Sy Au's Portfolio

Implementation of a Financial Management Information System

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Description: My client was a Canadian-Pakistani Chartered Accountant running his own management consulting firm; they did not have staff available to submit a last minute proposal. I did the technical writeup for a Financial Management Information System implementation.

Result: Client awarded $88,000 CAD contract by the Lahore Water and Sanitation Agency (LWASA)

Technical Approach Summary

Our general approach is to 1) consult and understand 2) assess current state (institutional knowledge and documents, human resources, process and procedure, hardware and software, assets and equipment etc.) and document as-is state and 3) make recommendations, design new systems and refine iteratively

We will also do the following:

  • Provide leadership and technical guidance, and a detailed vision for the system. We will design the new FMIS with a collaborative, participatory approach. 
  • Strike a balance between appropriate, fit for purpose solutions and ideal solutions.
  • Review of international best practices, success stories from similar utility service providers of the region to adopt the lessons learnt.

We have learned that there can be no sustainability of benefits without genuine ownership and participation on the part of the stakeholders. Our prior experience with LWASA is that the organization is eager and has worked diligently with partners to improve. To continue securing buy-in and reinforcing our working relationships, we will:

  • Deploy staff who have a commitment to teamwork; encourage mutual respect.
  • Work and update, wherever possible, established or emerging structures and processes.
  • Interact with our counterparts to help them distinguish wants, needs and demands; respect their choices and only offer support where there is real demand.
  • Recognize that technical assistance involves risks and mistakes, and that an agreed system must be established for evaluation.
  • Understand that an automated solution (FMIS) may be a new way of working for LWASA staff and that support must continue post-project for it to be a success.

Inception

The project activities will formally commence with a kick off meeting between our project team, FINCON’s consultants, LWASA project team and other relevant stakeholders. The meeting will help to facilitate the project execution and may involve, but not limited to, the following subtasks:

  • Review proposed plans to confirm understanding of the sequence and dependencies.
  • Overview of the key stakeholders and considerations related to the operations and financial management practices at LWASA.
  • Finalization of activities, assessment criteria and tools and work plan; definition of any additional activities that should be considered such as high level organizational strategy development, defining LWASA’s vision and mission; and business planning and cost minimization.
  • Identifying challenges during implementation and their mitigation strategies.
  • Finalize the outline for the first report.
  • Finalize the expected contents of the FMIS design / functional specification report. 
  • Minutes of kick off meetings will be documented and made part of our first report.

Assessment

The general process for each function that we will investigate includes 1) desk review of policies, management structures, financial data, HR policies and assess the extent to which they are being implemented. FINCON Services will also review LWASA’s monthly and quarterly progress reports 2) Interviews, and walkthroughs of working processes with LWASA staff.

Institutional Review, with focus on Financial Management

We will review staffing, selection and recruitment policies, staff grading and performance appraisal systems. We will check the credentials of the staff responsible for accounting and finance at LWASA. We will assess the entire financial management and accounting, and in particular:

Reviewing accounting system and records: We do this by checking if LWASA’s current accounting system is compliant with reporting regulations in Pakistan as well as international standards – that is to say, fundamental core concepts behind accounting and basic principles of accounting.

We will review their documented accounting policies and manuals, as well as the account records to validate if there are any discrepancies. However, the quality of analysis can never be better than the quality of the accounting data themselves. When reviewing the accounts, FINCON keeps in view certain principles:  Firstly, remember the basic principles of financial accounting, especially the historical cost principle. Also bear in mind that the measurements of accounting events are not always objective. In this connection, we must be aware of the possibility of manipulation of accounting data, and that great creativity can be involved. 

Funds Flow: We will assess the current system of inflows and outflows. We will diagram the current process, document the time it takes for transactions to complete and check if any approvals or steps should be added or removed from the process to balance both efficiency and proper financial control, discipline and transparency in the organization.

Internal Audit Policy and External Audit Reports: We will review their external audit reports to guide and align our own assessment.

We will assess LWASA’s internal audit policies and whether they are followed in practice. We recommend an independent audit unit led by a professional internal auditor, and we generally recommend the internal audit unit has these responsibilities:

  • Audit records, files and registers of all revenues collected. 
  • Inspect and audit all records, registers and accounts of all salaries/wages paid, including overtime;
  • Inspect and audit all materials and stores purchases, expenditure on recurring items made by all Directorates, departmental tenders purchases;
  • Inspect and audit all records and payments relating to contracts;
  • Check and audit administrative records regarding appointments, medical expenditure, vehicle usage and attendance of all Directorates.
  • Review and evaluate financial procedures and processes to identify loopholes, anomalies and work duplication.
  • Internal audits are proposed to be of three types. First, a regular quarterly internal audit of selected sections/ dept. of all Directorates. Second, surprise audit of any function/section as instructed by Managing Director or Deputy Managing Director. Third, regular inspections and verifications of stores and materials purchased by operating and support Directorates.

Budgeting and Forecasting

Proper financial planning affects all other areas of the organization; how it’ll fund what it needs to do and its financial self-sustainability. We have may to assess LWASA’s abilities in budgeting and forecasting, and how that will be integrated into the new FMIS.

  • Capital investment program 
  • Operations and maintenance budget forecast 
  • Cost minimization strategies and financial discipline

All these activities and our assessments will be summarized in our first report. Recommendations for improvement will be developed after our assessments, along with a proposed draft design of the new FMIS.

Billing System and Revenue Improvement 

We completed the consumer survey review and developed the current billing system used at LWASA in 2016. We are very familiar with these systems. We will seek additional feedback from users of the system about deficits and strengths in the current system, and prioritize improvements.

Data sources we will review again include:

  • Revenue collection by type of sources 
  • Revenue collection efficiency rate 
  • Tariff structure and rates 
  • Price of water including payment for connection 
  • Costs (investment, operation and maintenance of aquafers) 
  • Funding sources to cover investment costs 
  • Collecting information regarding different types of assets include water supply, wastewater collection and treatment, buildings, vehicles etc. 
  • Complaints ticketing system, average resolution times

After this review, we can then suggest way to increase revenue. Strategies we’ve done in the past, and that we can recommend include:

  • Tariff pricing strategy (ex. planned increases, tariff tiers based on consumer income)
  • Water sales forecasting and water demand management (WDM) forecsating aims to optimize production and conserve total water usage by controlling demand. WDM analysis will be useful in assessing water demand and is critical in addressing future water demand projected from historical records and expected water usage rates by customer category. Conducting an annual water balance is important and will greatly benefit LWASA. 
  • Affordability and willingness to pay studies to facilitate development of tariff tiers (perhaps derived from review of the consumer survey)
  • Further automation of revenue collection
  • Revenue recovery strategies from unaccounted for water (leakages and wastage) and non-revenue water (unbilled, illegal connections, etc); this includes
    • Proper asset management, maintenance and repairs (working with engineering depts)
    • Public communications campaigns to stress the importance of water conservation as well as LWASA’s achievements and leadership in water stewardship (leading by example)
    • Enforcing water restrictions and enforcing punitive measures against illegal water connections, perhaps through community mobilization

We will continue to research new and innovative approaches from international best practices in addition to these recommendations. We will try and stick to management techniques but we may also touch on technical and operational techniques. Examples include finding alternative sources of water like greywater reuse or rainwater harvesting. However, this will likely involve the participation of engineering staff, which we can ask for feedback at the final stages of project.

The customer service unit will be assessed as well, in comparison to the following ideal state. We have to ensure that staff have access to communications tools (phone and email), proper staffing levels and availability, and ensuring all managers have customer service training. The complaint tracking system should be a ticketing system with resolved/unresolved status that tracks average resolution time. 

Pension System

As stated in the ToR we will review the Pension management system developed by the Urban Unit of Punjab Government. We will conduct financial analysis on LWASA’s pension fund and strengthen its governance and administration.

Digitalization: Our consultants will scope out the potential for an electronic pension system design. We have experience digitalizing paper processes in M&E, land administration and the health sector. Based on our experience, as general recommendation, we will likely suggest a combination of the following:

  • Archiving paper records until full transition with a foolproof backup system is completed. The backup system should be done routinely on-site as well as having another automated remote backup on a cloud server or webhost. Once that is done and piloted, decision makers can choose whether to keep or dispose of the paper records.
  • Document scanner with an automated feeder: getting personal paper records into digital format
  • Data Entry and Validation: aggregate pension data needs to be entered into the system; if there is a high volume of documents to process, we can explore automated zonal OCR, which pulls data out from forms into a database.

Payroll and Monitoring system 

We first need to better define the monitoring system and clarify whether it means monitoring of employees, ie. a personnel information and HR system with attendance and work hours tracking, or a monitoring system for other functions of LWASA. We will clarify during inception.

We will examine the current payroll system and compare it to its ideal state.

Together with the payroll administrator, we will step through how LWASA supervisors and payroll teams are tracking and verifying employees hours, how the information is consolidated and how employees are paid; ie. the entire payroll process.

We’ve implemented automated payroll systems for municipal governments, and ideally such as system is capable of generating the monthly payroll, deductions for pensions, benefits and income tax, loan accounts, gratuity and other payroll records of the employees. Our payroll systems are supported by HR / personnel information systems that track attendance and hours, personal information, employment history, trainings, disciplinary actions, leave records and other related information.

As with all other functions, we need to check which ideal functions are covered manually already by LWASA. We need to determine whether any training or implementation of new processes on these new functions in these systems need to be done so that the new system is effective.

Final Phase – Collaborative Design and Feedback, Revising and Improving Reports

By the seventh week, we will have completed all of our initial assessments. During this phase we will have completed all of our assessments. We will present our findings and discuss our proposed designs in focus group discussions. We will need to prioritize business functions to include or remove from the overall FMIS. Most importantly, we need to predict the extent of business change management needed to support the new system, and plan for how LWASA will reach its ideal state. We need to find out how realistic our proposed FMIS design is, and improve it. We need to determine stakeholder capacity and organizational willingness to carry out FMIS implementation and process change to support FMIS implementation.

Tools we can use to elicit information and discuss includes:

Brainstorming Sessions – taking facilitative approaches, SWOT and other planning tools, ask leading questions like, how do we…

  • …improve water supply?
  • …improve sewage and sanitation?
  • …improve the distribution network? 
  • …improve revenue generation?

Mapping internal and external relationships that can help complete some of the objectives:

  • Government organizations (policy, legal framework, setting tariff etc) 
  • Non-government organizations (technical assistance, collaboration) 
  • Consumers (quality service, tariff)
  • Suppliers (provision of raw materials, equipment services) 
  • Regulators (enforcement of policy and legislation) 
  • Media (information and awareness raising) 
  • Financiers (conditions for grants and loans)

Stakeholder feedback will be incorporated into our reports and designs. We will ensure there is buy-in and consensus for the new FMIS functional design before the final report is compiled.

IT Hardware Specification

After the overall system design, with input from stakeholders, we will develop a list of equipment that needs to be procured, as well as schematics for how they should be connected and ideas for recommended locations on where to store them. The equipment list will depend on our assessment of the current IT infrastructure (taking stock of what is already available and that can be repurposed). We also suggest drafting scenarios for IT equipment based on the FMIS being hosted remotely (remote web host or on the cloud) vs locally. It will likely contain:

  • Servers
  • Networking equipment 
  • Workstations and peripherals
  • Software (operating system, office productivity suites)

We also suggest that we:

  • Develop a rough estimate for the total cost.
  • Scope out potential locations for a server room.
  • Assess organizational capacity to manage new system and hardware (likelihood of having to train staff, hire new IT staff, or rely on outside vendors to manage the IT infrastructure, and also whether any changes or renovation needs to happen at LWASA headquarters).