Financial Reporting and Auditing project being implemented

The Federal Government is implementing 'Financial Reporting and Auditing Project' to improve governance and accountability, with the co-operation of International Development Association (IDA) of World Bank.
According to official sources, the project will build capacity to improve accuracy, comprehensiveness, reliability, and timeliness of intra-year and year-end government financial and fiscal reports at federal, provincial and district levels, and initiate the process at sub-district levels thereby strengthening the financial accountability cycle.
It would, therefore, directly support Pakistan Government's commitment with donor agencies to improved public financial management, accountability, and transparency, and enhance the capacity of public sector managers to use credible financial information for better and informed decision-making.
It will facilitate public oversight of the use of public monies, and increase the national and international credibility of financial statements and assurance processes of governments.
Under this project, progress towards this goal would be measured by monitoring the achievement of intermediate benchmarks such as: implementation and operation of IT-based budgeting and accounting systems, for example, the number of sites operational and establishment of an SAP competency centre; the extent of reconciliation of accounts achieved and progress towards introducing interfaces with State Bank of Pakistan (SBP)/National Bank of Pakistan (NBP)/Central Board of Revenue (CBR); the adoption of the new accounting model and reduced level of date entry errors; improvement to the scope, timeliness and quality of reporting delivered to end-users; the extent to which entity accounts are audited using modern audit practices, and savings are identified by the audit; and creation and maintenance of a pool of professionally qualified government accountants/auditors capable o f developing and sustaining further initiatives.
Official sources said that clear, transparent, timely and accurate data about the Government's plans, progress with implementation, and final achievements shall become widely available as a result of the new systems, for example by publication of financial and fiscal performance data on web-sites. The Governments' performance shall also be subject to scrutiny through respective public accounts committees (PACs), which should receive improved quality and standard of audit reports, focused upon matters of substance and have the implementation of recommendations followed up routinely by the Controller-General of Accounts (CGA) and line agencies.
THIS PROJECT HAS FOUR CORE COMPONENTS:
a) financial accounting and budgeting system (FABS);
b) capacity building and upgrading of the Office of the Auditor-General of Pakistan (OAGP);
c) capacity building and upgrading of the Office of the Controller-General of Accounts (OCGA); and
d) project management.
The Government has proposed that it would finance about 10 percent of the total cost. IDA contribution (including contingencies) would, therefore, be $84 million equivalent.
The financing plan proposed is that IDA finances all expenditure categories of the four components, except the operational and maintenance costs at a rate of 100 percent, while Government finances all operational and maintenance costs.
After donors conference, the development work of 'Capacity Building and Upgrading of the Office of the Auditor-General of Pakistan' is actively going on, which will be completed with the assistance of $l9.345 million.
The objective of this project is to adopt modernised government audit procedures and internationally accepted auditing standards that will contribute to eradicating deficiencies in program and evaluation capabilities in a timely and effective manner.
Official sources said that there is also urgent need to upgrade the organisation and administrative support to meet its extended audit mandate.
THIS IS TO BE ACHIEVED THROUGH FOUR SUB-COMPONENTS:
1. Reorganisation and support technical assistance for audit management and development activities to implement new methodologies, and significant expansions of office space and equipment to meet the needs of expanded professional audit functions directed at improving the central capacity to report publicly on the full regularity and performance audit mandate including adequate audit of revenue, and the certification of annual accounts of corporate entities and national, provincial and district levels of government.
2. Physical upgrading and IT support for field audit--poor conditions and equipment will be upgraded to enable more efficient implementation of audit methods designed during implementation of this project.
3. Implementation of an integrated audit management information system (AMIS)--to improve audit control, reporting and follow-up through better communications and planning between Islamabad and the decentralised audit directorates; and
4. Upgraded training facilities and programs to develop staff to internationally accepted professional standards; deficiencies identified by a training needs analysis conducted during first phase will be corrected through the implementation of a comprehensive training program conducted in upgraded training facilities.
Furthermore, Capacity Building and Upgrading of the Offices of the Controller General of Accounts will be completed with the assistance of IDA ($18.470 million).
The CGA Ordinance conceives a broad role for the CGA. Accountant-General (AG) offices at federal and provincial levels have been made his responsibility as well as the departmentalised accounting entities. This has considerably enhanced the policy formulation, co-ordination, and administration responsibilities of the CGA. The CGA is also expected to play the lead role in developing an integrated accounting and financial reporting environment.
The systems that the CGA inherited are, in real sense, undergoing comprehensive change and the new systems will be very different from the legacy systems. The objective of the CGA component is to assist the CGA's Office and the AGs to professionally and adequately manage and maximise the benefits from the computerised accounting environment. This objective is to be achieved through two categories of assistance.
Firstly, 'Strengthening Government Financial Management Policy and Capacity' by strengthening the CGA's administrative and management powers through capacity building of CGA staff; and recruitment of senior staff with qualifications and experience required to take over, manage and maintain the new system; building a skilled internal audit complement via training and recruitment, and developing a comprehensive set of internal controls, internal audit work programs, and reporting regime, meeting the international standards of the Institute of Internal Auditors (IIA); revising/developing government accounting, budgeting, financial, and internal control manuals, taking into consideration the long-term vision of eventual transition to full international accounting and internal auditing standards; creating a SAP Competency Centre, including help desks, to provide reliable technical and maintenance support for SAP applications; building IT capacity through recruitment of technical professionals and providing technical training opportunities (local and foreign) for the staff responsible for the systems. The MOF has recognised the necessity for supporting the recruitment of well-qualified counterpart staff by the CGA for the IT function and has already sanctioned the necessary posts.
Secondly, strengthening of the CGA's facilities and systems to take maximum benefit from the IT-based environment by: renovation of CGA headquarters (HQ)--the HQ building would be upgraded to adequate standards to support a computerised environment; construction and renovation of Accountant-Generals' offices in Balochistan & Sindh (and others as required) to adequate standards and to support a computerised environment; the conversion o f Balochistan Treasury Offices to DAOs, including logistical support for the more remote sites, and new sanctioned posts; improved internal controls, specified by the CGA in consultation with the Auditor General and MOF/finance departments, for use by the Chief Financial Officers, and pilot implementation in ten sites; and improved records management needed to improve financial reports to assist accountability and management. A contractor will help set up archival policies and arrangements, supervise equipment procurement, train internal resources and transfer the systems to the department.