LV thạc sỹ_Apply ERP solution for public financial management

UNIVERSITE LIBRE DE BRUXELLES NATIONAL ECONOMICS UNIVERSITY

Vietnam – French Community of Belgium Master Programmes
MASTERS IN PUBLIC MANAGEMENT AND ECONOMICS

THESIS
APPLY ERP SOLUTION FOR PUBLIC FINANCIAL MANAGEMENT
CASE STUDY: PAYABLE RESPONSIBILITY IN BUDGET MANAGEMENT
INFORMATION SYSTEM (TABMIS) PROJECT

Prepared by:
Instructors:

Hanoi, November 2010


Acknowledgment

To complete the graduate program and thesis writing, I have received guidance,
help and suggestions enthusiastically teachers in “Vietnam – French Community
of Belgium Master Programmes” department in NATIONAL ECONOMICS
UNIVERSITY-Hanoi.
The First, my sincere thanks to teachers at Vietnam – "French Community of
Belgium Master Programmes” department, especially those dedicated teachers who
have taught me the whole time studying in Department.
I would like to express my deepest sense of gratitude to my supervisor Dr. …
for her patient guidance, encouragement and excellent advice throughout this study.
I would like to express my gratitude to the leaders and experts of the ministries
of finance, the central state treasury, project management TABMIS who spent time
to interview, get survey to collected information for my thesis.
Finally, I take this opportunity to express my profound gratitude to my beloved

parent, parent in law, my wife and children for their moral support and patience
during my study.
Although I have tried to complete the thesis with all the enthusiasm and my
capacity, however inevitable shortcomings, I hope to receive your comment for my
thesis.


Executive summary
The thesis concentrates on application of ERP in public finance
management, that detail in budget management, through Treasury And Budget
Management Information System (TABMIS). The TABMIS is one component of
public finance reform project in Vietnam. However, the research concentrates on
State budget expenditure management. To understand clearly on the above issue,
the theory will research the general background of State Budget and State Budget
Management including: structure, functions, tasks, role, organization and real
situation of State Management in Vietnam. Besides, the theory researches on ERP
model, detailed eBS production of Oracle Co-operation, concentrate on expenditure
subsystem and related subsystems. The thesis will answer those questions:
1.

Characters of State Budget Management in Vietnam?

2. The strong and weak points of State Budget Management system?
3. How is information system to State Budget Management?
4. What are restrictions of information system in State Budget Management and
resolving trends?
5. Is ERP system suitable to apply in State Budget Management in Vietnam?
6. How are resolutions of application ERP in State Budget Management with
eBS production?
7. How is project management arrangement?

8. To answer the above questions, the research uses the methodology of logic
system approach to solve problem, abstract and model the main subjects of
the research. The result of the research will be “to be process” at level 1. This
is a logistic diagram that defines subjects and interactive information between
subjects in ERP model of TABMIS project on budget management in
Vietnam.


Table of content

INTRODUCTION..................................................................................................................................................2
CHAPTER I: THEORY OF STATE BUDGET MANAGEMENT, ERP MODEL......................................7
I.1. GENERAL THEORY OF STATE BUDGET MANAGEMENT
7
I.1.1. State budget Overview.......................................................................................................................7
I.1.2. Budget Management........................................................................................................................14
I.2. INTRODUCTION TO ERP MODEL
17
I.2.1. ERP Model.......................................................................................................................................17
I.2.1. ERP Components.............................................................................................................................18
I.3. EBS-OVERVIEW
19
I.3.1. Technical architecture......................................................................................................................20
I.3.2. Business architecture.......................................................................................................................22
I.3.3. Oracle Payable Module...................................................................................................................27
CHAPTER II: ACTUAL SITUATION OF BUDGET MANAGEMENT IN VIETNAM.........................37
II.1. CHARACTERISTICS BUDGET EXPENDITURE MANAGEMENT IN VIETNAM.
37
II.1.1. The Budget plan..............................................................................................................................37
II.1.2. Allocate budget expenditure in Vietnam.........................................................................................37

II.1.3. Accounting posting and settlement of state budget:.......................................................................38
II.2. STATE BUDGET EXPENDITURE CONTENTS:
38
II.2.1. Contents and structures of state budget expenditure......................................................................38
II.2.2. Management tools for state budget expenditures:..........................................................................40
II.3. CURRENT PUBLIC EXPENDITURE STATUS FOR INDUSTRIES IN VIETNAM:
40
II.3.1. Actual situation of the state budget:...............................................................................................40
II.3.2. Current of information systems in budget management in Vietnam...............................................46
II.3.3. Problems in budget management....................................................................................................47
CHAPTER III: AN ERP FOR BUDGET MANAGEMENT IMPROVEMENT IN VIETNAM............50
III.1. TABMIS PROJECT
50
III.1.1. Introduction to TABMIS project....................................................................................................50
III.1.2. Organization chart of TABMIS Implementation Unit...................................................................53
III.2. ERP SOLUTION OF TABMIS PROJECT -EBS.
54
III.2.1. eBS Selected to TABMIS:..............................................................................................................54
III.2.2. Oracle E-Business Suite - eBS- Model..........................................................................................55
III.3. TABMIS- TO BE PROCESS AP.
55
III.3.1. General AP to be process..............................................................................................................56
III.3.2. Order Handling process flow of payments....................................................................................58
REFERENCES OR BIBLIOGRAPHY............................................................................................................61


TABLE OF ABBREVIATION

ADI: Asynchronous Data Interchange
ASNs: Advance Shipping Notices

COGs: Cost Of Goods Sold
DTKB: Treasury Estimate budget
eBS: Electric Business System
EDI: Electronic Data Interchange
ERP: Enterprise resource planning
GDB: General department of Budget
GDC: General Department of Customs
GDP: Gross Domestic Product
GDT: General department of taxation
IAS: International accounting system
IBPS: Inter banking payment system
IFSAS: International Financial System Accounting Standards
IMF: International Monetary Fund
Inter-Treasury: Payment inter-treasury system
JSPs: Java Server Pages
KTKB: Treasury account
MOF: Ministry of finances
PDA: Personal Digital Assistant
PFMRP: Public Financial Management Reform Project
PL/SQL: Package language/ Sequence query language
RFQs: REQUEST FOR QUOTATION
SQL: Sequence query language
TRM: Treasury Reference Model
TSA: Treasury Single Account
TSA: Treasury Single Account
TTTT-TAB: Payment system-related treasury
USD: United state dollar
WB: World Bank
WTO: World trade organization

1


INTRODUCTION

1. Reason to choose topic

Computerization in budget management has been implementing right from the
time when computers were applied in civil activities (from the 1970s). By the end of
1990s of the past century, these applications were mainly developed directly from base
technologies (such as database, programming languages etc.) However, most of the
programs were developed based on decentralized model or centralized model but small
scope of business and geography as well. From the end of this 1990s, a new trend had
been implemented by many countries, in which the ERP solution was deployed in
management of state budget. Especially, the World Bank (WB) and the International
Monetary Fund (IMF) had introduced the Treasury Reference Model (TRM),
specifying basic model in budget management – which best fits the ERP solution.
In Viet Nam, in April 21, 2003, the decision No. 432/QĐ- TTg was approved by
the prime minister in order to implement the Public Financial Management Reform
Project (PFMRP) to sustain the economic growth, and simultaneously change the
public financial management mechanism in order to meet the strict management
requirements of the world finance when Vietnam gain access to WTO. The public
financial management reform project was funded by the World Bank with total
contract value of 71,45 millions USD, and split into 3 key components: First
component: Treasury and Budget Management Information System. Second
component: Technical support to enable planning for medium-term finance and
expenditure capability. Third component: Technical support to strengthen domestic
debt management capability and debt risk management of state owned enterprises.
TABMIS is the biggest component out of the three components. Its key objectives are
to develop and implement the integrated Treasury and Budget Management

Information System (TABMIS), including deployment of software, integration,
technology transfer and technical support in order to reform the budget management
mechanisms, renew business processes etc. Total value of this component is 61,42
millions USD out of the total contract value of PFMRP of 71.45 millions USD.
TABMIS is designed, built based on Oracle applications kit, integrated with the world
best practices and standards.
Budget is a key concept in a financial system and there by the most of big ERP
systems such as Oracle, SAP have budget allocation and budget transfer functionality.
Budget is allocated based on budget funds, based on parent child and decentralization
of operating units, which are authorized for allocation of state budget. In each fiscal
year, a spending unit is allocated with a certain budget amount (detailed by group).
This unit will spend upon approved budget. Therefore, each spending unit has a fund
source from the state budget with payment obligation (recurrent expenditure, capital
expenditure) and also fixed assets shall be managed. These operating units are required
to manage, track payables for providers and suppliers of goods and services. Budget
allocation items and expenditure items are designated and based on the state budget
2


classification, which is promulgated by the Ministry of Finance. This is to ensure
expenditure items spent by spending units are complying and following the right
objectives and as planned. In Vietnam, these expenditure items are managed and
controlled by the state treasury pursuant to regulations by the law of Vietnam in the
use of state budget. For example, payment for suppliers are done via state treasury’s
accounts by the state treasury after spending units have completed their procurement
procedures and sent all supporting documents to the state treasury. However, the
process of budget allocation and payment management are distributed and sometimes
erroneous since the information is not in sync between allocating units and
expenditure management units at spending units. This blocks disbursement of budget
especially for investment and development projects.

The concept of the Chart of Accounts and its segments in ERP model in general
and Oracle-eBS in particular are useful in state budget allocation and spending. It
enables to manage budget levels, decentralization of administrative frontiers, programs
and projects, various types of budget sources, budget classification, fiscal years etc.
Spending at spending units and spending for capital projects can be done following
“From procurement to payment” process- basic ERP process. Management of planned
expenditures per regulations items and per approved quota and management for
procurement of fixed assets at spending units are also easily managed via accounts
payable module and related modules of ERP system. Moreover, the Cash Management
functionality of ERP also supports the state treasuries at various level very well in
balancing expenditures by spending units against state budget. For spending units
having revenue collection such as hospitals, notary public’s offices etc, ERP solution
with Sales, Services, Inventory, Accounts Payable module are also applied to serve
management work of such units.
In the “From procurement to payment” process, the “payment” is the end process,
which reflects expenditure related transactions of state budget and other transactions
recording the cash flow out of the state treasury. The process for management of
payment transaction for beneficiaries as well as payments with commitment in the
forms of capital expenditure, recurrent expenditure contacts - Payment Process are
packaged in the Accounts Payable module of Oracle-ERP. In Accounts Payable,
payment requests or invoices are created for payment processing and interfaced with
bank to transfer budget to beneficiaries.
Application of ERP in practice is very complicated. In order to successfully apply
ERP, standard processes of ERP project should be studied carefully, here is the OracleeBS and the actual requirements in order to convert these requirements to standard
processes of the applications system. Budget expenditure is a key requirement because
it reflects all state budget expenditures for beneficiaries and capital projects under the
state’s management. Therefore, studying Accounts Payable Module of Oracle-eBS and
current state budget expenditure requirements is one of the most important
requirement for successfully applying ERP in public financial management. This is the
reason why I have chosen the topic “APPLY ERP SOLUTION FOR PUBLIC

FINANCIAL MANAGEMENT CASE STUDY: PAYABLE RESPONSIBILITY IN
BUDGET MANAGEMENT INFORMATION SYSTEM (TABMIS) PROJECT”
3


2.

Objectives and content research

In order to have an in-depth understanding ERP system in general and Oralce-eBS
in particular, it is required to have a general understanding of the structure of data
arrangement and collection, processing and storage of data of the system. This is the
basis for understanding processes as well as business transactions of ERP system. For
each ERP system, here is Oracle-eBS, which is a resource planning system. This
comprises of many single modules, these modules are used to manage various business
transactions by organization. However, they are correlated in overall picture. In order
to understand mechanisms and operation of Oracle-eBS applications, it is required to
understand information management model and relationship between modules within
ERP system.
Payment management is the management of budget expenditure related
transactions and other transactions which record cash flows out of the state treasury.
Good processing of business transactions allows better management of payment
transactions for beneficiaries as well as payments with commitment in the forms of
capital expenditure, recurrent expenditure contracts. Accounts Payable Module of
Oracle-eBS is used to manage payment related transactions and record outgoing cash
flows. Accounts Payable is one of the 7 key modules of Oracle-eBS solution in
Vietnam. Therefore, studying standard processes of AP module and payment
management transaction of the state treasury helps to work out the standard “To Be
processes” at level 1 is a perquisite for applying Oracle –eBS, aiming to manage state
budget expenditures in a proper, correct, timely manner and align with the project

goal.
3.

Range of researching

Thesis research focuses on the concepts, functions, role and structure of state
budget management; find understand, analyze the current status of state budget
management present; Research ERP model and Oracle's eBS product to find out the
“to be process at level 1” for the future ERP system.
However, the study of state budget management, ERP and product models eEBS
very large and complex in terms of management, accounting and business knowledge,
structure of state budget, include knowledge of software technology, so the thesis will
focused research concepts, functions, roles, the basic structure of state budget. Find out
the current status of the current budget management, to answer the question why to
reform the system of budget management information. Besides thesis study process
management, process of implementation of budget management is now, focused on
expenditure state budget. Thesis researches model of ERP products and the Oracle
eBS, ERP's Product of Oracle cooperation. Through studies about, thesis looks out to
be process for state budget expenditures. This is a base to be process for budget
expenditure management of the state budget expenditure.
4.

Methodological
4


To use method logic system approach to problem solving with information
system. Thesis also use modeling processes method to abstract objects and an
overview about the processes and management systems in general state budget and
management of state budget expenditures particular. The management and operating

budget needs to be supplemented and improved in line with the ERP model. The
findings and proposed solution was culled from the gathering, survey and synthesis of
information and data, which compare with theoretical basis to clarify the content of
research. Research process be objective, comprehensive, systematic and integrated
5.

Significance of thesis

ERP model applied to the state budget management in a Treasury requirements set
out for Vietnam to improve budget management system, with the study of state budget
expenditure provides the following benefits:

Staff (accounting and finance professionals) of the Treasury accurate
accounting entries arising on transactions involving funds from Treasury.

Support for creating financial reports of state budget and management reports in
a variety of criteria.

Provide information quickly and accurately on the situation of the state budget
at all times and at all different budget levels.

Ensure data synchronization - between the state treasury budget and finance
agencies tax and customs administration.

Reduce duplication in the payment information on the state treasury and finance
agencies.


Ensure solvency at all times, forecasting cash flows.

6.

Thesis structure
Thesis structure outside the preamble and the conclusion includes three chapters:
Chapter I: Theory of state budget management, ERP Model.

This chapter introduces background of State Budget, ERP model and OracleeBS product of Oracle Cooperation.
Chapter II: Actual situation of budget management in Vietnam.
This chapter describes actual situation of budget management and information
system for budget management in Vietnam. Based on those, we define the resolution.
Chapter III: An ERP for budget management improvement in Vietnam
5


This chapter states application ERP through eBS product into public finance
management in Vietnam.

6


CHAPTER I: THEORY OF STATE BUDGET MANAGEMENT, ERP MODEL
I.1. General theory of State Budget Management
I.1.1. State budget Overview
I.1.1.1. Concept of State Budget
When State is established and operated, to maintain and survive, the Government
uses political power to compel organizations and people to contribute a part of their
revenues and income for fund. This fund is used for Government consumptions in
social, education, national defense, culture… and maintenance of power system.
Establishing State helps to develop economic relations together with taking form,
distribution and using monetary and serve State’s functions, roles and operation and

take form operation of National Finance. Appearance of monetization leads all
activities and expenditure of Government to implement through money. The nature of
national finance is classified by nature of State. National State effects to whole of
social economic development, showed through distribution and redistribution of
wealth. National Finance is formed before forming of National Budget. In National
Finance, State Budget take play the most important because of the biggest fund.
Though receipts channel, Budget mobilizes and gathers financial sources of whole
society such as: tax, fee, debt from domestic and abroad and international aid. Through
expenses channel, Government uses Budget for distribution of capital to economic
organizations to develop economy at given period. So Budget operates together with
State operation, and be one of the most important tools for the operation of State.
The establishment of State is objective so Budget is also objective. If the State
does not exist, Budget is disappearing. Nature of State classifies nature of Budget, but
Budget is managed by specific organizations and persons so management of Budget is
subjective. There are many concepts of Budget and in Budget Law, it is said that:
“Budget is whole of estimated incomes and expenditures that are approved by
authorities and implemented in 1 year”.1
I.1.1.2. Nature of State Budget
In the term of performance, we can understand that Budget is whole of estimated
expenditures that is decided by authority Government agencies and implemented for 1
year to carry out the functions, tasks of Government. The appearance of Budget is
diversified and abundant but desultory. It is Table of receipts and expenditures of
Government, including contribution of organizations and people and distribution of
Government to members. Although Budget performed desultory, all activities are
under control of Government. The items in Budget connect closely each other. Almost
of receipts are compulsory and expenditures are almost of unreturned allocation. Those
items take a deciding role on survival of Budget. Subject of Budget is Government.
However, nature of Budget is formed from internal relations during operation.
Activity of Budget is distribution of finance resources, including 2 parts: one is deposit
1

State Budget Law of Vietnam in 2002

7


to Budget and one allocates to society. The deposit to Budget continues to distribute to
consumption and investment of social economic development. It is the same with
another one. Hence, activities of Budget are really resolution economic interest
between Government and other stakeholders, linking with collection and using
Budget. Then in society, there are many relations between Government and other
social stakeholders that are showed through receipts and expenditures of Budget. The
main relations are: economic relation between Budget and enterprise areas, economic
relation between Budget and Government Agencies, economic relation between
Budget and people, economic relation between Budget and financial market. Budget
Management is really impacts to relations to get the fix goals. The main contents of
Budget:
The first: Budget is objectively economic category but is used
subjectively by Government.
The second: in term of physical sector, Budget is the biggest fund and
used and managed by State.
The third: In term of management sector, Budget is basically financial
plan of Government and implemented in fix duration (normally 1 year) and has 3
specific characteristics: estimativeness, balance and limited time.
The forth: In term of legal sector, Budget is financial law.
The fifth: Budget size is decided by result of national economic activities.
Hence, nature of Budget is total of economic relations arising in distribution
proceed and equal to total of price, total of social product and national incomes to
form fund serving social, economic tasks of Government in the limited time,
normally 1 year. Understanding Budget obviously to know relations, impacts and

give resolutions effectively
I.1.1.3. State Budget Structure
State Budget includes receipt and expenditure items arranged in fixed structure.
Structural State Budget is relation between receipt and expenditure in the limited time
to implement functions and tasks of State. Through structure of State Budget, we can
know about social economic development level, economic capability and management
of State.
The first: Relation between Total of Revenue and Total of Expenditure, relation
between Total of Revenue, Total of Expenditure and Gross Domestic Product (GDP),
relation between rate of revenue increase and expenditure increase and growing rate...
The relations show social economic development level at national or local level, so
they need to be defined for a period, normally 5 years. Rate of revenue and
expenditure need to be proposed suitably and scientifically during developing plan to
implement the goals of State.
8


The second: Structure of the State budget to be considered in relation to the
contents inside of it is basic income and expenses.
I.1.1.4. Function of State Budget
Function of Sate Budget proceeds from its nature and from political nature of
State. If State wants to survive and develop, it has to have money for activities and
investment for social economic development. Financial source comes from revenues
and State has to balance revenues and expenditures, so Sate Budget has two main
functions:
The first: Mobilize money from many financial sources and ensure expenditure of
State.
The second: Balance revenues and expenditure of State. Sate Budget is in State
Finance so it has functions distribution, director and adjustment of macro economics
itself through its tools.

I.1.1.5. Roles of State Budget
Roles of Sate Budget is defined for each period and based on nature, functions
and tasks. Roles of Sate Budget are performed through its function in actions.
Views of economists:
Almost of theories agree that it need to maintain budget for regular consumption,
but there are many points of view that all SB is for consumption budget or
consumption budget is a part of SB? Economist often defines roles of SB based on
function of State.
From the beginning of market economy of capitalism to the twenty century,
classical economics school (Adam Smith, 1723-1790) based on function of State and
“invisible hand” theory to define the limited roles of SB to
economy. It was supposed that market competed freely and perfectly, objectively
economic laws would impact to adjust economy. If State used tools to adjust economy
means to interfere rudely economy, it had caused negative consequence.
After that from 1940s to 1970s, Demand theory of England economist John
Maynard Keyner (1883-1946) was born to meet economic development. According to
this theory, State had to interfere to balance economy. The State had to adjust
macroeconomic by suitable policies to encourage and maintain stable growing rate for
total demand, using interest rate, adjusted inflation policy … to stabilize economy.
After theory of Keynes, many economists believe that during market economy
stage, State must impact to economy and reality proves that points of view is true.
However, methodology, measure and scale of each State are different.

9


Nowadays, with globalization, science and technology impact strongly to social,
economic life, State the more has to interfere to economy, in which SB is the best
tools. Roles of SB in current market economy as following:
Develop and mobilize financial sources for expenditure demand:

Operation of State always requires money for expenditure to archive proposed
goals. Revenue resources come from tax and untaxed. This is historic role of SB that
all social and economic mechanisms require. Mobilizing financial sources for SB need
consider 3 things:
The first: Mobilizing money from society through taxes, fees, charges and other
receipt has to be reasonable, if it is too high or too low, there will be negative impacts.
The second: Contribution rate from GDP has to base on social economic master
plan in fixed period, the rate is both suitable with economic growing rate and ensuring
production agencies can save capital for reproduction.
The third: policies, tools applied to revenue and expenditure of Sate Budget have
to be suitable and reasonable with each economic development stage, economic area
or beneficiary that feasible and uniform in Sate Budget system.
The forth: resource for Sate Budget need to be used effectively, including visibly
and invisibly financial resources.
Adjust macroeconomics:
Encourage growing rate: To stabilize and improve economic growing rate, State
uses many tools, in which Sate Budget is a tool with tax collection and investment. Tax
policy forces related subjects to obey and it is legal. Tax policy encourages and attracts
investment, creates condition for investors to expand production, shifts economic
structure, creates environment for free competition. Other hand, through expenditure,
SB helps to shift social, economic structure, implements industrialization,
modernization, improves social equal, creates motivation for development, such as
invests in key economic sectors, key areas, and extremely disadvantage areas;
improves infrastructure; increases cultural level of people, trains human resources.
Adjust market, price and inflation: Two main items of market: supply-demand and
price, often influent each other and control market activities. Unbalance between
supply and demand will effects to price, cause increase or reduce price out of control.
To ensure benefit of producer and consumer, State use Sate Budget to interfere to
market through expenditure as capital investment, subsidy, and good and fund reserve.
Flexible and effective adjustment of State through reserve fund depends on capacity of

forming fund. Multi-sector commodity economy oriented market is a active economy,
under impacts of economic rule it can be changed flexibly to social life. Hence, it is
necessary to increase national reserve or increase annual revenue for budget. The
reserve is collected from expenditure of Sate Budget or increase of revenue or from
surplus Sate Budget. During adjusting market, Sate Budget also impacts to operation
10


of monetary market, capital market, and then carries out deflation and controls
inflation. State can control by using methodologies: balancing Sate Budget,
developing loans from domestic and abroad by publishing Government bond,
attracting international aid, participating capital market as buyer and seller stocks.
Compensate for shortcoming of market, ensure social equality, protect
environment: With “two hands” theory, Samuelson, American economist, believed that
it is necessary to use two hands (Government and market) to arrange and develop
economics because of shortcoming of both Government and market and they have to
assist each other. Nowadays, almost Governments agree with macroeconomic
management role of Government, as well as appreciate objectively economic rule.
Government will limit impacts to market if market can control by itself and interfere
reasonably to compensate for shortcoming of market. In the terms of community
benefits, social equality and ecological environment, competitive market will not care
about poor people neither protect environment but race for benefits only? According to
social view, these distribution systems are not equal, unsustainable because of not care
to social, environmental benefits of community. The shortcomings are only
compensated by Government, based on using legal power to compel (or encourage) to
use (or not use) public goods/services. Budget is one of the most effective tools to
adjust incomes of people. Budget effects to income distribution on the whole society
by apply direct tax, indirect tax, expenses for social, public welfare of people under
social beneficiary groups.
I.1.1.6. Budget organization

Process of forming the state budget system:
Budget system is overall budget levels that relate each other on social, economic,
political mechanize as well as administrative organization principle. Budget system is
formed based on administrative system. Such as, in the countries that administrative
system is under federation institution (America, Germany, Canada, Malaysia…) there
are 3 budget levels: federation level, state level and local level. In the countries that
administrative system is under unify institution (English, French, Italia…), there are 2
levels: Central level and local level. …).
In Vietnam, budget is established for a long time, along with Government
establishment. Before 1945, budget was used for kings and army. After the August
Revolution in 1945, Government published many new policies that are self-control,
independent, democracy such as abrogated poll-tax, developed new tax system to
reduce tax for poor people, published coin (1-12-1946), established “independent
fund” to collect money for budget. During Resistance stage (1946 -1954), revenue and
expenses of budget was only served for war with French. In 1972, Government
published “commune budget regulation”, commune budget was not in budget system.
In 1978, Government published Decision No. 108/CP, local budget was divided into 2
levels: provincial/city level and district level. In Decision 138/HĐBT dated
19/11/1983, commune budget was been to budget system and budget system included
4 levels: central budget, provincial/city budget, district budget, communal budget. To
11


meet new condition of the country, on 20 March 1996, National Assembly published
Budget Law, validity from 1/1/1997. Since then, budget system of Vietnam includes 4
levels: central budget, provincial budget, district budget and commune budget.

I.1.1.7. Contents of budget management:
Budget revenue:
Nature of budget revenue is relation between Government and society that formed

from finance collection of Government for budget to serve expenditure. Budget
revenue is compulsory and unify all over the country, except some fees determined by
Provincial People’s Council, such as boat fee, market fee... Establishment competence
of receipts, rate, and subject is defined in Budget Law and only authority agencies can
establish or adjust receipts into budget, and prohibit Government at various levels
from illegal receipts. Budget revenue classify means arranging receipts sources into
categories, according to proposed criteria’s to meet requirement on economics research
and budget management. So, based on economic contents of revenue, we can classify
receipts sources into two types: domestic and abroad receipts; based on economic
character, we can classify receipts into receipts from tax and others related tax (tax,
fee, charge) and not taxed receipts (out of tax); based on mobilization form, we can
classify into three types: receipts under duty, receipts under contribution voluntary, and
borrow receipts.
Budget expenses:
In term of nature, budget expenses means relation of income distribution and
redistribution that formed by using fund of Government to implement roles of social
economic development management. Budget expenses includes expenditure for
investment for development, regular expenditure, investment for national defense,
security, and operation of State machine; pay country’s debt, expenditure for aid and
other expenditure as regulation.
Some attentions in budget management
The first, regular expenditure is rather complex, related to many sectors, so it need
to be used save according to regulation and distribution reasonably as scientific, equal
criteria, use effectively, based on annual budget plan and suitable with fact condition
of local and agencies to implement finance self-control mechanism. Ensure unity of
expenditure norm and increase self-control of local. This issue is being researched. It
relates to process of preparing and implementing budget balance, prepare budget
according to cost items or out put that are researched to carry out next time.
The second, expenditure for development investment includes construction,
assistance for enterprises, pay loan, or sponsor that have significant meanings for

priority social, economic development, that defined by percentage of GDP and
percentage of total of budget expenses. In total of expenses for in construction
12


investment, it need define suitable rate of technical infrastructure building and social
infrastructure. This is the first principle to arrange investment list and structure.
Besides, it need avoid from dispersed investment and ensure develop equal between
sectors and economic areas.
The third, Implement monitor and overview budget expenses regularly implement
periodic finance inspection and regular audit procedure. This action need pay attention
more to increase financial discipline, practice save, avoid waste and avoid from
corruption. Our country is in integration stage, besides of mobilizing and using
internal resources, investment, aid from external financial agencies have been attracted
by ensuring obviousness and discipline in budget management to improve capital
using effect.
The fourth, Budget revenue and expenses relate closely each other. Revenue
ensures for expenders, otherwise, spending budget for economic development can
create condition to increase revenue. Budget expenses connect closely to implement
social, economic, political policies of Government at limited time. It effects
significantly to social, economic and political life of Nation. However, in developing
country, it requires big capital for investment but still ensure overspending rate of
central budget and loan at budget balance rate, and ensure payment ability. Some
locals have this problem because debt is too large and effect to budget balance and
financial situation.
I.1.1.8. Factors those effects to budget size:
Budget size means total of money in economic relation that decide total of
revenue and expenditure of budget. Some important factors can effect to budget size as
follow:
1. Position of Nation, natural resources, geography location, education level,

human resources, culture-nation.
2. Political stability, security and social order not only help enterprises to develop
production but also attract external investors, develop strongly position in
tourism industry. Government has not to increase cost for assuring social order.
3. Policies, strategies, mechanism of Government on social, economic
development have to be consistent, opening, stable, equal, public... National
finance policies in given period effect extremely to social economic
development, effect directly to budget size.
4. One of the most important is State organization machine and people that
implement, manage and use effectively budget revenue and expenses.
Expenditure size also depends on natural condition to arrange contingency
suitably.
Factors effect to budget revenue
13


Budget revenue comes from tax, economic activities of Government, collection to
supplement budget deficit and other revenue. Because of compulsion of budget, by its
power, Government publishes budget revenue policies. High or low rates depend on
economic situation of each sector, field, area, product and financial demand, linking
with price, income, interest rate...
Revenue from tax and fee is important and significant for production and trade.
Defining revenue policies is difficult and requires scientific thought, experiences and
economic strategy. Besides, it is necessary to mobilize fund from enterprises and other
sources. We also define suitable policies to make new revenue source, so that budget
size can increase and stabilize. Beside revenue policy, revenue management is very
important and need to have Tax Management Law. Right now, we need speed up
administrative reform in tax collection and make condition for enterprises.
Factors effect to budget expenses:
Budget expenses include regular expenditure, investment for development and

pay loan. Investment is the main of infrastructure, sectors that hardly refund. Regular
expenditure is social consumptions and administrative activities of Government.
Paying loan depends on overspending and demand of loan for development investment
(do not borrow for regular expenditure).
In addition, budget expenditure has to base on tasks of social, economic development
and national defense and security to propose suitable expenditure estimates.
Expenditure estimates depend on demand of each sector, detail objective, and be
arranged in order of priority and period. Nowadays, a socialization cultural, social
sector helps to mobilize community in caring society.
In summary, research basic arguments of National budget and budget management
are basis for policy definition as well as implementation budget management at
various levels. National finance policy has to connect to social economic development
objectives in given period. The important content of National Finance is policies on
creating capital, distribution and using effectively capital, monetary, income
adjustment, and international integration. Understanding budget arguments thoroughly
have important meaning to manage local budget. Budget management has to connect
to social economic management
I.1.2. Budget Management
I.1.2.1. Budget Management is indispensable.
Budget Management is process that Government interfere budget relation to effect
social, economic activities to reach goals of objectives, strategies and social, economic
development master plan in limited time. Besides, budget is used as a tool to manage
and operate economy, orient economic relations according to proposed objectives.
Budget management orients activities of budget according to law, encourages
economic development, and use budget effectively and saving, ensure balance between
14


revenue and expenditure, reduce overspending. General objectives of budget
management are achieving positive balance for budget, stabilizing budget to make

advantage for financial environment for stabilization and development, improving
budget effectiveness for goals of social economic development strategy in limited
time. Government is management subject; budget relation, items is managed objects.
Budget management is indispensable:
Budget management principle:
The first: Principle Of Single Document country only has one budget system,
decision making concentrate on National Assembly and Government as well as
heightens responsibility of local Government. Unity in budget management is
implemented by law, policies, regulations and annual budget plan.
The second: Assure sufficiently and entire of budget. Revenues and expenses of
budget have to collect sufficiently and entire into budget. This principle ensures budget
is implemented strictly, helps Government control whole the budget, avoid from
losses, waste and corruption.
The third: Ensure to implement according to social, economic objectives; saving
is national policy, encourage economic development and ensure budget balance.
The fourth: Ensure financial reserve. This one is the strategic principle, ensure to
use budget stably and actively. The reserve does not appear but increase every year
(from surplus of budget, increasing revenue every year and arranging expenditure).
The fifth: Ensure obviousness, public. Expenditures have to record truly.
Estimates, balance-sheet have to revise, appraise strictly according to procedure.
Approved revenues, expenditure estimates have to be public.
The sixth: Comply with law. Execute seriously Budget Law, Tax Laws, and
regulations, ensure rules in financial management.
Relation between levels is implemented according to following principles:

- Receipt resources and expenditure is defined detailed at central and local Budget and
showed detailed in Budget Law and adjusted, added suitable with social, economic
environment. For example, Budget Law in 1996 recorded detail receipt resources and
expenditure for 4 budget levels. However, in 1992, law adjusted expenditure of local
budget would concentrate strongly to local.

- Central budget is a tool of Government, keep an important role to manage big
revenue with high rate in total of revenues; takes an important role for organized
orientation and defines direction for local budget’s activities.
- Local budgets often take form from revenue at local, implement social economic
tasks that is assigned. Roles of local budget are: ensure finance for expenditures at
local; ensure to mobilize, manage, monitor a part of central budget implementing at
area and adjust capital into central budget in necessary cases to balance budget system.
15


Moving fund from senior budget level to lower level to ensure equality, balanced
development between areas, locals. The supplementary is revenue of lower level. In
case of lower management agencies is act as a proxy for higher agencies and under
responsibility of the higher agencies, the higher agencies have to transfer fund from
their budget to lower budget level to do; do not use budget of this level to do for tasks
of other level.
I.1.2.2. Budget divides:
The neccessity to divide budget:
Together with divide of administration system, financial sources need to be
transfer from central level to local levels to serve tasks at correlative level. Budget
divide is necessary to resolve relations between levels. Equal management system
requires a reasonable divide between authority and competence of divided level.
Budget management divide means definite scope, authority, responsibility of budget
level in revenue and expenditure management at each budget level, to implement
according to function, roles in term of management level. Budget management divide
based on laws, policies, social economic development plan, in order to: ensure to apply
revenue-expenses policy consistently; use resources effectively and heighten
responsibility, encourage creativeness and initiative of local Government.
Management of divide process is difficult and complex. Dividing budget to local
level has opportunity for: local Government can collect and distribute financial sources

more effectively, supply services is more suitable with local, meet demands and desire
of local people better and reasonable to local reality. However, if divide is not good, it
causes risks such as creating overlapping, reducing connection and management
between central and local, increasing inequality and upgrading important services. So
that, divide have to ensure some principles:
Budget divide principle:
- Ensure budget concentration, promote ability and exploit all potentiality of local.
Budget divide has to be consistent with social economic management divide. For
example, management divide has to be consistent with budget divide in education, the
level managed by centre, the level managed by local connect with distribution budget
revenue and expenditure. In fact, budget divide in some sectors still is overlap,
unobvious, because using resources is not effective.
- Budget divide and classification of revenue-expenditure authority and divide rate
between central and local budget are usually associated. Management divide is suitable
with administrative management function of each Government level.
- Budget divide have to be suitable with Constitution and Law about definition
functions, tasks, authorities and responsibilities of Government levels, ensure each
budget level has receipt resources, expenditure, authority and responsibility
correlative.
16


- Besides, ensure some principles such as: ensuring receipt sources for some years to
improve active right of local Government; having equality between locals; having
ability on control, monitoring budget all over the country.
Contents of budget divide:
The first, define detail competency of developing revenue, expenses based on
Budget Law. The second define detail revenue, expenses management for each budget
level. For example, classify obviously which revenue allow to collect 100% and which
one is adjusted between receipts sources; define detail contents, scope of each expense

for each budget level. The third, stipulate authority and responsibility of Government
level for implementing budget (budget preparation, implementation and balance);
stipulate right to borrow from people, control rate, supplementary expenses, and divide
scale between provincial and district budget, dateline of preparing, reporting budget to
People’s Council and higher level...
I.2. Introduction to ERP model
I.2.1. ERP Model
ERP- Enterprise Resource Planning is a terminology, which relates to all activities
of enterprises and supported by computer and all processes are done automatically to
help enterprises manage their key operations, including accounting, financial analysis,
procurement management, stock management, planning and manufacturing
management, customer relationship management, human resource management,
purchase order tracking, sales management, etc. This system ensures integrated
resources of enterprise such as human resources, materials, machines and cash by
using planning tools.
ERP software allows enterprises to provide and consolidate information relating
to various and separate activities. ERP is a system of software’s, which can be
extended and developed by time, and by different types of enterprises, such extension
and development do not affect core ERP. ERP help to integrate separate computer
systems and remove separate ones: Financials, Human Resource, Sales,
Manufacturing, and Inventory. ERP will replace such separate component by
integrated software, which is divided by module and correlated. ERP system is flexible
and can be installed by module as per different demand by enterprise. ERP software
can be installed with some modules as per demand by enterprise; remaining modules
can be installed later but not affecting the system. ERP also has flexible grant-useraccess right from the administrator’s interface. ERP is also more secure by security
policy. In conclusion, ERP is a system used to manage and integrate all resources,
information and functionalities of an enterprise.

17

I.2.1. ERP Components
ERP model is divided into five main parts:

Picture 1: ERP model

SCM – Supply chain manager: SCM is the oversight of materials, information,
and finances as they move in a process from supplier to manufacturer to wholesaler to
retailer to consumer. SCM involves coordinating and integrating these flows both
within and between companies. The goal of any SCM system is to reduce inventory.
SCM of all the processes in order to cash, inventory, order entry, procurement, product
configuration, supply chain planning, supplier scheduling, inspection of goods, love
claim processing, commission included in the ERP system.
HRM- Human Resource Management: HRM is the organizational function that
deals with issues related to people such as compensation, hiring, performance
management, organization development, safety, wellness, benefits, employee
motivation, communication, administration, and training. In context of ERP system,
HRM include Human resources, payroll, training, time and attendance, roistering,
benefits sides.

18


CRM- Customer relationship management – CRM is the common terminology
used to describe the managing of prospects all the way through the entire sales
process. CRM is often an entire data system that can either be manipulated manually,
such as an index card system or a computer automated system. CRM systems are
useful in that they enable the management of the entire prospect/customer details such
as the names, addresses, phone numbers, call records and purchase history and more.
Other uses include planning of appointments, schedule of call back times and other

sales related activities. Automated CRM, depending on the system, can be for only one
user, or for several users to have access to customer accounts.

MRP-Manufacturing resource planning
a/ Computerized ordering and scheduling system for manufacturing and
fabrication industries, it uses bill of materials data, inventory data, and master
production schedule to project what material is required, when, and in what
quantity. MRP phases orders for dependent-demand items (such as raw
materials, components, parts) over a period to synchronize flow of materials and
in in-process inventories with production schedules. It also computes and tracks
effect of hundreds of variables such as new orders, changes in various capacities,
overloaded production centers, shortages, and delays by suppliers, and feeds
financial data into the accounting system. In contrast to just in time inventory (a
demand-pull production system), MRP is a plan-push system, and in contrast to
advanced planning system (a forward scheduling system) it is a backward-scheduling
system.
b/ Successor to the material requirements planning (MRP), it integrates
planning of all aspects (not just production) of a manufacturing firm. MRP-II
includes functions such as business planning, production planning and scheduling,
capacity requirement planning, job costing, financial management and
forecasting, order processing, shop floor control, time and attendance,
performance measurement, and sales and operations planning. See also
optimized production technology.
I.3. EBS-Overview
eBS is an EPR application software which be made by Oracle Co-operation. EBS
includes all components and functions of ERP software. It was built on a relational
database management powerful Oracle Database.

19

I.3.1. Technical architecture

The main value of this architecture is that accomplishes all of its tasks without
desktop software. Because it uses a browser as its client, it greatly reduces its
complexity and associated cost. The forms-based architecture delivers its functionality
across internal networks or the external web. Users get a full-featured user interface
common to installed software. But with EBS, the user interface is delivered via Java.
The self-service architecture is delivered through standard HTML and Javascript
using the Servlet Engine and Java Server Pages (JSPs) for business logic. The interface
may be less full-featured, but the functionality is equally represented. This is a
brilliance of the EBS architecture, in any mode. The business logic (or processing) is
done on the Applications-tier. As such, the client tier is only responsible for user
interface elements all the logic resides and is executed on the Applications-tier, or in
some cases for performance reasons resides and is executed on the Database-tier. The
business intelligence architecture uses an interface familiar to self-service users,
HTML and Javascript. It delivers its business logic through the use of the Discoverer
and Reports Servers. We have products that use PDAs and other wireless devices.
Using mobile and wireless standards, it can deliver both offline and online processing.
These processes use architecture identical to the self-service architecture differing only
in the end content shipped to/from the display device (i.e., PDA or wireless device).
Examples include cell phone or PDA access to calendars for sales people, and
inventory control and management through wireless bar code scanners. This is the
basic architectural diagram for eBS. You will see it in numerous documents.
The desktop tier is only responsible for displaying the form. The form can be
displayed using Java (forms-based access) or HTML/Javascript (self-service, business
intelligence or mobile access). There are two pieces of software that are needed for the
desktop tier in forms-based mode to operate. One, the browser needs a Java Virtual
Machine (JVM). This JVM is installed as either a plug-in (in Netscape) or an ActiveX
control (in IE). The JVM we provide is called jInitiator. JInitiator can be downloaded

20


and installed on demand, and is a one-time process. Since this is a simple add-on to
your browser and is only done one time, we do not consider it to be a software
installation. Two, the web listener will download numerous Java archive files (.jar
files) to your computer. These JARs are cached on your computer. The first time
these files are needed, it will take longer to start your session because these files need
to be downloaded. After that, the cache will greatly speed the start-up. JARs will only
need to be re-downloaded when they have been updated, and the copy in cache is no
longer valid. For any of the additional modes, the browser is inherently capable of
handling HTML and Javascript. No additional downloads are needed. The applications
tier is responsible for storing and executing most of the business logic associated with
EBS. It also provides all the non-database services required in an EBS instance (e.g.,
web listeners, forms servers, reports servers, concurrent processing, etc.).
The applications tier is responsible for storing and executing most of the business
logic associated with eBS. It also provides all the non-database services required in an
eBS instance (e.g., web listeners, forms servers, reports servers, concurrent processing,
etc.). The applications tier is the biggest catch-all of services within the EBS
architecture. It is easier to state that anything that isn't the desktop tier (i.e., forms
display) and isn't the database, belongs to the applications tier. The applications tier is
a elegant solution. In our discussion of the architecture, we've carefully avoided the
discussion of servers. Why? Because, the eBS system can run on a single server or
spread across multiple servers. The architectural diagram simply shows the roles that
must be played, not the server(s) who will play those roles. The architecture allows
multiple machines to be clustered together to cover any role.
The database tier is responsible for the storage, retrieval and management of all of
the data associated with your eBS instance. This means that any SQL or PL/SQL will
ultimately be executed on this machine. Regardless of the mode, all data queried,
inserted, updated or deleted is done on the database tier. It therefore means that the

database tier is involved in almost everything, because almost everything involves the
data. The database tier can now significantly benefit from Oracle's clustering
technology, by spreading the database chores across a cluster of machines.

21