PESHAWAR: Facing cash crunch for the last two years, the Khyber Pakhtunkhwa finance department has at last decided to look inwards to identify issues plaguing the province’s economy and reform the public finance management system.

To this effect, the department has notified four working groups and their terms of reference. Each group is headed by a deputy secretary and comprises five members.

These groups have been tasked with suggesting reforms for revenue mobilisation, corporate governance, expenditure management, and planning and budget reforms.

Forms working groups to propose reforms for revenue mobilisation, corporate governance, expenditure management

The ToRs of these groups available with Dawn show that the group working on revenue mobilisation will look into the federal government’s fiscal transfers, province’s own tax and non-tax revenue and cash management and come up with suggestions, models and timelines to streamline existing systems, resource generations and cash management.

As the first part of its task, the working group will have to design strategy for maximising the province’s share in the next National Finance Commission (NFC) award and develop a uniform procedure for accurate and reliable assessment and projection of the province’s share in the federal transfers based on the Federal Board of Revenue’s tax targets and collection.

For increasing the province’s tax and non-tax revenue, it will prepare a fiscal policy with the medium-term goals for the period of 2018-21.

The group will also review the cash balance reporting and propose a model for IT-based solution for daily cash balance reporting and forecasting system with historical trend analysis.

The other group tasked with suggesting reforms on corporate governance will examine local government finances, state-owned enterprises and autonomous institutes and debt management strategy.

It will devise institutional mechanism for the Provincial Finance Commission’s secretariat to ensure fiscal oversight of the three tiers of local government system under the KP Fiscal Transfer Rules, 2016, and coordinate with the controller general accounts, accountant general and local fund audit department to streamline accounting, financial reporting and audit of local government.

For the state-owned enterprise, the group will propose institutional framework for the fiscal oversight of all such entities by the finance department through its treasury and local fund audit wings.

It will also support the formulation of the provincial debt management strategy and propose a framework to govern grants and foreign project assistance in the budget sector.

The third group, which is tasked with developing the expenditure management strategy, will look into the legislative and regulatory framework, public expenditure review and transparency and accountability.

It will examine the 2001 delegation of financial powers and revise and update the 1999 budget manual and strategy of digitisation of all financial laws, rules and rules in collaboration with the law and IT departments.

The group will also pilot ‘zero-based budget strategy’ in a targeted sector and prepare policy paper on the expenditure tracking system at facility level in health, education and police departments.

It will also support structural reforms in local fund audit department and conduct open budget strategy to devise a roadmap for future reforms.

The group tasked with suggesting the planning and budgeting reforms will have a look at the annual budget documentation, medium-term budgetary framework and output-based budgeting.

It will review the annual budget statement and propose amendments to it to bring it on a par with the best international practices from the next fiscal.

Fahd Ikram Qazi, one of the group leaders for corporate governance working group, told Dawn that the initiative was part of the in-house reforms of the public finance management.

He said all PFM areas had been covered and handed over to working groups, which would have to liaise with other departments and come up with other overarching reforms.

Mr Qazi said the groups would strengthen the functioning of other multilateral partners, including Sub-National Governance and World Bank.

Published in Dawn, September 23rd, 2017