THE FINANCE Minister, Shaukat Aziz, formally inaugurated the pilot project of the new accounting system at Abbatabad some days back. It introduced the system of accounting— known as “integrated financial information system”.

Though it was initiated in 1996 by the government on the intervention of the World Bank but it could not take a practical shape. The total cost of the project is estimated to be at $37 million out of which the World Bank will provide $28 million.

The basic theme behind this exercise is to make changes in the current accounting system which is based on the “cash basis”— a concept that has been totally replaced with “accrual “basis which is already in operation in the private set-up in the shape of double entry system and all commercial organizations use it but in government circles, ‘single entry system’ is used. However, the sources in finance authorities, maintain that they face a lot of problems due to this system, one of them being the non-availability of the accurate and timely information required by managers.

Others oppose it because the limitations of the system, the recorded inflows and outflows, have no direct relationship with the actual performance and the obligations to make the future payments could not be properly identified.

The persons at the helm of affairs of the economy thought that the government is going to open up its economy and establish a good financial management as per best international practices, as the issue of transparency and accountability has become even more important in the context of a global economy.

The government has started with separating the accounting and the auditing departments and has launched a project known as Project to Improve Financial Reporting and Auditing (PIFRA) and the assignment is being carried out by the Siemens.

To bring the real change in entire set-up and to implement the new accounting model (NAM) wherein accounting policies and procedures are revamped by employing the most renowned software known as SAP R/3. The sites which will be brought into the net would include the office of the controller of accounts, the ministry of finance, finance departments of the four provinces, the office of the accountant general Pakistan revenues (AGPR), sub-offices of the AGPR, accountant generals of the four provinces and all district accounts offices in the country. In the first stage, computerization of all these sites has been started and sponsors are hopeful that more then 80 per cent of the total volume will be computerized before the end of the current financial year and remaining before the next financial year.

The NAM aims to record the commitments which do not have an immediate impact on the cash position but do have an effect on the budget availability in one of the key feature of the NAM, says Muhammad Shoaib Ansari, Controller General of Accounts. By keeping record of the commitments that have been entered into, the budget position can be effectively monitored and expenditures in overspending the budget may be readily identified, he adds.

The NAM will also cover up the fixed assets wherein a list of fixed assets and their value would be available. The recording of assets and liabilities as part of the modified cash basis of accounting will be kept in providing useful information for decision-making and for disclosures in financial statements.

The new accounting system that has been prepared is consistent with the international accounting standards. The ultimate objective of this is to introduce “double entry book -keeping system” and the accounting and auditing functions have been separated through a legislative effort so that each is performed in its won right.

The Auditor General of Pakistan and Controller General of Accounts are now two offices with well-defined functions and responsibilities. The separation will enable the CGA to devote energies on improving the quality of accounting functions whereas the Auditor General will be free to focus exclusively on audit so that traditional delays in settling audit observations can be reduced and relatively poor audit standards, emanating largely from poor fiscal record, improved.

The new system will be technology-intensive and will replace the existing manual system for maintenance of accounts. The entire fiscal cords of the government at all levels— provincials, districts and tehsils— will be computerized and managed electronically which will be one step advance for the timely availability of reliable fiscal information.

Shoukat Aziz who is on target to make all documents public has opened the doors of government accounts to all. Meanwhile, a website of the ministry of finance is hosting information on expenditures as soon as these are reconciled on monthly and quarterly basis, and contains the most reliable information for the benefit of researchers as well as general public.

The government has also planned to launch a new publication to be called “Public Finance Statistics of Pakistan “ which would contain simple analysis of revenue and expenditure trends.