1. P U B L I C S E R V I C E S FINANCIAL MANAGEMENT INFORMATION SYSTEMS: ESSENTIAL TOOLS FOR GOVERNMENTS EVERYWHERE PRESENTED BY MICHAEL VLAISAVLJEVICH MANAGING DIRECTOR - BARENTS GROUP TO THE INTERNATIONAL CONSORTIUM OF GOVERNMENTAL FINANCIAL MANAGEMENT APRIL 2, 2003

2. P U B L I C S E R V I C E S Page 1 MICHAEL VLAISAVLJEVICH MANAGING DIRECTOR BARENTS GROUP 1676 International Drive, Suite 7275 McLean, Virginia 22102 E-mail: mvlaisavljevich@bearingpoint.net Website: www.bearingpoint.com Phone: 703.747.3234 Fax: 703.747.3813

3. P U B L I C S E R V I C E S Page 2 FMIS Technology enables reform Critical tool for proper expenditure control Processes all transactions Records and accounts revenues and expenditures Essential for transparency and accountability

4. P U B L I C S E R V I C E S Page 3 FMIS PACKAGES ARE FEASIBLE NOW Packages have been tested and implemented in countries at all levels of development Tailored to the processes of the government sector Project budgets should be carefully matched to project scope and size Capable client project management is a key to success

5. P U B L I C S E R V I C E S Page 4 KAZAKHSTAN TREASURY MODERNIZATION PROJECT

6. P U B L I C S E R V I C E S Page 5 PROJECT FUNDED BY WORLD BANK To assist the government in strengthening the budget execution system by: Supporting the establishment of computerized treasury system Training of personnel Overall aim is to enhance the capacity of the government for: Effective use of cash resources Monitoring budget execution Production of timely and accurate financial information

7. P U B L I C S E R V I C E S Page 6 PHASED APPROACH BearingPoint was selected to assist the government of Kazakhstan to manage the Project Designed the Project for implementation through Phased Approach Phase 1 - Development of a functional design for the Treasury system Phase 2 - Development of computerized Treasury system and testing at pilot sites Phase 3 - Replication of the system throughout the country

8. P U B L I C S E R V I C E S Page 7 PROJECT DESIGN Treasury Ledger – Focal point of the government financial management Commitment Accounting – Essential tool for expenditure control Accounts Payable – Mechanism for paying government expenditures in coordination with Commitment System Revenue Management – Captures all sources of revenues for consolidation Payroll – Regional system for paying government employees Cash Management – System for reconciliation of Treasury Single Account and managing cash resources Asset Management – System to register all government assets in broad categories

9. P U B L I C S E R V I C E S Page 8 PHASE 1 Prepared a functional design for the new Treasury system and developed related procedures and manuals n Assisted the government in establishing the new budget classification system based on IMR GFS classifications n Established Standard Chart of Accounts n Assisted the government to upgrade the in-house technical capacity n Trained Treasury personnel on the new Treasury system and procedures n Developed hardware and software specifications for the technology platform required to set up the Treasury information system n Assisted the government in the procurement of the required HW and SW Preparation of RFP Tendering Evaluation of Proposals and selection of the most preferred bidder Contracting

10. P U B L I C S E R V I C E S Page 9 PHASE 2: BEARINGPOINT MANAGED HP/ORACLE Implemented: Treasury Ledger Commitment Accounting Accounts Payable Revenue Management Cash Management Asset Management Using the standard features of ORACLE Financials No customization of functionality; Developed few custom reports The government decided to put Payroll implementation on hold

11. P U B L I C S E R V I C E S Page 10 IMPLEMENTATION Developed detailed functional specifications for individual modules of the Treasury system n Performed as technical advisor to the government of Kazakhstan on hardware, software, training and project management areas n Provided technical advice to ORACLE team in mapping the Kazakhstan Treasury requirements with the features of ORACLE applications n Assisted in the development of training program and materials n Performed as medium between the contractor and the government of Kazakhstan in dealing with the day-to-day matters relating to the project n Assisted in pilot-testing the system at Central Treasury, 2 ministries, 2 oblast treasury offices and 20 rayon treasury offices

12. P U B L I C S E R V I C E S Page 11 PHASE 3: SYSTEM REPLICATION THROUGHOUT THE COUNTRY The involvement of BearingPoint completed after successful testing of the system at pilot sites The government of Kazakhstan, HW Supplier Hewlett Packard and SW Supplier ORACLE performed the system roll-out to the remaining oblasts and ministries

13. P U B L I C S E R V I C E S Page 12 GENERAL REMARKS ABOUT THE PROJECT The first Treasury Reform project in the former USSR that successfully implemented a government accounting system using off-the-shelf package The first project of its kind in the region that systematically implemented Treasury Single Account in conjunction with a treasury system

14. P U B L I C S E R V I C E S Page 13 NATION BUILDING: RAPID PUBLIC SECTOR FINANCIAL SYSTEMS IMPLEMENTATION IN WAR TORN KOSOVO

15. P U B L I C S E R V I C E S Page 14 THE MANDATE: SECURITY COUNCIL RESOLUTION 1244 Establish in Kosovo an interim Civilian Administration with: Legislative and Executive powers Administration of the Judiciary Promote the establishment of substantial autonomy and self-government

16. P U B L I C S E R V I C E S Page 15 THE CHALLENGE FOR FINANCIAL MANAGEMENT Build a Financial Management process and system from nothing No laws or regulations No people or infrastructure No banking system Protect the integrity of the revenue raising and expenditure process Issue of donor confidence

17. P U B L I C S E R V I C E S Page 16 GOOD GOVERNANCE Clarity of roles and responsibilities of levels of government and public entities Open decision processes particularly for budget preparation, execution, and reporting Public availability of information Independent assurances of integrity through external audit Source: IMF Code of Good Practices on Fiscal Transparency

18. P U B L I C S E R V I C E S Page 17 CENTRAL FISCAL AUTHORITY Manage the Kosovo Consolidated Budget (KCB) consisting of: General government Municipalities Public enterprises Formulate overall fiscal strategy based on sustainability Develop revenue and expenditure policies Develop revenue raising programs Determine procurement framework Conduct internal audit Manage the Kosovo Consolidated Fund Responsible for financial reporting

19. P U B L I C S E R V I C E S Page 18 CENTRAL FISCAL AUTHORITY ORGANIZATIONAL CHART

20. P U B L I C S E R V I C E S Page 19 TREASURY OPERATIONS Expenditure and revenue controls Banking arrangements Banking and payment authority of Kosovo (BPK) Commerzbank – Frankfurt Micro Enterprise Bank – Pristina Instruct agencies Funds management Accounting for expenditures and revenues

21. P U B L I C S E R V I C E S Page 20 IT SYSTEM DEVELOPMENT AND SUPPORT Key Issues Develop System to meet Kosovo requirements Simple Maintenance

22. P U B L I C S E R V I C E S Page 21 IT SYSTEM DEVELOPMENT AND SUPPORT Accounting application specifications Meet sound internal expenditure control procedures Provide management reporting for accountability Satisfy international reporting requirements under GFS Complex mix relating to donations for budget funding and reconstruction project financing Expandable to cover requirements of lower tiers of government FreeBalance system implemented

23. P U B L I C S E R V I C E S Page 22 AFGHANISTAN GOVERNMENT TREASURY SYSTEM

24. P U B L I C S E R V I C E S Page 23 FINANCIAL MANAGEMENT AGENT PROJECT LAUNCHED AUGUST 22, 2002 To immediately develop a centralized expenditure recording, payment processing and reporting system for budget expenditures A full computerized accounting system for expenditures and revenues and financial reporting for the government

25. P U B L I C S E R V I C E S Page 24 RAPID RESULTS Reviewed processes Developed chart of accounts Redesigned forms Determined reporting requirements Computerized the current manual system tracking using the facilities of FreeBalance accounting package Commenced live operations October 23, 2002

26. P U B L I C S E R V I C E S Page 25 FUNCTIONS OF THE SYSTEM Check expenditure data for payment Print checks Update treasury ledger Maintain banking information Maintain complete expenditure data of central agencies Maintain payroll expenditure data of provinces

27. P U B L I C S E R V I C E S Page 26 STANDARD CHART OF ACCOUNTS Source of funds General budget Designated grants Organization Location Economic classification

28. P U B L I C S E R V I C E S Page 27 REPORTING Expenditure reports of central agencies General budget Donor grant Reports by source of funding Reports by ministry/organization Reports by location Reports by economic classification Reports by individual payments

29. P U B L I C S E R V I C E S Page 28 TRAINING AND LOCALIZATION EFFORTS Basic computer skills training FreeBalance package training Applications System administration Technical On-going support from software vendor Daily operations performed by local staff

30. P U B L I C S E R V I C E S Page 29 PLAN FISCAL YEAR 1382 (DARI CALENDAR) Budget management New chart of accounts for enhanced reporting – GFS compliant Complete revenue and expenditure information Explore possibilities for system extension to provinces Provincial budget execution information System interface in Dari Reorganization of treasury bank accounts Suitable payroll system

31. P U B L I C S E R V I C E S Page 30 HOW BARENTS GROUP OPERATES Leading provider of financial management services in countries in transition 400 professionals based in more than 65 countries around the world Extensive experience in systems implementation around the world Emphasis on knowledge transfer and collaboration with government clients as partners