Financial management is key for any government seeking to maintain its finances in order and have the capability to provide good services to its citizens. It can be a complex task because it involves different government institutions and information systems that do not talk to each other.
To address this challenge, South Korea has created an integrated financial management information system, called Korean Financial Management Information System (KFMIS), considered among the best in the world.
The system manages the entire life cycle of national finance management, ranging from establishment of national fiscal management plans, budget formulation and execution, asset and debt management, accounting and settlement, all the way to performance evaluation. The system was nicknamed dBrain, a combination of “d” which signifies digitalization of public finance management, and “brain” referring to the center of national finance and the symbol of intelligence and accuracy.
The origins of the system can be traced back to the 1997 financial crisis in Korea, which forced the government to cut spending and reign on its finances to overcome the economic downturn and corporate restructuring and take measures to reduce the overall fiscal burden, which was forecast to grow due to a combination of lower tax revenue and increased welfare spending as a result of slower economic growth and demographic changes caused by falling birth rates and an aging population.
The crisis was one of the key factors that prompted the Korean government to implement fiscal management reforms in the decade that followed. These reforms substantially changed the country´s fiscal management framework and involved four major innovation initiatives:
- The development of a national fiscal management plan, which linked national development strategies and annual budget formulation,
- The implementation of top-down budgeting, which was aimed at ensuring fiscal management efficiency through the strategic distribution of resources,
- The adoption of a performance management system, whose goal was to make a shift from an input and ceiling-oriented system to a performance-centered fiscal management system, and
- The implementation of accrual-based and double entry accounting, which enhanced fiscal management transparency through unified and consistent accounting.
dBrain system implementation
The dBrain system was created in 2007 to develop the new fiscal management framework under such reforms. It integrated the country’s budget information system (Fiscal Information Management System, FIMSys) managed by the Ministry of Planning & Budget and the treasury information system (National Finance Information System, NaFIS) operated by the Ministry of Finance & Economy. The integration paved the way for a more efficient allocation and execution of natural resources.
After several upgrades, the system is currently now in its third generation. The current system can be divided broadly into four sub-systems: Central Financial Management System, Interface Systems, Statistical Analysis System, and Work Support System.
First, the Central Financial Management System manages the core tasks of fiscal management processes, including project management, budget management, treasury fund management, asset and debt management, accounting, and performance management. Second, through the Interface system(s) with bulk revenue collection agencies such as the National Tax Service (Internal Revenue Agency) and various financial institutions including Bank of Korea, necessary financial information is received and shared among the dBrain system and external information systems.
Third, all financial data created and managed through the Central Financial Management System and Interface Systems are compiled by the Statistical Analysis System which then produces various standardized and customized statistics and reports to aid policymaking. Furthermore, since 2015 all such statistical data is published through the Open Fiscal Data System to provide public access to information and enhance fiscal transparency. Lastly, in order to improve dBrain system users’ convenience, the Work Support System provides various user-oriented services such as a user portal and online training.
Given its far-reaching integration, the United Nations recognized dBrain in 2013 for promoting whole-of-government approach in the information age and the Korean government won the first prize in UN Public Service Award.
The operation status and characteristics of dBrain system
Currently, dBrain has about 64,000 users, with one-fourth of them (15,000) on average using the system daily. In terms of treasury operations, the system processes US$ 7 billion worth of expenditures and collects US$ 4 billion worth of revenue on a daily basis.
To ensure the system is properly maintained and upgraded to meet needs of users, the Korean government created in 2016 the Korea Public Finance Information Service (KPFIS), a specialized public institution for managing and operating the dBrain system, which provides users with 24 hours of IT service 365 days a year. The system data is stored in two data centers, of which one is the primary date center and the second is for disaster recovery.
The dBrain system has three main characteristics:
- Real time features, including Electronic Bill Presentation & Payment (EBPP) and Electronic Fund Transfer (EFT). EBPP enable payments of taxes and other penalties using Internet banking and ATM besides allowing revenue collection officials to monitor government receipts in real time, enhancing the convenience and promptness of public service. Meanwhile, the EFT enables dBrain users to transfer funds from the treasury single account to the account of goods or service providers.
- Program-based online feature: as all fiscal data ranging from budget and execution to fiscal reporting is displayed online based on program or project level so managers can easily monitor them.
- Integration and interface capabilities: all financial management processes for line ministries and funds are integrated through the system and have an interface with external systems, broadening the scope of the fiscal statistical information.
The lessons learned from the dBrain system implementation
For Latin American and Caribbean countries seeking to build an integrated financial management system, the dBran implementation offers three important lessons: Big picture, Facilitator, and Ownership.
The first lesson, Big picture, relates to the need to have a strategic foundation. This means that business strategy planning and business process reengineering must precede the development of a large and crucial information system. Moreover, public officials with deep familiarity with the fiscal work processes must participate in the design phase from the beginning.
The second one is facilitator. There should be a designated project management organization or entity that takes full charge of fiscal reforms and the system development. As a facilitator, the designated project management entity should moderate conflicts of interest among line ministries and other stakeholders.
The third lesson is about ownership. The national government should own the integrated system and be in charge of its management and operation. The building of the system must take into consideration particular environmental factors, policies and existing systems so that flexible and timely system adjustments can be possible.
I would like to say that implementing dBrain system was more than developing a simple financial management information system. It involved building a fiscal and financial management infrastructure for the Korean government that would support the four major fiscal innovation initiatives. At the end, dBrain became a fiscal innovation project on itself. We are currently working with the IDB to help showcase and share our experience with dBrain in Latin America and the Caribbean. We hope that Latin American and Caribbean governments find our experiences on dBrain system as informative and useful to develop their own integrated financial management information systems and fiscal reforms.