Abstract : In most developing countries (DCs), budget execution and accounting processes were/are either manual or supported by very old and inadequately maintained software applications.This has had deleterious effects on the functioning of their public expenditure management (PEM) systems, that are often not adequately appreciated.
The consequent lack of reliable and timely revenue and expenditure data for budget planning, monitoring, expenditure control, and reporting has negatively impacted budget management. The results have been a poorly controlled commitment of government resources, often resulting in a large buildup of arrears; excessive borrowing, pushing up interest rates and crowding out private-sector investment; and misallocation of resources, undermining the effectiveness and efficiency of service delivery.
Further, governments have found it difficult to provide an accurate, complete, and transparent account of their financial position to parliament or to other interested parties, including donors and the general public. This lack of information has hindered transparency and the enforcement of accountability in government, and has only contributed to the perceived governance problems in many of these countries.
In light of these adverse developments, it is perhaps not surprising that many DCs have pressed for, or have been pressed into, adopting financial management information system (FMIS) projects to strengthen their PEM systems.
The establishment of an FMIS has consequently become an important benchmark for the country’s budget reform agenda, often regarded as a precondition for achieving effective management of the budgetary resources.
Although it is not a panacea, the benefits of an FMIS could be argued to be profound. First, the improved recording and processing of government financial transactions also allows prompt and efficient access to reliable financial data.
This supports enhanced transparency and accountability of the executive to parliament, the general public, and other external agencies. Second, an FMIS strengthens financial controls, facilitating a full and updated picture of commitments and expenditure on a continuous basis.
Once a commitment is made, the system should be able to trace all the stages of the transaction processing from budget releases, commitment, purchase, payment request, reconciliation of bank statements, and accounting of expenditure.
This allows a comprehensive picture of budget execution. Third, it provides the information to ensure improved efficiency and effectiveness of government financial management. Generally, increased availability of comprehensive financial
information on current and past performance assists budgetary control and improved economic forecasting, planning, and budgeting.
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