Document of

The World Bank

Report No. 14890-PAK

STAFF APPRAISAL REPORT

PAKISTAN

IMPROVEMENT TO FINANCIAL REPORTING AND AUDITING PROJECT

August 5, 1996

Infrastructure Operations DivisionCountry Department ISouth Asia Region

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CURRENCY EQUIVALENTS(as on March 1996)

Pakistan Rupee = 100 paisaCurrency Unit = Rupee (Rs)

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

PRINCIPAL ABBREVIATIONS AND ACRONYMSAAT - Association of Accounting TechniciansAATI Audit and Accounts Training InstituteAG - Accountant GeneralAGPR - Accountant General Pakistan RevenuesDAOs - District Accounts OfficesECNEC - Executive Committee of the National Economic CouncilFY - Fiscal YearGOP - Government of PakistanHRM - Hluman Resource ManagementMIS - Management Information SystemsMOF - Ministry of FinancePAC - Public Accounts CommitteePAD - Pakistan Audit Department

GOP FISCAL YEARJuly I - June 30

PAKISTAN

IMPROVEMENT TO FINANCIAL REPORTING AND AUDITING PROJECT

STAFF APPRAISAL REPORT

Table of ContentsPage No.

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

I. THE SECTOR BACKGROUND . .1A. Government Accounting and Audit .B. Status of Governments' Financial Reporting and Auditing .2C. Government's Strategy .3D. Lessons from Previous IDA Involvement .5

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

III. INSTITUTIONAL ARRANGEMENTS .................................... 17A. Assessment of Current Arrangements .................................... 17B. Addressing Institutional Constraints .................................... 1 7

This report is based on findings of an appraisal mission to Pakistan in March 1995. Project teammembers included: Mr. G. Lee (Senior Municipal Financial Specialist, SAIIN), Task Manager andMission Leader; Ms. Antoinette Sayeh (Macro Economist, SAlCA); Mr. Ali Hashim (SeniorInformation Technology Specialist, EMTDR); Mr. Akbar Khawaja (Informatics Specialist, ITSIE);Messrs. Omer Morshed, Riyaz Bokhari and Vinod Sahgal (Consultants). The project is endorsed byMs. Mieko Nishimizu, Director, Country Department I, South Asia Region, and Ms. MarieRobinson, Chief, Infrastructure Operations Division. The Peer Review team comprisedMessrs. John Graves (Training and Staff Development), George Russell ( Financial Management);Al Kennefick (Accounting Systems), Pervaiz Rashid (Audit), and Eduardo Talero (InformationTechnology). Ms. Bina Duggal and Mr. Jack Williams (SA1IN) assisted in the production of thisreport.

IV. PROJECT IMPLEMENTATION . ........................... 21A. Organizations Responsible for the Project .21B. Implementation Responsibilities .22C. Implementation Strategy .23D. Status of Preparation .28E. Project Sustainability .28F. Accounts and Audit .29G. Monitoring and Evaluation .29

V. BENEFITS AND RISKS .. 31A. Benefits .31B. Economic Analysis .32C. Risks .32

VI. AGREEMENTS REACHED ..... 35

ANNEXES

1. Project Costs2. Government's Vision Statement for Financial Reporting and Auditing3. Scope of Work for Systems Consultants4. Information Systems Architecture for Government Fiscal Management5. Training Plan6. Implementation Plan7. Disbursement Schedule8. Project Milestones and Performance Indicators9. Supervision Plan

10. Technical Assistance Objectives, Classification, Activities and Outputs11. Documents in Project File

Map IBRD No. 27293

PAKISTANIMPROVEMENT 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 PlanningCommission

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

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 undisbursedcredit balance, set annually by the Executive Directors of IDA)

Financing Plan: See Table 2.2

Economic Ratof Retu: Unquantified

map: IBRD No. 27293

Project IdentificationNumber: 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 planningand programming and runs through budget formulation, budget execution, accounting, financialcontrol and audit/evaluation. The cycle is iterative; new plans are influenced by 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 andwithdrawals from the consolidated funds shall be regulated by law. The system of financial controland budgeting is based on federallprovincial secretaries being designated as the principalaccounting officers of their respective departments, with the responsibility to ensure that fundsallotted to their departments are spent for authorized purposes and that expenditure is not incurredin excess of budget allocations.

1.3 The Pakistan Audit Department (PAD) plays a key role in government financialmanagement. The functions of the Auditor General of Pakistan are defined in the Constitution ofPakistan and regulated by statutory orders issued from time to time. The most recent of these is thePakistan Audit and Accounts Order 1973. Under this authority, PAD is responsible for keeping theaccounts of the federal and provincial governments, with the exception of certain departmentalizedaccounts, defense, and railways. PAD is also responsible for audit of all expenditure and income ofthe 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 andprogramming purposes, and which forms part of the payments control process. PAD's auditfunction maintains public accountability by auditing the accounts of government entities andpresenting audit findings to the legislature's Public Accounts Committee (PAC).

1.4 PAD's responsibility for accounting for both the Federation and the Provinces isdischarged through a network of offices under five Accountant Generals (AGs), one for eachprovince 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 arefunctionally responsible to it. The governments' accounts are prepared by PAD at the respectiveAG'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 takeplace at DAOs/Treasuries, the process being as follows. The executive agencies submit claims forpayment 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 requiredto deposit the amount in the bank/treasury. The bank sends a daily record to the localDAO/Treasury which records the transactions. Transaction information, complied into accounts byDAOs or in the form of individual transactions from Treasuries, is submitted to the AG, whocompiles an account of aggregate receipts and expenditures for reconciliation with departmentalrecords and government information.

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

B. Status of Governments' Financial Reporting and Auditing

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

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

b) because of serious deficiencies in the financial systems, financial data forfinancial planning, budgeting, reporting and control is unreliable. Financialreports and final accounts, mostly based on manual accounting systems, areneither timely, complete nor designed to meet user needs;

c) PAD's audit function is viewed as a means of detecting irregularities and fraudrather than as a management control function. The focus is to verify transactionsregardless of their value. Reviews of internal controls for system weaknesses arenorrnally not carried out. Audits have limited coverage due to lack of resources andquality suffers due to a lack of expertise. Revenue audits do not have a major rolein PAD's audit function. Only a small proportion of Drawing and DisbursementOfficers are audited each year and purposeful parameters, such as potential risks orweaknesses in internal controls, are not used as selection criteria for audits.

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Certification audit has made little progress due to the volume of transactions andlack of expertise within PAD. In the absence of auditing standards and qualityassurance, the quality of audit work is low;

d) PAD, the Supreme Audit Institution of Pakistan, is compromised due to theagency's dual responsibility of maintaining the accounts of entities and beingresponsible for their audit. Separation of the accounting and auditing functionswithin government is viewed as a primary requirement for establishing theindependence and credibility of audit; and

e) the existing human resource management functions in PAD are limited in scope.Personnel at the accounts offices are frequently not adequately qualified ortrained. The effectiveness of training programs is undermined by lack ofapplication of training.

1.7 The absence of accurate, comprehensive and timely financial information inPakistan's federal and provincial governments hampers efforts to improve resource allocation,monitoring and control of expenditure, cash flow and debt management, and casts uncertainty onthe financial data underpinning public sector management decisions and the macro economicdialogue.

1.8 As major internal financial controls are not functioning, governance, based uponaccountability for use of resources, is being undermined. The accounting weaknesses furtherlimit the usefulness of audit, in addition to the technical shortcomings noted above.

C. Government's Strategy

1.9 Vision Statement The Government of Pakistan recognizes that as it proceeds toopen up its economy and free it from regulatory controls, the need for modern financialmanagement systems and good governance becomes paramount. Instead of direct intervention ithas to design appropriate fiscal and monetary responses to changing conditions. To be able to doso, the government recognizes the need for a modern set of tools to provide it with comprehensive,accurate and timely financial information. As government strives to attract private foreigninvestment the issues of transparency and accountability become even more important in thecontext of a global economy. Agreeing with the thrust of the recommendations of the diagnosticconsultancy, the govemment has developed an overall vision statement for financial reporting andauditing (see Annex 2) stating its intention to:

a) adopt and implement a modern accounting system designed according to recognizedaccounting principles and standards and based on modern information technology;

b) implement a governance structure and legal framework for an independent andeffective audit function;

c) improve the professional capacity of the elements of the civil service responsible forfiscal management;

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d) make increasing use of the private sector to supplement public sector resources; ande) adopt improved standards for private sector financial disclosure.

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

a) manage an increasingly open economy in the face of large capital inflows andoutflows;

b) implement policies to improve and make more competitive the enablingenvironment for the private sector; and

c) develop more efficient resource allocation and expenditure utilization structuresrequired for the expansion of basic social services.

1.11 In this connection, the government will need to follow through on theimplementation of the recommendations of the 1993 Economy Commission on theadministrative restructuring and organization of the Federal Secretariat. MOF and the PlanningCommission -- which are the primary users of the financial information prepared by PAD -- haverequested assistance to strengthen their analytical and policy formulation capacity in these andother 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 governmentsector;

b) a phased transfer of responsibilities for government accounting from the AuditorGeneral to the executive arm of government;

c) enhanced independence, standards and capacity for government audit, includinggreater use of private sector firms in public sector finance; and,

d) development of the skills and competencies of government finance staff, includingrevised human resource management and training policies.

1.13 Government has requested IDA's assistance to implement these strategies, whichit is considered would require a sequence of projects. This project would address standards foraccounting and auditing, design improved systems and start implementation of selectedimprovements (with greater initial emphasis on accounting), strengthen capacity, initiateinstitutional changes, such as the phased transfer of accounting responsibilities to the executive armof government, and identify further strengthening of financial management, particularly with regardto 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 satisfactoryperformance, subsequent projects would, in conjunction with the executive agency created forgovernment accounting, complete the replication of accounting systems across all accountingoffices, and with the restructured Audit Department help to address matters to further enhancecapacity and independence which need to be handled over the longer term, providing tools forfurther enhancing governance. In all, about a 10 to 15 year period of involvement in improvingfinancial 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; andd) rigorous supervision.

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

a) computerization of accounting and payroll procedures through automation ofexisting procedures;

b) enhancing research and development capabilities of the Department, includingassessing 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 appropriatemechanisms for involving and obtaining agreement from federal and provincial government at anearly stage of the project. Project management requirements include setting up clearly definedproject management structures, for proper planning in the use and development of newapplication software, and for developing appropriate performance indicators to judgeeffectiveness. Training programs need clear statements of objectives and benefits of training,local participation in course development, appropriate procedures for selecting trainees anddeploying trained staff, training for senior officers, and use of in-country courses whereappropriate 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 ofgovernment accounting and audit, which resulted in the preparation of the strategies underpinningthe project. Internal ownership of the project is strengthened as the project would build on PAD'sown computerization initiatives and training undertaken prior to and as part of the Third TechnicalAssistance Project (Cr. 1755-PAK). The project concept has been widely discussed within PAD, toinform departmental staff of the objectives of change and the opportunities generated thereof. PADhas developed external ownership within the government, through discussions with andinvolvement of the main users of financial reports and information, the major intended beneficiariesof the improved accounting systems and financial reporting. The relevant agencies concerned withHRM, particularly the Establishment Division and the Federal Public Services Commission havealso been consulted about project design. A Committee has been established comprising the keyfederal and provincial government users of financial information, to advise on the improvements tofinancial 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; andc) 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 managementincluding accounting, auditing and institutional development, economic policy-making andmanagement.

2.4 GovernMent Accounting and Financisl Reporting (base cost USS 12.3millio) The government wishes to develop accounting standards, reporting systems andfinancial administration procedures conforming as far as practicable to internationally acceptedprinciples. 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 needsis no longer feasible for the delivery of the type of information required for financialmanagement. Therefore, the adoption of some degree of automation is inevitable. Properlydesigned computer based systems would, in addition to managing the processing of a largenumber 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 theeffectiveness of public expenditure management processes. Accordingly, PAD wishes toimplement a set of high priority computer based financial application systems. The projectincludes consultancy assistance to define a modem set of accounting standards, forimplementation of the improved standards, and computer hardware, software, consultancies andtraining required for the design, development and implementation of the following high priorityfinancial systems at about 21 of the total 95 sites:

a) Core Accounting and Reporting System: This system would provide integratedgovernment-wide accounting, encompassing the functional requirements forbudget 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 crediblesource of reliable and timely data. Accordingly, the Core Accounting Systemwould be fully automated, interfacing with external data sources, such as externaldebt, on a periodic basis. This system, introduced along with a modem budgetclassification system and an appropriate chart of accounts, would enableexpenditures and revenues to be recorded at a detailed level and related to specificprograms and projects. The data would be amenable to cross classification forfinancial and economic analyses.

It would be used by: (i) PAD (including its subordinate units and its successororganization) to perform the basic accounting functions; (ii) the federal MOF andthe provincial Finance Departnents to perform the processes associated with budgetexecution, monitoring and control; implement cash limits, as may be required; (iv)the federal Planning Division and the provincial Planning Departnents to obtain thestatus of actual expenditures on ongoing programs and projects. Data would also bedirectly available for use by agencies/spending units for program and projectmanagement.

b) Payroll and Pension Systems: The payroll of government employees constitutesa large portion of government expenditures. The need for an automated payrolland pension system is evident in view of the increasing volume of transactions.The proposed system would perform the full range of the payroll functions, andthe expenditures processed would automatically update the core accounting andreporting system.

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

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

2.6 A study would also be made to assess the impact to date of departmentalizedaccounting, and to recommend future strategy options. PAD would also, within its existingresources, 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; andc) reflect changes in systems and procedures.

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

a) Audit Standards and Techniques: Consultant services to prepare guidelines forthe introduction of international auditing standards, to introduce modem auditingtechniques and concepts, to review PAD's audit policies, processes andprocedures, output, workload, efficiency and quality assurance for the auditfunction, to advise on methodologies to enhance PAD's communications withstake holders, for internal audit of PAD's systems under development, to assist inthe use of automated audit tools and standard audit programs whereverappropriate, to improve communication of audit results and to develop qualityassurance 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 resourcemanagement procedures through international training in a modem financialsystem environment and through arranging attachments with other Supreme AuditInstitutions.

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

2.8 Institutional Development To sustain the above improvements to financialmanagement systems, the project would assist in the introduction of revised human resourcemanagement policies, the strengthening of financial management training, the development of aManagement Information Systems (MIS) wing of PAD, introduction of office automation toassist 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): TheHRM component would involve organizational and systems development.Although PAD would implement most components without external support, theproject would provide consultant assistance for managing the process of change,for preparation of job descriptions and performance standards, and for installingan MIS system for HRM planning and monitoring. PAD would share the detailsand results of its HRM policies with provinces and the Establishment Division.

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

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

i. MIS Wing: The project would support the creation of an MIS Wing andwould 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, throughprovision of staff, facilities, hardware and software, consultants and training.Assistance would also be provided for technical review of computerizedinformation systems' development, and for a senior level advisory panel ofinternational experts, which would at least meet annually.

iii. Future Project Preparation: Assistance for preparation of the follow-upproject if grant funds are not available.

iv. Office Automation: Provision for a local area network and associated officesoftware 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 financialpolicy issues related to the on-going macroeconomic and structural reform program, a diagnosticstudy of the institutional arrangements for macroeconomic policy-making, and technicalassistance/training to upgrade staff skills. Specific areas include international capital markets,foreign asset/liability management, improving the revenue yield of certain taxes, on-the-jobspecialized training in macro modeling, and assistance for establishment of a nucleus in thePlanning Commission for analyzing and monitoring poverty. The project would finance thecosts of (mostly local) consultancy services required for the studies and short-term technicalassistance for staff training. Terms of reference for key studies would be completed prior tonegotiations.

D. Performance Monitoring Indicators

2.10 To measure implementation performance, and to monitor the project's impact, thefollowing key indicators, discussed and agreed with government, would be selected from theproject'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; andvi) 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; andvi) improved training impact evaluation results.

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E. IDA's Strategy

2.11 The proposed project is consistent with IDA's Country Assistance Strategy (CAS)discussed on December 15, 1995. The CAS stresses the centrality of fiscal adjustment toPakistan's reform and development efforts. Addressing these concerns involves, inter alia,improved resource mobilization, public expenditure reform, more effective use of governmentresources, and improved public sector management. The project would focus on developingmore effective financial accounting, reporting, control and monitoring systems, and wouldtherefore provide an essential support for these activities. The policy support component wouldassist achieve CAS objectives by contributing to improvements in macroeconomic management.

2.12 The CAS, in support of the establishment of a more competitive enablingenvironment, also seeks to improve governance in Pakistan. The proposed emphasis on improvedaccounting and financial reporting will have a direct impact in this regard. Sound accounting is thefirst line of good governance. Governance would also be assisted by the improved transparency ofthe linkages between budgeting, internal controls and accountability resulting from the newsystems, and the improved financial systems would help ensure the routine application of allprescribed controls on financial transactions. In the longer term, the measures to enhance theauditor's independence and strengthen audit capacity would also contribute to improvedgovernance.

2.13 IDA's involvement would build upon its existing dialogues with PAD, relating toproject audit and the preparation of this project. The proposed project complements and reinforcesBank group operations such as the Sindh Special Development Project (Cr. 2558-PAK) whichassists Government of Sindh's efforts to reform provincial policies and programs. The projectwould also support government's effort to seek greater involvement of private sector firms ingovernment financial management. IDA is well placed to provide assistance because of itscontinuing dialogue with government on fiscal adjustment, its involvement with executivedepartments of both federal and provincial government, and its ability to provide, subject tosatisfactory performance, longer termn support to undertake subsequent stages of reform.

F. Environment

2.14 There are no environmental problems anticipated for this project, which hasreceived a C rating under the IDA's Environmental Assessment Operational Guidelines.

G. PoJect Cost and Fa

2.15 The total cost of the proposed project, including physical and price contingencies, isestimated at US$ 37.2 million equivalent, of which taxes and duties amount to US$1.8 millionequivalent. Summary estimates are given in Table 2.1 and detailed estimates are given in Annex 1.Full details are contained in the project file. The foreign exchange component is estimated atUS$17.1 million equivalent or 46% of total project costs.

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Table 2.1: SUMMARY COST ESTIMATES

PRS Million USS Million %%/. Total

Local Foreign Total Local Foreign Total Foreign BaseExch. Costs

r , _ _ ... . . .~~~....................... ........... ......... ....................... ........ .......... 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 ResourceManagement 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 computerhardware and purchased software, and 10% on software development services have been allowed.Price contingencies and foreign exchange conversions have been calculated in accordance withBank guidelines, using World Bank estimates prevailing at the time of appraisal. Foreign inflationrates 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% annuallythereafter. No price contingencies have been included for hardware. Price contingencies amount to5.4% of the total estimated project cost. Estimated exchange rate parities between US dollars andPakistan 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 wouldinclude finance for duties, taxes, and recurrent costs, including incremental staff salaries,maintenance, consumables and other recurrent costs. The project financing plan is summarized inTable 2.2 below.

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Table 2.2: PROJECT FINANCING PLAN

US$ million

Foreign . oal,~~~~~~~~~~~~~~.......... ............................................................... ...... .

Government of Pakistan 8.4 - 8.4 23~~~~~~~~~~.................................................................... ........................................ ........................................................

IDA 11 7 17.1 .2 I 77Tota21i i 17.1 37;2 100

2.18 The IDA credit would be made available to GOP on standard terms. US$26.9million equivalent would be passed to PAD, US$0.7 million equivalent to the PlanningCommission 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 withWorld 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 wherecomputer systems would be installed and renovation of training facilities would be in accordancewith national competitive procedures acceptable to IDA. The estimated cost of civil works forsite preparation and renovation is US$ 0.9 million equivalent inclusive of contingencies withindividual contracts under US$ 100,000 equivalent. The small scattered nature of the workwould limit the interests of foreign bidders. Existing procurement procedures of theimplementing agency have been reviewed to ensure adequate competition and encourageeconomy and efficiency.

2.21 Goods: The estimated cost of goods (mainly computer hardware and software,office furniture and equipment, and vehicles) is US$10.0 million inclusive of contingencies.Procurement of the main computer systems would be in accordance with IDA's procurementguidelines. A total of 12 computer systems are to be procured for accounting and financialreporting; one system for the Software Development Center, and the remaining 11 for accountingoffices nationwide. The computer system required for systems development and testing at theSoftware Development Center, about two years prior to the main procurement, would beprocured as a separate item following national competitive bidding procedures (NCB). Thetechnical specification for this system would be based on UNIX and OPEN system standards,thereby not pre-determining the procurement of the remaining 11 systems. These will bepackaged as a single international competitive bidding (ICB) procurement, with phased deliveryof equipment. Other contracts over US$ 100,000 equivalent would be awarded on the basis ofICB, including the procurement of vehicles and equipment. Local suppliers and manufacturerscompeting for the supply of goods under ICB would be granted a margin of preference of 15% ofthe 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 incontracts of less than US$ 100,000 equivalent would be carried out under NCB procedures

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aggregating not more than US$ 2.8 million. Minor items including office furniture andequipment, personal computers, vehicles and items in small quantities which would not attractthe interest of foreign suppliers, would be procured through local shopping obtaining pricequotations 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 TotalProject 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 AssistanceImplementation 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

Operating Costs 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 FinancedNumbers in parentheses indicate IDA Financed Amounts

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2.22 Consultancies. Incremental Staff and Operating Costs: The estimated cost ofservice contracts, consultants and training is US$19.8 million equivalent. Consultanciesincorporating substantial international expertise include: development of accounting standards,financial systems design and implementation (base costs US$ 3.7 million); assistance to strengthenaudit (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 incorporating mostly national expertise include: financialsystems software coding (base costs US$ 1.7 million); fees for private sector audit firms (base costsUS$ 2.0 million); economic management studies (base costs US$ 1.1 million); assistance to thePlanning Commission (base costs US$ 0.6 million); and assistance to replicate systemsimplementation (base costs US$ 0.6 million). Training courses and attachments includeinternational training in financial management/MBAs (base costs US$ 1.0 million) and attachmentswith SAIs (base costs US$ 0.5 million). Technical training of computer staff (base costs US$ 0.5million) 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 ofConsultants. Incremental staff and operating costs would be financed by government.

2.23 Contract Review. All individual contracts for civil works and goods estimated tocost the equivalent of US$ 100,000 or more and contracts for the employment of consulting firmsestimated to cost US$ 100,000 equivalent each or more and contracts for the employment ofindividuals estimated to cost US$ 50,000 equivalent each or more would be subject to IDA's priorreview and approval. For consultants contracts below these thresholds, prior review would berequired of: (a) terms of reference; (b) single source selection of firms; (c) assignments of a criticalnature, as reasonably determined by the Bank; (d) amendments to contracts for the employment ofconsulting firms or individuals that would raise the contract values to these thresholds. It isestimated 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 financeabout 77% per cent of the cost of the project. The proceeds of the Credit would be disbursedagainst eligible expenditures, net of taxes and duties, as indicated in Table 4.2 below. Theestimated disbursement schedule is shown in Annex 7.

2.25 Disbursements would be fully documented except those for expenditures: (a) undercontracts 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) $50,000 for the services of individualconsultants; and, (b) for training. Such disbursements would be made against Statements ofExpenditure (SOE), the documentation for which would not be submitted to IDA but retained byPAD in Islamabad and made available during the course of project supervision. It is estimated thatabout US$ 8.6 million equivalent would be disbursed through SOEs. Individual small contractsfor works, goods, services and training can be claimed through submission of Statement of

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

2.26 Special Accounts. To facilitate disbursement, a Special Account would be openedby PAD, with an amount of up to US$1.2 million in the National Bank of Pakistan on terms andconditions 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 andmaintained by PAD and would be used for payments of all eligible foreign and localexpenditures. The Special Account would be replenished on a monthly basis or whenever 20% ofthe account has been utilized, whichever occurs first.

Table 2.4: DISBURSEMENT BY CATEGORY

Expenditures Catego Amount of Credit % to be FinancedAllocation

(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) and70% for other items procured locally

3. Consultants Services and 19.0 100% of expendituresTraining

4. Refinancing of Project 0.8 100%Preparation Facility

TOTAL 28.8

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111. INSTITUTIONAL ARRANGEMENTS

A. Assessment of Current Arrangements

3.1 PAD, which is presently responsible for most of governments' accounting functionsand for the external audit of government's financial transactions, has an established organizationand structure, including decentralized offices providing accounting, treasury functions and audit foreach of the federal and four provincial governments. Financial regulations and procedures are inplace. PAD has some experience of introducing and operating computerized financial systems,although these have tended to automate the previously existing procedures rather than to amendsystems to introduce modern financial management. It has a network of training institutes. Staff inPAD belong to the audit and accounts service, which is a recognized category (cadre) within theCivil Service of Pakistan. These features provide a positive base from which to develop PAD'scapacity. Nevertheless, the detailed evaluation of current institutional arrangements forgovernment's fiscal reporting and auditing (para. 1.6) highlights weaknesses in the outputs fromexisting financial systems. It identifies institutional constraints including the lack of arrangementsto ensure that systems respond to users' needs, the limited availability of staff with up-to-dateprofessional or technical skills, the lack of independence of audit from accounting, and poor humanresource 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 ofgovernment, 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; andg) use of consultants for design and implementation technical assistance.

3.3 Separation of Audit and Accounts As a first step towards separation of theaudit and accounts functions, PAD has already initiated moves to bifurcate the two functionsunder the Auditor General to such an extent that the eventual transfer of the accounting functionto the executive would not have any wide-ranging organizational implications. As part of thebifurcation process it would be necessary for the Auditor General to ensure that essential internalcontrols are in place and operating in the accounting wing. Following full implementation of thisbifurcation 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 accountingfunction to the executive. Regulatory changes would be prepared as required, and the separationwould 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

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Auditor General's accounting and audit functions by July 1, 2000, and to achieve the separationby 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 byMarch 31, 1999; and (c) thereafter take all measures necessary to effect the separation of thesefunctions (para. 6.1).

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

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

a) a Standards and Policies Section would be responsible for defining and keepingunder review PAD's standards and policies with regard to information systems,and also responsible for detailed technical aspects of any central acquisition ofhardware and software;

b) a Systems Development Section which would be responsible for the developmentand maintenance of the application systems with the assistance of consultants; and,

c) an Implementation Section which would be responsible for the implementation ofdeveloped systems and the day to day operations of the computer installationsaround the country.

3.6 In the case of field offices, all personnel (including those responsible for day today 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 overallimplementation strategy would be that the responsibility for implementation would be assignedto an end-user support group formed at each AG office which would be headed by a DeputyAccountant General and which would be dedicated to systems implementation. The end-usersupport group would be trained by the technical team and would thereafter be responsible fortraining all other personnel at the AG offices as well as at DAOs.

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

a) study of potential areas for greater private sector involvement, includingopportunities to reduce overlap and for more efficient use of audit resources, the

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scope for joint working between public and private sector auditors, and thecomparative 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, togetherwith preparation of revised operating procedures, manuals, and quality controlarrangements; and

d) gradual expansion of the program as appropriate.

3.11 Human Resource Management To reflect its need for increasedprofessionalism and specialization, PAD would implement revised HRM policies including:

a) developing a structured career path for specialist staff including auditors andaccountants;

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 andevaluation purposes;

d) enhancing the effectiveness of training, including requiring staff to be committed toremaining in PAD prior to receiving entry-level training, and relating training moreclosely 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 ofPAD staff would include:

a) replacing the current eight month entry-level training for probationary officers with atwo year course;

b) substitution of the SAS examination for mid-level staff by that of the Association ofAccounting Technicians;

c) substantial reduction in promotion of unqualified candidates from mid-level grades,and allowing direct-entry recruitment of individuals with appropriate MBA/graduatequalifications, subject to accountancy examination success within a prescribed period;

d) training for officers due for promotion to B- 1 9;e) encouragement for officers to acquire an accredited financial qualification; andf) instituting a program of training for continuing professional education.

3.13 PAD is coordinating the proposed changes for its career officers with the FederalPublic Service Commission and the Establishment Division. In addition to developing anddelivering training for the above, PAD's training strategy would also address training needsrelated to the implementation of the new working arrangements and procedures to be introducedthrough the project. A third aspect of PAD's training strategy would be to extend financial

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management training to include selected provincial and secretariat personnel within the circle ofbeneficiaries.

3.14 User Involvement A Steering Committee has been formed to ensure userinvolvement in the project and to perform the functions of interagency coordination.Representatives from MOF, Economic Affairs Division, Planning Division, Pakistan ComputerBureau, and all four Provinces will assist PAD to ensure that the financial accounting systemsdeveloped by the project are responsive to user requirements and interests, that users' trainingneeds are met, and that systems and procedures relating to audit are effective. Other relevantagencies would be co-opted as necessary. PAD would also coordinate with the Federal PublicService Commission and the Establishment Division on aspects relating to the implementation ofits human resource management strategy. Users would be directly involved in the definition ofthe financial reporting systems development, through consultation with the systems designconsultants. PAD would extend its training to include users from outside the department.

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IV, PROJECT IMPLF.1CENATION

A. Orgaizations Responsible for the Project

4.1 The organizations responsible for implementation of sub-components of theproject are: PAD, MOF, and the Planning Commission. The aspects of the project relating togovernment accounting and audit would be PAD's responsibility. MOF and the PlanningCommission would implement the component for strengthening economic management. Theinstitutional responsibilities for project implementation are shown below:

COMPONENT AGENCIF.S

Govenment FinancialManameOverall responsibility PAD (Project Director)

xovmment AAcountingOverall responsibility PAD (CG (A))Inter-agency coordination PAD (CG(A)) and Steering Committee

Core Government Financial SystemsOverall responsibility PAD (GM MIS)Inter-agency coordination PAD (CG(A)) and Steering Committee

GQovemmentAudiOverall responsibility PAD (DAG GA)

Tnstitutional Development and Proiect Pren-arationTraining PAD (DG Training)HRM PAD (DG HRM)Project Management PAD (PD/ DG R&D)Future Project Preparation PAD (PD)

Advisory ServicesInternal Steering CommitteeExternal Panel of Experts

Other Policy SportEconomic Policy Studies MOFAssistance to Planning Commission Planning Commission

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4.2 Implementation arrangements in PAD are shown in Figure 1.

Figure 1: Implementation Arrangements in PAD

Auditor General

| Project |!|Coordinato

DGot Aui 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 withinthe Department that are already responsible for the respective function, with suitablestrengthening as required. Hence, the Controller General (Accounts) would be responsible forthe accounting component. A new General Manager (MIS) would lead the computer systemsdevelopment as head of the MIS Wing. Since the bulk of the work related to informationsystems 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 andwould be functionally responsible to the Deputy Auditor General (Accounts & Payments) forimplementation. The Deputy Auditor General (Government Audit) would be responsible forimplementation of the audit component. The Director General of Training, head of the Audit andAccounts Training Institute (AATI), based in Lahore and with regional offices in Balochistanand NWFP, would be responsible for the training component. The Director General, HumanResource Management, would be responsible for the HRM component.

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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 wouldbe 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 overallresponsibility for monitoring project costs, funds flow, adherence to schedules and quality ofwork performed. It would receive monthly reports from heads of the units managing sub-components from which it would prepare overall project summary progress reports. Thesereports would summarize project expenditures by major project activities and category ofexpenditure, report work progress relative to the major project milestones and performanceindicators, and would highlight any issues relevant to project progress. Summary reports wouldbe provided to the Bank on a quarterly basis. The Project Directorate would be assisted by alocal consultant, to provide backup services and peak-load facilities as required.

4.6 Agreement was obtained at negotiations that PAD would: (a) employ staff withqualifications satisfactory to IDA in the key posts of Controller General (Accounts), DeputyAuditor 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 Directoratea Project Coordinator and a Deputy Project Coordinator, with qualifications satisfactory to theAssociation and other staff necessary for the carrying out of the Directorate's functions, and thatthese key staff, subject to satisfactory performance, would be retained in post for a minimum ofthree years (para. 6.1).

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

C. Implementation Strategy

4.8 PAD's implementation strategy involves defining new standards for accounting andauditing, which move closer to international standards, and introducing improved systems in aphased 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 initialstrengthening of audit are also incorporated.

4.9 Accounting Standards and Financial Reporting This activity to improvefinancial reporting would define a modem set of accounting guidelines, including the introduction

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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 financialreporting needs of government and broadly determine the content, timing and distribution offinancial reports. This work is a prerequisite for the commencement of the main informationsystems development consultancy, and would need to precede the design and development of theCore Information Systems. It would be undertaken by the systems development consultants, andfinanced up to Credit effectiveness by PPF P916-0 PAK.

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

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

a) Phase I would cover requirements definition, functional and technical design,specification and procurement of the hardware and software required forimplementation, with development centered at PAD's head office.

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

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

4.12 For development of the applications software, the systems analysis andcomprehensive functional design would be carried out by consultants, who would also carry out asearch for suitable software packages. In the event of suitable packages being identified, theconsultants would prepare specifications for, assist procure and supervise an ICB turnkey contractfor acquisition and installation of the package, its customization, and acquisition and installation ofsuitable hardware and operating software. In the event of no suitable package being identified, theconsultants would prepare specifications for, assist procure and supervise two contracts, one for thedevelopment and testing of software, and another for the provision/installation of 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.

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The scope of work for the consultants is described in more detail in Annex 3. The project wouldfinance assistance from private firms for further replication of systems across the remaining sites.The implementation schedule shows possible time savings of 6-9 months if suitable applicationsoftware packages could be identified.

4.13 Technology Strategy for PAD's Core Information Systems Computer systemswould, 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; andc) keep pace with emerging technology innovations.

4.14 The project envisages a distributed hardware arhitecture with computerprocessing power located at the various nodes of the network (the AGPR office, AG offices,and DAOs). Where facilities allow and data volumes justify, nodes would be connected viatelecommunications facilities. Alternatively, data transfer would be via diskettes. Thetransaction processing and database management required at each node would be carried out bythe computer at that node. Summary or detailed data, as required, would be transmitted to thecomputers located at the respective AG's office and AGPR in Islamabad. The advantage of suchan architecture is that it distributes computing power, commensurate with needs, to differentnodes of the network, thereby optimizing usage, and making it less vulnerable to malfunctions ata single central site. In addition, end-users at provincial AG and DAOs would have bettercontrol over their technology and data resources, strengthening systems' ownership. The sizeand distribution of computing power across the various nodes of the network would bedetermined by the volumes of data and transactions that are generated and stored, and thevolumes and frequencies of data transmitted. Information gathered from PAD has been used toestimate the size and location of computers. This information would be progressively refined bythe consultants during the preparation phase of the project, by undertaking surveys to gather datafor each site.

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

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

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automated systems it appreciates the importance of appropriate manpower policies in order toachieve successful implementation of change. Several aspects would be catered for:

a) the skills of staff who currently maintain the manual systems would be augmented sothat they are able to operate and maintain the new automated systems;

b) retraining or recruitment would provide for the jobs created related to the operationand 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 staffare 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 trainingprogram 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 useof 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; andg) building future capacity - through revised HRM procedures, international training in a

modem financial systems environment, and arranging attachments with other SupremeAudit Institutions

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

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

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policy based on open and quantified performance standards and a recognized merit system, andto 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 formaltraining (for example, for accounting technicians and probationers), short courses, and providecourse material and backstopping for field office training. PAD would strengthen the AATI andaugment them by establishing Field Office Training Centers (FOTCs) at the larger accountingoffices to provide training in revised procedures, and basic computer skills. The componentwould be implemented in the following sequence:

a) preparation for the Accounting Technician qualification, which can be accommodatedwithin the existing competence of the training faculty, updating existing trainingmaterials, upgrading the capacity of faculty staff, through training, to prepare forintroducing 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 enhancedprobationers and staff retraining courses, and renovation of facilities;

c) introduction of enhanced probationers and staff retraining courses, equipping ofcomputer training facilities, and initial annual impact evaluation.

4.23 Economic Management Agreed recommendations of the studies financed underthis component would be used to draw up an agenda for policy and/or institutional reforms inspecific areas. The strengthening of institutional capacities of and coordination between theMOF and the Planning Commission in economic management is a long-term endeavor requiringdetailed diagnosis and follow-up to the 1993 Economy Commission recommendations. Thediagnostic study of the institutional arrangements for macroeconomic management would assessoptions for strengthening capacity for the formulation of strategies on longer-term developmentfinance issues. The study would look at institutional, staffing and financing arrangements fordeveloping the government's forward planning and policy analysis capacity, including how tobetter link the policy work required by Finance with the longer-term development planningcurrently handled by the Planning Commission. It would also assess how to attract and retain thehighly skilled and experienced staff required, as well as the related training requirements. GOPand IDA would jointly formulate action plans to implement the agreed recommendations of theeconomic, financial policy, and diagnostic studies.

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4.24 Implementation Plan The implementation strategy is reflected in the agreedimplementation plan (Annex 6). Agreement was obtained at negotiations that GOP wouldimplement the Project in accordance with the agreed implementation plan; and would byJanuary 31, 1997 and by each January 31 thereafter review and update the implementation planin 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 projectactivities would commence without undue delay. Preparatory activities for the project, financedby a Project Preparation Facility (P916-0 PAK), include:

a) initiating the consultancy for developing accounting principles, standards and afinancial reporting framework to guide the detailed systems design;

b) establishment of the MIS organization structure by appointment of a computerprofessional as General Manager MIS and other key staff in the MIS wing;

c) undertaking a training needs analysis for provincial government staff includingusers 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; andf) project management training and assistance with setting up project management

systems.

4.26 The project's Planning Commission Formn I (PC-1) has been approved byECNEC. 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'sappointment of the accounting standards and systems design consultants (and of IDA to issue itsno objection) would be a condition of Credit effectiveness (para. 6.2). The project managementdirectorate is in place and PAD is in the process of recruiting key technical personnel. It wasagreed at negotiations that appointment of the General Manager (MIS) to the satisfaction of IDAwould 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 andcommitment to project objectives. Ownership is strengthened as the project builds uponinitiatives already taken by PAD to computerize accounting. PAD has extensively discussed itsdevelopment strategy internally within the department, including with middle management, toattempt to build a broadly based consensus. Under PAD's direction, project preparation has triedto develop participation through thoroughly canvassing user needs, and the development strategyhas obtained the commitment of federal government and three of the four provincialgovernments, who would be directly involved in guiding and monitoring the project through

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membership of the Steering Committee. Participation in the project's implementation includesPakistan's professional accountancy bodies. Technology changes would be institutionalizedthrough recruitment of specialists, departmental reorganization and structured training.Establishment of an MIS wing would provide the necessary technical skills for systemsdevelopment and maintenance. Staff to be involved in systems maintenance would be initiallyassociated with systems development. In areas such as information technology where PAD lackssuitable skills, it would recruit technical staff required for the implementation of the project fromthe open market. Human resource management policies would be amended to facilitate retainingspecialist skills and to make better use of trained staff, and further institutional support would bearranged through training. Training would be extended to provinces and executive departments,to provide the skills to better use the improved financial information, thereby reinforcing thefuture demand for such data. It is recognized that systems operations will have an ongoingimpact on recurrent costs, estimated to amount to about $1.3 million equivalent per annum. Thiswill be provided for in the armual budget after the project is completed. Increased participationof the private sector would also help ensure sustainability. PAD has confirmed its intentions toinvolve private sector audit firms in the public sector,while remaining within the context of theAuditor General's responsibilities under the Constitution. IDA has already recognized thatcompleting automation of all 95 sites will require a follow-up project, which will help furtherinstitutionalize the changes introduced in this project.

F. Accounts and Audit

4.28 PAD, Planning Commission and MOF would maintain separate accounts for theirrespective parts of the project, and would keep all the documentation including that for theStatement of Expenditures. PAD would prepare consolidated project accounts annually. IDAwould require annual audit reports from external auditors (independent and suitably qualified) forproject accounts with a separate opinion on the Special Account and the Statement ofExpenditures. The Audit Reports would be submitted to the IDA within six months after the endof a financial year. In order to assure transparency and independence, PAD has agreed that itwould engage a private sector audit firm for this purpose, subject to the concurrence ofgovernment. PAD would prepare and submit to IDA within six months after the close of eachfiscal year fully audited consolidated project accounts including an auditor's opinion and reportfor 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 beused as a basis for monitoring and evaluating the project. A thorough mid-term review would beincorporated to assess performance achieved, and to review the appropriateness and continuingrelevance of the project's design, including taking account of technology changes. PAD hasdeveloped a project implementation management system to monitor progress. A summary of itsresulting implementation plan appears as Annex 6. Quarterly progress reports would be providedto IDA. A mid-term review would be scheduled three years after credit effectiveness, to coincide

- 30 -

with the completion of the pilot implementation phase, would be conducted by PAD, PlanningCommission and MOF with IDA. Performance as assessed during the mid-term review would bean important consideration for preparation of a future project. Agreement was obtained atnegotiations that PAD, MOF and Planning Commission would prepare, by April 30, 1999, a reportevaluating progress to date, including recommendations to enhance implementation of the project,which would form the basis for a mid-term review by June 30, 1999 (para. 6.1). In addition toHeadquarters supervision for the project, the anticipated heavy supervision demands would beinternalized to the extent possible through use of consultancy firms to assist change managementand for institutional development.

4.30 A senior level panel of internationally-experienced experts would be constitutedto meet at least annually and advise the govermment on ways to continually enhance the project'scontribution towards achieving its vision for financial management and public accountability(this panel would report to the steering committee). The panel of experts would comprise at leastthree international experts, having among them expertise in Government Accounting,Government Auditing, and Information Systems Development. Preference would be given toofficers serving in (or just retired from) Supreme Audit Institutions/ Govenmment AccountingOrganizations. The panel may also include two or three local counterpart experts. Agreementwas obtained at negotiations that PAD would establish by December 31, 1996 and retain duringthe implementation of the project, an international panel of experts with membership andresponsibilities satisfactory to IDA (para. 6.1).

4.31 In view of the significant complexity of the project, Bank staff and consultantsupervision inputs are expected to be high and atypical as compared to average, but comparable toother similar projects. It is estimated that the requirement will be in the range of 25-30 staff weeksper year as indicated in the supervision plan attached at Annex 9. Supervision would include:

a) general portfolio management - review of procurement and consultant contractingdocuments, progress reports and correspondence;

b) formal reviews - participation in the mid-term and other reviews; andc) participation in regular progress meetings (by local consultants);d) routine biannual supervision missions.

4.32 Two supervision missions would be necessary annually, each for a period of twoweeks on average. Supervision missions would normally require participation from the taskmanager, auditing, accounting, human resource and information systems specialists. Supervision ofthe policy support component would require participation from a macro economist. Total staffinputs for these missions would be about 20 staff weeks per year. The proposed level ofsupervision includes local as well as Headquarters inputs. The use of local consultants wouldreduce the total costs of supervision. The continued high level of supervision towards the end ofthe project reflects the timing of implementation of the pilot systems and their replication.

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V. BENEFITS AND RISKS

A. BENEFITS

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

5.2 Basic accounting information underpinning financial management decisions wouldbe prepared according to enhanced accounting standards, thereby providing the basis for moreinformed decision-making. Financial monitoring reports would be geared to users' needs, andwould incorporate information presently missing such as budget and variance information, anddetails, by project, of development expenditure. This improved financial infornation would enablestrengthened management and monitoring of public expenditures, and hence assist improvedeconomic 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 throughstrengthened audit, by introducing modern audit techniques, reporting formats and quality controls.Financial management skills within government would also be developed by training, by improvedhuman resource management policies, and by making greater use of the resources and capacity ofprivate audit firms. Such improvements in financial management would gradually increase theeffectiveness 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 andaccountability. The International Federation of Accountants considers that sound accounting is thefirst line of good governance. As the project would address many of the weaknesses in the presentarrangements for government accounting, it would lay a stronger foundation for improvedgovernance. Greater capacity and independence of governments' external audit would enhancetransparency and accountability, thereby further assisting strengthened governance.

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

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B. ECONOMIC ANALYSIS

5.6 The following aspects of the project were selected from the range of possiblealternatives in order to achieve a cost effective solution to Governments' financial informationneeds, 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 qualityof accounting and financial information, thus strengthening the platform for existingfinancial management and control procedures, and all subsequent improvementsthereto;

b) the project would address a major structural weakness in present arrangements byseparating functional responsibilities for accounting and audit, thereby creatingindependence which would enhance the contribution of both functions to improvedpublic expenditure management;

c) the project includes measures to increase institutional capacity through amendingmanpower policies, training, use of the private sector in areas of comparativeadvantage, and technical assistance, to enhance the development impact of improvedfinancial information, and to ensure sustainability of the improved procedures;

d) financial systems would be prepared in the context of an overall informationarchitecture for government fiscal management, to ensure they are integrated amongstthemselves and with other Government systems, and to avoid overlapping orduplication of functionality;

e) the technological approach proposed in the project, based on distributed, OPEN andscaleable systems, strikes a balance between large mainframe systems which wouldbe 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 oftransactions; and

f) the phased implementation strategy of the computerized financial systems, restrictingthe implementation to 21 out of a total 95 sites, is a prudent approach to managingimplementation risks.

5.7 The total cost of the project amounts to approximately 0.25% of annual publicexpenditure in Pakistan. The benefits of even minor improvements to the efficiency,effectiveness or management of public expenditure, which would arise from improved financialinformation and control, would exceed project costs. The net development impact of the projectis 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 highrisk. Although identified risks and mitigating measures are summarized below, as the projectwould address sensitive areas related to control and reporting of financial transactions, wouldintroduce structural changes within PAD, and would install new technology, reluctance and at times

- 33 -

even resistance to implementation should be anticipated to occur, and the full achievement ofobjectives should therefore be considered uncertain.

5.9 The main categories of risk facing the project are:

a) Vested interests. By improving the quality of financial systems and reporting, theproject would introduce controls which would affect those who benefit fromweaknesses in present arrangements. These interests may act to delay the project, or todivert it from its objectives. The following would assist to manage this risk: (i) supportfrom those senior levels of government which do acknowledge the need to improve andupdate governments' current financial systems; (ii) monitoring and guidance by a panelof international experts - drawn from other Supreme Audit and Accounting Institutions- to provide external perspectives and professional peer pressure; and (iii) the phasedand relatively gradual introduction of new systems, allowing a wider appreciation ofbenefits to develop, enhancing ownership.

b) Resistance to change. Organizational risks include PAD's capacity for managing theprocess of change, especially those aspects related to its union and staff concerns arisingfrom the introduction of new procedures, technology and the functional separation ofaccounting and audit. The Auditor General understands the need for leadership, forclear direction and for keeping staff fully informed and involved, to reduce these risks.A change-management specialist would advise on processes and appropriate actions.The Steering Committee, comprising key users of financial information, would assist toensure that end-users are fully involved and buy into the proposed changes. The projectincludes extensive training and retraining opportunities for staff within and outside PADto prepare for change.

c) Technology development and operation. Risks related to the development andoperation of computer-based financial information systems arise as staff have limitedtechnical skills and experience of technically more complex financial systems. Theserisks are mitigated somewhat by the fact that PAD already has some prior experience ofdeveloping and operating computer systems in its five Accountant Generals offices andseveral District Accounts Offices. These offices would also face less difficulty ininstalling new systems than a green-field site. The project also supports strengtheningPAD's capacity to manage technology by creating an MIS Wing, headed by a GeneralManager recruited from the open market. Certain other key technical posts would alsobe filled by local staff on contract terms. The development of new systems would beunder the control of internationally experienced consultants, with PAD staff involved indevelopment to prepare for eventually operating and maintaining the systems.

d) _ . Obtaining the benefits of improved technologyrequires skills to control the quality of financial data inputs, and to apply the financialinformation generated. The project includes three measures to address the risk ofinadequate skills. Changes to HRM policies, to provide a structured career path foraccounting and audit specialists, would underpin efforts for institutional development.

- 34 -

Upgrading of skills would be addressed by improved training, including for the users offinancial information, and consultants would provide technical assistance in specificaspects. The project would support greater involvement of local private sector firns inpublic sector financial management to further increase capacity.

e) Project management. The complexity of the project, and the likelihood of delays indecision-making and implementation, increase project management risks. A committedand stable team of senior management within PAD is considered a critical factor to dealwith this risk. Many of these key staff have been involved during project preparation,thus developing ownership. Project conditionality limiting key staff transfers wouldhelp to retain a stable team. There is an existing Project Directorate, with experience ofimplementing a component of the Third Technical Assistance Project (Cr.1755-PAK)and this project's preparation, which will be strengthened further and given logisticalsupport by consultants. Monitoring arrangements include a detailed implementationplan, performance indicators and intensive supervision.

f) Policy Changes. There is a risk that policy changes or revised administrativearrangements could be introduced which would disrupt the project. To mitigate thistype of risk, the government has approved a vision statement for financial reporting andauditing which is fully in line with project objectives. Two final risks are delays ininitiating the economic management studies and of weak commitment to implement thepolicy and institutional changes recommended by them. To mitigate these risks, termsof reference for key studies will be submitted prior to negotiations, and action plans forimplementing their recommendations will form part of the annual review and updatingof the project implementation plan in a manner satisfactory to the Bank.

- 35 -

VI,AGREEMIENTS REACHEDI

6.1 inn the following were agreed with the GOP:

a) GOP shall prepare a plan for the separation of the Auditor General's accounting andaudit functions by July 1, 2000, and to achieve the separation by that date, shall: (i)complete bifurcation of the audit and accounting functions by June 30, 1997; (ii)complete detailed proposals for the functional separation of audit and accounting byMarch 31, 1999; and (iii) thereafter take all measures necessary to effect theseparation of these functions. (para. 3.3);

b) PAD would: (i) employ staff with qualifications satisfactory to IDA in the key postsof Controller General (Accounts), Deputy Auditor General (Government Audit),General Manager (MIS), Director General (HRM), Director General (Training); (ii)designate and maintain a Project Director satisfactory to IDA, with overallresponsibility for project implementation; (iii) employ within the Project Directorate aProject Coordinator and a Deputy Project Coordinator, with qualifications satisfactoryto the Association and other staff necessary for the carrying out of the Directorate'sfunctions; and (iv) that these key staff, subject to satisfactory performance, would beretained in post for a minimum of three years (para. 4.6);

c) MOF and the Planning Commission would set up by December 31, 1996, projectmanagement arrangements satisfactory to IDA for the studies carried out and the short-term technical assistance provided under their respective components (para. 4.7);

d) GOP would implement the Project in accordance with the agreed implementationplan; and would by January 31, 1997 and by each January 31 thereafter review andupdate the implementation plan in consultation with the Association (para. 4.24);

e) PAD, MOF and Planning Commission would prepare, by April 30, 1999, a reportevaluating progress to date, including recommendations to enhance implementation ofthe project, which would form the basis for a mid-term review by June 30, 1999 (para.4.29);

f) PAD would by December 1996, establish and retain an international panel of expertswith membership and responsibilities satisfactory to IDA (para. 4.30).

6.2 Before credit agrement effectiveness the following actions would be completed:

a) appointment of the accounting standards and systems design consultants (para. 4.26);and,

b) appointment of the General Manager MIS (para. 4.26).

- 36 -

6.3 BRcmmndstion. On the basis of the above agreements, the proposed project issuitable for an IDA Credit of SDR 20.1 million (US$28.8 million equivalent) to the IslamicRepublic of Pakistan.

AtNlEX IPage I of 6

PkM

Prqoj klw buqwoVing Fhiancil Fbponr9i *al Aud^iung ii GCoerm et of PakidtanCompm odS P_ect Cos fluiny

(PRM MElo) (uss MEon)

% %Tgtal % % TolaFoi E ForeIgn Obe

Local Foreign TOtW Excange Costs Local Foreign Tota Exucamge Casts

A. Goermnmaen Accounting and Fiancia RapostingA.na.ng and Plcy SLridafds 13.524 10.350 23.874 43 2 0.392 0.300 0.692 43 2

Syshmns Develpnmen 160.806 240.084 400.892 60 34 4.661 6.959 11.620 60 34SuhbStid 174.332 250.434 424.766 59 36 5.053 7.259 12.312 59 36

B. Governet AudtingAudi 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. MHama Resource 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*uhProdssnum 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 lralianMSming 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 Office Audomnaion 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 SupportEauunuid 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

Physial Coiinjencies 16.531 15.637 32.168 49 3 0.479 0.453 0.932 49 3

Price C4x enawies 168.400 118.608 287.006 41 24 1.384 0.611 1.995 31 6

Total PROJECT COSTS 814.151 606.373 1.500.524 46 127 20.101 17.068 37.169 46 109

ANNFX Ihac 2.l16

i p Fi_ " U M lin in G 6_ d P _036tofmco 8, bYvo - "Cl

Bas Co" FMm . C.a o3S mm3611111 Wm3 am 411101 Om Tomd 66*37 Wm7 Om 91I. 1111 Om 1 612 low

AL GW#.S MACONWAW§ aM Fesedi bprn.gAC 183ar3P0A , I, D5 *4 4U-30 - 23614 0.300 0252 0140 - - 0652S 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 4355s,- 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"PoO __ _ 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 1564Sub S-_-^; INLA4361 10.617 ISo 1.611 1613 - 20262 0123 0310 0048 0049 0(64 - 0646F~,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 3265f 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 1053111 24 3451 35412 49142 38W0 235S36 216.450 3 1.307 ' 1 1424 os0s 0669 6274

F. 0 Po"p SupoadEm p Pokey_ _ 7.43 7436 7436 7436 7435 37.191 - 0216 0216 0216 0216 0216 1076AssanceiPLwd 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 1726T 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 4.516F_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 SIWowedrnm 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 1.96STmr.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 IG 1III

ANNEX Iage3ofr6

Pakistan -Pro lot Ior Iroving 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 1 635 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 0 O036 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. TraIingPotlsaomin .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 6513E. 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 2139PAD 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 8 8.623 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 - - - - 0.684Subtotal - 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

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TedBSaL4rCOSTS 0012 so82 an 35 2 2n OUI4 0 77 15664 05|8 3443 3.2SS 1.96 1.OSX 1078 0U7 1U 22 2 7 OS322

Pb wCft".' .4n '134 §°^ '4 13' 0.051 *OOS9 *065 oSX2

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5~~~~~~~~~~~~~~~~~~1 ago0 12,, $ft Doou 0.111 Dow0 0 201 a0F ouZ 0 4 0719 0512 - 024 0 0* 5 197

D w ~~~~ ~ ~~~~ ~ ~~~ ~ ~~~4018 081 M OUS6 007S 40Um 408 Ole o07 Oo 0S 4429 04^74 40314 .0.027 40127 401a .3202

S fseP..C~V s 2 aos 401i 104^2 *021 eso *0s7 Gal ns1 02 5 OIS 49 0027 0 120 a*01 1 119 0 3 0o0o

TrdrPAcIc l COT*m 1.SU *49 2M as" GM I.64 *624 4.201 *asl 2 17 1S2 1.11 *U 37 I" 2 5 e ra

Taft *7750340 4.125 * 04 - 0.2U *.974 §|S 9.1@ - 111 4 2 0075

famf.dm 0200 1.4s 2074 11s 0.0- ssn 1032 027S3 ff eas .02 oun Gall esos4 Din 17.2 2 7 o na

. . :~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~iIA

ANNEXI

Pagc 5 of'

Prpd lx kiWrovng Fdwns Rpo"g nd AuSag In Govesnhnwl of PalusinExpenditure Accounts by Componnls - Totals Including Contingences

fUSS MAn)

Govenment Accounting and Olher Policy SupponFIancial Reponing GoeWnmnent Audutmg Humnn Resource Managemnt1 framing

Accounting Audit (HRM) Sub Admn.istralton Econo-ic Assistanceand Polcy Systlem Systems Systeni Organisatinal Systes Profesionai Pfelssiona Project PAD Oicfe PoWliy to PlanningStandaids DOx_iopunt bnl ro ment Eleop nemi t)Oetopmc.i Deopmen t n Tainmg T-ue i Faciliies MIS Wing Diecltrat. Auointion Studies Con...ssion T1al

I Macstwm CstsA ViWks

Co5t Si iPicyain - 0269 - 0096 0200 - - O I 51 0 56Renooason - --- 0322 - 0 322

Suslls - 0.29 - 0 - 0020 - - 0322 0151 - - - Bu8 Goads

0xcaFumdtss&Eipn*T - 0435 0165 0033 - 1216 0038 0030 - 1il6

PuiccsAhsSuh.-c 3i875 - 16 -i 066 - 0725 0354 0022 0840 - 7SiIVeaks - 1- - - - - 0053 a- - 003jel* . - - 0a 09004 - - - 0133

1S&6 - 4 110 - 1 t3 - 0 0 039 2 034 0 392 0105 640 10 012 ,C Sentes -

,c eat.ob -j 2 03ft - - - - 2 036

AssI.cvo - - 2 303 - - - 2303Cu_aii5 - - - - - - - - - I419- 1 419

A*stw rl - - - -- - - 0 142 -- 142

Sola - 2093 2.3 - - - - - - 1419 0142 9- 504D. lecIca Assitance

wneu AiMOA.uslw 0.303 0171 - - - - -- - 0450 I- 529mzauls.V.u .l aoiool 0120 4065 1644 - 0536 0036 0310 0349 w060Pi"scySugigisit - - - - - - -- - 1.126 0681114 16 3

.aot 0423 4150 1.644 053 0.036 0310 0349 - - 0.450 I I98 o84 10491C. Tuing

TiasyoigOcoosca -- 0S4 - 0820 1 720TrMOgLeOaly - - - - - - 0262 - - ObQ - - 0 8esosal - 090 - 1102 - 0606 - 2616

F Flehrameg ofPPF 0300 - - - 0046 - 0100 0029 0011 0204 0096 0792TOWilsnssunsCols 0o7m 11.290 4684 1931 0.564 0715 1552 0.376 2371 2.772 0793 0640 119t 0664 306S94L Racuinoe Cost

A bic---da - - - a 0595 0359 - - 0955a i_ ar I 31300 0464 0093 - - 0687 0213 0043 0252 3252C Lii-a Lin- - - 0 70 - - - O 7DI- u 135 0 247 0 073 - 0 943 - 1 3W

tal ews,ui. 1 390 0464 0093 0131 0247 1 630 0il0 1346 0252 6 475hoaPROJI.I LU5tS o01m 12566 46054 2 395 0564 0608 1687 0624 4201 3581 2139 1092 I t 048 371N6

Tsies - 0775 - 0349 - 0128 0004 0264 0074 0025 0i86 - 1711Fina. 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

Page 6 of 6

PrOja kw kivWnng Famt RtaPM NW Asig na Govaninuat d Paalan

Componntus by Ftuancla

(PRS 3WOn) JUSS ftion)Oa'aanuuut u8 Local tovna11 ci Ldocal

Pakistan IDA Total (EacL Duts & Pakistan IDA Total Foat (Eci. DautasAmount % Amount % Amount % For. Each. Toots) Taoes Amnount % Amount 7 Amount V. Each. laes) la.*e

A Goastnersl A;ountg a.ndt fmanciul RepotdingAutgaW Pa.iySIu-,u.ds 27072 1000 27.072 1.8 £0800 16272 - 0723 1000 0723 19 0300 0423SySIta r t9lpas 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.n AudWitagA,.e:.y,i 1Ii4 . -I i 0o00 :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 6 6 69 262 14 t3 24141 0 523 34 3 £ 573 65 7 2395 6 4 1 622 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 3 7 0665 0 598 0 128

0. TraemtnPwless.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 1 7 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 0264S.MNA 101.013 386 154176 60t4 256.191 270 65612 159.045 10535 2522 386 4002 624 6.513 175 2194 4051 026i

E. AdAllreaonAss 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 lqd raO'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 SuppoRtEcorro Ps S4"., 0eo0 49897 2000 4.9697 33 23564 26133 1 2296 100 0 2 196 3 2 0 S 0630 -

A.Ustar- o P .. _ c. 25 86 200.0 25 96 17 12 284 13 514 . 0 684 100 0 0 664 1 8 0 325 0 359

61blotal 0000 7-5565 £000 75.565 50 35384 3971£ - - 3 83 1000 2683 0£ 0893 0990Tot4aDl 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

43ANNEJX Page I of I

PAKISTAN

IMPROVEMENT TO FINANCIAL REPORTING AND AUDITING PROJECT

STAFF APPRAISAL REPORT

'GOVERNMENT OF PAKISTAN

VISION STATEMENT FOR FrNANCIAL REPORTING AND AUDITING

Draft Prepared by PAD

1. As Pakistan proceeds to open up its economy and free it from regulatory controls, theneed for good governance and modem financial management becomes paramount. Instead of directintervention, the Government has to design appropriate fiscal and monetary responses to changingconditions, while in the context of a global economy, issues of transparency and accountabilitvhave become even more important. In this environment, the synergy of greater public-private sectorpartnership has to be eXploited to accelerate and enhance the development process.

2. The effectiveness and credibility of government policies is critically dependent on theavailability of timely and accurate financial and management information, the existence of a cadreof competent professionals in the public and private sectors, a framework of financial andaccounting principles and procedures designed according to internationally accepted standards, anda system of public accountability that includes a strong and independent legislative audit function.

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

- a modem accounting system designed according to internationally recognized accountingprinciples and standards, functioning under the Executive, and based on modem informationtechnology to ensure ready availability of relevant, accurate and timely information required bymanagers;

- a governance structure and legal framework consistent with international standards for anindependent comprehensive audit function which supports public accountability by timelyreporting to the legislature for effective and appropriate action;

- increasing professionalization of the elements of its civil services which deal wvith financial andeconomic management, requiring key competencies in staff training and appropriate humanresource management policies emphasizing performnance, experience and knowledge:

- increasing partnership between the private and public sectors in their respective areas ofconmparaLtive advantage: and.

- adoptiLn improved standards for private sector linancial disclosure.

This drUiIltx rsion staternenL mtould be counlrined byv he Go%crnment at projeci negotiations

44ANNIEX3

Page I of 2

PAKISTAN

IMPROVEMFNT TO FINANCIAL REPORTING AND AUDITING PROJECT

STAFF APPRAISAL REPORT

SCOPE OF WORK FOR ACCOUNTING STANDARDS AND INFORMATION SYSTEMS CONSULTANTS

The project will finance consultancies. computer hardware, software and trainingrequired for the preparation of revised accounting standards and reporting framework, and thedesign, development and implementation of elected high priority financial application systems atselected sites. These application systems include a Core Accounting and Reporting System, aPayroll and Pension System and a Cash Forecasting System.

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

a) revision of accounting principles and standards to meet, as far as considered practicable,with International Accounting Standards:

b) revision of the financial reporting and accounts classification;c) reclassification of the chart of accounts to closely reflect users' financial needs;d) definition of reporting responsibilities between PAD and executive agencies;e) definition of key information for trend analvsis of expenditure and revenue, and cash flow

forecasting systems; andf) establishment of procedures for coordination and integration of all financial information.

Particular attention would be given to PAD's requirements for receiving financialinfornation from other departments/agencies to feed into the accounting and reportingsystem, enabling PAD to produce reports which fulfill the financial information needs ofthe government (and particularly the MOF) completely.

3. The scope of work for the remaining phases of the Information SystemsConsultants would include:

a) Preparation of the detailed functional design for the specified svstems: This wouldinclude: i) analysis of the functional processes including administrative procedures,transaction documents. forms and information flows, data flow statistics, related to theaccounting and reporting, payroll. pension and cash management areas currently in useand/or recommended by the project consultancies; ii) developing and defining a newset of functional processes, informnation flows, procedures. transaction types andassociated documents and torms. and related structures required to set up the newsy stemis: aLnd iii) developing, a full ftrncLiotial design for the computer svstems required.including tlle specitication ot the outputs reports. the input formats. transactionLlocurnents. processini ancd controls for the systems required at various nodes of theintormatioii tlow network. the interfaces Lnd data flows between these nodes and withexternal svstems.

45ANNEX'

Page 2 of 2b) Specification of the technologzy architecture required for the implementation of these

systems: Thlis activity would include the development of specifications for the H/Wand S/W to be installed at the various nodes and the mode of interconnection of thisl-lardware and Software.

c) lnvestigation of altematives for application software: This would entail investigatingand ascertaining whether one or more off the shelf software packages are availablewhich can meet the functional requirements of one or more of the systems, as definedabove.

d) Procurement of H/W and S/W: Project consultants will incorporate the Hardware andSoftware specifications into an RFP for procurement, develop criteria for the evaluationof vendor proposals; assist the govemment in the tendering process, in evaluatingvendor proposals, in the acquisition of the hardware and software, monitoring theinstallation and carrying out qualitv assurance during the testing of the hardware andsoftware procured for the project. In the event of a suitable package being identified,project consultants would develop terms of reference for a turn key project foracquisition and installation of the package (including any customization required) andacquisition and installation of suitable hardware and software using InternationalCompetitive Bidding (ICB). In the event of no suitable package being identified, thehardware and svstems software would be acquired through intemational competitivebidding and the development of the software and related documentation would becontracted out to a local software house. In both cases the supervision of the softwarecustomization/ development and implementation of the systems at the first few (4-5)sites would be the responsibility of the consultants selected for preparing the systemsdesign.

e) Svstems implementation: The Core information systems defined above will beimplemented in a phased manner. In the first phase the systems will be implemented atthe AGPR Head Office, at an Accountant General's (AG) Office at a provincialheadquarters, and at two District Accounts offices (DAOs) reporting to this AG. This isreferred to as the Pilot implementation. In the second phase the systems will bereplicated over the course of this project to a total of 21 sites including all ProvincialAG offices in Sindh. Punjab, NWFP and Baluchistan, and selected DAOs within eachprovince. Systems implementation wvill involve: (i) preparation of an implementationschedule, (ii) installation and testing of the hardware and systems software. DBMS, andApplication Development tools etc.; (iii) installation and testing of the applicationsystems and training end users; and (iv) preparation of related technical and end userdocumentation. Replication of the system would involve preparation of a replicationplan and schedule for the system for all designated sites. including a check list detailingtasks that need to be unldertaken for replication of the system at , tepical provincial ordistrict sitc. %%orkiin closelv with the H.-W. S/W venidor to ensure that the replicationsaire operauional and training of sufficiellt :ocal staff capable of carrying out subsequentreplicatiolls.

46ANNEX 4Page I of 5

PAKISTAN

IMPROVEMENT TO FINANCIAL REPORTING AND AUDITING PROJECT

STAFF APPRAISAL REPORT

INFORMATION SYSTEMS ARCHITECTURE FOR GOVERNMENT FISCAL MANAGEMENT

A. Information Systems Architecture

1. Figure I shows the overall Inforrnation Systems Architecture for Government FiscalManagement in Pakistan. This architecture showvs the major functional processes required to becarried out as part of government fiscal management. the agencies associated with these processes,the complete suite of information systems required by these agencies to perform these functions andthe major data flows between the systems. The high priority information systems. identified by thediagnostic consultancv as being critical for the governments financial information needs areindicated by the shaded boxes in this diagram. A brief description of these application systemswhich have been selected for implementation under this project is given below.

a) Core Accounting and Reporting System: The Core Accounting and Reporting System willprovide an integrated government wide accounting function and will encompass thefunctional requirements for the budget execution and accounting processes and would coverthe appropriation, commitment, funds allocation, and payment processes for both theinvestment and current budgets.

This system would be the core financial management inforrnation svstem of theGovernment of Pakistan. It will be used by: i) the Pakistan Audit Department (includingits subordinate units) to perform the basic accounting functions: ii) the Federal Ministry ofFinance and the Provincial Finance Departments to perform the processes associated withbudget execution, monitoring and control: iii) the Ministry of Finance to provide theinformation it requires for cash management and to implement cash limits, as may berequired; and iv) the Federal Planning Division and the Provincial Planning Departments toobtain the status of actual expenditures on ongoing programs and projects.

The information contained in the system data bases would provide the MOF and other corefinancial agencies a foundation for a comprehensive management information related to thecountry's financial resources. The information contained in the data bases would beavailable to other governmnent agencies on an as required/approved basis. In addition, thesystem would provide useful financial information to the ministries, spending units (in theirrespective areas) to enable them to better manage their work programs. It will give thesedepartments the facilities to down load relevant and authorized data and perform requiredanaly ses.

1he system x \il[ be desiunied in accordance with internationally accepted accountingsprinciples and standards it will be based on a double entrv accounting model. Such asvstem would need to be comprehensive in terms of coverage and be a source of reliableand timelv data to become a credible source ot inforrnation for users. The Core Accounting

47ANNEX4Page 2 of 3

System will therefore be a ftillly automated system. with data captured only once as anaccounting transaction progresses throughl tile system. This system, introduced along with amodem budget classification system and aln appropriate chart of accounts, would enableexpenditures and revenues to be recorded at a detailed level and related to specific programsand projects. Data recorded at this level will then be directly available for use bvarencies/spending units for program and project management. This data will also be easilyamenable to cross classification for financial and economic analyses. The introduction ofan automated accounting system would ensure completeness of data capture (that is notransaction would be processed outside the svstem) and rigorous application of all relevantfinancial controls to all transactions processed by the system.

The System would have interfaces with external data sources on a periodic basis.Establishing such an interface will ensure that financial data in the system data bases has thecoverage necessary to provide a comprehensive financial picture for the Government ofPakistan. ,

b) Pavroll and Pension Svstems: The payroll of government employees constitutes a largeportion of the government expenditures. The need for an automated Payroll and PensionSystem is evident in view of the increasing volume of transactions. The proposed payrolland pension system will perform the full range of both the payroll and pension functions asan integrated system and the payments processed will automatically update the accountingdata in the Core Accounting and Reporting System. The system will be designed toincorporate government rules and regulations related to the payroll and pension functions.

c) Cash Flow Forecasting and Financial Analysis System: One of the MOF's maininforrnation needs is to establish a cash forecasting system for forecasting likely flows ofexpenditure and receipts and the consequent impact on cash balances and issue of debtinstruments. The Cash flow and Financial analysis system will be designed to provideaccurate cash balances for the MOF to perform its cash forecasting functions.

B. Technology Architecture for PAD's Core Information Systems

2. The technology architecture for the project specifies the nature size anddistribution of the computer processing facilities and associated work stations; the nature of thecommunications connections between the nodes of the network; and the nature and type ofapplication development. svstems software and Data Base Management Systems (DBMS), thatshould be employed for the project. This architecture is determined by the characteristics of theapplication systems for government accounting which may be summarized as follows:

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

b) some mnodules xx ill need tv be implemente' at multiple levels e.g. the AGPR in Islamabad.the l'rovincial AG offices and the District Accounts Ot'fices. Data will be generated. storedand processed at each level and will need to be transferred between Lhe various levels: and

48ANNEX4Page 3 of 5

c) the data and transaction volumes will vary by province and district. For the Central AGPRsite and for some AG offices and District .Accounts Offices they could be quite high.

3. Hardware Characteristics: These application characteristics require that adistributed architecture be used and computer processing power be located at the various nodes ofthe network (the AGPR office, AG offices, and District Accounts Offices). Where facilities allowand data volumes justify it, these nodes should be coinected via telecommunications facilities. Inthe absence of telecommunication facilities data transfer would be via computer compatible media(diskettes). The transaction processing and database management required at each node should becarried out by the computers installed at these nodes. Summary or detailed data, as required, wouldbe transmitted via telecommunications facilities/diskettes to the central computers located at theAGPR 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 optimizing usage and makingit more reliable and less vulnerable to malfunctions at a single central site. In addition, end users atProvincial AG and District Accounts Offices would have better control over their technological anddata resources and this inculcates a sense of ownership for the systems they use. The size anddistribution of computing power across the various nodes of the network is deternined by thevolumes of data and transactions that are generated and stored at the various nodes and the volumesand frequencies of data that are transmitted betwveen the nodes. Information zathered fromdiscussions with PAD has been used to estimate the size and location of computers. Thisinformation will be progressively refined by the consultants during the preparation phase of theproject, by undertaking actual surveys to gather data for each site.

5. Software Characteristics: The nature of the application systems requires thatthe same core functionality be available at all nodes of the network. Thus, for example, the corefinctionality requirements will be similar at all District Accounts Offices. Therefore the sarneapplication software package would need to be replicated at multiple sites. This characteristicrequires that the application software be scaleable and be able to run on small or large computerswithout major changes. Scaleability can be achieved by choosing a line of computers of varyingcapacities which are fully compatible from the software perspective. However. such a choicewould 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 usingapplication development tools and DBMS software that can operate on machines of different sizesoffered by several vendors. This feature is called software portability. Several applicationdevelopment and DBMS packages are available in the market which are both vertically andhorizontally portable.

6. Ideallv. the %%a\ to ensure vertical and horizontal portability and scaIeabilitv at thevarious n(odes of the network is to choose hard%varc and software that subscribes to the OPENsystemns conicepts. Ill practice. the environment that comes closest to this concepr is the UTNIXenvironment. ApplicaLtions developed under this en ironment would be able to run. \ith minimumchanges. on any computer that has a UNIX based operating svstem. Most hardware vendors nowoffer a version of UNIX as an operating systems alternative. The project therefore proposes to use

49ANNE 4Page 4 of 5

UNIX as the operating system environment across the nodes of the network. In addition theapplication development environment chosen will use Fourth Generation Languages (4GLs) andRelational Data Base Management Systems (DBM[Ss) and associated development tools, GraphicalUser Interfaces (GUls) to increase application development productivity and offer a user friendlyenvironment for data access and usage. This approach strikes a balance between large main framesystems which would be cumbersome and expensive and other options which could be underpowered and not scaleable to sites with a large number of transactions.

ANNEXI'age 5 of 5

Figurel: Pakistan - Information Systems Architecture for Government Fiscal Management IFunction State Economic Ptanning Div A MOF & PAD AGIDAO Agencies Agencies with Central Board of Rev. Nap. SBP, PAD_______________ Bank Affairs Div. Prov. nlan spis Prow. Fin Depts AGPR Omffies Coveted by PAD oepaubmntaiized Accounts Taxation Customs Treasuries Audit

Legend t Anwows show miormati dbon Somelows Wtm be PapW based.sone electronintomaan Systems Plawnnd Undr this PlojcMacro Economic Syslens for Macro-Economic Forecasting :

Forecasting ._.

Macro-Economic Fraework Limn Agency Oelencemallways Tax Cusioav 4i'wes l eid Bud. Prep. ludet Prep. Planning I Pl nAcl.ads _Boom _ ye Byaarra j ystem systa m Feed backBudget Preparation Budget Gutn x |ul Guatbas I- I I born

System for Budgetl eu4r1wethePreparadon 4 Iddierttr

A 4_ _ wCx | C...,t Benuv Esi_s areasiktorc £bd * .- BItsuin Dala bAinm d eIon.nx oiqs CapiJ. Cu.rent Fiaumncu kawion Ar-ncYrograms;widI rojs

epproved L Line agency Departonuinlaized Toa Cusioms t- _ _- _ _ _ _ _kb _ _ _ _ _ Itudgel Execution Accounting Syslens ACirri"s= Adunm"=a OBudget Executmo"s , SystemNs to Budget lk.d AYrioi tEore Govt. M-_ system..s RailwaysUdelsnce. sic.

Monitoring, Couiol @ Execution, Aonitoring £ Tiaxnse Accounting A * amni Etoaa Cou.irni Fiscal Reporting [xpen(iiUrs L System sur ran Pep4 naiizeti A c4rats R Rver cap t1COding)Fiscl Reporting oaIioi-us t 77

eDeU i y m il S for fjrsaBanknPmgrsss il i I C t P D tar Bert Remnncaion| Paying|! P ftoin9 X n r d rq1 1 1r xXPgWt|IW oank

Cash nCa. -nt bommingR r [-... i,r I Cashi i - -- -|n - -[Mbi | a! -FdFo |

ftm mnagwwt I De CO Sewvic Pav.entsA.omn roe"elD- slc F oG xrsnm Iwo A I I

fbbt nf Sy l IbA SPx?_oon E|. gBonetic~~~~~~~~~~~~~~~~~Pt Admne

Petmoimme am I'ir VlS n Sif IPe..rilonl| _ _agmna hduordE.mirW.a L. . .. . ..t | .~j

Amr v v _ .y j y x-7xb_|q lio Aug Syatems ker Vati Aron Auditing

ANNEX5Page l of4

PAKISTAN

IMPROVEME NT TO FINANCIAI, RFPORTING AND AUDITING PROJECT

STAFF APPRAISAL REPORT

TRAINING PLAN

S Iescipltis.il, of Target Group Criteria for Trainiing esponsibiity Expeclted Resuilts Airangenieits forNo. 'Ir;aining Selectioll of Motde for. Designinig etc. ratinces to Rle-cuter

- T._, ruincecs j ________________ _______________r_ _e W orkplace

TI S- I (A): RCvised I. PAD officers & All slaff in B5 I . Slaff: lField I. Respective Efficient amd effective I IRM %s ing to issuestandaids anid procedtires staff. above Office Accountanits implementation of revised policy directiveincludinig comnputeriied Training General standards & proceduresaccounting procedures 2. Staffand officers of Centers through trained staff and

the Treasuries and officers.the DAOs 2. °llicers:

AA1'l 2. A A'I'l3. Managerial slikiTol'

thi l'rovihcialGovts. based inSecrelarials (Secits)

2 TSI-B: Retaininig Staff of the Accounts All redundant staff Field Office Respective Redundant staff trained inredundant stalf oni Offices of the PAD. Training Centers Accountants new skills -do-CompLuterization of GeneralaccouLntillU prceS _ _ __ures

3 TSIA&B: Ttinainig of Ofricers selected as FOTC Trainers, Training to be AAT'I A core of 18 trainers shallTrainers for Field Offices trainers for FOTCs B-17/18 arranged by become available toTraining Centers "course impart training of l'OTCs -do-(FOTCs) developers" in withi help of course

revised developersprocediires andstaliidar ds

4 TSIA&13: Twrininu Selected trainers of the Trainers wilh at Training by AATI to coordinate Trainiers with skills inabroad ol'ljaiiici-s in AATI least 3 years selected foreign course development -do-Training service in tihe Training inethodology/techiiiquesMethodologyfFechniquies AATI Institutions

ANNEX 5I'age 2 of 4

_ . 1 SeIto of Mo. Io )gig1Tane oR-neS I)escription of rr.aining Target Groulp Criteria for Training Responsibility Expected ltesults Arrangements ror

No. 5;clection of Motde ror l)csigning Trainees to Rc-ecnlerTrainiees etc. Workiplace

5 TS-2: Expanding anid PAD officers and staff PAD staff and Accountanits 1. Computer Fulfillnent of IIRM Wing to issuestrengtlheniing computer officer (B-5 to General/AATI Advisor requirements of policy directivetrainiing to meet B- 19) trainiing inrecluirenlunits o 2.raiini!5 2 AATI "Comptiter Basics"flowinig from l)iagnostic and "OfficeConsullancy Automiiation"

identified byDiagnosticConsultanicy

6. TS-5A: Trainina of Officer in B-19/18 Officers without Selected I. Director Preparation of aO)fficers abroad lo1r Ivo posied in thc AATll any previous loreigni GcneCral fIM core of 1 2 trainersyears t0ir NlIt tll' and ihose likely to he long terIn universilies or to Irain in curriculaetluin Alelal lU)'l I;madualme so posted training abroad insliltules 2. AAI'l ol' ile Revise(d 2 -do-tdegrees in Accounting, wilh specified years 'IrainiingAuditing, Managemlenl, i minimum Program forFinancial Management, period of ProbationersCoimputer Science/MIS teachingand EDP Auditinig experience

7. TS-5A: Traininlg of Probationary Officers Probationary AATI AATI ProfessionalProbatioiners in Revised of the Accounts Officers of the development ofProgram Group Accounts Group newly inducted

who have officers -do-exhausted Ilteirchances forreappearing inthe F-PSC exams

S. TS-Ii: Seminiiars, B- 17 officers and Fixed yearly Short courses tIRM ContinuedConferelices. Short above louirs of at AATI Professional -do-Courses training lor ClPE I lducalion

ANNEXSPage 3 of 4

S. D)escr-iption of Targct Group Criteria for Training Responsibility ror Expected Results Arrangements forNio Tr aininig Selection of Mode D)esigning etc. Trainees to Re-enter

Trainees ___ _|_Workpbace

9. TS-3: Trraining Of B-I8 officers of the B-I8 officers of AATI AATI and Prepare officers forB- 18 officers in Accotuts Group PAD due for PAD/HRM Wing professional HRM Wing to issuepreparation for and tilose who promotionl within. responsibilities in B-19 policy directivepromotion to A- 19 frulfill conditions one year

for promotion

10 TS-14: Professional Ofiicers likely to be Local AATI in Mid. Manageniienit No specific policyTraining lor 13PS- 18 to promoted to BPS- Consultation with Professional required on posting19 Promolion Zone 19 in six months IIRM Wing Development CourseOfficers

It. I RN I sti alegy Seniority-cum- Appropriale PAD/I IKM Wing Enable PAD/I ItM to I IRM Winlg to issueNklalnpk)%Cl- 4Ilai;IIIIIi. filness and aptilude local andi lauliCil MIS policy (lirectiveJob Aiialyl is I )Diabase for I IRM (I0 loreign developiient, andManagemelit etc. officers) institution undertake preparation

of Job Descriptions etc.

12. Audit Strategy Officers giving Study tours PAD/Audit Wing Acquaint officers with IiRM Wing to issueTraininig - IForeign options to serve in abroad to modem audit practices policy directiveTraining Audit Offices (40 offices of in other SAls.

officers) cooperatingSAis

13. Audlit Siraiegy Officers considered Competitioni MBA program PAD/Audit Wing Acquaint officers with I IRM Wing to issueI raiiiinig - F:oreigna lo liave senior modlerin finaincial policy direclive'Iraining management mnilagement practices.

polenlial

14. Audit Strategy Officers giving 4-6 monthis PAD/Audit Wing Acquaint officers witiTrainitiii - I ocal oplions to service witli private altestalionl audil

Altacluinnis wilih in Auidit Ollices or sector audit practices in the privale -do-Private :\udifiuig F:irmiIs otherwise selected firms in sector

I (100 ollicers) Pakistan_

ANNEXSPlage 4 of 4

S.; ] l)escriplion iif Target Croul) Criteria for Training Responisibility for| Expected Rtesults Arrangeymcnts forNo T rainllng Selection ofi Motic Dcsigining ctc. ITrainees to Rle-enterI ______ ________ ______ _ ________ _______ T rainces j _ ___________ ________rainces W ork p)lace1I. Orienl.tlioll Programl Senior to middle All Local PAD/MIS Wing raamiliarize the IT IT professional staff

(1316-20) level IT professionals of the will be inducted inprofessional MIS Wing %viltl ille the MIS Wing forinduicted in the MIS objectives and specific jobs and theyWing (BPS 17-20) activities of PAD, its woould remaini posted

organizationi and the on these jobslong ternicomputerization plan ofthe Department

16 Tecchinology Relieshier Systems Analysts, All Local MIS Wing and llpdate the knowledgeprogrami (I I17- I ')) Programmers and Pakislan Comiiputier about tlhe latest trenids

OA Stall ol MIS 13Burcaui (ICII) in thc lechinlology and As aboveWilng Upgrade and reiniforce

skills in some areasrelevant to this project

17. Skills l)evlopmecnmt Operators and Data All Local Separate MIS Wing, PCB [)evelop skills required PAD staff would bePrograii (1B 16-17) Control staff of AG Modules by Hardware vendors for DP operations and trained unider this

Offices and DAOs Job-type and consultants management at each programil and PADand Computer Site (Implementation site would have to makeManagers of these Assistance) arrangement to retainoffices t I I Iinte MIS

Winig

55

ANNEX6Page I of 8

PAKISTAN

IMPROVEMENT TO FINANCIAL REPORTING AND AUDITING PROJECT

STAFF APPRAISAL REPORT

IMPLEMFNTATION PLAN

1. The attached Project Implementation Plan represents a summary of an operational projectmonitoring system developed by PAD to track key activities and for monitoring project progress.The implementation plan contains:

(a) the list of all key activities and milestones associated with each project sub-component, including technical assistance and training, the dates of their start andcompletion, and linkages with preceding and following activities;

(b) a schedule of procurement actions. including target dates for each step; and

(c) specified actions required to achieve the project's development initiatives.

2. The operational monitoring system also includes:

(a) schedules for disbursements for each project component, detailing expectedfmancing by financier, maintained by PAD as part of the project's COSTAB files;

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

(c) arrangements for monitoring and review, including a Steering Committee and anexternal Panel of International Experts (paras. 3.7 and 4.29).

3. PAD would keep the implementation plan up to date, and it would form the basis forperiodic reporting to senior management, the Steering Committee and IDA.

4. Key development impact indicators and progress indicators for monitoring delivery ofproject inputs are further described in Annex 8.

Implemnentation PlanPAKISTAN: Improvement to Financial Reporling 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 IQ2103T41 IDA Credit Effectiveness

2 Governmnent Accounting & Financial Reporting

3 Financial Administration

4 Review of Rules & Regulations ro

10 Study of depaitmeptalization

11 Review of the impact of departrmentalization

12 Consultancy; Accounting Standads & System Develop /Irnpl,

13 Systems Consultants Appointed * i

14 Study for impovemenr of accdnft pgicis & fncial repoping.

16 Complete accounting standards and reporling frarmework

16 Adopt accounting standards

17 Complete revised chart of accounts

1B Appoint consultants to assist implement revised accounting polkie

19 Imnpleientation of accounting poicies & standards study

20 Implement revised chart of accounts

21 Systerm developmnent & implementation_.______

29 Finalze hlirctional design & software specifications --

30 Functional Specifications Completed

31 Search software package (off the shelfl

32 Software Development & Customnization V33 HIW/SW for Systems Developnent lnstaled (see MIS Center)

34 Award SW/Devebprment Procuremnent Contract o

35 Develop Core Accounting & Reporting System .

3B Develop Payroll System.|

37 Develop Pension System.I

38 Develop Cash-Flow Forecasting & Financial Analysis

39 Pilot Instalation

40 Core Accounting & Repoting Systemn

41 Payroll System I

42 Pension Syslem

43 Cash-Flow Forecasting & Financial Analysis

44 Pilot Implementtion Conpleted (using TAC ll HW)I45 Hardware, Software, and Facilities I-j

46 Finalize design & specification

47 BSi ing |_i__ _ _ _|

1 Annex B

Implementation PlanPAKISTAN Imnprovemenl to Finandal Reporting and Auditing (PIFRA) Pr*oect

1996 | 1997 199 | 19S | 2000 2001

ID Task Name a210314 GQF021030Q4101 2 304 Ql 0Q21030Q4101TQ2T033 401102 1030456 Evaluation & Award r64 Delivery.71 Faciites and Sile Preparation . r n

so Systems Rephcation

I1 Core Accounting & Report Sysen'

22 Payrd Sytr

Is Phase I Systm s Repicain o6P.nio System

3 Cash-Fl Foreasing & Fnial Analysm

* ComlSeteSystems Replaion

87 Cosuiancy: Imoptmmdlon Asabtan

U Local consulants - swurvor i _

n9 Local consuitants - team

90 Govemment AUd_I

91 Systems Improvement Coehu_any

92 Procurement of 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 4116 Inremal audik - systm under development

117 MBA Program for Auditors/AccountantailS . : =

113 SAI Attachrnenis

119 Private sector cooperation -

120 Study for potential areas for greater private sector involwement

121 Piot introduction of audits

122 Review performance, cost. & quality assurance

123 Extension of trial partnerships in governrment auditing =

124 Gradual expansion of the program

125 Audit System (IIW/SWlFacililies)

2 Annex 6

Inipleenlntion PlanPAKISTAN: Improvement to Financial Reporting and Auditing (PIFRA) Ptf*

1996 1997 1998 1999 2000 2001

ID Taslk Name 203 4 011021 03 Q4 Q 0Q20Q30Q4 Q1 02 Q3 Q4 010Q2 03 04 10QlQ2|03Q4126 Finalize design & spedficationu

127 Bidding _

136 Evaluation & Award

143 Delivery

144 Site preparations i

145 Physical facilities =

146 Implefmentation147 Review and evaluation : _

143 Humnan Resource Management

149 Organizational Development

150 Procurernent of Consultants

151 Finalize spedfications/TOR

162 Bidding I

160 Evaluation & Award

166 Consultants appointed

167 Consulants services

168 Job analysis - foreign consultants *--__ IA

169 Clangie Mallagelment

173 HRM Policy Changes -

174 Depanrtental Cadre

175 Eliminate unqualifed promotion for new entrants

176 Revive Dired entry at B-16

177 SubstUute SAS by AAT exam

173 Inter Deparnmental Cadre

179 Start CPE program

180 Star 2 year probationers training

181 Explore professional competence scheme

182 Career Development -

183 Assign staff or 3 year period

1B4 Develop structured career path for specialist staff

185 Rotate staff on structured career path

188 Rationalize incentives for professional qualifications

189 Provide salary supplements for specialists

190 Employee Accountability

191 Define job descriptions

3 Annex 6

Implenentation PlanPAKISTAN: tmprovenent to Financial Repotting and Auditing (PIFRA) Project

1996 1997 1998 1999 2000 2001ID Task Name Q20304Q102030412Q304 QiQ203|041010Q21030Q410Q213Q4192 [)evelop performance standards

193 Performance evaluation against standards

194 Complete job analysis, job description, and manpower plan t

195 Training - HRM specialists

196 Syslems Development

197 Consultancy - MIS

198 Application Software

199 Install IIRM MIS

200 Establish MIS for Audit wing

201 Establish MIS tor Accounting wing

202 PAD Secretariat Information System

203 Finalize design & specification

204 Bidding

213 Evaluation & Award

220 Delivery

221 Site preparations

222 P8ysical facilities __ _ flu223 lImpleileiilalion . -

224 Install PAD Secretariate MIS

225 Training

226 Procurement of Consultants

227 Finalize specifications/TOR

228 Bidding

235 Evaluation & Award

241 Consultants Services r242 Professional Training

243 Training Packages

244 Training need analysis (TNA) o245 Training material development

246 2 year Probationers Program

247 TNA - prooationers program

248 Course design

249 Training mnaterial development

250 Introduce training course I

251 Training evaluation anrd corrective actions

4 Amu 6

Implementation PlanPAKISTAN: Improvement to Financial Reporting and Auditing (PIFRA) Project

1996 1997 1996 1999 2000 2001

ID TaskName 0 2 3 Q4 QI 0Q2030Q4 Q 0203 Q4 01TQ2103TQ4 QlQ2 Q3 04 Ql 020304

252 BPS 18-19 Training

253 TNA - BBPS 18-19

254 Course design o3

255 Training material development

256 Introduce training course

257 Training evaluation and corrective actions |.

258 Sub-professional Training

259 Accounting Technicians

260 TNA hr revised standards

261 Course design

262 Training material development

263 Introduce training course

264 Training evaluation and corrective actions

265 FOTC Training in Revised Procedures

266 TNA for revised standards

267 Course design

268 Training malerial development

269 liitioxuce training course i. . o

270 Training impact evaluation and corrective actions

271 Seminar, conferences, other training etc.

272 MBA Program for Faculty

273 Links wih institutions

274 National seminar-1

275 National seminar-2

276 International seminar-I I

277 International seminar-2

278 Visit to/from other SAis . __

234 Training abroad for faculty

289 Facilities

290 Lease lor SAS/AT Hostel

291 Furniture etc. for SAS Hostel __r

292 AATI

293 Set-up/renovation of AATI Lahore

294 HW/SW for library

295 lvW/SW for MTI

5 Annex 6

Implementation PlanPAKISTAN: Improvement to Financial Reporting and Auditing (PIFRA) Project

1996 1997 | 1998 | 1999 2000 2001

ID Task Name Q2 3Q401020304 1 2Q3 Q4 Q1 Q2 Q30Q40Q1Q20Q30Q40Q1 Q2 Q30Q4

296 UPS and copier for library !

297 Completion of set-up & re-equipping of AATI Lahore

298 FOTCs

299 Set-up/renovation of FOTCs

300 Furniture etc. for FOTCs

301 HW/SW for FOTCs

302 Completion of set-up & re-equipping of FOTCs

303 Others

304 Subscribe journals & books __,_,

309 Administration

310 MIS - Software Development Center

311 Civil Works .-r312 Finalize design & specification

313 Bidding

321 Evaluation & Award

328 Construction/Delivery

329 Contract posts and staffing (MIS)

330 Computer HW/SW

331 Finalize design & specification

332 Bidding .

340 Evaluation & AwardX

348 Delivery. ,

349 Facilities and Sitel

350 Site preparationsI

351 Physical facilities

352 HW/SW for Systems Development Installed

353 Project Management

354 Contract posts and staffing (PMU)

355 Office furniture & equipment

356 IlHardware/software i

358 Consultancy: Future project preparation

359 Advisory panel of experts a a a a

365 Macro-Economic Management

366 MOF A 6

6 Annex 6

Implementation PlanPAKISTAN: Improvement to Financial Reporting and Auditing (PIFRA) Project

_ ~~~~~~~~~~~~~ ~~1996 T: 1997 1 1998 1999 2000 1 2001 lID 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 | Q4367 PC - Establishment of Nuclei and training of staff

368 PC - Construction of Models & Simulation and poverty analysis/monitor

369 PC - Strengthening of PPMI

370 Separation of Auditing and Accounting Functions

371 Bifurcation

372 Placement of HQ officers

381 Provide Separate Organizations Order

382 Formalize division of assets between Audit and Accounts Offices .

386 Review quality assurance arrangements

387 Complete bifurcation & separate 1996/97 budget |

388 Prepare for Separation !

389 Draft terms of reference (TOR) for Separation Task Force (TF)

390 Review and agree TOR for TF

391 Set up TF i*:

392 Prepare Separation Strategy

393 Amend regulations, setup new structure, transfer staff etc.

394 Arrangements for Separation of Audit and Accounts Complete

395 Project Finish

7 Annex 6

ANNEX 7Page 1 of 1

PAKISTANIMPROVEMENT 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 54Jun-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 8Page I of 7

PA K I STAN

IMPROVEMEN-T TO FINANCIAL REPORTING AND AUDITING PROJECT

STAFF APPRAISAI. REPORTI

PROJECT MILESTONES ANI) PERFORMANCE MONITORING INDICATORS

Component Government Accounting and Financial Reporting

Objectives Develop and introduce accountinig standards, reporting systems and financial administration procedures conforming as far as possible to internationally acceptedprinciples.

Input Indicaturs P rocess Indicators Output/lImpact Indicators Performance Indicators

ioeCIInIIentI i c\ Io S.tting UI) 6overnineil study teamIIIs - January 1997 Repolts onl reviews ol 'i nanncial rules and regulationls - Availability ol improved linancial reportstinl.1.iiial Ik Li u 1lit ongoing mieasured by deinostrAItilliOll alt pilot stage and

regulations and tlhe imip)act iipleinenialion at completion ol replication -ol departilicnlli/alioll. Appoint consultants to review dcpartmentalizationl - Report on the review of ilic impact of for the selected province and for x% of

January 1997 departmentalization -January 1998 federal transactions

I A provided tom Appointimient of Accountinig Standards and Systems Improved accounting standards and reporting Implementationi of systems measured by;mlevclopment and Consultants- September 1996 frainework completed and adopted - May 1997 Numbcr of districts systems automated andimplementation of % of automated transactions by value shownaccounting siandanrd, f)cvelopment, agreement and adoption of improved Revised budget structure and chart of accounts in a schedule staning from zero and showingfinancial reporting accouinting standards and reporting framework - April conforming with GFS classification methodology a target % by yearframework anid inforiiiation 1997 adopted and budget for FY 1999 prepared accordingsystems. to revised structure -July 1998 Cash flow forecasting and efficiency of

D)evelopment and implementation of revised chart of borrowing mcasured by thc initroduictioni ofaccounts - July 1998 cash ilow forecasts, their accuracy and the

extent to which a rationalized borrowingIlardware, systems D)evelopment of functional design of systems, Full functional design of systems, processes and strategy is adopted b) Governrentsoftwarc and application processes and procedures and application softwarc procedures for Core Accounting, Payroll, Pensionssoftware required for tilC specifications - November 1997 and Cash Forecasting completed - September 1997implementation of core

Annex 8Page 2 of 7

PROJECT MILESTONES AND PERFORMANCE MONITORING INDICATORS

Component CovernmentAccounling and Financial Reporting (continiedl)

Input Indicators Process Indicators Outputl/mpact Indicators Performance Indicators

0overnmient accotiliting. Acquisitioni and Installation of I lardwvare and Improvement in timeliness of expenditure

paN roll and pension and Sofltware for Software Development Cenitcr - management information measured by reduction inca.sh loreca&stimig sctccn> al I )cciber 1997 timc for comilpilation 01'accoUnts at sites wilerea total oi' 21 sItIC itelLdig systenis have been installed and iOii the Governmentthc AGPR office in t?ompiction of Systems Development/Customization/ Il/W, Systems S/W delivered, installed and tested;

Islamabad, all provincial I esling/ ior the Core Accounting/Playroll/Plensioni and Application S/W tested lor esscntial liimmctionialityAG oilices, and sclccted (ash Forecasting Systems - March 1999DAts within each Pilot systems installattion completed - December 1999province.

New systemiis implemented at 21 sites December 2001Iiiplementation of Pilot Systems at AGPR Islamabad, ImpactAG Peshawar; and two DADs reporting to this AG New management processes for budget execution,- D)ecember 1999 (cash allocation, commitinctl, payment processing

and receipts) palyroll and pensions; and casholoccasling in place and Ilulmclionllng

P'octmil cinenlol of I 1/W aid '- S/W lor SystemmisRcpihcation - D)ecemiber 1998 Ability lo produce liscal accounts data consistent wilh

international standards; improved financial reports

Replication of Phase I Systems - Core Accounting and including budget variance and project costsPayroll - January 2001

Functional and economic analyses of budget and

Completion of Systems Replication - Cash expendittires available from the new systemForecasting and Pensions - December 2001

Improved expenditure management information andimproved controls of expenditures

Improved payroll and pensions processing andassociated management information available forcivil servants

Improved cash maimagement Ior the Government as awhole

Annex 8Page 3 of 7

PROJECT MILESTONES AND PERFORMANCE MONITORING INDICATORS

(omitpontent Government Auditing

Objectives Develop and introduce improved auditing standards and techniqtues, automated tools for auditing, improved auditing capacity and increased use of privale sectorlirms

Input Indicators Process Indicators Outputl/mpact Indicators Performance IndicatorsOutput

IA ftianiced b) the project Appointment of Auditing Consultants - April 1997 Report on review of auditilng procedures Proportion of PAD's audits using amendedliur review ol 'PA) audit, proccdures.xwork load, Review of auditing systems, proce(lures - to bc Improved auditing guidelines, policies, procedurcscommunications withl completed by March 1998 and standards completed and adopted - August 1997 I'roportion of PAD's audits using improvedstakeholders; preparation onwards reporting formatsof guidelines, policies, and Development and agreement on revised guidelines,process for the introductioni policies, procedures and standards and preparation of Operating manuals prepared and completed - Proportion of PAD's audits subject to qualityof intemational auditing related operating manuals - to be completed by December 1997 to December 1998 assurance procedures.standards; efficiency December 1998itproveteints. qua lit l Revised procedures impleiimieited - Scptember 1998 Improved timeliness of auditing rcports; ONIssuratcc assi.tantcc in ihc Itplemenitiiation of rcvised proccdilrcs and tlic onwards timittg of'Auditor Gcneral's suhittission ol'use of autonmated tools aid evaliuiationi - to comtinerce by October 1998 rcports to lPresident and PAC; improvementsstl;dard audit progranis: Evaltiation completed of new systetns and procedures to be assessed from current base period of 9development of revised - July 2000 inonthsI IRM procedures andtraining programs and lo Internal audit of systems under development Internal audit of systems under development Numbers of staff trained and in placeexplore avenues for priva:e lo commence - May 1997 completed - December 2000 measured according to target schedule.sector cooperation

Development of training programs and Training programs implemented and completed;implementation: a) MBA program for a) MBA program for auditors/accountants and MISauditors/accountants and MIS professionals - Start professionals - completed July 2000; b) AttachmentsOctober 1996; b) attachments with other SAis - start with other SAls- completed July 2000October 1996

Sludy on avenues for private sector cooperation; Avcnucs for private sector cooperation identiiied -I'ilot recommendalions -start July 1998; review of' December 1997; Increased use of'private sector lirns measuiredperformancc/ costs - start January 1999; by umiber of audits conducted jointly byextension of trail partnerships and expansion of Pilot exercise completed - December 1998; PAD with private sector iirms; current base isprogram- start July 1999 zero.

Review of Pilot completed - July 1999;

'Trial partnerships extended and program expanded -December 2000;

Annex 8Page 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 Development of functional design of automated Functional design of automated auditing systems. Implementation of audit systems measured by:softlxare and applicatioui auditing systems, processes and procedures and processes and procedures and software specifications, number ol audit o'fices automalted accordingsoftware for audit software specifications- July 1998 completed - July 1998 to target scheduleplanning, sampling anddocumentation and tor Acquisition and Installation of Hardware and Hardware and Software installed - Sept. 1999audit of automatcd Software by September 1999 Auditing Systems implemented- April 2000systems.

Completion of Systems implementation - April 2000 Review of auditing systems completed - December2000

Review and evaluation of new systems - December2000 Impact

PADs Auditing capacity improvcd, better quality stafftraintcd and in place -4

New auditing guidelines, processes, procedures andstandards in place and functioning

Improved and timely auditing information andimproved controls of expenditures throughoutGovemment; timely reports to PACs

Enhanced scope and independence of audit

Strengthened performance monitoring and evaluationcapacity through new procedures and automated tools

Increased public accountability and improvedGovernance in place for the Government as a whole

Annex 8Page 5 of 7

PROJECT MILESTONES AND PERFORMANCE MONITORING INDICATORS

Comiponent Separation of the Audit and Accounts Functions

Objectives Achieving better independenec of the auditing function by initiating a gradual transfer of responsibility for accounting to the executive arm of Government.Input Indicators Process Indicators Output/impact Indicators Performance Indicators

Output

Governmm:nl ' ask lorccs Iifurcation: Bilurcatioll:and studies for hifurcation Arrangemnenis for bifurcation of administralion of Progress accordinig tt) agreed scheduile forof administration ol the Developmenit ot arranigemenis for bifurcation of audit and accounts functions completed development and approval of proposals toraudit an account UingS, adminiistration of audit and accounts lunctions, - I IQ ollicers placed - t)eccimber 31, 1996 lunctlionlall separialioni of accountingi an auiditdevelopment ot proposals - Placement of IIQ officers- Dec. 1996 - Separate organizations created - March 31, 1 997 and implementation of arrangements fbrfor a separate structure of - provision of separate organizations- March 1997 - Division of assets between audit and accountis Bifurcation by July 1997the accounting function - fomialization of division of assets between audit offices fomialized - June 30, 1997with the executive arn ol and accounts offices - July 1997 - Quality assurance arrangements reviewed - Progress according lo agrced schedule forgovernmente - review of quality assurance arrangements - starting June 30, 1997 development and approval of proposals andrcorganization the AAI lis January 1997 - Bifurcation completed and 1997/98 budget separated implementation of arrangemenis for lunctional oto cater to the Iraining - completion of bilurcationi and a separate 1996/97 separation by July 2000reLlt iririeeilts: au.iiociiiicnts budget for auititi and accotiints - July 1997required in tlie Icgal lini. Scparation:work and approval ol Separation: TORs for Separalion Task force completedgovernment to revised -TORs for TF agreed and reviewedpolicies - Draft TORs for Separation Task force - -Separation TF set up

January 1998 -Separation Strategy completed- Review and agreement on TORs for TF - -Regulations anended, new stricttures set up and slaff

March 1998 transferred- Selting up TF - March 1998 -Arrangements for separation of Audit and Accounts- Development of Separation Strategy - March 1999 functions completed- Amendment to regulations setting up new structures

and transferring staff- July 2000 Impact- Completion of arrangements for separation of Audit

and Accounts functions - July 2000 Improved independence of the auditing function

Increased public accountability and improvedgovernance in place for the Goverinent as a whole

Annex 8Page 6 of 7

PROJECT MILESTONES AND PERFORMANCE MONITORING INDICATORS

Component Institutional Development (Human Resource Management)

Objectives Developing PAD's institutional capacity to sustain improvements to financial management systems by introduction of revised lIRM policies and thestrengthening of financial management training.

Input Indicators Process Indicators Output/lmpact Indicators Performance IndicatorsOutput

I'A tor managing process Appointment of Job analysis and change managemcint a) Departmcntal Cadre- less promotioni ofunqualificd stafif: Itertoriinaoece meastiied by progress onof change, preparation of consultants - July 1997 direct entry at B316; and improved understanding ofi the key milestones in the developmelitJob descriptions anid principles of accounting and(I auditing. amid implemilentation of revisedperformance standards and Implementation of HRM policy changes as follows: policies as shown in iltedesigning and installing a b) Inter- Departmental Cadre-CPE program; 2 year implementation planMIS for llRM planning a) Departmental Cadre- eliminate unqualified probationers training; professional certification schemiieand monitoring proportion quota- December 1996; revive direct entry Percentage of stalT rotated within 3

at llt6 grade- Decemiiber 1997; substitute SAS by c) IIRM policies for: staff assignment for 3 years; career path yearsAA'I' examination - September 1996 for specialist staff; stall' rotation policies liniked to career

dlvclopmnit: iicenfives b)r prollssiomnail qodihications: sal;iry Number ol' stalli nicilde in rcvis.cdl) Intcl-I)epaltilicnital C'adre- Start CI' plogilail - sutpplenmenits lor specialists I IKl sysictm

July 1997; start 2 year probationers training -Deceimiber 1998; explore proflcssional ceritiication d) Employee Accountability- Job dcscriplions; lIercentage of staff covered by newscheme - December 1998 performance standards; manpower plan; trained IIRM job descriptions

specialistsc) Career policies- assign staff for 3 years - July 1996;develop career path for spccialist staff- Dec. 1997; e) IIRM MIS Installedrotate staff on structured path- Nov. 1998; rationalizeincentives for professional qualifications - Dec. 1998; Impactsalary supplements for specialists - July 1999 Staff training more in line with requirements of modern

financial procedures and a system of continuous professionald) Employee Accountability- Define Job descriptions education to keep staff skills up to date, leading to enhanced- Dec. 1997; develop performance standards -July staff competence.1998; develop manpower plan - December 1997;evaluate staff according to standards- December Promotion and rewards policy based on open and quantified2000; train fIRM specialists - December 1997 perfoniance standards and a recognized merit system

e) Implementation of I IRM MIS - April 2000 Improved related management information systemsresulting in monitoring of compliance with new HRM policies

Annex 8Page 7 of 7

PROJECT MILESTONES AND PERFORMANCE MONITORING INDICATORS

Component Inslitutional Development (Training)

Objectives Developing PAD's Institutional Capacity to sustain improvements to financial management systems by strengthening of financial manaigement training.Input Indicators Process Indicators Output/impact Indicators Performance Indicators

Outputi ulids lor reluibhislijuicit Appointmenit of'l'raining consultants - December Trainiing needs analysis completed

and cxteision ol existing 1996training iacilitics; Training materials developcd Peiformance miaesured b)y ipimemcienationi ofequipment; computer I l/W Completion of'l'raining needs analysis- February changes according to impleiiientation scheduleand S/W; 1997 2 years probationers program implemented

Number of trainee hours for PAD andI'A to assist in training Development of training materials- April 1997 B 18-19 training program implemented provincial staffneeds assessment, course

design; materials D)esign and implementation of 2 years probationers Accounting ''echnicians training program Number trainec hours lor AAT Probationersdevelopmenit and( training program - May 1999 implemented and U 1 8 staffol trainers

IDcsigil and impleitentatio ol' BIIS 18-19 training - 1F01( training Prograin ImplementedInlernat iona:l scholarshipisp commencing ()cloher 1997 olor lacult) tiainicis and Foreign training and MBIA priograms iinplcmnentedlunds 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 conferences1998 held

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

Development of Links with other institutions and ImpactSAIs - January 1997 Improved training programs and facilities

National and International scminars and conferences - A system of continuiouis professional educationCommence - February 1997

Improved professional competence of staffRenovation of training facilities SAS hostel, AATIs Department wideand FOTCs - Compleled - July 1998

71ANNEX9Page 1 of 2

PAKISTAN

IMPROVEMENT TO FINANCIAL REPORTING AND AUDITING PROJECT

STAFF APPRAISAL REPORT

SUPERVISION PLAN

Approx. Date Activity Participation Staff WeeksSeptember 1996 Project launch Task Manager 10

Accounting SpecialistAudit SpecialistInformatics SpecialistHR & Training SpecialistMacro Economist

March 1997 Supervision Mission (coordinated Task Manager 10with panel of experts meeting) Accounting Specialist

Audit SpecialistInformatics SpecialistHR and Training SpecialistMacro Economist

September 1997 Supervision Mission Task Manager 10Accounting SpecialistAudit SpecialistInformatics SpecialistHR and Training Specialist

March 1998 Supervision Mission (coordinated Task Manager 10with panel of experts meeting) Accounting Specialist

Audit SpecialistInformatics SpecialistHR and Training Specialist

September 1998 Supervision Mission Task Manager 10Accounting SpecialistAudit SpecialistInformatics SpecialistHR and Training SpecialistMacro Economist

72ANNEX 9

Page 2 of 2Approx. Date Activity Participation Staff Weeks

March 1999 Supervision Mission (coordinated Task Manager 10with panel of experts meeting) Accounting Specialist

Audit SpecialistInformatics SpecialistHR and Training Specialist

June 1999 Mid-Term Review Mission Task Manager 10Accounting SpecialistAudit SpecialistInformatics SpecialistHR and Training SpecialistMacro Economist

March 2000 Supervision Mission (coordinated Task Manager 10with panel of experts meeting) Accounting Specialist

Audit SpecialistInformatics SpecialistHR and Training SpecialistMacro Economist

September 2000 Supervision Mission Task Manager 10Accounting SpecialistAudit SpecialistInformatics SpecialistHR and Training Specialist

March 2001 Supervision Mission (coordinated Task Manager 10with panel of experts meeting) Accounting Specialist

Audit SpecialistInformatics SpecialistHR and Training SpecialistMacro Economist

September 2001 Supervision Mission Task Manager 10Accounting SpecialistAudit SpecialistInformatics SpecialistHR and Training Specialist

March 2002 ICR Mission (coordinated with Task Manager 10panel of experts meeting) Accounting Specialist

Audit SpecialistInformatics SpecialistHR and Training Specialist.Macro Economist

ANNEX 10Page 1 of 3

PAKISTAN

IMPROVEMENT TO FINANCIAL REPORTING AND AUDITING PROJECT

STAFF APPRAISAL REPORT

TECHNICAL ASSISTANCE OBJECTIVES, CLASSIFICATION. ACTIVITIES AND OUTPUT

Objectives anid Classification Activities Source and Duration OutputI ~~~~~~~~~~Foreign Local

1 Strengthening the auditing Review PAD audit policies processes and 70 10 i) Revised audit policies, procedures, work allocationfunction in Ihe PAD. procedures, output, work-load, efficiency methods;Classification Institutional ii) Improved audit efficiencyDevelopment

Perform quality assurance for PADauditing 8 Improved quality assurance procedures

Advise on Methodologies to enhancePAD's communicationis with stake 6 10 Methodologies for enhanced communications withholders major stake holders

Advise on identification of areas forPublic/ Private sector cooperation 15 Identified areas for public/ private sector cooperation

Intemal Audit of PAD's systems underdevelopment 6 10 Improved quality of information systems

Membership in the advisory Panel ofexperts 2 Input to PAD's advisory panel

Managing TA 6 36 Efficient administration of TA

ANNEX 10P'age 2 of 3

Objectives anl(d Activities Source and Duration OutputClassification l l Foreign Local I

Development andl Prepare detailed funictionial design; for the 110 100 Detailed functionial design for specified informiationimplementation of high Core accounitinig, Payroll and pensions and systems; design of the technology architectLuiC forpriority application the Cash forecasting systems; Specify the information systems; Tender documenits for H/W, S/W;systems. technology architecture required for the Management of the Pilot systems implementationi andClassitication: implementation of these systems; systems replication processesInstitutional Investigate alternatives for applicationDevelopimecit Software; Assist in the procuremenit of

hardware and software; Assist in Systemsimplementation- Pilot systems and firstphase replications

Classil-icationi: Assistance to IPAD in the process of systemsImplemeniation assistanc Consultancy for implementation assistance 192 implementation and replication

3. Humani Resouice Job Analysis 3 5 Revised Job descriptions and performance standardsManagement.

ClassiIicitlionl:InstitLutionial MIS constillanicy (I IRM) 6 M IS systemils tob I IRM planninig and moniitorinigDeve lopmen it

Change Management consultancy 12 Consultinig assistance for managing the process of change

4. Traininig. Training needs analysis 2.5 2 i) Training needs for B- 18/19 officersClassificationi: ii) New training packagesInstitutional iii) Revised training standardsDevelopment iv) Training needs for probationers

Course design 2 2.5 Course designs for: i) B 18-19 training; ii) two yearsprobationers program; iii) FOTC courses

Training material development/ testing 10 22 Course material for i) accounting technicianis, BS 18/19training, training of probationiers, revised training packlages

Quality control evaluation of training 1 5 i) Revised systems to assess quality of training;application of the new systems to evaluate training ofprobationers, accounting technicians and overall impact oftraining

ANNE3X 10Vage 3 of 3

Objecti%es and 1 Activities Source and Duration OutputClassification Foreign Local

5. Macro economic studies. Preparation of macroeconomic, financial 40 133 Agreed action plan to implemenit recomimenidations ofClassilication: Policy policy, and diagnostic studies. policy and diagnostic stidies.Support

6 Privalte secbol finanicial Provision of on-the-job specialized 6 20 Strengthnilied capacity for macroeconomliic modeling anddisclosure. training in macro modeliig and short-tcrnm improved moniloring of povertyClassilication: Policy technical assistance for establishment oSupport poverty monitorinig nucleus.

7 Assislallce to Plaonning EIconomic Policy Analysis Dizaginostic 13 44 Stidies and action plans to inipiove management of federalCo'mimmiissioni Study. Specialized on-the -job training and provincial developmenit expendiftirc; diagniostic studyClassifhication: I olicy and action plan to streamlinie institutionial airanigemiients forSupport macroeconomic policy making; increased capacity for

poverty analysis and monitoring

8. Future Project Preparation of Future Project 10 30 Project feasibility report and detailed documentsPreparationClassification:ImplementationAssistance

76ANNEX I IPage 1 of I

PAK1ITAN

IMPROVEMENT TO FINANCIAL REPORTING AND AUDITING PROJECT

STAFF APPRAISAL REPORT

DOCUMENTS IN PROJECT FILE

1. Report on the effectiveness of the Pakistan Audit Department's component of the ThirdTechnical 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 Waterhousea) Interim Report I, Detailed Analysis. November 7, 1992b) Interim Report II, Proposed recommendations, November 25, 1992c) Final Report, February 3, 1993

4. Pakistan Audit Department. Training Consultancy, CIPFA, March 1993a) Overview Reportb) Technical Report 1. The Establishment of a Professional Bodyc) Technical Report 2, Training Needs Analysisd) Technical Report 3, A Strategy for Human Resource Management

5. Pakistan Audit Department, March 1995.Strategies for:

a) Implementing an Improved Financial Reporting Systemb) Implementing an effective Audit Function and Public-Private Partnershipc) Improving Human Resource Managementd) Implementing Computer based Information Systems to Support Government

Accounting, Audit, Human Resource Management and Office Automatione) Training

6. Terms of reference for consultancy services for the development of accounting principles andstandards, and the development and implementation of core financial systems for theGovernment of Pakistan.

IBRD 27293

60 65 70 /TAJIKISTAN 75; /J ' :t'CCHINA

PAKISTAN ov

IMPROVEMENT TO FINANCIAL REPORTINGAND AUDITING PROJECT _/

* AGPR OFFICE v

3 AG OFFICES I ,....

35 f; PILOT IMPLEMENTATION SITES AT\ Appromte 35b Lin of Control

PROVINCE WIDE SYSTEM REPLICATION ., Peshawar ®)ISLAMABAD JAM

and KASHMIRf59 NATIONAL CAPITAL

19 PROVINCE CAPITALS j

PROVINCE BOUNDARIES ! r¶ _ . _ INTERNATIONAL BOUNDARIES S ) A #

RIVERS Lahore® \

30 Q .1 A Quetta 300

% _ INDIA

ISLAMIC \REPUBLIC OF I -

IRAN '0 100 200 300 Kilometers

25 * 100 200 MilesS1NDH / 25'

Karachi .

-. _._ t- ~ Tbis map woo prod,ced by the Mop Design Unit of T he-J World Bonk The boundaries. colors, denominatons and any

g other reformotson ho-n on this map do not imply, on thepart of The World Bo1k Group, any judgment on the legolstatus of any territory or any endorsementor acceptance of such boundaries

60 65- 70 75'

JULY 1996