Financial Management System

The Problem

The Municipal Finance Authority of B.C. employs a unique business model that pools the borrowing capacity of its members to leverage better rates for financing the projects of local government organizations in the Province of British Columbia. The remarkable success achieved by the MFA led to an increasing client base with larger and more complex financial requirements. An existing legacy system operating on an AS/400 computer could not handle the changes needed to meet these new challenges. Furthermore, not all the required changes could be predicted in advance because the MFA’s business model was expected to change in response to outside influences, including possible changes in its mandate and other demands imposed by the ever-changing financial world.

The Solution

Gears imageThe MFA Financial Management System was developed as a secure, web-based J2EE and Oracle database application that handles short and long term debt, investments, leasing, and expense management, all integrated with a custom general ledger program.

Evolution

Unique for this application was the extent to which the Financial Management System was designed to evolve.

The system started out primarily as a Capital Financing System. That is, the system would manage the lifecycle of long term debt incurred by municipalities. This includes the launching of new debt instruments (Debentures), the repayment of a municipality’s specific portion of the debt (Issues), a Debt Reserve Fund that all municipalities must subscribe to, and an Investment Management System that the MFA manages on behalf of the municipalities.

Additional sub-systems were added to the system as programs were added or expanded. This includes a system that manages short-term debt which is used by the MFA to handle short term cash-flow situations. Interim financing where municipalities need to borrow funds for an intermediate term until the borrowing can be converted to long-term debt. A Leasing system was added that allows municipalities to lease items such as automobiles, office equipment, fire trucks and other depreciable items. Operating Fund was added that takes care of paying invoices, writing checks and etc.

The system continues to evolve and is always updated to current available technologies. For instance, the system is being converted from a system serving static pages and forms to one that employs dynamic pages using a Rich Internet Application environment. A client interface is also being added that will provide banking-like environment for municipalities to directly access their balances and debt within the system.

Major Components

Capital Financing (Issue Management and Long Term Debt)

The Capital Finance Module is the core of the MFA Financial Management System. It creates and manages all operations on “Issues”. An Issue is associated with one or more debt instruments that provide funds that subscribing members can borrow. The interest for the debt instruments is serviced by payments from the members according to the amounts they borrow, but the principle portion is retained for investment purposes until the debt instruments mature. Earnings from investments are periodically distributed to members. Over the life of the issue, profits from investments are used to reduce the amount required from members for final payment, usually resulting in early retirement of their debt obligations. Although this explanation is simplified, this is the fundamental core of the MFA’s business model.

The Issue Management Module provides all the functionality to create, launch, and manage an issue over its (up to 30-year) life cycle, including automatic billing of members; maintenance of debt payment schedules; buying, selling and re-allocating investments; distributing profits, interest, and investment management fees; providing checks and balances through cash flow reporting; answering queries about issue and member status; and providing account tracking and transaction summary information to the General Ledger Module for further analysis and reporting.

Custom General Ledger

The General Ledger Module is comprised of two parts: one for issue-based accounts related to the Issue Management Module, and another for non-issue accounts to support other MFA operations. The issue-based accounts record all journal entries provided automatically by the Issue Management Module in an account structure specifically designed to help the MFA manage and provide audit information for issue-based financing. Erroneous entries can be automatically replaced if detected prior to posting, or retracted otherwise. Additional accounts and manual transactions can be manually created to support additional financial analysis and reporting. User privileges are controlled at the functional level, and can be configured by roles. XML technology is used extensively to filter reports so that only the information allowed by user privileges is presented in any report. Non-issue accounts are supported by manual account and journal entry creation in any structure the user desires in order to provide General Ledger services to the MFA’s other business processes (e.g. operating accounts).

Leasing

The MFA’s leasing service enables almost anything (fire trucks, computers, buildings, land, etc.) to be leased at lower rates through a process that greatly eases the administrative burden on the MFA’s members. The Leasing Module manages a lease throughout its life, from initial application (with all required documentation), approval, funding, automatic billing, and termination or renewal of the lease. The Leasing Module also provides a secure web interface for members (to review the status of their leases).

Short Term Debt Management

The Issue Management Module provides funds for terms ranging from 5 to 30 years but money is sometimes needed on a more temporary basis. The Short Term Debt Management Module secures funds from the Commercial Paper program and its Line of Credit in response to requests for short term debt from the Issue Management, Leasing, and Interim Financing modules.

Expense Management

The Expense Management Module handles all payments required by any of the modules in the Financial Management System and also handles revenues and payments required in the normal operations of the Municipal Finance Authority.

Technologies Used

  • J2EE (Java 2 Enterprise Edition) using EJB, JSP, JNDI, JDBC
  • JBoss
  • Tomcat
  • Javascript
  • XML
  • Json
  • Rich Internet Applications
  • Oracle 11g

DEMO Screen Grabs

General Ledger Accounts showing Tree View drill-down capability.

Application screenshot image

General Ledger Journal Entries showing filter and search form.

Application screenshot image

DRF Investment Report showing level of detail available, filter form and pop-up command menu.

Application screenshot image

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