Code Number for Project* (To be filled in by Planning Commission)

PART 'A'PROJECT DIGEST

1. Name of Project: Project for Improvement of Financial Reportingand Auditing.

2. Authorities responsible for:

(i) Sponsoring World Bank, CIDA and GOP.(ii) Execution Pakistan Audit Department Ministry of Finance/

Ministry of Planning.

(iii)Operation and maintenance. Pakistan Audit Department Ministry of FinanceMinistry of Planning.

3. Time required for completion of project. 60 Months---(Sixty months).4. (a) Plan Provision:

(i) if the Project is included in die current Five-Year Plan, specify actualallocation.

Not Applicable

(ii) if not included in die current Plan, how is it now proposed to be accommodated (Inter/Intra-Sectroral adjustments in allocation or other resources may be indicated).

IDA and CIDA Loan is 77.5% of the cost of Project(iii) If the project is proposed to be financed out of block provision for aprogramme indicate:

Total Block Provision Amount already Amount proposed Balance availablecommitted for this project

Not Applicable

(1)) if project is not in the Plan, what warrants its inclusion in die Plan.2

Kindly' refer to our response to item No.115. Relationship of the project with the objectives of file sector.--1ndicate tile Contribution

of tile project, quantified if possible, to tile targets in tile Five-Year Plan and tile names of other projects (whether sanctioned or under preparation) which would form pail of an

integrated programme within the sector.

Given in Para 8

6. Capital Cost of Project:

Local costs: US $ 19.274M Rs. 721.690M

Foreign Exchange costs: US$ 17.238M Rs. 641.719M

Total. US $ 36.512M Rs. 1363.409 M

7. Annual recurring expenditure after completion: (in thousand rupees)

Local US$ 1.268M Rs.SO.147 M

F.E. US$ O.385M Rs.1i215 M

Total US$1.652M Rs.65.362 M

8. Objectives of the ProjectThe Project for Improvement in Financial Reporting and Auditing (PIFRA) described in this document basically addresses the vision Statement of the Government of Pakistan and Pakistan Audit Department as approved in P. CII and refined as at Annex-II It will help produce accurate, timely and meaningful accounts which cater to the needs of the users. The project will also help produce analysis of budgeted data reported in monthly accounts producing significant deviation between actual budgeted account and total actual expenditures and receipts. This would help budget formulation in a more constructive manner and promote the idea of good governance. The improvements envisaged in the Audit component would help in enhancing accountability on the part of the Government of Pakistan and, consequently, more effective and efficient government. More specific benefits to be expected of this project can be summarized as follows:

1. Modernized government audit procedures and adoption of internationally accepted auditing standards will eradicate program oversights and improve evaluation capabilities.

2. Effective accounting and reporting systems will enable the government to better formulate, control, and monitor its budget.

3. Strengthened financial management practices will increase the impact of development programs and related external assistance.

4. Financial information generated by the improved accounting and information systems will be more useful, complete, reliable and timely. Improved data will facilitate program management by government decision-makers.

5. Tighter internal controls will lessen the occurrence of errors and irregularities in the processing of payments and receipts.

6. Related training programs will build staff capabilities and enhance utilization of human resources.

Prepared by: Muhammad Junaid, Director (PIFRA) Tanweer Ahmed, Director (PIFRA)

Checked t)y Muhammad Mohsin Khan, Project Coordinator, Syed Mujahid Hussain, Project Director.

Approved by: Muhammad Naseer Ahsan, Auditor-General

Dale:- December 7, 1995PART 'B

PROJECT DESCRIPTION AND FINANCING

9. Location of Project; (Attach map):

(a) Give name of place and administrative districts in which the service centre will be located.

The computerized system would be tested and implemented during the current project at the following pilot sites:-Federal 1. AGPR - Islamabad

2. AGPR - Peshawar3. AGPR-Quetta4. AGPR-Lahore5. AGPR-Karachi

NWFP 6. AGO-Peshawar7. DAO -Abottabad& DAO-Mardan

Punjab 9. AGO -Lahore10. DAO -Faisalabad11. DAO -Multan12. DAO -Sahiwal13. DAO -Bahawalpur14. DAO -Jhelumii DAO -Sialkot

Balochistan 16. AGO-QuettaSindh 17. AGO -Karachi

18. DAO -Hyderabad

19. DAO -Thatta20. DAO -Sukkur21. To -Badin22. To -Nawabshah23. To - Nosheroferoz24. To -Mirpurkhas

(*) Would use the Computer Centre of the AG. offices, there would be no independent computer installation for these sub-offices of AGPR. Total number of computer sites would thus be 20 only.(b) Indicate total area will be served

In the beginning the province of Sindh will be the beneficiary, some other major cities of Pakistan would also benefit. Sindh province has been selected with the sole purpose of covering maximum federal and provincial transactions with the aim of demonstrating the benefits accrued from the project with certainty.

10. Give information about Public and private sector institutions in the area, their staff and equipment, actual enrollment in various classes and capacity enrolment of the institution. The information about Public and private sectors institutions should be given both for the level of tile educational programme proposed by the Project as well as for the lower level institutions which will serve a feeder institutions for the Project. Existing facilities and the weaknesses of the system

The financial reporting system of the Government of Pakistan (GOP) and the Provinces, being operated by the Pakistan Audit Department (PAD) constitutes an important sub-set of the Government’s financial management cycle. This cycle begins with the planning phase vis. the budget formulation and runs through budget execution, accounting and finally the audit phases. All these information inflows constitute an integrated information network the main objective of which is to help the policy makers and its implementors in decision making. The system, in order to function effectively, has to deliver timely, accurate and relevant data to satisfy the objectives of financial management in areas of financial planning, utilization of resources and aggregate control, more specifically in financial analysis, cash and debt management, appropriation and performance audit The present financial system suffers from defects pointed out in each segment of the system explained below:

A. GOPs Existing Financial Management Information

The Government of Pakistan’s financial cycle begins with the planning and programming phase and peaks at the budget formulation stage, budget execution and accounting, and auditing phases follow. Generally planning, programming, and budgeting decisions are based on reliable financial information in a process that is integrate with the budget execution and accounting phase and the subsequent audit phases.Without reliable financial data and an integrated process, the gaps and weaknesses of the overall cycle become apparent The existing system is riddled with weaknesses which

renders the whole system feeble and ends in wasteful efforts. The weaknesses of this system are as follows:

• The Accountant General Pakistan Revenues (AGPR) does not include important financial data in the monthly civil accounts produced by it, i.e., tax revenues foreign aid and loan receipts, and transfers to provinces. The Ministry of Finance has to collect the missing data from various various sources

to construct a complete set of accounts appropriate for fiscal management.• PAD does not incorporate budgetary data in its monthly civil accounts leading to

lack of integration between budgetary and accounting data• Financial data is not considered reliable by the users, notably die finance and

planning departments, because certain crucial reconciliations such as cash balance with the State Bank of Pakistan (SBP), are not performed effectively

• Financial information is not meaningful to the users due to the lack financial analysis in die reports produced by PAD. Required financial information has to be extracted from the reports by the users.

• Required information is not available in a timely manner to the users. Except for certain automated DA Os, the financial information is produced manually. Data submission is often delayed and, as a result, the information is considered by the user as being too late to have any effect on the decision making.

B. PADs Existing Accounting Practices

The current system of financial administration in government as a whole, and in PAD in its capacity as the principal accounting body, does not meet the objective of producing the reliable and timely accounting information. At present, die focus of PAD's procedures is primarily on the generation of periodic accounting reports; the implementation and review of procedures necessary to ensure die accuracy and timeliness of such reports has not been given sufficient importance. Following are sonic of the weak areas that require strengthening to streamline PAD's existing system of financial reports:

• PAD does not have a standard set of international accepted accounting principles, to ensure the consistency and reliability of the accounting practices followed in government.

• A major chunk of accounting operations in PAD are handled manually, as such the organization can not adequately cope with the size and complexity of the government’s operations.

• PAD'S role as reporting body vis-a-vis the executive as the principal accounting body in the financial systems needs to be defined clearly, under the current system of PAD is not required to produce a comprehensive financial picture. The

executive agencies and State Bank of Pakistan maintain parallel reporting lines to Finance. Internal controls of the accounting system are not functioning effectively due to a lack of clear understanding of the control objectives of the tasks performed, the focus of functional staff is on the maintenance of records and over control in

minor transactions. Revenue receipts are not properly accounted for in the current system. PAD records receipts based on information received from the bank rather than from tile collecting agencies. In the absence of a comprehensive internal management reporting system, the problems, discrepancies and bottlenecks in PAD'S accounting system are not brought to the attention of management on a timely basis.

C. PADs Existing Audit Function

The Auditor General carries out this mandate under the Audit and Accounts Order, 1973,a Presidential Order. Legislation providing the office with complete financial and administrative independence from the executive has yet to be enacted. In addition, PAD has the dual responsibility of maintaining the accounts for a minority of federal and provincial governments as well as auditing the accounts where expenditures are incurred out of revenues of the Consolidated Fund. A summary of analysis of PAD'S audit function are presented in the paragraphs below:

Organizational independence is not assured as at present the office is dependent on the Ministry of Finance (MOF) for sanctioning of its annual budget before approval by the legislature. It has also the dual responsibility of maintaining the accounts of the federal and provincial governments as well as auditing those accounts.

• Auditors' independence is not ensured as the accounting officer involved in preparation of the accounts may also be responsible for their subsequent audit due to possibility of transfer of officers between the audit and accounts departments and also to the executive departments.

• Current audit approach is narrowly focused since audit scope is on transaction verification of selected months to ensure compliance with government regulations rather than on forming an opinion on the annual government accounts using modern auditing techniques.

• Certification audit has made little progress due to the volume of transactions in the selected department and the lack of expertise and experience in certification audit within PAD.

• There is insufficient audit of revenues due to resource constraints and lack of expertise in the revenues audit areas.

• Local funds audit is conducted by the Director Local Funds Audit, who reports to the Finance Department, not the legislature. The local funds include grants from the consolidated fund are not being audited by PAD.

• Audit programs specifying tests and procedures to be performed by the audit teams are not consistently prepare. Consequently, the quality of the audit is largely dependent on the competence and judgment of the audit team.

• Experience and educational background of existing staff are not adequate to meet the expanded audit approach, i.e. moving towards certification audit, performance audit and EDP audit

• Benefits received from formal staff training are limited since audit techniques learned in the classroom are not always applied in the field The trained personnel are not always assigned to the jobs related to the training.

• The absence of a set of internationally accepted auditing standards and procedures for audit execution and quality assurance leads to non-standardized audit execution and consequently excessive reliance on the field auditor's approach and competence.~

• The budget for audit is allocated to individual organization units and controlled centrally, this inflexibility makes it difficult for the head of functional Organization to reallocate the resources between units of his organization

D. PADs Existing Supporting Functions

The growing volume of transactions which outpaced the ability of the manual systems combined with pressure from the Federal Ministry of Finance to speed up the process of producing monthly accounts, PAD initiated a pilot project to computerize its accounting functions in I 988. Initially, one AG Office and four DAOs were selected as pilot sites. Since then, two additional AG offices and three AGPR sub offices have been computerized to varying degrees. Weaknesses related to this area are presented below:

• The pilot project to automate the accounting functions was implemented as a prototype without a long-term strategic plan. Consideration was not given to how and to what extent automation could support PAD's information needs. Moreover, the type of technical environment and MIS organization and management would be needed to support the system were not addressed at the time of project planning.

• There is a lack of standardization. The technical platform consists of a variety of configurations, presenting unnecessary difficulty in data interface and requiring additional effort for maintenance

• There is a lack of system integration among the current applications resulting in fragmentation of PAD’s financial management function and increasing the need for data reconciliation.

• Weaknesses in the pilot system include the difficulties in adhoc reporting and insufficient audit trail.

• Support for software, maintenance within PAD is insufficient. The lack

of self-reliance is further compounded by the lack of system maintainability. The system's design is outmoded and inflexible and documentation is inadequate.

• Required experience and expertise system administration is lacking.

E. PAD's Existing Human Resource Management Function and Training.

Currently there is no comprehensive Human Resource Management function PAD function in PAD would indicate a task-oriented performance evaluation system, a comprehensive career development program, and a resource planning policy. The current personnel policy is not conductive to promoting competent personnel effectiveness of existing training is undermined by the lack of application of training. Trained personnel cannot be retained in the unit where training can be utilized effectively.

• The project is a result of the recommendations of two International consultancies by M/s Price Waterhouse (who carried out a Diagnostic Evaluation) and M/s CIPFA International (who were consultants for training). Both the studies identified and recommended a number of areas requiring intervention through further consultancies and technical assistance with a view to adopt a long term strategy for improving the existing system of Government accounting and auditing in Pakistan.

Recommendations of the consultants were accepted by the Auditor-General of Pakistan as well as the Ministries concerned iii the Federal Government. The Provincial Governments were also involved in the consultancies and follow-up decisions. Presentations were given to the Finance Minister of the Caretaker Government and the Advisor to the Prime Minister on Finance & Economic Affairs of the present Government for seeking high level clearance for the project Go ahead signal has been given by Ministry of Finance, Planning and EAD.

11. Description of the Project:

Brief History of the Project:The PIFRA project aims at improving and integrating government financial management at Federal & Provincial levels. The project consists of the following components

A. Government Accounting and Financial ReportingB. Government AuditingC Human Resource ManagementD. TrainingE. AdministrationF. Other Policy Support.

The details of the above mentioned components are given below:

A. Government Accounting and Financial Reporting

Keeping the above role in view an assessment of PAD's reporting system was made by independent experts during 1989 and 1992. The weaknesses identified in the system will be strengthened by improvement in the following areas.

A. 1. Strengthening the government financial management practice bi' updating government-wide financial rules and regulations and adopting a set of accounting principles and standards for the Government of Pakistan. This is intended to be done as under:

• PAD intends to adopt a set of accounting principles and standards suitable for the Government of Pakistan and of the provinces, which will be observed by all accounting units under the system.

Project envisages automation of 30 sites all over Pakistan with almost complete computerization in one single Province to effectively assess the impact of the new system.

• Existing Government rules and regulations would berequired to be revised in accordance with the requirements of the new system.

• AG would be established as the primary reporting entity in government.• Executive agencies would be made fully responsible for budget control but

the A G.s would ensure that budgets are not exceeded by having proper controls in operation.

The system would record receipts on the basis of information received from the collecting agencies instead of the bank.

A.2. Improvement in government financial information through revision of reports and account code structure.

• PAD will review and revise the structure of all the interim reports as well as the final reports generated by the system. According to the users of the Monthly Civil Accounts, certain critical data is not presented in the reports due to the limitation of current account code structure PAD intends to review the account code and chart of classification vis-a-vis the report format and revise the chart of classification to more closely reflect users financial information needs.

• The format of the Monthly Civil Accounts will also be reviewed and revised according to users' needs. The Monthly Civil Accounts will also present the aggregate cash position. One of the major deficiencies of the Monthly Accounts, is that critical data (e.g. non-cash receipts, project-related foreign aid, inter-government transfers) are not received ill a timely manner in the monthly accounts. This issue will be addressed.

A.3. Improvement of Government accounting operations by streamlining procedures and enhancing internal controls.

• PAD is still implement a two-stage bank reconciliation and to enhance the internal control structure, it will also institute a management reporting system which produces regular monitoring reports to executive agencies and to various levels of AG offices to bring the problems and exceptions to the attention of management.

A. 4. Provide facility for cash forecasting and financial analysis.

• PAD will implement a facility for retrieving current andhistorical financial data from its financial database, allowing the end-user to perform cash forecasting and financial analysis.

A. 5. Introduction of Target Applications

PAD plans to introduce the following target application in its accounting system. All the applications will be customized and developed by foreign consultants but PAD's personnel will be involved in development. The target applications are:

i) Core Accounting and Reporting Systemii) Payroll and Pension Systemiii) Cash Forecasting and Financial Analysis

This task would be carried out by consultants who would develop system consultancy, TORs attached with the document as annexure

A6. System Automation

Computerization in PAD is directed at achieving the goals of PIFRA and to assist the department in accomplishment of its long term objectives. Following key application have been selected for development and implementation during this project.

(i) Payments and Accounts System:- Core Accounting and Reporting System- Cash Forecasting and Financial Analysis System- Payroll System- Pension System

(ii) Audit Management System(iii) Human Resource Management System(ii) Qffice Automation

Detailed strategy to automate the systems is given in the following paragraphs.

A6.1. Pilot Sites

The Payment and Accounts System, which forms the largest part of the Computer component wou1d be implemented at all the Federal, Provincial, District Accounts Offices and treasuries (108 sites at present) but the current project would cover only 24 of these sites. This restriction would allow the Department to test the system exhaustively and implement it in a systematic manner. The time frame of the project does not permit implementation of the system at a larger number of sites. The site distribution has been planned been planned with the following objectives: there should be maximum coverage of all federal and provincial transaction in one province, which should entail implementation of the new computer systems at the Accountant General's Qffice in the province as well as the majority of District Accounts Qffices (DAOs) and Treasuries in the province. The Province of Sindh has been identified for this purpose. The remaining sites would be selected with a view to maximizing the coverage of remaining federal transactions, while minimizing implementation risk. Hardware and systems software has already been acquired for 10 sites under the Third Technical Assistance Project The present project will finance the hardware and software for the remaining 10 sites. Once the new set of application systems are ready they will be implemented at all the sites and the applications currently running at the old sites would be converted to the new system.

The core information systems will be implemented in a phased manner. In the first phase the Systems will be designed, specifications developed for the required hardware and software and procurement arrangements completed in the second phase, the Systems will be implemented at the Accountant General Pakistan Revenues Office (AGPR) at Islamabad, at an Accountant General's Office (AG) at a Provincial Headquarters and at four District Account Qffices (DAO) reporting to this A. G. This is referred to as the Pilot implementation of the System. In phase three the Systems will be replicated over the course of this project to a total of 20 sites including all Provincial AG offices in Sindli, Punjab , NWFP, Baluchistan and selected DAOs within each Province.

Each phase will normally start upon substantial completion of the preceding phase; and will be contingent upon the satisfactory completion and acceptance by PAD of the deliverables listed for that phase. The aim of the pilot implementation is to ensure that the contractor executes the contract in accordance with the TORs and at the same time to enable a phased handing

over of the products to the government and for implementation 0f the Systenis in Pakistan.

Audit Management System would be implemented at Federal and Provincial Audit Offices (5) during the project and HRM system would be implemented centrally at PAD Head Office at Islamabad with parts of this application being implemented at the AG Office. Office Automation would cover 120 offices during the project.

A6.2 Standardization

As large number of sites are to be computerized with a number 0f applications it is necessary that steps are taken to maintain a hardware and software compatibility and uniformity across the sites and to ensure portability and movement of applications, software and data files between the offices, without any problem and without extensive effort for conversion. Standardization of hardware, software and the data processing techniques is therefore essential.

PAD will always select and use the latest technological products and DP techniques which should help to avoid outdating and obsolescence and allow PAD to move progressively to more advanced technologies that become available from time to time.

A6.3 Technology Platform and Operating System

Open Systems would be standard for PAD and the hardware and software products used by the department would conform to the open system specifications. UNIX which complies with the Open System specifications would be the standard operating system for multi-user systems used for the P&A System and HRM System. For OA Application, the industry standards DOS and windows would be used. Since Audit Management System involved use many of the OA products and other software package in a LAN environment the industry standard products used for OA application should also be used in this application.

Informix would be the standard Relational Data Base Management System for PAD. Informix has been selected because it conforms to Open Systems specifications, it is well supported in Pakistan and is available at a comparatively lesser cost.

A6.4 Systems Design and Application Software

Presently PAD does not have the necessary expertise for application development, therefore the department will avail the services of foreign consultants to design the systems and to supervise the development, testing and implementation of the software and to provide quality assurance System Development Consultants would be engaged for development of P&A applications, while in case of Audit Management and HRM, the system design and software will be provided by the respective consultants.

Software requirements can be met by using pre-developed or off-the-shelf software packages but in most cases the software would be custom developed for the application. The consultants who design the systems for various applications would help PAD in making the decision for each application.

Local software houses would be contracted for development of the software for the P&A Applications. The work of the software house would be supervised by the Systems Development Consultant. 4 GL tools and Informix would be used for development of the software.

A6.5 Software Development and Maintenance Centre

A software Development Centre would be established for the purpose of software development, Systems analysts and programmers employed for this centre would be attached with the Systems Development consultant for training and gaining experience from this exercise.

A6.6 Computer Configuration

Multi-user mini-computers would be used for P&A System, HRM System and the Software Development Centre. The Audit Management System would use PC's in a Local Area Network (LAN) environment.Stand alone PCs would be used at most of the OA sites but in case oflarge offices (up to 4) the PCs would be networked (LAN).

B. Government Auditing

The Auditor General of Pakistan carries out his mandate of Audit in the light of the Audit and Accounts Order 1973, a Presidential Order. Currently PAD has the dual responsibility of maintaining the accounts of the federal and the provincial governments as well as auditing the accounts where the expenditures are incurred out of the Consolidated Fund The endeavor of PAD would be to improve audit approach, methodologies and techniques, with an aim to achieve the following by adopting:• A comprehensive and professional approach culminating in an opinion

based on adequate, competent and relevant evidence;• performance audit of entities, their functions, activities and programs,• quality assurance program; and

• a frequent open and meaningful dialogue with the auditee management.

For achievement of these objectives PAD has planned to focus on the areas detailed below:

BI. Establishing Auditing Standards

• PAD has plans to enforce a set off auditing standards based on INTOSAI auditing standard for providing guidelines on all aspects of government audit function . For the sake of audit independence it is intended to ensure that auditors are professionally competent to conduct financial and audit of the accounts, functions and activities of the government and its entities, and are able to report the results to the management and the legislature with due care and objectively.

B.2.lntroducting Modern Audit Approach, Methodologies and Techniques

• PAD has planned to introduce detailed operating procedures and techniques for audit in the field accounts offices (AGs & DAOs), which would require verification of compliance to regulatory framework by the accounts offices, attestation of financial statements (appropriation accounts, finance accounts and combined finance and revenue accounts), verification of the adequacy and effectiveness of internal controls.

• Similar procedures will also be prepared for the already departmentalized accounts offices, e.g, Defence Services, Pakistan Railways, Ministry of Food and Agriculture, Ministry of Foreign Affairs, Pak PWD, Pakistan Mint, Geological Survey of Pakistan etc.

• PAD has also planned to develop an EDP auditing procedure for civil accounts offices (AGs and DAOs), as well as departmentalized accounts offices, based on the existing information technology.

• PAD has plans to develop an operating procedure for review of internal controls iii departments which are maintaining their own accounts to ensure that these controls are in place and that the prescribed accounting principles and policies are observed.

B3. Improving Audit Efficiency

Current structure of reporting audit results to improve the overall audit efficiency, following actions are planned:

• To develop a three years roll-over plan of audit assignments and an MlS to monitor implementation of the audit plan

• To review existing procedures to ensure that the reports are issued timely, discussed at all tile levels of management and submitted within six

months of the closing of the annual accounts.• To review the format and contents of existing audit reports to make them

more meaningful and directional.• To develop methodology for finalisation and settlement of audit

observations.• To provide automatic office equipment and tools to auditors to improve

their efficiency.

B. 4. Quality Assurance Program

PAD has planned to develop a quality assurance program by adopting following steps:

• prescribing and reviewing the working papers for all audit work• providing periodical review of the major areas of audit, and,• developing an MIS

B. 5. Strengthening The Accountability Process

• The process of the accountability would be achieved by arranging regional, national and international seminars/conferences on various aspects of legislative accountability and government audit and financial management, and establish a Research and Developmetn Cell in the audit wing to under take research in co-relating the results of audit with the needs of accountability process.

B. 6. Cooperative arrangement with another SAI

• The successful implementation of initiatives planned by PAD for improving the audit practices in public sector in Pakistan, which have been listed, depend to a substantial degree on the external help and assistance available during the project period. To get the requisite professional and technical support in our efforts for improving public sector audit, it is planned to enter into a cooperation agreement with the supreme audit institution (SAl) of Canada, for providing us technical support in this difficult task of institution building.

C. HUMAN RESOURCE MANAGEMENT

Following actions arc planned for improvement in HRM policy

C.1. Bifurcation of Auditing and Accounting Functions

Auditor-General has in principle agreed to the functional bifurcation, in accordance with the consultants recommendation this would lead to the formation of two quasi independent entities; one dealing with accounts and the other with audit, with minimum possible traffic in between the two. The task force formed for the study of separation aspect comes up with its report and decision for separation of the accounting and auditing functions takes place, accounting function and its organization would be handed over to the Federal Government as an on going organization.

The handing over of Accounting Function to the Executive (Federal Government) is conditional on the following grounds:

a) There would be a Comptroller General of Accounts who would prepare the annual financial Statements of the Government and any other reports required by the legal users

b) The Comptroller General should also prepare with the assistance of Provincial Comptroller General the accounts of the Provinces in a format and manner prescribed by the Auditor General.

c) Ultimately each Government Ministry at the Federal level would prepare its own accounts in the format prescribed by the Auditor-General.

d) There would be a Controller of Accounts/Comptroller in each Ministry who would be responsible for preparing the Accounts of the Ministry/Division/Departments under the Ministry and their submission to Comptroller General for consolidation.

e) Each Ministry would have its internal audit function under a Chief Internal Auditor.

f) The Departmentalization that is already on going would be speeded up and a time frame developed for total Departmentalization within five years from start

g) In order to avoid unemployment and unnecessary employment surplus staff of existing Accounting Offices under Auditor-General would be transferred to Ministries/Departments to also avoid massive training costs of fresh employment

h) As a control measure and also prescribed by law, all accounting and auditing positions in the departmentalized structure and bifurcated structure would be manned by officers of Accounts Group. The Accounts Group will continued to be administered by the Auditor-General as per existing law/rules/Orders.

The handing over of the Accounting Function to the Federal Government would be subject to satisfactory maintenance of the accounts with internal controls in place, working the Auditor General of Pakistan. Following measures have been planned for the bifurcation of the auditing and accounting functions:

• Establishment of a Task Force in addition to the Working Group already created by the Ministry of Finance on Bifurcation.

• Preparation of career plans for the IDC Officers including a rotation policy.• Providing regulatoy framework in field audit and account offices for the personnel of

already separated Departmental Cadres.• Reviewing the existing personnel strength of all field audit and accounts offices and shift

surplus staff to field audit offices, which are presently short of human resources.• Providing separate budget allocations for "accounting" and "auditing" functions.• Bifurcating staff in the AGP's office for dealing with human resource management of

accounting and auditing functions.• Formalizing the division of assets between accounts and audit offices.• Developing separate MIS for direction, control and quality assurance of HRM function

and audit offices.• Preparation of a Time Table for Departmentalization.

C2. Professionalism

Quality of government accounting and audit can only be improved if the accountants and auditors are professionally competent and have necessary expertise to undertake the work To promote professionalismV in the organization, it has been decided to take a number of initiatives which

include:

• substituting SAS exanimation by that of Association of Accounting Technicians (AAI);

• extending the period of specialized in-service training of accounts group probationers to a period of two years;

• developing a structured career path for all professional staff and provide salary supplement to specialists to retain them in their areas of specialization;

• developing quantitative performance standards and enforcing a system of transparent evaluation of the individual performance against the given job description and prescribed standards; and

• Implementing a program of continuing professional education

The project envisages increased use of information technology and improved working methods. A precondition of achieving these objectives is that the employees (both of IDC and DC) acquire professional competence in their work by acquiring new skills and improving the existing skills to work efficiently. Actual implementation of the training schedule and program of all employees will be monitored and linked to individual’s

performance evaluation record.

C.3. Motivation and Career Development

For efficient utilization and motivation of PAD man power review of organizational structure has been planned with reference to the available human resource to formulate an appropriate organization configuration in the light of a long term manpower plan. It has also been decided to develop a structured career path for all specialist staff including auditors, accountants, and other specialized sub-groups(such as system analysts and programmers) and assign then: to jobs for a normal period of 3 years.

Plans are also underway to frame rotation policy on assignments of officers in accordance with their structured career path and in a manner that helps them to contribute better to the organization. Provision of salary supplements to specialists/professionals to retain them in their areas of specialization have been catered for along with a scheme of providing incentives to employees for acquiring licentiate and/or professional qualifications.The manpower plan would be based on existing staff requirements and would be thoroughly reviewed to cater for changes in staff requirements due to introduction of new information technology.

C.4. Managing “Change Process”.

It is essential in the project to have the employees of the PAD supportive to the change, therefore it is intended to employ external support of behavioral scientists in this area to improve our communication with the staff, to understand their fears and their expectation in an objective manner so that the A GP and his staff make a well knit team. Consultancies would be needed in this regard for achieving the following:

• preparing a detailed manpower plan, and then reviewing it,• preparing job description/specifications,• developing quantitative performance standards,• developing a quantifiable transparent, output oriented performance

evaluation system, and,• developing an MIS for HRM function.• preparing a statistical data base model for manpower planning to

enable the A GP and the field offices to recruit, train, place and promote employees in a proper manner.

• prepare a "change model" for the organization, keeping in view the totality of the project, the changes contemplated and the utilization of available resources.

• The TORs are annexed.

D. Training

Revised Procedures under PIFRA will require training of the entire staff of the Auditor-General's Department, the management staff of the provincial government based in the Secretariats, staff of the Treasuries and the District Accounts Offices (DAOs). The training arrangements will be organized at two levels:

a) The Audit and Accounts Training Institutes (AA TI).b) Field Offices Training Centers (FOTCs).

The revised procedures will require necessary training of PAD staff who continue to work in their existing jobs. The retraining of redundant staff in new skills would also be required.

D.1. TRAINING QUALITY

PAD is placing a great emphasis on the quality of training, it will require creating Training Packages of high quality in new areas of training, revision and updating of existing Course Packages, standarization of Training Packages to the FOTCs and regional AATIs, relating course contents with TNA, monitoring of the training at FOTCs, evaluating the impact of training periodically, and organizing a programme of continuous Professional Development of trainers through training abroad and locally.

D.2. COOPERATION ARRANGEMENTS WITH TRAINING WINGS OF OTHER SUPREME AUDIT INSTITUTION(S)

PAD has catered for upgrading its proficiency in the training function. It will require twining arrangements with the training wings of sonic other Supreme Audit Institutions. [These arrangements will provide an opportunity to the Department to keep itself up-to-date with latest developments in public sector accounting and auditing and appropriate training methodologies].

Physical facilities at the existing AATIs will be upgraded by providing for additional computer labs, additional teaching aids and equipment, expansion of the library by new acquisitions, subscription to professional journals, obtaining computer equipment and software for indexing, maintenance and loan tracking, induction of additional staff through internal re-arrangements.

E. ADMINISTRATIONE1. Management Information System

Measures have been planned iii the project for establishing a management

information system relating to human resource and ensuring that this resource is supportive of the change process. This would entail integrating the existing HRM and Administration wings of the A GP's organization with a view to developing and establishing an MIS both in AGP's office and field offices for HRM function. Further more the project will establish a concurrent review and evaluation mechanism to ensure that the employees of file organization support the change process.

A2. Management Information System Wing.

MIS Wing would be established under GM (MIS) to manage the development, implementation and maintenance of the systems and other related functions. This Wing will have three branches - Standards and Policies Branch, Software Development and Maintenance Centre and Implementation Branch.

Software Development and Maintenance Centre will have three teanis various Systems Teams will be responsible for development, testing, installation and maintenance of the applications. During the current project the two teams will work with the consultants for their training and to gain experience that is necessary for this work.

The OA Team will plan and implement OA ill all offices of PAD support OA and other PC applications in these offices and provide on-sites training to the PC users.

The Implementation Branch would be responsible for implementation of tile applications at various sites, and provide functional supervision and technical guidance for data processing operations and for management of the sites.

The Director and Deputy Director (Operations) will supervise the sites in their region and control their operations. They would be trained during this project in installation and implementation of applications so that they can under take this work independently in future.

As the number of the audit and accounts offices is large, it would not be practicable to implement the P&A applications at all sites at the same time. Also considering that much of the time would be spent during this project on development of the applications, and taking various other constraints into account, it was found that it would not be possible to implement the Payments and Accounts System at more than 20 sites during this project, so the remaining sites would have to be covered after the project. Since the AGPR sub-Offices located in the 4 provincial capitals can be easily covered be the A G Office of the province, these four have also been added to the fist of the pilot sites, thus a total of 24 sites would actually be covered in this period, While selecting the pilot sites, an important consideration has been

that at least ill one province the pilot sites should cover all the federal as well as provincial transactions so that the impact of the computerized systems could be evaluated: the province of Sindh was chosen for this purpose. However it was not found possible to include all sites of Sindh or any other province in the list of pilot sites, therefore some of the minor sites in Sindh having very small volume of transactions, were left out. Manually compiled accounts of these sites can be posted in the computerized system at the AG Office which would allow the objective to be met, to a great

E3. Project Directorate

An exclusive task force comprising experienced officers of the PAD has been created to implement the project. The task force is placed in the project Directorate located at the Audit House Islamabad.

E4. Setting up of an automated MIS

PAD will set up an automated MIS that will be responsible for planning acquiring developing and managing the implementation of the information technology according to a strategic information system plan.

F. OTHER POLICY SUPPORT

In order to strengthen the Economic Advisor’s Wing of the Ministry of Finance the project includes the following measures:

F1. Training

It is proposed that the officers of this Wing should be sent abroad for long-term as well as short term training. They should also attend refresher courses and seminars both in Pakistan and abroad. Our officers require training in quantitative methods and macro-economic analysis. A crash training programme should also be arranged at local level to sharpen their skills in modern research methods.

F2. Advisor Service

(a) Expert on Macro-economic analysis and forecasting methods. (48 man months).

(b) Expert on Fiscal, Monetary and International Trade (48 man months).

(c) Expert in computerization and data management (48 man months).

F3. Equipment

(a) To strengthen the Economic Analysis Wing in the Ministry of Finance, we need to establish data bank in the Economic Adviser's Wing so that all initial information is made available. This would help the Finance Secretary to keep a close watch over the key economic and financial indicators. For this purpose we need to add more units of hardware. The hardware and software requirements and specifications for the system would be as under:-

(i) Inter net/Electronic Mail facility will be provided by network to have access to various agencies.

(ii) Link up with main frame in Q Block for which lines have already been laid.

(iii) Server Pentium 90 MHZ, 512 kb Cache, 16 MB RAM, 1GB Hard Dist, One each 1.44 MB and 1.2 MB Floppy drivers. Quad speed CD ROM Drive.

(iv) PC's10 PC's 486 DX-66 256V, MB RAM, Network card, a20 MB hard dist, 1.44 MB floppy drivers.

(iv) Laser Printer .(v) Dot-Matrics Printers .

(b) Transport facilities

(1) Two motor vehicles transport.

12. Give date when capital expenditure were prepared ------- If prepared more than one year ago, confirm if they are still valid. Oct. December, 1995