31/12/2017

A Report
On
IT and IS Architecture for IFMIS
 Department of Management Information Systems
Course Name: Financial Information Systems and Technology
Course code: 506
Report on: IT and IS Architecture for IFMIS

Prepared By:

Diniyat Kamal Nizami

ID: 08-068
8th Batch
Department of Management Information Systems
Faculty of Business Studies, University of Dhaka.

Submitted To:

Md. Abul Kashem

Professor
Department of Management Information Systems
Faculty of Business Studies, University of Dhaka.

Date of Submission: 31st December 2017

Letter of Transmittal

31st December, 2017

Md. Abul Kashem

Professor

Management Information Systems

University of Dhaka

Dear Sir,

With great pleasure, I submit this term paper on “IT and IS Architecture for IFMIS” that you
have assigned to me as an important requirement of MBA program under Department of
Management Information Systems, University of Dhaka.

During the completion of my term paper I got a lot of help from different books and web sites. I
am also grateful to you for assigning me such kind of report which is very crucial part of modern
financial management and also which helped me to gather a vast knowledge about different
issues and services related with the financial management information systems. It also helps to
earn experience about the professional work.

Yours Sincerely,

Diniyat Kamal Nizami

ID No: 08-068
Acknowledgement

In preparing this document, the support, ideas and assistance of the following individuals are
greatly appreciated:

Md. Abul Kashem, honorable faculty member of Department of Management Information

Systems, University of Dhaka.

And special thanks to those who helped us to make this report more informative.

 Wahidul Islam, International Business 19th batch, University Of Dhaka.

 Ariful Haque, International Business 18th batch, University Of Dhaka.
 Md. Shahjahan Khan, Finance and Banking, University Of Chittagong.
 Jawadur Rahim, International Business 19th Batch, University of Dhaka.
 Anisur Rahman, Marketing 18th Batch, University of Dhaka.
 Asif Abdullah, Finance 18th Batch, University of Dhaka.
Limitation

The topic of our report is the ‘IT and IS architecture for IFMIS’ and we have tried our best to
prepare this report as efficiently as we can. Though we have tried our utmost, in some cases we
couldn’t do it properly. As a result, there is some lacking in our report.

The problems or the limitations we have faced during preparing this report:
 We could not attain enough sources to make it more enriched.
 Our time was limited. We could not find more information in this limited time.
 Couldn’t find enough reference books or articles on the relevant topic.
 Survey answers can be biased by the interviewer.

We have tried to overcome our limitations in preparing this report. Overall we have made our
best effort to make this report on ‘Managing Diverse Work Group in Organization’ more
informative and constructive.
Abstract

This paper discusses the subject of “IT and IS Architecture for IFMIS” for designing and
implementing Integrated Financial Management Information Systems (IFMIS) and how to put
them into place in specific environments: namely, in developing and transitional countries as
well as in conflict and post-conflict situations. The IFMIS provides a critical financial
management solution for countries whose administrative and economic infrastructure is obsolete,
or has been destroyed through war and years of conflict.

There is broad agreement that a fully functioning IFMIS can improve governance by providing
real-time financial information that financial and other managers can use to administer programs
effectively, formulate budgets, and manage resources. Sound IFMIS systems, coupled with the
adoption of centralized treasury operations, can not only help developing country governments
gain effective control over their finances, but also enhance transparency and accountability,
reducing political discretion and acting as a deterrent to corruption and fraud. Obstacles should
not be underestimated. The road to implementing successful IFMIS in developing countries is
paved with difficulties, such as resistance from the bureaucracies involved; lack of decision-
making from the top; weak human capital; corruption and fraud; and, in the case of conflict-
ridden countries, the instability and violence that impair any efficient long-term work. Moreover,
IFMIS systems are complicated, expensive, and difficult to manage and maintain.
Table of Contents
Introduction ..................................................................................................................................... 8

What is FMIS .................................................................................................................................. 9

Literature Review.......................................................................................................................... 10

The Ideal FMIS Systems ............................................................................................................... 11

Features of an FMIS...................................................................................................................... 11

FMIS prerequisites ........................................................................................................................ 13

The importance of FMIS ............................................................................................................... 14

IT architecture ............................................................................................................................... 16

Enterprise IT Architecture ............................................................................................................ 17

Benefits of Enterprise IT Architecture .......................................................................................... 18

Use of IT and IS architecture for financial purposes .................................................................... 18

The role of IT in FMIS.................................................................................................................. 19

Available IT solutions for FMIS ................................................................................................... 23

Conclusion .................................................................................................................................... 24

References ..................................................................................................................................... 25
Introduction

Financial Management Information Systems accumulate and analyze financial data in order to
make good financial management decisions in running the business. FMIS is the acronym for the
term “Financial Management Information Systems (McLeod & Schell, 2013). The basic
objective of the financial information system is to meet the firm's financial obligations as they
come due, using the minimal amount of financial resources consistent with an established margin
of safety. Outputs generated by the system include accounting reports, operating and capital
budgets, working capital reports, cash flow forecast, and various What-If Analysis reports. The
evaluation of financial data may be performed through ratio analysis, trend evaluation, and
financial planning modeling. Financial planning and forecasting are facilitated if used in
conjunction with a Decision Support System (DSS). In this report the introduction of FMIS is
given as well as the importance of FMIS has been discussed. The structure of IS and IT for FMIS
has been discussed.
What is FMIS

Financial Management Information Systems (FMIS) support the automation and integration of
public financial management processes including budget formulation, execution (e.g.
commitment control, cash/debt management, and treasury operations), accounting, and reporting.
FMIS solutions can significantly improve the efficiency and equity of government operations,
and offer a great potential for increasing participation, transparency and accountability.
Whenever FMIS and other PFM information systems (for example, e-procurement, payroll, debt
management) are linked with a central data warehouse (DW) to record and report all daily
financial transactions, offering reliable consolidated platforms can be referred to as integrated
FMIS (or IFMIS). The World Bank is a leading provider of financing and technical assistance for
FMIS development.

According to definition of FMIS, FMIS has following characteristics:

 Information system that tracks financial events and summarizes information

 Supports adequate management reporting, policy decisions, fiduciary responsibilities, and
preparation of auditable financial statements
 Should be designed with good relationships between software, hardware, personnel,
procedures, controls and data
 Generally, FMIS refers to automating financial operations

Integrated FMIS refer to core and non-core integration. It has four characteristics given below:
Standard data classification for recording events

 Common processes for similar transactions

 Internal controls over data entry, transaction processing, and reporting applied
consistently
 Design that eliminates unnecessary duplication of transaction entry
Literature Review

This section reviews the existing theoretical and empirical literature on the IT and IS
Architecture for IFMIS. The chapter is organized into IFMIS implementation concept,
challenges, success factors and benefits of IFMIS implementation on the public sector and the
theoretical concept (Bender, 2010). IFMIS creates a framework in which the government
agencies such as buyers can be able to procure goods/services by browsing catalogues advertised
by suppliers hence a one-stop Portal for public sector procurement. The scope and functionality
of an IFMIS however can vary from a basic general ledger accounting application to a
comprehensive system covering budgeting, accounts receivable or payable, cash management,
commitment control, debt, assets and liability management, procurement and purchasing,
revenue management, human resource management and payroll. E-sourcing is a functionality of
IFMIS that entails using the internet technology to identify new suppliers for a specific category
of purchasing requirements (Brown, Gatian & Hicks, 2005). E-tendering on the other hand is
sending requests for information and prices to suppliers and receiving the responses of suppliers
using Internet technology. While e-reverse auctioning is buying goods and services from a
number of known or unknown suppliers using the internet technology. Whereas e-informing
refers to gathering and distributing purchasing information both from and to internal and external
parties using internet technology. Despite there been introduction and measures put in place to
ensure the success of IFMIS, there are various setbacks that hinder the achievement of its key
objectives, these include; lack of capacity, lack of commitment to change , resistance and
technical challenges. Capacity refers to the required staff in operating the IFMIS systems. The
lack of capacity is regarded as one of the major factors impending successful implementation of
IFMIS especially in the public sector (Schonberger, 2009). IFMIS practices if effectively
implemented may result in a number of benefits in the public sector performance such as
enhanced transparency and compliance, increased performance and quality, and economic
development.
The Ideal FMIS Systems

There are some defining features that determine if a financial information system is efficient or
not. An ideal or well-designed system should have the following attributes.

 Collect accurate, timely, complete, reliable, consistent information

 Provide adequate management reporting
 Support government-wide and agency policy decisions
 Support budget preparation and execution
 Facilitate financial statement preparation
 Provide information for central agency budgeting, analysis and government-wide
reporting
 Provide complete audit trail to facilitate audits.

Features of an FMIS

In terms of terminology, an FMIS usually refers to computerization of public expenditure

management processes including budget formulation, budget execution, and accounting with the
help of a fully integrated system for financial management of the line ministries and other
spending agencies. The full system should also secure integration and communication with other
relevant information systems. Because of the integration requirement, the FMIS is commonly
characterized as an integrated financial management information system (IFMIS). Unfortunately,
using the term “integrated financial management information system” can sometimes be
erroneously interpreted as describing a system that can capture all the functional processes, and
the relevant financial flows, within public expenditure management. However, the complexity of
information systems within the government sector is, to a large extent, due to the multiplicity of
functions and policy areas. In many functional areas specialized information systems are in place
and will still be required even with the implementation of an FMIS. It should be noted that in this
article the term FMIS has been used generically to include an IFMIS.
As the name implies, there are, and should be, three guiding characteristics for a well-designed
FMIS.

 It is a management tool. When developing an FMIS it is important that it cater to

management needs – not just those of the central agencies, but also line agencies.
Moreover, as a management tool it should support the management of change. It must be
viewed as an integral part of budget system reform – hence not be designed just to meet
present requirements, but also to support those needs that are likely to arise as parallel
budget reforms are implemented.
 It should provide a wide range of nonfinancial and financial information. As a tool
of management it should provide the information required for decision making. For this
purpose it is anchored in the government accounting system, and should be designed to
perform all necessary accounting functions as well as generate custom reports for internal
and external use. However, this does not mean that it should exclusively concentrate on
financial information. Managers will require other nonfinancial information. For
example, personnel information such as numbers of employees, their grade within the
organisational structure and rates of remuneration. For performance-based budgets,
performance information will be important to managers, such as the identification of
programmes, the objectives or outcomes of programmes, the types of goods and services
produced, as well as indicators by which to judge the efficiency and effectiveness of
programmes.
 It is a system. Its role is to connect, accumulate, process, and then provide information to
all parties in the budget system on a continuous basis. All participants in the system,
therefore, need to be able to access the system, and to derive the specific information they
require to carry out their different functions. The converse is also true: if the FMIS does
not provide the required information – that is, has not the right functionality – it will not
be used, and will cease to fulfil its central function as a system. Further, by automating
procedures and internal controls, it strengthens financial controls and promotes
accountability.
Although the FMIS does not capture all the information flows, adopting a comprehensive
approach in the development of the project is fundamental to ensure that all functional
interdependencies are identified, hence securing the capture of all related information flows.

FMIS prerequisites

The key elements of an FMIS enabling environment are referred to as “FMIS prerequisites.”
These prerequisites should be substantially completed before the contract signature with ICT
solution provider(s) in order to reduce potential complications during system development and
rollout. These elements are categorized in three groups:

Functional Aspects

 Improvement of budget classification

 Development of a united chart of accounts, integrated with budget classification
 Improvement of treasury single-account operations
 Development of commitment control and monitoring mechanisms
 Establishment of cash management functions

Technical Aspects

 Establishment of a secure countrywide communication network

 Preparation of system/data centers

Human Resources

 Presence of a core team of ICT specialists within PFM organizations

In practice, country context will influence the degree to which these prerequisites should be met
ex-ante. However, all of these prerequisites should be considered before any FMIS
implementation to minimize the risks of cost overruns, delays, and failure in meeting the design
requirements and reform objectives.
The importance of FMIS

Financial Management Information System is the automation of financial operations.

Automation is achieved through the use of financial accounting applications and database
management systems (Dener & Watkins, 2011). The use of FMIS applications is designed to
simplify the recording of events, processing of transactions and reporting of financial
information in your business.

Quick Decisions

The FMIS application provides timely, accurate, reliable and verifiable information that hasten
your decision-making process (Rodin-Brown, 2008). It provides advanced financial reporting
and decision-making procedures for evaluating the merits or shortcomings of your operational
and strategic approaches to business. This reduces uncertainties that may derail your
implementation of important business decisions.

Planning

Implementation of FMIS enhances your scheduling and forecasting capacity. This enables you to
allocate your financial resources effectively and set realistic performance targets. Limit the scope
of your plans to your financial resource capabilities. The realistic planning capacity also
accelerates the achievement of your goals within the desired time frame.

Efficiency

You stand to achieve greater efficiency in financial operations and reporting procedures when
using FMIS applications (Watkins, 2014). These systems entrench the controls you need to
eliminate misuse of financial resources, but also the mitigation measures you employ to protect
your business against the occurrence of expected and unexpected risks. The control measures
also provide the historical evidence of performance you need to regulate the current and future
activities of the business. Auditors also use this historical evidence to evaluate the progress of
your business.
Integration

FMIS provides you with a framework for integrating functional processes and financial resources
in your business. This accelerates the processing of transactions and conveyance of financial
information, in addition to eliminating duplicate activities and responsibilities along the
organization’s chain of command (Dener & Watkins, 2011). Systems integration also provides
you greater leverage for centralizing shared services so as to reduce operational costs associated
with running multiple operational units for the shared services.

Competition

The adoption of FMIS applications elevates the competitive advantage of the business. Indeed,
the strategic value of information technology is extremely important in the advancement of
customer satisfaction and growth of productivity. It enables the business to respond appropriately
to changes in target markets and stay ahead of its competitors.

Information Transparency

One key benefit of a financial management information system is transparency of information.

Often, the owner and the accounting and finance-related personnel are the only ones who know
and understand what is happening financially with the company (Rodin-Brown, 2008). Through
the use of an FMIS, all individuals with access to the system can check on aspects of a
company’s financial performance. This helps managers of other departments and functions better
understand how and to what extent what they do impacts the business.

Budget Control

As companies grow larger, the budgeting process becomes more complex. Because different
departments can track their spending and make ongoing adjustments through an FMIS, it reduces
budgeting complexity (Rodin-Brown, 2008). Instead of having to regularly meet to discuss the
budget and any changes, department heads can see what they and others are doing and provide
insightful commentary on any issues that arose that did impact or could impact their respective
budgets. This also facilitates tighter budget control.
Strengthens Financial Controls

For an FMIS to be effective, it requires companies to put systems, procedures, policies and
methodologies in place. It may require one or more software systems. For example, an FMIS
may require an accounting software package, a database system and an enterprise resource
planning software program that pulls financial-related data from the accounting and database
systems. All of these working together serve to significantly strengthen a company’s internal
financial controls.

IT architecture

• Develop information architecture to rationalize information needs and flows

• Develop data architecture to enable sharing, access, management, security and integrity
of data

• Develop system architecture to computerize and support business processes

• Develop technology architecture to support computerized processes, information flows,

and data management

• Develop networking architecture to enable information flows across space and

institutional boundaries

• Develop security architecture to ensure protection, integrity and confidentiality of data

Enterprise IT Architecture

Enterprise IT Architecture covers the architectural principles and practices, under whose
guidance IT applications are built, purchased, customized and deployed within the organization.

It provides a technology framework and a set of standards to enable acquisition, development,

and deployment of IT services that maximize interoperation, minimize duplication, and simplify
the IT environment.

1. Information architecture identifies where and how important information, like customer
records, is maintained and secured.

2. Infrastructure architecture includes the hardware, software, and telecommunications

equipment that, when combined, provide the underlying foundation to support the organization’s
goals.

3. Application architecture determines how applications integrate and relate to each other.
Benefits of Enterprise IT Architecture

Use of IT and IS architecture for financial purposes

IT and IS architecture benefits the business world by allowing organization to work more
efficiently and maximize productivity, faster communication; electronic storage and electric
record are the few popular practices. Since the ubiquity of IT has increased across the boundaries
it has now become an inevitable domain to incorporate IT in all workstations to tackle all the
activities in efficient and effective fashion (Asongu, 2016). Technology is an essential partner in
management for business, regardless of the kind of enterprise you operate. Whether you need
computers for storage, transfers, retrieval or transmission of information, you can manage your
business with greater accuracy and efficiency with the assistance of information technology and
computer applications. The benefits of using IT are tangible and can be measured.
The role of IT in FMIS
Following are the roles of ICT in FMIS:

Global Financing

Information technology allows finance to function on a global level. Financial markets can be
thought of as the first organized, global information markets operating through network
computers. Without information technology, financial markets could not react to global
development and finance companies couldn’t consistently acquire information at the same time
as their competitors. For example, the internet allows continuous access to credit scores and
credit rating to all lenders, insurance companies and businesses that need financially responsible
customers.

Social Media

The Information Technology that runs social media on the internet that provides financial
institutions with valuable information on their customers. By encouraging online communities
associated with their products, finance companies not only acquire information but also
encourage brand loyalty (Schoute & Budding, 2017). For example, websites such as Amazon
allows online stock traders to discuss their picks and advise newcomers. Socially driven
information technology allows finance companies to contact the younger demographics that will
be in future customers

Storing and Protecting Information

Information technology creates electronic storage system to protect company’s valuable records.
Secure maintenance of customer and patients files is vital to business integrity, storage systems,
such as vital vaults, keep information safe by only allowing certain users within the company to
access, withdraw, add or change the documents and protect from being hacked, or wiped out
during a technological disaster (Schoute & Budding, 2017). Electronic security means your
valuable records will remain safe. Computer for data storage for business, inventory, sales,
receivables’ and payable stored in excel, and open office or a similar program keeps this figure at
your fingertips. Accounting software stores your payroll information, tax records and specialized
data for your business.
Marketing

Large and small businesses are on level playing field on the internet. You can have web
presence, take orders, buy merchandise, sell excess or even operate some business entirely
online. A marketing tool that uses information technology is the quick response that looks like a
bar code. We can use your business management skills to direct employees or contractor to do
your internet marketing with the help of information technology.

Information

The internet is a wealth of information to keep your current with trends, techniques, software and
human resources. We can draw on online database and websites to locate potential employees,
compare insurance proposals, tackle employee issues or check out the competition. Managing
your business with information gleaned from the internet keeps knowledge and on the cutting
edge.

Communication

Communication by email is faster and costs less than sending a paper letter by post. The business
communication in various commercial organizations has widely accepted email as main medium
for information dissemination across platforms (World Bank, 2017). Email systems not only
carry out information in textual formats rather provides the way to transmit multimedia
information from customer to client and vice versa.

Benefits to the Business

The business benefits arising from effective ICT generally relate to the reliable and consistent
matching of ICT services to user needs i.e. service quality. Which in turn contribute to the
overall success of the organization’s business through higher productivity? These benefits are
achieved through increasing service availability and quality to users, better match of capacity of
requirements, more efficient handling of problems and reduce risk of failure, minimizing the
effect of such failure (Smallbusiness.chron.com, 2017).
Time saving

The main time saving factor is the flexibility of scheduling when to engage on a process. For
example a visa application form can be filled when the applicant has a free time and not
necessary during the opening hours of the consulate (Smallbusiness.chron.com, 2017). The data
filled are verified immediately for validity. Acknowledge is sent immediately as prove of
application. Payment is made online with credit card thereby saving the time of passing through
the cashier.

Enterprise Resource Planning

Even very small companies use accounting software packages that generate financial reports
such as income statements and cash flow statements. This simple form of IT allows a small
business owner to save accounting time and have management reports available on a timelier
basis. Mid-size and larger companies use more sophisticated IT systems called enterprise
resource planning or ERP, which are groups of software modules that serve the needs of all
functional areas of the company. As its name suggests, ERP helps the company plan the use of
its resources, a process that the finance department oversees.

Faster Flow of Information

IT systems allow a company to link up every department within the organization. Information
generated by the manufacturing, marketing and finance divisions can be shared for example.
This information is available real-time, meaning as soon as it is created on the system. Accessing
it does not require a great deal of research or manual effort (Global Delivery Initiative, 2017).
The time finance staff used to devote to “digging” for the numbers they needed can now be
devoted to analyzing and interpreting the information -- finance’s primary role in the
organization.

Customized Reporting

The IT systems used by the finance department have a report generating functionality that speeds
up the process of producing management reports. The system provides a certain degree of
customization -- the reports can be configured based on the specific needs of the management
team (Garrigos-Simon and Gil-Pechuán, 2014). Automation of these reporting systems means
that routinely generated reports, such as those produced at the end of each month, can be created
quickly. With many of the decisions management has to make, time is of the essence. IT systems
address this need for rapid, customized reporting capability.

Collaboration

Many organizations take advantage of collaborative effort across departments, the concept of
each department benefiting from other departments’ expertise. The finance team acts as in-house
consultants to other departments within the organization. When all departments use a centralized
IT system, it drops the barriers that formerly blocked the flow of information. The company now
has a centralized database that all team members can access -- subject to certain security rules. In
the case of a company with multiple offices or international divisions, this ability to access the
same information from around the globe saves time and improves efficiency. If finance requires
manufacturing cost data to create a report for an upcoming board meeting, operations personnel
can quickly transmit the data in the format the finance department requires and understands.

Better Forecasting

Better forecasting means producing a forecast that is a more accurate prediction of what the
company’s financial results are likely to be. Finance staff members need access to in-depth
information to create forecasting models that depict how the organization actually works. Having
access to information from all segments of the company makes accurate forecasting much easier.
Finance has real information and does not have to rely on guesswork when creating assumptions
for the forecast (Garrigos-Simon & Gil-Pechuán, 2014).
Available IT solutions for FMIS

Modern integrated FMIS systems are designed and implemented as centralized web-based
applications, supporting decentralized operations. Implementation of the FMIS includes the
following IT components:

 Establishment of countrywide network connections (communications lines) usually as a

Government contribution.

 Development of web-based Application Software (ASW) as a combination of customized

COTS package + locally developed software (hybrid solution).

 Installation of central servers (database & application servers) and data storage units
(fiber disk arrays) at the Main System Center & Business Continuity Center (Schoute and
Budding, 2017).

 Installation of standard field hardware (domain servers, user workstations and

peripherals) in central and field offices.

 Installation of network equipment, system security and user management tools and
engineering support solutions.
Conclusion

After studying about FMIS it is understood that Financial Management Information System is
the automation of financial operations. Automation is achieved through the use of financial
accounting applications and database management systems. The use of FMIS applications is
designed to simplify the recording of events, processing of transactions and reporting of financial
information in your business. Financial management information system is of great value and
importance for a business organization. It involves collecting and analyzing financial data which
is used in running a business in a way as wanted as well as making good financial decisions.
There are many benefits of implementing financial management information system in an
organization. Some of most important benefits are mentioned in this article. Financial
management information system is of great help and assistance in tracking the financial events
and summarizing the information. At this point, it is important to discuss briefly about
information. Information may be defined as the data which is organized and presented so as to
facilitate effective decision making process and enable the users to take necessary actions. In
this way, information consists of collected facts and data which is processed, stored and used for
various purposes in a business.
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Access. SSRN Electronic Journal.

Dener, C. and Watkins, J. (2011). Financial management information systems. Washington,

D.C.: The World Bank.

Garrigos-Simon, F. and Gil-Pechuán, I. (2014). Advances in crowdsourcing.

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McLeod, R. and Schell, G. (2013). Management information systems. Upper Saddle River, N.J.:
Pearson/Prentice Hall.

Rodin-Brown, E. (2008). Integrated financial management information systems. [Washington,

DC]: USAID.

Schoute, M. and Budding, T. (2017). Stakeholders’ Information Needs, Cost System Design, and
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Management, 33(1), pp.77-101.

Smallbusiness.chron.com. (2017). What Are the Benefits of a Financial Management

Information System?. [online] Available at: http://smallbusiness.chron.com/benefits-
financial-management-information-system-71943.html [Accessed 18 Dec. 2017].

Watkins, J. (2014). Financial Management Information Systems. Washington, D.C.: The World
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