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Document of

The World Bank

Report No. 14890-PAK

STAFF APPRAISAL REPORT

PAKISTAN

IMPROVEMENTTO FINANCIAL REPORTING AND AUDITING PROJECT

August 5, 1996

Infrastructure Operations Division


Country Department I
South Asia Region
CURRENCY EQUIVALENTS
(as on March 1996)

Pakistan Rupee = 100 paisa


Currency Unit = Rupee (Rs)
Rs 1.00 = US$ 0.03
US$ 1.00 at appraisal = Rs. 34.5 (March 1996)

PRINCIPAL ABBREVIATIONS AND ACRONYMS


AAT - Association of Accounting Technicians
AATI Audit and Accounts Training Institute
AG - Accountant General
AGPR - Accountant General Pakistan Revenues
DAOs - District Accounts Offices
ECNEC - Executive Committee of the National Economic Council
FY - Fiscal Year
GOP - Government of Pakistan
HRM - HlumanResource Management
MIS - Management Information Systems
MOF - Ministry of Finance
PAC - Public Accounts Committee
PAD - Pakistan Audit Department

GOP FISCAL YEAR


July I - June 30
PAKISTAN

IMPROVEMENT TO FINANCIAL REPORTING AND AUDITING PROJECT

STAFF APPRAISAL REPORT

Table of Contents
Page No.

CREDIT AND PROJECT SUMMARY............................. i

I. THE SECTOR BACKGROUND . .1


A. Government Accounting and Audit .
B. Status of Governments' Financial Reporting and Auditing .2
C. Government's Strategy .3
D. Lessons from Previous IDA Involvement .5

1I. THE PROJECT .. 6


A. Project Origin and Borrower Ownership .6
B. Objectives .6
C. Project Description .6
D. Performance Monitoring Indicators .10
E. IDA's Strategy .1
F. Environent .11
G. Project Cost and Financing . 1
H. Procurement .13
I. Disbursement .15

III. INSTITUTIONAL ARRANGEMENTS .................................... 17


A. Assessment of Current Arrangements.................................... 17
B. Addressing Institutional Constraints.................................... 17

This report is based on findings of an appraisal mission to Pakistan in March 1995. Project team
members included: Mr. G. Lee (Senior Municipal Financial Specialist, SAIIN), Task Manager and
Mission Leader; Ms. Antoinette Sayeh (Macro Economist, SAlCA); Mr. Ali Hashim (Senior
Information Technology Specialist,EMTDR); Mr. Akbar Khawaja (Informatics Specialist, ITSIE);
Messrs. Omer Morshed, Riyaz Bokhari and Vinod Sahgal (Consultants).The project is endorsed by
Ms. Mieko Nishimizu, Director, Country Department I, South Asia Region, and Ms. Marie
Robinson, Chief, Infrastructure Operations Division. The Peer Review team comprised
Messrs. John Graves (Training and Staff Development), George Russell ( Financial Management);
Al Kennefick (Accounting Systems), Pervaiz Rashid (Audit), and Eduardo Talero (Information
Technology). Ms. Bina Duggal and Mr. Jack Williams (SA1IN) assisted in the production of this
report.
IV. PROJECT IMPLEMENTATION . ...........................21
A. OrganizationsResponsiblefor the Project.21
B. ImplementationResponsibilities.22
C. ImplementationStrategy.23
D. Statusof Preparation.28
E. Project Sustainability.28
F. Accountsand Audit.29
G. Monitoringand Evaluation.29

V. BENEFITS ANDRISKS .. 31
A. Benefits.31
B. EconomicAnalysis.32
C. Risks.32

VI. AGREEMENTS REACHED..... 35

ANNEXES

1. ProjectCosts
2. Government'sVisionStatementfor FinancialReportingand Auditing
3. Scopeof Work for SystemsConsultants
4. InformationSystemsArchitecturefor GovernmentFiscal Management
5. TrainingPlan
6. Implementation Plan
7. DisbursementSchedule
8. ProjectMilestonesand PerformanceIndicators
9. SupervisionPlan
10. TechnicalAssistanceObjectives,Classification,Activitiesand Outputs
11. Documentsin ProjectFile

Map IBRD No. 27293


PAKISTAN
IMPROVEMENT TO FINANCIAL REPORTING AND AUDITING PROJECT

Credit and Project Summary

Borrower: Islamic Republic of Pakistan

Implementing Agencies: Pakistan Audit Department, Ministry of Finance and the Planning
Commission

Beneficiaries: Pakistan Audit Department, Ministry of Finance, and the Planning


Commission

Poverty: Not Applicable

Amount: SDR 20.1 million (US$28.8 million equivalent)

Terms: Standard, with 35 years maturity.

Commitment Fee: Standard (a variable rate between 0% and 0.5% of the undisbursed
credit balance, set annually by the Executive Directors of IDA)

Financing Plan: See Table 2.2

EconomicRat
of Retu: Unquantified

map: IBRD No. 27293

Project Identification
Number: PK-PA-36015
PAKISTAN

IMPROVEMENT TO FINANCIAL REPORTING AND AUDITING PROJECT

STAFF APPRAISAL REPORT

I. THE SECTOR BACKGROUND

A. Government Accounting and Audit

1.1 The Government of Pakistan's financial management cycle begins with planning
and programming and runs through budget formulation,budget execution, accounting, financial
control and audit/evaluation. The cycle is iterative; new plans are influencedby past results.
Reliable financial information is a key requirement for all phases.

1.2 The Constitution of Pakistan prescribes that all government expenditures, revenues,
loans and their repayments shall form part of provincial or federal consolidated funds and
withdrawals from the consolidated funds shall be regulated by law. The system of financial control
and budgeting is based on federallprovincial secretaries being designated as the principal
accounting officers of their respective departments,with the responsibility to ensure that funds
allotted to their departments are spent for authorized purposes and that expenditure is not incurred
in excess of budget allocations.

1.3 The Pakistan Audit Department (PAD) plays a key role in government financial
management. The functions of the Auditor General of Pakistan are defined in the Constitution of
Pakistan and regulated by statutory orders issued from time to time. The most recent of these is the
Pakistan Audit and Accounts Order 1973. Under this authority, PAD is responsible for keeping the
accounts of the federal and provincial governments, with the exception of certain departmentalized
accounts, defense, and railways. PAD is also responsible for audit of all expenditure and income of
the federal and provincial governments. As a crucial part of budget preparation and execution,
PAD prepares the accounting information which is used by executive agencies for planning and
programming purposes, and which forms part of the payments control process. PAD's audit
function maintains public accountability by auditing the accounts of government entities and
presenting audit findings to the legislature's Public Accounts Committee (PAC).

1.4 PAD's responsibility for accounting for both the Federation and the Provinces is
discharged through a network of offices under five Accountant Generals (AGs), one for each
province and the fifth, Accountant General Pakistan Revenues (AGPR), for the federal government,
with each office supported by District Accounts Offices (DAOs) and/or Treasury Offices which are
functionally responsible to it. The governments' accounts are prepared by PAD at the respective
AG's office located in each provincial capital, and by the AGPR in Islamabad for the Federation.
The accounts are based upon the primary financial transactions of payments and receipts which take
place at DAOs/Treasuries, the process being as follows. The executive agencies submit claims for
payment to the local DAO/Treasury, which authorizes payment by the local branch of the National
Bank of Pakistan, acting as the government's cashier. In case of receipts, the depositor is required
to deposit the amount in the bank/treasury. The bank sends a daily record to the local
DAO/Treasury which records the transactions. Transaction information, complied into accounts by
DAOs or in the form of individual transactions from Treasuries, is submitted to the AG, who
compiles an account of aggregate receipts and expenditures for reconciliation with departmental
records and government information.

1.5 PAD produces monthly and annual (Civil) accounts on the basis of information
received from the DAOs, Treasury offices, agencies with departmentalizedaccounts and inter-
government and inter-office adjustments. At the year end, annual appropriation accounts, annual
finance accounts and the combined finance and revenue accounts are prepared and supplied to the
federal and the provincial governments.

B. Status of Governments' Financial Reporting and Auditing

1.6 The government's fiscal reporting system and the institutional arrangements for
accounting and auditing were reviewed by a diagnostic consultancy financed under the Third
Technical Assistance Credit (Cr. 1755-PAK)to assess the adequacy of current institutional
arrangements, systems and procedures and to formulate a long term strategy for improvement. The
key findings of this study are:

a) reports produced by the PAD do not meet the objectives of a fiscal reporting
system. Crucial financial information such as budget data and revenue collection
details are not reported. Financial information is fragmented between various
agencies and a reliable cohesive picture cannot be obtained. As a result the
reporting system does not provide government with an effective method to: (i)
monitor the fiscal deficit and its financing for aggregate control; (ii) manage its
cash and debt position; (iii) monitor expenditures in relation to appropriations; or,
(iv) provide analyses of spending and revenue trends to assist with policy
formulation and performance measurement;

b) because of serious deficiencies in the financial systems, financial data for


financial planning, budgeting, reporting and control is unreliable. Financial
reports and final accounts, mostly based on manual accounting systems, are
neither timely, complete nor designed to meet user needs;

c) PAD's audit function is viewed as a means of detecting irregularities and fraud


rather than as a management control function. The focus is to verify transactions
regardless of their value. Reviews of internal controls for system weaknesses are
norrnally not carried out. Audits have limited coverage due to lack of resources and
quality suffers due to a lack of expertise. Revenue audits do not have a major role
in PAD's audit function. Only a small proportion of Drawing and Disbursement
Officers are audited each year and purposeful parameters, such as potential risks or
weaknesses in internal controls, are not used as selection criteria for audits.
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Certificationaudithas madelittleprogressdueto the volumeof transactionsand


lack of expertisewithinPAD. In the absenceof auditingstandardsand quality
assurance,the quality of audit workis low;

d) PAD, the SupremeAudit Institutionof Pakistan,is compromiseddue to the


agency's dual responsibilityof maintainingthe accountsof entities and being
responsiblefor their audit. Separationof the accountingand auditingfunctions
within governmentis viewed as a primaryrequirementfor establishingthe
independenceand credibilityof audit; and

e) the existinghumanresourcemanagementfunctionsin PAD are limited in scope.


Personnelat the accountsofficesare frequentlynot adequatelyqualifiedor
trained. The effectivenessof trainingprogramsis underminedby lack of
applicationof training.

1.7 The absence of accurate,comprehensiveand timely financialinformationin


Pakistan's federaland provincialgovernmentshamperseffortsto improveresourceallocation,
monitoringand controlof expenditure,cash flow and debt management,and casts uncertaintyon
the financialdata underpinningpublic sectormanagementdecisionsand the macro economic
dialogue.

1.8 As major internalfinancialcontrolsare not functioning,governance,based upon


accountabilityfor use of resources,is beingundermined. The accountingweaknessesfurther
limit the usefulnessof audit, in additionto the technicalshortcomingsnotedabove.

C. Government'sStrategy

1.9 VisionStatement The Governmentof Pakistanrecognizesthat as it proceedsto


openup its economyand free it from regulatorycontrols,the need for modernfinancial
managementsystemsand goodgovernancebecomesparamount.Insteadof direct interventionit
has to designappropriatefiscaland monetaryresponsesto changingconditions. To be able to do
so, the governmentrecognizesthe need for a modernset of tools to provideit with comprehensive,
accurateand timelyfinancialinformation.As governmentstrivesto attractprivateforeign
investmentthe issuesof transparencyand accountabilitybecomeeven moreimportantin the
contextof a globaleconomy. Agreeingwith the thrustof the recommendationsof the diagnostic
consultancy,the govemmenthas developedan overallvisionstatementfor financialreportingand
auditing(see Annex2) statingits intentionto:

a) adoptand implementa modernaccountingsystemdesignedaccordingto recognized


accountingprinciplesand standardsand basedon moderninformationtechnology;
b) implementa governancestructureand legalframeworkfor an independentand
effectiveauditfunction;
c) improvethe professionalcapacityof the elementsof the civil serviceresponsiblefor
fiscalmanagement;
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d) make increasing use of the private sector to supplement public sector resources; and
e) adopt improved standards for private sector financial disclosure.

1.10 The redefinition of public/private roles which forms a core element of Pakistan's
structural reform program requires a diminished public sector involvement in productive
activities but imposes increased demands on the government for economic policy coordination
and economic information. However, the current capacity of the Ministry of Finance and the
Planning Commission to prepare medium-to-longer term policy options on key development
finance issues and to monitor the implementation of related reforms is weak and requires
strengthening. In particular, improved skills and policy formulation capacity are needed to:

a) manage an increasingly open economy in the face of large capital inflows and
outflows;
b) implement policies to improve and make more competitive the enabling
environment for the private sector; and
c) develop more efficient resource allocation and expenditure utilization structures
required for the expansion of basic social services.

1.11 In this connection, the government will need to follow through on the
implementation of the recommendations of the 1993 Economy Commission on the
administrative restructuring and organization of the Federal Secretariat. MOF and the Planning
Commission -- which are the primary users of the financial information prepared by PAD -- have
requested assistance to strengthen their analytical and policy formulation capacity in these and
other areas of macroeconomic management.

1.12 Policy Changes To address problems in accounting and auditing described above,
the government has agreed to introduce policy changes relating to:

a) adoption of improved accounting principles and standards for the government


sector;
b) a phased transfer of responsibilitiesfor government accounting from the Auditor
General to the executive arm of government;
c) enhanced independence, standards and capacity for government audit, including
greater use of private sector firms in public sector finance; and,
d) development of the skills and competencies of government finance staff, including
revised human resource management and training policies.

1.13 Government has requested IDA's assistance to implement these strategies, which
it is considered would require a sequence of projects. This project would address standards for
accounting and auditing, design improved systems and start implementation of selected
improvements (with greater initial emphasis on accounting),strengthen capacity, initiate
institutional changes, such as the phased transfer of accounting responsibilitiesto the executive arm
of government, and identify further strengthening of financial management, particularly with regard
to audit. The project will provide a basis for improvements in governance and accountability.
Private sector firms have been consulted during the design of this project, and the project includes
assistance to increase further private sector participation in public finance. Subject to satisfactory
performance, subsequent projects would, in conjunction with the executive agency created for
government accounting, complete the replication of accounting systems across all accounting
offices, and with the restructured Audit Department help to address matters to further enhance
capacity and independence which need to be handled over the longer term, providing tools for
further enhancing governance. In all, about a 10 to 15 year period of involvement in improving
financial management is envisaged.

D. Lessons from Previous IDA Involvement

1.14 IDA's past experience with similar projects demonstrates the need for:

a) a high level of commitment on the part of the member country to project objectives;
b) well defined objectives, consistent with the country's absorptive capacity;
c) thorough preparation and accurate assessment of needs; and
d) rigorous supervision.

1.15 IDA's previous experience of PAD is limited to project audit, and PAD's
component of the Third Technical Assistance Credit (Cr.1755-PAK) which had four sub-
components:

a) computerization of accounting and payroll procedures through automation of


existing procedures;
b) enhancing research and development capabilities of the Department, including
assessing the strengths and weaknesses of the existing system of fiscal reporting;
c) reviewing and improving the Department's training arrangements and facilities;
and
d) preparing a development program for the next phase.

1.16 Experience gained in this project highlights the necessity of setting up appropriate
mechanisms for involving and obtaining agreement from federal and provincial government at an
early stage of the project. Project management requirements include setting up clearly defined
project management structures, for proper planning in the use and development of new
application software, and for developing appropriate performance indicators to judge
effectiveness. Training programs need clear statements of objectives and benefits of training,
local participation in course development, appropriate procedures for selecting trainees and
deploying trained staff, training for senior officers, and use of in-country courses where
appropriate since foreign training is expensive.
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I. THE PROJECT

A. Project Origin and Borrower Ownership

2.1 The project is based upon diagnostic analysis undertaken by PAD of the status of
government accounting and audit, which resulted in the preparation of the strategies underpinning
the project. Internal ownership of the project is strengthened as the project would build on PAD's
own computerization initiatives and training undertaken prior to and as part of the Third Technical
Assistance Project (Cr. 1755-PAK). The project concept has been widely discussed within PAD, to
inform departmental staff of the objectives of change and the opportunities generated thereof. PAD
has developed external ownership within the government, through discussions with and
involvement of the main users of financial reports and information, the major intended beneficiaries
of the improved accounting systems and financial reporting. The relevant agencies concerned with
HRM, particularly the Establishment Division and the Federal Public Services Commission have
also been consulted about project design. A Committee has been established comprising the key
federal and provincial government users of financial information,to advise on the improvementsto
financial systems and to monitor implementation.

.R Objectives

2.2 The overall objectives of the project are:

a) to improve public sector accounting and financial systems;


b) to provide the basis for enhancing public sector accountability; and
c) to support improved institutional capacity for economic policy-making and
management.

C. Project Description

2.3 The project would comprise components for public sector financial management
including accounting, auditing and institutional development, economic policy-making and
management.

2.4 GovernMent Accounting and Financisl Reporting (base cost USS 12.3
millio) The government wishes to develop accounting standards, reporting systems and
financial administration procedures conforming as far as practicable to internationally accepted
principles. In view of the very high and continuously increasing volume of financial transactions,
a completely manual recording and processing system for PAD's accounting and auditing needs
is no longer feasible for the delivery of the type of information required for financial
management. Therefore, the adoption of some degree of automation is inevitable. Properly
designed computer based systems would, in addition to managing the processing of a large
number of transactions and the corresponding information retrieval needs, efficiently, also help
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ensure that controls prescribed for financial transactions are adhered to, thereby improving the
effectiveness of public expenditure management processes. Accordingly, PAD wishes to
implement a set of high priority computer based financial application systems. The project
includes consultancy assistance to define a modem set of accounting standards, for
implementation of the improved standards, and computer hardware, software, consultancies and
training required for the design, development and implementation of the following high priority
financial systems at about 21 of the total 95 sites:

a) Core Accounting and Reporting System: This system would provide integrated
government-wide accounting, encompassing the functional requirements for
budget execution, and covering the appropriation, commitment, funds allocation,
and payment processes for investment and current budgets.

The system would be comprehensive in terms of coverage and provide a credible


source of reliable and timely data. Accordingly, the Core Accounting System
would be fully automated, interfacing with external data sources, such as external
debt, on a periodic basis. This system, introduced along with a modem budget
classification system and an appropriatechart of accounts, would enable
expenditures and revenues to be recorded at a detailed level and related to specific
programs and projects. The data would be amenable to cross classification for
financial and economic analyses.

It would be used by: (i) PAD (including its subordinate units and its successor
organization) to perform the basic accounting functions; (ii) the federal MOF and
the provincial Finance Departnents to perform the processes associated with budget
execution, monitoring and control; implement cash limits, as may be required; (iv)
the federal Planning Division and the provincial Planning Departnents to obtain the
status of actual expenditures on ongoing programs and projects. Data would also be
directly available for use by agencies/spendingunits for program and project
management.

b) Payroll and Pension Systems: The payroll of government employees constitutes


a large portion of government expenditures. The need for an automated payroll
and pension system is evident in view of the increasing volume of transactions.
The proposed system would perform the full range of the payroll functions, and
the expenditures processed would automatically update the core accounting and
reporting system.

c) Cash Flow Forecasting and Financial Analysis System: One of the MOF's
main information needs is to establish a system for forecasting likely flows of
payments and receipts, and the consequent impact on cash balances and issue of
debt instruments. The cash flow and financial analysis system would be designed
to meet this requirement. It would provide a powerful facility for retrieving
current and historical data from the accounting system, and it would allow end-
users to manipulate the data for forecasting and analysis purposes.
-8-

2.5 A more detailed description of the information systems, their scope in terms of the
functional processes and agencies they cover, how they fit in the context of the overall
information systems architecture for fiscal management in Pakistan, and a description of the
proposed technology architecture, is given in Annex 4 and shown schematically in Figure 1 in
the Annex.

2.6 A study would also be made to assess the impact to date of departmentalized
accounting, and to recommend future strategy options. PAD would also, within its existing
resources, establish as needed continuous review of government rules and regulations to:

a) identify changes required to bring the rules up to date;


b) implement recommendations in audit reports; and
c) reflect changes in systems and procedures.

2.7 Government Auditing (base cost US$ 6.6 million) This component focuses on
audit systems improvement and systems development. It includes:

a) Audit Standards and Techniques: Consultant services to prepare guidelines for


the introduction of international auditing standards, to introduce modem auditing
techniques and concepts, to review PAD's audit policies, processes and
procedures, output, workload, efficiency and quality assurance for the audit
function, to advise on methodologies to enhance PAD's communications with
stake holders, for internal audit of PAD's systems under development, to assist in
the use of automated audit tools and standard audit programs wherever
appropriate, to improve communication of audit results and to develop quality
assurance programs.

b) Automated Tools: Provision of hardware and audit software for audit planning,
sampling and documentation, and for audit of automated accounting systems.

c) Capacity Development: Consultancy to support revised human resource


management procedures through international training in a modem financial
system environment and through arranging attachments with other Supreme Audit
Institutions.

d) Use of Private Sector Firms: Assistance with developing modalities for utilizing
private sector firms, and finance for private audit firms' fees.

2.8 Institutional Development To sustain the above improvements to financial


management systems, the project would assist in the introduction of revised human resource
management policies, the strengthening of financial management training, the development of a
Management Information Systems (MIS) wing of PAD, introduction of office automation to
assist in the performance of day to day work, and put in place project management structures.
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a) Human Resource Management (HRM) (base cost US$ 1.3 million): The
HRM component would involve organizational and systems development.
Although PAD would implement most components without external support, the
project would provide consultant assistance for managing the process of change,
for preparation of job descriptions and performance standards, and for installing
an MIS system for HRM planning and monitoring. PAD would share the details
and results of its HRM policies with provinces and the Establishment Division.

b) Training (base cost US$ 6.0 million): The training component includes moving
towards professional-level training, providing retraining associated with the
changes introduced by the project, strengthening the quality of training and
training facilities, and expanding the circle of beneficiaries. The project would
provide refurbishment and some extension of existing facilities, equipment,
computer hardware, materials, and consultants to assist in training needs
assessments, course design, materials development and training of trainers. The
component would also include international scholarships for faculty trainers, and
seminars. In addition to including provincial staff in its training programs, PAD
would share training course materials with provincial training institutes as
appropriate. A detailed training plan is attached at Annex 5.

c) Administration (base cost US$ 6.3 million): The project would include
administrative capacity development as follows:

i. MIS Wing: The project would support the creation of an MIS Wing and
would provide for the following:
* a Software Development Center;
* selected posts to be staffed by contract professionals (such as the
General Manager (MIS) and other technical specialists);
* local training for PAD staff in systems development; and,
* recurrent costs for systems maintenance.

ii. Project Management: Strengthening the Project Directorate, through


provision of staff, facilities, hardware and software, consultants and training.
Assistance would also be provided for technical review of computerized
information systems' development, and for a senior level advisory panel of
international experts, which would at least meet annually.

iii. Future Project Preparation: Assistance for preparation of the follow-up


project if grant funds are not available.

iv. Office Automation: Provision for a local area network and associated office
software for PAD.
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2.9 Other Policy Support for Economic Management (base cost US$ 1.7 million)
MOF and the Planning Commission would manage selected studies on economic and financial
policy issues related to the on-going macroeconomic and structural reform program, a diagnostic
study of the institutional arrangements for macroeconomic policy-making, and technical
assistance/training to upgrade staff skills. Specific areas include international capital markets,
foreign asset/liability management, improving the revenue yield of certain taxes, on-the-job
specialized training in macro modeling, and assistance for establishment of a nucleus in the
Planning Commission for analyzing and monitoring poverty. The project would finance the
costs of (mostly local) consultancy services required for the studies and short-term technical
assistance for staff training. Terms of reference for key studies would be completed prior to
negotiations.

D. Performance Monitoring Indicators

2.10 To measure implementation performance, and to monitor the project's impact, the
following key indicators, discussed and agreed with government, would be selected from the
project's implementation plan (Annex 6) and milestones and performance indicators (Annex 8):

a) Implementation Performance

i) revised accounting standards adopted by May 1997;


ii) pilot implementation of core financial systems completed by
December 1999;
iii) province-wide replication of core financial systems completed by
December 200 1;
iv) identification of public/private audit cooperation opportunities by
December 1997;
v) introduction of Accounting Technicians and 2 year Probationers'
training by April 1998 and January 1999, respectively; and
vi) approval of proposals for functional separation of accounting and audit by
December 1999.

b) Outcome and Impact

i) improved financial reports including budget, variance and project costs;


ii) percentage of transactions automated, by value;
iii) cash-flow forecasts introduced and efficiency of borrowing improved;
iv) PAD staffs job rotation within 3 years reduced;
v) more timely reports to Public Accounts Committees; and
vi) improved training impact evaluation results.
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E. IDA's Strategy

2.11 The proposedprojectis consistentwith IDA's CountryAssistanceStrategy(CAS)


discussedon December15, 1995. The CAS stressesthe centralityof fiscal adjustmentto
Pakistan'sreform and developmentefforts. Addressingthese concernsinvolves,inter alia,
improvedresourcemobilization,publicexpenditurereform,more effectiveuse of government
resources,and improvedpublic sectormanagement.The projectwould focus on developing
more effectivefinancialaccounting,reporting,controland monitoringsystems,and would
thereforeprovidean essentialsupportfor these activities. The policy supportcomponentwould
assist achieveCAS objectivesby contributingto improvementsin macroeconomicmanagement.

2.12 The CAS, in supportof the establishmentof a morecompetitiveenabling


environment,also seeksto improvegovernancein Pakistan. The proposedemphasison improved
accountingand financialreportingwill have a directimpactin this regard. Soundaccountingis the
first line of goodgovernance.Governancewouldalso be assistedby the improvedtransparencyof
the linkagesbetweenbudgeting,internalcontrolsand accountabilityresultingfrom the new
systems,and the improvedfinancialsystemswouldhelp ensurethe routineapplicationof all
prescribedcontrolson financialtransactions.In the longerterm,the measuresto enhancethe
auditor's independenceand strengthenauditcapacitywouldalso contributeto improved
governance.

2.13 IDA's involvementwouldbuilduponits existingdialogueswith PAD,relatingto


projectauditand the preparationof this project. The proposedprojectcomplementsandreinforces
Bank group operationssuchas the SindhSpecialDevelopmentProject(Cr. 2558-PAK)which
assists Governmentof Sindh's effortsto reformprovincialpoliciesand programs. The project
would also supportgovernment'seffortto seek greaterinvolvementof privatesectorfirms in
governmentfinancialmanagement.IDA is wellplacedto provideassistancebecauseof its
continuingdialoguewith governmenton fiscaladjustment,its involvementwith executive
departmentsof both federalandprovincialgovernment,and its abilityto provide,subjectto
satisfactoryperformance,longertermnsupportto undertakesubsequentstagesof reform.

F. Environment

2.14 Thereare no environmentalproblemsanticipatedfor this project,whichhas


receiveda C ratingunder the IDA's EnvironmentalAssessmentOperationalGuidelines.

G. PoJect Cost andFa

2.15 The total cost of the proposedproject,includingphysicaland pricecontingencies,is


estimatedat US$ 37.2 millionequivalent,of whichtaxesanddutiesamountto US$1.8million
equivalent. Summaryestimatesare givenin Table2.1 and detailedestimatesare givenin Annex1.
Full detailsare containedin the projectfile. The foreignexchangecomponentis estimatedat
US$17.1million equivalentor 46%of totalprojectcosts.
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Table 2.1: SUMMARY COST ESTIMATES

PRS Million USS Million %


%/. Total
Local Foreign Total Local Foreign Total Foreign Base
r , ...........
_ _ ... ........... .~~~.......................
.......................
Exch.
........
Costs
.........
. A. Gove.nment
Accounting.....
and Financial Reporting 174.3 250.5 424.8 5.1 7.3 12.4 59 36

B. Government Auditing 108.2 120.5 228.6 3.2 3.5 6.7 53 19

C. Human Resource
Management 23.4 21.1 44.5 0.7 0.6 1.3 47 4

D. Training 135.9 71.6 207.5 3.9 2.1 6.0 35 18

E. Administration 156.5 59.9 216.5 I 4.5 1.7 6.2 28 18

F. Other Policy Support 30.9 28.6 59.5 0.9 0.8 1.7 48 5

|TotalBaselineCosts 629.2 552.2 1181.4 18.3 16.0 34.3 47 100 |

Physical Contingencies 16.5 15.6 32.1 . 0.4 0.5 0.9 49 3

Price Contingencies 168.4 118.6 287.0 1.4 0.6 2.0 31 6

Total Project Costs 814.1 686.4 1500.5 20.1 17.1 37.2 46 109
(Totals may not add due to rounding)
US$ I = Rs. 40.4 (average)

2.16 The base cost estimates reflect price levels in March 1996. Estimates for materials,
equipment, vehicles and technical assistance have been based on recent quotations from suppliers,
market surveys of manufacturers, and contracts. Physical contingencies of 5% on computer
hardware and purchased software, and 10% on software development services have been allowed.
Price contingencies and foreign exchange conversions have been calculated in accordance with
Bank guidelines, using World Bank estimates prevailing at the time of appraisal. Foreign inflation
rates are estimated as 3.6% for the calendar year 1996, and about 2.4% annually thereafter.
Domestic annual inflation is estimated to be 12% for calendar year 1995 and 7.5% annually
thereafter. No price contingencies have been included for hardware. Price contingencies amount to
5.4% of the total estimated project cost. Estimated exchange rate parities between US dollars and
Pakistan Rupees result in an average Rs. 40.4 per US dollar over the course of the project.

2.17 The proposed IDA credit of US$28.8 million equivalent would finance about 77%
of project costs, covering 100% of foreign exchange and 56 % of local currency requirements.
Federal govemment (23 %) would finance the balance. The government's contribution would
include finance for duties, taxes, and recurrent costs, including incremental staff salaries,
maintenance, consumables and other recurrent costs. The project financing plan is summarized in
Table 2.2 below.
- 13 -

Table 2.2: PROJECT FINANCING PLAN

US$ million
Foreign ................................................................
,~~~~~~~~~~~~~~..........
oal ...... .
Government of Pakistan 8.4 -
~~~~~~~~~~.................................................................... 8.4 23
................................................................................................
11 7
IDA 17.1 .2 I 77
Tota21i i 17.1 37;2 100

2.18 The IDA credit would be made available to GOP on standard terms. US$26.9
million equivalent would be passed to PAD, US$0.7 million equivalent to the Planning
Commission and US$1.2 million equivalent to MOF through normal budgetary procedures.

H. Procurement

2.19 Procurement of goods and civil works would be carried out in accordance with
World Bank procurement guidelines, with arrangements as indicated in Table 4.1 below.

2.20 Works: Procurement of civil works for site preparation at the 12 sites where
computer systems would be installed and renovation of training facilities would be in accordance
with national competitive procedures acceptable to IDA. The estimated cost of civil works for
site preparation and renovation is US$ 0.9 million equivalent inclusive of contingencies with
individual contracts under US$ 100,000 equivalent. The small scattered nature of the work
would limit the interests of foreign bidders. Existing procurement procedures of the
implementing agency have been reviewed to ensure adequate competition and encourage
economy and efficiency.

2.21 Goods: The estimated cost of goods (mainly computer hardware and software,
office furniture and equipment, and vehicles) is US$10.0 million inclusive of contingencies.
Procurement of the main computer systems would be in accordance with IDA's procurement
guidelines. A total of 12 computer systems are to be procured for accounting and financial
reporting; one system for the Software Development Center, and the remaining 11 for accounting
offices nationwide. The computer system required for systems development and testing at the
Software Development Center, about two years prior to the main procurement, would be
procured as a separate item following national competitive bidding procedures (NCB). The
technical specification for this system would be based on UNIX and OPEN system standards,
thereby not pre-determining the procurement of the remaining 11 systems. These will be
packaged as a single international competitive bidding (ICB) procurement, with phased delivery
of equipment. Other contracts over US$ 100,000 equivalent would be awarded on the basis of
ICB, including the procurement of vehicles and equipment. Local suppliers and manufacturers
competing for the supply of goods under ICB would be granted a margin of preference of 15% of
the CIF bid price for locally manufactured goods or the applicable custom duties and taxes-
whichever is lower-during bid evaluation. Other procurement of vehicles and equipment in
contracts of less than US$ 100,000 equivalent would be carried out under NCB procedures
- 14-

aggregating not more than US$ 2.8 million. Minor items including office furniture and
equipment, personal computers, vehicles and items in small quantities which would not attract
the interest of foreign suppliers, would be procured through local shopping obtaining price
quotations from not less than three suppliers, in packages not exceeding US$50,000 equivalent,
and not exceeding US$ 0.3 million equivalent in aggregate.

Table 2.3: PROCUREMENT ARRANGEMENTS


(US$ Million)

Procurement Method Total


Project Element ICB NCB Other NIF Costs

Works 0.9 0.9


(0.8) (0.8)

Goods 6.9 2.8 0.3 10.0


(5.7) (2.3) (0.2) (8.2)

Service Contracts 5.9 5.9


(5.9) (5.9)

Technical Assistance
Implementation Assistance 1.9 1.9
(1.9) (1.9)

Institutional Development 9.4 9.4


(incl. Training) (9.4) (9.4)

Policy Support 1.8 1.8


(1.8) (1.8)

Incremental Staff Costs 1.0 1.0

OperatingCosts 5.5 5.5

Refinancing PPF 0.8 0.8


(0.8) (0.8)

TOTAL 6.9 3.7 20.1 6.5 37.2


(5.7) (3.1) (20.0) (0.0) (28.8)
NIF = Not IDA Financed
Numbers in parentheses indicate IDA Financed Amounts
- 15-

2.22 Consultancies. Incremental Staff and Operating Costs: The estimated cost of
service contracts, consultants and training is US$19.8 million equivalent. Consultancies
incorporating substantial international expertise include: development of accounting standards,
financial systems design and implementation (base costs US$ 3.7 million); assistance to strengthen
audit (base costs US$ 1.5 million); development of training and training materials (base costs US$
0.6 million); and change management assistance for HRM (base costs US$ 0.3 million).
Consultancies and service contracts incorporatingmostly national expertise include: financial
systems software coding (base costs US$ 1.7 million); fees for private sector audit firms (base costs
US$ 2.0 million); economic management studies (base costs US$ 1.1 million); assistance to the
Planning Commission (base costs US$ 0.6 million); and assistance to replicate systems
implementation (base costs US$ 0.6 million). Training courses and attachments include
international training in financial management/MBAs (base costs US$ 1.0 million) and attachments
with SAIs (base costs US$ 0.5 million). Technical training of computer staff (base costs US$ 0.5
million) and seminars and conferences (base costs US$ 0.1 million) would be mainly national.
Consulting services would be procured in accordance with The World Bank Guidelines for Use of
Consultants. Incremental staff and operating costs would be financed by government.

2.23 Contract Review. All individual contracts for civil works and goods estimated to
cost the equivalent of US$ 100,000or more and contracts for the employment of consulting firms
estimated to cost US$ 100,000 equivalent each or more and contracts for the employment of
individuals estimated to cost US$ 50,000 equivalent each or more would be subject to IDA's prior
review and approval. For consultants contracts below these thresholds, prior review would be
required of: (a) terms of reference; (b) single source selection of firms; (c) assignments of a critical
nature, as reasonably determined by the Bank; (d) amendments to contracts for the employment of
consulting firms or individuals that would raise the contract values to these thresholds. It is
estimated that 70% of the contracts for civil works and goods would be subject to prior review.
Post review would be undertaken of the remainder on a random basis.

I. Disbursement

2.24 The IDA Credit would be disbursed over a period of five years and would finance
about 77% per cent of the cost of the project. The proceeds of the Credit would be disbursed
against eligible expenditures, net of taxes and duties, as indicated in Table 4.2 below. The
estimated disbursement schedule is shown in Annex 7.

2.25 Disbursements would be fully documented except those for expenditures: (a) under
contracts not exceeding the equivalent of: (i) US$ 100,000 each for goods and civil works, (ii)
US$ 100,000 for the services of consulting firms, and (iii) $50,000 for the services of individual
consultants; and, (b) for training. Such disbursementswould be made against Statements of
Expenditure (SOE), the documentation for which would not be submitted to IDA but retained by
PAD in Islamabad and made available during the course of project supervision. It is estimated that
about US$ 8.6 million equivalent would be disbursed through SOEs. Individual small contracts
for works, goods, services and training can be claimed through submission of Statement of
- 16-

Expenditures. PAD would be required to keep all documentation relating to these activities for
inspection by IDA and for audit.

2.26 Special Accounts. To facilitate disbursement, a Special Account would be opened


by PAD, with an amount of up to US$1.2 million in the National Bank of Pakistan on terms and
conditions acceptable to IDA. This would be used for IDA's share of project expenditures
(equivalent to the requirement for about 4 months). The Special Account would be operated and
maintained by PAD and would be used for payments of all eligible foreign and local
expenditures. The Special Account would be replenished on a monthly basis or whenever 20% of
the account has been utilized, whichever occurs first.

Table 2.4: DISBURSEMENT BY CATEGORY

Expenditures Catego Amount of Credit % to be Financed


Allocation
(US$ million)
1. Civil Works expenditures 0.8 90%

2. Goods and Equipment 8.2 100% of foreign expenditures, 100%


of local expenditures (ex factory) and
70% for other items procured locally

3. Consultants Services and 19.0 100%of expenditures


Training

4. Refinancing of Project 0.8 100%


Preparation Facility
TOTAL 28.8
- 17 -

111.INSTITUTIONAL ARRANGEMENTS

A. Assessment of Current Arrangements

3.1 PAD, which is presently responsible for most of governments' accounting functions
and for the external audit of government's financial transactions, has an established organization
and structure, including decentralizedoffices providing accounting, treasury functions and audit for
each of the federal and four provincial governments. Financial regulations and procedures are in
place. PAD has some experience of introducing and operating computerized financial systems,
although these have tended to automate the previously existing procedures rather than to amend
systems to introduce modern financial management. It has a network of training institutes. Staff in
PAD belong to the audit and accounts service, which is a recognized category (cadre) within the
Civil Service of Pakistan. These features provide a positive base from which to develop PAD's
capacity. Nevertheless, the detailed evaluation of current institutional arrangements for
government's fiscal reporting and auditing (para. 1.6) highlights weaknesses in the outputs from
existing financial systems. It identifies institutional constraints including the lack of arrangements
to ensure that systems respond to users' needs, the limited availability of staff with up-to-date
professional or technical skills, the lack of independence of audit from accounting, and poor human
resource management practices within PAD.

B. Addressing Institutional Constraints

3.2 The project scope and design addresses the institutional constraints through:

a) initiating a gradual transfer of responsibility for accounting to the executive arm of


government, separate from audit;
b) strengthening the capacity of PAD by developing an MIS Wing;
c) encouraging greater use of private sector audit firms to augment PAD's skills;
e) developing PAD's staff through improved HRM policies and training;
0 close involvement of users in project systems' design and coordination; and
g) use of consultants for design and implementation technical assistance.

3.3 Separation of Audit and Accounts As a first step towards separation of the
audit and accounts functions, PAD has already initiated moves to bifurcate the two functions
under the Auditor General to such an extent that the eventual transfer of the accounting function
to the executive would not have any wide-ranging organizational implications. As part of the
bifurcation process it would be necessary for the Auditor General to ensure that essential internal
controls are in place and operating in the accounting wing. Following full implementation of this
bifurcation PAD would, by 1997/98, set up a task force to identify and address issues
(legal/regulatory, administrative and procedural) relating to the transfer of the accounting
function to the executive. Regulatory changes would be prepared as required, and the separation
would be planned to become effective from July 1, 2000 subject to government approval.
Agreement was obtained at negotiations that GOP shall prepare a plan for the separation of the
-18-

Auditor General's accounting and audit functions by July 1, 2000, and to achieve the separation
by that date, shall : (a) complete bifurcation of the audit and accounting functions by June 30,
1997; (b) complete detailed proposals for the functional separation of audit and accounting by
March 31, 1999; and (c) thereafter take all measures necessary to effect the separation of these
functions (para. 6.1).

3.4 Creation of an MIS Wing The project would strengthen PAD's capacity by
reorganizing the existing Computer Directorate and creating an Management Information Systems
(MIS) Wing, headed by a General Manager (MIS). The General Manager (MIS) would be a
computer professional, recruited externally on a project post for a period of up to 5 years. During
this period, PAD would attach officers to be trained to potentially take over this position by the
end of the project. The General Manager (MIS) would have the status of a Deputy Auditor
General, reporting to the Auditor General, with complete autonomy with respect to technical
issues.

3.5 There would be three sections in the MIS Wing each headed by a Director
General:

a) a Standards and Policies Section would be responsible for defining and keeping
under review PAD's standards and policies with regard to information systems,
and also responsible for detailed technical aspects of any central acquisition of
hardware and software;
b) a Systems Development Section which would be responsible for the development
and maintenance of the application systems with the assistance of consultants; and,
c) an Implementation Section which would be responsible for the implementation of
developed systems and the day to day operations of the computer installations
around the country.

3.6 In the case of field offices, all personnel (including those responsible for day to
day field operations) would report within the field office structure, (i.e. to the DAO or AG),
except for a limited number of technical positions under the Director General Implementation,
responsible for providing technical support, but located at AG offices. A key factor in the overall
implementation strategy would be that the responsibility for implementation would be assigned
to an end-user support group formed at each AG office which would be headed by a Deputy
Accountant General and which would be dedicated to systems implementation. The end-user
support group would be trained by the technical team and would thereafter be responsible for
training all other personnel at the AG offices as well as at DAOs.

3.7 Involvement of the Private Sector Information about the project and its
proposed approach is being made widely available and comments sought from the accounting
profession in Pakistan. These comments have been incorporated in the project design. PAD has
proposed a phased strategy to initiate further private sector participation based upon:

a) study of potential areas for greater private sector involvement, including


opportunities to reduce overlap and for more efficient use of audit resources, the
- 19-

scope for joint working between public and private sector auditors, and the
comparative advantages of each sector;
b) pilot introduction of audits by private sector firms under amended procedures,
joint audits, staff exchanges, etc.;
c) extension of trial public/private partnerships in government auditing, together
with preparation of revised operating procedures, manuals, and quality control
arrangements; and
d) gradual expansion of the program as appropriate.

3.11 Human Resource Management To reflect its need for increased


professionalism and specialization, PAD would implement revised HRM policies including:

a) developing a structured career path for specialist staff including auditors and
accountants;
b) rotating staff on assignments in accordance with this career path and prior experience,
and assigning jobs for a nornal period of at least three years;
c) defining standard job descriptions for recruitment, deployment, training and
evaluation purposes;
d) enhancing the effectiveness of training, including requiring staff to be committed to
remaining in PAD prior to receiving entry-level training, and relating training more
closely to job descriptions and training needs assessments;
e) developing a system of quantifiable and transparent evaluation and evolving an open,
merit-based, promotion and reward system; and
f) detailed manpower planning.

3.12 Training Key initiatives aimed at increasing the professional competence of


PAD staff would include:

a) replacing the current eight month entry-level training for probationary officers with a
two year course;
b) substitution of the SAS examination for mid-level staff by that of the Association of
Accounting Technicians;
c) substantial reduction in promotion of unqualified candidates from mid-level grades,
and allowing direct-entry recruitment of individuals with appropriate MBA/graduate
qualifications, subject to accountancy examination success within a prescribed period;
d) training for officers due for promotion to B- 19;
e) encouragement for officers to acquire an accredited financial qualification; and
f) instituting a program of training for continuing professional education.

3.13 PAD is coordinating the proposed changes for its career officers with the Federal
Public Service Commission and the Establishment Division. In addition to developing and
delivering training for the above, PAD's training strategy would also address training needs
related to the implementation of the new working arrangements and procedures to be introduced
through the project. A third aspect of PAD's training strategy would be to extend financial
- 20 -

managementtraining to includeselectedprovincialand secretariatpersonnelwithin the circle of


beneficiaries.

3.14 User Involvement A SteeringCommitteehas been formed to ensure user


involvementin the projectand to performthe functionsof interagencycoordination.
Representativesfrom MOF, EconomicAffairsDivision,PlanningDivision,PakistanComputer
Bureau,and all four Provinceswill assist PAD to ensurethat the financialaccountingsystems
developedby the project are responsiveto userrequirementsand interests,that users' training
needs are met, and that systemsand proceduresrelatingto audit are effective. Other relevant
agencieswould be co-optedas necessary. PAD would also coordinatewith the FederalPublic
ServiceCommissionand the EstablishmentDivisionon aspects relatingto the implementationof
its humanresourcemanagementstrategy. Users would be directlyinvolvedin the definitionof
the financialreportingsystemsdevelopment,throughconsultationwith the systemsdesign
consultants. PAD would extendits trainingto includeusersfrom outsidethe department.
- 21 -

IV, PROJECT IMPLF.1CENATION

A. Orgaizations Responsible for the Project

4.1 The organizationsresponsiblefor implementationof sub-componentsof the


project are: PAD, MOF, andthe PlanningCommission.The aspectsof the projectrelatingto
governmentaccountingand audit would be PAD's responsibility.MOF and the Planning
Commissionwould implementthe componentfor strengtheningeconomicmanagement. The
institutionalresponsibilitiesfor projectimplementationare shownbelow:

COMPONENT AGENCIF.S

Govenment FinancialManame
Overallresponsibility PAD (ProjectDirector)

xovmment AAcounting
Overallresponsibility PAD (CG (A))
Inter-agencycoordination PAD (CG(A))and SteeringCommittee

Core GovernmentFinancialSystems
Overallresponsibility PAD (GM MIS)
Inter-agencycoordination PAD (CG(A))and SteeringCommittee

GQovemmentAudi
Overallresponsibility PAD (DAG GA)

Tnstitutional Development and Proiect Pren-aration


Training PAD (DG Training)
HRM PAD (DG HRM)
ProjectManagement PAD (PD/ DG R&D)
FutureProject Preparation PAD (PD)

Advisory Services
Internal SteeringCommittee
External Panelof Experts

Other Policy Sport


EconomicPolicy Studies MOF
Assistanceto PlanningCommission PlanningCommission
- 22 -

4.2 Implementation arrangements in PAD are shown in Figure 1.

Figure 1: Implementation Arrangements in PAD

Auditor General

| Project |!
|Coordinato

Aui
DGot M(I)Controller General DAG

| AGA

|AG Baloc AG NWFP

B. Implementation Responsibilities

4.3 PAD's components of the project would be implemented by the sections within
the Department that are already responsible for the respective function, with suitable
strengthening as required. Hence, the Controller General (Accounts) would be responsible for
the accounting component. A new General Manager (MIS) would lead the computer systems
development as head of the MIS Wing. Since the bulk of the work related to information
systems development deals with the implementation of accounting systems, the Director General
(Implementation) who is part of the MIS Wing would have a dual reporting relationship and
would be functionally responsible to the Deputy Auditor General (Accounts & Payments) for
implementation. The Deputy Auditor General (Government Audit) would be responsible for
implementation of the audit component. The Director General of Training, head of the Audit and
Accounts Training Institute (AATI), based in Lahore and with regional offices in Balochistan
and NWFP, would be responsible for the training component. The Director General, Human
Resource Management, would be responsible for the HRM component.
- 23 -

4.4 For project administration and coordination purposes, the Controller General
(Accounts), the DAG (Government Audit), the General Manager (MIS), the Director General
(Training), and the DG (HRM) would report to the Project Director. The project director would
be assisted by the DG (R&D) as project coordinator and head of the Project Directorate. Initially,
the Auditor General would be the Project Director.

4.5 The Project Directorate, which is already established for project preparation,
would provide project coordination, administration and monitoring. It would have overall
responsibility for monitoring project costs, funds flow, adherence to schedules and quality of
work performed. It would receive monthly reports from heads of the units managing sub-
components from which it would prepare overall project summary progress reports. These
reports would summarize project expenditures by major project activities and category of
expenditure, report work progress relative to the major project milestones and performance
indicators, and would highlight any issues relevant to project progress. Summary reports would
be provided to the Bank on a quarterly basis. The Project Directorate would be assisted by a
local consultant, to provide backup services and peak-load facilities as required.

4.6 Agreement was obtained at negotiations that PAD would: (a) employ staff with
qualifications satisfactory to IDA in the key posts of Controller General (Accounts), Deputy
Auditor General (Government Audit), General Manager (MIS), Director General (HRM),
Director General (Training); (b) designate and maintain a Project Director satisfactory to IDA,
with overall responsibility for project implementation; (c) employ within the Project Directorate
a Project Coordinator and a Deputy Project Coordinator, with qualifications satisfactory to the
Association and other staff necessary for the carrying out of the Directorate's functions, and that
these key staff, subject to satisfactory performance, would be retained in post for a minimum of
three years (para. 6.1).

4.7 The MOF and the Planning Commission would set up project management
arrangements for managing the studies carried out and the short-term technical assistance provided
under their respective sub- components. Agreement was obtained at negotiations that MOF and the
Planning Commission would set up by December 31, 1996, project management arrangements
satisfactory to IDA for the studies carried out and the short-term technical assistance provided
under their respective components (para. 6.1).

C. Implementation Strategy

4.8 PAD's implementation strategy involves defining new standards for accounting and
auditing, which move closer to international standards, and introducing improved systems in a
phased manner with close involvement of end-users of financial reporting and auditing information.
The focus of development would first be upon accounting systems, although measures for the initial
strengthening of audit are also incorporated.

4.9 Accounting Standards and Financial Reporting This activity to improve


financial reporting would define a modem set of accounting guidelines, including the introduction
- 24 -

of a double entry accounting model, and a set of policies and procedures for accounts payable,
revenues and liabilities recognition, foreign loans, suspense accounts and development projects,
and prepare a plan for implementation government-wide. It would also review the financial
reporting needs of government and broadly determine the content, timing and distribution of
financial reports. This work is a prerequisite for the commencement of the main information
systems development consultancy, and would need to precede the design and development of the
Core Information Systems. It would be undertaken by the systems development consultants, and
financed up to Credit effectiveness by PPF P916-0 PAK.

4.10 Core Information Systems As PAD's account keeping operations for federal and
provincial governments are conducted by its network of AG's offices, each supported by
DAOs/Treasuries, PAD has overall control of the process, which enables flexibility during
implementation. A factor affectingthe implementation strategy is that all AG offices and several of
the larger DAOs are already operating computer-basedsystems, and therefore would face less
difficulty than a green field site in installing new software.

4.11 Accordingly, the core information systems will be implemented in a phased manner as
follows:

a) Phase I would cover requirements definition, functional and technical design,


specification and procurement of the hardware and software required for
implementation, with development centered at PAD's head office.

b) In Phase II, the systems would be implemented at the federal government's main
accounting office, the AGPR office in Islamabad, at the AG's office in Peshawar and
at two DAOs reporting to this AG which are already computerized. This is referred to
as the pilot implementation.

c) In Phase III the systems will be replicated over the course of this project to a total of
about 21 of the 95 sites, including all provincial AG offices, and selected DAOs
within each province. This would include maximum coverage in at least one
Province (presently identified as Sindh), referred to as the Province-wide system
replication. The remaining sites would be selected with a view to maximizing the
coverage of federal transactions.

4.12 For development of the applications software, the systems analysis and
comprehensive functional design would be carried out by consultants, who would also carry out a
search for suitable software packages. In the event of suitable packages being identified, the
consultants would prepare specifications for, assist procure and supervise an ICB turnkey contract
for acquisition and installation of the package, its customization, and acquisition and installation of
suitable hardware and operating software. In the event of no suitable package being identified, the
consultants would prepare specifications for, assist procure and supervise two contracts, one for the
development and testing of software, and another for the provision/installationof the hardware.
Supervision of implementation at about 12 sites (4 pilot sites and the first phase of replication -
about 8 sites) would also be the responsibility of the consultants selected for preparing the design.
- 25 -

The scope of workfor the consultantsis describedin moredetailin Annex3. The projectwould
financeassistancefrom privatefirmsfor furtherreplicationof systemsacrossthe remainingsites.
The implementationscheduleshowspossibletime savingsof 6-9 monthsif suitableapplication
softwarepackagescouldbe identified.

4.13 Technology Strategy for PAD's Core Information Systems Computer systems
would, as far as possible, be designed to:

a) be open and portable to avoid becoming tied to a single supplier;


b) facilitate adaptability and updating; and
c) keep pace with emerging technology innovations.

4.14 The project envisagesa distributedhardwarearhitecture with computer


processing power located at the variousnodes of the network (the AGPRoffice, AG offices,
and DAOs). Where facilitiesallowand datavolumesjustify, nodes would be connectedvia
telecommunications facilities. Alternatively, data transfer would be via diskettes. The
transaction processing and database management required at each node would be carried out by
the computer at that node. Summary or detailed data, as required, would be transmitted to the
computers located at the respective AG's office and AGPR in Islamabad. The advantage of such
an architecture is that it distributes computing power, commensurate with needs, to different
nodes of the network, thereby optimizing usage, and making it less vulnerable to malfunctions at
a single central site. In addition, end-users at provincial AG and DAOs would have better
control over their technology and data resources, strengthening systems' ownership. The size
and distribution of computing power across the various nodes of the network would be
determined by the volumes of data and transactions that are generated and stored, and the
volumes and frequencies of data transmitted. Information gathered from PAD has been used to
estimate the size and location of computers. This information would be progressively refined by
the consultants during the preparation phase of the project, by undertaking surveys to gather data
for each site.

4.15 The nature of the application systems requires that the application software be
able to run on small or large computers without major changes (scaleable) and be able to operate
on machines offered by several vendors (portable). The project proposes to use UNIX as the
operating systems environment since, in practice, this environment comes closest to an OPEN
systems environment and ensures a high degree of scalability and portability. In addition, the
application development environment chosen will use Fourth Generation Languages and
Relational Data Base Management Systems and associated development tools, Graphical User
Interfaces to increase application development productivity and offer a user friendly environment
for data access and usage.

4.16 Implications of large scale computerization on PAD staffing PAD recognizes that a
department wide introduction of computer based information systems would have significant
implications for staff. Although PAD does not expect overall staff reductions, it does expect
significant staff reassignments, and based on its past experience with the introduction of
- 26 -

automated systems it appreciates the importance of appropriate manpower policies in order to


achieve successful implementation of change. Several aspects would be catered for:

a) the skills of staff who currently maintain the manual systems would be augmented so
that they are able to operate and maintain the new automated systems;
b) retraining or recruitment would provide for the jobs created related to the operation
and maintenance of the systems (both in the functional and the technical areas); and,
c) other staff would be re-trained and re-assigned, mostly to audit where additional staff
are required.

4.17 As part of this project, PAD are concurrently looking at the staffing and training/
re-training aspects under the HRM and training components respectively. An extensive training
program is envisaged for staff to enable them to operate and maintain the systems. In addition,
facilities for re-training would be created or augmented as part of the training component,
including training for reassignment.

4.18 Auditing Government plans to strengthen the legislative audit function, through the use
of consultants, within a conceptual framework comprising the following:

a) moving towards adopting international auditing standards developed by INTOSAI;


b) developing the principle of public accountability;
c) improving financial reporting and control systems;
d) enhancing the scope and independence of audit;
e) strengthening performance monitoring and evaluation capacity, through new
procedures and computerized audit tools;
f) increasing the competence and capacity of government auditors, including making
greater use of the private sector; and
g) building future capacity - through revised HRM procedures, international training in a
modem financial systems environment, and arranging attachments with other Supreme
Audit Institutions

4.19 In the move towards adoption of INTOSAI standards of auditing, PAD considers
that it has adequate powers in respect of performance auditing and reporting to the legislature. The
practice of PAD conducting performance audit has been in place since the early 1980s and resulting
audit reports have been considered by the Public Accounts Committees of the federal and
provincial legislatures. The executive and the legislature's support for performance audit indicates
that PAD's mandate in the area is not disputed. This gives a firm basis to start the process of
adoption of standards in the auditing area.

4.20 HEM PAD recognizes that the project cannot be successfully executed and
sustained unless its human resources are efficiently deployed, are of substantially improved
quality, and are properly motivated. It would therefore implement an HRM policy designed to
raise the level of professional competence of staff, to institute a system of continuous
professional education, to provide a structured career path, to evolve a promotion and reward
- 27 -

policy based on open and quantified performance standards and a recognized merit system, and
to improve related management information systems.

4.21 Iraining The strategy for training addresses:


a) the needs arising from introduction of changes in accounting and audit procedures;
b) improving the quality of existing training (for example, relating training courses more
closely to training needs assessments) and training facilities;
c) expanding the circle of beneficiaries to include provincial staff and users in line
departments;
d) moving towards professionalism in training of government accountants and auditors
(for lower and higher levels of staff), and upgrading facilities.

4.22 The Audit and Accounts Training Institutes (AATI) would provide formal
training (for example, for accounting technicians and probationers), short courses, and provide
course material and backstopping for field office training. PAD would strengthen the AATI and
augment them by establishing Field Office Training Centers (FOTCs) at the larger accounting
offices to provide training in revised procedures, and basic computer skills. The component
would be implemented in the following sequence:

a) preparation for the Accounting Technician qualification, which can be accommodated


within the existing competence of the training faculty, updating existing training
materials, upgrading the capacity of faculty staff, through training, to prepare for
introducing the enhanced probationers training and retraining in revised procedures,
and training quality control measures;
b) introduction of Accounting Technicians training courses, training needs analysis,
course and materials preparation, and training of trainers for the enhanced
probationers and staff retraining courses, and renovation of facilities;
c) introduction of enhanced probationers and staff retraining courses, equipping of
computer training facilities, and initial annual impact evaluation.

4.23 Economic Management Agreed recommendations of the studies financed under


this component would be used to draw up an agenda for policy and/or institutional reforms in
specific areas. The strengthening of institutional capacities of and coordination between the
MOF and the Planning Commission in economic management is a long-term endeavor requiring
detailed diagnosis and follow-up to the 1993 Economy Commission recommendations. The
diagnostic study of the institutional arrangements for macroeconomic management would assess
options for strengthening capacity for the formulation of strategies on longer-term development
finance issues. The study would look at institutional, staffing and financing arrangements for
developing the government's forward planning and policy analysis capacity, including how to
better link the policy work required by Finance with the longer-term development planning
currently handled by the Planning Commission. It would also assess how to attract and retain the
highly skilled and experienced staff required, as well as the related training requirements. GOP
and IDA would jointly formulate action plans to implement the agreed recommendations of the
economic, financial policy, and diagnostic studies.
- 28 -

4.24 Implementation Plan The implementation strategy is reflected in the agreed


implementation plan (Annex 6). Agreement was obtained at negotiations that GOP would
implement the Project in accordance with the agreed implementation plan; and would by
January 31, 1997 and by each January 31 thereafter review and update the implementation plan
in consultation with the Association (para. 6. 1).

D. Status of Preparation

4.25 The Project is in an advanced state of preparation and hence proposed project
activities would commence without undue delay. Preparatory activities for the project, financed
by a Project Preparation Facility (P916-0 PAK), include:

a) initiating the consultancy for developing accounting principles, standards and a


financial reporting framework to guide the detailed systems design;
b) establishment of the MIS organization structure by appointment of a computer
professional as General Manager MIS and other key staff in the MIS wing;
c) undertaking a training needs analysis for provincial government staff including
users of financial information, accountants and auditors;
d) training for MOF, provincial and PAD's HRM, MIS and training institute staff;
e) preparation of detailed designs and tender documents for civil works for site
preparation and training facility renovation works; and
f) project management training and assistance with setting up project management
systems.

4.26 The project's Planning Commission FormnI (PC-1) has been approved by
ECNEC. Consultants are selected for the accounting standards and systems design consultancy.
(The scope of work is summarized in Annex 3.) It was agreed at negotiations that PAD's
appointment of the accounting standards and systems design consultants (and of IDA to issue its
no objection) would be a condition of Credit effectiveness (para. 6.2). The project management
directorate is in place and PAD is in the process of recruiting key technical personnel. It was
agreed at negotiations that appointment of the General Manager (MIS) to the satisfaction of IDA
would be a condition of Credit effectiveness (para. 6.2).

E. Project Sustainability

4.27 The sustainability of the project would largely depend upon project ownership and
commitment to project objectives. Ownership is strengthened as the project builds upon
initiatives already taken by PAD to computerize accounting. PAD has extensively discussed its
development strategy internally within the department, including with middle management, to
attempt to build a broadly based consensus. Under PAD's direction, project preparation has tried
to develop participation through thoroughly canvassing user needs, and the development strategy
has obtained the commitment of federal government and three of the four provincial
governments, who would be directly involved in guiding and monitoring the project through
- 29 -

membership of the Steering Committee. Participation in the project's implementation includes


Pakistan's professional accountancy bodies. Technology changes would be institutionalized
through recruitment of specialists, departmental reorganization and structured training.
Establishment of an MIS wing would provide the necessary technical skills for systems
development and maintenance. Staff to be involved in systems maintenance would be initially
associated with systems development. In areas such as information technology where PAD lacks
suitable skills, it would recruit technical staff required for the implementation of the project from
the open market. Human resource management policies would be amended to facilitate retaining
specialist skills and to make better use of trained staff, and further institutional support would be
arranged through training. Training would be extended to provinces and executive departments,
to provide the skills to better use the improved financial information, thereby reinforcing the
future demand for such data. It is recognized that systems operations will have an ongoing
impact on recurrent costs, estimated to amount to about $1.3 million equivalent per annum. This
will be provided for in the armual budget after the project is completed. Increased participation
of the private sector would also help ensure sustainability. PAD has confirmed its intentions to
involve private sector audit firms in the public sector,while remaining within the context of the
Auditor General's responsibilities under the Constitution. IDA has already recognized that
completing automation of all 95 sites will require a follow-up project, which will help further
institutionalize the changes introduced in this project.

F. Accounts and Audit

4.28 PAD, Planning Commission and MOF would maintain separate accounts for their
respective parts of the project, and would keep all the documentation including that for the
Statement of Expenditures. PAD would prepare consolidated project accounts annually. IDA
would require annual audit reports from external auditors (independent and suitably qualified) for
project accounts with a separate opinion on the Special Account and the Statement of
Expenditures. The Audit Reports would be submitted to the IDA within six months after the end
of a financial year. In order to assure transparency and independence, PAD has agreed that it
would engage a private sector audit firm for this purpose, subject to the concurrence of
government. PAD would prepare and submit to IDA within six months after the close of each
fiscal year fully audited consolidated project accounts including an auditor's opinion and report
for the project, SOEs and Special Accounts, undertaken by auditors satisfactory to IDA.

G. Monitoring and Evaluation

4.29 Significant performance indicators and project milestones (para. 2.10 and Annex 8) will be
used as a basis for monitoring and evaluating the project. A thorough mid-term review would be
incorporated to assess performance achieved, and to review the appropriateness and continuing
relevance of the project's design, including taking account of technology changes. PAD has
developed a project implementation management system to monitor progress. A summary of its
resulting implementation plan appears as Annex 6. Quarterly progress reports would be provided
to IDA. A mid-term review would be scheduled three years after credit effectiveness, to coincide
- 30 -

with the completionof the pilot implementationphase,would be conductedby PAD, Planning


Commissionand MOF with IDA. Performanceas assessedduringthe mid-termreview wouldbe
an importantconsiderationfor preparationof a futureproject. Agreementwas obtainedat
negotiationsthat PAD, MOFand PlanningCommissionwouldprepare,by April 30, 1999,a report
evaluatingprogressto date,includingrecommendationsto enhanceimplementationof the project,
whichwould form the basis for a mid-termreviewby June 30, 1999 (para.6.1). In additionto
Headquarterssupervisionfor the project,the anticipatedheavysupervisiondemandswouldbe
internalizedto the extentpossiblethroughuse of consultancyfirmsto assistchangemanagement
and for institutionaldevelopment.

4.30 A senior levelpanel of internationally-experienced


expertswould be constituted
to meet at least annuallyand advise the govermmenton ways to continuallyenhance the project's
contributiontowardsachievingits visionfor financialmanagementand public accountability
(this panel would reportto the steeringcommittee).The panel of expertswould compriseat least
three internationalexperts,having amongthem expertisein GovernmentAccounting,
GovernmentAuditing,and InformationSystemsDevelopment. Preferencewould be givento
officersservingin (orjust retiredfrom) SupremeAuditInstitutions/Govenmment Accounting
Organizations.The panel may also includetwo or three local counterpartexperts. Agreement
was obtainedat negotiationsthat PAD would establishby December31, 1996and retain during
the implementationof the project,an internationalpanel of expertswith membershipand
responsibilitiessatisfactoryto IDA (para.6.1).

4.31 In view of the significantcomplexityof the project,Bank staffand consultant


supervisioninputsare expectedto be high and atypicalas comparedto average,but comparableto
othersimilarprojects. It is estimatedthat the requirementwill be in the range of 25-30 staffweeks
per year as indicatedin the supervisionplan attachedat Annex9. Supervisionwould include:

a) generalportfoliomanagement- reviewof procurementand consultantcontracting


documents,progressreportsand correspondence;
b) formalreviews- participationin the mid-termand otherreviews;and
c) participationin regularprogressmeetings(by local consultants);
d) routinebiannualsupervisionmissions.

4.32 Two supervisionmissionswouldbe necessaryannually,eachfor a periodof two


weekson average.Supervisionmissionswouldnormallyrequireparticipationfrom the task
manager,auditing,accounting,humanresourceand informationsystemsspecialists.Supervisionof
the policy supportcomponentwouldrequireparticipationfroma macro economist.Total staff
inputsfor thesemissionswouldbe about20 staffweeksper year. The proposedlevel of
supervisionincludeslocalas well as Headquartersinputs.The use of localconsultantswould
reducethe total costsof supervision.The continuedhigh levelof supervisiontowardsthe end of
the projectreflectsthe timingof implementationof the pilotsystemsand theirreplication.
- 31 -

V. BENEFITS AND RISKS

A. BENEFITS

5.1 Benefits would include improved, timely, accurate and consistent financial
information from the 21 automated sites to assist resource planning, cash management, budgeting,
management and control at provincial and federal levels of government, and improved fiscal
information flows for macro-economicmanagement. The improved financial informnationwould
assist Government in its efforts to complete fiscal adjustment. It would also provide a basis for
enhanced governance. The project would also set the stage for subsequent initiatives to improve
government financial reproting and auditing.

5.2 Basic accounting information underpinning financial management decisions would


be prepared according to enhanced accounting standards, thereby providing the basis for more
informed decision-making. Financial monitoring reports would be geared to users' needs, and
would incorporate information presently missing such as budget and variance information, and
details, by project, of development expenditure. This improved financial infornation would enable
strengthened management and monitoring of public expenditures, and hence assist improved
economic performance. Systems would provide the information required for cash flow forecasting,
thereby improving cash management and reducing the costs of short term borrowing.

5.3 Government financial management performance would benefit through


strengthened audit, by introducing modern audit techniques, reporting formats and quality controls.
Financial management skills within government would also be developed by training, by improved
human resource management policies, and by making greater use of the resources and capacity of
private audit firms. Such improvementsin financial management would gradually increase the
effectiveness of public expenditures.

5.4 Governance would be assisted by the improved financial infornation and systems,
which would provide clearer linkages between budgeting, use of resources, internal controls and
accountability. The International Federation of Accountants considers that sound accounting is the
first line of good governance. As the project would address many of the weaknesses in the present
arrangements for government accounting, it would lay a stronger foundation for improved
governance. Greater capacity and independence of governments' external audit would enhance
transparency and accountability,thereby further assisting strengthened governance.

5.5 Assistance to MOF and the Planning Commission would enable the government to
better fulfill its redefined role by increasing capacity to formulate and monitor policies for
deepening macroeconomic and structural reforms, and by identifying the institutional changes
required for better coordination of such policies.
- 32 -

B. ECONOMIC ANALYSIS

5.6 The following aspects of the project were selected from the range of possible
alternatives in order to achieve a cost effective solution to Governments' financial information
needs, and to provide a set of efficient and effective tools for public expenditure management:

a) the financial systems improvements would initially focus upon improving the quality
of accounting and financial information, thus strengthening the platform for existing
financial management and control procedures, and all subsequent improvements
thereto;
b) the project would address a major structural weakness in present arrangements by
separating functional responsibilities for accounting and audit, thereby creating
independence which would enhance the contribution of both functions to improved
public expenditure management;
c) the project includes measures to increase institutional capacity through amending
manpower policies, training, use of the private sector in areas of comparative
advantage, and technical assistance, to enhance the development impact of improved
financial information, and to ensure sustainability of the improved procedures;
d) financial systems would be prepared in the context of an overall information
architecture for government fiscal management, to ensure they are integrated amongst
themselves and with other Government systems, and to avoid overlapping or
duplication of functionality;
e) the technological approach proposed in the project, based on distributed, OPEN and
scaleable systems, strikes a balance between large mainframe systems which would
be cumbersome and expensive and other PC-based options (e.g. stand-alone PCs)
which could be under-powered and not scaleable to sites with a large number of
transactions; and
f) the phased implementation strategy of the computerized financial systems, restricting
the implementation to 21 out of a total 95 sites, is a prudent approach to managing
implementation risks.

5.7 The total cost of the project amounts to approximately 0.25% of annual public
expenditure in Pakistan. The benefits of even minor improvements to the efficiency,
effectiveness or management of public expenditure, which would arise from improved financial
information and control, would exceed project costs. The net development impact of the project
is therefore expected to be positive. The fiscal impact of the project's cost would be negligible.

C. RISKS

5.8 Due to the extent of change envisaged, this project should be considered as high
risk. Although identified risks and mitigating measures are summarized below, as the project
would address sensitive areas related to control and reporting of financial transactions, would
introduce structural changes within PAD, and would install new technology, reluctance and at times
- 33 -

even resistanceto implementationshouldbe anticipatedto occur,andthe full achievementof


objectivesshouldthereforebe considereduncertain.

5.9 The main categoriesof risk facingthe projectare:

a) Vested interests. By improvingthe quality of financial systems and reporting,the


project would introduce controls which would affect those who benefit from
weaknessesin present arrangements.Theseinterestsmay act to delaythe project,or to
divertit from its objectives. The followingwould assistto managethis risk: (i) support
fromthose seniorlevelsof governmentwhichdo acknowledgethe need to improveand
updategovernments'currentfinancialsystems;(ii) monitoringand guidanceby a panel
of internationalexperts- drawn from otherSupremeAuditand AccountingInstitutions
- to provide externalperspectivesand professionalpeer pressure;and (iii) the phased
and relativelygradual introductionof new systems, allowing a wider appreciationof
benefitsto develop,enhancingownership.

b) Resistanceto change.Organizationalrisks include PAD's capacity for managing the


processof change,especiallythose aspectsrelatedto its unionand staff concernsarising
from the introductionof new procedures,technologyand the functionalseparationof
accountingand audit. The Auditor Generalunderstandsthe need for leadership,for
clear directionand for keepingstaff fully informedand involved,to reducetheserisks.
A change-management specialistwould adviseon processesand appropriateactions.
The SteeringCommittee,comprisingkeyusersof financialinformation,would assistto
ensurethat end-usersare fully involvedand buy into the proposedchanges. The project
includesextensivetrainingand retrainingopportunitiesfor staffwithin and outsidePAD
to preparefor change.

c) Technology development and operation. Risks related to the development and


operationof computer-basedfinancialinformationsystemsarise as staff have limited
technicalskills and experienceof technicallymore complexfinancial systems. These
risks are mitigatedsomewhatby the fact that PAD alreadyhas someprior experienceof
developingand operatingcomputersystemsin its five AccountantGeneralsofficesand
several District Accounts Offices. These offices would also face less difficulty in
installingnew systemsthan a green-fieldsite. The project also supportsstrengthening
PAD's capacityto managetechnologyby creatingan MIS Wing,headedby a General
Managerrecruitedfrom the open market. Certainotherkey technicalposts would also
be filled by local staff on contractterms. The developmentof new systemswould be
underthe controlof internationallyexperiencedconsultants,with PAD staffinvolvedin
developmentto preparefor eventuallyoperatingand maintainingthe systems.

d) _ . Obtainingthe benefitsof improvedtechnology


requiresskills to controlthe qualityof financialdata inputs, and to apply the financial
informationgenerated. The project includes three measures to address the risk of
inadequateskills. Changesto HRM policies,to provide a structuredcareer path for
accountingand audit specialists,would underpineffortsfor institutionaldevelopment.
- 34 -

Upgradingof skills wouldbe addressedby improvedtraining,includingfor the usersof


financial information,and consultantswould providetechnicalassistance in specific
aspects. The projectwould supportgreaterinvolvementof local private sectorfirns in
public sectorfinancialmanagementto furtherincreasecapacity.

e) Project management. The complexityof the project, and the likelihoodof delays in
decision-makingand implementation,increaseprojectmanagementrisks. A committed
and stableteam of seniormanagementwithinPADis considereda criticalfactorto deal
with this risk. Many of these key staff have been involvedduringprojectpreparation,
thus developingownership. Project conditionalitylimiting key staff transfers would
help to retain a stableteam. Thereis an existingProjectDirectorate,with experienceof
implementinga componentof the Third TechnicalAssistanceProject (Cr.1755-PAK)
and this project's preparation,whichwill be strengthenedfurtherand given logistical
supportby consultants. Monitoringarrangementsinclude a detailed implementation
plan,performanceindicatorsand intensivesupervision.

f) Policy Changes. There is a risk that policy changes or revised administrative


arrangementscould be introducedwhich would disruptthe project. To mitigate this
type of risk, the governmenthas approveda visionstatementfor financialreportingand
auditingwhich is fully in line with project objectives. Two final risks are delays in
initiatingthe economicmanagementstudiesandof weak commitmentto implementthe
policy and institutionalchangesrecommendedby them. To mitigatethese risks, terms
of referencefor key studieswill be submittedprior to negotiations,and actionplans for
implementingtheir recommendationswill form part of the annualreview and updating
of the projectimplementationplan in a mannersatisfactoryto the Bank.
- 35 -

REACHEDI
VI,AGREEMIENTS

6.1 inn the followingwere agreedwith the GOP:

a) GOP shall preparea plan for the separationof the AuditorGeneral's accountingand
audit functionsby July 1, 2000, and to achievethe separationby that date, shall: (i)
completebifurcationof the audit and accountingfunctionsby June 30, 1997;(ii)
completedetailedproposalsfor the functionalseparationof audit and accountingby
March 31, 1999;and (iii) thereaftertake all measuresnecessaryto effect the
separationof these functions.(para. 3.3);

b) PAD would: (i) employstaff with qualificationssatisfactoryto IDA in the key posts
of ControllerGeneral(Accounts),DeputyAuditorGeneral(GovernmentAudit),
GeneralManager(MIS),DirectorGeneral(HRM),DirectorGeneral(Training); (ii)
designateand maintaina ProjectDirectorsatisfactoryto IDA, with overall
responsibilityfor projectimplementation;(iii) employwithin the ProjectDirectoratea
ProjectCoordinatorand a DeputyProjectCoordinator,with qualificationssatisfactory
to the Associationand otherstaff necessaryfor the carryingout of the Directorate's
functions;and (iv) that these key staff, subjectto satisfactoryperformance,would be
retainedin post for a minimumof three years (para. 4.6);

c) MOFand the PlanningCommissionwould set up by December31, 1996,project


managementarrangementssatisfactoryto IDAfor the studiescarriedout andthe short-
term technicalassistanceprovidedundertheirrespectivecomponents(para.4.7);

d) GOP would implementthe Project in accordancewith the agreedimplementation


plan; and would by January31, 1997and by each January31 thereafterreview and
updatethe implementationplan in consultationwith the Association(para.4.24);

e) PAD, MOF and PlanningCommissionwouldprepare,by April 30, 1999,a report


evaluatingprogressto date,includingrecommendationsto enhanceimplementationof
the project,whichwouldformthe basis for a mid-termreviewby June 30, 1999 (para.
4.29);

f) PAD would by December1996,establishand retain an internationalpanel of experts


with membershipand responsibilitiessatisfactoryto IDA (para.4.30).

6.2 Beforecredit agrement effectivenessthe followingactionswould be completed:

a) appointmentof the accountingstandardsand systemsdesign consultants(para. 4.26);


and,
b) appointmentof the GeneralManagerMIS (para.4.26).
- 36 -

6.3 BRcmmndstion.On the basis of the aboveagreements,the proposedproject is


suitable for an IDA Credit of SDR 20.1 million(US$28.8million equivalent)to the Islamic
Republicof Pakistan.
AtNlEX I
PageI of 6

PkM
ii GCoermet of Pakidtan
Fhiancil Fbponr9i*al Aud^iung
Prqoj klwbuqwoVing
Compm odS Cos fluiny
P_ect

(PRMMElo) (uss MEon)


% %Tgtal % % Tola
Foi E ForeIgn Obe
Local Foreign TOtW Excange Costs Local Foreign Tota Exucamge Casts

Accountingand Fiancia Raposting


A. Goermnmaen
A.na.ng andPlcy SLridafds 13.524 10.350 23.874 43 2 0.392 0.300 0.692 43 2
SyshmnsDevelpnmen 160.806 240.084 400.892 60 34 4.661 6.959 11.620 60 34
SuhbStid 174.332 250.434 424.766 59 36 5.053 7.259 12.312 59 36
B. Governet Audting
Audi Systnis inproveent 84.360 65.880 150.240 44 13 2.445 1.910 4.355 44 13
Syleun Develkqiqpn-i 23.853 54.560 78.413 70 7 0.691 1.581 2.273 70 7
subtl" 108.213 120.440 228.653 53 19 3.137 3.491 6.628 53 19
C. MHamaResource Manageonr (HiRE)
Orgarmsrn.Ld Deipm len 15.674 3.002 18.676 16 2 0.454 0.087 0.541 16 2
System DevekOpank 7.717 18.060 25.777 70 2 0.224 0.523 0.747 70 2
Sublolal 23.391 21.063 44.454 47 4 0.678 0.611 1.289 47 4
0. Tdr*uh
Prodssnum rrainwg 20.604 34.042 54.f46 62 5 0.597 0.987 1.584 62 5
Sub PrlmiunAlI daiing 11.275 9.007 20.282 44 2 0.327 0.261 0.588 44 2
FacFies 104.033 28.559 132.593 22 11 3.015 0.828 3.843 22 11
Sdtbkdl 13fi911 711N 207.520 35 18 3.939 2.076 6.015 35 18
E. Adis lralian
MSming 91.503 21.815 113.318 19 10 2.652 0.632 3.285 19 10
Prnic Liredorale 55.070 11.729 66S799 18 6 1.596 0.340 1.936 18 6
PAD OfficeAudomnaion 9.886 26.446 36.333 73 3 0.287 0.767 1.053 73 3
S-Mbow 156.460 59.990 216.450 28 16 4.535 1.739 6.274 28 18
F. 1bnh Pocy Support
Eauunuid PukLy SklaSh 19.320 17.871 37.191 48 3 0.560 0.518 1.078 48 3

Asaisl"uce go P-namg Coxrnmiesin 11.592 10.723 22.315 48 2 0.336 0.311 0.647 48 2

Subtka 30.912 28.594 59506 48 5 0.896 0.829 1.725 48 5

Total BASELINE COSTS 629.220 552.129 1.181.348 47 100 18.238 16.004 34.242 47 100

PhysialCoiinjencies 16.531 15.637 32.168 49 3 0.479 0.453 0.932 49 3


PriceC4x enawies 168.400 118.608 287.006 41 24 1.384 0.611 1.995 31 6
TotalPROJECT COSTS 814.151 606.373 1.500.524 46 127 20.101 17.068 37.169 46 109
ANNFXI
hac 2.l16

i p Fi_ lin U" M in G 6_ d P _036to


fmco 8,
bYvo - "Cl

Bas Co" FMm . C.a


o3S mm
3611111 Wm3 am 411101 Om Tomd 66*37 Wm7 Om 91I.1111 Om 1 612 low

AL GW#.S MACONWAW§ aM Fesedi bprn.g


AC , 183ar3P0A
I,D5 *4 4U-30 - 23614 0.300 0252 0140 - - 0652
S w __ ISIIwakwinsi111,413
57.077 6ZCS1 2301 33SS4 0.920 4032 GAI46 1.664 1.16 6072 0964 0606 11620
_ubbom 271W 65771 67461 2461 33294 206 424 M6 0.7D 16o 1956 6012 0964 060 12312

A.l,S h _ - 17.11 35.44S 3S.79 40.743 18320 150240 - 0517 1 an I0 1.181 0560 4355
s,- DM.,rn4g 1111.169 2.33 SUN UN9 6391 78L413 - 0.324 0069 1.564 0156 0156 2273
s*0d9 2901i 3IL 11s0.501 4S134 24711 226.613 0841 1.110 2623 1 337 0716 662
C. Ihea U.emwc*U 96p35"Po
O __ _ 7-745 2164 2.164 2.164 2.164 2276 16676 0224 003 0053 0063 0063 0066 0541
- 1159 11735 18726 107I 16 25717 - 0034 0340 0311 0031 0031 0747
' 7745 3323 1330 12110 3242 1354 44454 0224 O009 0403 0374 0094 0097 1268
D.T _
ra sei." _ 166W 14616 12117 5639 4352 0638 54646 0484 0429 0351 0169 0126 0004 1564
Sub INLA4361
S-_-^; 10.617 ISo 1.611 1613 - 20262 0123 0310 0048 0049 0(64 - 0646
F~,s 36.214 22.625 27.241 33016 7.305 7.105 132.5W3 061 0656 0.790 1102 0.214 0206 3643
6S1.217 43127 41.044 4535 11611 7.11 207.520 1.45 1.395 190 1320 0395 0.230 601S

"MV05V ias0 32 916 19567 1517 14757 1427 111318 0.523 094 0.566 056 0426 0244 3265
f gpUma
aa 11245 7m3 7.113 2e36 8765 6L27 6s.7s o32. 0227 0227 0.604 0263 0269 1.3B
PA D: - 4353 7962 67" 3447 5692 30.333 - 0.125 0232 0253 0274 01609 1053
111 24 35412
3451 49142 38W0 235S36 216.450 3 1.307
' 1 1424 os0s 0669 6274
F. 0 Po"p Supoad
Em p
Pokey_ _ 7.43 7436 7436 7436 7435 37.191 - 0216 0216 0216 0216 0216 1076
AssanceiPLwd Cumm - 22315 - - - 22.316 - 0647 - - - 0647
- 23.S9 7.43 1 .436 7.6T 7.439 56 - 9.662 0.216 0.216 0216 0216 1726
T ammcoiTS 11S47 221.Z 6 2m&Si 414135 1363B S7J4 I.t8t.346 1347 S,410 590 12.W9 4010 Z547 34242
P lC_6bV- 711 31Q 53 lil 1663 1354 32 US 0611 0.162 0.t 0.440 8103 00W GM3

Local4546 16204 3036 4S.6 32.04 27.316 15223 132 0530 OW 1322 09Q3 0792 4.516
F_mn 0614 4f45 4S91 63S9 1770 8673 210W2 &018 0123 0146 016S 010 002S O611
S _ _"MbdLibm S.1510 22733 3636I 51.9S5 35Q84 2Q1t3 179235 0150 0.65 1.S 1.507 1G3C DS17 SIW
owedrnm 2.21Z 11C3 1416 57= 143S 7.6 10.713 4.M 4317 4555 4.913 0696 4636 -3M20
PlwA C.gmacs 7.434 34.43 49.511 US3231 Se1 36.11 26705 8056G 0343 0470 05S4 0 343 0179 1.96S
Tmr.oSTSrcvsi 123121 25D952 25 SW 539.5t5 tSZO 127.303 .OSD524 1434 663 am 13063 i 457 2S23 37.11

TOWN 42 am 7.O0 51254 1.31 8613 724721 am 0213 0Ga 1241 1iLO4 a0 I.7
F _ebp g1S3 U 27.562 m5s4 266D GRAM 38743 _D 1.690 1.374 2515 7.23D 1.62 OLM 1III
IG
ANNEX I
age3ofr6

Pakistan-
Pro lot Iroving
Ior Fminaial Reporting and ALidting in Govefrmlent of Pakislat
Project Conipoiteitts by Year -- Tota ls
icluditig Contingencies

Totals Including Conlingencies IPRS Million) Totals Including Conxtingencies (USS Million)
-9617 97198 W99 S9/00 00101 01102 Total 96197 97199 OW19 991/00 00/01 01/02 Total

A. Government Accounting and Financial Reporting


Accounbi PlicyStanddads 10.800 10.188 6.084 - - 27.072 0.300 0.270 0.154 0723
Systems D)v.aogutldl 17.971 67.234 81.991 271.277 45 627 28.084 512.184 0 499 1.779 2.070 6.568 1.059 0.623 12 598
Subtotal 28.771 77.422 88.075 271.277 45.627 28.084 539.256 0.799 2048 2.224 6568 1 059 0623 13321
B. Govenuttent Auditinag
Auysat SnysMInV kileill - 20545 44.153 49103 58053 29769 201 623 - 0544 1115 1.189 1347 0660 4854
SySkin; DIWI:h.lHWatI 13430 3.898 67.529 6C09 6841 98372 0355 0098 1635 0155 0152 2395
Subk,jl - 33981 48051 11G.632 64722 3GG09 2J999G - 0899 1213 2824 1 502 0812 7250 '
C. Hurnitn Mesuu. .c MAii.agewne.it HRU)
IgS eJlUk.W
0 bl 8.194 2.536 2.726 2.919 3120 3.469 22.964 0228 0.067 0.069 0071 0072 0077 0.584
Syslems Devedpognent - 1.358 15.193 13.508 1.334 1.368 32.759 0O036 0.384 0.327 0.031 0030 0.808
Subtoul 8.194 3.894 17.919 18425 4 454 4.837 55.723 0.228 0.103 0 452 0.398 0103 0107 1.391
0. TraIing
Potlsaomin .aa.101 17.757 17.134 15.002 7.818 6211 1.279 65.190 0.493 0.453 0379 0.189 0144 0028 1.687
SubProkesiuaw l.aungll 4.624 12.287 2.116 2.260 2.701 23.995 0.128 0.325 0.053 0055 0063 0624
Feokees 32.864 27.170 34.521 50.243 10.541 10.638 165.997 0913 0.719 0.872 1.217 0.245 0.236 4.201
Suboal 55.285 56.591 51.639 80.325 19.453 11.917 255.191 1.535 1.497 1.304 1.461 0451 0.264 6513
E. Adminiatration
..usMi 19.489 38489 24.558 26.218 20.982 12589 142325 0.541 1.018 0620 0635 0.487 0279 3.581
Proed Darectracte 11902 9175 9.855 27.852 14055 14.252 87091 0.331 0243 0249 0.674 0326 0316 2139
PAD OfIe AuatMa,on , 5.009 9.606 10.871 12.202 7.690 45.377 - 0133 0.243 0.263 02283 0.170 1092
subu" 31.390 52.673 44.019 84.942 47.239 34531 274.793 0872 1.393 1.112 1.572 1 096 0.768 6811
F. Other Poky Support
Econonrs,lePySlu.Jsb 88.623 9.260 9.904 10.585 11.325 49.697 0.228 0.234 0.240 0.246 0251 1.198
Assiance o Plwaaiwj w.uainission - 25.868 - - 25 888 - 0.684 - - - - 0.684
Subtotal - 34491 9.260 9.904 10.585 11325 75.585 - 0912 0234 0240 0.246 0251 1883
Totl PROJECT COSTS 123.621 259.052 258.963 539.505 192.080 127.303 1.500.524 3.434 6.853 8.539 13.063 4.457 2.823 37.169

311196
Pagc4 of6

P60
Pfqed k. k h ft Fwa R _ MWAWn
dw _ d PA
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S"W- _ D _ Dev_ *Xu. P=f.we F-W -W3 V" Dw-6" C b.w TOWa fw -xn

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3 1 - 0.148 -A 010--I135 04036 a 020 - -I7611


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C _.WHMO-,¢ .-
1.574 - §574 0689 a 338 a021 0800 74S5 S0 0 37S
fiebw S- .. - i350
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45
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49
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famf.dm 0200 1.4s 2074 11s 0.0- ssn 1032 027S3 ff eas .02 oun Gall esos4 Din 17.2 27 o na

. . :~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~iIA
ANNEXI
Pagc 5 of'

Prpd lx kiWrovngFdwns Rpo"g nd AuSag In Govesnhnwl of Palusin


ExpenditureAccounts by Componnls - TotalsIncluding Contingences
fUSSMAn)

GovenmentAccountingand Olher PolicySuppon


FIancial Reponing GoeWnmnent
Audutmg HumnnResourceManagemnt1 framing
Accounting Audit (HRM) Sub Admn.istralton Econo-ic Assistance
andPolcy Systlem Systems Systeni Organisatinal Systes Profesionai Pfelssiona Project PAD Oicfe PoWliy to Planning
Standaids DOx_iopunt bnl ro ment Eleop nemi t)Oetopmc.i Deopmen n t Tainmg T-ue i Faciliies MISWing Diecltrat. Auointion Studies Con...ssion T1al
I Macstwm Csts
A ViWks
Co5t SiiPicyain - 0269 - 0096 0200 - - OI 51 0 56
Renooason - -- - 0322 - 0 322
Suslls - 0.29 - 0 - 0020 - - 0322 0151 - - - Bu
8 Goads
0xcaFumdtss&Eipn*T - 0435 0165 0033 - 1216 0038 0030 - 1il6

PuiccsAhsSuh.-c 3i875 - 16 -i 066 - 0725 0354 0022 0840 - 7SiI


Veaks - 1- - - - - 0053 - a-003
jel* . - - 0a 09004 - - - 0133
1S&6 - 4 110 - 1 t3 - 0 0 039 2 034 0 392 0105 640 10 012 ,
C Sentes -
eat.ob
,c -j 2 03ft - - - - 2 036
AssI.cvo - - 2 303 - - - 2303
Cu_aii5 - - - - - - - - - I419- 1 419
A*stw rl - - - -- - - 0 142 -- 142
Sola - 2093 2.3 - - - - - - 1419 0142 504
9-
D.lecIca Assitance
wneu AiMOA.uslw 0.303 0171 - - - - -- - 0450 I-529
mzauls.V.u aoiool
.l 0120 4065 1644 - 0536 0036 0310 0349 w060
Pi"scySugigisit - - - - - - - - - 1.126 0681114 16 3
.aot 0423 4150 1.644 053 0.036 0310 0349 - - 0.450 I I98 o84 10491
C.Tuing
TiasyoigOcoosca -- 0S4 - 0820 1 720
TrMOgLeOaly - - - - - - 0262 - - ObQ - - 0 8e
sosal - 090 - 1102 - 0606 - 2616
F Flehrameg ofPPF 0300 - - - 0046 - 0100 0029 0011 0204 0096 0792
TOWilsnssunsCols 0o7m 11.290 4684 1931 0.564 0715 1552 0.376 2371 2.772 0793 0640 119t 0664 306S94
L RacuinoeCost
A bic---da - - - 0595
a 0359 - - 0955
a i_ ar I 31300 0464 0093 - - 0687 0213 0043 0252 3252
C Lii-a Lin- - - 0 70 - - - O 7D
I- u 135 0 247 0 073 - 0 943 - 1 3W
tal ews,ui. 1390 0464 0093 0131 0247 1630 0il0 1346 0252 6 475
hoaPROJI.I LU5tS o01m 12566 46054 2 395 0564 0608 1687 0624 4201 3581 2139 1092 It 048 371N6

Tsies - 0775 - 0349 - 0128 0004 0264 0074 0025 0i86 - 1711
Fina. Gange 0300 7.406 2.074 161 o.on 0172 1032 0273 0a66 0662 0372 0611 0566 0.325 1i0o

sbaes kg" Oet

31196
ANNE
Page6 of 6

PrOja kw kivWnng Famt RtaPM NWAsig naGovaninuat d Paalan


Componntus by Ftuancla

(PRS 3WOn) JUSSftion)


Oa'aanuuut u8 Localtovna11 ci Ldocal
Pakistan IDA Total (EacL Duts & Pakistan IDA Total Foat (Eci. Dautas
Amount % Amount % Amount % For. Each. Toots) Taoes Amnount % Amount 7 Amount V. Each. laes) la.*e
A Goastnersl A;ountg a.ndtfmanciul Repotding
AutgaW Pa.iySIu-,u.ds 27072 1000 27.072 1.8 £0800 16272 - 0723 1000 0723 19 0300 0423
SySIta
t9lpas r 8lo9 174 42298t 8t26 512 1N4 341 299651 120544 31990 2103 167 10.495 8133 12598 339 7405 4419 0775
ShLad so81998 165 450.057 835 539256 359 310451 106816 31.90 2103 258 11218 84.2 13321 358 7705 48t42 0775
e Goenmew.nAudWitag
A,.e:.y,i 1Ii4 . -I 0o00
i :01 t23 1t000 201 623 £34 b4 344 II 275 0 000 4b54 1000 4 554 2J I 20/4 2 /bO
S, s e.3lc c,u- 34 WI£ 35 1 63 812 64 9 98 372 66 69 262 14 t3 24141 0 523 34 3 £ 573 65 7 2395 64 1622 0 J6 0 349
Ssblotu 3456£ II£5 265435 955 29999% 200 15360 1323242 14147 0623 213 6427 697 7250 19S 376S 312 0349
C. Hsenai euto i listS)
Ortatasaa3 W-k'eWle - 22.964 tOO£ 22.964 15 3636 £9326 - - 0.564 200r0 0584 16 0093 0491
Sysfrttiedons, l 9257 28.3 23502 171 32.759 22 23.233 4351 5175 0223 276 0 585 72.4 0808 22 0572 0107 0128
SbutoLaa 9257 261 46466 834 55 723 3.7 26t871 23677 5175 0223 160 1 168 8 0 1391 37 0665 0 598 0 128
0.Traemtn
Pwless.wultI a.- 5754 88 59445 912 65219 43 39256 25.802 0141 0139 8i2 1548 918 1687 45 1032 0651 0004
SubPvo.-c.na RJIa.: 986£ 41.1 14.134 589 23995 16 10319 13676 - 0.247 385 0378 805 0624 17 0273 0352
FacAas 85.35 51.4 05°9 46.6 165917 1121 36037 129566 10394 2 126 50.6 2.075 494 4201 213 o08 3049 0264
S.MNA 101.013 386 154176 60t4 256.191 270 65612 159.045 10535 2522 386 4002 624 6.513 175 2194 4051 026i
E. AdAllreaon
Ass V5no 36.822 257 105.704 74.3 142.325 9.5 25031 114.456 2110 08t96 251 2U83 749 3.58£ 96 0662 28t44 0074
P lqdraO'te 5625i 848 30.833 354 87.091 5S 15306 70895 0891 1.371 641 0768 359 2139 56 0372 1741 0025
PAD OLCOsA~6lIa1. 17£777 390 27.700 610 45377 30 33649 4803 6925 0420 3it5 0672 6I 5 2092 2.9 0all 0113 0168
subiwal 110558 402 164237 598 274.7 16.3 73988 190.1i4 10624 288U 3.95 4 123 05 68812 £83 284 4868 0267
F. Der Poay SuppoRt
Ecorro Ps S4"., 0eo0 49897 2000 4.9697 33 23564 26133 1
2296 100 0 2 196 32 0 S 0630 -
A.Ustar- o P .. _ c. 2586 200.0 25
96 17 12 284 13514 . 0 684 1000 0 664 18 0 325 0 359
61blotal 0000 7-5565 £000 75.565 50 35384 3971£ - - 3 83 1000 2683 0£ 0893 0990
Tot4aDl s wyne 344 5i6 23.0 1.155 93i 77 0 1500.524 100.0 6n 373 741 680 72 471 8 349 22 5 28.820 77 5 37 1689 00 0 17 0U t8 3135 1 78

3(2:96
43
ANNEJX
Page I of I
PAKISTAN

IMPROVEMENT TO FINANCIAL REPORTING AND AUDITING PROJECT

STAFF APPRAISAL REPORT

'GOVERNMENT OF PAKISTAN

VISIONSTATEMENT FOR FrNANCIAL REPORTING AND AUDITING


Draft Prepared by PAD

1. As Pakistan proceeds to open up its economy and free it from regulatorycontrols, the
need for good governance and modem financial management becomes paramount. Insteadof direct
intervention, the Government has to design appropriate fiscal and monetary responsesto changing
conditions, while in the context of a global economy, issues of transparency and accountabilitv
have become even more important. In this environment,the synergy of greater public-privatesector
partnership has to be eXploitedto accelerateand enhance the development process.

2. The effectiveness and credibility of government policies is critically dependenton the


availability of timely and accurate financial and management information, the existenceof a cadre
of competent professionals in the public and private sectors, a framework of financial and
accounting principles and proceduresdesigned according to internationally accepted standards,and
a system of public accountability that includes a strong and independent legislativeaudit function.

3. As part of its vision the Governnent intends to separate its accounting and auditing
functions and re-engineer its economic and financial management function to include as key
elements of its strategy:

- a modem accounting system designed according to internationally recognized accounting


principles and standards, functioning under the Executive, and based on modem information
technologyto ensure ready availability of relevant, accurate and timely informationrequired by
managers;

- a governance structure and legal framework consistent with international standards for an
independent comprehensive audit function which supports public accountability by timely
reporting to the legislaturefor effective and appropriateaction;

- increasing professionalizationof the elements of its civil services which deal wvithfinancialand
economic management, requiring key competencies in staff training and appropriatehuman
resource managementpolicies emphasizingperformnance,experience and knowledge:

- increasing partnership between the private and public sectors in their respective areas of
conmparaLtiveadvantage: and.

- adoptiLn improved standards for private sector linancial disclosure.

This drUiIltxrsion staternenL


mtould becounlrined
byvheGo%crnmentat projecinegotiations
44
ANNIEX3
Page I of 2

PAKISTAN

IMPROVEMFNT TO FINANCIAL REPORTING AND AUDITING PROJECT

STAFF APPRAISAL REPORT

SCOPE OF WORK FORACCOUNTING STANDARDS AND INFORMATIONSYSTEMS CONSULTANTS

The project will finance consultancies. computer hardware, software and training
required for the preparationof revised accounting standards and reporting framework,and the
design, developmentand implementationof elected high priority financialapplication systems at
selected sites. These application systems include a Core Accountingand Reporting System, a
Payroll and Pension System and a Cash Forecasting System.

2. The first phase of the systems consultancy would thus be directed towards the
following objectives:

a) revisionof accountingprinciples and standards to meet, as far as consideredpracticable,


with InternationalAccounting Standards:
b) revision of the financial reporting and accounts classification;
c) reclassificationof the chart of accounts to closely reflect users' financial needs;
d) definitionof reporting responsibilities between PAD and executiveagencies;
e) definitionof key informationfor trend analvsis of expenditureand revenue, and cash flow
forecastingsystems; and
f) establishmentof procedures for coordination and integrationof all financial information.
Particularattention would be given to PAD's requirementsfor receiving financial
infornation from other departments/agencies to feed into the accountingand reporting
system, enabling PAD to produce reports which fulfill the financial informationneeds of
the government(and particularly the MOF) completely.

3. The scope of work for the remaining phases of the Information Systems
Consultantswould include:

a) Preparationof the detailed functional design for the specified svstems: This would
include:i) analysis of the functional processes includingadministrativeprocedures,
transactiondocuments. forms and informationflows, data flow statistics, related to the
accountingand reporting,payroll. pension and cash managementareas currently in use
and/orrecommended by the project consultancies; ii) developing and defining a new
set of functionalprocesses, informnationflows, procedures.transactiontypes and
associated documents and torms. and related structuresrequiredto set up the new
systemis:aLndiii) developing,a full ftrncLiotialdesign for the computer svstems required.
includingtlle specitication ot the outputs reports. the input formats.transaction
Llocurnents.processini ancdcontrols for the systems requiredat various nodes of the
intormatioiitlow network. the interfaces Lnd data flowsbetween these nodes and with
external svstems.
45
ANNEX'
Page 2 of 2
b) Specificationof the technologzyarchitecture required for the implementationof these
systems: Thlisactivitywould include the developmentof specificationsfor the H/W
and S/W to be installedat the various nodes and the mode of interconnectionof this
l-lardwareand Software.

c) lnvestigationof altematives for application software:This would entail investigating


and ascertainingwhetherone or more off the shelf softwarepackages are available
which can meet the functionalrequirements of one or more of the systems,as defined
above.

d) Procurementof H/W and S/W: Project consultants will incorporatethe Hardwareand


Softwarespecificationsinto an RFP for procurement, developcriteria for the evaluation
of vendor proposals;assist the govemment in the tenderingprocess, in evaluating
vendor proposals,in the acquisition of the hardware and software,monitoringthe
installationand carryingout qualitv assurance during the testingof the hardware and
software procuredfor the project. In the event of a suitablepackage being identified,
projectconsultantswould develop terms of reference for a turn key project for
acquisitionand installationof the package (including any customizationrequired) and
acquisitionand installationof suitable hardware and softwareusing International
CompetitiveBidding(ICB). In the event of no suitablepackage being identified,the
hardwareand svstemssoftware would be acquired through intemational competitive
bidding and the developmentof the software and relateddocumentationwould be
contractedout to a local software house. In both cases the supervisionof the software
customization/developmentand implementation of the systemsat the first few (4-5)
sites would be the responsibility of the consultants selectedfor preparing the systems
design.

e) Svstems implementation:The Core information systemsdefinedabove will be


implementedin a phased manner. In the first phase the systemswill be implementedat
theAGPR Head Office,at an Accountant General's (AG) Officeat a provincial
headquarters,and at two District Accounts offices (DAOs)reporting to this AG. This is
referredto as the Pilotimplementation. In the second phase the systems will be
replicatedover the course of this project to a total of 21 sites including all Provincial
AG offices in Sindh.Punjab, NWFP and Baluchistan,and selectedDAOs within each
province. Systemsimplementation wvillinvolve: (i) preparationof an implementation
schedule, (ii) installationand testing of the hardware and systems software.DBMS, and
ApplicationDevelopmenttools etc.; (iii) installationand testing of the application
systems and trainingend users; and (iv) preparationof relatedtechnical and end user
documentation. Replicationof the system would involvepreparationof a replication
plan and scheduleforthe system for all designated sites. includinga check list detailing
tasksthat need to be unldertaken for replication of the system at tepical
, provincial or
districtsitc.%%orkiincloselvwith the H.-W.S/W venidorto ensure that the replications
aireoperauional andtraining of sufficiellt :ocalstaff capableof carryingout subsequent
replicatiolls.
46
ANNEX 4
Page I of 5
PAKISTAN

IMPROVEMENTTO FINANCIAL REPORTING AND AUDITINGPROJECT

STAFF APPRAISAL REPORT

INFORMATIONSYSTEMSARCHITECTURE FOR GOVERNMENT FISCALMANAGEMENT

A. Information Systems Architecture

1. Figure I showsthe overall Inforrnation Systems Architecturefor GovernmentFiscal


Management in Pakistan. This architecture showvsthe major functionalprocesses required to be
carriedout as part of governmentfiscal management. the agencies associatedwith theseprocesses,
the completesuite of informationsystems required by these agenciesto performthese functions and
the major data flows betweenthe systems. The high priority informationsystems.identifiedby the
diagnostic consultancv as being critical for the governments financial information needs are
indicated by the shaded boxes in this diagram. A brief description of these application systems
which have been selectedfor implementationunder this project is given below.

a) Core Accountingand Reporting System: The Core Accountingand ReportingSystem will


provide an integrated government wide accounting function and will encompass the
functionalrequirementsfor the budget execution and accountingprocessesand would cover
the appropriation, commitment, funds allocation, and payment processes for both the
investmentand currentbudgets.

This system would be the core financial management inforrnation svstem of the
Government of Pakistan. It will be used by: i) the Pakistan Audit Department(including
its subordinateunits) to perform the basic accounting functions: ii) the FederalMinistry of
Finance and the ProvincialFinance Departments to perform the processes associated with
budget execution, monitoring and control: iii) the Ministry of Finance to provide the
information it requires for cash management and to implement cash limits, as may be
required; and iv) the FederalPlanning Division and the Provincial PlanningDepartments to
obtain the statusof actualexpenditures on ongoing programs and projects.

The informationcontainedin the system data bases would providethe MOF and other core
financial agenciesa foundationfor a comprehensive managementinformationrelated to the
country's financial resources. The information contained in the data bases would be
available to other governmnent agencies on an as required/approvedbasis. In addition, the
system would provideuseful financial information to the ministries,spendingunits (in their
respective areas) to enable them to better manage their work programs. It will give these
departments the facilitiesto down load relevant and authorizeddata and perform required
analyses.

1he system \il[


x be desiunied in accordance with internationallyaccepted accountings
principles and standards it will be based on a double entrv accounting model. Such a
svstem would need to be comprehensive in terms of coverage and be a source of reliable
and timelvdata to becomea credible source ot inforrnationfor users. The Core Accounting
47
ANNEX4
Page 2 of 3
System will therefore be a ftilllyautomated system. with data captured only once as an
accounting transactionprogressesthroughltile system. This system, introducedalong with a
modem budget classificationsystem and alnappropriate chart of accounts, would enable
expenditures and revenuesto be recorded at a detailed level and relatedto specific programs
and projects. Data recorded at this level will then be directly available for use bv
arencies/spending units for program and project management. This data will also be easily
amenable to cross classificationfor financial and economic analyses. The introduction of
an automated accountingsystem would ensure completeness of data capture (that is no
transaction would be processedoutside the svstem) and rigorousapplicationof all relevant
financial controls to all transactionsprocessed by the system.

The System would have interfaces with external data sources on a periodic basis.
Establishing such an interfacewill ensure that financial data in the systemdata bases has the
coverage necessary to provide a comprehensive financial picture for the Government of
Pakistan. ,

b) Pavroll and Pension Svstems: The payroll of government employees constitutes a large
portion of the governmentexpenditures. The need for an automatedPayroll and Pension
System is evident in view of the increasing volume of transactions. The proposed payroll
and pension system will performthe full range of both the payroll and pension functions as
an integrated system and the payments processed will automaticallyupdate the accounting
data in the Core Accountingand Reporting System. The system will be designed to
incorporate governmentrules and regulations related to the payroll and pensionfunctions.

c) Cash Flow Forecasting and Financial Analysis System: One of the MOF's main
inforrnation needs is to establish a cash forecasting system for forecastinglikely flows of
expenditure and receipts and the consequent impact on cash balances and issue of debt
instruments. The Cash flow and Financial analysis system will be designed to provide
accurate cash balancesforthe MOF to perform its cash forecastingfunctions.

B. Technology Architecture for PAD's Core Information Systems

2. The technology architecture for the project specifies the nature size and
distribution of the computer processingfacilities and associated work stations; the nature of the
communications connections between the nodes of the network; and the nature and type of
application development. svstems software and Data Base Management Systems (DBMS), that
should be employed for the project. This architecture is determined by the characteristicsof the
application systems for governmentaccounting which may be summarizedas follows:

a) the application systems for government accounting wiil consist of several modules that need
t) exchanue data wx-ith
each ollher:

b) some mnodulesxxill need tv be implemente' at multiple levels e.g. the AGPR in Islamabad.
the l'rovincial AG officesand the District Accounts Ot'fices. Data will be generated.stored
and processed at each leveland will need to be transferred betweenLhevariouslevels: and
48
ANNEX4
Page 3 of 5

c) the data and transactionvolumeswill vary by province and district. For the CentralAGPR
site and for some AG officesand District .AccountsOffices they could be quitehigh.

3. Hardware Characteristics: These application characteristics require that a


distributed architecture be used and computer processing power be located at the variousnodes of
the network (the AGPR office, AG offices, and District Accounts Offices). Wherefacilitiesallow
and data volumes justify it, these nodes should be coinected via telecommunicationsfacilities. In
the absence of telecommunicationfacilities data transfer would be via computer compatiblemedia
(diskettes). The transaction processingand database management required at each node should be
carried out by the computers installedat these nodes. Summary or detailed data, as required,would
be transmitted via telecommunicationsfacilities/diskettes to the central computers locatedat the
AGPR offices in Islamabad.

4. The adxantage of such an architecture is that it distributes computing power,


commensurate with needs, to different nodes of the network, thereby optimizingusage and making
it more reliable and less vulnerableto malfunctions at a single central site. In addition,end users at
Provincial AG and District AccountsOffices would have better control over their technologicaland
data resources and this inculcates a sense of ownership for the systems they use. The size and
distribution of computing power across the various nodes of the network is deternined by the
volumes of data and transactionsthat are generated and stored at the various nodes and the volumes
and frequencies of data that are transmitted betwveenthe nodes. Information zathered from
discussions with PAD has been used to estimate the size and location of computers. This
information will be progressivelyrefined by the consultants during the preparationphase of the
project, by undertaking actualsurveysto gather data for each site.

5. Software Characteristics: The nature of the application systems requires that


the same core functionality be available at all nodes of the network. Thus, for example,the core
finctionality requirements will be similar at all District Accounts Offices. Thereforethe sarne
application software package would need to be replicated at multiple sites. This characteristic
requires that the application software be scaleable and be able to run on small or largecomputers
without major changes. Scaleabilitycan be achieved by choosing a line of computersof varying
capacities which are fully compatible from the software perspective. However. such a choice
would restrict further additions to the network to a particular vendor and line of computers.
Altematively, to avoid these restrictions, the application systems should be developed using
application development tools and DBMS software that can operate on machines of differentsizes
offered by several vendors. This feature is called software portability. Several application
development and DBMS packages are available in the market which are both vertically and
horizontally portable.

6. to ensure vertical and horizontal portability and scaIeabilitvat the


Ideallv. the %%a\
various n(odesof the network is to choose hard%varcand software that subscribesto the OPEN
systemns conicepts. Ill practice. the environment that comes closest to this concepr is the UTNIX
environment. ApplicaLtions developedunder this en ironment would be able to run. \ith minimum
changes. on any computer that has a UNIX based operating svstem. Most hardwarevendors now
offer a version of UNIX as an operatingsystems alternative. The project therefore proposesto use
49
ANNE 4
Page 4 of 5
UNIX as the operating system environment across the nodes of the network. In addition the
application development environment chosen will use Fourth Generation Languages(4GLs) and
Relational Data Base ManagementSystems (DBM[Ss)and associated developmenttools, Graphical
User Interfaces (GUls) to increase application development productivity and offer a user friendly
environment for data access and usage. This approach strikes a balance between largemain frame
systems which would be cumbersome and expensive and other options which could be under
powered and not scaleable to sites with a large number of transactions.
ANNEX
I'age 5 of 5

Figurel: Pakistan - Information SystemsArchitecture for Government Fiscal Management I


Function State Economic PtanningDivA MOF& PAD AGIDAO Agencies Agencies
with Central Board of Rev. Nap. SBP, PAD
_______________ Bank AffairsDiv. Prov.nlan spis Prow.Fin Depts AGPR Omffies Coveted by PAD oepaubmntaiized
Accounts Taxation Customs Treasuries Audit
Legend tAnwows
showmiormatidbon Some
lowsWtmbePapWbased.soneelectroni
ntomaan SystemsPlawnndUndr thisPlojc
Macro Economic Syslens for Macro-Economic Forecasting
:
Forecasting ._.

Macro-Economic
Fraework
LimnAgency Oelencemallways Tax Cusioav 4
i'wes
l eid
Acl.ads
Bud. Prep. Prep.
ludet Planning I Pl n
_Boom _ ye Byaarra j ystem systam
Budget Preparation Feedback
BudgetGutn x |ul Guatbas I- I I born
System forBudgetl eu4r1wethe
Preparadon 4 Iddierttr
A 4_ _ wCx | C...,t Benuv Esi_s areas
iktorc £bd *
BItsuin Dala bAinm d eIon.n .-
x oiqs CapiJ. Cu.rent Fiaumncu
kawion Ar-ncYrograms;widIrojs
epproved L
Line agency Departonuinlaized Toa Cusioms t
- _ _- _ _ _ _ _kb_ _ _ _ _ ItudgelExecution Accounting Syslens
BudgetExecutmo"s ACirri"s= Adunm"=a O
, SystemNsto Budget lk.d AYrioi tEoreGovt. M-_ system..s RailwaysUdelsnce.sic.
Monitoring, Couiol Execution, Aonitoring
amniCou.irni
Fiscl Reporting
Etoaa
oaIioi-us
@
Fiscal Reporting
£ Tiaxnse
[xpen(iiUrs L Accounting
System
*A
surran
t 77
Pep4
naiizeti A c4rats R cap t1COding)
Rver
eDeU i il Sy for
m il i I C t P D tar Bert Remnncaion|
fjrsaBanknPmgrsss Paying
|! Pftoin9 X n r d rq1 1 1r xXPgWt|IW oank

Cash nCa. -nt bommingR r [-...i,r I Cash


i i - - -|n - -
[Mbi
a! | -FdFo

I
|

ftmmnagwwt
D- slc xrsnm
F oG Iwo
De Sewvic CO
Pav.entsA.omn
roe"el II A
gBonetic~~~~~~~~~~~~~~~~~Pt Admne
fbbt nf Sy l IbA E|.
SPx?_oon
Petmoimme am I'ir VlS Sif
n IPe..rilonl|
_ _agmna hduordE.mirW.a L. . .. . t |.. .~j
Amr v v _ .yj y x-7xb_|
q lio
Aug Syatems
ker Vati Aron Auditing
ANNEX5
Page l of4
PAKISTAN
IMPROVEME
NT TO FINANCIAI,RFPORTINGAND AUDITINGPROJECT

STAFFAPPRAISALREPORT

TRAININGPLAN

S Iescipltis.il, of Target Group Criteria for Trainiing esponsibiity Expeclted Resuilts Airangenieits for
No. 'Ir;aining Selectioll of Motde for.Designinig etc. ratinces to Rle-cuter
- T._,
ruincecs j ________________ _______________r_ _e W orkplace
TIS- I (A): RCvised I. PADofficers& All slaff in B5 I . Slaff:
lField I. Respective Efficientamdeffective IIRM %s ing to issue
standaids anidprocedtires staff. above Office Accountanits implementationof revised policydirective
includinigcomnputeriied Training General standards& procedures
accountingprocedures 2. Staffand officersof Centers throughtrained staffand
theTreasuries
and officers.
the DAOs 2. °llicers:
AA1'l 2. AA'I'l
3. ManagerialslikiTol'
thi l'rovihcial
Govts. based in
Secrelarials(Secits)
2 TSI-B: Retaininig Staffof the Accounts All redundantstaff Field Office Respective Redundantstafftrainedin
redundantstalf oni Offices of the PAD. Training Centers Accountants new skills -do-
CompLuterization of General
accouLntillU prceS _ _ __ures

3 TSIA&B: Ttinainigof Ofricersselected


as FOTCTrainers, Training to be AAT'I A coreof 18trainersshall
Trainersfor Field Offices trainersfor FOTCs B-17/18 arrangedby becomeavailableto
TrainingCenters "course imparttrainingof l'OTCs -do-
(FOTCs) developers"in withihelp of course
revised developers
procediiresand
staliidar
ds
4 TSIA&13:Twrininu Selectedtrainersof the Trainers wilhat Training by AATIto coordinate Trainierswithskills in
abroadol'ljaiiici-s in AATI least3 years selected foreign coursedevelopment -do-
Training service in tihe Training inethodology/techiiiques
MethodologyfFechniquies AATI Institutions
ANNEX5
I'age2 of 4

_
S
No.
.
I)escriptionofrr.aining TargetGroulp
1 SeIto of
Criteria for
5;clectionof
Mo.
Training
Motde
)gig1Tane
Responsibility
ror l)csigning
Expectedltesults
oR-ne
Arrangements ror
Traineesto Rc-ecnler
Io

Trainiees etc. Workiplace


5 TS-2:Expandinganid PADofficersandstaff PAD staffand Accountanits 1. Computer Fulfillnent of IIRM Wingto issue
computer
strengtlheniing officer(B-5 to General/AATI Advisor requirements of policydirective
trainiingto meet B-19) trainiingin
o
recluirenlunits 2 AATI
2.raiini!5 "ComptiterBasics"
flowinigfrom l)iagnostic and"Office
Consullancy Automiiation"
identifiedby
Diagnostic
Consultanicy

6. TS-5A:Traininaof Officerin B-19/18 Officerswithout Selected I. Director Preparation of a


O)fficersabroadlo1rIvo posiedin thcAATll anyprevious loreigni fIM
GcneCral coreof 12 trainers
years t0irNlIt tll' and ihoselikely tohe longterIn universilies
or to Irain in curricula
etluinAlelallU)'l I;madualme so posted trainingabroad insliltules 2. AAI'l ol' ile Revise(d2 -do-
tdegreesin Accounting, wilh specified years'Irainiing
Auditing,Managemlenl, i minimum Programfor
FinancialManagement, periodof Probationers
Coimputer Science/MIS teaching
andEDPAuditinig experience

7. TS-5A:Traininlgof Officers Probationary AATI


Probationary AATI Professional
in Revised
Probatioiners of theAccounts Officersof the developmentof
Program Group AccountsGroup newlyinducted
whohave officers -do-
exhausted Ilteir
chancesfor
reappearing in
exams
theF-PSC

S. TS-Ii: Seminiiars, B-17officersand Fixedyearly Shortcourses tIRM Continued


Short
Conferelices. above louirsof at AATI Professional -do-
Courses traininglor ClPE I lducalion
ANNEXS
Page 3 of 4

S. D)escr-iptionof Targct Group Criteria for Training Responsibility ror ExpectedResults Arrangements for
Nio Tr aininig Selection of Mode D)esigningetc. Trainees to Re-enter
Trainees ___ _|_Workpbace

9. TS-3: TrrainingOf B-I8 officers of the B-I8 officers of AATI AATI and Prepareofficers for
B-18officers in Accotuts Group PADdue for PAD/HRMWing professional HRMWing to issue
preparationfor and tilosewho promotionlwithin. responsibilitiesin B-19 policy directive
promotion to A- 19 frulfillconditions one year
for promotion

10 TS-14: Professional Ofiicers likely to be Local AATI in Mid. Manageniienit No specific policy
Traininglor 13PS-
18to promotedto BPS- Consultationwith Professional requiredon posting
19 PromolionZone 19 in six months IIRM Wing DevelopmentCourse
Officers

It. I RNI stialegy Seniority-cum- Appropriale PAD/I IKM Wing Enable PAD/I ItM to I IRM Winlg to issue
Nklalnpk)%Cl-
4Ilai;IIIIIi. filness and aptilude local andi lauliCilMIS policy (lirective
Job Aiialylis I )Diabase for I IRM(I0 loreign developiient, and
Managemelitetc. officers) institution undertake preparation
of Job Descriptionsetc.

12. AuditStrategy Officersgiving Studytours PAD/AuditWing Acquaintofficers with IiRM Wing to issue
Traininig- IForeign options to serve in abroad to modem audit practices policy directive
Training AuditOffices (40 offices of in other SAls.
officers) cooperating
SAis

13. AudlitSiraiegy Officersconsidered Competitioni MBAprogram PAD/AuditWing Acquaintofficers with I IRM Wing to issue
I raiiiinig- F:oreigna lo liave senior finaincial
modlerin policy direclive
'Iraining management mnilagementpractices.
polenlial

14. AuditStrategy Officersgiving 4-6 monthis PAD/AuditWing Acquaintofficers witi


Trainitiii- I ocal oplions to service witli private altestalionl audil
Altacluinnis wilih in AuiditOllices or sector audit practices in the privale -do-
Private:\udifiuigF:irmiIsotherwiseselected firms in sector
I (100ollicers) Pakistan_
ANNEXS
Plage4 of 4

S.; ] l)escriplion iif Target Croul) Criteria for Training Responisibility for| Expected Rtesults Arrangeymcntsfor
No

1I.
I ______
T rainllng
________ ______

Orienl.tlioll Programl
_ ________ _______

Senior to middle
Selection ofi

All
Trainces j
Motic
_ ___________

Local
Dcsigining ctc.
________rainces

PAD/MIS Wing raamiliarize


theIT
ITrainees to Rle-enter
W ork p)lace
IT professional staff
(1316-20) level IT professionalsof the will be inductedin
professional MIS Wing %viltlille the MIS Wing for
induictedin the MIS objectives and specificjobs and they
Wing(BPS 17-20) activitiesof PAD,its woould remainiposted
organizationi and the on these jobs
long terni
computerizationplan of
the Department

16 TecchinologyRelieshier SystemsAnalysts, All Local MIS Wing and llpdate the knowledge
programi(II17-I ')) Programmersand PakislanComiiputier about tlhelatest trenids
OA Stall ol MIS 13Burcaui
(ICII) in thc lechinlologyand As above
Wilng Upgrade and reiniforce
skills in some areas
relevant to thisproject

17. Skills l)evlopmecnmt Operatorsand Data All Local Separate MIS Wing, PCB [)evelop skills required PAD staff would be
Prograii (1B16-17) Control staff of AG Modulesby Hardwarevendors for DP operationsand trained uniderthis
Offices and DAOs Job-type and consultants managementat each programiland PAD
and Computer Site (Implementation site would have to make
Managersof these Assistance) arrangementto retain
offices I I Iinte t MIS
Winig
55
ANNEX6
Page I of 8
PAKISTAN

IMPROVEMENTTO FINANCIALREPORTINGAND AUDITINGPROJECT

STAFF APPRAISAL REPORT

IMPLEMFNTATIONPLAN

1. The attachedProject ImplementationPlan representsa summaryof an operationalproject


monitoring system developedby PAD to track key activities and for monitoringprojectprogress.
The implementationplan contains:

(a) the list of all key activities and milestones associatedwith each projectsub-
component,includingtechnical assistance and training, the dates of their start and
completion,and linkages with preceding and followingactivities;

(b) a scheduleof procurementactions. includingtarget dates for each step; and

(c) specifiedactionsrequired to achieve the project's developmentinitiatives.

2. The operationalmonitoringsystem also includes:

(a) schedulesfor disbursementsfor each project component,detailing expected


fmancingby financier,maintained by PAD as part of the project's COSTABfiles;

(b) project accountingand auditing arrangements(para.4.28); and

(c) arrangementsfor monitoring and review, includinga Steering Committeeand an


externalPanel of International Experts (paras. 3.7 and 4.29).

3. PAD would keep the implementationplan up to date, and it would form the basisfor
periodic reportingto senior management,the Steering Committeeand IDA.

4. Key developmentimpactindicators and progress indicatorsfor monitoringdeliveryof


project inputs are furtherdescribedin Annex 8.
Implemnentation
Plan
PAKISTAN:Improvementto FinancialReporling and Auditing(PIFRA) Project

1996 1997 1998 J 1999 2000 2001


ID Task Naie 92103IQ4Q1 042 0304101 Q2 03 0401 02 Q3 04 01 0Q2103104 01 IQ2103T4
1 IDA Credit Effectiveness
2 Governmnent
Accounting& FinancialReporting
3 FinancialAdministration
4 Reviewof Rules& Regulations ro
10 Study of depaitmeptalization
11 Reviewof the impactof departrmentalization
12 Consultancy;AccountingStandads & System Develop/Irnpl,
13 SystemsConsultantsAppointed * i
14 Studyfor impovemenrof accdnft pgicis & fncial repoping.
16 Completeaccountingstandardsand reporling frarmework
16 Adopt accountingstandards
17 Completerevisedchartof accounts
1B Appointconsultantsto assist implementrevisedaccountingpolkie
19 Imnpleientationof accountingpoicies & standardsstudy
20 Implementrevisedchart of accounts
21 Systermdevelopmnent
& implementation_.______
29 Finalze hlirctionaldesign & softwarespecifications --

30 FunctionalSpecificationsCompleted
31
32
33
Searchsoftwarepackage(off the shelfl
SoftwareDevelopment& Customnization
HIW/SWfor SystemsDevelopnent lnstaled (see MIS Center)
V
34 Award SW/DevebprmentProcuremnentContract o
35 DevelopCoreAccounting& ReportingSystem .
3B DevelopPayrollSystem.|
37 DevelopPensionSystem.I
38 DevelopCash-FlowForecasting& FinancialAnalysis
39 Pilot Instalation
40 Core Accounting& Repoting Systemn
41 PayrollSystem I
42 PensionSyslem
43 Cash-FlowForecasting& FinancialAnalysis
44 PilotImplementtion
Conpleted(usingTAC ll HW)I
45 Hardware,Software,and Facilities I-j

46 Finalizedesign & specification


47 BSi
ing _ _ _| |_i__

1 AnnexB
ImplementationPlan
PAKISTAN Imnprovemenl
to Finandal Reporting and Auditing (PIFRA)Pr*oect

1996 | 1997 199 | 19S | 2000 2001


ID TaskName a210314 GQF021030Q4101 2 304 Ql 0Q21030Q4101TQ2T033401102 10304
56 Evaluation& Award r
64 Delivery.
71 Faciites and Sile Preparation . r n

so Systems Rephcation
I1 CoreAccounting& Report Sysen'
22 Payrd Sytr
Is Phase I Systms Repicain o
6P.nio System
3 Cash-Fl Foreasing & Fnial Analysm
* ComlSeteSystemsReplaion
87 Cosuiancy: Imoptmmdlon Asabtan
U Local consulants - swurvor i _

n9 Local consuitants- team


90 GovemmentAUd_I
91 Systems ImprovementCoehu_any
92 Procurementof consuants
93 _ __Prepare
terms d rference (TOR) cA
94 i_Bdmg ________
102 Evaluation& Award
110 Audig Syste _epr
uent
111 Review o sys_e
112 Agie e_ _oW
113 Prep manulsi
114 is dItnn
irnp_o mn
116 Evaluation 4
116 Inremalaudik- systm underdevelopment
117 MBA Programfor Auditors/AccountantailS . : =

113 SAIAttachrnenis
119 Privatesectorcooperation -

120 Study for potentialareas for greaterprivatesector involwement


121 Piot introductionof audits
122 Reviewperformance,cost. & quality assurance
123 Extensionof trial partnershipsin governrmentauditing =
124 Gradualexpansionof the program
125 Audit System(IIW/SWlFacililies)

2 Annex 6
Inipleenlntion Plan
PAKISTAN:Improvementto FinancialReportingand Auditing (PIFRA)Ptf*

1996 1997 1998 1999 2000 2001


ID TaslkName 203 4 011021 03 Q4 Q 0Q20Q30Q4 Q1 02 Q3 Q4 010Q2 03 04 10QlQ2|03Q4
126 Finalizedesign & spedficationu
127 Bidding _
136 Evaluation& Award
143 Delivery
144 Sitepreparations i

145 Physicalfacilities =
146 Implefmentation
147 Reviewand evaluation _ :
143 Humnan
ResourceManagement
149 OrganizationalDevelopment
150 Procurernentof Consultants
151 Finalizespedfications/TOR
162 Bidding I

160 Evaluation& Award


166 Consultantsappointed
167 Consulants services
168 Job analysis- foreignconsultants *--__ IA
169 Clangie Mallagelment
173 HRMPolicy Changes -

174 DepanrtentalCadre
175 Eliminateunqualifedpromotion for new entrants
176 ReviveDired entry at B-16
177 SubstUuteSAS by AAT exam
173 Cadre
Inter Deparnmental
179 StartCPE program
180 Star 2 year probationerstraining
181 Exploreprofessionalcompetencescheme
182 CareerDevelopment -

183 Assignstaff or 3 year period


1B4 Developstructuredcareer path for specialiststaff
185 Rotate staff on structuredcareer path
188 Rationalizeincentives for professionalqualifications
189 Providesalary supplementsfor specialists
190 EmployeeAccountability
191 Definejob descriptions

3 Annex6
Implenentation Plan
PAKISTAN:tmprovenent to FinancialRepottingand Auditing(PIFRA) Project

1996 1997 1998 1999 2000 2001


ID TaskName Q20304Q102030412Q304 QiQ203|041010Q21030Q410Q213Q4
192 [)evelop performancestandards
193 Performanceevaluationagainststandards
194 Completejob analysis,job description,and manpowerplan t
195 Training- HRM specialists
196 Syslems Development
197 Consultancy- MIS
198 ApplicationSoftware
199 InstallIIRMMIS
200 EstablishMIS for Audit wing
201 EstablishMIS tor Accountingwing
202 PAD SecretariatInformationSystem
203 Finalizedesign & specification
204 Bidding
213 Evaluation& Award
220 Delivery
221 Sitepreparations
222 P8ysicalfacilities __ _ flu
223 lImpleileiilalion . -
224 InstallPAD SecretariateMIS
225 Training
226 Procurementof Consultants
227 Finalize specifications/TOR
228 Bidding
235 Evaluation& Award
241 ConsultantsServices r
242 ProfessionalTraining
243 TrainingPackages
244 Trainingneedanalysis(TNA) o
245 Trainingmaterialdevelopment
246 2 year ProbationersProgram
247 TNA - prooationersprogram
248 Coursedesign
249 Trainingmnaterial
development
250 Introducetrainingcourse I
251 Trainingevaluationanrdcorrectiveactions

4 Amu 6
ImplementationPlan
PAKISTAN:Improvementto FinancialReportingand Auditing (PIFRA) Project

1996 1997 1996 1999 2000 2001


ID TaskName 02 3 Q4 QI 0Q2030Q4 Q 0203 Q4 01TQ2103TQ4 QlQ2 Q3 04 Ql 020304
252 BPS 18-19Training
253 TNA - BBPS 18-19
254 Coursedesign o3

255 Trainingmaterialdevelopment
256 Introducetrainingcourse
257 Trainingevaluationand correctiveactions |.
258 Sub-professional
Training
259 AccountingTechnicians
260 TNAhr revisedstandards
261 Coursedesign
262 Trainingmaterial development
263 Introducetrainingcourse
264 Trainingevaluationand correctiveactions
265 FOTCTrainingin RevisedProcedures
266 TNA for revisedstandards
267 Coursedesign
268 Trainingmalerial development
269 liitioxuce trainingcourse i. . o

270 Trainingimpact evaluationand correctiveactions


271 Seminar,conferences,other training etc.
272 MBAProgram for Faculty
273 Links wih institutions
274 Nationalseminar-1
275 Nationalseminar-2
276 Internationalseminar-I I
277 Internationalseminar-2
278 Visit to/from other SAis . __

234 Trainingabroadfor faculty


289 Facilities
290 Leaselor SAS/ATHostel
291 Furnitureetc. for SASHostel __r

292 AATI
293 Set-up/renovation of AATI Lahore
294 HW/SWfor library
295 lvW/SWfor MTI

5 Annex 6
Implementation
Plan
PAKISTAN:Improvementto FinancialReportingandAuditing(PIFRA)Project

1996 1997 | 1998 | 1999 2000 2001


ID Task Name Q2 3Q401020304 1 2Q3 Q4 Q1 Q2 Q30Q40Q1Q20Q30Q40Q1 Q2 Q30Q4
296 UPS and copierfor library !
297 Completionof set-up& re-equippingof AATILahore
298 FOTCs
299 Set-up/renovation
of FOTCs
300 Furnitureetc. for FOTCs
301 HW/SWfor FOTCs
302 Completionof set-up& re-equippingof FOTCs
303 Others
304 Subscribe journals& books __,_,

309 Administration
310 MIS - SoftwareDevelopmentCenter
311 Civil Works r .-
312 Finalizedesign& specification
313 Bidding
321 Evaluation& Award
328 Construction/Delivery
329 Contractposts andstaffing(MIS)
330 ComputerHW/SW
331 Finalizedesign & specification
332 Bidding .
340 Evaluation& AwardX
348 Delivery. ,
349 Facilitiesand Sitel
350 SitepreparationsI
351 Physicalfacilities
352 HW/SWfor SystemsDevelopmentInstalled
353 ProjectManagement
354 Contractpostsand staffing(PMU)
355 Officefurniture& equipment
356 IlHardware/software i

358 Consultancy:Futureprojectpreparation
359 Advisorypanelof experts a a a a

365 Macro-Economic Management


366 MOF A 6

6 Annex 6
ImplementationPlan
PAKISTAN:Improvementto FinancialReportingand Auditing(PIFRA)Project

_ T: 1997
~~~~~~~~~~~~~ 1 ~~1996
1998 1999 2000 1 2001 l
ID Task Name 02 03 04 | Q1 I Q2 I Q3 I Q4 | 1 02 | 1 Q4 I Q1 I Q2 I Q3 I Q4 | 1 02 03 04 | Ql I Q2 03 | Q4
367 PC - Establishmentof Nucleiand trainingof staff
368 PC - Construction of Models & Simulation and poverty analysis/monitor
369 PC - Strengtheningof PPMI
370 Separationof AuditingandAccountingFunctions
371 Bifurcation
372 Placementof HQofficers
381 ProvideSeparateOrganizationsOrder
382 Formalizedivisionof assetsbetweenAudit and AccountsOffices .
386 Reviewqualityassurancearrangements
387 Completebifurcation& separate1996/97budget |
388 Preparefor Separation !
389 Drafttermsof reference(TOR)for SeparationTask Force(TF)
390 Reviewand agreeTORfor TF
391 Set upTF i*:
392 PrepareSeparationStrategy
393 Amendregulations,setup new structure,transferstaff etc.
394 Arrangementsfor Separationof Audit andAccountsComplete
395 ProjectFinish

7 Annex6
ANNEX 7
Page 1 of 1

PAKISTAN
IMPROVEMENT TO FINANCIAL REPORTING AND AUDITING PROJECT
STAFF APPRAISAL REPORT

IDA Disbursements by Semesters


(USS Million)

IDA Cumulative
Fiscal Year Semester Disbursement Disbursement Percent
Ending (US $ million) (US $ million) %

FY97 Jun-97 1.6 1.6 6

FY98 Dec-97 2.1 3.7 13


Jun-98 2.3 6.0 21

FY99 Dec-98 2.9 8.9 31


Jun-99 2.9 11.8 41

FY00 Dec-99 3.8 15.6 54


Jun-00 4.0 19.6 68

FY01 Dec-00 3.2 22.8 79


Jun-01 3.2 26.0 90

FY02 Dec-01 1.4 27.4 95


Jun-02 1.4 28.8 100

June 1997 figures include PPF refinancing


Annex 8
Page I of 7

PAK ISTAN

IMPROVEMEN-TTO FINANCIAL REPORTING AND AUDITING PROJECT

STAFF APPRAISAI. REPORTI

PROJECTMILESTONES ANI) PERFORMANCE MONITORING INDICATORS

Component GovernmentAccountingand FinancialReporting

Objectives Developandintroduceaccountinig reportingsystems


standards, accepted
proceduresconformingasfar aspossibleto internationally
andfinancialadministration
principles.
InputIndicaturs ProcessIndicators Output/lImpact
Indicators PerformanceIndicators

ioeCIInIIentI i c\ Io - January
S.tting UI)6overnineil studyteamIIIs 1997 Repoltsonlreviewsol'i nanncial - Availability ol improvedlinancialreports
rules andregulationls
tinl.1.iiialIkLi 1lit
u ongoing alt pilot stageand
mieasuredby deinostrAItilliOll
regulationsand tlheimip)act iipleinenialion at completionol replication-
ol departilicnlli/alioll. Appointconsultants -
to reviewdcpartmentalizationl Reportonthe reviewof ilic impactof provinceandfor x% of
for the selected
January 1997 -January1998
departmentalization federaltransactions

I A providedtom of Accountinig
Appointimient andSystems
Standards Improvedaccountingstandards
andreporting Implementationiof systemsmeasured by;
mlevclopmentand September
Consultants- 1996 fraineworkcompletedandadopted- May 1997 Numbcr of districtssystemsautomated and
implementation of % of automated by valueshown
transactions
accounting siandanrd, f)cvelopment, andadoptionof improved
agreement Revisedbudgetstructureandchartof accounts in a schedulestaningfrom zeroandshowing
financial reporting andreportingframework- April
standards
accouinting conformingwith GFSclassificationmethodology a target% by year
frameworkanidinforiiiation 1997 adoptedandbudgetfor FY 1999prepared according
systems. to revisedstructure- July 1998 Cashflow forecasting andefficiencyof
of revisedchartof
D)evelopmentandimplementation borrowingmcasured of
by thcinitroduictioni
- July 1998
accounts cashilow forecasts,theiraccuracyandthe
extentto whicha rationalizedborrowing
Ilardware,systems D)evelopmentof functionaldesignof systems, Full functionaldesignof systems,
processesand strategyis adoptedb) Governrent
softwarcandapplication processesandproceduresandapplicationsoftwarc procedures for CoreAccounting,Payroll,Pensions
softwarerequiredfor tilC - November1997
specifications andCashForecasting completed- September 1997
implementation of core
Annex 8
Page 2 of 7

PROJECT MILESTONES AND PERFORMANCE MONITORING INDICATORS

Component CovernmentAccounling and Financial Reporting (continiedl)

Input Indicators ProcessIndicators Outputl/mpact Indicators PerformanceIndicators


0overnmient accotiliting. Acquisitioni and Installation of I lardwvareand Improvement in timeliness of expenditure
paNroll and pensionand Sofltwarefor Software Development Cenitcr- managementinformation measuredby reduction in
ca.shloreca&stimigsctccn> al I )cciber 1997 timc for comilpilation01'accoUntsat sites wilere
a total oi' 21 sItICitelLdig systenishave been installed and iOiithe Government
thcAGPR office in t?ompiction of Systems Development/Customization/ Il/W, SystemsS/W delivered, installed and tested;
Islamabad,all provincial and
I esling/ ior the Core Accounting/Playroll/Plensioni Application S/W testedlor esscntial liimmctioniality
AG oilices,and sclccted (ash ForecastingSystems - March 1999
DAts within each Pilot systemsinstallattioncompleted- December1999
province.
New systemiisimplementedat 21 sites December2001
Iiiplementation of Pilot Systemsat AGPR Islamabad, Impact
AG Peshawar;and twoDADs reporting to this AG New managementprocessesfor budget execution,
- D)ecember 1999 (cash allocation, commitinctl, payment processing
and receipts) palyroll and pensions;and cash
oloccasling in place and Ilulmclionllng
cinenlol
P'octmil S/Wlor Systemmis
of I 1/W aid '-
Rcpihcation- D)ecemiber1998 Ability lo produceliscal accountsdata consistent wilh
international standards;improved financial reports
Replication of PhaseI Systems- Core Accounting and including budget variance and project costs
Payroll - January 2001
Functional and economic analysesof budget and
Completion of SystemsReplication - Cash expendittiresavailable from the new system
Forecastingand Pensions- December2001
Improved expenditure managementinformation and
improved controls of expenditures

Improved payroll and pensionsprocessing and


associatedmanagement informationavailablefor
civil servants

Ior the Governmentasa


Improvedcashmaimagement
whole
Annex 8
Page 3 of 7

PROJECT MILESTONES AND PERFORMANCE MONITORING INDICATORS

(omitpontent Government Auditing

Objectives Develop and introduce improved auditing standardsand techniqtues,automatedtools for auditing, improved auditing capacity and increaseduseof privale sector
lirms
Input Indicators ProcessIndicators Outputl/mpact Indicators Performance Indicators
Output

IA ftianicedb) the project Appointment of Auditing Consultants- April 1997 Report on review of auditilng procedures Proportion of PAD's audits using amended
liurreview ol 'PA) audit, proccdures.
xworkload, Review of auditing systems,proce(lures- to bc Improved auditing guidelines, policies, procedurcs
communicationswithl completedby March 1998 and standardscompleted and adopted- August 1997 I'roportion of PAD's audits using improved
stakeholders;preparation onwards reporting formats
of guidelines, policies, and Developmentand agreementon revised guidelines,
processfor the introductioni policies, proceduresand standardsand preparation of Operating manualspreparedand completed - Proportion of PAD's audits subject to quality
of intemational auditing related operating manuals- to be completedby December 1997 to December 1998 assuranceprocedures.
standards; efficiency December1998
itproveteints. qualit lRevisedproceduresimpleiimieited- Scptember 1998 Improved timeliness of auditing rcports; ON
Issuratcc assi.tantccin ihc Itplemenitiiation of rcvised proccdilrcs and tlic onwards timittg of'Auditor Gcneral's suhittission ol'
useof autonmated tools aid evaliuiationi
- to comtinerceby October 1998 rcports to lPresidentand PAC; improvements
stl;dard audit progranis: Evaltiation completedof new systetnsand procedures to be assessedfrom current baseperiod of 9
developmentof revised - July 2000 inonths
I IRM proceduresand
training programsand lo Internal audit of systemsunder development Internal audit of systemsunder development Numbers of staff trained and in place
explore avenuesfor priva:e lo commence- May 1997 completed- December2000 measuredaccording to target schedule.
sectorcooperation
Developmentof training programsand Training programs implementedand completed;
implementation:a) MBA program for a) MBA program for auditors/accountantsand MIS
auditors/accountantsand MIS professionals- Start professionals- completed July 2000; b) Attachments
October 1996; b) attachmentswith other SAis - start with other SAls- completedJuly 2000
October 1996

Sludy on avenuesfor private sectorcooperation; Avcnucs for private sectorcooperation identiiied -


I'ilot recommendalions-start July 1998; review of' December 1997; Increaseduseof'private sectorlirns measuired
performancc/ costs - start January 1999; by umiberof audits conductedjointly by
extensionof trail partnershipsand expansion of Pilot exercisecompleted - December1998; PAD with private sectoriirms; current baseis
program- start July 1999 zero.
Review of Pilot completed- July 1999;

'Trialpartnerships
extended
andprogramexpanded-
December 2000;
Annex 8
Page 4 of 7

PROJECT MILESTONES AND PERFORMANCE MONITORING INDICATORS

Component Government Auditing (continued)

Input Indicators Process Indicators Output/lmpact Indicators Performance Indicators

I lards%are,
systemi Developmentof functional design of automated Functional design of automatedauditing systems. Implementation of audit systemsmeasuredby:
softlxare and applicatioui auditing systems,processesand proceduresand processesand proceduresand software specifications, number ol audit o'fices automaltedaccording
software for audit software specifications- July 1998 completed - July 1998 to target schedule
planning, sampling and
documentationand tor Acquisition and Installation of Hardware and Hardware and Software installed - Sept. 1999
audit of automatcd Software by September1999 Auditing Systems implemented- April 2000
systems.
Completion of Systemsimplementation - April 2000 Review of auditing systemscompleted- December
2000
Review and evaluation of new systems- December
2000 Impact

PADs Auditing capacity improvcd, better quality staff


traintcdand in place -4

New auditing guidelines, processes,proceduresand


standardsin place and functioning

Improved and timely auditing information and


improved controls of expendituresthroughout
Govemment; timely reports to PACs

Enhancedscope and independenceof audit

Strengthenedperformancemonitoring and evaluation


capacity through new proceduresand automatedtools

Increasedpublic accountability and improved


Governance in place for the Governmentas a whole
Annex 8
Page 5 of 7
PROJECT MILESTONES AND PERFORMANCE MONITORING INDICATORS

Comiponent Separation
of the Audit and Accounts Functions

Objectives Achieving better independenecof the auditing function by initiating a gradual transferof responsibility for accounting to the executive arm of Government.
Input Indicators ProcessIndicators Output/impact Indicators PerformanceIndicators
Output

Governmm:nl ' ask lorccs Iifurcation: Bilurcatioll:


and studiesfor hifurcation Arrangemnenis for bifurcationof administralion of Progressaccordinigtt) agreedscheduilefor
of administration ol the Developmenitot arranigemenisfor bifurcation of audit and accountsfunctions completed developmentand approval of proposals tor
audit an account UingS, adminiistrationof audit and accountslunctions, - I IQ ollicers placed - t)eccimber31, 1996 lunctlionlallseparialioniof accountingianauidit
developmentot proposals - Placementof IIQ officers- Dec. 1996 - Separateorganizationscreated - March 31, 1997 and implementation of arrangementsfbr
for a separatestructure of - provision of separateorganizations- March 1997 - Division of assetsbetweenaudit and accountis Bifurcation by July 1997
the accounting function - fomialization of division of assetsbetween audit offices fomialized - June30, 1997
with the executivearn ol and accountsoffices - July 1997 - Quality assurancearrangementsreviewed - Progressaccording lo agrced schedulefor
governmente - review of quality assurancearrangements- starting June 30, 1997 developmentand approval of proposalsand
rcorganizationthe AAI lis January 1997 - Bifurcation completedand 1997/98budget separated implementation of arrangemenisfor lunctional o
to caterto the Iraining - completion of bilurcationi and a separate1996/97 separationby July 2000
reLlt iririeeilts:au.iiociiiicnts budget for auititiand accotiints- July 1997
required in tlie Icgal lini. Scparation:
work and approval ol Separation: TORs for SeparalionTask force completed
governmentto revised -TORs for TF agreedand reviewed
policies - Draft TORs for SeparationTask force - -Separation TF set up
January 1998 -SeparationStrategycompleted
- Review and agreementon TORs for TF - -Regulationsanended, new stricttures set up and slaff
March 1998 transferred
- Selting up TF - March 1998 -Arrangementsfor separationof Audit and Accounts
- Developmentof Separation Strategy - March 1999 functions completed
- Amendmentto regulations setting up new structures
and transferring staff- July 2000 Impact
- Completion of arrangementsfor separationof Audit
and Accounts functions - July 2000 Improved independenceof the auditing function

Increasedpublic accountability and improved


governancein place for the Goverinent as a whole
Annex 8
Page 6 of 7

PROJECT MILESTONES AND PERFORMANCE MONITORING INDICATORS

Component Institutional Development(Human ResourceManagement)

Objectives Developing PAD's institutional capacity to sustain improvementsto financial managementsystemsby introduction of revised lIRM policies and the
strengtheningof financial managementtraining.
Input Indicators ProcessIndicators Output/lmpact Indicators PerformanceIndicators
Output

I'A tor managingprocess Appointment of Jobanalysis and change managemcint a) DepartmcntalCadre- less promotioniofunqualificdstafif: Itertoriinaoece
meastiied by progresson
of change,preparationof consultants- July 1997 direct entry at B316;and improved understandingofithe key milestones in the developmelit
Job descriptionsanid principles of accounting and(I auditing. amidimplemilentationof revised
performancestandardsand Implementation of HRM policy changesas follows: policies as shown in ilte
designing and installing a b) Inter- DepartmentalCadre-CPEprogram; 2 year implementation plan
MIS for llRM planning a) DepartmentalCadre- eliminate unqualified probationerstraining; professional certification schemiie
and monitoring proportion quota- December1996;revive direct entry Percentageof stalTrotated within 3
at llt6 grade- Decemiiber1997;substitute SAS by c) IIRM policies for: staff assignmentfor 3 years;careerpath years
AA'I' examination - September1996 for specialiststaff; stall' rotation policies liniked to career
dlvclopmnit: iicenfivesb)r prollssiomnail qodihications: sal;iry Numberol' stalli nicilde in rcvis.cd
C'adre- Start CI' plogilail -
l) Intcl-I)epaltilicnital sutpplenmenitslor specialists IIKl sysictm
July 1997; start 2 year probationerstraining -
Deceimiber1998;explore proflcssionalceritiication d) Employee Accountability- Job dcscriplions; lIercentageof staff covered by new
scheme- December 1998 performancestandards;manpower plan; trained IIRM job descriptions
specialists
c) Careerpolicies- assignstaff for 3 years - July 1996;
develop careerpath for spccialist staff- Dec. 1997; e) IIRM MIS Installed
rotate staff on structured path-Nov. 1998; rationalize
incentives for professionalqualifications - Dec. 1998; Impact
salary supplementsfor specialists- July 1999 Staff training more in line with requirementsof modern
financial proceduresand a systemof continuous professional
d) Employee Accountability- Define Job descriptions educationto keep staff skills up to date,leading to enhanced
- Dec. 1997;develop performancestandards-July staff competence.
1998;develop manpowerplan - December1997;
evaluatestaff according to standards- December Promotion and rewards policy basedon openand quantified
2000; train fIRM specialists- December1997 perfoniance standardsand a recognizedmerit system

e) Implementation of I IRM MIS - April 2000 Improved related managementinformation systems


resulting in monitoring of compliance
with newHRM policies
Annex 8
Page 7 of 7

PROJECT MILESTONES AND PERFORMANCE MONITORING INDICATORS

Component Inslitutional Development(Training)

Objectives Developing PAD's Institutional Capacity to sustain improvementsto financial managementsystemsby strengtheningof financial manaigementtraining.
Input Indicators ProcessIndicators Output/impact Indicators PerformanceIndicators
Output
iulids lor reluibhislijuicit Appointmenitof'l'raining consultants - December Trainiing needsanalysis completed
andcxteision ol existing 1996
training iacilitics; Training materials developcd Peiformancemiaesuredb)yipimemcienationi of
equipment; computer I l/W Completion of'l'raining needs analysis- February changes according to impleiiientation schedule
and S/W; 1997 2 years probationers program implemented
Number of trainee hours for PAD and
I'A to assist in training Development of training materials- April 1997 B 18-19 training program implemented provincial staff
needs assessment, course
design; materials D)esign and implementation of 2 years probationers Accounting ''echnicians training program Number trainec hours lor AAT Probationers
developmenit and(training program - May 1999 implemented and U 18 staff
ol trainers
IDcsigiland impleitentatio ol' BIIS 18-19 training - 1F01( training Prograin Implemented
Inlernationa:l scholarshipisp commencing ()cloher 1997 o
lor lacult) tiainicis and Foreign training and MBIA priograms iinplcmnented
lunds for semiinars Design and implementation of Accounting
T'echnicians [raining - June 1998 Links with other institutions and SAls established

Design and Implementation of FOTC training - July National and International seminars and conferences
1998 held

Implementation of MBA foreign training program for Training facilities renovated- SAS hostel, AATIs and
faculty - Commencing October 1996 FOTCs

Development of Links with other institutions and Impact


SAIs - January 1997 Improved training programs and facilities

National and International scminars and conferences - A system of continuiouis professional education
Commence - February 1997
Improved professional competence of staff
Renovation of training facilities SAS hostel, AATIs Department wide
and FOTCs - Compleled - July 1998
71
ANNEX9
Page 1 of 2

PAKISTAN

IMPROVEMENT TO FINANCIAL REPORTING AND AUDITING PROJECT

STAFF APPRAISAL REPORT

SUPERVISION PLAN

Approx. Date Activity Participation Staff Weeks


September 1996 Project launch Task Manager 10
Accounting Specialist
Audit Specialist
Informatics Specialist
HR & Training Specialist
Macro Economist
March 1997 Supervision Mission (coordinated Task Manager 10
with panel of experts meeting) Accounting Specialist
Audit Specialist
Informatics Specialist
HR and Training Specialist
Macro Economist
September 1997 Supervision Mission Task Manager 10
Accounting Specialist
Audit Specialist
Informatics Specialist
HR and Training Specialist

March 1998 Supervision Mission (coordinated Task Manager 10


with panel of experts meeting) Accounting Specialist
Audit Specialist
Informatics Specialist
HR and Training Specialist
September 1998 Supervision Mission Task Manager 10
Accounting Specialist
Audit Specialist
Informatics Specialist
HR and Training Specialist
Macro Economist
72
ANNEX 9
Page 2 of 2
Approx. Date Activity Participation Staff Weeks
March 1999 Supervision Mission (coordinated Task Manager 10
with panel of experts meeting) Accounting Specialist
Audit Specialist
Informatics Specialist
HR and Training Specialist

June 1999 Mid-Term Review Mission Task Manager 10


Accounting Specialist
Audit Specialist
Informatics Specialist
HR and Training Specialist
Macro Economist
March 2000 Supervision Mission (coordinated Task Manager 10
with panel of experts meeting) Accounting Specialist
Audit Specialist
Informatics Specialist
HR and Training Specialist
Macro Economist
September 2000 Supervision Mission Task Manager 10
Accounting Specialist
Audit Specialist
Informatics Specialist
HR and Training Specialist
March 2001 Supervision Mission (coordinated Task Manager 10
with panel of experts meeting) Accounting Specialist
Audit Specialist
Informatics Specialist
HR and Training Specialist
Macro Economist
September 2001 Supervision Mission Task Manager 10
Accounting Specialist
Audit Specialist
Informatics Specialist
HR and Training Specialist

March 2002 ICR Mission (coordinated with Task Manager 10


panel of experts meeting) Accounting Specialist
Audit Specialist
Informatics Specialist
HR and Training Specialist
.Macro Economist
ANNEX 10
Page 1 of 3
PAKISTAN

IMPROVEMENT TO FINANCIAL REPORTING AND AUDITING PROJECT

STAFF APPRAISAL REPORT

TECHNICAL ASSISTANCE OBJECTIVES, CLASSIFICATION. ACTIVITIES AND OUTPUT

ObjectivesanidClassification Activities Source and Duration Output


I ~~~~~~~~~~Foreign
Local
1 Strengtheningtheauditing Review PAD audit policies processesand 70 10 i) Revisedaudit policies, procedures,work allocation
function in Ihe PAD. procedures,output, work-load, efficiency methods;
Classification Institutional ii) Improved audit efficiency
Development
Performquality assurancefor PAD
auditing 8 Improved quality assuranceprocedures

Advise on Methodologiesto enhance


PAD's communicationiswith stake 6 10 Methodologies for enhancedcommunicationswith
holders major stake holders

Advise on identification of areasfor


Public/ Private sectorcooperation 15 Identified areas for public/ private sector cooperation

Intemal Audit of PAD's systemsunder


development 6 10 Improved quality of information systems

Membership in the advisory Panelof


experts 2 Input to PAD's advisory panel

Managing TA 6 36 Efficient administrationof TA


ANNEX 10
P'age 2 of 3

Objectives anl(d Activities Source and Duration Output


Classification l l Foreign Local I
Developmentandl Preparedetailed funictionialdesign; for the 110 100 Detailed functionialdesign for specified informiation
implementationof high Core accounitinig,Payroll and pensionsand systems;design of the technology architectLuiC for
priority application the Cash forecastingsystems;Specify the information systems;Tender documenitsfor H/W, S/W;
systems. technology architecturerequired for the Managementof the Pilot systemsimplementationiand
Classitication: implementationof thesesystems; systemsreplication processes
Institutional Investigatealternativesfor application
Developimecit Software;Assist in the procuremenitof
hardwareand software; Assist in Systems
implementation-Pilot systemsand first
phasereplications
Classil-icationi: Assistanceto IPADin the processof systems
Implemeniationassistanc Consultancyfor implementationassistance 192 implementation and replication

3. HumaniResouice Job Analysis 3 5 Revised Job descriptionsand performancestandards


Management.
ClassiIicitlionl:
InstitLutionial MIS constillanicy(I IRM) 6 M IS systemilstobI IRM planninigand moniitorinig
Developmenit
ChangeManagementconsultancy 12 Consultinigassistancefor managingthe processof change

4. Traininig. Training needsanalysis 2.5 2 i) Training needsfor B- 18/19 officers


Classificationi: ii) New training packages
Institutional iii) Revisedtraining standards
Development iv) Training needsfor probationers

Coursedesign 2 2.5 Coursedesignsfor: i) B 18-19 training; ii) two years


probationersprogram; iii) FOTC courses

Training material development/testing 10 22 Coursematerial for i) accounting technicianis,BS 18/19


training, training of probationiers,revisedtraining packlages

Quality control evaluationof training 1 5 i) Revised systemsto assessquality of training;


application of the new systemsto evaluatetraining of
probationers,accountingtechniciansand overall impact of
training
ANNE3X10
Vage 3 of 3

Objecti%esand 1 Activities Sourceand Duration Output


Classification Foreign Local
5. Macro economicstudies. Preparationof macroeconomic,financial 40 133 Agreed action plan to implemenitrecomimenidations
of
Classilication: Policy policy, anddiagnostic studies. policy and diagnostic stidies.
Support

6 Privaltesecbolfinanicial Provisionof on-the-job specialized 6 20 Strengthniliedcapacity for macroeconomliic


modeling and
disclosure. training in macromodeliig and short-tcrnm improved moniloring of poverty
Classilication: Policy technical assistancefor establishmento
Support poverty monitorinignucleus.

7 Assislallceto Plaonning EIconomicPolicy Analysis Dizaginostic 13 44 Stidies and action plans to inipiove managementof federal
Co'mimmiissioni Study. Specializedon-the -job training and provincial developmenitexpendiftirc; diagniosticstudy
Classifhication:
I olicy for
and action plan to streamlinieinstitutionialairanigemiients
Support macroeconomicpolicy making; increasedcapacity for
poverty analysisand monitoring

8. FutureProject Preparationof Future Project 10 30 Project feasibility report and detailed documents
Preparation
Classification:
Implementation
Assistance
76
ANNEX I I
Page 1 of I
PAK1ITAN

IMPROVEMENT
TO FINANCIALREPORTINGANDAUDITINGPROJECT

STAFFAPPRAISALREPORT

DOCUMENTSIN PROJECTFILE

1. Report on the effectiveness of the Pakistan Audit Department's component of the Third
Technical Assistance Project (Cr. 1755 - Pak). Pakistan Audit Department, December, 1994.

2. Pakistan: Improving the Fiscal Reporting System, William Allan and Michael Woolley,
Fiscal Affairs Department, IMF, August 27. 1990.

3. Pakistan Audit Department, Diagnostic Consultancy Project, Price Waterhouse


a) Interim Report I, Detailed Analysis. November 7, 1992
b) Interim Report II, Proposed recommendations, November 25, 1992
c) Final Report, February 3, 1993

4. Pakistan Audit Department. Training Consultancy, CIPFA, March 1993


a) Overview Report
b) Technical Report 1. The Establishment of a Professional Body
c) Technical Report 2, Training Needs Analysis
d) Technical Report 3, A Strategy for Human Resource Management

5. Pakistan Audit Department, March 1995.


Strategies for:

a) Implementing an Improved Financial Reporting System


b) Implementing an effective Audit Function and Public-Private Partnership
c) Improving Human Resource Management
d) Implementing Computer based Information Systems to Support Government
Accounting, Audit, Human Resource Management and Office Automation
e) Training

6. Terms of reference for consultancy services for the development of accounting principles and
standards, and the development and implementation of core financial systems for the
Government of Pakistan.
IBRD27293
60 65 70 /TAJIKISTAN75; /
J ' :t'CCHINA
PAKISTAN ov
IMPROVEMENTTO FINANCIALREPORTING
AND AUDITINGPROJECT _/
* AGPROFFICE v
3 AG OFFICES I ,....

35 f; PILOTIMPLEMENTATIONSITES AT\ Appromte 35


b of Control
Lin
PROVINCEWIDE SYSTEMREPLICATION
., Peshawar ®)ISLAMABAD JAM
and KASHMIR
f59 NATIONAL CAPITAL

19 PROVINCECAPITALS j
PROVINCEBOUNDARIES ! r
¶ _ . _ INTERNATIONAL
BOUNDARIES S ) A #
RIVERS Lahore® \

30 .1 A Quetta
Q 300

%_ INDIA
ISLAMIC \
REPUBLICOF I -
IRAN ' 0 100 200 300 Kilometers

25 * 100 200 Miles


S1NDH / 25'

Karachi .

-. _._ t- ~ Tbismap wooprod,cedby the Mop DesignUnit of T he


J
- WorldBonk Theboundaries. colors,denominatons
andany
g otherreformotson ho-n onthismap do not imply, on the
part of TheWorld Bo1kGroup,any judgment on thelegol
statusof anyterritory or any endorsement
or acceptanceof suchboundaries
60 65- 70 75'

JULY1996