IFMIS IN KOREA:IFMIS IN KOREA:BACKGROUND, OVERVIEW AND ACHIEVEMENTS

NOWOOK PARKNOWOOK PARK

CENTER FOR PERFORMANCE EVALUATION & MANAGEMENT

KOREA INSTITUTE OF PUBLIC FINANCE

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CONTENTSCONTENTS

BackgroundBackground

Overview of IFMIS and Its development

Achievements and Key Success FactorsAchievements and Key Success Factors

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CONTENTSCONTENTS

BackgroundBackground

Overview of IFMIS and Its development

Achievements and Key Success FactorsAchievements and Key Success Factors

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GENERAL ISSUE OF

FMIS DEVELOPMENTFMIS DEVELOPMENT

Technical issuesTechnical issues

• Design, implementation and maintenance of centralized computerized system

• Financial support• Financial supportStreamlining budget system

• Computerizing a process requires exact and precise formalization of concepts and proceduresformalization of concepts and procedures

• Streamlining the chart of accounts• Budget classification• Accounting standards• Reporting: integration of central and sub-national governments• Scope of government and public sector reporting entity• Implementing TSA

Change Management Change Management

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IFMIS AS A FOUNDATION

FOR PFM REFORMS

IFMIS AS A FOUNDATION

FOR PFM REFORMS

3 + 1 PFM reforms were pursued3 + 1 PFM reforms were pursued

3 reform elements

• MTEF• MTEF• Top-down budgeting• Performance budgeting

1 infrastructure1 infrastructure

• Digital budget and accounting system• Program budget classification• Accrual accounting• IFMIS

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EXISTING FMIS IN

THE GOVERNMENTTHE GOVERNMENT

Fiscal Information Management System ( FIMSys) in the Fiscal Information Management System ( FIMSys) in the Ministry of Planning and Budget

National Financial Information System (NaFIS) in th e Ministry of Finance and Economyof Finance and Economy

• Other relevant systems: E-procurement system, The National Tax Revenue System

Local Financial Information System in the Ministry of Public Administration

Local Education Financial Information System in the Ministry Local Education Financial Information System in the Ministry of Education

Defense Financial Information System in the Ministr y of DefenseDefense

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FRAGMENTED

EXISTING FMISEXISTING FMIS

Each system addresses the need of handling existing Each system addresses the need of handling existing business process in each sector without connection with other systems.

• For example, FIMSys did not have connection with • For example, FIMSys did not have connection with information of budget execution and settlements produced by NaFIS, which is essential information for budgeting purpose.

• Even FiMSys was not integrated with FMIS system in each • Even FiMSys was not integrated with FMIS system in each ministry and National Tax office, and e-procurement system.

Lack of real time on-demand information

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NEED FOR IFMIS

DEVELOPMENTDEVELOPMENT

Need for system integration of existing various sys temsNeed for system integration of existing various sys tems

Need for accommodating PFM reforms, especially prog ram budgeting

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SEQUENCE OF PFM REFORMS IN

KOREAKOREA

PB pilot

Top Down

Program Budget

Accrual Accountingpilot

2000Down 2004

Budget2006

Accounting2010

2003MTEF &

2005MTEF

2007FMISMTEF &

Top Down pilot

MTEF&

PB

FMIS

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CONTENTSCONTENTS

BackgroundBackground

Overview of IFMIS and Its development

Achievements and Key Success FactorsAchievements and Key Success Factors

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DEVELOPMENT OF FMISDEVELOPMENT OF FMIS

Brief History of FMIS Development

• Establishment of integrated Fiscal Management Information System (IFMIS) was set in the National Agenda Meeting

2004~2005• System development (Cost: $60M)

2006

• System launch

2007

• 67,895 users

364,431 cases daily

2014. 4

BSP, BPR/ISP

National Agenda Meeting• Launched a joint study project named “Path

toward Successful Introduction of Program Budgeting in Korea” with WB

• To establish IFMIS, consecutively drew up

• Open test 5.7 trillion won daily

($5.5 billion)

BSP, BPR/ISP

DetailsDetails

BSP(Business Strategy Planning)

• With analysis of policy environments, demonstrates the objective and major strategy of fiscal innovation

BPR(Business Process Reengineering)

• Optimize and streamline the existing procedure in accordance with the information system to maximize the adoption effect(Business Process Reengineering) information system to maximize the adoption effect

ISP(Information Strategy Planning)

• Computerization of given work process

CHALLENGES IN IFMIS DEVELOPMENT

Three Major Obstacles Solutions

Allowed to maintain own

Opposition

• Local governments and the Ministry of Education were against the idea of disclosing and integrating their financial information – Concerns over possible undermining of their autonomy

Allowed to maintain own systems but required to submit financial information to be consolidated

Placed FMIS under control of MPB while letting MOFE to be in charge of certain parts1)

Competition

• Two ministries competed fiercely to have control of the FMIS– Competition between MOFE and MPB as these two ministries

were formerly in charge of existing FMIS (each ministry

• Users of newly adopted FMIS were reluctant to adapt themselves to the new system

Provided effective user trainingthroughout the

certain parts1)were formerly in charge of existing FMIS (each ministry controlled NaFIS and FIMsys, respectively)

Resistance– In the early 2000’s, users already went through the process

when the Korean government first introduced NaFIS and FIMSys

• Strict internal control process built in the new FMIS made it even harder for users to become familiarized with the system

trainingthroughout the years

even harder for users to become familiarized with the system

1) The competition eventually waned when those two ministries merged into one in 2008

Brief Brief Overview of FMIS MechanismOverview of FMIS Mechanism

Integrated Fiscal InformationIntegrated Fiscal InformationIntegrated Fiscal InformationIntegrated Fiscal InformationIntegrated Fiscal InformationIntegrated Fiscal InformationIntegrated Fiscal InformationIntegrated Fiscal InformationWork Support Work Support Work Support Work Support Work Support Work Support Work Support Work Support

SystemSystemSystemSystemSystemSystemSystemSystem Fiscal Statistics Analysis Fiscal Statistics Analysis Fiscal Statistics Analysis Fiscal Statistics Analysis Fiscal Statistics Analysis Fiscal Statistics Analysis Fiscal Statistics Analysis Fiscal Statistics Analysis SystemSystemSystemSystemSystemSystemSystemSystem

Unit Business Management SystemUnit Business Management SystemUnit Business Management SystemUnit Business Management SystemUnit Business Management SystemUnit Business Management SystemUnit Business Management SystemUnit Business Management System

OLAPOLAPOLAPOLAPOLAPOLAPOLAPOLAP EISEISEISEISEISEISEISEIS

DBAS DBAS DBAS DBAS DBAS DBAS DBAS DBAS

SystemSystemSystemSystemSystemSystemSystemSystem Fiscal Statistics Analysis Fiscal Statistics Analysis Fiscal Statistics Analysis Fiscal Statistics Analysis Fiscal Statistics Analysis Fiscal Statistics Analysis Fiscal Statistics Analysis Fiscal Statistics Analysis SystemSystemSystemSystemSystemSystemSystemSystem

Treasury MgtTreasury MgtTreasury MgtTreasury MgtTreasury MgtTreasury MgtTreasury MgtTreasury Mgt

Budget MgtBudget MgtBudget MgtBudget MgtBudget MgtBudget MgtBudget MgtBudget Mgt

Performance-based Budget

Budget Formulation

Project MgtProject MgtProject MgtProject MgtProject MgtProject MgtProject MgtProject Mgt

Monitoring

Execution

Data MartData MartData MartData Mart

BudgetBudgetBudgetBudget

Data Data Data Data WarehouseWarehouseWarehouseWarehouse

LiabilityLiabilityLiabilityLiability

DBAS DBAS DBAS DBAS DBAS DBAS DBAS DBAS

Budget

Accounting

ProgramAsset & Credit, Debt MgtAsset & Credit, Debt MgtAsset & Credit, Debt MgtAsset & Credit, Debt MgtAsset & Credit, Debt MgtAsset & Credit, Debt MgtAsset & Credit, Debt MgtAsset & Credit, Debt Mgt

Treasury MgtTreasury MgtTreasury MgtTreasury MgtTreasury MgtTreasury MgtTreasury MgtTreasury MgtElectronic Bill & Electronic Bill & Electronic Bill & Electronic Bill & Electronic Bill & Electronic Bill & Electronic Bill & Electronic Bill &

PaymentPaymentPaymentPaymentPaymentPaymentPaymentPayment

EBPP

Expenditure

Revenue

Treasury

Monitoring

TreasuryTreasuryTreasuryTreasury

AssetAssetAssetAsset

AccountingAccountingAccountingAccounting Program

data

GFSGFSGFSGFSGFS

Asset & Credit, Debt MgtAsset & Credit, Debt MgtAsset & Credit, Debt MgtAsset & Credit, Debt MgtAsset & Credit, Debt MgtAsset & Credit, Debt MgtAsset & Credit, Debt MgtAsset & Credit, Debt Mgt

Accounting MgtAccounting MgtAccounting MgtAccounting MgtAccounting MgtAccounting MgtAccounting MgtAccounting Mgt

Inventory

Cash

Credit(bond)

Property

Government Government Government Government Government Government Government Government Finance StatisticsFinance StatisticsFinance StatisticsFinance StatisticsFinance StatisticsFinance StatisticsFinance StatisticsFinance Statistics

Fiscal I/F SystemFiscal I/F SystemFiscal I/F SystemFiscal I/F SystemFiscal I/F SystemFiscal I/F SystemFiscal I/F SystemFiscal I/F System

Accounting MgtAccounting MgtAccounting MgtAccounting MgtAccounting MgtAccounting MgtAccounting MgtAccounting Mgt

CostSettlement DataDataDataDataDataDataDataDataGFSM ‘01

GFSM ‘86

Board of Audit & Board of Audit & Board of Audit & Board of Audit & InspectionInspectionInspectionInspection

Local education Local education Local education Local education financefinancefinancefinance

Public enterprises/ Public enterprises/ Public enterprises/ Public enterprises/ Gov’tGov’tGov’tGov’t----Affiliated Affiliated Affiliated Affiliated

agenciesagenciesagenciesagenciesFinancial institutionsFinancial institutionsFinancial institutionsFinancial institutions Local Gov’t financeLocal Gov’t financeLocal Gov’t financeLocal Gov’t finance

FMIS’s Interface with External Fiscal Systems

Housing Fund

Agencies w/ Their Own SystemsAgencies w/ Their Own SystemsAgencies w/ Their Own SystemsAgencies w/ Their Own Systems

Housing Fund

Pension Fund

Credit Guarantee Fund

Employment Insurance

Ministry of Defense

Defense Fiscal Mgmt. Information System

Ministry of Knowledge Economy

Mgmt. Information System

Bulk Collection AgenciesBulk Collection AgenciesBulk Collection AgenciesBulk Collection Agencies

Bank of Korea

Financial NetworkFinancial NetworkFinancial NetworkFinancial Network

Ntl. Tax Service Central Fiscal Mgmt. Information Central Fiscal Mgmt. Information Central Fiscal Mgmt. Information Central Fiscal Mgmt. Information SystemSystemSystemSystem

Bank of Korea

Banks

Financial Telecommunications &

Clearings

Customs Service

Police Agency

Central Fiscal Mgmt. Information Central Fiscal Mgmt. Information Central Fiscal Mgmt. Information Central Fiscal Mgmt. Information SystemSystemSystemSystem

Ntl. PropertyNtl. PropertyNtl. PropertyNtl. Property

Korea Asset Mng. Corporation

Public Public Public Public ProcurementProcurementProcurementProcurement

Board of Audit & Board of Audit & Board of Audit & Board of Audit & InspectionInspectionInspectionInspection

Local Gov’t SystemLocal Gov’t SystemLocal Gov’t SystemLocal Gov’t System

Local Gov’t Finance

G2B E-Inspection Local Gov’ EducationKorea Forest Service

EBPP SYSTEM ENHANCES CONVENIENCE AND TRANSPARENCY OF

PAYMENTS

<Work Flow of National Tax Collection>

National Tax Service

1 Notice information

Service

1 Notice

4 Payment Results(batch/daily)

5 Payment Results

FMIS PayerBank of Korea

(batch/daily)

Commercial

1 Notice information3 Payment Results

Commercial Banks 2 Payment3 Cash (batch/daily)

• EBPP(Electronic Bill Presentment and Payment) allows payers to choose among various means of payment including:• EBPP(Electronic Bill Presentment and Payment) allows payers to choose among various means of payment including:

– E-banking, ATM(Automated Teller Machine)– Money is automatically transferred from commercial banks to the treasury account, eliminating potential threat of fraud

Status of FMIS

Status of As of 2014

• Status of Users : 67,895 users

(including 53 central offices, several local governments, public institutes)

FMIS

Status of User

Linked

As of 2014

governments, public institutes)

• Interface: 45 institutes, 63 systems with 14,543 daily users,

364,431 cases/day

Linked Institutes

e-Transactions364,431 cases/day

• e-Transactions: 5.7 trillion won per day ($5.5 billion)

Educ. & Training

International PR

e-Transactions

• Education & Training Program : on-site education, regular training, online training

CONTENTSCONTENTS

BackgroundBackground

Overview of IFMIS and Its development

Achievements and Key Success FactorsAchievements and Key Success Factors

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Flow Charts of National Closing Statement (as enforced under National Accounting Act since Jan. 0̀9)

National Finance Law National Accounts LawNational Accounting Act

(as enforced under National Accounting Act since Jan. 0̀9)

General Accountin

g

Settlement of Revenue and Expenditure

Account (Cash-based)Financial Report

(Accrual-based)

Overview of Closing Accounts

Settlement of Revenue and

Expenditure Account

Special Accountin

gPerformance Report

( Since 2008)

(Accrual-based) (In a case of funds, including

revenue, expenditure and settlement)

Financial Statements

Settlement of Funds Account

(Cash & Accrual based)

Statement of Financial

Position

Statement of Financial Mgmt.

Financial Report

Funds

Performance Reports

Statement of Changes in Net

Asset

Performance Report

Financial Report

(Accrual-based)

( Since 2008)

Implementation of Performance-Based System

Improved Budget Execution & Performance Monitoring

Before AfterBefore After�Limited evaluation of budget execution outcomes

�Only central government offices monitored and evaluated for performance

� Project-level performance-based budgeting

�Local governments, quasi-government organizations, and public funds all linked to dBrain

evaluated for performance

�Fiscal execution monitoring results only reviewed at year-end and applied to next year’s budget planning

� Scope (# projects): 23 (2013)→ 2196 (2014)

� Convenient, easy budget execution monitoring in real-time through Performance Information (PI) Board

� necessary corrective adjustments can be made within the fiscal year

�Yearly Budget Execution Plan

within the fiscal year

�Budget execution schedule broken down monthly� up-to-date execution realization rate (expressed as % of scheduled amount) �Yearly Budget Execution Plan

�Prone to inefficient project management practices, wasteful spending and poor project results

scheduled amount)

� execution realization rate

+ realization rates for pre-determined performance indicators

= overall performance score for a project= overall performance score for a project

�prevents inefficient project management (project execution appropriately spaced out throughout the year)

Enhanced Transparency

User Convenience with Transparency

�Interactive Open System

User Convenience with Transparency

Before After

�Interactive Open System

�Single input

�On-line Bidding and Payment System for

�Closed & One-way System

�Unavoidable double input �On-line Bidding and Payment System for Procurement

�Reduced number of accounting fraud

�Face-to-face submission of Document for Procurement

�Subsidy and payment fraud�All-out Open Policy: the system helps boost transparency of national financial management.

�Subsidy and payment fraud

�Limited open data with no feedback

� Providing financial information to the National Assembly & BAI

Improved User Experience

User Satisfaction

� Most users express greater satisfaction in working through FMIS

� Users had appealed inconvenience in using separated systems of each organization.

Before After

satisfaction in working through FMIS

e.g) Reduction of working time

� FMIS helps secure more work

organization.

� Too much time consumed in order to complete work by following work process. � FMIS helps secure more work

efficiency.

� User satisfaction has been enhanced.

process.

Service Quality Index

User Satisfaction Rate1)(%)User Satisfaction Rate

52.655.9

62.464.5

67.7

(%)

1) User Satisfaction Rate is the result of surveyconducted by the Korea Institute of PublicAdministration (KIPA).:This survey includes the items such as Frequency ofAccess (gaining 3.93 points out of a possible 5

2008 2009 2010 2011 2013

52.6 Access (gaining 3.93 points out of a possible 5points), Recognition of Work Range via FMIS (3.73points), Processing Most of Works only via FMIS(3.14 points), Reduction of Work Burden (3.25points), Systemization of Work Process (3.56 points)and Reduction of Expenditure (3.41 points), etc.

KEY SUCCESS

FACTORSFACTORS

Strong commitment form high -level decision makers Strong commitment form high -level decision makers

The reform team’s adaptive capacity to overcome cha llenges

Strategic communications with stakeholdersStrategic communications with stakeholders

Capacity building among stakeholders

Compromise between all-inclusive ambitious reform a genda and actual implementation and actual implementation

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THANK YOU!THANK YOU!

NOWOOK PARKNOWOOK PARK

NPARK@KIPF.RE.KR

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