Improved financial management urged for credibility
By Ihtashamul Haque
ISLAMABAD, June 13: The World Bank has urged Pakistan to improve public financial management, accountability, transparency, and enhance the capacity of public sector managers to meaningfully use credible financial information for better and informed decision-making.
The World Bank in its latest Country Report, which was made available to Dawn, said that an improved financial system would increase the national and international credibility of the federal and provincial governments’ financial statements and assurance processes.
"The reform efforts need to include identification of the relevant international standards of accounting and auditing applicable to the public sector and help achieve compliance with those standards," the report – Pakistan Public Sector Accounting and Auditing, a comparison to International Standards - said.
It also called for adoption of International Public Sector Accounting Standards (IPSAS) for accounting and financial reporting in improving the basis for adequate public financial management.
The World Bank also urged Pakistan to build capacity aimed at improving the accuracy, comprehensiveness, reliability, and timeliness of intra-year and year-end government financial reports at federal and provincial levels.
It called for initiating the process at district and sub-district levels for strengthening the financial accountability cycle.
The Bank has expressed its willingness to provide financial and technical support to help undertake the second phase of reforms in improving country's overall financial and auditing system.
The replacement of inefficient manual and outdated accounting processes in the general government sector by faster and updated computerised programmes, the Bank said, is underway with a programme to computerise all district accounting offices by the end of 2007.
According to the World Bank, the assessment of public sector accounting and auditing is generally meant to help implement more effective public financial management (PFM) through better quality accounting and public audit processes in Pakistan and to provide greater stimulus for more cost-effective outcomes of government spending.
More specific objectives are: (a) to provide the country's accounting and audit authorities and other interested stakeholders with a common, strongly-founded knowledge where local practices stand against the internationally developed norms of financial reporting and auditing; (b) to assess the prevailing variances; (c) to chart paths for improving the accordance with international standards; and (d) to provide a continuing basis for measuring improvements.
At the present time, the Bank said, Pakistan does not comply with the IPSAS in preparing its annual accounts. The country's accounts do not provide a statement of cash receipts and payments which (a) recognises all cash receipts, cash payments, and cash balances controlled by the entity; and (b) separately identifies payments made by third parties on behalf of the entity.
"In addition, the country's accounts do not provide accounting policies and explanatory notes." A general programme is underway for the adoption of accounts in a form specified in its New Accounting Model (NAM).
"Under the guidance of the Auditor General of Pakistan (AGP), the Controller General of Accounts (CGA) needs to restructure the present cash basis of financial reporting to conform fully to the cash basis IPSAS," the report added.
While the IPSAS-2 reporting format has been designated by the Auditor General as additional reporting requirements for the government, it would be appropriate to set up a committee to review and steer the process to implement cash basis IPSAS on a continuous basis.
