September 2008

FMRP, Bangladesh

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Introduction
In the context of developing countries, the concept of 'Good Governance' in the democratic process of government mechanism is highly related with four factors. These are: transparent decision-making, stakeholders' participation, effective public financial accountability relationships between a country's governing bodies and its executive management and ethical practices. A transparent public financial system is a strong platform to establish good governance. For example, where there are effective relationships of financial accountability, performance is likely to be managed and reported fairly and honestly. 

ICT application in public financial management can make the entire process of public financial management process easier. It can minimize systematic corruption, mitigate fraud, waste and abuse in the public funds.  One successful example of ICT application in public financial management is Financial Management Reform Programme (FMRP). It is a five-year programme executed by the Ministry of Finance, Government of Bangladesh and supported by UK Department for International Development (DFID) and the Royal Netherlands Embassy (RNE).

Financial sector reforms in Bangladesh

From 1971, Bangladesh had a poor record in developing financial management skills in both the public and the private sector. By the mid 1980s, the GoB was hard pressed to provide any effective data about its finances.

To create a better public financial management system in Government mechanism  an inter-ministerial committee was appointed to address the need for improved public financial management in 1991. The Committee on Reforms in Budgeting and Expenditure Control (CORBEC) was led by the Ministry of Finance and was given responsibility to analyze the problems and prepare recommendations for reform. In this perspective, CORBEC set out a series of objectives for the Government's reform programme; analyzing some of the existing problems. The committee identified that manual processes, unsatisfactory systems and procedures of accounting and bank reconciliation were the main barrier for lack of adequate and accurate financial information on a timely basis. In addition, the committee identified a repetitive budgetary system, the lack of updated, comprehensive financial rules and regulations, the inadequacy of trained manpower and a training system to meet financial management needs across the government.

However, on the basis of the problems and recommendations, they have built the foundations for governance systems. It included the computerization of the budgeting system in the Ministry of Finance for data capture, financial and economic analysis, budget forecasting, electronic linkage and transfer of budgeting and accounting data between Ministry of Finance and Accounts offices etc. and other initiatives. As a result of these, officials, legislators, civil society and donors now have considerably better information on state finances, which in turn is enabling improvements in policy making, management and external accountability, albeit starting from a very low base.

The Reforms in the Budgeting and Expenditure Control (RIBEC) Programme was in October 1992. RIBEC phase 1 proposed an implementation plan for the programme. 9 months later, Phase 2 began in January 1995 which  was planned to be a comprehensive reform effort across GoB consistent with the CORBEC's vision. They also identified some of the interventions which had to be addressed immediately. These were: sector wide introduction of new technology; new systems of financial management, new procedures, publicsector wide training for adoption of the new technology, systems and procedures and institutional changes in key elements of the PFM structure.

RIBEC 2 was a big project but there was little or no ownership of the process by the Government; it was a traditional donor-driven “Technical Assistance Programme” and eventually, the project was discontinued. The next 20-month phase of the project (RIBEC 2B), comprised of easily defined targets, focusing on simpler aspects of technical capacity development which were more mechanical in nature. It was noted that the success of these reform could not be achieved through technical excellence  and consultations alone. Hence, the DFID staff consciously began  to employ diplomatic and political strategies. As a result, the quality of accounting improved, and a strong financial management system  developed. At the end of RIBEC 2B, a further 3 years of assistance was agreed upon, known as RIBEC 2000. The scope of the programme involved engaging more ministries and deepening the focus on priority areas such as the management of accounts.

It has also been said in the DFID FMRP project document that

“Whilst the RIBEC projects have made a major contribution to improving the quality and comprehensiveness of financial information, the evaluation recognized that the improved financial information was not being used to inform resource allocation decisions and there were questions over the sustainability of project activities. The FMRP has been designed to consolidate the achievements to date and address these weaknesses. The Contribution of the RIBEC projects to public sector reform in Bangladesh is unique. There are no other major initiatives in public sector reform at the present time and the RIBEC

projects are often cited as the only initiative which has made a substantial impact.”

In 2002, the next phase of assistance, the Financial Management Reform Programme (FMRP) was approved with five components. The main objectives of FMRP are: to improve the efficiency and effectiveness of the allocation of resources and to achieve more equitable and improved public service delivery.

FMRP

The programme has been designed to build upon the previous financial reform initiatives piloted by the DFID funded Reforms in Budgeting & Expenditure Control (RIBEC) project. FMRP  comprised of five components: to provide improved audit reports and well researched reports on other financial management issues for parliamentary scrutiny of public accounts; to enhance aggregate fiscal management and to develop the regulatory framework for financial and performance management; to enhance resource allocation and utilization, and financial, resource and performance management capacity in the ministries; to enhance financial management reporting systems; to build the capacity of the Financial Management Academy as a centre for excellence in financial management training to the Government.

How ICT is used

In Bangladesh, The Office of the Comptroller and Auditor General (CAG) receives and disburses the Government fund on behalf of Ministry of Finance.  So CAG has to be well informed about the decentralization and allocation of Government fund.  FMRP developed a Wide Area Network (WAN) in the central unit which is connected to 64 District (regional) Accounts Offices (DAO) for capturing  data. Online connectivity is also available with the departmental Accounts Office. So, any transaction of field offices is automatically recorded in the central server. Thus total expenditure of that respective institution is tracked  from the CAG office. The robust and automated information system reduces the repetition of work and data errors and creates a quick way to see the Government allocation and expenditure of  respective ministries and agencies. If this type of flow of information of the public financial management can be ensured then it also have a positive impact on national budget.

Impact of FMRP

FMRP has created a long term effect on the whole system of financial management. The use of Information and Communication Technology (ICT) in FMRP ensures the possibility of availability of more accurate and timely delivery of financial information . In addition, resource allocation has been enabled, decentralization of budget has been increased, the expenditure of entire ministry can clearly be identified. It has also increased the staff's skills. As a result, technical improvements have also led to institutional change. The whole budgetary system has been improved. It has also contributed in the Medium Term Budgetary Framework (MTBF), which is  related with digitization system. The financial digitized system helps to justify accurate expenditure and fixation of future planning for expenditure and allocation. 

Why it is successful

We have seen some critical factors behind the success of FMRP. When ICT is used in the implementation of the programme it is used as an integrated tool, not as an intervention method. So usage of technology has not become a challenge for project implementation. The programme has also provided training to build the technical skill and capacity of project personnel for smooth running of project activity.

Besides the technical aspect, ownership has been the central point for the success of the process. Even GoB officials are keen to point out that ownership of the reforms has been higher than  most other donor supported initiatives in Bangladesh.  Thinking out of the project is one of the critical success factors of FMRP. It has also been seen that in most of the cases the individuals involved had drive and participated in the reform process. In addition, a culture of innovation and reform has developed among senior civil servants in the Ministry of Finance.

Conclusion

FMRP would be a successful example for financial management reform where technology is used as a tool and not as an intervention method.  If we go through the insights of that project we can see the term “computer operator” has not been used in their work plan. The team is not just thinking about project implementation but is really trying to formulate a transparent and accountable public financial management system and in the process, using technology as an integrated tool. The framework of FMRP is a good strategy to control and monitor the whole financial management system of a country in an effective manner. The strategy of FMRP to control public financial system is a good way to clear the path for good governance. Thus, FMRP provides the groundwork to establish a clear framework of public financial management system and creates a platform or scope for wider replication of the idea of FMRP in Government entities for many developing countries.

Suparna Roy
suparnaroy@pmo.gov.bd

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