INTEGRATED FINANCIAL MANAGEMENT INFORMATION SYSTEM (IFMIS)

IMPLEMENTATION IN KENYA

LAWRENCE WAKAMORI WAMBU

BUS-1-8540-3/2013

A Seminar Paper Submitted In Partial Fulfillment of the Requirement for Bachelor in

Business Administration Option of Kenya Methodist University

November 2015

TABLE OF CONTENTS
TABLE OF CONTENTS..............................................................................................................ii
LIST OF ABBREVIATIONS AND ACRONYMS.....................................................................iii
ABSTRACT..................................................................................................................................iv
CHAPTER ONE.......................................................................................................... 1
1.0 Introduction........................................................................................................... 1
1.1 History of the Integrated Financial Management System Kenya...............................1
1.2 IFMIS Re-engineering in 2011.................................................................................. 7
1.3 IFMIS Re-engineering Strategic Plan 2013-2018......................................................10
1.4 Organizational Structure for IFMIS Re-Engineering........................................................10
CHAPTER TWO....................................................................................................... 12
2.0 IFMIS Implementation in Other Countries.............................................................12
2.1 The case of Slovak Republic................................................................................... 12
2.3 The Case of Uganda.............................................................................................. 13
2.4 Benefits of using the IFMIS system.........................................................................14
2.5 Challenges of IFMIS Implementation.................................................................................15
2.5.1 Institutional Challenges......................................................................................................15
2.5.1 Political Challenges............................................................................................. 16
2.5.2 Technical Challenges..........................................................................................................17
CHAPTER THREE.....................................................................................................................18
3.0 Recommendations..................................................................................................................18
REFERENCES............................................................................................................................20

LIST OF ABBREVIATIONS AND ACRONYMS

CoA

Chart of Accounts

CPF

Comprehensive Project Framework

CRA -

Commission on Revenue Allocation

DFID -

Department for International Development

DIIU -

Departmental IFMIS Implementation Unit

ERP

Enterprise Resource Planning

GoK -

Government of Kenya

IAS

International Accreditation Service

ICT

information and communications technology

IFMIS -

Integrated Financial Management Systems

IFRS -

International Financial Reporting Standards

P2B

Plan to Budget

PFM -

Public Financial Management

PFMR -

Public Financial Management Reforms

PPOA -

Public Procurement Oversight Authority

SCOA -

Single Chart of Accounts

TCI

Technical Committee on IFMIS

ABSTRACT
The Government of Kenyas IFMIS is an Enterprise Resource Planning (ERP) Software. ERP
applications are large-scale computer software and hardware systems that attempt to integrate all
data and processes of an organization into a unified system housed in a centralized database
which is accessed through a secure network. ERPs have capabilities for handling enterprise wide
business processes ranging from functions such as manufacturing, logistics, distribution,
inventory, shipping, invoicing, and accounting. They can also aid in the control of business
activities like sales, marketing, quality control, and human resource management. ERP
functionalities are managed through a system of modules, which allows for flexibility in
implementing various functions. This not only plays an important role in streamlining the
efficiency and effectiveness in the management of public financial resources, but further
contributes to fighting corruption through the promotion of greater comprehensiveness and
transparency of information across government institutions.

CHAPTER ONE
1.0 Introduction
The introduction of Integrated Financial Management Systems (IFMIS) has become a core
component of financial reforms to promote efficiency, security of data management and
comprehensive financial reporting. IFMIS provide an integrated computerized financial package
to enhance the effectiveness and transparency of public resource management by computerizing
the budget management and accounting system for a government. It consists of several core subsystems which plan, process and report on the use of public resources. The scope and
functionality of IFMIS can vary across countries, but sub-systems normally include accounting,
budgeting, cash management, debt management and related core treasury systems. In addition to
these core subsystems, some countries have chosen to expand their IFMIS with non-core subsystems such as tax administration, procurement management, asset management, human
resource and pay roll systems, pension and social security systems and other possible areas seen
as supporting the core modules (Chne, 2014).
1.1 History of the Integrated Financial Management System Kenya
In 1996 the GoK, through the Accountant Generals Department undertook an in-depth analysis
of financial management and audit, people management and organisation and financial
management information systems in the government, and established the way forward in
addressing the financial management problems in government.The Accountant Generals
Department developed a project proposal for IFMIS emphasizing the need to address the
problems that had been identified which included:
1. Poor record management
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2.
3.
4.
5.
6.

Untimely presentation of financial reports

Poor accountability of financial resources
Lack of proper audit trail
Enhanced transparency and accountability
Improved efficiency

The development of an IFMIS commenced with diagnostic reviews to identify issues and
problems of finance and accounting in GoK. This review was carried out in three phases. The
first two phases were undertaken between 1997 and 2000. In 1997, DFID provided some
development assistance to GoK for Strengthening Government Finance and Accounting
Functions. This was carried out in two phases which concentrated on team building and
investigating the issues, problems, deficiencies and needs. Subsequently, a Comprehensive
Project Framework (CPF) was developed.
The DFID CPF set out to improve the performance of GoK finance and accounting functions,
especially in financial management control and audit, financial management information system
and people management and organizations. Specifically, the following issues had been identified
in relation to PFM issues in GoK:
1.
2.
3.
4.

Accountability and transparency is poor

Irregular payments are significant
Outstanding bills to suppliers have escalated
AIE holders lack up to date and accurate information for effectively monitoring and

controlling expenditures
5. Revenue streams are poorly identified and collection rates are low
6. Mobilisation of donor funds is poor, causing delays in implementing projects
7. Donors lack confidence in existing systems
8. Current emphasis is on monitoring inputs rather than outputs
9. There is no objective or effective mechanism for disseminating budgets to the district level
10. GoK proposes to move to a modified accrual basis of accounting
11. Motivation, morale, compliance and enforcement are all low

IFMIS implementation in Kenya commenced in 2003, originating from gaps and weaknesses
within the SIBET system that was in use at the time. It was felt that there was need to introduce
different modules comprising of Accounting, Revenue management, and Asset management
among others, and the establishment of interfaces with the Central Bank payment information
system, Kenya Revenue Authority and the Ministry of State for Public Service for payroll and
human resource management modules. The GoK therefore procured an integrated financial
computer package, Oracle Government Financials for the Public Sector by State Informatics Ltd
of Mauritius and Simba Technology Ltd of Kenya. The GoK Strategy to Revitalize Public
Financial Management, by the PFM Reform Coordination Unit at the Ministry of Finance in
2006 recognized IFMIS contribution to the six PFM reform pillars to improve the governments
capability and systems to utilize public financial resources towards Economic Recovery Strategy
(ERS) for Wealth and Employment Creation (GoK, 2014).
In 2006, the Ministry of Finance sought to procure the services of a consultant to undertake a
diagnostic review of the Integrated Financial Management Information system. A Contract was
given to M/S Information Technology Associates Limited for provision of consultancy services
to the IFMIS project in January 2007 for 20 weeks. This contract was to perform a situational
analysis of the extent of implementation of IFMIS and prepare an action plan and
recommendations for fast tracking IFMIS implementation.
This consultancy established the following:
1. General Ledger rolled out to 24 out of the 43 accounting units.
2. Purchase Order and Accounts Payable modules rolled out in 24 out of 43 accounting units

3. Budget module set up but was not in use due to an inadequate SCOA structure and inability
to produce printed estimates in a format acceptable to the users, especially reflecting
personnel details. This led to the development of an in-house budget system.
4. Cash management module was initially set up in 2006 but did not go beyond testing. The
local supplier had no experience in implementing this module.
5. The financial analyser module had not been set up, and this was attributable to lack of
understanding of its functionalities.
6. Hardware procured was not aligned to IFMIS requirements, and were allocated to ministries
for non-IFMIS use. The report made recommendations that GITS should take over the
management of acquisition, installation and support of all IFMIS hardware
7. Lack of installation of data recovery hardware for IFMIS operations
8. Insufficient capacity building on sun solaris in IFMIS
9. It was unlikely that customized manuals could be produced without being derived from an
output of business re-engineering. The report recommended that detained documentation of
business processes for each functional area be undertaken and used as the basis for
customized user manuals
10. The business process re-engineering was also useful to identify areas that require policy,
legal and procedural authorization
11. The location of the IFMIS office in the AGD gave the perception that IFMIS is an accounting
project. The report recommended that each of the project components, eg budget, GITS,
procurement oversight authority, accountant general, internal auditor general and controller
and auditor general should establish office facilities to support their respective modules.
It was therefore recommended that an IFMIS project charter be developed that would guide the
re-engineering of business processes, and a comprehensive management and technical
infrastructure be established to support IFMIS deployment. Identification of systems to be
integrated with the IFMIS was also recommended. The manual processes were also prone to long
bureaucratic steps that often delayed transaction processing and payments, and led to
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opportunities for mismanagement of public funds due to the various approvals required. Only
three IFMIS financial modules were implemented by 2010, namely the General Ledger,
Accounts Payables and Purchase Order. Though these modules had been rolled out, they had
been partly implemented with considerable reliance on manual processes.With only three
financial modules in operation by 2010, public financial management (PFM) in Kenya relied
almost exclusively on manual processes (including expenditure approval and bank reconciliation
processes) which undermined the security and integrity of PFM (GoK, 2014).
In addition, the three modules were separately managed and implemented by respective
departments at the then Ministry of Finance in a silo based framework. This framework
exacerbated the already precarious status due to the independent modular management approach
restricted to distinct officers operating the system without due cognisance to the integrated nature
of their operations.
At the same time, not all PFM disciplines used the system. In view of the fact that only the three
modules above were in operation, only accountants and procurement officers operated the
system. Finance/budget officers, and accounting officers in charge of their ministries did not
have access or use of the system.
During this time, the Ministry of Finance was operating two distinctly different Charts of
Accounts one for budget preparation and one for budget execution. The process of translating
between the two codification structures for purposes of expenditure was manual and prone to
errors. At the same time, the Public Sector Budgeting module could not handle budgeting and
reporting. This latter problem led to the development of a separate stand-alone programme for
budgeting developed under an MSQL programme which could not be integrated with the IFMIS.
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Financial reporting on budget and expenditures was thus highly manual and difficult to
implement.
Other problems prior to IFMIS Re-engineering included frequent system shutdown due to lack of
professional support and inefficient infrastructure, limited coordination among user departments,
insufficient networking, insufficient strategic focus, limited system ownership and less than
optimal human resource development to support system users. Various source systems such as
debt management, pensions and payroll that should have provided vital information to support
the IFMIS and enhance its reporting capabilities existed independently, with no integration
framework in place (GoK, 2014).
Due to these system challenges, users and beneficiaries of the system were often frustrated with
its use. The IFMIS system acquired a negative perception amongst users and customers (such as
government suppliers), and was often the scapegoat for general government inefficiencies with
regards to payment processing and transacting and created avenues for corruption. This therefore
led to calls for the re-engineering of IFMIS to reverse this trend and introduce a full cycle endto-end integrated approach for better financial service delivery to citizens. In 2010, the
Government developed a Master Plan for IT shared services across the 42 ministries and 175
local authorities. The government recognized that the investments in the current IFMIS must be
balanced with the requirements of the new Constitution and the need for automation. This called
for an automated budgeting system for the financial year 2011/12 (GoK, 2014).
1.2 IFMIS Re-engineering in 2011

The Re-engineering of the Integrated Financial Management Information System (IFMIS) was
initiated in 2011, and guided by the Strategic Plan for the period 2011-2013. This Strategic plans
was premised on the following components:
1. Re-engineering for Business Results: This components objective is to re-engineer
business processes for improved financial management.
2. Plan to Budget (P2B): This component is aimed at providing a structured framework for
development and deployment of a fully functional, automated planning and budgeting
system, aimed at improving the accuracy and efficiency in the Governments planning
and budgeting process.
3. Procure to Pay: This component is aimed at creating an end to end automated process
that starts at development of procurement plans, to the actual procurement of goods and
services, to payment of suppliers for goods or services delivered.
4. Revenue to Cash: This component is aimed at providing functionalities for collection,
recording and classification and reporting of Government revenue. It involves all
activities related to revenue and cash management from generation, collection, recording
of revenue and distribution of funds to the ministries.
5. Record to Report: This component encompasses all activities that include the updating
and maintenance of the general ledger, the reconciliation of sub ledgers to the general
ledger and closing of books. It also includes recording, control and reporting on fixed
assets at both National and County level.

6. ICT to Support: The main objective of this component is to provide the technical
support underpinning effective and efficient automation of all the IFMIS processes. ICT
to Support aims to provide the infrastructure and support required for a fully functional
financial management system.
7. Communicate to Change: This component focuses on change management, capacity
enhancement, information generation and dispersion, education and effective
communication among IFMIS stakeholders.
The IFMIS Re-engineering programme adopted a policy direction from a modular to full cycle
end to end framework. This approach was crucial in moving away from the silo based
implementation of modules, to an end to end integrated framework in which users would be
cognizant of their roles and responsibilities within the entire spectrum of public financial
management.
The programme was successful in undertaking business process reviews of all public financial
management processes. In appreciating that government protocols and procedures are often rigid
and difficult to change, this was a milestone achievement. The Business Process Reviews
facilitated a review and in some cases removal of obsolete process steps that would not be
automated.
The programme activated additional financial modules-Cash Management, Fixed Assets, and
Accounts Receivable in ten pilot ministries. The functions and operations of the existing
financial modules were also stabilized. Approval processes in transaction processing and
payments were automated in the system.

An IFMIS Academy was established to enhance capacity of IFMIS users both at the national and
county governments. The IFMIS Academy utilizes an in-classroom and online training
framework in which users can receive continuous training even while back at their offices.
A new Single Chart of Accounts (SCOA) was developed and mapped into the IFMIS. The
development of the new SCOA facilitated the consolidation of both budget and financial
information, and incorporated elements that would support programme based budgeting, and
facilitate analysis of budgets and expenditure by geography, programmes, projects and donor
facilities (GoK, 2014).

1.3 IFMIS Re-engineering Strategic Plan 2013-2018

The subsequent IFMIS Re-engineering Strategic Plan (2013-2018) was developed informed by
the progress of implementation and the changes in the government structure. The focus of the
second Strategic Plan was to ensure optimal use of the system in national and county
governments in contribution towards efficient and effective management of public funds. This
Strategic Plan also addresses the objectives of Public Financial Management Reforms (PFMR).
This phase of implementation is on-going, with concurrent implementation of the IFMIS
Security solution. In addition, greater emphasis has been placed on the support for the optimal
utilization of all financial modules and generation of financial reports from the system. Capacity
building for IFMIS users in national and county governments through the IFMIS Academy is ongoing, with measures initiated to transition the IFMIS training to the Kenya School of
Government (GoK, 2014).

1.4 Organizational Structure for IFMIS Re-Engineering

The IFMIS Steering Committee (SCI) is the decision making organ that provides policy direction
for IFMIS Re-engineering. The Steering Committee is chaired by the Cabinet Secretary, National
Treasury, and consists of the cabinet secretary Ministry of Devolution and Planning, principal
secretary - National Treasury, principal secretary - Ministry of Information and ICT, Principal
Administrative Secretary-National Treasury, Economic Secretary, Governor Central Bank of
Kenya, Commissioner General Kenya Revenue Authority, Controller of Budget, Auditor
General, CRA Chairperson, Transitional Authority Chairperson, Director general - PPOA,
Director general - NIS, and the Kenya ICT Authority (GoK, 2014). The SCI provides overall
policy guidance to the re-engineering process and secures the high level commitment, setting the
priorities and endorsing resolutions on the direction and progress of the programme. The SCI
meets regularly to update on progress of project implementation.
The Technical Committee on IFMIS (TCI) comprises of heads of user departments at the
National Treasury. It ensures that the re-engineering IFMIS programme is implemented
efficiently and effectively and that it delivers on its desired objectives. The TCI meets as and
when required.
The Departmental IFMIS Implementation Units (DIIUs) support the day to day consultative
framework for key activities of the re-engineering process. They consist of designated officers
from user departments nominated by their Heads of Departments. The DIIUs are the first point of
contact in user departments on IFMIS issues, and provide feedback on IFMIS implementation
that constantly informs business process re-engineering efforts (GoK, 2014).

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CHAPTER TWO
2.0 IFMIS Implementation in Other Countries
2.1 The case of Slovak Republic
IFMIS has been a success in the Slovak Republic. The main driving force in the success was the
political will though it was underpinned by some clearly defined timeframe and strategy. Some
clear comprehension of what was required by the government and the other institutions turned
out to be clear examples of what was required as well as a clear cut definition of the tools that
needed to be made use of. This system was defined, tested, configured and then switched on in a
timely manner at the start of the fiscal year. The result of this system in its basic form was
enough to pay for the money invested in less than a year of operation. In determining the
effectiveness of the system, there was a need to do need assessment. This was important to
establish the functions of the new IFMIS for the countries minis try of finance that was also to
serve in other organizations that were related to the government in a feasible manner. The
requirements of the system included; the system ought to function like a bank for all the destined
users, the system should have functionality that manages budgets, records transactions and
manages financial resources, the framework of accounting to be used was to be IAS, currently
IFRS.
The Slovak IFMIS was a major achievement given the political climate as well. The
implementation process endured a change in government, but the process was not derailed
because the elected Assembly (Parliament) was committed to a new system and forced the hand
of the bureaucracy (Muigai, 2012).

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2.2 The Case of Malawi

There has been a series of reforms in the legal and institutional framework for management of
public finances in Malawi. This system has undergone quite some reforms since the first
elections in 1994. The process of incorporating a sound system was spearheaded by sound
legislations that regulated finances, audits, and procurements which were in time for the Malawi
budget process. There are various studies that have indicated that the IFMIS system in Malawi
was a success and relatively well designed. In principle, it provides a good starting point for a
sound management of public finances (Rakner et al. 2004). For example, the World Banks 2003
Country Financial Accountability Assessment for Malawi states: When compared to most
developing countries, Malawi has a good legal and institutional framework for public sector
financial management and accountability. (World Bank 2003). Therefore, one could expect that
the formal legal and institutional PFM framework in Malawi should provide in principle for
effective fiscal and expenditure planning, budget preparation, execution, and control in line with
the priorities set in the Malawi Poverty Reduction Strategy Paper (MPRSP) (Muigai, 2012).
2.3 The Case of Uganda
Uganda is a successful case of the implementation of the IFMIS system. There was an initial
implementation of this system that was never to be. The most recent started in 2002 and was set
up with joint World Bank financing. The system, which is based on an Oracle Financials
platform, is a good system though it has some design issues that require a system migration. In
the Ugandan case, the main problem lies in the Chart of Accounts (CoA). The Government
signed off on the CoA and the system was configured, only to discover several months later that
there were several deficiencies in the design of the CoA fieldsa discovery that led to months of

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delays and considerable cost overruns. Most CoAs have this limitation: Once the structure is
created, it is very difficult and costly to change (Muigai, 2012).
This problem could have been easily avoided, but once the CoA was approved and the software
configured it was too late. The problem was discussed but the cost involved for a rebuild of the
system would have added more than US$6 million to the project cost. This would have meant
going back to the World Bank to negotiate an increase in funding. Rather than go back to the
donor, the system was put into operation with the defects unaltered. The Uganda IFMIS has
limped along ever since, underperforming its potential, with patches and workarounds that only
serve to decrease the efficiency of what could have been an excellent system. Some of the other
problems encountered in Uganda were common to other world systems and included; inadequate
planning, poor communication between the implementing parties, the donors and the
government, little management capacity and resources, changes in the design documents of the
system, poor implementation in trainings and unnecessary budgets.
2.4 Benefits of using the IFMIS system
The IFMIS Re-engineering has promoted transparency, accountability and responsiveness of
public financial resources. Other benefits include curtailing wasteful spending and corruption,
enhancing controls and audit procedures as well as strengthening fiscal planning and reporting.
The system also:
1. Enables efficient resource allocation mechanisms;
2. Improves management information for decision making;
3. Establishes effective links between key players in accounting and financial management;
4. Improves financial controls by availing reliable and timely financial information,

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5. Improves accounting, recording and reporting through timely, accurate financial data
provision;
6. Accelerates the pace / scope of economic growth;
7. Enhances development partners confidence.
2.5 Challenges of IFMIS Implementation
Implementing and maintaining IFMIS is a complex task that involves the Ministry of Finance
and all line ministries. There are many risks involved that go far beyond mere technological risks
of failure and deficient functionality. A 2005 IMF working paper on introducing Financial
Management Information Systems more specifically highlights a number of challenges that
explain why IFMIS projects tend to stall in developing countries (Chne, 2014).
2.5.1 Institutional Challenges
The introduction of IFMIS involves more than the simple automation of public finance tasks
and processes. IFMIS imply both efficiency reforms and reforms that change existing
procedures. They should therefore be seen as an organizational reform which deeply affects work
processes and institutional arrangements governing the management of public finance. Failure to
undertake parallel reforms required by IFMIS is one of the reasons that often impede successful
implementation. A USAID practical guide on IFMIS implementation published in 2008 identifies
a series of issues that commonly accompany IFMIS reforms (Chne, 2014);
1. Legal framework IFMIS must be underpinned by a coherent legal framework governing
the overall public finance system.

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2. Business processes IFMIS generally imply fundamental changes in operating

procedures and should be preceded by a detailed functional analysis of processes,
procedures, user profiles and requirement that the system will support.
3. Budget and account structure Implementing IFMIS requires that many government
structures start working with common tools. For the information to be coherent, all
administrative units at national, regional and local level need to adopt a common
language in the form of unified budget classifications and charts of account. This can be a
very lengthy and cumbersome process, which for example took more than five years in
Vietnam.
4. Centralised treasury operations IFMIS reform is often accompanied by the
consolidation of all government financial resources in a single treasury account or a set of
linked accounts.
2.5.1 Political Challenges
IT reforms are perceived as complex, risky, resource intensive and requiring major procedural
changes, often involving high-level officials lacking incentives for reform. Decision makers must
be sold the idea that benefits exceed risks, while the incentive structure that may undermine
political will for reform has to be adequately assessed from the early stage of the project.
Similarly, at the agency level, it is of crucial importance for successful implementation that
agencies recognize the need for a new system (Chne, 2014).. Change management is therefore a
critical and often neglected aspect of IFMIS reform for overcoming resistance to change from
those, who benefited from the old way of doing business, all the way to end users, whose work
might be profoundly altered by the new system. It is important to sell the reform through
communication, education and training, using various channels such as the media, workshops,
seminars, conferences, etc.
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2.5.2 Technical Challenges

Many IFMIS projects have also failed because the basic system functionality had not been
clearly specified from the onset of the intervention. IFMIS must be carefully designed to meet
agencys needs and functional requirements, including the accounting and financial management
tasks the system should perform. In some cases, interfaces with existing IT systems have to be
created to fit the countrys specific circumstances. As documents on the functional requirements
which will often serve as a blueprint for later phases of the system are difficult to rectify at a
later stage, it is of crucial importance to spend enough time on the design phase of the project
(Chne, 2014).

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CHAPTER THREE
3.0 Recommendations
First, the introduction of an IFMIS should be regarded as a component of a wider reform process.
These projects, therefore, should not be viewed as isolated interventions, but should be
accompanied by, and related to, other reforms in public sector financial management. It is also
necessary that the IFMIS objectives and outputs are both relevant and consistent with wider
fiscal policy reforms.

Second, the use of IFMIS needs to be accompanied by strong commitment, sufficient manpower
and financial resources, widespread internal support, and an agenda for effective change
management. Unless these are in place, the chances of success are limited.

Third, the implementation strategy both in terms of functionality and number of entities needs to
be phased. The benefits expected from the system develop only over time, and it will be
necessary to maintain interim arrangements to facilitate various aspects of financial control and
reporting. Country authorities should be prepared for a long implementation path, and one that
involves significant challenges. It will be a complex learning process for all concerned. A
number of difficulties are likely to be encountered en route, but the existence of the previously
indicated three conditions, along with resolute commitment of key stakeholders, should
overcome these difficulties and ensure success of this worthwhile reform.

The application of the IFMS requires a high overhead in training across all government
ministries and at different levels of staffing. This training, and the basic computer literacy
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training that has to accompany it, has relied primarily on external funding. As a result training
has had to be limited to key users. This calls for budgetary allocation of the same to increase
computer literacy among the ministries employees.

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REFERENCES
Chne,Marie (2014). The implementation of the Integrated Financial Management System
(IFMIS). A research Paper Presented to Transparency International.
Government of Kenya (2014). Implementation of IFMIS in Kenya. Nairobi: Government
Printers.
Muigai, Evans (2012). The Effect of Integrated Financial Management Information Systems on
the Financial Management Of Public Sector in Kenya: A Case of the Kenyan Ministries.
An unpublished masters thesis presented to school of business of the University of
Nairobi.

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