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Agenda
Welcome and Introductions Kosovo The Context Specific Challenges The Goal Key FMIS Requirements Why FreeBalance Overview of Current Financial Management Framework in Kosovo Future Plans Lessons Learned and Reasons for Success Panel Discussion / Q & A FreeBalance Demo
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Kosovo
30 municipalities 25 majority Albanian, 5 majority Serbian Estimated Population 1.7 million Ethnic mix 88% Albanian; 7% Serbian; 5% Other 2004 Estimated GDP 1895 million euro Estimated 2.06 billion euro of donor investment to date since 1999
Serbia Montenegro
Albania Macedonia
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Centuries of Struggle
1389 Serbs defeated by Turks in Kosovo. Serbia ruled by Turkey for next 500 years. Kosovo takes its place at the heart of Serbian nationalist history. 1974 Kosovo established as an autonomous province of Serbia. 1989 Autonomy is revoked by Serbian President Slobodan Milosevic. 1992 Ethnic Albanians establish a shadow government. 1999 A cease-fire is broken. NATO war planes begin an air campaign against military targets throughout Yugoslavia. UNMIK established by Resolution 1244. 2001 First election of provincial institution of self governance. Government ministries established. 2005 UN to initiate review of Kosovos Standards Before Status
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International Mandate
"The task before the international community is to help the people in Kosovo to rebuild their lives and heal the wounds of conflict."
UN Secretary-General Kofi Annan
Post-Conflict Physical infrastructure badly damaged or nonexistent before conflict began; further deteriorated during and post conflict Government organizational structures, policies, and processes needed from ground up Human capacity needed strengthening Urgent need for process to receive, allocate, and control donor funds
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The Goal
Establish a Central Fiscal Authority to manage Kosovos fiscal issues, including Treasury; Budget; Fiscal Policy; Tax Administration; Customs; Macroeconomic Analysis and Reporting; Internal Audit. Form a team of experienced international advisors to ensure best practice design and implementation Recruit, train and mentor local staff Select and implement a financial management methodology to underpin the operations of the Central Fiscal Authority
Options Considered
Paper ledgers (manual system) Excel / Access Locally-developed software Commercial Off-The-Shelf (COTS) software
Financial management system to help control government financial processes Protect the integrity of the revenue raising and expenditure process (donor confidence) Transparency and accountability Must comply with multiple accounting and reporting requirements WB TRM, IMF GFS, IPSAs, bestpractices, donors, creditors, local rules, and regulations Local capacity building and sustainability Multi-language capability (Albanian, Serbian and English) URGENCY
Late 1999 meeting with WB and IMF about challenges in transition governments. Early 2000 FB arrives in Kosovo 26 days later FB Foundation installed original configuration six months of data captured - reports to CFA and donors No custom code configuration regularly modified Procurement
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Banking Systems
Interfaces
Interfaces
Payment Systems
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FreeBalance is designed specifically for government Rapid deployment Flexible configuration Processes not over engineered (intuitive easy to learn) Scaleable Expandable solution (core system can be extended via modules)
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Process Flow
System/electronic processing of transactions Central database system with direct access connectivity to municipalities and regional offices enabling processing of transactions, and real-time access to the information for reporting needs Revenues collections posted to G/L Daily back-ups of the database to ensure no data is lost
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Overview cont.
Multi-language system capabilities (in two local languages) to support cultural and ethnic diversity and integrity in accordance with laws and regulations
System forms enable standardization of forms used by all budget spending units - helps prevent corruption and data entry mistakes
Timely processing of government payroll (70,000+)
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Overview cont.
Central Fiscal Authority functioning as Ministry of Finance and Economy with competence in budget, treasury, and taxation; budget classification and planning system implemented; internal audit and control system implemented; and a transparent and rigorous procurement system established. Financial Legal Framework underpinned by KFMIS by integrating key processes and decisions into KFMIS commitments, approving and spending public monies
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Overview cont.
Enhanced internal controls within budget spending units by creating separate roles (functional classes) and groups of users (user groups) with access to the system in accordance with budget spending units position hierarchy High quality certification program for the budget spending units and their staff, to ensure the correctness of data and reduce errors during transaction processing
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Overview cont.
Capacity Building
Specialized training program in budget planning and execution and procurement processes for Cabinet of Ministers, Provincial Assembly, CFA, line ministries, and municipal staff Help Desk is established to provide daily support and advise to all users from all budget spending units for a better transaction work flow Extensive ongoing training and certification program no independent certification, no access to the system
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Overview cont.
Transparency
Comprehensive public information and consultative program to disseminate information on new budget planning and execution system Increased transparency in all areas of expenditures and revenue collection Timely Monthly, Quarterly, and Annual Reports all produced from KFMIS
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Overview cont.
Additional Functionality
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Future Plans
VPN and network connections to 80 new Central Agency Users Procurement Module to underpin new Procurement Law Assets Module to be piloted in 2 municipalities in early 2005 Further utilization of the Revenues Module to improve cash management
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Automation of Bank reconciliations Creation of multiyear commitments and appropriations to underpin MTEF implementation Targeting MFE paperless interface with all clients
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Lessons Learned
The Kosovo environment was unique, the fiscal management requirements were NOT System implementation can be achieved in a matter of weeks, financial management reform takes years Success breeds success donor funding flows to successful projects gov is energized by progress
Donor funding is time sensitive and need driven Ongoing buy-in from key stakeholders is critical for long-term success (there are winners and losers in change external encouragement)
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Think big, start small, scale up Phased implementation to allow absorption of key reforms Achieve high-profile wins early to ensure buy-in Ownership within the government Comprehensive Training Program and mentoring of local staff - some are still with Treasury after five years High quality team of international budget planning and execution, procurement, and FMIS experts are necessary to ensure best-practice design and implementation Long-term sustainability - total cost of ownership
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Conclusions
Automated FMIS is an early building block in creating good governance transparency, accountability and anti-corruption.
Core of best-practices experts in the real issues and challenges of these countries Software solutions that are effective, affordable and understandable A few key sponsors in the government A supportive community donors and others (WB IMF).
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Thank You
For more information
Please contact: Mr. Bruce D. Long Bearing Point Email: bruce.long@bearingpoint.com
Tel:
+1.703.747.5564
Tel:
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MFE (Ministry of Finance and Economy MTEF (Medium Term Expenditure Framework)
KFMIS (Kosovo Financial Management System) CFA (Central Fiscal Authority) BPK ( Bank Public Kosovo) US AID (U. S. Agency for International Development) CIDA (Canadian International Development Agency) SIDA (Swedish International Development Agency) BE (Bearing Point) FB (FreeBalance)
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