NEW ACCOUNTING MODEL

NEW ACCOUNTING MODEL

1. It was a long felt need to update the forms and procedures of budgeting, accounts keeping and auditing. The existing system is decades old and does not cope with requirements of proper reporting, which could support financial management and financial control. Presently cash accounts are prepared at the districts' level and reported every month to the respective Accountant Generals. Where it is compiled and civil, appropriation and finance accounts prepared. The figures are prepared on the basis of functions with no reference to grants/departments and objects/heads of expenditure, which is again transformed in Finance Department making it compatible with requirements of financial managers and funding agencies. The Provincial Government always faces the problem of not knowing exact information about monthly expenditure against releases. The Government can't make effective financial management without having information about financial flow and its utilization. Secondly the manual processing of figures has its own weaknesses of errors and omissions and causes delay in timely availability of the information.

2. In the above backdrop, the Government of Pakistan, initiated a project namely Project to Improve Financial Reporting and Auditing (PIFRA) during 1996-97. The Government has signed an agreement with the World Bank for funding the programme. The project is aimed at reengineering and restructuring of the budget preparation process, accounts keeping, maintenance and consolidation of accounts and financial reporting. Other major area of intervention is the improvement in the auditing functions of Auditor General of Pakistan.

3. The new system is based on New Chart of Accounts replacing the existing Chart of Classification. The accounts procedures and forms are being modified, updated and redundancies being removed. The system will be available on an integrated computerized countrywide network. The Federal Finance Ministry, four Provincial Finance Departments, offices of AGs/AGPRs, all 127 District Account offices and treasury offices will be computerized and linked together. Every financial transaction shall be processed through computers and the actual position of financial utilization will be available on daily basis. All expenditure bills will be computerized & daily position will be available for effective planning, monitoring and financial management. Efficiency, Transparency and accountability would be the byproducts of the new system.

4. Thirteen pilot sites were selected through out the country for implementation of NAM. Out of which six have been given to Khyber Pakhtunkhwa, due its better performance in the field of computerization in the public sector organizations. Provincial Finance Department of Khyber Pakhtunkhwa has been selected as pilot site where the budget for the financial year 2004-05 is being prepared under the new system. The budget documents have been prepared in parallel under the existing and new system so that to facilitate the switch over, establish link with legacy system and have a back up data available. The Federal Government has prepared the budget for 2004-05 under the new system and has been announced accordingly.