Mizoram IFMIS Project by decree


									                                        Mizoram IFMIS Project
                                                                                                     A. Lianzuala
                                                                                               Eddie Khawlhring

       IFMIS or an Integrated Financial Management Information System refers to the use of
information technology in financial operations to assist in managerial and budgetary decision-
making, carrying out financial duties & responsibilities, and in the preparation of financial reports
and statements. In simpler terms, it is an information system that records financial transactions and
summarizes financial information. In the sphere of Government operations, IFMIS refers more
specifically to the computerization of public financial management (PFM) processes, from budget
preparation and execution to accounting and reporting, with the help of an integrated system for the
purpose of financial management. The scope and functionality of an IFMIS can vary, from basic
General Ledger accounting application to a comprehensive system covering budgeting, accounts
receivable/payable, cash management, commitment control, debt, assets and liability management,
procurement and purchasing, revenue management, human resources management and payroll.
Integration is most critical in any IFMIS. This implies that the system should have a standardized
system of data classification for recording financial transactions; internal controls for data entry,
processing and reporting and common processes for similar operations to avoid duplication.
       In the government realm, IFMIS systems must be designed to support distinctly public sector
functions. They must be able to handle and communicate all the financial movements for the
complex structure of budget organizations. Moreover, they must be designed to ensure compliance

     Figure 1: Typical IFMIS components

       Payment module           Receipts module               Budget module               Other modules
         Precheck and            Recording inflows,              Planning &              Project, debt, asset
         payments with             tax & non tax                preparation of             management,
       budgetary controls.           revenues.                 budget, controls.          utilities, security.

                                               General Ledger
       Cash mangt. module                    Central database where                       HR module
       Forecast & manage cash                     all info is posted                 Payroll, Provident fund,
             flows, bank                     following rules imposed                      Pension etc.
            reconciliation.                   by Chart of Accounts.

                 Financial reports             Statutory reports               Other reports
                 Accounts, budgetary             As per statutory              HR reports, CoA
                   reports, financial           requirements and                listings, security
                     transactions.                specifications.             related reports etc.

with budget laws and public finance rules and restrictions. An IFMIS can improve governance by
providing real-time financial information that financial and other administrators can use to formulate
budgets, manage resources, and administer programs. Sound IFMIS systems can not only help
governments gain effective control over public finances, but also enhance transparency and
accountability, reducing political discretion and serving as a deterrent to corruption and fraud.

IFMIS in the Government of India
       In the Government of India (GOI), IFMIS has been implemented by the use of two
applications namely COMPACT and e-lekha. COMPACT is an application for computerizing
processes involved in payment/receipts systems and accounting which provides information
backbone for Monthly and Annual financial reporting for Government of India. COMPACT is certified
by STQC and is already running successfully in 324 Pay and Accounts Offices (PAOs) of
Government of India. The system uses a Client - Server Architecture, has role based access and
database level security with multiple user facility with Graphic User Interface. The system has
elaborate input and process validations and has integration of payment and accounting functions.

     Figure 2: IFMIS in the Government of India

          CGA                            Line Ministry                       DDO

                                                   Budget Allocation             Bills/ Valuables

                                                                                          COMPACT at PAOs

                                                         ECR                         Passed Bills &
                                                                                     Ch eq ues

          Web                                  BUDGET                                     GPF          PENSION
         based                upload
         e-lekha              s
                                                                           V ouchers/         GPF
                                                   Daily Mem o.            Valu ab les        V oucher/
                                                                                              Ch allan s
                                                                                              Sch edu les
                                                               COMPILATION                                     PPO
                                        Cancel led
                                        Ch eques
                                        T E & Challans

                              Date wise /DDO
                              wise Accounts               Scrolls                         Voucher/
                                                          (Receipt /       Error          Challans
                                                          Payment)         Scrolls

                                                                  BANK                CDDO                  CPAO

       CGA      :   Controller General of Accounts             DDO     :   Drawing & Disbursing Officer
       Pr. AO   :   Principal Accounts Office                  CDDO    :   Cheque Drawing & Disbursing Officer
       CPAO     :   Central Pension Accounting Office          ECR     :   Expenditure Control Register
       PPO      :   Pension Payment Order                      GPF     :   General Provident Fund
COMPACT interfaces between the PAOs and other entities like Drawing & Disbursing Officers,
Banks and the Central Pension Accounting Office. E-Lekha on the other hand is a Web based top
level consolidation and financial reporting system. The decentralized application (COMPACT) feeds
the centralized e-lekha database. It facilitates global accounting and administrative directories for
effective validations of COMPACT data and is used for compilation of Government accounts and
MIS systems. e-Lekha is also being used as a platform for monitoring of Plan Schemes. The e-
lekha application, incidentally has achieved recognition by way of being awarded as one of the best
IT applications by PC Quest in its June 2007 issue.
       The value additions made available by the use of these applications in the Central
Government are computerisation and modernisation of functions in the PAOs in terms of elimination
of duplication, redundancies and human errors in processes, speed and accuracy; transparency in
processing of payment claims with concurrent compilation of accounting information; better
monitoring, exchequer control, reconciliation and transparency; computerised maintenance of
Provident fund accounts; computerised pension processing; better Cash Management through
electronic interface with the banking system and availability of historical data for trend analysis.

Genesis of the Project
       The initiative of the office of Controller
General of Accounts (CGA), Ministry of Finance,
GOI for developing and implementing IFMIS for the
State of Mizoram has its genesis in January 2008
at Shillong, Meghalaya wherein INGAF (Institute of
Government Accounts and Finance), the training
wing of the office of the CGA had organized a
seminar as a part of its outreach programme. The
seminar titled ‘Integrated Financial Management
Information System (IFMIS) - The North Eastern
Perspective’ was attended by representatives of the
state governments of the North Eastern region, and
amongst    other    things,   the   initiatives   being
undertaken by the office of the CGA on IFMIS in
Government of India was presented. In order to
meet its requirements for automation of key
aspects of budget and accounting operations, the Government of Mizoram (GOM) had proposed
setting up of IFMIS in Mizoram on similar lines. A Study Team from the office of CGA was deputed
to visit Mizoram on several occasions for assessment of the ground environment at Mizoram. The
team made a careful study of the procedural systems involved in government spending, budgetary
process, the chart of accounts in use, Internal Audit & Control mechanisms, comparative analysis
with the procedures in place at the Central Government and the general readiness of the state for
change. The findings of the Study Team in broad terms are:
   -   GOM follows an accounting system that is very similar to the system followed in the
       Government of India.
   -   The Chart of Accounts used has the exact 15-digit structure, along with the 6-tier
       classification followed by GOI Departments.
   -   The treasury rules and manuals followed are in line with those followed in the Government of
   -   The procedures regarding payments, reconciliation and final accounting is different.
   -   The Treasuries, offices of DDOs and other higher-level offices involved in financial activities
       were still relying on manual procedures.
   -   The State had already recognized the need for change and had deputed officials to study
       initiatives in automating Treasury operations in the states of West Bengal & Maharashtra.
The Study Team recommended that the existing system of payment and accounting system in
Mizoram could be revamped by the development and implementation of IFMIS for Mizoram on lines
of COMPACT and e-lekha. The process could be initiated by implementing COMPACT as a pilot
project in one of the Treasuries as similarity of procedures with the PAOs would allow replication of
COMPACT without major changes in its architecture. The expertise available in the office of CGA
could also assist the state in capacity building in areas of financial management and Internal Audit.
After holding number of discussions and consultations with the GOM, it has been decided to run the
pilot at one of the Treasuries situated at the capital (Aizawl), i.e. the Aizawl South Treasury.

       The project seeks to implement IFMIS in Mizoram by use of IFMIS applications already
available in the Government of India, i.e. COMPACT & e-lekha, after undertaking necessary
customizations to accommodate minor procedural differences in the working of the two
governments. As mentioned earlier, the project will make a modest start by undertaking a pilot at the
Aizawl South Treasury, which is proposed to be completed in a time frame of 12 months. Necessary
customization will be carried out by the National Informatics Center (NIC), who will also provide
initial assistance with regard to hardware requirements, setting up of a Local Area Network,
provision of Internet facilities, installation of the software and other technicalities. Site preparation
will be carried out by the Government of Mizoram. Training, data entry operations and modifications
of the Chart of Accounts and project management will be handled by INGAF. The pilot will serve to
test the waters and by the time it is completed all necessary customization required in COMPACT
for the environment in the Government of Mizoram would have been identified and carried out. More
importantly, IFMIS through COMPACT and e-lekha would have made its presence felt in the political
and power dynamics of the State,                                         M izoram: B as ic I nf ormat ion

which would define its role for the               Location                    : Latitude 21o 58' & 24o 35' N
                                                                                Longitude 92o 15' & 93 o 29' E
future. The pace of roll out of a                 Area                        : 21,087 Sq Kms
                                                    North - South               277 Kms
Mizoram-tuned COMPACT to the other                  East - West                 121 Kms
eight Treasuries will depend on a host            International Border        : (a) With Myanmar - 404 Kms
                                                                                (b) With Bangladesh - 318 Kms
of   factors   such    as     political   will,
                                                  Temperature                 : 11o - 21o C in winter, 20o - 30o C in summer
budgetary      constraints,    acceptability      Average rainfall            : 250 per annum
and absorption capacity of existing               Population                  : 8,91,058 (2001 Census)
                                                  Sex Ratio                   : 938 female per 1000 male
system to the change.
                                                  Literacy                    : 88.49% (Second Highest in the country)
        The Mizoram IFMIS initiative is           Highest Point               : Phawngpui (Blue Mountain) 2,210 M
not intended to be limited to the state           Religion                    : 90% Christianity
of Mizoram alone. The project is                  Assembly Constituencies     : 40
                                                  Seats in Parliament         : 1 each in Rajya Sabha and Lok Sabha
intended for replication in other states
                                                  Districts                   : 8
of   the    North     East,    which      has     Autonomous District Councils: 3
unfortunately continued to be one of              Longest River               : River Tlawng - 185.15 Kms
                                                  Source: http://www.mizoram.nic.in/about/glance.htm
the most backward regions of the
country. The North Eastern Region Vision 2020 attributes this to weak governance and widespread
leakages—of revenues that should have accrued to the public exchequer, of expenditures on
various development schemes due to rent-seeking of various kinds, and of large amounts of funds
through rigging of contracts. A situation that a well-defined IFMIS could help to change for the
better. However, care would have to be taken that the beneficiaries are informed all along that
IFMIS does not drive the system, and it is the other way round. Introducing an IFMIS should not be
viewed merely as an IT solution and simply automating inefficient processes will not make them any
more efficient; nor will anything be gained from automating tasks that were not needed in the first
place. As such, capacity building exercises, training and orientation programmes will have to
carefully designed prior to and during the change process.

Objectives and advantages
        The project envisages setting up of COMPACT and e-lekha with architecture as shown in
figure 3. The operations of COMPACT have been shown as bifurcated in the offices of the Treasury
and the Directorate of Accounts & Treasuries, as this is the procedure in place in the GOM. Modules
that are shown in dotted lines represent those that will not be implemented during the pilot phase,
but will be incorporated later after GOM undertakes necessary systemic changes. As mentioned
earlier, the project in Mizoram is to serve as a model for replication in other states of the region with
the aim of providing these states a system driven budget control & adherence mechanism;
improvements in organizational processing efficiencies - automation of manual processes and
General Ledger; greater data consistency and accuracy of financial information in Government;
enhanced accountability - improved methods of financial and management visibility; and accurate
and timely management reports that better equip administrators with a control and monitoring

   Figure 3: Proposed IFMIS at Mizoram

                               Line Ministry                       DDO             Directorate of Accounts
                                                                                        & Treasuries
                                                 Bills/ Valuables        Summary                GPF/Pension Bills
       Daily uploads        L OC
       & downloads          All ocation
                                                                           V ouchers/             Treasury
                                    BUDGET                                 Valu ables
       Web based
                             Cancelled                             COMPILATION
        e-lekha              Cheques
                             TE & Challans

                                                      Scr ol ls;                        V oucher/ challans
     Daily uploads             Line Ministry          /Chall ans
     & downloads                                             BANK                  CDDO
                                             GPF cases
                                                                             DDO w ise Accounts & Vou chers

                                PENSION                 GPF                                         COMPACT
                                                                                              Dir. Acs & Tres.
       Accountant                                                        COMPILATION
       spending                           GPF/Pension
       agencies etc.                      Bills

                                                                                           DDO wise
                                                                                           Accounts & Vouchers

                                          Treasury                          Accountant
                                           Office                            General

mechanism, ensuring that sound financial governance is adhered to.
       As a solution for inadequate physical infrastructure, low human capital formation and
stagnant economic growth, Governments in the region are seeking investments from financial
institutions and business houses. A debilitating factor common to all governments in the region is
their inability to convince investors of transparency and accountability in the delivery processes of
the proposed investments. The IFMIS initiative is targeted to address these issues and the GOM is
expected to avail this advantage immediately, as it is in the process of negotiating a USD 150
million loan from the Asian Development Bank for its developmental schemes. The Mizoram IFMIS
project is being incorporated as the solution to the ADB’s specified necessity for a reliable FMIS
prior to the latter’s financial assistance to the State.
        The use of COMPACT for this project also has an added advantage as this would enable the
GOM (and optimistically to other states later on) to enjoy both benefits of ‘build or buy’ options as
the systems and procedures prevalent in the two governments does not differ much, as we have
seen in the preceding paragraphs. Advantage of a custom designed application, with saving of
considerable time normally spent in designing, developing and testing custom designed software
would be available. Anyway, at present, a commercial package ‘off the shelf’ (COTS) for automating
government financial operations, having capacity for tailoring to needs and capturing transaction
level information (as available in COMPACT) is yet to be made available in India.

Project Prospects
        The Mizoram IFMIS project so far is going          Mizoram is our homeland
as per plan. It has been well received at all levels of    It is not given or gotten as a gift
                                                           It is not acquired by privilege
the government machinery in the State, right from          Or potential contracts
                                                           It is not bought with gold or held by the force
the Chief Minister who expressed enthusiasm and
                                                           No, it is made with us the sweat of the brow
pledged support for the project when the CGA               It is the historic creation
                                                           And the collective enterprise of a people
visited him in March 2008. Top level officials have        Bodily, spiritual and moral
given priority to the essentialities at this stage such    Over a span of generations.

as site preparation at the Aizawl South Treasury           Poem posted in the official website of Mizoram:
and made available staff for training and initial data
entry. The officials of the Treasury themselves are keen as they have availed information
technology enabled services (ITES) in the banks, travel agencies and other institutions and the
prospect of change from the existing manual procedures to an IT based on has generated a certain
level of excitement bordering on anxiety.
        However, there is still a long way to go and accordingly change management will have to be
carefully executed. As the project progresses, the continued commitment of the top management
will be tested as the detailing of customization will often require immediate decisions on matters
such as the chart of accounts, inclusion or exclusion of procedures, allotment of resources and
provision of facilities for the project. As in the case of any organization, routine work would take
precedence over matters that require planning and analysis. The patience of the staff at the site
office will also be severely tested as they will have to engage in the learning process while coping
with their existing day-to-day functions. As integration is the key in any IFMIS solution, work will
proceed at the pace of the slowest learner. Also, unlike the private sector, the option of hiring new
staff more oriented or better qualified for the new system is not available in a government setup.
The clientele of the site office i.e. pensioners drawing monthly pension, contractors involved in
construction works seeking payments, government employees seeking salary payments or medical
reimbursements, non governmental organizations involved in social reform seeking government
assistance etc. will also have to bear with the difficulties during the change process.
        Notwithstanding the challenges, the project is feasible and the prospects are promising. As
an    indicator   of   this   optimism,   the   e-governance   roadmap     of   Mizoram    prepared    by
PricewaterhouseCoopers states “the biggest strength of Mizoram is the close knit, information
sharing, highly literate, value based community. At a time when democracies all across the World
are trying to evolve to next and more effective stage of governance by the means of localized,
decentralized but interlinked decision making mechanisms, Mizoram starts with advantage of
already having a rich legacy of autonomous but interoperable coexistence among various ethnic
groups, tribal sets, NGOs and regional collections in a predominantly rural society. This implies that
empowerment of institutions of local governance, as envisaged by Government of India, would
require considerably less social reengineering in Mizoram in comparison to most other regions of
the Country. This also implies that in terms of attracting active and long-term participation from
various external entities in different domains of its economic and social life, Mizoram can grow to be
amongst the best in the country”.
        Mizoram attained Statehood as recently as 5th August 1986 and as such has an advantage
of late start in governance. Before the older and closeted system of governance gets ingrained into
its own systems, it has the opportunity to utilize technology for creating modern governance
characterized by efficiency and transparency. The young State has an even younger population as
59% of it is in the age group of 16 to 59 years (Census 2001 figures) with literacy of over 88%,
which is second in the country after the State of Kerela. With the advent of the Right to Information
Act, this population is demanding ever more of its government in terms of programme delivery
especially in areas of employment generation. In this context, initiatives like the implementation of
an IFMIS to assist governance could not have come at a better time.

     1. Rodin-Brown, Edwin (April 2008). “Integrated Financial Management Information Systems – A
        Practical Guide”.
     2. ADB “Preparing the Mizoram Public Resource Management Program” Draft Final Report, 2008
     3. North Eastern Region Vision 2020, Vol 1. http://mdoner.gov.in/writereaddata/sublinkimages/summary-
     4. Vision Document of Mizoram. http://mdoner.gov.in/writereaddata/sublinkimages/Mizoram-
     5. PricewaterhouseCoopers (June 2006). E-Governance Roadmap of Mizoram.

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