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Economy

Treasury budgets to spend Sh7.6bn on IFMIS upgrade

Treasury secretary Henry Rotich. PHOTO | SALATON NJAU
Treasury secretary Henry Rotich. PHOTO | JEFF ANGOTE | NATION MEDIA GROUP 

The government’s controversial digital payment platform, the Integrated Financial Management Information System (IFMIS), is set for a Sh7.6 billion upgrade in the next couple of years, according to budget documents tabled in Parliament.

A huge chunk of the money will go towards annual renewal of Oracle licences and provision of IFMIS application and hardware support. Oracle is the service provider for IFMIS.

The budget documents presented to the National Assembly’s Finance, Planning and Trade committee show that the Treasury plans to renew 220 licences for IFMIS having budgeted Sh350 million in the current budget and Sh450 million next year.

The Treasury has also set aside Sh2.8 billion to install a procure-to -pay system integrator and IFMIS rollout and support to all parastatals, ministries, departments and agencies of government (MDAs), sub-county offices for 19 parastatals and county governments.

Some Sh550 million is in the current budget for the rollout of IFMIS to parastatals and a further Sh500 million has been set aside in the next budget for a similar exercise.

“Expenditure management is being strengthened with expansion of IFMIS modules across parastatals, line ministries, departments and all county governments. The government rolled out the Plan-to-Budget and Procure-to-Pay modules of IFMIS and is cascading training on public finance management in all MDSs and county governments,” Economic secretary Geoffrey Mwau said in a brief to MPs that is signed by Principal Secretary Kamau Thugge.

Dr Mwau told the Finance committee chaired by Ainamoi MP Benjamin Lang’at that the Treasury will pump a further Sh1.54 billion into the development and establishment of an IFMIS Academy.

The academy is expected to be in the form of a Classroom and Virtual/Online Learning programme and Oracle service-oriented architecture suite (SOA). An additional Sh150 million has been factored into the current budget and a similar amount next year.

The plan is to provide capacity to IFMISto both the national and county governments once the project is complete.

Treasury secretary Henry Rotich has allocated another Sh570 million for procurement of county point-to-point connectivity of the IFMIS system.

The aim is to provide integrated financial management system services to all the 47 counties and Sh150 million is being spent in the current fiscal year, with a similar amount budgeted for the 2017/18 financial year.

Call centre and help desk

Taxpayers will also pick a Sh80 million bill for the establishment of an IFMIS call centre and a help desk.

Auditor-General Edward Ouko in a special audit of IFMIS found that the total commitment to the system during the 2010 to 2013 period was Sh5.9 billion.

“In addition, Sh5.6 billion was planned to be spent on IFMIS during the period 2013 to 2018,” Mr Ouko said, adding that the total estimated cost of ownership of the system by the Treasury will be Sh11.4 billion having excluded marketing, general and administration costs.

Kenya in 2011 awarded Oracle Egypt a contract worth Sh60,681,600 ($705,600) to supply the licence and implement the revenue to cash module, including the establishment of cash management, accounts receivables and asset management functionalities.

“Further, during the year 2011/12, Oracle Egypt was also awarded another contract worth $250,000 or approximately Sh21.5 million at the then prevailing exchange rate to implement the modified chart of accounts structure and values of the government of Kenya,” Mr Ouko said in the report.

Transnational Computer Technologies was also awarded a contract worth $15,532,820 in the 2011/12 to do the same reconfiguration of new chart of accounts structure.

The IFMIS system has come under sharp scrutiny following the loss of billions of shillings to fictitious companies and individuals, who purportedly supplied goods and services to government agencies.

The National Youth Service (NYS) lost about Sh1.5 billion to such firms in a scandal that is currently under investigation by the National Assembly’s Public Accounts Committee.

More recently, the Kilifi County government has come under scrutiny for losing Sh51 million in another IFMIS fraud that is currently under probe by the Ethics and Anti-Corruption Commission.

Both the national and county governments have blamed weaknesses in the system for the loss of taxpayers’ money.

The Treasury has, however, defended IFMIS, saying the system has made audit trails of transactions possible in both the national and county governments, saving the taxpayer money.

Jerome Ochieng, the IFMIS director, said the complex structure deliberately designed to safeguard financial malpractice makes it impossible for any procuring entity to approve a transaction through IFMIS and the Central Bank of Kenya’s Internet Banking unnoticed.

“IFMIS approval hierarchy ensures security, accountability, checks and balances and leaves an audit trail at each point of action,” Mr Ochieng said, adding that the system provides audit trails of all financial transactions, including details of persons who logged in, the time, computer used and the action performed for each transaction.

Mr Ouko’s audit on the effectiveness of IFMIS, however, poked holes into the system and called for urgent activation of functionalities that have not been configured.

“This includes automation of the exchequer release process and bank reconciliation process,” he said in the report tabled in Parliament early this month.

Mr Ouko has since recommended that IFMIS be linked to other digital financial management systems such as the Kenya Revenue Authority’s CS-DRMS and eProMIS to mitigate the risk of error and fraud.

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