Using Financial Management Information Systems (FMIS) for Fiscal Control: Applying a Risk-Based Approach for Early Results in the Reform Process

Abstract

FMIS are a set of automation solutions that allow government finance and accounting staff to carry out their day-to-day operational tasks. This enables government finance managers to plan, prepare and approve budgets, approve and verify commitments, issue payment orders and payments, monitor and report on financial resources collected, and develop appropriate resource allocation and borrowing strategies. Budgetary controls are an essential function of FMIS in that they provide control that execution happens against appropriations, meaning that at the aggregate expenditure targets should be met, providing more realism into deficit targets. The potential of such systems to improve effective service delivery, and increase participation, transparency, and accountability to citizens, their elected representatives, and creditors is widely recognized by the literature and practitioners alike. As such considerable resources have been invested into FMIS around the world, however at times with mixed results. This study finds suggestive evidence that FMIS coverage is associated with better budget performance and fiscal deficits conditioning on there being a functioning budget execution system in place. An important implication of this findings is that a roll-out strategy of initially capturing high-value transactions with FMIS could be pursued. Such a risk-based approach would be an important innovation in achieving early results in improved budget management, fiscal control and accountability, prior to scaling up to the full range of many more, smaller transactions.