arrears can threaten fiscal stability, by leading to significant

distortion in expenditure and liability. The phenomenon of unpaid suppliers of goods and

services for which no records are kept and which are unverifiable is a typical part of such a

scenario indicating a very poor internal control system.

A subsequent e-readiness assessment in 2004 revealed that a focused and coordinated

approach to implementation was required. This led to the establishment of an ICT Working

Group that tabled a number of recommendations. One of the recommendations executed early in

2006 was the establishment of a Ministry of ICT to address the convergence of ICT and to

provide co-ordination of policy development, Chene (2009). Through the use of ICT, new things

are possible and ultimately ICT reinvents governments and their services, Lerner (2006)

explains. For instance, through ICT, a system called the Integrated Financial Management

System (IFMS) was developed.

Integrating financial accounting and management accounting is already a well-

established practice in large businesses, Stolowy and Touron (1998). According to Lener et al

(2006), this system generally deals with automating the financial operations of both the budget

and treasury units. There is broad agreement that a fully functioning Integrated Financial

Management System (IFMS) can improve governance by providing real-time financial

information that financial and other managers can use to administer programs effectively,

formulate budgets, and manage resources. Sound Integrated financial management systems

(IFMS), coupled with the adoption of centralized treasury operations, can not only help

developing country governments gain effective control over their finances, but also enhance

transparency and accountability, reducing political discretion and acting as a deterrent to

corruption and fraud as stated by Asselin and Srivastava (2009).

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 given the Temangalo Saga, NSSF saga, ghost employees in

public service payroll and the GAVI fund scandal in the Office of the prime minister – Uganda

involved large sums of donor funds being mismanaged. The current financial management

systems in Government was 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, Semakula & Muwanga (2012).

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According to Africa Region Working Paper Series No. 25, (January 2002), 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

Information 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.

In simple terms, it is an ICT-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, Chene (2009). 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, Bartel (1996). The IFMS will

interface with other systems such as the Integrated Personnel and Payroll system (IPPS), URA

Revenue systems and Bank of Uganda systems, Semakula L. & Muwanga R. (2012).

1.3 - Problem Statement

Vision 2040 stipulates that, knowledge is information that is interpreted and used by decision

makers to meet their goals. Therefore, information and Communication Technologies (ICT)

utilization of the Integrated Financial Management Systems (IFMS) in Government ministries

like the Ministry of Finance and the Electoral Commission and more so in the Finance and

Accounts departments, the Treasury and Procurement department. These have become an

essential component in the management of public financial expenditure in the government of

Uganda today given the recent corruption scandals that have marred government operations

particularly in the Public Finance and Expenditure management sectors. Stolowy and Touron

(1998) present different arguments for the integration of the systems, such as the elimination of the

information reconciliation work and the calculation of the cash flows in real time.

A solution to this problem of transparency and proper accountability of financial

information to top management was urgently required, Semakula & Muwanga (2012). There was

a broad agreement that a fully functioning IFMS can improve the Financial Management in the

public service by providing real-time financial information that financial and other managers can

use to administer programs effectively, formulate budgets, and manage resources, Stolowy and

Touron (1998). Sound IFMS systems, coupled with the adoption of centralized treasury

operations, can not only help developing country governments gain effective control over their

5

finances, but also enhance transparency and accountability, reducing political discretion and

acting as a deterrent to corruption and fraud, Asselin and Srivastava, (2009).

1.4 - Purpose of the Study

The purpose of the study is to examine the relationship between the integrated financial

management system (IFMS) and financial management in the public sector taking Uganda’s

Ministry of Finance, Planning and Economic Development (MoFPED) and the Electoral

Commission as the case studies.

1.4.1 - Specific Objectives

1. To examine the relationship between general ledger operations and financial management.

2. To examine the relationship between cash management and financial management.

3. To examine the relationship between commitment control and financial management.

1.5 - Research Questions

1. What is the relationship between general ledger operations and financial management?

2. What is the relationship between cash management and financial management?

3. What is the relationship between commitment control and financial management?

1.6 - Conceptual Framework

Figure 1.1: Conceptual Framework

Integrated Financial Management

System

General Ledger Operations

Cash Management

Commitment Control

Management Policy

Financial Management

Budget System

Internal Control

Monitoring and Evaluation

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1.6.1 – Notes to the Conceptual Framework

This is the graphical illustration of the interrelations between the independent variable and the

dependent variable and how the dependent variable can be influenced by the moderating variable

a factor outside the control spheres of the independent variable and shown in Figure 1.1.

1.7 – Scope of the Study

The study is going to be carried out at two government ministries that is, Ministry of Finance,

Planning and Economic Development and the Electoral Commission, to evaluate the utilization

of the Integrated Financial Management Information System (IFMS) in the Accounts

department, Finance and Audit departments in relationship to Public Financial Management.

The study will zero down with critical focus on the general ledger, cash management and

commitment control application of the Integrated Financial Management System (IFMS) on

public financial management as used in the Uganda government ministries. According to

Schiavo-Campo and Tommasi (1999), Public Financial Management (PFM) underlies all

government activity which encompasses the mobilization of revenue, the allocation of these

funds to various activities, expenditure and accounting for spent funds in an efficient and

transparent manner void of corruption.

An in depth study will be conducted for a period of five (5) years beginning from 2009 –

2014 on the IFMS use and Public Financial Management, which staff members have been using

this system, their knowledge about the product and how it has helped them achieve their mission

for which it was established. The study is anticipated to last for a duration of six (6) months from

14th, January 2015 to 31st, July 2014.

1.8 - Significance of the Study The set objectives are aimed at analyzing the relationship between IFMS general ledger, cash

management, the quality of supervision (Commitment control) and the public financial

management accounting standards or regulations to the proposed strategies in the improvement

of public service. This will ensure efficient, effective and accountable use of public resources as

the basis for economic development and poverty eradication through improved service delivery

as mentioned in managing the nation’s money by Roscoe (2007) .

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CHAPTER TWO LITERATURE REVIEW

2.1 - Introduction This chapter reviews some of the salient literatures that highlights on the relationship between

IFMS general ledger and the public financial management structure, the relationship between

IFMS cash management and the quality of supervision in the public financial management

system, the relationship between IFMS commitment control and the public financial

management accounting standards regulations. The researcher explored sources such as

published materials like Text books, research journals, government publications and online data

sources.

2.2 - Financial Management in Public service

Peterson (1998) explained Public Financial Management as the legal and institutional framework

for supervising all phases of the budget cycle, including formulation and preparation of the

budget, budget execution and expenditure management, internal controls and audit, procurement,

monitoring and reporting arrangements, external oversight and audit. The IFAC 2012 mentioned

the broad objectives of public financial management as follows; to achieve overall fiscal

discipline, allocation of resources to priority needs, and efficient and effective delivery of public

services. Jones, Rowan (1992) illustrated a solid and strong PFM system that provides a

framework through which it’s possible to reduce and avoid wastage in the use of public

resources and ensure that public funds are used appropriately for the intended purpose.

Peterson (2007) pointed out that the challenge is for government to move to centre stage

in the utilization of ICT in its modernization public financial management to suit the challenges

of the world today with the help of engineers, scientists, and administrators who are at the centre

of the decision making process. We should not be afraid of moving slowly, rather, we should

only be afraid of not moving at all, noted Ssewanyana & Busler, (2007). The indicators of a good

Public Financial Management include; the budget system, internal control policies, monitoring

and evaluation process to ensure that the variables meet the intended purpose.

2.2.1 – The Budget system (BS)

Tommansi (2007) pointed out that the various Financial Management in the public service

indicators are structured around the budget cycle. Schiavo-Campo, (1999) in addition stated that

this annual cycle aims to ensure that public expenditure is well planned, executed and accounted

8

for. Revenue management is a large and crucial indicator of the PFM system which interacts

closely with expenditure management, particularly when determining the overall budget

envelope and when managing in-year cash flow, Storkey (2003). The budget system includes the

formulation, execution, Accounting & reporting and the external oversight as in figure 5.1

below.

The budget formulation Process

Source: Schiavo-Campo and Tommasi (1999); Managing Government Expenditure.

Figure 2.1 The budget formulation Process

Potter (1995) clarified that the budget is usually presented in a format that reflects the most

important classifications (usually administrative combined with economic, functional and/or

9

programmatic) and the classification will be embedded in the chart of accounts to ensure that all

transactions can be reported in accordance with any of the classifications used.

Budget formulation

According to Rebecca (2011), the budget cycle starts with the budgeting process, in which the

government, with legislative oversight, plans for the use of the coming year’s resources in

accordance with policy priorities.

Budget execution

Poker (2005) stated that once the budget has been approved and the new fiscal year begins,

spending agencies and the Ministry of Finance embark on its implementation. Semakula (2012)

noted that, they use the resources allocated to them on salaries for public servants, running costs

for their offices, such as rent and electricity, and goods and services delivered to their

beneficiaries (school books, medicines). The Ministry of Finance manages the flow of funds and

monitors and makes in-year adjustments to ensure compliance with the budget and PFM rules.

Accounting and reporting

Von Hagen (1995) noted that throughout the fiscal year, each spending agency records its

expenditures (accounting) and then these accounts are consolidated centrally by the Ministry of

Finance. At the end of the fiscal year, the Ministry of Finance issues a report that demonstrates

how the budget was implemented, Harden (1995).

External oversight

This report is then subjected to external scrutiny. The Supreme Auditing Institution, an

independent government body, reviews the government’s revenue collection and spending and

issues its own statement on the execution of the budget and the strength of the PFM systems. In

many countries, this audit report is presented to the legislature for further scrutiny and follow-up.

Weaknesses in the Budgetary Process

Schiavo-Campo (1999) noted that the World Bank after analyzing the budgetary processes of

several countries (Uganda inclusive) and came to the conclusion that government budgets

generally have the following shortcomings: Poor planning, No links between policy making,

planning and budgeting, Poor expenditure control, Inadequate funding of operations and

maintenance, Little relationship between budget as formulated and budget as executed,

10

Inadequate accounting systems, Unreliability in the flow of budgeted funds to agencies and to

lower levels of government, Poor management of external aid, Poor cash management,

Inadequate reporting of financial performance and Poorly motivated staff.

Many of the weaknesses in budgeting reflect the failure to address linkages between the

various functions of budgeting which factors contribute to budget systems and processes that

create a disabling environment for performance in the public sector, both by commission and by

omission, Dorotinsky (2007).

2.2.2 - Internal Control (IC)

According to Angelkort (2011), Internal control systems are basic indicators of Public financial

management control systems with a view to ensuring compliance with rules and regulations,

reliability of financial data and reports and to facilitate efficiency of government operations.

Chan (1998) complements that a sound internal control framework of which internal audit is an

important element, is required to assure that government operations linked to Public financial

attain some basic fiduciary standards in guarding against misuse and inefficient use of resources,

for safeguarding government assets, countering fraud and error, checking maintenance of

satisfactory accounting records, and whether budgetary objectives set out in the government

policies are being achieved.

Though internal audit is also a part of internal control system, it has a distinct role in that

it is one of the tools for evaluating and improving the internal control system, Von Hagen (1995).

Internal audit in government also involves audit on the basis of standards of financial propriety

(as does the external audit) and, therefore, is required to observe upon cases of improprieties in

financial operations. The function of audit has been entrusted to the Comptroller and Auditor-

General. Thus, Internal controls can be regarded as one of the foundations of good governance

and the first line of defense against improprieties. They also provide the public with ‘reasonable

assurances’ that if improprieties do occur, they will be made transparent and appropriately

addressed.”

2.2.3 - Monitoring and Evaluation (M&E)

The Monitoring and Evaluation (M&E) is an indicating framework for the PFM strategy and its

implementation will utilise the existing Monitoring and Evaluation systems and instruments. The

framework makes a clear distinction between monitoring and evaluation, it also recognises the

two as complementary parts of an integrated PFM system indicator, aiming at controlling and

determining whether planned activities are being implemented as planned (the monitoring part)

11

and an assessment of whether or to what extent the objectives of the programme have been or are

being achieved (the evaluation part). The framework defines monitoring as management’s

continuous examination of progress made during the implementation of an undertaking to track

compliance with the plan and to take necessary decisions to improve performance, whereas

evaluation is seen as the process of determining the relevance, effectiveness, efficiency, impact

and sustainability of the interventions, which in turn form basis for adjustment or redesign of

reform strategies or even change of policy direction if need be. The framework proposes

progress monitoring at activity level to be done on a monthly basis; output monitoring to be done

on a quarterly basis whilst evaluation should be done on an annual basis.

2.3 – Integrated Financial Management System (IFMS)

Information and communication Technology (ICT) allows the government internal and external

communications to gain speed, precision, simplicity, outreach and networking capacity, which

can then be converted into cost reduction and increased effectiveness, two features desirable for

all government operations but especially for public services according to Farrell, Glen and

Shafika Isaacs, (2007). Information and communication Technology (ICT) also enables 24/7

usefulness, transparency and accountability, as well as networked structures of public

administration, information management and knowledge creation.

In addition, it can equip people to participate in an inclusive political process that can

produce well informed public consent, which is, increasingly the basis for legitimacy of

Governments. Internet Communications Technology (ICT) is at the core of National

development efforts worldwide (MICT, 2009). Uganda developed its initial ICT national policy

in 2003 (Farrell, 2007). The Integrated Financial Management Systems (IFMS) focuses on key

Expenditure Management Systems that include the Accounting and reporting (General Ledger),

budgeting, purchasing and commitment Accounting, Payments, Cash Management and Revenue

Receipting/Accounts Receivable, Purchasing and Public Sector Budgeting including Activity

Based Costing (MFPED, 2012).

The IFMS uses the Oracle application and database and the HP UNIX platform which

both subscribe to open technologies. The concept of open technology architectures allows the

flexibility to implement interfaces and integrate with other systems for the purpose of sharing

data and enhancing efficiency, Ssemakula (2012). The IFMS is able to easily interface with

systems at the Uganda Revenue Authority (URA) and the Bank of Uganda (BoU). It is expected

that it will be easy to interface with the integrated personnel and payroll system (IPPS) currently

being implemented by the Ministry of Public Service.

12

The Implementation of the Integrated Financial Management System (IFMS) was

motivated by the Ugandan Government’s desire to improve efficiency in budget preparation,

execution and financial reporting. Since 2003 according to Ssemakula (2012), the IFMS has been

extended across all 22 ministries and 25 central government agencies. The IFMS has also been

implemented in 8 local Governments with plans to extend it to 6 more districts as part of the first

tier1 IFMS implementation. Using a lower (second) tier solution which offers less complexity,

the Government intends to further extend the IFMS to all local governments. The second tier

project implementation (based on MS Navision) has recently commenced. The discussion in this

research is limited to the first tier IFMS implementation.

An IFMS will generally consist of several distinct components or modules that use

information to perform different functions, Chene (2009). Figure 2 presents a basic diagram of a

typical government IFMS, including several core components, as well as non-core components

that will either be integrated into the system or connected to the system via an interface.

Components of a typical IFMIS

Source: Transparency International Source Book (2004).

Figure 2.2: Components of a typical IFMIS

13

2.3.1 - The General Ledger (GL)

At the core of the system is the General Ledger which constitutes the central books of any IFMS.

Every transaction entered into the system posts to the General Ledger, starting with the

allocation of budget funds through to the commitments to payment for goods and services,

Bartel, Margaret (1996). All transactions should simultaneously post to the General Ledger and

to all appropriate sub-ledgers/modules following the rules imposed by a standardized chart of

accounts. These records remain as a permanent track of the history of all financial transactions,

and represent the source from which all reports and financial statements are derived. This

enables electronic and automated posting of transactions on the system. In agreement, Morahan-

Martin (2000) indicates that dichotomous arguments do not do justice to our understanding of

how the use of ICT computer and the Internet impacts on our lives, in fact, the question is no

longer whether or not to use ICT, but how we can use it to improve our daily lives.

2.3.2 - Cash Management (CM)

Cash Management monitors and forecasts cash flows and financing requirements, and performs

reconciliation between bank accounts and IFMS records. Cash management is necessary because

there are mismatches between the timing of payments and the availability of cash. Even if the

annual budget is balanced, with realistic revenue and expenditure estimates, in-year budget

execution will not be smooth, since both the timing and seasonality of cash inflows (which

depend in turn on tax and nontax flows, and timing of grant or loan disbursements) and of

expenditures can result in conditions of temporary cash surpluses or temporary cash shortfalls.

Ssewanyana and Busler (2007) stated that the IFMS has enabled the Government to address

many of the fiduciary issues faced prior to 2003.

This has led to greater expenditure control and discipline in budget management as a

result of improved oversight and enforcement of internal controls, a reduction in the time taken

to process payments, improvement in account reconciliation and more accurate and reliable

financial reporting, Ian Lienert (2009). Modern cash management has four major objectives, To

ensure that adequate cash is available to pay for expenditures when they are due. Pooling

revenues in a treasury single account (TSA) facilitates this, to borrow only when needed and to

minimize government borrowing costs, to maximize returns on idle cash, i.e., to avoid the

accumulation of unremunerated or low yielding government deposits in the central bank or in

commercial banks, To manage risks, by investing temporary surpluses productively, against

adequate collateral.

14

Effective cash management contributes to the smooth implementation of the operational

targets of fiscal policy, the public debt management strategy, and monetary policy, Williams and

Mike (2004).

2.3.3 - Commitment Control (CC)

Commitment control ensures that before a purchase is committed to, there is sufficient cash

allocated for the expense and the allocation matches the appropriated budget, Peterson S. (1998).

The commitment control model entirely deals with the Income and expenses a located in the

budget as Accounts payables and Accounts receivable, Lienert (2009). Accounts payable

processes and generates payments with built-in checks to ensure invoices match approved

commitments.

It receives and processes suppler invoices which are linked electronically and validated

in real time. Success in implementing the system depends significantly on how these components

are managed, Ssewanyana and Busler (2007). In order to minimize risk for example, especially

in view of the capacity and skills available at the time, the ministry opted to have the supplier

implement and provide project management services for all components (except change

management) under a turnkey concept (one single contract), Radev & Khemani, (2009). The

Government shifted the risk for delivering the IFMS to a single supplier, rather than managing

each component under a separate contract. The contract was arranged accordingly and payments

tied to delivering key components which proved to be a powerful strategy in implementing the

IFMS, Bartel & Margaret (1996). Accounts receivable produces bills and processes and records

receipts, including all types of inflows received by government units, including nontax revenues

and fees. It Links Treasury with the Uganda Revenue Authority (URA) in respect of tax returns.

Invoicing and collections of non tax revenue is also expected to be managed online.

Beyond these core components, there are myriad other types of information that an IFMS

could conceivably support. Other modules or systems that an IFMS can support or interface with

might include: Budget preparation/planning, Procurement and contracts management, Payroll

and human resources, Revenue administration (tax and customs), Debt management, Assets

management, Project ledger, Grants management (e.g., counterpart funds from international

assistance).

The list of potential add-ons can be very long, depending on the particular needs and

the level of sophistication by the government. Moreover, the functions of IFMS may be called on

15

to perform varying from producing budgets and reports, to managing procurements and grants, to

processing payments and receipts, Bartel, Margaret (1996). On top of this, the system needs to

provide security on several levels like Internal system security, user profiles for each type of user

and external security as the system communicates with the outside world in the form of internet

connectivity, the banking system, citizen interfaces for facilities like taxes, licenses.

2.4 - The Management Policy (MP)

Ministry of Finance, Planning and Economic Development is a Government Ministry which

plays an important role to ensure mobilization and management of public resources for the whole

Government. It is further charged with the policy of overseeing how these resources are raised

and accounted for the benefit of its citizens. The ministry is also concerned with matters of

achieving the fastest rate of economic transformation alongside emerging economies. It targets to

formulate sound economic policies that lead to sustainable economic growth and development.

The ministry is organized with Directorates of Budget, Economic Affairs, Accountant General’s

Office and departments of Finance and Administration.

It’s mandated to Develop and monitor appropriate policies and strategies that guide

annual and medium term expenditure, Oversee and implement the Integrated Financial

Management System (IFMS), Prepare the Annual National Budget and medium term expenditure

allocations, Formulate and review and appraise projects and programs in liaison with line

Ministries and Institutions, Review and update of the Public Investment Plan, Execute and

monitor the annual National Budget, Coordinate releases of funds for both recurrent and

development activities in Central and Local Governments, Formulate tax policies aimed at

generating domestic revenue for Government expenditure, Develop appropriate fiscal and

monetary policies, Coordinate policies that promote institutional capacity and development of

the public and private sector, Mobilize domestic and external resources.

The Ministry has to formulate strategies for appropriate external and internal public debt

management, Facilitate trade and Regional integration initiatives within the East African

Community, and the COMESA region, Harmonize and monitor the National Public Procurement

Policy with International and Regional Organizations' Procurement and Trade Policy

Agreements, produce timely, accurate and reliable public financial management information that

meets professional standards and conforms to internationally accepted best practices, Ensure

appropriateness of internal control systems and internal audit functions throughout Government,

Provide overall framework for control of public resources and expenditure, Ensure that

16

Accounting officers observe the PFAA 2003 and associated financial regulations, set standards

for professionalism for accounts cadres in government, ensure provision is made for the security

of government's financial and non-financial assets, maintain a register of public debt, manage

fiscal data for government departments and agencies, provide information technology related

finance support services to government ministries and agencies, carry out financial transaction

processing and reporting leadership.

The directorates of Budget, Economic Affairs, Accountant General’s Office and

departments of finance and administration have a mandate to develop and monitor appropriate

policies and strategies that guide annual and medium term expenditure, oversee and implement

the Integrated Financial Management System (IFMS), prepare the Annual National Budget and

medium term expenditure allocations, Formulate and review and appraise projects and programs

in liaison with line Ministries and Institutions, review and update of the public investment plan,

execute and monitor the annual national budget, coordinate releases of funds for both recurrent

and development activities in central and local governments.

17

CHAPTER THREE: METHODOLOGY

3.1 Introduction

This chapter discussed the research design and the methods that were used when conducting the

study. It specifically identified the processes of gathering and analysing of data that was used in

the study. The chapter begins with the research design, which is a description of the research

approach. It also looks at the data collection tools that were used in the course of the research. It

also presents the data collection instruments that were used in the process of data collection and

methods that were used to maintain the validity of the research and the interpretation of data

collected and how it is going to be used for the research. It also covers the sampling strategy

used in obtaining the sample size and sample population to which the data collection instruments

were subjected in data collection.

3.2 Research Design

The study will use a case study design of a cross sectional nature in which both quantitative and

qualitative data will be collected. Kothari (2003), defined a research design as an arrangement of

conditions for data collection and analysis of data in a way that aims to combine relevance with

the research purpose. It’s a conceptual structure within which research is conducted. Bell (1997),

notes that the research design outlines the basis for making an interpretation of data and

establishes the format for detailed steps to follow when conducting the study. According to

Bromley (1990), it is a “systematic inquiry into an event or a set of related events which aims to

describe and explain the phenomenon of interest” (p. 302).

Both Baxter (2008) and Yin (2003) agree that in social sciences and life sciences, a case study is

an implementation of a research method involving an up-close, in-depth, and detailed

examination of a subject of study (the case), as well as its related contextual conditions. The

researcher used a case study design to study an individual unit or government ministry to

emphasize developmental issues and relationships with the environment especially of the IFMS

system, in order to compare a larger group to the individual unit, Gillham (2001). Therefore, the

type of questions asked by the researcher ultimately determines the type of approach necessary to

complete an accurate assessment of the topic at hand, Baxter (2006).

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3.3 Study Population

Gillham (2001) defines population as a group of individuals or items which are taken for

measurement. The study was held at two Uganda government ministries namely, Ministry of

Finance and the Electoral Commission. The study mainly aimed at the users of the Integrated

Financial Management (IFMS), under the department of treasury, Finance, Audit and

procurement departments. The research targeted 280 members of both senior management team

and employees working in the government ministry that utilizes IFMS as they were directly

linked to the study. They included auditors, accountants, Senior managers, procurement officers

and finance managers. Table 3.1 shows the study population under study.

Study population Departments Min. of Finance Electoral

Commission Total

Senior Team

Treasury 02 00 02

Finance 05 03 08

Accounts 03 03 06

Procurement 02 02 04

Audit 02 02 04

Employees

Treasury 10 00 10

Finance 28 23 51

Accounts 20 15 35

Procurement 10 05 15

Audit 10 05 15

Total Population 92 58 150

Source: MOFPED & Electoral Commission 2014, for study purposes only Table 3.1: Study Population 3.4 Sample selection

In order to select a sample size from the above study population,, the Yamane (1973:886) model

will be used. According to Yamane, n = ______N______

1 + N (e)2

19

Where n is the sample size, N is the population size, and e is the level of error (precision) or

0.05. When this formula is applied to the above sample on table 3.1,

n = _____150______ ; n = _____150______ ; n = _____150______

1 + 150 (0.05)2 1 + 150 (0.0025) 1 + 0.375

n = ____150___ ;

1.375 n = 109 Employees

Sample size Departments Min. of Finance Electoral Commission Total

Senior Team

Treasury 02 00 02

Finance 05 02 07

Accounts 03 03 06

Procurement 02 02 04

Audit 02 02 04

Employees

Treasury 10 00 10

Finance 20 12 32

Accounts 15 10 25

Procurement 05 04 09

Audit 05 05 10

Total population 69 40 109

Source: MOFPED & Electoral Commission 2014, for study purposes only Table 3.2: Sample size

3.5 Sample Procedure

Israel, Glenn (1996) defines sampling procedure as a deliberate process of selecting a part of

population for study with the intention of generalizing the findings to the whole population. The

sample size of 109 people was derived from the Yamane formulae. Purposive sampling

procedure will be used to collect data from the individuals who use IFMS as per the departments

20

selected. (Patton, 1990 and Glaser & Strauss, 1967) agree that the main advantage of purposeful

sampling technique is that logic and power lies in selecting information rich cases for an in depth

study with a combination of qualitative and quantitative data well established in case study

research. Therefore, the management team was subjected to random sampling methodology for

qualitative data analysis and the employees were subjected to purposeful sampling to obtain

quantitative data for analysis.

3.6 Data Collection

The researcher will used various methods to collect both primary and secondary data for the

study. As such, primary data will be subjected to the use of structured questionnaires, face to

face Interviews and Observation methods while secondary data will be collected through the use

of Document analysis method, (Yin R., 1994 & Patton 1990). Under this method both published

and grey literature materials such as research papers, journals, internet resources and related

sources will be reviewed as explained below. The methods are as follows;

3.6.1 Structured Questionnaire

The questionnaire is the most widely used technique in data collection. It consists of written

questions to which the respondent responds to in writing (Busher and Hunter, 1980). According

to Mbaaga (2000:25), questionnaires are defined as a set of related questions designed to collect

information from respondents on an intended topic. These may be structured or unstructured

questions but the researcher is going to use the structured questionnaire approach for data

collection. Structured questionnaires need factual answers that call for facts as well as

explanations about the usage of the IFMS on financial management in the public service sector,

Yin R. (1984). The structured questionnaires will be distributed to both the management team

and the employees of the two government ministries for data collection.

3.6.2 Observation

Observation can be defined as a purposeful examination of research phenomenon for purposes of

gathering data, Baxter (2008). It involves the use of sensory organs to make sense of the study

phenomenon. It allows one to collect data in a purposeful and systematic way about the IFMS

use of the financial management in the public service. Adzobu (2003) continues to say that the

method studies events as they occur and also what people do rather than what they say they do.

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3.7 Data Analysis

Data analysis is the process which involves the way data will be collected, coded and presented

in an understandable, systematic and clear way. Data will be subjected statistical manipulation

using the Scientific package for social sciences (SPSS) to test the quality. All data collected will

be edited to ensure accuracy and consistency involving the preparation of the collected data into

useful, clear and comprehensive information. The data will be presented in form of explanatory

notes based on the researcher’s objectives and questions.

3.8 Limitation to the study

The researcher had two limitations;

The time constraint; the death of my first supervisor (the lt. Rachkara Andrew – may his soul rest

in Peace) and getting appointments from the respondents was a challenge that was proving too

difficult to overcome given the time allocated for the research study.

The financial constraint was another challenge despite the budget drawn. There were many

unplanned for expenses during the course of carrying out the study which were very significant

to the study purpose.

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CHAPTER FOUR

DATA PRESENTATION, ANALYSIS AND INTERPRETATION

4.1 – Introduction This chapter contains a detailed description of the data collected during the study in ministry of

finance and electoral commission. The findings presented were interpreted and analysed in

accordance to the objectives and research questions. The research questionnaire for the study

comprised of four sections and data generated will be presented as follows; the first section

comprises of biographical data like the gender, age distribution, education qualification, period

served, department and rank. The second section comprises of data related to variables of

financial management like Budget system, internal control, monitoring and evaluation,

(Tommansi, 2007). While the third section comprised of data variables of the integrated financial

management system – IFMS like the general ledger, cash management, commitment control,

(Farrell, 2007). And the forth section comprises of data highlighting the influence of

management policy to the variables.

From table 4.1, a total of 113 questionnaires (n=113) were issued to the government ministry and

electoral commission and only 2 did not respond back, that is, 98.2% responsive rate. Descriptive

statistical analysis was used to identify frequencies and valid percentages to answer all of the

questions in the questionnaire. The researcher used the Pearson product-moment correlation

coefficient or Pearson correlation coefficient to measure the strength of the linear/relationship

associated between the two selected data variables (independent and dependent) of the study and

this is denoted by r. The multiple regression analysis was used to interpret the various predictions

of the study. The results are therefore, presented in form of tables of frequencies and valid

percentages in the sub sections that follows.

4.2 – Respondent Biographical Information

Table 4.1: Gender Frequency Percent Valid Percent Cumulative Percent

Valid Male 61 54.0 54.0 54.0 Female 50 44.2 44.2 98.2 No Response 2 1.8 1.8 100.0 Total 113 100.0 100.0

Source: Primary data

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The majority of respondents in the study were males from table 4.1 with a valid percentage of

54% compare to female respondents with a valid percentage of 44%. The two respondents who

did not fill the questionnaire constitute 2% of the valid percentage as shown in the table 4.1. This

represents 98% responsive rate in the study where more males are employed in comparison to

the female counter parts in the two government ministries working directly where the IFMS

system is used.

Figure 4.1: Age Distribution

The highest valid percentage in age distribution (table 4.2) was 44% (50) of the

respondents were aged between 30 – 39 years, implying that they were mature and experienced

adults employed in supervisory positions. 27% (30) were aged between 20 – 29 years who

formed the majority data clerks’ employees; they also monitored and evaluated data entry to

ensure that the compliance standards were maintained. 21% (23) were aged 40 – 49 years

employed at the management level in the ministries while the least valid percentage was 7% (8)

were aged above 50 years represented the senior management team who made the final decisions

on every transaction entered in the system and its implementation as a whole. 1% represented the

two questionnaires which were returned unanswered as shown in the table 4.2;

Table 4.2: Age Distribution

Frequency Percent Valid Percent Cumulative Percent Valid (20-29) yrs 30 26.5 26.5 26.5

(30-39) yrs 50 44.2 44.2 70.8 (40-49) yrs 23 21.2 21.2 92.0 (50+) yrs 8 7.1 7.1 99.1 No Response 2 0.9 0.9 100.0 Total 113 100.0 100.0

Source: Primary data

24

Table 4.3: Educational Qualifications Frequency Percent Valid Percent Cumulative Percent

Valid Degree 54 47.8 47.8 47.8 Other 59 52.2 52.2 100.0 Total 113 100.0 100.0

Source: Primary data According to the study findings of the respondents’ qualification in table 4.3 above, the study

shows that the majority with 52% (59) of the valid percentage had qualifications above the

degree level. This finding could be because they are mature and well experienced handlers of the

IFMS and financial management in the public service. Only 48% (52) employed in the study

were degree holders. This implied that all the respondents were literate which encouraged the

researcher to use structured questionnaires as one of the most convenient data collection tool.

Table 4.4: Period Served Frequency Percent Valid Percent Cumulative Percent

Valid (< 5) yrs 52 46.0 46.0 46.0 (5-10) yrs 43 38.1 38.1 84.1 (11+) yrs 18 15.9 15.9 100.0 Total 113 100.0 100.0

Source: Primary data

The study also revealed that 46% (52) of the valid percentage represented the majority

respondents who had served for less than 5 years, followed by 38% (43) valid percentage of

respondents serving for a period 5 – 10 years. Only 16% (18) valid percentage represented

respondents who had served for more than 11 years in the government ministry and electoral

commission as shown in the table 4.4 above.

Table 4.5: Department Frequency Percent Valid Percent Cumulative Percent

Valid Accounts 39 34.5 34.5 34.5 Finance 35 31.0 31.0 65.5 Treasury 12 10.6 10.6 76.1 Audit 13 11.5 11.5 87.6 Procurement 14 12.4 12.4 100.0 Total 113 100.0 100.0

Source: Primary data

25

As high as 34% (39) valid percentage of the respondent were employed in the accounts

department, followed by 31% (35) employed in finance, 11% (12) employed in the treasury

while 12% (14) employed in procurement section and the least study findings of 12% (13) were

employed in the audit department as per the table 4.5 above.

Figure 4.2: Department

Source: Primary data

The graph on figure 4.2 above represents the allocations of respondents to their different

departments of employment as per the findings of the study. This illustrates that the IFMS

system is frequently used in the Accounts (39 respondents) and Finance department (35

respondents) from the results of the questionnaires answered. This is followed by the

procurement department (14), audit (13) and the treasury department (12) respectively.

Table 4.6: Rank

Frequency Percent Valid Percent Cumulative Percent Valid Clerical 23 20.4 20.4 20.4

Supervisory 33 29.2 29.2 49.6 Managerial 27 23.8 23.8 73.5 Other 30 26.6 26.6 100.0 Total 113 100.0 100.0

Source: Primary data

In the study respondents ranking, 29% (33) valid percentages of the respondents in the study

were employed as supervisors. 27% (30) were employed in different departments other than that

mentioned in the questionnaire, then, 24% (27) valid percentage employed in managerial

positions while 20% (23) valid percentage were clerical employees, refer to table 4.6.

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4.3 – Variable Correlations Statistics

Table 4.7: Pearson's Correlations

1 2 3 4 5 6 7 8 9 1. General Ledger Operations 1 2. Cash Management -.023 1 3. Commitment Control .104 .246** 1 4. IFMS .480** .639** .779** 1 5. Management Policy .196* .217* .141 .278** 1 6. Budget System .152 .127 .257** .286** .287** 1 7. Internal Control .060 .276** .141 .249** .056 .049 1 8. Monitoring and Evaluation .073 .217* .109 .206* .149 .146 .253** 1 9. Financial Management .160 .285** .281** .382** .283** .783** .535** .595** 1 IFMS = Integrated Financial Management System; **Correlation is significant at the 0.01 level (2-tailed); *Correlation is significant at the 0.05 level (2-tailed). Source: Primary data

Interpretation (Table 4.7)

Basically, a Pearson’s correlation attempts to draw a line of best fit through the data of two

variables in the findings and the Pearson correlation coefficient, r, indicates how far away all

these data points are to this line of best fit (how well the data points fit this new model/line of

best fit). The stronger the association of the two variables, the closer the Pearson correlation

coefficient, r, in determining the relationship showing that all the data points from the study was

included on the line of best fit. The closer the value of r to 0 the greater the variation around the

line of best fit.

From the study findings, the correlation coefficient has a positive value, that is, IFMS =

Integrated Financial Management System; **Correlation is significant at the 0.01 level (2-tailed)

and financial management; *Correlation is significant at the 0.05 level (2-tailed) indicating that

there is a variation around the line of best fit. A value greater than 0 indicates a positive

association between the study variables moving in tandem; that is, as the value of one variable

increases, so does the value of the other variable.

The findings show that the financial management is positively related to the IFMS by (r =

0.382, p < 0.01) or 38%. This indicates that Sound systems (IFMS), strong legal and regulatory

frameworks as well as a competent and productive civil service are the cornerstones of an

efficient component of Financial Management in the public service in the government ministry

and electoral commission, Pokar (2008).

In addition, the study findings show that the budget system was positively related to

IFMS by (r = 0.286, p < 0.01) such that as one improves by 29%, the other also improves by the

same percentage (Note that: (0.286) is equivalent to 29%). This implies that the budget system is

27

structured around the annual public expenditure planning, execution and accountability which

interacts with the layout and implementation of the IFMS, Schiavo-Campo, (1999). The budget

system is also positively related to the general ledger by 15% that is, (r = 0.152). Potter (1995)

clarified that the budget is usually presented in a format that reflects the most important

classifications (usually administrative combined with economic, functional and/or

programmatic) embedded in the general ledger.

Similarly, findings from the respondents show that the Internal control system is

positively related to cash management by (r = 0.276, p < 0.01) or (28%). The reasonable

explanation in this finding is that internal controls can be regarded as one of the foundations of

good governance and the first line of defense against improprieties and cash management, Von

Hagen (1995). The results also show a very strong and significant positive relationship between

internal control system and the IFMS by (r = 0.247, p< 0.01) or 25%, an illustration that the

internal control has a distinct role as one of the tools for evaluating and improving the internal

control system, Von Hagen (1995).

The study findings of monitoring and evaluation is also positively associated with cash

management to the extent of (r = 0.217, p < 0.05) or (22%). The respondents agree that the

process of determining the impact, relevance, effectiveness, efficiency and sustainability of cash

management during the interventions in public service delivery is complimented through the

monitoring and evaluation process. This is also consistent with the study findings where

monitoring and evaluation has a positive relationship with the IFMS to the extent of (r = 0.206, p

< 0.05) or (21%). The respondents confirmed the fact that IFMS allows 24/7 government internal

and external communications to gain speed, precision, simplicity, outreach and networking

capacity. This is converted into cost reduction and increasing effectiveness, two features

desirable for all government operations, Farrell, Glen and Shafika Isaacs, (2007).

However, there is an inverse relationship between cash management and general ledger

operations of (r = -0.023) where changes take place in opposite directions. A value less than 0

indicates a negative association/relationship; that is, as the value of one variable increases, the

value of the other variable decreases. In this finding, the respondents illustrated that there was a

negative/non relationship between cash management and the general ledger.

The inverse relationship demonstrates that the general ledger is at the core of IFMS and central

book where all transactions are simultaneously entered and allocated to appropriate sub-

ledgers/modules following the rules imposed by a standardized chart of accounts, Bartel,

Margaret (1996). But cash management involves monitoring and forecasting of cash flows and

financial requirements. This is reconciled with the available funds in the bank accounts and the

28

IFMS records to minismise the mismatch between the timing of payments and the availability of

cash, Ssewanyana and Busler (2007).

4.4 – Variable Predictions (Multiple Regression Analysis)

It had been predicted in our objectives of the study that general ledger operations (GLO),

Commitment control (CC), and Cash Management (CM) predict or explain changes in financial

management (FM) in the ministry and electoral commission. According to our findings, these

factors explain FM to the extent of (0.745) or (75%) as per the adjusted r-squared figure in Table

4.8 (SEE items in bold).

Table 4.8: Regression Model Summary

Model

R

R Square Adjusted R Square Std. Error of the Estimate Guards against fraud, errors in resource mgt

1 .924a .854 .745 .569 a. Predictors: (Constant), Commitment Control, General Ledger Operations, Cash Management. Source: Primary data

This means that the remaining (25%) of what takes place in FM is as a result of factors in these

institutions which this research did not investigate. These factors include the political will by the

government to implement the regulations that up hold a sound financial management system.

Poor planning and expenditure control as a result of inadequate funding of operations and

maintenance, this results in temporary cash short falls. Inadequate accounting systems because of

insufficient human resource skills required to implement the system in the different financial

departments. This will spiral to poor management of the available funds, external aid and

inadequate reporting of financial performance, coupled with poorly motivated staff as result of

the technical know who during the recruitment process. Let alone the high cost of designing,

installing, staff training, implementation and maintaining an automated integrated financial

management system.

29

Table 4.9: Regression Coefficients a, b

Model

Un-standardized Coefficients

Standardized Coefficients

t Sig. B Std.

Error Beta 1 (Constant) 21.691 2.144 10.116 .001

General Ledger Operations (GLO) -1.618 .339 -1.016 -4.776 .009 Cash Management (CM) -.240 .214 -.254 -1.123 .324 Commitment Control (CC) -.233 .127 -.413 -1.830 .141

a. Dependent Variable: Financial Management

Source: Primary data

The regression coefficient is when the regression line is linear (y = ax + b), the regression

coefficient is the constant (a) that represents the rate of change of one variable (y) as a function

of changes in the other (x); this is the slope of the regression line. Therefore, the Regression

Equation for this study (Table 4.9) can therefore be stated as follows:

[Financial Management = (a - 1.016GLO - 0.254CM - 0.413CC + e); where a=constant and e=error factor].

30

CHAPTER FIVE

FINDINGS, DISCUSSIONS, CONCLUSION AND RECOMMENDATIONS

5.1 Introduction

This chapter presents the discussion of results which is about interpretation of findings in the

context of previous research and implications of the findings to the researcher based on the

research objectives and questions posed by the research. Conclusion is the overall summary

highlighting the main points of the research findings. Recommendations refer to the solutions

produced from the research. The researcher presents the possible solutions also based on the

findings of the research.

5.2 Findings

The study was taken with the purpose of examining the relationship between the integrated

financial management system (IFMS) and financial management in the public sector taking

Uganda’s Ministry of Finance, Planning and Economic Development (MoFPED) and the

Electoral Commission as the case studies. This study analysed the linkages between the

components of Integrated Financial Management System (IFMS) towards increasing the

efficiency and effectiveness of Financial Management in public service.

The findings was guided by the specific objectives of the study to answer the research questions

which included, Examining the relationship between general ledger operations and financial

management; Examining the relationship between cash management and financial management;

Examining the relationship between commitment control and financial management. According

to the findings, 75% of the respondents agree to the statement that IFMS increases the efficiency

and effectiveness of financial management in the public service.

A total of 113 respondents were considered in this study, they include thirty nine accountants,

thirty five in finance, and fourteen in procurement, thirteen auditors and twelve in the treasury.

Of these, 61 were male respondents and 50 female respondents who gave their opinion and

experiences with the IFMS in financial management.

According to the findings, the biggest challenge faced by the IFMS is that it is limited to

employees who are directly involved in finance and need more training to enhance their

31

computer literacy skills. 25% of the respondents stated that the IFMS implementation involves

considerable human resources requirements and capacity building needs throughout the entire

government. The lack of sufficient staff with required IT-knowledge for system maintenance

cannot be easily remedied by training and hiring. The current salary structure and terms of

employment in the public sector are usually not attractive enough to compete with private sector

employment conditions and to incentivise candidates with required IT-skills. There is also a risk

that trained staff leaves for better job opportunities (Semakula, 2012).

The study findings based on the first tier IFMS implementation indicate that since 2003, the

IFMS has been extended across all 22 ministries and 25 central government agencies. The IFMS

has also been implemented in 8 local governments with plans to extend it to 6 more districts as

part of the first tier1 IFMS implementation. Using a lower (second) tier solution which offers less

complexity, the government intends to further extend the IFMS to all local governments in the

near future. The second tier project implementation (based on MS Navision) has recently

commenced (Semakula, 2012).

In addition, the implementation of the IFMS has enabled the Government to address many of the

fiduciary issues faced prior to 2003. This has led to greater expenditure control and discipline in

budget management as a result of improved oversight and enforcement of internal controls; a

reduction in the time taken to process payments; improvement in account reconciliation; and

more accurate and reliable financial reporting, (Semakula, 2012).

5.3 Discussions

The first objective of the study was to examine the relationship between general ledger (GL)

operations and financial management in the public service in the government ministry and

Electoral commission. The study findings indicated a strong relationship between the general and

financial management by (0.160) or 16% and the management policy by (r = 0.196, p<0.05) or

20% that GL is the central book which captures all transactions in the system used to produce

financial information conforming to accepted and best accounting practices.

7% or (0.073) shows a significant relationship with monitoring and evaluation that the GL

controls and determines implementation of the budget planned activities by keeping a permanent

track of the history of all financial transactions. The results in addition show a (0.060) or 6%

strong link between the GL and internal control system as it ensure compliance with the set rules

and regulations in the system by integrating it with the chart of accounts for data sharing and

classification. The study results also indicates a significant relationship between the GL and the

32

budget system by (0.152) or 15% because it is the source from which all reports and financial

statements are derived for supervising all phases of the budget system by ministry of finance.

The second objective of the study was to examine the relationship between cash

management (CM) and financial management in public service. The findings from respondents

(table 4.7) show a very significant relationship by (r = 0.285, p < 0.01) or 29%. In addition, CM

and management policy had a strong relationship by (r = 0.217, p < 0.05) or 22% implying its

use in the formulation, execution, monitoring and review process of the annual national budget

through cash flows forecasts and financing requirements. The study illustrated a positive

relationship between the CM; monitoring and evaluation by (r = 0.217, p < 0.05) or 22%

implying it assesses progress of the policy implementation process through performing

reconciliations between bank accounts and IFMS records.

In addition, allocated of resources to priority needs in the budget is possible by

monitoring the timing of cash payments and cash availability because of the positive relationship

between CM and the internal control system at (0.127) or 13% from the respondents. CM relates

positively with the internal control policies by (r = 0.267, p < 0.01) or 27% explaining the

efficient and effective implementation of government programs as a result of a good expenditure

control and the budget management discipline from the findings. From the respondents, the CM

and monitoring and evaluation had a significant relationship by (r =0.217, p < 0.05) or 22%

illustrating the strong linkage between policy beneficiaries and government program

implementers to meet operational targets, e.g. fiscal policy.

The third objective was to examine the relationship between commitment control and

financial management in the public service. Another important finding shows a positive

relationship of this objective by (r = 0.281, p < 0.01) or 28% and with management policy by

(0.141) or 14%. This finding demonstrates that the implementation and control of the IFMS by

MoFPED guarantees the commitment of sufficient funds to an expense/purchase in the approved

government budget. The study results in addition show a very strong and positive relationship

between commitment controls (CC) and the budget system by (r = 0.257, p < 0.01) illustrating

the fact that the budget envelope/size is determined by revenue and expenditure management to

ensure that allocated funds match the appropriated budget.

It has been found out that (0.141) or 14% demonstrates the strong link between CC and

the internal controls implying that linking treasury and Uganda Revenue Authority under a

turnkey concept guards against fraud, error and misuse of government resources. Similarly,

33

(0.109) or 11% positive relationship between CC and monitoring and evaluation implies that the

process whereby transactions are electronically validated, processed and linked in real time

enables decision making in redesigning or improvement of the government programs.

In addition, the study findings discovered a positive and very significant relationship

between financial management in the public service and IFMS by (r = 0.382, p < 0.01) or 38%

and management policy by (r = 0.283, p < 0.01) or 28%. Analysed results from respondents

confirm that financial management has a very close and significant inter relationship with the

selected study variables/indicators used to achieve the objectives that is, budget system (r =

0.783, p < 0.01) or 78%, internal control (r = 0.535, p < 0.01) or 53%, monitoring and evaluation

by (r = 0.595, p < 0.01) indicating its influence in public financial management.

Another empirical finding is the positive inter relationship between IFMS and its

components that is, general ledger (r = 0.480, p < 0.01) or 48%, commitment control (r = 0.779,

p < 0.01) or 78% and cash management (r = 0.639, p < 0.01) or 64% implying that the system

helps track financial events and summarises financial information ready for decision making.

5.4 Conclusion The findings in this study indicate a positive perception that the objective of this research has

been achieved as illustrated in chapter four and the proceeding discussions in chapter five. The

purpose of this study was to establish the extent to which IFMS impacts financial management in

public service.

The researcher concludes from the study findings of a close and positive relationship between the

study variable from the Pearson's Correlations significance level at 0.01 and 0.05 level (2 tail)

that the implementation of the IFMS has enabled the Government to address many of the

fiduciary issues faced prior to 2003. This has led to greater expenditure control and discipline in

budget management as a result of improved oversight and enforcement of internal controls; a

reduction in the time taken to process payments; improvement in account reconciliation; and

more accurate and reliable financial reporting.

Based on the findings, the researcher concludes that the IFMS contributes greatly to the

stewardship of public money and assets in ensuring efficient and effective use/ prioritization of

scarce resources to achieve value for money in meeting government objectives of social -

economic service delivery. It had been predicted in our objectives of the study that the

components of the IFMS; general ledger operations (GLO), Commitment control (CC), and cash

management (CM) explain changes in financial management (FM) in the ministry and electoral

34

commission. According to our findings, these factors explain FM to the extent of (0.745) or

(75%) as per the adjusted r-squared figure in Table 4.8

The researcher also draws a conclusion from the age distribution (Table 4.2), educational

qualification (table 4.3) and period served (Table 4.4) that the effective implementation of IFMS

is effective to the extent that it is accepted and utilized by the relevant staff and management.

The researcher asserts that introducing the IFMS is more than procuring and installing

technology (hardware and software) but about changing the way business is conducted and

changes to procedures will need to be adopted by staff and management.

5.5 Recommendations Based on the findings of this study, the following recommendations were made by the researcher

with the hope that if the line ministries and IFMS users implement it, then it will strengthen the

efficiency of financial controls in the public service. IFMS will provide comprehensive, reliable

and timely financial information to the Auditor General, parliament and also provide vital

information to investigative and prosecutorial agencies.

From the findings, the researcher recommends that a comprehensive chart of accounts

mapping budget classification to accounts is needed to allow seamless reporting between budget

and expenditures. The effectiveness of the IFMS depends significantly on the extent to which it

is comprehensive in covering government financial transactions and the government units

throughout the budget process. All government transactions like revenue receipts, debt,

expenditures and all government units (ministries, agencies, sub-national units, projects to the

local government) should be covered in the IFMS. This approach will enhance the

implementation of a common control regime and comprehensive fiscal reporting.

The researcher recommends that a public finance legal and regulatory framework providing

a sound basis for implementing and using electronic systems and the right conditions to operate

the IFMS is needed. The legal framework and the internal controls regime will review and enable

proper interpretation and acceptance of electronic records and reports by relevant authorities and

institutions for example when approving payments or auditing financial statements.

In addition, the researcher recommends the continued development of skills and assignment

of relevant staff to participate in implementing and using the IFMS. Implementing IFMS is

effective to the extent that it is accepted and utilized by the relevant staff and management. It is

about changing the way business is conducted which procedures will need to be adopted by staff

and management. This will minimise fears, risks and negativity from the staff about their

35

entrenched practices or power networks threatened with the introduction of IFMS, coupled with

requirements to learn new skills and the fear of layoffs among staff for them to own it when it is

rolled out country wide under a turnkey concept /one single contract.

Despite the meticulous planning, maintaining the IFMS has posed challenges. The researcher

recommends that arrangements for maintenance budgets be put in place to manage the IFMS

application, hardware and communication nets (local area networks or LANs) within each

institution, the interagency communication infrastructure (wide area network or WAN), change

management and training, system integration during and after its implementation. Success in

implementing the system depends significantly on how these components are managed. The

ministry of finance has to continue providing leadership to ensure maintenance is done when it is

due and to ensure the system continues to function at a satisfactory level, including in the wake

of new reforms.

The researcher recommends the ministry of finance to allow students to study this system

which is helping stream line the efficiency and effective of public financial management and its

benefits to the community for them to understand how it works. The ministry should provide an

alternative study program for beginners and learners of IFMS for it to adopted by those who have

interest in its implementation especially the large corporate companies.

36

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APPENDICES

Integrated Financial Management System (IFMS) and Financial Management in Public Service: The Case of Ministry of Finance, Planning and Economic

Development and Electoral Commission, Uganda

Appendix A: Questionnaire

Dear Sir/Madam, I am carrying out a research investigation on the above stated topic with the support of Gulu University. The stewardship of public money and assets to ensuring efficient and effective prioritization and use of scarce resources to achieve value for money may be explained by the implementation of the integrated financial management system (IFMS). This helps in meeting government objectives of social - economic service delivery. This system covers all the major government business processes which include budgeting, accounting and reporting, purchasing, payments/payables and revenue management. The study will establish the extent to which IFMS impacts financial management in government. You have been identified as a key resource person for the study in view of your expertise, skill and experience in financial management in public service. This is therefore to request for your invaluable input which when provided may significantly contribute to the success of this inquiry. All opinions provided will be kept secret and strictly confidential. Its results will be availed to you if you express interest.

Thank you in advance for your time and cooperation.

Laboke Noah +256 782 698488

laboke76@gmail.com

Response Guide Please Tick in the appropriate Box

SECTION A: Biographical Data

1. Gender: (a) Male (b) Female 2. Age Bracket: (a) (20-29) yrs (b) (30-39) yrs (c) (40-49) yrs (c) (50 yrs and above) 3. Education: (a) Diploma (b) Degree (c) Other 4. Period Served: (a) (Below 5) yrs (b) (5-10) yrs (c) (11 yrs and above) 5. Department: (a) Accounts (b) Finance (c) Treasury (d) Audit (e) Procurement 6. Rank: (a) Clerical (b) Supervisory (c) Managerial (d) Other

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For each of the following questions from section B to section D, you are requested to tick the most appropriate answer as provided in the space given the key:

Strongly Disagree Disagree Undecided Agree Strongly Agree SDA DA UD A SA

SECTION B: FINANCIAL MANAGEMENT Bs B1 :Budget System SDA DA UD A SA 1 All phases of the budget system are supervised by ministry of finance 2 Resources are allocated to priority needs in the budget 3 Revenue and expenditure management determine budget envelope/size 4 The budget classifications are embedded in the chart of accounts 5 Links government policy, programs and budget performance Ic B2 :Internal Control 1 Ensure compliance with the set rules and regulations in the system 2 Facilitate efficient and effective implementation of government programs 3 Guards against fraud, error and misuse of government resources 4 Ensures that policies set in the budget objectives are achieved 5 Basis for good governance and public assurance against improprieties Me B3 :Monitoring and Evaluation 1 Controls and determines implementation of the budget planned activities 2 Assesses progress of the policy implementation process 3 Links the policy beneficiaries to the government program implementers 4 Used for decision making in redesigning or improvement of the program 5 Carried out by an independent organization or body SECTION C: INTEGRATED FINANCIAL MANAGEMENT SYSTEM Glo C1 :General Ledger Operations 1 The central book which captures all transactions into the system 2 Keeps a permanent track of the history of all financial transactions 3 Integrated with the chart of accounts for data sharing and classification 4 The source from which all reports and financial statements are derived 5 It enables electronic and automated posting of transactions on the system Cm C2 :Cash Management 1 Monitors and forecasts cash flows and financing requirements 2 Performs reconciliations between bank accounts and IFMS records 3 Monitors the timing of cash payments and cash available 4 Led to greater expenditure control and discipline in budget management 5 Led to smooth implementation of the operational targets e.g. fiscal policy Cc C3 :Commitment Control 1 Guarantees sufficient cash funds committed to an expense/purchase 2 Ensures that allocated funds matches the appropriated budget 3 It links Treasury and Uganda Revenue Authority under a turnkey concept 4 Transactions are electronically validated, processed and linked in real time 5 Manage risks by instituting tight security control from an authorized user. SECTION D: MANAGEMENT POLICY Mp D4 :Management Policy 1 Produces financial information conforming to accepted and best practices 2 Formulate, execute, monitor and review the annual national budget 3 Over see & implement the Integrated financial management system 4 Appraise & review projects in liaison with line ministries and institutions 5 Develop fiscal & monetary policies for the public and private sector growth

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AN OBSERVATION AND EVALUATION OF THE INTEGRATED FINANCIAL MANAGEMENT SYSTEM OF FINANCIAL MANAGEMENT

IN PUBLIC SERVICE

Appendix B: OBSERVATION GUIDE The researcher used this guide to observe and evaluate the specific objectives of the study which included, examining the relationship between IFMS general ledger operations, cash management, commitment control and financial management in public service. Areas of observation included; 1- The software set up and loading of IFMS. 2- The different oracles and modules installed with users of IFMS in their departments. 3- Loading of the system and the internal control system set in place. 4- The importance of IFMS in financial management. 5- The activities done in IFMS. 6- The challenges encountered using IFMS and alternative solution.

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Figure 5.1 IFMS General set up

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Figure 5.2 Transaction Process

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Figure 5.3 Responsibility Window

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Figure 5.4 Reconciliation Window

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Figure 5.5 Project definitions Reconciled