State debt and cash resource management system

Customer: The Ministry of Finance of the Republic of Lithuania

Sector: public sector

Overview of the activities

The following laws of the Republic of Lithuania regulate the performance of public debt and cash management functions: The Public Debt Law and the State Treasury Law of the Republic of Lithuania. The Public Debt Law of the Republic of Lithuania regulates government borrowing on behalf of the state, providing guarantees, relations related to a claim right of the state to debtors and debtors, for whose obligations fulfilment the state guarantees. When borrowing or managing undertaken obligations on behalf of the state, the Government is represented by The Ministry of Finance of the Republic of Lithuania.

The situation of activities up to Project realization

There was no integrated system for public debt and cash management in earlier period. The status of the legacy information systems could be described as follows:

• All legacy information systems were only partially integrated, o were not integrated at all, although it processed logically related data;
• There was not such an information system with its functionality to really satisfy the activity demand, thus the employees of the Ministry of Finance of the Republic of Lithuania used both formal information systems and informal tools, created in the MS Excel environment;
• Information systems used in the public debt and cash management were created by using different database management systems (MS Access, Oracle, Visual FoxPro, MS Navision), that impeded system integration and raised risk for data integrity;
• Interfaces with external information systems (i. e. information systems in other organizations, also systems being used by other divisions of The Ministry of Finance of the Republic of Lithuania) have been only partially automated;
• Some applied systems used in the public debt and cash management have not been continually updated (e.g. DMFAS), did not fully satisfy the needs of system users.

Because of the above mentioned reasons the public debt and cash management required a lot manual work, increased error probability and demand for control, did not provide enough required information in real time.

Decision

The system created by using functionality of Financial Supply chain management –Treasury and Risk management of SAP module and also Financial Supply chain management – Cash and Liquidity management and Financial accounting of SAP modules up to the maximum. The main tasks which were determined and implemented are as follows:   

• In the integrated solution, data is entered into the system once and is used in various operating processes and for various purposes;
• An implemented solution ensures the integrity and correctness of entered data, improves control and work efficiency, reducing or eliminating the demand for manual work to enter data for several times;
• An implemented solution ensures the integrity and correctness of entered data, improves control and a wide range of financial measures and integration with market data are being maintained in the system (Bloomberg);
• After the implementation of advanced simulation methods, the risk management process became more effective, debt portfolio management costs more optimised referring to risk and optimal cash management is being ensured;
• The reports are formed of the entered data into an integrated solution, they are exact and reflect the situation in real time – that is very important for the authority decision making. It is especially important while making decisions on borrowing in order to compensate the shortage of the forecasted funds, making investment deals, forecasting available funds and other decisions, ensuring effective cash management and improving public debt management on time;
• The automated preparation of reports strongly decreases or eliminates the demand for employee’s manual work, therefore reliable data is provided more rapidly, manual work error risk is eliminated, and work efficiency is growing;
• After strictly defining each user’s authorization rights in the system, data control and security become more effective. The user authorization rights are strictly separated between „Front Office“, „Middle Office“ and „Back Office“ users and separate user groups.

Solution users/beneficiaries

The implemented Public Debt and Cash Management System is designed to fulfil state debt and cash management functions: 

• Making various financial borrowing and investment deals;
• Risk management;
• Administration and accounting of the made financial deals;
• Accounting of state budget and state monetary funds;
• Cash flow forecasting and management; planning the volume of debts, borrowing and investment;
• State treasury accounting;
• Preparing reports.

The main beneficiaries of the implemented system in the Ministry of Finance of the Republic of Lithuania are:

• State Treasury Department of The Ministry of Finance of the Republic of Lithuania;
• Financial Market Department of The Ministry of Finance of the Republic of Lithuania (Assets management department);
• Departmentof Information Technology of TheMinistry of Finance of the Republic of Lithuania.

The Public Debt and Cash Management System implemented functionality makes assumptions for executing most of these functions of the State Treasury Department divisions of The Ministry of Finance of the Republic of Lithuania effectively, exactly and in real time:

• Borrowing and Cash Management Division;
• Forecasting and Risk Management Division;
• Financing Division;
• Finance Statistics Division;
• Debt liabilities administration Division;
• Accounting and Reporting Division;
• EU assistance and cash funds accounting division.

Results

Integrated, flexible, secure and optimized solution, which has been implemented, ensures continuation of activities and improves business processes of the Ministry of Finance of the Republic of Lithuania.

This solution was being implemented in accordance with public sector accounting and accountability according to accrual-basis accounting reform that is currently being performed. Although the implementation of the reform was not the object of this implemented solution, however in order to optimize processes and data flows, it was essential to ensure a required information storage for state consolidated financial statements during the implementation of public debt and cash management processes. The project lasted 13,5 months. Currently 20 users work with SAP system.

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