IFMIS ROLE IN BUDGET PROCESS Hekinus Manao Director for Financial Accounting & Reporting Ministry of Finance - Republic of Indonesia

IFMIS : Integrated Financial Management Information System An interrelated set of Sub-Systems that plans, processes and reports upon resources, quantifying them in financial terms. IFMIS provide decision makers : To control aggregate spending and the deficit; Strategic prioritization of expenditure across policies, programs, and projects for allocative efficiency and equity; Better use of budgeted resources, i.e., to achieve outcomes and produce outputs at the lowest possible cost

IFMIS Support at Macro, Strategic, and Operational Levels 1. Macroeconomic Forecasting : Used by the MOF, the Planning Agency, and the Central Bank to support the setting of fiscal policy; Assist with macro fiscal planning and the development of the macroeconomic framework; To set aggregate budget parameters and to submit estimates

IFMIS Support at Macro, Strategic, and Operational Levels 2. Budget Preparation and approval : Support strategic priority setting by assisting with the preparation of budget estimates; Consolidate details of ongoing and planned programs and projects from line ministries and produce documents that form the basis of the negotiations between MOF and line ministries ; Produce the approved budget estimates.

IFMIS Support at Macro, Strategic, and Operational Levels 3. Budget Execution, Accounting, and Fiscal Reporting : Support operations; Repository of financial data that serve as the basis of the IFMIS; Perform accounting functions, processes for budget execution, monitoring and control, Provide information required for Cash management Produce Financial Reports.

IFMIS influence, and are influenced by an overall regulatory framework : The control structure that governs the use of government funds, and are derived from the legislative framework; Account classification, which enables consistent recording of each financial transaction for expenditure control, costing, and economic and statistical analysis; Reporting requirement : internal and external

IFMIS link through SET OF COMMONLY SHARED DATA BASES Vertical Integration Horizontal Integration PLANNING ACCOUNTING BUDGETING CASH MANAGEMENT AUDIT BUDGETING FINANCIAL MANAGEMENT CYCLE

IFMIS INADEQUACIES SYMPTOMS UNDERLYING FACTORS No costing information on policies and programs; Lack of timely and appropriate financial information for decision making during planning and budget formulation; Lack of timely and accurate financial management information during budget execution; Financial reporting is not available on time Gap in the legal framework; Lack of a Chart of Account; Poorly specified reporting requirement; Multiple ex ante controls on expenditure; Un integrated FMIS across government; Inability to move data from one stage in the budgetary cycle to the next; indiscipline in implementing Chart of Account

INTEGRATION is Requirement not an Option; The Failure to Integrate FMIS Fragmented and unreliable data; Duplications of data and difficult to reconcile Failure to use actual results in planning and budgeting; Failure to fully and publicly report Financial and operational results; Undue emphasis upon one of the component subsystems, usually budgeting, which tends to dominate, duplicate and crowd out the others

ACCOUNT CLASSIFICATION ORGANIZATION FUNCTION SUB FUNCTION PROGRAM ACTIVITY Account Code

EXPENSE CLASSIFICATIONS (Economic) 1. Wages and Salaries 2. Government Operation 3. Capital Expenditure 4. Interest 5. Subsidies 6. Grant 7. Social Benefits 8. Other

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