Why integrate vendors to government financial management systems?

Why integrate vendors to government financial management systems?

Why integrate vendors to government financial management systems?
 ? Why integrate vendors to government financial management systems

Over the years public financial management systems have evolved as a robust payment system transferring funds to divers’ group of beneficiaries (including the government employees, suppliers and cash transfer beneficiaries under various social sector scheme). However, there is little progress in digitizing the upstream of payment processes in order to make system transparent, efficient and accountable. 
Though significant efforts have been made worldwide to automate procurement systems but the key link of issuing purchase order and invoicing remains predominantly a manual process (Figure-1) particularly in developing and LIDCs thus keeping personal interaction with the suppliers at each stage of procurement to pay. There appears to be vested interest in keep this personal interaction in order to keep open the opportunities for rent seeking, deliberate delays in processing payments, avoid commitment controls and budget authorization (it is possible to issue purchase orders without committing budgets and postponing payment processing leading to accumulation of expenditure arrears). Moreover, these manual systems are prone to frauds as in many cases fake invoices from non-existent vendors can be used to process payments.
Download Also:
Thus, there is a felt need to extend the existing PFM systems to integrate with the vendors and suppliers for online issuance of PO, GRN and invoice receipting because such an integration with the suppliers facilitates stronger commitment controls and bring in efficiency in suppliers’ payments. 
  1. In few developing countries, following factors make this integration possible in a short span of time-       
  2. It is a next logical step because in many cases governments have created a central repository of the vendors and suppliers to process payments. This central database can be used to create a dedicated portal in the government IT systems to provide access to the system.      
  3. Widespread availability of internet connectivity provides easy and secure access the government system through a mobile app or web portal.     
  4. Centralized database of the businesses available with government authorities with unique business and tax identification numbers which can be used to authenticate genuine vendors.      
  5. Many countries have PKI which can be used for signing the documents exchanged through the electronic interface. In case where PKI is not available, many private companies are offering digital signature solution which can be integrated in the IT systems.   
Integrating vendor functions in the pubic financial management systems will have following benefits-      
  1. Online invoice submission by the suppliers which also promotes social distancing in a crisis like COVID-19     
  2. eliminate data entry errors in the PFM systems     
  3. paper based invoices are difficult to store and many times lost or damaged. Electronic documents are easy to store for a longer time in databases, easy to retrieve. All documents can be accessed simultaneously by various actors in the payment process thus saving time and paper     
  4. Such system will enforce commitment controls and monitoring of transaction from procurement to payment thus bringing in transparency and accountability in the process     Vendors can track invoices in the process and visibility on cash flow will facilitate better business planning at their end    
  5. Minimize the risk of duplicate invoice processing, fake invoices and frauds by linking all transactions electronically in the process     
  6. And at last it will prevent corruption by reducing opportunities for rent seeking 
Related Topics:
Developed countries have taken lead and laid down standards to facilitate standard exchange of information. For example, in European Union , “PEPPOL provides a set of technical specifications that can be implemented in existing eProcurement solutions and eBusiness exchange services to make them interoperable between disparate systems across Europe. PEPPOL enables trading partners to exchange standards-based electronic documents over the PEPPOL network (based on a 4-corner model). These documents include e-Orders, e-Advance Shipping Notes, eInvoices, eCatalogues, Message Level Responses, etc.” (https://peppol.eu/what-is-peppol/).
I have extensive relevant experience of working with the IMF (as resident advisor in Swaziland and as a STX in Botswana, Zimbabwe, Seychelles and Somalia) and with the Government of India (GoI). I have rich experience in developing and conducting training for building PFM capacities at the various levels of government.  1)    Budget preparation  2)    Budget Execution   
a) Expenditure Control/Internal Controls.  
b) IFMIS.  
3) Financial Reporting: .  
4) Accounting Reforms: I have introduced several accounting reforms in the GOI and supporting these reform in Swaziland.  
a) Chart of Accounts (CoA).  
b) Treasury Single Account/Cash Management.  
c) Accounting Processes/Manuals:   
d) Banking Arrangements and Reconciliation. I e)    
PFM regulations.

Post a Comment

Previous Post Next Post