Government financial management systems provide checks and balances to public finances…


Bornali Bhandari and Pawan Kadyan

The main objectives of PFM are “to maintain a sustainable fiscal position, allocate resources efficiently, and deliver public goods and services efficiently” (Cangiano, Curristine and Lazare, 2013). Diamond and Khemani (2005) define FMIS as a management tool that provides a wide range of financial and non-financial information. This involves the computerization of public expenditure management processes, including budgets, financial management of line ministries and other spending agencies.

The developments of FMIS in the country started in the last decade, the technology of which was not available before. NCAER’s Direct Benefits Transfer Survey conducted in 2018 found that states use two FMIS – one developed by the Center, namely the Public Financial Management System (PFMS) and their own internal FMIS. State.

Modern PFM comprises a set of complex processes, rules and systems that are intrinsically linked to each other through the FMIS architecture. These architectures are developed by different States and the Center independently and in phases. Therefore, these FMIS are at different stages of maturity. The Center is well placed to consider the Holder States in the development of their FMIS and the interconnection of FMIS at the Center and State level. Unlike the Goods and Services Tax Network (GSTN), such interconnection should aim to maintain the functional and data autonomy of state governments that ensure their control over the developments of their own FMIS systems, provide and sufficient counterweights to promote fiscal sustainability and minimize “float” in the Systems. Interconnected but independent systems would lead to sustainable capacity development in states and encourage greater innovations in PFM through healthy competition on the one hand and promote fiscal federalism on the other. This would reduce reliance on bank accounts to manage public finances. These systems could complement each other and systematically strengthen the learning exchange between States and the Centre.

Among the state-level FMIS, West Bengal (WB) is one of the most advanced. It is oriented towards the development of all the characteristics of an ideal FMIS as defined in the literature (Table 1). The Integrated Financial Management System (iFMS) is a web-based application to streamline state government financial and tax management.

Source: Conceptualization of the authors from the literature.

Hashim and Piatti (2016), in their World Bank working paper “A Diagnostic Framework to Assess the Capacity of a Government’s Financial Management Information System as a Budget Management Tool”, stated that the effectiveness of FMIS as a budget tool will depend on it has the following five features.

  1. Treasury Single Account: It is a tool for consolidating and managing state resources. The iFMS has a centralized web-based treasury system. All treasuries and their functions are integrated into a unified architecture, including treasury functions such as receipts, payments, pensions, stamps, PL operations, deposit accounts, provident funds, monthly accounts , etc Similarly, banking operations are linked to the iFMS via the schematic bank account. Management System Module (SBMS).
  2. FMIS coverage: All government transactions are covered by the iFMS (Table 1).
  3. Online budget tool: The Centralized Budget Monitoring System, a module within the iFMS has been developed for the online submission of budget requirements by the administrative services and its processing by the Finance Department. In addition to this, the module has the option of online integration with the RBI for obtaining the clearance note for the funds received from the Government of India through the budget route. The module also provides for the online submission of a request to create an account manager to the Accountant General of West Bengal, thereby reducing the time required to open any new sub under any account manager . In addition, all centralized, central and state programs can be monitored online and the use of funds tracked in real time and on an actual basis.
  4. Auxiliary characteristics: It covers all aspects of human resources management, from the appointment stage to the retirement stage of an employee’s life cycle, provides support for various audit functions, grants administrative approvals and financial penalties, links schematic bank accounts, generates all sorts of role-based GIS reports, and more. The iFMS was also the first FMIS in the country to integrate with RBI’s e-Kuber platform. It is also connected to the GSTN. A different iBudget platform exists for the preparation of the state budget and budget allocations of the respective departments, which is integrated with the iFMS. Fixed asset management tools are coming soon in iFMS 2.0.
  5. Technical aspects: The entire IFMS is housed in the State Data Center (SDC) with its disaster recovery site at the NDC. It runs its operations over a secure multi-protocol label switching network with the West Bengal state wide area network serving as a backup. All Treasurys are connected to the Central Server located at the SDC.

In sum, there are alternative FMIS at the state level, which can be complementary to the PFMS. While the WB FMIS has desirable properties and characteristics and has proven itself during the pandemic, detailed, systematic, unbiased and independent analysis can help states learn from each other, improve financial management and assess their effectiveness.

Bornali Bhandari is a Senior Fellow at NCAER and pawan kadian is an IAS officer belonging to the cadre of West Bengal.

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