Bangladesh - Review of iBAS integrated budget and accounting system moving toward 2nd phase of iBAS (iBAS+)

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This review of iBAS (Integrated Budget and Accounting System) is an opportunity to assess the state of development and the capacity of iBAS in its current form to be a suitable platform for ongoing development of a budget and accounting system for the government of Bangladesh. iBAS has helped the government of Bangladesh (GoB) and the ministry of finance(MoF) to make considerable and absolutely necessary steps forward in both the use of computers and networks and also in developing familiarity and use of computer-based financial systems. iBAS has also greatly improved the speed of reporting and the increase in controls that improved reporting to management provides. These developments are to be lauded as real advancements for MoF and the government. The major factors considered in reviewing the current version of iBAS as the platform for ongoing development identified a number of elements of a sound and standard form of financial system not present in iBAS and which would form a major hindrance to its ongoing development. Two major options are recommended, and the report concludes that MoF should urgently consider and determine the preferred course of action and place the current version of iBAS on a care and maintenance basis, reallocating resources to whichever of the two options is chosen.
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 70140 REVIEW OF iBAS Integrated Budget and Accounting System Moving Toward 2nd Phase of iBAS (iBAS+) Ministry of Finance Government of Bangladesh March/April 2010 Strengthening Public Expenditure Management (SPEMP) Multi-Donor Trust Fund Program Contents Acknowledgement .................................................................................................................................. 1 Executive Summary................................................................................................................................. 1 1. Introduction .................................................................................................................................... 5 2. iBAS as a Future Base for FMIS Development................................................................................. 7 2.1 iBAS Database ........................................................................................................................... 7 2.2 iBAS Software ............................................................................................................................ 7 2.3 Platform Summary .................................................................................................................... 7 3. Functional Development ................................................................................................................. 8 3.1 Integration Proposal ................................................................................................................. 9 3.2 District Office Systems ............................................................................................................ 10 4. Technical Design Concerns ........................................................................................................... 12 4.1 Inefficient Code ....................................................................................................................... 12 4.2 Database Indexing ................................................................................................................... 12 4.3 Pay-Point Funds Checking ....................................................................................................... 13 4.4 System Integrity Reporting ..................................................................................................... 13 4.5 Audit Trail and Data Protection .............................................................................................. 13 4.6 Journal Files and Summary Tables .......................................................................................... 13 4.7 Chart of Accounts Limitations ................................................................................................. 14 4.8 Security ................................................................................................................................... 14 4.9 Other Issues ............................................................................................................................ 14 5. Summary ....................................................................................................................................... 15 6. Options for Moving Forward......................................................................................................... 16 7. Financial System Functionality ...................................................................................................... 16 8. Strategy for Achieving System Functionality ................................................................................. 18 8.1 Business Process Review ......................................................................................................... 18 8.2 Define User Requirements and Development Objectives ...................................................... 19 8.3 Network Capacity .................................................................................................................... 19 8.4 System Design Specifications .................................................................................................. 20 9. Options for Financial System Development.................................................................................. 20 9.1. Ongoing Development of Current iBAS ................................................................................. 20 9.2. Design New System iBAS 2 ..................................................................................................... 21 9.3. Procure COTS FMIS (Off-the-shelf Product) ........................................................................... 22 9.4 Options Timetables ................................................................................................................. 23 10. Recommendation...................................................................................................................... 23 Annex 1 ................................................................................................................................................. 25 Annex 2 ................................................................................................................................................. 26 Acknowledgement This report is prepared as part of Strengthening Public Expenditure Management (SPEMP) Multi- Donor Trust Fund Program. The SPEMP is funded by UKaid from DfID, DANIDA,and European Union and administered by the World Bank. The overarching objectives of the SPEMP are a) strengthen and modernize core institutions of budgeting within the government with particular emphasis on introducing a performance orientation in public financial management; and b) enhance demand for better budget outcomes by improving the effectiveness of formal institutions of financial accountability, in particular, Comptroller an Auditor General’s Office and the financial oversight committee of the Parliament. This report, an independent review of Integrated Budget and Accounting System (iBAS), is initiated upon the request of the Ministry of Finance and is intended to provide objective assessment of the current iBAS and make concrete, practical recommendations for improvement. The main author of the report is Bruce Pollock, independent consultant, and the report is task-managed by Junghun Cho and Suraiya Zannath of the World Bank. Rubaba Anwar has provided excellent administrative support for this task. The team expressed its gratitude for excellent support and cooperation from officials in the Ministry of Finance, Office of Comptroller and Auditor General and other agencies. 1 Executive Summary This review of iBAS (Integrated Budget and Accounting System) is an opportunity to assess the state of development and the capacity of iBAS in its current form to be a suitable platform for ongoing development of a budget and accounting system for the Government of Bangladesh. iBAS has helped the Government of Bangladesh (GoB) and the Ministry of Finance(MoF) to make considerable and absolutely necessary steps forward in both the use of computers and networks and also in developing familiarity and use of computer-based financial systems. iBAS has also greatly improved the speed of reporting and the increase in controls that improved reporting to management provides. These developments are to be lauded as real advancements for MoF and the Government. The major factors considered in reviewing the current version of iBAS as the platform for ongoing development identified a number of elements of a sound and standard form of financial system not present in iBAS and which would form a major hindrance to its ongoing development. These concerns mainly focus around: 1. Lack of Integration - iBAS is not integrated but is running on two distinct systems, one for Budget and one for Accounting, each hosted on different main servers in different physical locations in Dhaka. This poses significant challenges for iBAS to form the basis for ongoing development of financial system development. In addition to separate budget and accounting systems, the current iBAS also faces the following challenges: 2. Pay point funds checking unavailable. As the central version has no budget numbers in the accounting system, funds checking is undertaken manually. District Offices have no budget system installed and also must funds check manually. To achieve a suitable outcome, integration is required as is expanded functionality such as commitment accounting and full procurement processing and available at all locations using iBAS. 3. Security control is restricted and data integrity compromised by:  lack of internal integrity checking of data within the iBAS systems;  complete reliance on a third party reporting tool (Crystal Reports) for all data extraction;  lack of development environments so that changes to data and program code can be made directly into the production environment; and  lack of an audit trail, essential for data integrity checking, protection of authorized users and for error/fraud management. 4. Design limitations of iBAS resulting from: 1  inefficient database table indexing which reduces the speed and efficiency of extracting reports and also slows transaction recording for users;  inefficient code design that results in areas of iBAS re-loading entire screens when it is only necessary to refresh changed fields on a screen;  use of mid-scale development tools (VB.net, .Net framework etc) which may be significantly challenged for efficiency of operations as the functionality and user numbers increase;  use of SQL as the database which may also be challenged as capacity and demand on the database increases with functionality and user numbers; and  network limitations which have constrained the network effectiveness by restricting the transmission of transaction data between District Offices (DOs) and Dhaka. 5. Reporting and Functionality is limited due to:  the Chart of Accounts being restricted to a current limit of dimensions or ‘fields’ that constrain the capacity to report beyond those dimensions (such as Location, Program, Activity etc);  functionality restricted to cash-based transaction recording effectively at the point of bill submission for payment;  lack of core financial functionality such as procurement, commitment accounting, debtors, creditors, cash management, asset management, inventory management, audit trails etc;  budget restricted at the high or aggregate level of the Chart of Accounts whereas, to facilitate pay-point funds checking, budget allocation needs to be cascaded down to the Spending Unit level;  very limited support for cash forecasting and management; and  information on both debtors and creditors cannot be collected until almost the point of receipt and payment. The proposed interface between the two systems to provide a link between budget and accounting data is effectively a patch over an underlying design flaw that effectively eliminates the real option of using the current version of iBAS as a suitable platform for ongoing significant development to gradually transform iBAS into a comprehensive equivalent of Financial Management Information System (FMIS). Moving Forward MoF should undertake a comprehensive Business Process Review of all financial and budget transactions irrespective of whether the decision is to retain the current version or to undertake 2 either of the proposed two Options presented in this Report. Current manual practices have been computerized by iBAS and this has resulted in MoF bypassing the opportunity and the need to review all processes that might otherwise produce significant savings in effort, time, costs and information flows to managers and decision makers. The current combination of software and database are largely aimed at mid-sized application development and may not be capable of the amount of development and the combination of user and data volumes that might be envisaged to develop over the next few (5 or so) years and some consideration should be given to transporting the FMIS development environment to a high-end capacity environment before stresses appear in operations. Two distinct alternatives to attempting to further develop iBAS in its current base are available for GoB to consider: Option 1: Rebuild iBAS from the ground up using a design that is architecturally sound and based on designs that largely mirror modern ‘Best-of-Breed’ financial systems that would be compatible with the current and expected ICT and communications environment in Bangladesh. The tools used for the rebuild should be robust and capable of supporting the design and build and ongoing development and it is suggested using Java and Oracle as the base. Option 2: Procure a suitable Commercial-Off-The-Shelf (COTS) solution that is already capable of operating in environments at least somewhat similar to Bangladesh. There is frequently expressed concern about cost but when comparisons are made over product life cycles, in-house developments are often as costly as COTS in real terms. Option 1 would require MoF to undertake a comprehensive analysis and identification of all current and likely future functional requirements for financial systems once the business processes had been reviewed and agreed. Based on the process review and functional requirements, a comprehensive design process would set parameters for the building and rollout of the new iBAS. Built, test, document, train and data conversion prior to implementation across all user locations, including SOEs. Timing for the entire process for Option 1 would require a minimum of 4 years with minimal enhancements (such as pay-point checking) or considerably longer should additional functionality be required. Cost, including all consulting, hardware, software, contractors, MoF staff time, license fees for all operational software (database etc) can be expected to amount to between $m 6 to 10, excluding significant expanded functionality over current iBAS. Option 2 would require essentially the same time period to conduct business process reviews and functional requirements definition and documentation. This would be followed by procurement, implementation and rollout with a total likely timeframe of 5 years following preliminary activities. Total cost might be between $m 10 and 15 but providing comprehensive accounting and budgeting functionality and reporting. 3 Whole of life costs traditionally are similar between bespoke and COTS but with COTS expected to be considerably less risky over whole of life. It is recommended that MoF should urgently consider and determine the preferred course of action and place the current version of iBAS on a care and maintenance basis, reallocating resources to whichever of the two options is chosen. 4 1. Introduction iBAS is the name for integrated Budget and Accounting System. It was developed from the earlier Transaction Accounting System (TAS) which needed replacing because it was based on old technology and required enhancement. TAS was badly afflicted with software problems and was proving both functionally unsuitable and technically unsustainable. iBAS was initially seen as a modern replacement/updating of TAS and was developed initially as a simple transaction recording system. During development it was decided to add a Budget module but as the transaction system was already under way and budget had traditionally been seen as a quite separate process from accounting, a completely separate Budget system was developed. There were no links at all with the accounting system, notwithstanding that the new system was to be called ‘integrated’. Each system was developed as completely stand-alone with separate servers, one for each functional system and hosted in different locations, one in the Comptroller General of Accounts (CGA) offices and the other in the Budget Wing of the Finance Division. Together, and with the earlier TAS, these systems have created the necessary computer-based environment across government finance areas where, prior to their introduction, computer use was largely unknown in most operational areas of finance and networking did not exist. Through the introduction of these systems, particularly iBAS, computer usage and reliance on computers has become established and provided the environment into which it will be far easier to introduce more and more sophisticated computer-based financial management systems and facilities across almost all government finance areas. Where iBAS is viewed as a step in the development of computer- based systems, the ongoing development of iBAS forms a continuous path to full computer-based accounting. A further development provided by iBAS has been the rapid production of reports, improved report quality and monitoring and control features available to management that has added considerably to both the capacity to manage and the scope of management tools at their disposal. The combination of these considerable developments has contributed to an appreciation of iBAS by many and a growing reliance on systems. At the same time, there seems acute awareness and complaints from staff to the current shortcomings of the system and the desire to see further system development. The accounting (transaction) system basically records transactions at the point of payment request. There is no pre-payment process recorded and therefore no budget validation, commitment or obligation recording so almost no assistance to cash management and cash forecasting. iBAS, representing itself as Integrated Budget and Accounting System does not achieve any of these functions in the system’s current status. It is not integrated, it does not support budget fully and only covers one small aspect of accounting. Integrated refers to systems where data, entered once, is available to fulfil all functions of that data without the need to enter the same data again for other functions in the one, fully integrated, 5 system. iBAS consists of two separate and stand-alone application systems hosted on their own servers and databases. Budget refers to a system that allows for budget entr
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