Pifra Business Finance Project

8/2/2019 Pifra Business Finance Project

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Table of contents:

Chap 1 : Introduction

1.1) Introduction to pifra1.2) Components of pifra1.3) Software used1.4) Scope&institunal relations


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IntroductionThe Govt. of Pakistan took an initiative to address the shortcomings of the financial reportingsystem and to ensure good governance. The IMF carried out a survey in Government Accountingin early 1990s, followed by a diagnostic study sponsored by the World Bank. As a result, theProject to Improve Financial Reporting and Auditing (PIFRA) was introduced by the AuditorGeneral of Pakistan in 1994.

The main objective of this project is to computerize the whole accounting and auditing system of the country. The idea behind computerizing the whole system is to generate timely, accurate andreliable financial statements; to monitor fiscal deficit; to forecast flow of cash; to manage public

debt and to achieve effective financial controls.

The accounting system of Pakistan was inherited from the century old accounting system of theIndian govt. The old accounting system lacks timeliness, accuracy and most importantlytransparency. Accounts of any organization, large or small, are the most important tool forcurbing the corruption by keeping an eye on ins and outs of the money and more importantlythey give the overall inner picture of the organization to the stakeholders which helps them takebetter financial decisions.

While talking about the country as an organization the importance of the accounts becomes muchmore vital. The stakeholders are everyone, be that any foreign aid entity, any govt. department,

govt. employees, provincial or district govt., any bank, any foreign govt. etc. You name it andthey are there. So the importance of these accounts increases manifolds.

Furthermore, the old manual system was like a haunting monster also for a common governmentemployee. There are three main things which a common govt. employee comes to an accountsoffice for, viz. salary, general provident fund and pension. Our experience shows that in the oldsystem a common man had a series of unlimited problems and hurdles to face in order to get hisfinancial claims. His fever started a week before he had to visit the accounts office for any of thefinancial claims.

But, unfortunately, till the recent past our governments did not pay proper attention to overcome

these problems. Due to which the exact and clear picture of the economy of the country is stillnot visible to virtually anybody and on the other hand common man face enormous difficulties inreceiving his financial claims.

After the introduction of PIFRA this ultimate goal would be achieved soon. That is why thisproject was introduced. The main objectives are to achieve timely, accurate and completeaccounts with transparency and most importantly to facilitate the common govt. employeeregarding their financial claims. But, there is a lot more to be done to achieve this goal.


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1.3 software: (SAP ERP)

in order to keep the uniformity a common automation solution has been chosen for the whole countryunder this project. The world-renowned state-of-the-art integrated software SAP is the EnterpriseResource Planning (ERP) which is being implemented at all the accounting entities overall the country.There are number of functionalities available in this ERP, which are highly flexible in nature and can bemodified according to the requirements of the particular organization. Keeping in view the requirementsat the country level, the Govt. of Pakistan has purchased three most essential modules of SAP. They are:


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Different modules of pifra

In order to keep the uniformity a common automation solution has been chosen for the whole countryunder this project. The world-renowned state-of-the-art integrated software SAP is the EnterpriseResource Planning (ERP) which is being implemented at all the accounting entities overall the country.There are number of functionalities available in this ERP, which are highly flexible in nature and can bemodified according to the requirements of the particular organization. Keeping in view the requirementsat the country level, the Govt. of Pakistan has purchased three most essential modules of SAP. They are:

Basis (System Administration) Module

This module covers the overall system administration. The user authorization, the working of themain servers, the roles of particular users, the connectivity between all the sites in the countryand various server-related issues are covered in this module.

Financial Module

This module covers the financial side of the system. The generation of various financial reports,like monthly, quarterly and annual accounts, etc.; the budget preparation and maintenance andexpenditure booking into the system, project & commitment accounting are some of the taskswhich are performed using this module.

Human Resource (HR) Module

In HR module, the update record of the employee, the updated GP Fund account, its calculationand payment; the pension/commutation calculation and payment; and salaries of the govt.employees are operated through the system.

Pension and GP Fund Functionalities (HR Module)

HR Module covers Salary, Pension and GP Fund Functionalities or govt. employees. It has beenmentioned above that when the site (District Accounts Office) is made productive/online the

salary of the employees of that district is paid through the system. As for the Pension and GPFund Modules, they are being currently in the implementation phase. These functionalities arestarted after a reasonable time is elapsed after the productivity of district, so that the usersbecome more acclimatize with the system. The pension and GPF Functionalities have beensuccessfully started at AG Sindh and District Accounts Office Hyderabad, so far. Currently thesefunctionalities are being extended in DAOs Sukkur, Nawabshah and Larkana. As soon as theyare successfully implemented in these sites, the rest of the sites will also be brought on the samesystem.


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In these functionalities one of the most important tasks is to update the past informationregarding their Provident Fund deduction of the employees who are in the service well before thesystem was introduced. This updating will ultimately facilitate the employee at the time of theirretirement.

Budget Availability Check (FI Module)There are numerous functionalities in FI Module. So far, several functionalities have beenimplemented in AG Sindh and its DAOs, e.g. Civil Accounts, Workflow, etc. But there are stillsome which are in the implementation phase.

One of the most important functionalities is Budget Availability Check. In fact, this functionalityshows the beauty of the system. The idea is that no financial claim is entertained through thesystem if the budget in the relevant head of account is not available. This prevents any wrongpayment, intentionally or unintentionally. Moreover, it also keeps the accounts updated anderror-free.This system has been successfully implemented in the AG Sindh office, being the pilot

site. The next target is to implement this functionality at all the productive sites.

1.4 ) Scope and institutional relationships:


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1.2) Components Of Pifra:

Component I:

Government Accounting and Financial Reporting :

Development of accounting standards, reporting systems and financial proceduresconforming to international accepted principles and computer based financial systembased on complacent to internationally recognized standards.

System would enable the uniform application of prescribed controls for these transactionsand support information retrieval needs for government finance managers at the centreand in the provinces.

a. Core Accounting and Reporting System:

To provide integrated government-wide accounting, encompassing the functionalrequirements for budget preparation and budget execution, covering appropriation,commitment, funds allocation and payment processes.

System would be comprehensive in terms of coverage and would provide acrediblesource of reliable and timely data.

Core Accounting System would be fully automated, interfacing with external datasources, i.e. SBP/NBP on periodic basis.

Would enable expenditures and revenues to be recorded at a detailed level and to relatethese to specific programs and projects.

System Usage by :

CGA (including its AG and DAOs) to perform the basic accounting functions.

The Federal Ministry of Finance and Provincial Finance Departments to perform theprocess associated with budget compilation, monitoring and control and implement cashlimits as may be required.

The Federal Planning Division and Provincial Planning Departments to obtain the statusof actual expenditures on ongoing programs and projects.

b. Payroll and Pension System

Need for an automated payroll and pension system was evident in view of the increasingvolume of transactions.

System to perform the full range of the payroll functions and the expenditures processedwould automatically update the core accounting and reporting system.


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GP Fund :Automated GP fund ledgers, balance sheets, interest calculations, adjustmentsof loans and advances etc

Cash Flow Forecasting and Financial Analysis System:

To establish a system for forecasting likely flows of payments and receipts, and theconsequent impact on cash balances and issue of debt instruments with the help of cashflow and financial analysis system.

This would provide a powerful facility for retrieving current and historical data from theaccounting systemallowing end -users to manipulate the data for forecasting andanalysis purposes.

Component II

Government Auditing :

Focus on audit systems improvement and systems development including

1. Audit Standards and Techniques : Consultant services to

Prepare guidelines for the introduction of international auditing standards. Introduce modern auditing techniques and concepts. Review PADs audit policies, processes and procedures, output, workload , efficiency and

quality assurance for the audit functions. Advise on methodology to enhance PADs communication with stakeholders, for internal

audit of PADs systems under development. To assist in the use of automated audit tools and standard audit programs wherever

appropriate.- Improve communication of audit results and to develop quality assurance programs.

2. Administrative tool : Provision of hardware and audit software for audit planning, samplingand documentation as well as for audit of automated accounting systems.

3. Capicity Development : consultancy to support revised human resource managementprocedures through international training in a modern financial system environment and througharranging attachments with other Supreme Audit Institutions.

4. Use of Private Sector Firms : Assistance with developing modality for utilizing private sector

firms and finance for private audit firms fees.Component III:

Human Resource Management

Involves organization and systems development. To reflects needs for increased professionalism and specialization.


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PAD would implement revised HRM policies relating to the career paths of accountantsand auditors, defining standard job descriptions, enhancing the effectiveness of trainingdeveloping a transparent and quantifiable system of evaluation and manpower planning.

Consultant Assistance. Managing the process for change..

Preparation of job descriptions and performance standards. Installing an MIS system for HRM planning and monitoring.

Component IV:

Training :

Moving towards professional-level training. Providing retraining associated with the change introduced by the project.

Strengthening the quality of training and training facilities. Expanding the circle of beneficiaries.


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Component V:

Administration

1. MIS Wing: to provide;

Software development centre. Selected posts to be staffed by contract professional. Local training for PAD staff in systems development. Recurrent cost for system maintenance.

Project management: strengthening the Project Directorate through;

Provision of staff. Facilities. Hardware and software. Trainers. Consultants.

Output by Components:


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Component II: Government Auditing

Subcomponents:

i) Completion of the Financial Audit Manual, Supervision Instruments, Working Paper

Kits and Specific Guidelines First development of general financial audit manuallater supervision instruments and

working paper kits with audit guidelines for 16 were finalised. These instruments give tailored audit guidelines for specific audit areas on how to use the

Supervision Instrument and Working Paper in their scenario. Guidelines used for the audit of:

1. Federal Government2. Provincial Governments3. District Governments4. Procurement

5.

Foreign-aided projects6. Customs and Sales Tax7. Income Tax8. Civil Works9. Railways10. Water and Power Development Authority (WAPDA)11. Commercial Enterprises12. Defense Services13. Zakat Collection14. Privatization15. Environment

16. Foreign Mission

ii) Procurement of Hardware and Software: used for the test implementation field auditwere

ADM Plus for Audit Management purpose. ACL for CAATs.

iii) Test Implementation of the Audit Manual: DAGP identified seven audit teams andassigned audit objectives.

Deral Audit Team

audit a portion of Repayment of Domestic Debt (a significantcomponent of the federal appropriation account).

Provincial Audit Team audit a portion of Interdepartmental and Judicial Deposits ( asignificant portion of the Financial Statement of Public Accounts).

District Audit audit a portion of payroll data from the SAP/R3 accounting systempertaining to the District of Abbottabad (to enable use of CAATs software tool againstpayroll which is a significant component of District expenditures).


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Railways Audit Team audit consumption of fuel (a significant element of Railwaysexpense).

WAPDA Audit Team audit of Civil works (a major activity of WAPDA). Work Audit audit of Pak PWD (a major activity). Revenue Audit audit of customs receipts pertaining to Vehicle Imports (an important

Revenue activity).

iv) Training of Core Group of Auditors :

Completion of audit training material using new audit manual. On-job-training provided through pilot testing activity. Strong source of expertise via DAGP master trainer counterparts and local consultants.

Internal Audit deliverables include:

Internal audit plan.

Internal audit manual. Draft internal audit legislation.

CHAPTER 3:

Sumarizing

3.1) Achievements

i) Integration of Budget & Expenditure information flow ii) Accuracy and timeliness in Reporting


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iii) Cash Forecastingiv) International credibilityvi) Transparency in Accounting systemVii) Good governanceViii) Elimination of fraudulent activities

ix) Integration of Salary Network x ) Pension / Commutation Calculation through systemxi) Consolidated Personal Informationxii) Updated GP Fund Accounts

Xiii) GP Fund calculation through the system

3.2 problems faced:

Difficult to resolve:

Policy Change: accountabilities, public disclosure, devolution mandated by 2006

Legal framework slow to embrace change


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Organization Change: roles and responsibilities, shifts in charter, new functions

Can control your resources, not those of others

HR Change: civil service rules, groupings, certifications, incentives, staff reductions

Civil service reforms are measured in years

Progress depends upon level of commitment and individual champions

Turnover causes major rework, delays

Missions fail if reviews are not timely

Security situation adds another layer

Factor in starting point tailored to client

Timelines are local - use real ism in governments implementation capability

Small steps are necessary

Recommendations:

Need much more attention to:

Change management: everyone is affected by new processes, procedures, or linkages(ERP)

Automating existing processes yields few benefits

Cross-cutting reforms help motivate, mandate

Communication: resistance can build quickly if all stakeholders dont know proposedbenefits

Training: building skills for thousands is complex

Documentation: critical, overlooked, delayed


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PROFILE:

All financial activities starting with planning, preparation and execution of budget, accounting of all resultant transactions, evaluation and audit of accounts and ultimately financial reporting toserve as the basis for future planning and budgeting. The financial management system isembodiment of macro economic management which effects all internal and externalstakeholders. In turn the macro economic indicators such as rate of inflation, changes in currentand capital account, rate of growth, GNP etc. are all based on this financial management system.

Authorities Responsible:

Sponsoring Agency: World Bank, Government of Pakistan.

Implementing Agency: Pakistan Audit Department (Comprising AGP & CGA),Planning Division, Ministry of Finance.

Credit: 2921-PAK

Improved audinting and accounting skills

Over 80 Master TrainersTraining on New Chart, NAMOver 29,000 DDOs TrainedTraining labs at provincial HQ for system trainingTraining NAM/SAP for Sites-2000 SAP UsersRoll Out Training continuing through master trainers


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Pifra Business Finance Project

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