Republic of Moldova

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Republic of Moldova







Public Finance Management Project



Technical Assistance for the Integrated Financial
Management Information System Concept Definition


Final

Report




September

2005










Moldova FMIS Final Report


-

i

-


EXECUTIVE SUMMARY

The objective of this assignme
nt is to create an agreed Conceptual Design for the Financial
Management Information System (FMIS) for the Government of Moldova (GOM) at both
national and sub
-
national levels.

This
Final

Report is produced at the end of the
third

input
phase of the assign
ment
.

The

report
describes

a high level conceptual model of the Government FMIS which will be
established in Moldova.
It
recommends that the core of the system

(including budget
preparation, budget execution, cash management, accounting and reporting)

is
provided by
an ‘off
-
the
-
shelf’ Financial Management Software Package.

Processes

that are not covered
by this core package
(such as payroll or debt management)
will be
electronically
interfaced
with it
, enabling speedy transfer of information
.

The key to

the system’s effectiveness is
to ensure

that all components

(both package and
interfaced)

use the same budget classification and chart of accounts, and that this chart of
accounts collects data in sufficient detail that it can be arranged into information

in any
reporting format that may be required.

This requirement applies to
all S
tate and
ATU

government institutions, and to the

State Social Insurance Budget (SSIB) and the Mandatory
Health Insurance Budget (MHIB).

The package system will operate in the
Ministry of Finance

(MoF)
:
the General Division of
Budget Synthesis, the
Sectoral
Finance Divisions
,
State
Treasury

(Central Treasury and all
Territorial Treasuries)
,
and the State Enterprise
Fintehinform (formerly IT department).

Line
ministries,
ATU

gov
ernments and general finance departments will be linked to the system
using locally developed software, enabling transmission of input data and receipt of reports.
The network connections in Chisinau (r
eferred to as the Metropolitan A
rea Network


MAN)
wi
ll be made using the
government
f
ibre
-
optic network being developed by the special
Telecommunications Centre

(STC)
, which will be completed in 2006. A decision will be
made during the next two years on which network connections shou
ld be used to link
Terr
itorial T
reasuries to the centre

(the Wide Area Network


WAN)
.
At the moment the
Moldt
elecom
f
ibre
-
optic network extends to 20 rayons (though not to Territorial Treasuries)
and
may

be extended to most rayons by 2009.

STC also has plans to extend the
go
vernment fibre
-
optic network.


The FMIS package will process detailed transactions for State and ATU budget institutions
but not for SSIB or MHIB. Analysed summaries of income and expenditure of the SSIB and
MHIB should be transmitted electronically to Mo
F with the frequency and timeliness that
MoF requires.

The new FMIS will bring substanti
al benefits to its stakeholders:


i
mproved access to
information
;

b
etter quality information
;

improved transaction efficiency;

and i
mproved control

and auditability.

This will enable
improved fiscal control, resource allocation, management of
resources, cash management, and control of expenditure
.

Although the FMIS could simply be used to make the existing financial management
processes in Moldova more efficient, th
e opportunity has been taken to examine
these
processes and to
identify gaps and differences from what may be called ‘best practice’ or
‘best experience’ in government financial management. Some of these gaps represent
faults where improvements must be ma
de. Others indicate that modern systems may offer a
more convenient, more efficient, or simply more ‘user
-
friendly’ way of achieving objectives.
C
hanges in processes that need to be made
include:

Moldova FMIS Final Report


-

ii

-




Requiring all government organisations (except state owned
business
enterprises) to use the same budget classification and chart of accounts.



Budget format to be improved to co
-
ordinate directly with MTEF
.



The revenue from special funds and s
pec
ial means income

will be paid into the
same bank account as other reve
nue
, but these will
continue to be accounted
for as separate funds with designated expenditure purposes. However, the
number and value of these funds is high and, over time, it is accepted that
they will be reduced
.



Introduction of a warranting system
.
This is a system whereby Ministry of
Finance authorises the maximum sums of money that budget executors may
spend in agreed time periods (e.g. t
wo
-
week
ly

or
one
-
monthly

periods
)
.
It
modifies the original budget appropriation limits in the light of availab
le cash
flow.



A new set of rules

developed by MoF

showing the conditions in which

spending
agencies and line ministries
have some delegated

authority in determining
changes to their financial plans

(
budget reallocation


in English this is

virements
’ bu
t the term has a different meaning in Romanian
)
.



Registering of commitments for all expenditure

at (or before) the time that the
order is placed.



Improved cash forecasting procedures
.



Electronic authorisation of procedures and documentation, and reduced pa
per
flow.

To maintain the timetable or implementation of FMIS,
changes to laws and regulations
should be in place

by 2007 enabling adoption of the new budget classification and chart of
accounts,
changes in procedures

allowing
warranting,
the
ability of bu
dget executors

to
make
budget reallocation
s within agreed limits and rules,
and
registering of c
ommitments for
all expenditure
.

As a general principle, government expenditure should be transacted through as few bank
accounts as possible.
However, since th
e
National Bank of Moldova will not provide branch
offices, the T
erritorial
T
reasuries (TT
s
)

will
continue to make use of commercial banks until a
better alternative is found. A decision needs to be made about the nature of the contracts
with the commerci
al banks
, with the probable need for TTs to change locations and to be
connected to the FMIS wide area network.

A

single responsibility contract
should

be awarded
to a vendor
for the supply, development
and installation of all new
FMIS
software and hardwar
e.
This prevents ambiguity of
responsibility in the event problems developing during or after installation. The software
package chosen will di
ctate the hardware requirements,
and t
he hardware will be
progressively supplied as the system is rolled out.


The FMIS procurement
should

be initiated by pre
-
qualification
of vendors. This can be

started
when

this

Conceptual Design is agreed
. Meanwhile the detailed functional
specifications of the system can be prepared.
The procurement
will
then

be
a
two
-
stage

i
nternational tender process
. In the first stage

the vendors submit their proposals and, in the
second stage, those vendors who are chosen as compliant come

to Moldova

to
demonstrate

their
system

s functionality against

test scripts
’ (examples of functiona
lity) prepared during
the detailed functional specifications.

Moldova FMIS Final Report


-

iii

-


An implementation management specialist (international) and a change management
specialist (local) should be chosen to support the
Project Task force during the whole period
of the
implementatio
n

of FMIS.

The chosen contractor will
work with the Task Force to
organise a pilot implementation and
testing of the software, firstly at a test site and then at pilot sites. The pilot should involve
MoF

(including Budget

Synthesis
,
Central

Treasury
,
Sect
oral Finance
Divisions
, and
Chisinau T
erritorial
T
reasury

for the state budget), a line ministry, another selected territorial
treasury, and

one Finance Directorate of the Local

Public Administration Authority, in the
same location as the TT.


Following a

successful pilot, remaining line ministry offices in Chisinau will be connected by
the MAN, the software will be replicated across the remaining territorial treasury sites on the
WAN,
and
Finance Directorates Of Local Public Administration Authorities
wi
ll be
connected
.

The report gives an

outline target timetable for implementation
, in which the contractor is
selected in 2006, the system is piloted in 2007, rolled out to the ministries and territories in
2008 and runs live in 2009.

T
he final sections of

the report examine the human and organisational implications

of the
new system
,
the training requirement,
the security requirements,
and
the risks involved, both
for the project itself and for the sustainability of the system.

Clearly this is a major pro
ject
and demands full commitment from all stakeholders.





Moldova FMIS Final Report


-

iv

-


SUMMARY OF RECOMMENDATIONS

Recommendation 1:

The Financial Management Software Package used as the basis for
FMIS should inclu
de the following modules: Budget preparation (including a facility
for MTEF figures), Budget Management, Budget Execution (purchasing), General
Ledger, Accounts Payable, Accounts Receivable, Cash Management, Financial
Reports and Management Information Sys
tem.

................................
.......................

13

Recommendation 2:

The baseline plan for the use of the Financial Management Software
Package should assume that it is initially used in Ministry of Finance and Territorial
treasuries o
nly, with central government and ATU government budget executors
gaining access to the system by a locally developed software programme which
interfaces with the FM Software Package. This baseline plan should not, however,
be used to restrict suppliers fr
om offering superior functionality where it is cost
effective.

13

Recommendation 3:

S
pecialist systems
which

form part of the FMIS are payroll, debt
management,
revenue administration; social
and medical funds.
These systems may
be modules of the FM software package or, where they are separate systems they
must interface with it.

The systems in use at the SSIB and MHIB should be improved
sufficiently to be able to provide more frequent informa
tion to MoF
. Systems used by
auditors are no part of the FMIS but must interface with it in order to examine FMIS
data.
7
.

13

Recommendation 4:

For systems that interface with the FM Software
Package it is
required that that they are able to import or export data organised by any relevant
grouping of budget codes in the chart of accounts, and in standard data interchange
formats.

13

Recommendation 5:

FMIS Databases for central government and ATU governments
should be kept centrally at the State Enterprise Fintehinform.

................................
.

13

Recommendation 6:

Alternative infrastructures fo
r the Wide Area Network connecting
Territorial Treasuries to MoF in Chisinau should be considered during the detailed
systems design stage of the project.

................................
................................
........

14

Recommendation 7:

As part of this
project a new payroll package will be piloted in MoF.
GoM should consider the acquisition of a central HRM/payroll package to replace the
various systems used at present.

................................
................................
............

14

Recommendation 8:

The budget classification structure is adopted, developed into a
chart of accounts, and prescribed by law for all central government and ATU
government institutions and funds (other than state
-
owned companies).

.................

24

Recommendation 9:

A revised budget format is adopted and prescribed by law for all
central government and ATU government institutions and funds (other than state
-
owned companies).

................................
................................
................................
.

24

Recommendation 10:

The FMIS will continue to record transactions on a modified cash
basis until further notice.

................................
................................
..........................

24

Recommendation 11:

The FM Software Package to be acquired must
be capable of
recording transactions on an accrual basis (recording invoices when received or
issued, debtors and creditors, and assets and liabilities).

................................
........

24

Recommendation 12:

There should be
as few bank accounts as feasible. Special funds
and special means income should be paid into the main receipts accounts.

............

25

Recommendation 13:

Territorial treasuries will continue to use comm
ercial banks for the
foreseeable future, but plans should be made for the longer term to move them to
permanent premises, and connect them to the Wide Area Network of FMIS.

..........

26

Moldova FMIS Final Report


-

v

-


Recommendation 1
4:

A system of warranting is introduced for line Ministries and the
FMIS is specified to include warranting controls.

................................
.....................

28

Recommendation 15:

The FMIS should permit budget reallocation under spe
cified
authorisation: (i) within spending units; and (ii) between spending units.

.................

28

Recommendation 16:

That the FMIS be specified to properly record and account for all
commitments.

29

Recommendation 17:

A cash management system is implemented as part of the FMIS.
Training on improved cash management procedures is given.

................................

31

Recommendation 18:

A data warehouse is set up to receive data summaries from FMIS
and other systems. A Management Information module (either part of the main FM
Software Package or a separate add
-
on package) is acquired to interrogate the data
war
ehouse and produce summary reports for managers.

................................
........

33

Recommendation 19:

By the end of 2007, required changes to laws and regulations
should be in place, to enable the following changes in proce
dures: warranting, ability
of budget executors to make budget reallocations (virements) within agreed limits
and rules, registering of commitments for all expenditure, inclusion of special funds
into budget classification.
................................
................................
.........................

33

Recommendation 20:

A training plan should be designed and implemented to provide for
training of senior managers in using information; training of supervisors in managing
IT functions; training of IT staff in managing and
supporting new networks and FMIS;
and training operational staff in using the FMIS
………………

................................
..

36

Recommendation 21:

The training plan should provide for the creation of a sustainable
training capac
ity in all of the above areas.

................................
...............................

36

Recommendation 22: A single responsibility contract will be awarded for the supply,
development and installation of all new software and hardware for the FMIS.

Recommendation 23:

The FMIS procurement will be initiated by a pre
-
qualification
process started once the Conceptual Design is agreed

................................
...........

38

Recommendation 24:

The FMIS procurement will be two
-
stage. The first stage will
involve evaluation of vendors’ submitted proposals. The second stage will include
selected vendors coming to Moldova and demonstrating their systems functionality
against test scripts.

................................
................................
................................
..

38

Recommendation 25:

An implementation management specialist (international) should be
chosen to support the implementation of FMIS.

................................
.......................

41

Recommendation 26:

As part of
the FMIS acquisition, adequate security procedures
should be established to control access to and security over information and
applications, backup and disaster recovery arrangements.

................................
......

42

Reco
mmendation 27:

The acquisition and implementation strategy must be designed to
specifically recognise and minimise risk

................................
................................
..

43



Moldova FMIS Final Report


-

vi

-


T
ABLE OF CONTENTS


EXECUTIVE SUMMARY

................................
................................
................................
.......

i

A

Overview

................................
................................
................................
..................

1

A.1

Assignment objective

................................
................................
.....................

1

A.2

Outline of this report

................................
................................
.......................

1

A.3

Benefits of the new FMIS

................................
................................
...............

1

B

High level conceptual model of the FMIS

................................
..............................

3

B.1

Scope of the FMIS

................................
................................
.........................

3

B.2

Processes and component systems

................................
...............................

4

B.3

Choice between package modules and specialist syst
ems

............................

6

B.4

Description of component systems of FMIS

................................
...................

7

B.5

Decision on FM package and interfaced systems

................................
........

10

B.6

Geographical coverage of FMIS

................................
................................
...

11

B.7

Recommendations

................................
................................
.......................

13

C

Issues and gaps in the M
oldovan procedures and system

................................

15

C.1

Incompatibility of underlying data and fragmentation of databases

...............

15

C.2

Weaknesses in the
underlying processes

................................
....................

16

C.3

Unnecessary duplication of effort

................................
................................
.

18

C.4

Opportunity to reduce paperwork / manual controls

................................
.....

19

C.5

Non
-
availability or difficulty of obtaining timely information

...........................

19

C.6

Key actions and policy reforms before upgrading FMIS

...............................

20

C.7

Full benefit of computerization

................................
................................
.....

21

D

Functionality

................................
................................
................................
..........

22

D.1

Summar
y of changes to business processes

................................
...............

22

D.2

Budget classification and budget format

................................
.......................

22

D.3

Structure of the accounting and reporti
ng system
................................
.........

24

D.4

Warranting

................................
................................
................................
...

26

D.5

Budget reallocation (virement)

................................
................................
.....

28

D.6

Commitment Accounting

................................
................................
..............

29

D.7

Improved cash management

................................
................................
........

29

D.8

Reporting

................................
................................
................................
.....

31

D.9

Legislative changes

................................
................................
.....................

33

E

Impact of changed business processes

................................
..............................

34

E.1

Impact on processes and organisation
s

................................
.......................

34

E.2

Human resource and training impact

................................
............................

35

Moldova FMIS Final Report


-

vii

-


F

Acquisition and implementation

................................
................................
...........

37

F.1

Overview of acquisition and implementation

................................
................

37

F.2

Managing the acquisition

................................
................................
.............

41

F.3

Security

................................
................................
................................
........

41

F.4

Risks

................................
................................
................................
............

42

F.5

Sustainability risks

................................
................................
.......................

42

ANNEX 1: Conceptual models of fina
ncial management systems

................................

44

ANNEX 2: Existing system of public financial management in Moldova

......................

52

ANNEX 3: Laws and regulations
affecting public financial management in Moldova
..

62

ANNEX 4: Key actions and policy reforms needed before upgrading an FMIS

............

63

A
NNEX 5: Functions and Data Entities in the Treasury Reference Model

....................

64

ANNEX 6: Example of test script

................................
................................
.....................

77

ANNEX 7: Reports speci
fied by the TRM
................................
................................
.........

81

ANNEX 8: Definition of an integrated system

................................
................................
.

86


TABLE OF FIGURES


Figure 1
: Overvie
w diagram of FMIS and related systems

................................
....................

5

Figure 2: Integration or interface

................................
................................
...........................

6

Figure 3: Coverage of FMIS computer systems in init
ial implementation up to
2009

.

12

Figure 4: Implementation overview

................................
................................
......................

40


LIST OF TABLES


Table 1: FMIS s
ystems architecture

................................
................................
......................

7

Table 2: FM package and interfaced systems
................................
................................
.....

10

Table 3: Comparison against institutional and policy reform
s

................................
..............

20

Table 4: Implementation of budget classification, chart of accounts and FMIS

....................

37

Table 5: Goals of public financial manageme
nt

................................
................................
...

44

Table 6: TRM high level conceptual model

................................
................................
.........

50

Table 7: Laws regulating government financial management

................................
..............

62



LIST OF ABBREVIATIONS


ADSL

Asymmetric Digital Subscriber Line (provides fast network access)

ATU

Administrative
-
Territorial Unit

Moldova FMIS Final Report


-

viii

-


CD

Customs Department

ESA

European System of Accounts


Fintehinform

(
New name for the IT Department of the Mo
F
)

FMIS

Financial Management Information System

GOM

Government of Moldova

HRM

Human Resource Management

IFAC

International Federation of Accountants

IPSAS

International Public Sector Accounting Standards

IT

Information Technology

MHIB

Mandatory Health Insu
rance Budget

MIS

Management Information System

MoF

Ministry of Finance

MTEF

Medium Term Expenditure Framework

PFMP

Public Finance Management Project

SSIB

State Social Insurance Budget

STC

Special Telecommunications Center

STS

State Tax Service

SU

Spending
Unit

TOR

Terms of Reference

TT

Territorial Treasury




This report has been prepared by:


International Management Consultants Limited)


(IMCL)

Sheridan House

23/25 London Street

Andover

Hampshire SP10 2NU

United Kingdom


Tel: 44 1264 364661

Fax: 44 1264
360233

E
-
mail: imcl@imcl.biz


Web site:
www.imcl.biz



Moldova FMIS Interim Report

-

1

-

A

OVERVIEW

A.1

Assignment objective

(
1)

The objective of this assignment is to create an agreed Conceptual Design for the
Financial Manageme
nt Information System (FMIS) for the Government of Moldova (GOM) at
both national and sub
-
national levels.

(
2)

This
Final

Report is produced at the
end of the
third

input phase of the assignment.
It

takes into account discussions
, clarifications and decisions that have been made since the
Interim

Report was produced at the end of the
second

input
.

A.2

Outline of this report

(
3)

We open this report with a high level conceptual model of the Government FMIS whic
h
will be established in Moldova. This model describes the processes and component
systems involved, and recommends that the core of the system is provided by an ‘off
-
the
-
shelf’ Financial Management Software Package.
Processes that are not covered by this

core
package will be interfaced with it. The key to the system’s effectiveness is ensuring that all
components use the same budget classification and chart of accounts, and that this chart of
accounts collects data in sufficient detail that it can be arra
nged into information in any
reporting format that may be required.

Following this, we examine the processes in Moldova’s existing government financial
management systems, and

identify gaps and differences from what may be called ‘best
practice’ or ‘best e
xperience’ in government financial management. Some of these gaps
represent faults where improvements must be made. Others indicate that modern systems
may offer a more convenient, more efficient, or simply more ‘user
-
friendly’ way of achieving
objective
s.

(
4)

The report continues by making recommendations on the
functionality

for the new
FMIS,
summarising changes in processes that need to be made and the implications for law
and regulations. Options that were provided by our p
revious progress report have now been
substantially clarified and decisions made.
In the final sections of the report we
examine
how the system will be acquired and implemented, look at the human and organisational
implications,
a
nd highlight the risks in
volved, both for the project itself and for the
sustainability of the system.

A.3

Benefits of the new FMIS

(
5)

The new FMIS will bring substantial benefits to its stakeholders.



Improved access to information
: The fragmented systems
currently existing will
be integrated into a single system covering all government financial
information, accessible by all managers who need to make decisions.



Better quality information

for management at all levels, resulting in improved
fiscal control,

resource allocation, management of resources, cash
management, and control of expenditure.



Improved transaction efficiency
, with reduced paperwork and less duplication of
activities and reports.

Moldova FMIS Final Report



-

2

-



Improved control
: The new FMIS will have improved built
-
in c
ontrols over
expenditure and will be more accessible to internal and external auditors.

Moldova FMIS Final Report



-

3

-

B

HIGH LEVEL

C
ONCEPT
UAL

MODEL
OF
THE

F
MIS

B.1

Scope of the FMIS

(
6)

The FMIS will record detailed budgets and financial transactions for:



State Budg
et institutions (i.e.
Central Government
); and



Administrative Territorial Units (ATUs
-

i.e.
Regional and

Local Government
)


both
at Level 2 (rayons, etc.) and at Level 1 (towns, etc.)
.

T
he extent to which the electronic systems described in this report

will be used in Level
1
ATUs

will
increase as the system develops. Until then, the new systems will be
operated manually.

(
7)

The FMIS will interface with the systems of the State Social Insurance Budget

(SSIB)

and Mandatory Hea
lth Insurance Budget

(MHIB)
, which must use the same
budget
classification and
chart of accounts as the State and ATU budgets
. These
insurance

funds
need to be brought into the general government budgeting process because they will need
to be supported by

government expenditure if contributions are insufficient to cover their
expenditures.
T
he
funds

have their own accounting systems

and detailed

results
for
analysed income and expenditure should

be
electronically
transmitted to MoF so that a
statement of
financial results for the
National
Public Budget (
State Budget, ATU budgets
plus
SSIB and MHIB)
can be produced
when required

by MoF.

At present, reports for the

income and expenditure of

SSIB and MHIB are sent to MoF only
monthly
.
For the new
system, rep
orts will be needed
much more frequently.


(
8)

At any point in time, t
he FMIS will be capable of reporting on and consolidating the
budgets and financial results for:



e
ach State Budget institution
;



t
he total of State Budget insti
tutions;



e
ach Level 1
ATU
, including the results of Level 2
ATUs in its region
;



t
he total of
ATUs
.

Consolidated statements
of
the financial results
for

the
National Public Budget

(State Budget, ATU budgets
plus the
SSIB and MHIB
)

can be produced at
interva
ls depending on the frequency with which information is received from
SSIB
and MHIB
.

(
9)

For the above to be possible a necessary pre
-
requisite is that all State and ATU
institutions
and the
SSIB

and
MHIB

record budgets and transa
ctions using the new budget
classificati
on / chart of accounts (see section D2
)
.


(
10)

The FMIS will not record detailed transactions for State
-
owned companies and they
will not use the same chart of accounts.
The Department of S
tatistics will prepare the
National Accounts
, consolidating the results of the National Public Budget and State
-
owned
companies.

Moldova FMIS Final Report



-

4

-

B.2

Processes and c
omponent systems

Processes


(
11)

The
key
processes of Government Financial Management c
onsidered in this report
are
: m
acroeconomic forecasting
; medium term planning, includ
ing medium term expenditure
framework (MTEF)
; b
udget preparation and approval

by Parliament; budget management
(including controlling the authority to spend); budget execu
tion (income and expenditure
,
including payroll
); cash management; debt management; accounting; and fiscal reporting.

Component systems of the FMIS

(
12)

The component systems of a

Government
FMIS
are
designed to support

these
proce
sses and are

organised into
the following

main groups
:

1.

Planning
:
Macroeconomic forecasting
, m
edium term planning, and
budget
preparation.

2.

Execution
:

(a)

The Treasury system:
Cash
management
,
budget management,
budget
execution
,
accounting

and fisca
l reporting
.


(b)

Other s
pecialist systems: Payroll, revenue administration, debt
management.

(
13)

In addition to
the

central
fiscal
r
eporting facilit
y
,
individual systems are also capable of
reporting, in order
to assist planning,

decision making and control.

The
goals,
concepts and
benefits
of these system components

are described in Annex 1

to this report.


(
14)

S
pecialist s
ystems
are
in use
and under development
to control transactions for the
Social I
nsurance and Health Insurance budgets. These must interface with FMIS to provide
the necessary summary data when required, as described in Section
B.1
.
They must also
produce this information far more promptly

than at present. The present delays of receiving
information only once per month and subject to delays of up to six weeks is regarded as
unacceptable by MoF, given the large amounts of money involved.
Information is required by
MoF on a daily basis.

FMIS

o
verview system diagram

(
15)

Figure
1

below
gives an overview of how the components combine to form the FMIS.
It
shows
the system components

for planning and executing the State Budget

(i
.e. the
Central Government budget) of Moldova.
A
similar

configuration applies to
the
ATU

budget
financial management
systems. In the diagram, t
he financial
management
processes are
listed down the left hand side and the various ministries, agencies and d
epartments involved
are shown along the top.
The Treasury System (described in the World Bank’s publication
‘The Treasury Reference Model’ is the shaded area at the centre of the FMIS.



Moldova FMIS Interim Report

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5

-

Figure
1
: Overview diagram of FMIS and rela
ted systems

Treasury System
Approved
State
budget
Ministry/agency budget
execution systems -
through Territorial
Treasuries
Budget
preparation
system
HRM + Payroll
Revenue
Administration
Debt
Management
MTEF
preparation
system
National Bank
+ commercial
bank systems
Budget
management
and accounting
Cash management
Debt management
Revenue
administration
Budget Preparation
MTEF
Macro-
economic
forecasting
Budget
synthesis
Cash
management
Central
office
Territorial
treasuries
Treasury
Ministries/
agencies
Budget
preparation
system
Approved
agency
budget
Cash
management
system
Budget
management
system
Fiscal
reporting
GENERAL LEDGER
+ accs receivable and
payable
Fiscal reporting
Macroeconomic
forecasting
Debt
Management
Revenue
collection
agencies
Paying/
receiving
banks
Human Resource
Management / payroll
Tax
payers
Vendors
Ministry of Finance


Moldova FMIS Interim Report

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6

-

B.3

Choice between package

modules

and specialist systems

FMIS packages

(
16)

A growing number of vendors now produce software packages that are suitable for
handling core government financial management systems.
To do t
his they have taken
commercial applications and tailored them to include the processes that are specific to
governments, such as warranting and commitments (see Section D). Reputable packages
have well
-
documented advantages over the development of self
-
wr
itten software: they are
speedier to implement, have been tested in use in other governments, contain
comprehensive controls and are robust.

(
17)

It is therefore taken as an assumption of this report that a package solution will
form
the heart of the FMIS. This package should be specifically designed for government
financial management.
Although packages for commercial organisations can be tailored
using self
-
written modules for government processes, this is not recommended, as
upgrades
to the package system often cause the need for the self
-
written modules to be re
-
written.
The package system chosen should therefore require minimal tailoring.

Package modules or interfaced specialist software?

(
18)

Packa
ge systems contain a number of modules. Core modules such as the ledgers
are compulsory, whereas other modules are optional (e.g. budget preparation, payroll, cash
management). For some of these optional modules there are alternative specialist software
applications. The choice of a package solution therefore involves decisions on which
systems will be served by modules within the package and which will be served by specialist
applications.

(
19)

If specialist software is chosen

(e.g. for payroll) the requirements are that:



the system must use the agreed government chart of accounts to analyse data;
and



the system must interface electronically with the core package, so that data can
be transfer
red electronically between them (s
ee
Figure
2

below).

(
20)

For more information on
integrated
versus
interfacing
systems, see Annex 8.



Figure
2
: Integration or interface

Payroll
Module
General Ledger
FMIS
package
INTEGRATED PACKAGE
Payroll
Package
General Ledger
FMIS
package
INTERFACING SYSTEMS

Moldova FMIS Final Report



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B.4

Description of componen
t systems of FMIS

(
21)

Table
1

below describes the component systems of the FMIS and indicates whether
they

are
generally available as part of a core package

FMIS

or
are better served by
sp
ecialist systems.

It is assumed throughout that the new budget classification system /
chart of accounts
is in use throughout government, enabling
information transmitted between
core and specialist systems to be meaningfully linked.

Table
1
: FMIS systems architecture

Systems

Description

Core or specialist?

Systems to
support Macro
Economic
Forecasting

These systems assist the MOF with
macro fiscal

forecasting and development
of the macroeconomic framework which is
used by the MOF
to advise the cabinet
on

aggregate budget parameters and
guidelines for budget agencies to submit
budget estimates.


These
are normally specialist
systems
outside the core
FMIS.


System to
support
M
edium Term
E
xpenditure
F
ramework
(MTEF)


A medium
-
term ex
penditure framework
(MTEF) consists of a top
-
down estimate of
aggregate resources available for public
expenditure; bottom
-
up estimates of the
cost of carrying out policies, both existing
and new; and a framework that reconciles
these costs with aggregate
resources. It is
called “medium
-
term” because it provides
data on a prospective basis, for the
budget year (
n
+1) and for following years
(
n
+2 and
n
+3). MTEF is a rolling process
repeated every year.
The system is used
in line ministries and by the MoF.

Fro
m the FMIS viewpoint,
the end result of the MTEF
process is three years of
budget figures, produced in
the same budget
classification and format as
the annual budget.

It is
therefore highly
desirable
that

these figures
are recorded

on the same
system a
s the annual budget
preparation
system
, below
.
L
ack of a good link
would

make it difficult to update the
budget for changes in MTEF
or vice versa and
would

result in much re
-
keying of
data
)
.

As
with

budget preparation,
suitable

system
s for holding
MTEF dat
a are

found in
some core packages but not
others

(see below)
.

Moldova FMIS Final Report



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-

Systems

Description

Core or specialist?

Systems to
assist in
Budget
Preparation
and Approval

The Budget preparation system is
also
used in line ministries and by the MoF.
Line ministries receive details

of
program
me
s and projects fr
om executing
agencies, cross
-
check them against the
MTEF, consolidate them, and produce
the

budget drafts for negotiations with the
MoF. The MoF receives these budget
drafts, consolidates them and negotiates
changes. Further changes will be made
w
hen the b
udget is presented to
P
arliament. After finalization of

the
budget, the system produces the
approved budget and these figures are
transferred to the systems for budget
execution, accounting and fiscal
reporting.


Budget preparation systems
are found as mod
ules in
most core FMIS packages.
However, it is essential that
the module

is able to
properly record government
budgets,
(including MTEF
figures (see above) and can
keep

records of budget

versions and budget

changes.
Government
budgets have a legal status
,
unlike those of private sector
organisations
.

An alternative
would be to

choose a specialist budget /
MTEF package.

Systems for
Budget

Management,
Budget

Execution,
Accounting
and Fiscal
Reporting

These integrated systems are used in
MoF, central treasu
ry, territorial
treasuries, line ministries and major
executing agencies. They do the
following:



receive

approved budget data from
the budget preparation system;



maintain data on

approved budget
appropriations spending authority,
sources of financing of pr
ograms and
projects, budget
reallocation
s,

supplementary
allocations, and warrants.



record commitments and actual
expenditures

against budget
allocations receive commitment and
payment transactions

from the
spending unit systems, or in hard copy
format, a
s they occur during the
course of the year.



record tax and non tax revenues,
receiving information on receipts from
the banks responsible.



assist the Government in the budget
monitoring, accounting and
fiscal

reporting processes, allowing
enquiries from a
uthorised users

These systems are the
centrepiece of the

GFM
systems network, the primary
repository of financial data,
and serve as the basis of the
FMIS
. It is highly desirable
that these systems are fully
integrated together. A
package system which
hand
les all the requirements
is a
preferred
solution.

It is essential that the
package can handle of
government
budget
execution, which has
functions not found in
commercial organisations,
such as warranting and
commitments (see section
D
).

It is
also
advantageous if line
ministries and agencies can
input their data directly into
the system rather than taking
or sending paper documents
to territorial treasuries.

Electronic authorization of
transactions can replace
many of the signatures in
use on paper systems.

Agency budget execution
systems also include
procurement and contracts.

Moldova FMIS Final Report



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9

-

Systems

Description

Core or specialist?

Cash
Management
System

This system assists

Government to
maintain an up
-
to
-
date picture of
the

government's liquidity position and
cas
h requirements. They receive the
information on cash requirements from
the

ministries/ spending units and the data
on cash balances from the Banks where
government accounts are held.


It is
recommended

that this
system is integrated with
treasury and agenc
y budget
execution systems and this
should

form part of the core
FMIS

package
.

Debt
Management
System

This system maintains information on
public domestic and foreign
borrowings.

Payments related to
government borrowings are carried out by
the central acc
ounting system based on
the data in the

debt management system.
Loan receipts recorded in government
accounts are processed by the central
accounting

system and then used to
update the debt database maintained by
the debt management system.


As with many g
overnments,
debt management in
Moldova
is
handled by

a
separate
specialist
system

(DFMAS).

Until 2005 this
system has not handled
domestic debt, but is now
able to do so, and it is
anticipated that this ability
will replace the current
domestic debt syste
ms in
Treasury when the new
FMIS is implemented. The
system will interface with
FMIS.

Revenue
Administration
Systems

This group of systems assist the
government in the processes associated
with

formulating tax and tariff policies and
the subsequent colle
ction of tax and non
tax revenue. A number of
separate

systems are involved in this
group: for example, those supporting the
administration and collection of income
taxes,

customs duties or VAT, and those
supporting the collection of various types
of non
-

tax revenues, such as
stamp

duties.


These are
specialist systems
outside the core FMIS
, which
hold records of taxpayers’
assessments and payments.
The systems provide inputs
to the budgeting and cash
forecasting processes, for
which they need to interface

with FMIS.

Human
resource
management
and payroll
systems

From a financial management
perspective
,
these systems modules
assist with



management of staff numbers and
positions;



payroll and deductions.


Similar systems apply to
pension

payments.



Althoug
h core FMIS
packages
often contain
payroll modules, these
systems

are more often
linked with specialist Human
Resource management
systems.

At present, each
Ministry uses its own payroll
system and there is a need
to develop a central
specialist payroll sy
stem.


Moldova FMIS Final Report



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10

-

Systems

Description

Core or specialist?

Systems to
Support
Auditing

These systems assist the internal and
external auditors in their functions.
To

perform the audit function, they need
access to the data bases maintained by
the other systems modules.


To maintain auditor
independence t
he audit
systems must be separate
from the FMIS, but can make
use of
information

within the
FMIS
.

B.5

Decision on FM package and interfaced systems

MoF decision

(
22)

After considering the above factors, the Ministry of Finance has dec
ided
that treasury
core financials, budget preparation and reporting
should be
handled by means of
a Financial
Management Software
Package,
while other functions

should

serviced by specialist
interfaced software, as shown in
Table
2

below.

Table
2
:
FM package and interfaced systems

Component system

Provided by

Core Financials (Treasury System: General Ledger,
Accounts Payable, Accounts Receivable, Budget
Management, Budget Execution

(purcha
sing) in
central and territorial treasuries
, Cash Management)

F
inancial
management software
package

Budget preparation (including facility for MTEF
figures)

Financial management software
package

Financial Reports and Management Information
System

Financ
ial management software
package

Communication
by

agencies with the Financial
Management Package

Locally developed software

Macroeconomic forecasting

Locally developed software

Debt and aid m
anagement

DMFAS (the specialist debt
management system which is

currently in use)

Human Resource Management and Payroll

Specialist system, locally developed

Organisation / workflow management

Locally developed software

(
23)

In addition the Financial Management
Software
Package

will also int
erface with the
banking systems currently in use (National Bank of Moldova and commercial banks)
,

and
with the
specialist
systems for social and health insurance

and revenue management
.
Auditors will be able to interrogate the package, using audit softwar
e.

How spending units will communicate with the Financial Management Package

(
24)

MoF have decided that
budget executors (
line m
inistries
, agencies and their
ATU

government equivalents
)

should not be users of the Financial Manageme
nt
Software
Package, on the grounds that this will cause annual user license fees to be too high.

For
further discussion of the numbers

of users involved
see
Section
B.6
.

Moldova FMIS Final Report



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11

-

(
25)

The Fi
nancial Management
Software
Package will be
used
in the Ministry of Finance
and the territorial treasuries
,

and key controls over budget execution will be operated in
those locations.
Budget executors will communicate with the FM package using locally
deve
loped software which will not carry a license fee and which will eventually enable all
spending units to be interfaced with the FM package.
This software will enable budget
executors to transmit batches of data and to receive information.


(
26)

Whereas
this is clearly a sensible decision when user licensing costs are high, it is less
efficient than having the FM software package (and its built
-
in
functional
controls) actually
present at the offices of the spending units. This is be
cause software controls present in the
FM package (e.g. to prevent over
-
commitment of expenditure)
will not take effect until the
data is presented to the territorial treasury, which is one of the weaknesses of the present
system.


(
27)

We therefore recommend that when suppliers are
invited

to tender

for the FM software
package
they
are asked
provide costs for extending it to major spending units. GoM may
then accept or reject this approach based on the tendered costs.

HRM/Payroll

package

(
28)

At present, government ministries and
spending units

use a variety of separate manual
and computerised systems to prepare their payroll data. We agree with the MoF’s decision
that there should be a central HRM/payrol
l package which will compute payroll for all central
government employees. This will
play a major role

in improving information and control in
the FMIS. In due course the system could also be extended
to
ATU

governments.

As an
initial step, a new payrol
l package will be piloted in MoF as part of this project.

B.6

Geographical coverage of FMIS

(
29)

The FMIS is the basis of Moldova’s
central

government

and
ATU

government

financial
management systems.
When considering geographical cov
erage, a distinction needs to be
made between
:

(i)

the FMIS as a set of
functions and
processes
; and

(ii)

the

computer systems on which the FMIS runs.

Coverage of revised FMIS functions and processes

(
30)

Section
D

of this report describes improvements to functionality that will take place in
preparation for the implementation of the new FMIS

(e.g. revised chart of accounts,
processes of warranting, commitments, etc)
. It is recommended that these

changes in
functionality
are implemented throughout
central

government

and
ATU

government
s
. Where
the new computer systems have not yet been installed the revised processes can be carried
out manually.



Coverage of new computerised systems

(
31)

Ultimately the computerised FMIS will extend throughout central and local
governments. There are approximately 1,000 municipalities and 2,500 spending units.
However, because of limited resources and technical capacity the expansion wi
ll be carried
out in phases.

Moldova FMIS Final Report



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12

-

(
32)

It is planned that
for the first stage of the project, which should be running live for the
2009

budget year,

the new FM
Software
Package

will be installed for 177 users, as follows
:



MoF
Central
Treasury
:

10



MoF Budget Synthesis Department:

5



MoF
sectoral
finance divisions

5



Fintehinform (forme
r
ly MoF IT Department)

10



39 Territorial Treasury Offices

147





Total

177

users

(
33)

The line ministries and agencies in Chisinau
will communicate with the FMIS using
locally developed software. This communication will be across a high speed fibre
-
optic
metropolitan area network in Chisinau that is currently being developed by the Special
Telecommunications Centre

(STC)

and which wi
ll be completed by 2006.

(
34)

Territorial Treasuries will be users of the FM software package and will need to
communicate with the central systems in Chisinau. At present they use the commercial
banks’ network system
s

to communica
te

and will do so until the current leases expire,

but
these
networks (as they stand at present)
are not regarded as

fast enough or secure enough
for a long term solution.


During the detailed
systems

design

stage of this project,

infrastructure alternativ
e
s

will be considered for the Wide Area Network, including

the
extension of the STC’s fibre
-
optic government network to the territories
.
Currently the
Ministry of Information Technology (which is the governing ministry of MoldTelecom and the
government’
s registers of people, companies, passports, etc.)
has a fibre optic network that
communicates with

20 rayons
, though extensions would be needed to reach the Territorial
Treasuries
. Estimates of when
MoldTelecom’s

network will be exten
ded to all the rayon
s
vary, but a most likely year is 2009. For the extension of the STC network,

funding
is

the
main constraint.

(
35)

ATU

government offices (36) and finance directorates (35) will communicate with
Territorial Treasury offices by me
ans of locally developed software over dial
-
up

or ADSL

connections. In the initial implementation there will be therefore be 177 users of the
FM
Software Package and approximately 100 users of locally developed software, though this
latter number can be ra
pidly extended in the next phase of implementation beyond 2009.


Figure
3
: Coverage of FMIS computer systems in initial implementation up to 2009

Ministry of
Finance, Chisinau
30 users
Ministries / Agencies
Chisinau
28 offices
Territorial
Treasuries
39 offices,
147 users
Local
governments
36 offices
Finance
directorates
35 offices
FM package software
Metropolitan Area Network
Wide Area
Network

Moldova FMIS Final Report



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-

(
36)

The Metropolitan and Wide Area Networks will be set

up as a Virtual Private Network
(VPN) across which public financial management data can be transmitted in encrypted
format. This
network

will also be used to provide internet access , e
-
mail, and Voice over IP
(to reduce internal telecommunication costs)
.

(
37)

It is recommended that the databases for the Financial Management Software
Package, for both central government and for
ATU

governments, are held centrally with
the

State enterprise

Fi
ntehinform (formerly MoF IT

Department
).
It will be necessary to take
proper security and back
-
up precautions, including the setting up of Disaster Recovery and
Business continuity Plans. Security is discussed in Section
F

of this report.

B.7

Recommen
dations

(
38)

Based on the descriptions in this section of the report, our recommendations are set
out below.

Recommendation 1:

The
Financial Management Software Package used as the
basis for FMIS
should include

the following modules
:
Budget
prepara
tion (including a facility for MTEF figures), Budget
Management, Budget Execution (purchasing),
General Ledger,
Accounts Payable, Accounts Receivable, Cash Management,
Financial Reports and Management Information System.

Recommendation 2:

The baseline plan for t
he
use of th
e
Financial Management
Software Package should
assume that it is
initially used in
Ministry of Finance and Territorial treasuries only, with
central

government

and
ATU
government

budget executors
gaining access to the system by
a locally developed software

programme which interfaces with the FM Software Package.
This baseline plan should not, however,
be used to
restrict
suppliers from offering superior functionality

where it is cost
effective.



Recommendation 3:

S
pecialist
systems
which form part of the FMIS are payroll,
debt management; revenue administration; social and
medical funds.

These systems may
be modules of the
FM
software package

or, where they are separate systems they
must interface

with it.

The systems in use at the
SSIB

and
MHIB

should

be improved suffici
ently to
be able
to
provide
more frequent information to MoF
.

Systems used by auditors
are not part of the FMIS but must interface with it in order to
examine FMIS data.

Recommendation 4:

For systems that interface with
the FM Software Package
it
i
s
required that that
they

are able to import or export data
organised by any
relevant
grouping of budget codes

in the
chart of accounts,
and in standard data interchange formats.

Recommendation 5:

FMIS Databases for
central

government

and
ATU

governments
should be kept centrally at
the State Enterp
rise

Fintehinform
.

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-

Recommendation 6:

Alternative infrastructures for the
Wide Area Network
connecting

Territorial Treasuries to MoF in Chisinau should
be considered during the detailed systems design stage of
the project.


Recommendation 7:

As part of this project a new payroll package will

be piloted in
MoF.
GoM should consider the acquisition of a central
HRM/payroll package to replace the various systems used at
present.



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15

-

C

ISSUES AND GAPS

IN THE
M
OLDOVAN

P
ROCEDURES
AND
SYSTEM

(
39)

A
concise
description of the pr
esent system of
government
financial management in
Moldova is given in Annex
2
to this report.

(
40)

This section
, on issues and gaps,

compares the
Moldov
an

system against
best
practice as
defined

in the Treasury
Reference Model
i
n Annex 1
.

Much progress has been
made in government financial management in Moldova

over the last 12 years,
but there is
now an opportunity to make a ‘quantum leap’ by combining reforms to processes with the
installation of an improved computer system.

(
41)

Gaps

or issues

in the

current system can be grouped into the following areas:



Incompatibility of underlying data

and f
ragmentation of databases



Weaknesses in

underlying processes



Unnecessary duplication of effort



Opportunity to
reduce paperwork / manual controls



Non
-
availability of information, or difficulty of obtaining timely information

(
42)

In some cases a number of problems flow from a single cause.
For each gap or issue,
a suggested remedy is given

and, where necessary, these solutions are discussed further in
later sections

of this report.

At this stage, purely technical IT issues are not considered.

C.1

Incompatibility of underlying data

and fragmentation of
databases

(
43)

Da
ta
which should be closely linked
is being produced in different formats. In most
cases the remedy for this will

the new budget classification, and the development of a new
chart of accounts

(see section

D.2
)
.

This will facilitate a system whereby databases can be
linked, and in some cases, where
processes can use the same database.

Planning and budgeting


Gap / issue

Remedy

The MTEF, budgets and financial plans
are
held
in different databases, requiring re
-
k
eying of data
.


In the new FMIS these will need to be closely
linked so that data can pass smoothly

and

transparently from one stage to the next.

Once the new budget classification is introduced,
this should form the basis for all plans and
budgets, to
cover State Budget,
ATU

budgets
and the budgets for

SSIB and MHIB
.


MTEF and budget

figures

can be held in the
same database
.

The Ministry of Finance and National Social
Insurance House are using different databases
for policy analysis.


Sharing of data a
nd development of common
database.


Moldova FMIS Final Report



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-

Budget execution and accounting

Gap

/ issue

Remedy

There are currently four different charts of
accounts in use, for treasury, state budget
institutions,
regional
(Level 2 ATU)
budgets, and

local

(
level 1
ATU)
budgets.


After introduction of the new budget classification,
a single chart of accounts to cover all budget
institutions
will

be
developed
. This will also affect
payroll programs and the d
ebt management
system
and the
SSIB and MHIB
.

There are several different

bases of accounting.

Treasury uses
a
modified

cash basis
, recording
transactions after they have been paid by the
banks,

but budget institutions follow the
Accounting Law and also produce records of
debtors and creditors. Reconciliations between
the tw
o different systems
are
carried out
quarterly.

National Social Insurance House uses accrual
accounting.

The new FMIS will work on the modified cash
basis of accounting, as in the present Treasury
system. Reconciliation will still be needed with
the accru
al accounts produced by budget
institutions, but this will be much easier, as there
will be a unified chart of accounts.


Information received from
SSIB and MHIB

is
infrequent and subject to large delays.

These systems must be improved, as well as
changed

to conform with the new chart of
accounts.

C.2

Weaknesses in

the
underlying processes

Release of funds by MoF

to budget executors

(
44)

The existing budget execution processes allow efficient control by MoF over total
expenditure on
a day
-
to
-
day basis by ensuring that (1) rapid information is obtained on cash
receipts; (2) all payments pass through territorial treasuries; (3) total expenditure
requirements are signalled to central treasury daily; and (4) the Minister of Finance
priori
tises expenditure where necessary. However, this comes at a cost to budget
executors.


Gap / issue

Remedy

Although authority to spend is in theory given to
budget executors when their financial plans are
approved, in practice, cash is only released to
them by MoF on a day
-
to
-
day basis
after

they
have entered into contracts / commitments. This
affects their ability to plan execution, can cause
arrears of payments and causes some suppliers
to require payment in advance.

There is no warranting process, a

gap when
compared against the TRM.


Warranting
:
As the year progresses, sector
agencies prepare
periodic requests for funds

by
economic category.

The Mo
F then issues
warrants

to ministries for
each category of spending. From these amounts
the ministrie
s issue
sub
-
warrants

for their
spending units and advise the appropriate
spending units. These processes take place
periodically through out the year. The warrant
and sub warrant amounts need to be within the
amounts specified in the spending limits for th
ese
organizational units. Warrant amounts are
determined in the light of the results of periodic
budget reviews, revised revenue forecasts and
cash balances.

See Annex
5

and Annex
6
.

Moldova FMIS Final Report



-

17

-

Budget
reallocations

/ virements

Gap / issue

Remedy

All changes to the
financial plans of budget
executors must be approved by MoF. This is a
lengthy process which follows the same
procedure as the approval of the original plan.
It
is time
-
consuming for MoF sector divisions.

The Law on
Budgetary system and budgetary
Process
Article 35 (3) says:
Expenditures
included in the monthly allotment for specific uses
may not be transferred to other destinations
without the notification and approval of the
Minister of Finance.

When compared with the TRM, the

budget
reallocation

(
‘virem
ent’
)

procedures are missing.

Normally the Budget Law permits the MoF, the
spending ministries and the spending units to
shift the approved budget between organizational
and object classifications within restrictions set by
the relevant laws. Shortfalls id
entified by
spending units in one or more economic
categories may be met from excesses in other
economic categories in their budget.

For this, a
budget
reallocation

request

needs to
be processed.

For some items and within certain thresholds,
spending uni
ts may have the financial powers to
make the
reallocation

themselves. For these
cases, they will update the budget data base in
the system.

For cases which are beyond their financial
powers, they will request the parent ministry or
MOF to process the
real
location
, depending on
the type of
reallocation
. If approved, the Ministry /
MOF will process the
reallocation

and update the
data base. The spending unit will be informed of
the
decision on the request
.

See Annex 5
.

Commitments

(
45)

In Moldova, territorial treasuries run an effective contract management system which
ensures that (i) the total value of contracts in an expenditure category for a spending unit
cannot exceed the allowed amount in the financial plan
; (ii)
payment canno
t be made unless
the contract is
registered; (iii) payment cannot exceed the contract amount; (iv) the supplier
must be registered. This needs to be extended into a system whereby spending units
register commitments for all expenditure.


Gap / issue

Reme
dy

All expenditure should be committed
by the
spending unit
before payment

by the territorial
treasury.


In response to a request for a purchase, t
he
spending unit will register a
commitment

in the
system and block the corresponding amount from
the availa
ble budget and spending limit. The
commitment transaction is forwarded to the
parent ministry and
to
the
territorial treasury

that
will process the payment against this
commitment.

Procedures for changes to payroll commitments
also need to be in place.

Se
e Annex 5
.

Moldova FMIS Final Report



-

18

-

Cash
management

(
46)

In an upgraded FMIS the role of the cash management unit in Central Treasury
Central grows in importance.
At present, information on cash receipts, requests for payment
and balances is available da
ily, but effective c
ash flow forecasting
over longer periods is
important

if MoF wishes to move from the current position of daily cash releases to monthly
(or quarterly) releases.


Gap / issue

Remedy

Availability of funds and budget executors
financial r
equirements need to be forecast and
planned
more effectively. There are sometimes
timing differences which cause arrears in
payments of contracted expenditure.

Line ministries

and spending units should be
playing a greater role in this, not just at the st
art
of the year but throughout the year, and revenue
collection agencies should play a greater role in
revenue forecasting.



Spending ministries prepare expenditure
forecasts,
revised periodically specifying the
amount of money required at specific times
of the
year for each major category of economic
expenditure)
and from the debt management
department on debt servicing expenditures.

The revenue collection agen
cies prepare revenue
forecasts,
revised periodically on the basis of
actual out turns
.

The c
ash

management department examines this
data
together with the

accounting data in the
TGL, the
debt
management database and the
cash balances in the
bank accounts
.

This enables it to determine the liquidity position
of the government and shortfalls/ surpluse
s. This
infor
mation forms the basis of the Mo
F
determining the borrowing requirements and the
spending limits and warrants for spending
ministries and units
.

See Annex 5
.

Commercial bank accounts are used for budget
execution by territorial treasuries.
They do not
clear their balances to the Treasury’s main
account daily (but they pay commercial interest
rates on balances).

The TRM main model envisages consolidation of
government bank accounts to a Treasury Single
Account (with sub
-
accounts) held at the
National
Bank of Moldova and branches. Use of
commercial banks is recognised as a valid
alternative. There are options for how to
organise banking in the future


see section
D.3
.

Receipts of fees and charges

by spending units
are treated as special means, put to separate
bank accounts and used to offset expenses by
those spending units. This makes overall cash
management more difficult.

T
hese receipts
should be paid into the main
revenue accounts, as
discuss
ed in section
s
D.3

and
D.9

.


C.3

Unnecessary duplication of effort

Gap / issue

Remedy

Data prepared in one location, either on paper or
a spreadsheet, is re
-
keyed int
o the main system
by somebody else.
This is a duplication of effort
that can be eliminated.

So far as possible data prepared for input in the
FMIS should be keyed in by the originato
r, who is
online to the FMIS.

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-

19

-

Gap / issue

Remedy

Re
-
keying of data also allows the possib
ility of
transposition errors. A transposition error in re
-
keying a debt payment into the payment system,
for example, could be expensive.

Elimination of re
-
keying automatically eliminates
transposition errors. Other computer based
controls and monitoring

checks can also help
assure data integrity.

Most of the present systems are affected by this
problem. MTEF figures are re
-
keyed
to provide
spending limits. B
udgets are re
-
keyed to provide
financial plans. Changes to financial plans are
prepared by spen
ding units and re
-
keyed in
budget department.

Payment details are typed in
spending units and re
-
keyed in territorial
treasuries. Quarterly results in spending units
are re
-
keyed for consolidation by IT department.

The elimination of re
-
keying, and redu
ction of
associated transposition errors, is one of the
most far
-
reaching improvements that a new FMIS
can make,
provided that a consistent budget
classification and chart of accounts are adopted
.

The decisions needed here are on which and
how many users a
re put on
-
line to the FMIS. See
section
D.3
.

This is a cost problem rather than a security
problem, because the FMIS will allow access
controls that only allow users to see the
applications they need.

C.4

Opportun
ity to reduce paperwork / manual controls


Gap / issue

Remedy

Even where computer files and controls are in
use there is tendency for the existing system to
be based on the production of hard copies of
documents, which are officially stamped and
signed.
As such, the computer system is limited
to being a calculating machine which operates a
few
‘limit’

controls.

The new FMIS should take
greater
advantage of
the facilities of computer systems to organise files
and to allow on
-
line authorisation controls.

For example
access controls restrict who can use
a particular application, computer logs keep a
check of who is creating data, or making
changes,
different versions of
key documents
such as
the budget
could

be ‘locked’
in the
system to prevent unauthorise
d changes,
electronic signatures could be used. External
paper documents could stay at the point where
they are received and the information be passed
on electronically from there.

C.5

Non
-
availability
or difficulty of obtaining timely
information


Gap / iss
ue

Remedy

The existing system is capable of generating any
information required by users except in cases
where the coding of the underlying data does not
allow sufficient analysis or if there is an
incompatibility in the coding systems used.

The new budge
t classification
and chart of
accounts will allow the theoretical possibility of
producing all information that is required.

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-

20

-

Gap / iss
ue

Remedy

All reports are currently programmed by IT
department, in response to designs from MoF, or
in direct response to user needs.

Mo
st reports are paper based, though on
-
screen
data can be seen by some users.


Senior and middle managers do not have on
-
line
access to relevant current financial information,
e.g. on commitments as against budget,
predicted financial balances, etc

Given th
at the underlying data is held in the new
classification,
and that databases are li
n
ked or
integrated,
the problem with the new system will
not be lack of information, but the ability to
produce too much information.

A set of key reports must be decided an
d
designed, and included in the specifications for
the new computer system. A list of reports (for
management information and control)
recommended by the
Treasury Reference Model
is shown at Annex 7
.


In addition users will need the ability to generate
th
eir own reports by on