The Integrated State Finance System
Ministry of Finance

A. Problem Analysis

 1. What was the problem before the implementation of the initiative?
In 1970, when HM Sultan Qaboos bin Said ascended the throne, there was a need to restructure the economy. With oil revenue, there was a need to structure the public finance to support and fuel the economic growth of the country. Oil revenue jumped from OMR 923.7 million (USD$2.4 billion) in 1980 to OMR 13.5 billion (USD$ 35 billion) in 2012. Similarly, government expenditure also rose from OMR 949 million (USD$2.5 billion) in 1980 to OMR 13.5 billion (USD$ 35 billion) in 2012. The Ministry of Finance (MOF) is responsible for managing and controlling public expenditure. Apart from managing the financial matters of government entities, MOF is also responsible for the collection of tax revenues from companies and establishments, property tax, domestic goods and services and customs duties. The total revenue from tax rose from about OMR 1.5 billion (USD$3.9 billion) in 2010 to about OMR 2.05 billion (USD$5.3 billion) in 2012. However with more than 70 government entities and organisations, it was tedious to carry out budgetary plan for each entity and manage the entire public finance without an integrated financial mechanism. The existing systems were silos infrastructure and not connected. Hence, it was difficult to consolidate and monitor public finance through manual and silos system. This resulted in long time taken to disburse payments to vendor and also salary to government employees.

B. Strategic Approach

 2. What was the solution?
The Integrated State Finance System (ISFS) of the Ministry of Finance (MoF) was developed by a team of in-house IT expertise to serve and maintain the accounts of the various government organisations, their budget estimates, journal entries, variations and prepare the financial accounts at the end of the financial year for the Sultanate of Oman. Ministry of Finance (MOF) is responsible for the financial management, control and accounting for all Ministries within the Sultanate of Oman. All the financial activities are centralized at the Ministry. The Integrated State Financial System covers the State Budget, State Final Accounts and the 5 year Development Plan. The ISFS is fully integrated in real-time with all its stakeholders. By adhering to Strict Budgetary Control System, the system is assured of its accuracy, confidentiality, availability and supports timely reporting functions. It manages around 20k to 25k accounts and controls over 1million transactions per year. The system is bilingual system where Arabic is mainly used, but it also works with an English interface. In addition, more than 3,000 users cannot access from remote areas in Oman. This shows that the entire government sector of Oman relies on the services of this ISFS system for its efficient, accurate and transparent functioning. The ISFS serves to manage and control the entire country’s State Account. So it integrates the all government stakeholders. In addition, the ISFS also integrated all the following functions at the MOF including specialised areas: • Budgets & Contracts • Revenue & Investment • Treasury & Accounts • Administration & Finance • Taxation • Internal Audit • Information Technology Department • Salalah Office at Dhofar Governorate • External Audit This system is used by all Ministries (25,000 accounts) for budget preparation, budget approvals, and purchase approvals and to report their transactions to MoF. Some of the Ministries do not have a financial system of their own. The Ministries record their financial transactions directly on to the ISFS through a secure login authorization. There are about 3,000 users across all Ministries who are currently using ISFS application. Based on the current level of operations at the MOF, the average number of transactions per day in ISFS is approximately in the range of 1,500 to 2,000. A Business Intelligence layer using SAP Business Objects is just nearing completion to cater for information and reporting needs of all government entities from the ISFS.

 3. How did the initiative solve the problem and improve people’s lives?
The centralized ISFS enables very strict Budgetary Control System; with complete freedom for users as well as control to ensure transparency and auditability of public accounts. Both the State budget and the State’s Final Accounts for the current as well as past years are available in both Excel and PDF format publicly for free download at the Ministry of Finance’s website at www.mof.gov.om in addition to electronic and printed formats. ISFS cover the Country’s State Account, so it covers all the account of Civil Ministries, Defense & National Security, Oil & Gas Sector and Investment & Subsidies to Private Sector. It was developed based on the needs of the MOF and is fully customised based on MOF workflow and processes. It was one of the pioneer IT systems which were developed based on consultation with the other ministries and government entities in order to streamline and automate the financial processes.

C. Execution and Implementation

 4. In which ways is the initiative creative and innovative?
1988 – Based on consultancy report on public finance system, MOF developed the first integrated version of the public finance system to improve its efficiency in managing and controlling public sector expenditure – only payroll system, financial system. Developed on CSP-IBM 4th GL language and DB 2 database. Statistical systems for other ministries. 1990– Development of payroll personnel and integrated into the ISFS. Develop the state general reserve fund portfolio management, internal deals and general ledgers 1990s -Development of debt management and taxation system 2000s – Development of vehicle management system or asset registers and maintenance of the ISFS 2010 – Consultancy work to upgrade the ISFS into an integrated ERP or eBusiness Suite and replace the HR personnel system with the Oracles HRMS 2011 – Identify gaps in the systems so as to refine the internal process and Business Intelligence (Business Objects from SAP) package to web-enabled the application.

 5. Who implemented the initiative and what is the size of the population affected by this initiative?
The entire government sector of Oman relies of the services of this ISFS system for its efficient, accurate and transparent functioning. The ISFS serves to manage and control the entire country’s State Account. So it integrates the following stakeholders: • Civil Ministries (e.g. Ministry of Health, Ministry of Education etc.) • Self-accounting units (e.g. Muscat Municipality) • Defence & National Security (DNS) (e.g. Royal Oman Police, Ministry of Defence etc.) • Oil & Gas Sector entities of Oman • Investment & Subsidiaries • Banks
 6. How was the strategy implemented and what resources were mobilized?
Ministry of Finance currently uses the Integrated State Finance System (ISFS) which was developed in-house and implemented in 1988. ISFS offers an integrated, comprehensive set of functionality aimed at automating the government accounting systems, practices and procedures at the Ministry of Finance (MoF). The main features of ISFS are: Financial accounting, Treasury and Cash flow management, Purchasing Budget recording and reporting. Technically, the ISFS runs on IBM Z 10 systems which were written in IBM Visual Age Generator with DB2 database. It is accessible from all locations throughout Oman over a point-to-point network. The ISFS infrastructure was developed for OMR 300,000 and funded by the government and maintained internally.

 7. Who were the stakeholders involved in the design of the initiative and in its implementation?
a. The ISFS is considered the central nervous system of the government with main veins supporting the government organisations and ministries. The centralized ISFS enables very strict Budgetary Control System; with complete freedom for users as well as control to ensure transparency and auditability of public accounts. Both the State budget and the State’s Final Accounts for the current as well as past years are available in both Excel and PDF format publicly for free download at the Ministry of Finance’s website at www.mof.gov.om in addition to electronic and printed formats. Through the system, it has successfully increased the management of accounts from about 3000 accounts before 1988 to more than 25,000 accounts in 2012. b. The ISFS facilitates a bilingual interface in both Arabic and English to various ministerial staff. They can even access the main system from remote locations through web-interface via VPN connection, accessible only through high-secure login authorization. c. Integrated complex budgeting functions - While the system handles current financial year’s treasury accounts against estimated allocations (for example for the year 2011), in parallel it is capable of handling budget planning based on past 12month’s estimates (for example for the year 2012, data from 1st 6 months of 2011 and last 6months of 2010 are used). Although financial accounts are closed at the year and any unused allocations are transferred back to the state reserves, long-running projects are tracked over a 5yrs period providing for handling of contractual projects as a special category. The ISFS captures financial and generates annual budgets in three levels: Revenue, Expenditure (Operational Expenditure, Capital Expenditure, Investments and Subsidies) and Financing (loans, state reserves, surplus, development bonds in local and foreign banks). d. Another salient feature of this ISFS is the ability to account for payments made in any foreign currency and this makes is possible to account for any split payments made in multiple currencies for a single payment voucher. e. For every Development Project of the government as stipulated within each Five Year Plan, the entire financial life cycle of the project is captured in the ISFS. All Commitments (Contract) within the projects as well as each and every payment as well as variation orders and other details can be tract across the entire lifetime of the project some of which are spread over several five year plans. On a daily basis, during its 20 minutes batch run, ISFS produces outputs detailing daily statistics on the system usage such as the following: • The number of LPOs approved/rejected • The number of Payment Vouchers approved • The number of Budget Revisions approved • The number of Revenue Vouchers approved • The number of Journals approved etc. Such outputs are used as useful inputs for capacity planning and online performance monitoring purposes.

 8. What were the most successful outputs and why was the initiative effective?
• At any given time the mainframe system handling ISFS data and application processing handles between 100,000 to 200,000 task requests in real-time reliably. The technical infrastructure includes the main processing system at the Ministry of Finance site and the Disaster Recovery system at another remote and secure location. • The ISFS chart of accounts consists of around 20,000 to 25,000 accounts along with more than 1million Transactions yearly. Over 3,000 users of various skill levels from various stakeholders use this system from remote areas of the Sultanate of Oman. • Technical support center operates round the clock reachable through telephone lines along with some escalation triggers raised by the system automatically. The fully trained, in-house team manages both development as well system admin operations. • A multi-layered approach security implementation includes physical, application and data security at all times. User access to ISFS is managed through admin system where user accounts are managed and authorizations for specific tasks are given in a customized menu designed as per their business process requirements. • This system is mainframe based and is highly secured to attacks due to the strict information safety features built-in and inherent in the mainframe environment. During the entire history of the system, no external entity was ever able to hack or penetrate into this system. • The system is available almost 24 x 7, except for about 20 minutes each day from Sunday to Thursday. The system is only unavailable when the batch posting interface runs to produce certain critical reports for the Accounts and Treasury Departments of the Ministry of Finance from 2.30-2.50 p.m. on weekdays.

 9. What were the main obstacles encountered and how were they overcome?
a. The system had to be implemented in a very short time. The IT Team in MOF had less than 6 months to roll out the final version by 1 Jan 1988. The challenge was that it had to be roll out to the other ministries at the same time. However with co-operation and effective training and communications with the rest of the ministries and government organisations, the ISFS was implemented on 1 Jan 1988. b. In the late 1980s and early 1990s, the ICT infrastructure was still lacking in Oman. Hence, the team had to develop application that was very light using text-based application. c. Users were technophobic. With proper training and awareness programme, MOF managed to eliminate this fear and got the users to work on the automated ISFS.

D. Impact and Sustainability

 10. What were the key benefits resulting from this initiative?
a. The ISFS – budgeting module enables review, analysis and approval of both recurrent and capital budgets proposed by the different ministries and government entities taking into consideration the general financial guidelines and spending policies set for the government of Oman as a whole. The recurrent and capital budgets are prepared by the different Ministries on a yearly basis. They are amended, controlled and approved by Ministry of Finance. The recurrent budget is classified into three different classifications: • Ongoing – For budget line items carried forward from previous year and are not expected to change in the current budget year, such as payroll (in case there is no addition in manpower and related payroll costs). • Additional – For any additions on the budget that were not part of the previous year budget and will be added to the current year one. • Operational – For new additions on the budget due to complete capital projects that will become operational, such as starting to operate a hospital after it was built. • The system has fully stabilized and is very widely used by all ministries in the civil government as a critical and essential part of their day to day financial transaction processing. The entire civil government is totally reliant on the ISFS for most of its budgeting, revenue recording and financial processing needs. There are built-in data validation consoles, context-sensitive help and batch-document validation controls which make the system robust yet very user-friendly. Needless to say, every single payment to every Supplier who has done any significant work for the government is processed through the ISFS. b. Another salient feature of this ISFS is the ability to account for payments made in any foreign currency and this makes is possible to account for any split payments made in multiple currencies for a single payment voucher. c. The State’s Final Accounts and the State’s General Budget for the year are accurately produced by the Integrated State Finance System (ISFS), approved and made available to the public on the first official working day of the Ministry of Finance each year. This is vital to the timely and efficient functioning of Oman’s government as a system. d. No ministry handles any paper documents or data disks to enter data into this system but they do it directly through the web-interface into ISFS. The data from the integrated system is also available in a continuous basis for both Internal Audit and State Audit institutions in a system-neutral data format thus enabling high-level of accuracy and transparency is managing state funds. e. ISFS cover the Country’s State Account, so it covers all the account of Civil Ministries, Defence & National Security, Oil & Gas Sector and Investment & Subsidies to Private Sector. f. This system integrates the financial accounts all the ministries and their multi-budgeting units with the mainframe systems at ministry’s headquarters and is designed to capture daily transactions in real-time, offering provisions for daily, monthly and yearly closing of accounts. This brings in efficiency and transparency within the public sector while saving time, cost and efforts for each stakeholder within the system. g. Both the State budget and the State’s Final Accounts for the current as well as past years are available in both Excel and PDF format publicly for free download at the Ministry of Finance’s website at www.mof.gov.om saving distribution costs.

 11. Did the initiative improve integrity and/or accountability in public service? (If applicable)
The Annual Budget of the nation is prepared by the Integrated State Finance System (ISFS), in three sections following the 1986 chart of accounts classifications of the International Monetary Funds and World Banks. The ministries are able to independently post journal vouchers and request for account closure daily, monthly of annual basis as they require. In addition the ISFS aid in civil entities to plan their budgets by giving them and mid-year estimate based on the past 12months transactions. Bilingual interface, multi-currency payment facilities, project-based accounting and the built in report generation modules of the ISFS have saved a lot of time and effort in managing financial accounts of the ministries and improved their efficiency vastly still maintaining a centralized control with the Ministry of Finance. One of the major tasks of the system is to manage Centralized Payment & Purchased Orders Module for all Civil Ministries. All the payments to private sector establishments, routine payments for Civil Ministries as well to all other Govt. Sector establishments (including the payroll management and salary disbursements) are made through the Payment Module of the ISFS. At any given time the mainframe system handling ISFS data and application processing handles between 100,000 to 200,000 task requests in real-time reliably. The technical infrastructure includes the main processing system at the Ministry of Finance site and the Disaster Recovery system at another remote and secure location. Technical support center operates round the clock reachable through telephone lines along with some escalation triggers raised by the system automatically. The fully trained, in-house team manages both development as well system admin operations.

 12. Were special measures put in place to ensure that the initiative benefits women and girls and improves the situation of the poorest and most vulnerable? (If applicable)
a. Trust and support from top management for in-house development – this is one of the most important lesson learnt because without top-management support it would have been very difficult to obtain the relevant IT expertise to develop the ISFS system based on the needs and requirements of MOF. b. Co-operations of the stakeholders – as the ISFS involved other government entities and organisations, it is very important to seek their buy-in and educate them on how the ISFS would facilitate their internal processes and improve their services. c. Accuracy of the ISFS is also very important as the outcome of budget planning supports the entire economic planning and activities in the Sultanate. Through collaboration with the Supreme Council for Planning, national projects and commitments are now part of the ISFS function. d. Scalability and Flexibility of the technology – the ISFS was developed in the late 1980s, lots of the systems are now obsolete. Since it was developed on a scalable platform and flexible system, it was migrated to newer technologies and platform with ease.

Contact Information

Institution Name:   Ministry of Finance
Institution Type:   Government Agency  
Contact Person:   khalid Al Subhi
Title:   Mr.  
Telephone/ Fax:   00968 24746246
Institution's / Project's Website:  
E-mail:   alsubhi@mof.gov.om  
Address:  
Postal Code:  
City:   Muscat
State/Province:  
Country:  

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