1. It was a long felt need to update the forms and procedures of budgeting, accounts keeping and auditing. The existing system is decades old and does not cope with requirements of proper reporting, which could support financial management and financial control. Presently cash accounts are prepared at the districts' level and reported every month to the respective Accountant Generals. Where it is compiled and civil, appropriation and finance accounts prepared. The figures are prepared on the basis of functions with no reference to grants/departments and objects/heads of expenditure, which is again transformed in Finance Department making it compatible with requirements of financial managers and funding agencies. The Provincial Government always faces the problem of not knowing exact information about monthly expenditure against releases. The Government can't make effective financial management without having information about financial flow and its utilization. Secondly the manual processing of figures has its own weaknesses of errors and omissions and causes delay in timely availability of the information.

2. In the above backdrop, the Government of Pakistan, initiated a project namely Project to Improve Financial Reporting and Auditing (PIFRA) during 1996-97. The Government has signed an agreement with the World Bank for funding the programme. The project is aimed at reengineering and restructuring of the budget preparation process, accounts keeping, maintenance and consolidation of accounts and financial reporting. Other major area of intervention is the improvement in the auditing functions of Auditor General of Pakistan.

3. The new system is based on New Chart of Accounts replacing the existing Chart of Classification. The accounts procedures and forms are being modified, updated and redundancies being removed. The system will be available on an integrated computerized countrywide network. The Federal Finance Ministry, four Provincial Finance Departments, offices of AGs/AGPRs, all 127 District Account offices and treasury offices will be computerized and linked together. Every financial transaction shall be processed through computers and the actual position of financial utilization will be available on daily basis. All expenditure bills will be computerized & daily position will be available for effective planning, monitoring and financial management. Efficiency, Transparency and accountability would be the byproducts of the new system.

4. Thirteen pilot sites were selected through out the country for implementation of NAM. Out of which six have been given to Khyber Pakhtunkhwa, due its better performance in the field of computerization in the public sector organizations. Provincial Finance Department of Khyber Pakhtunkhwa has been selected as pilot site where the budget for the financial year 2004-05 is being prepared under the new system. The budget documents have been prepared in parallel under the existing and new system so that to facilitate the switch over, establish link with legacy system and have a back up data available. The Federal Government has prepared the budget for 2004-05 under the new system and has been announced accordingly.

5. The functional and object classification of receipts and expenditure has been modified and improved in the New Chart of Accounts (CoA). Comparison of the major functions of expenditure under the New Chart of Accounts (CoA) and existing Chart of Classification (CoC) is given as under:-

S.no Existing Function Code Function Description Existing Function Code Function Description
1 00000 General Administration 01 General Public Services
  60000 Subsidies    
  70000 Debt Servicing, Investible Funds and Grants    
  80000 Unallocable    
2 10000 Defense 02 Defense affairs and services
3 20000 Law and Order 03 Public Order and Safety Affairs
4 50000 Economics Services 04 Economics Affairs
      05 Environment Protection
5 30000 Community Services 06 Housing and Community Amenities
6 40000 Social Services 07 Health Affairs and Services
      08 Recreational, Cultural and Religious Affairs
      09 Education Affairs and Services
      10 Special Protection

6. The new system has been implemented in DAO Abbotabad, AG Office Peshawar and under implementation in DAO Swat. The process of further implementation of the new system in all the District Account offices (DAOs) will get a boost with the switch over of the budget system to NAM. The financial transactions will start taking place under NAM from July first 2004. The accounts shall be accordingly prepared under the new system.

7. In the first phase the Provincial budget for Financial Year 2004-05 is being switched over to the new system. In the second phase District Governments' budget will be prepared under the new system from the ensuing financial year 2005-06, so that the system is made compatible for interaction with Provincial Government and to have a uniform system of accounting across the country. Under the new system, separate budget has been prepared for every DDO. Appropriations and excesses/savings will be made online eliminating the requirement of revised budget and supplementary budget.

8. Computer Hardware and software has been provided through the PIFRA project.  Server of Finance Department Government of Khyber Pakhtunkhwais directly linked with the server in the Office of Auditor General of Pakistan. Similarly the computers of 24 DAOs will be linked with the server in the office of AG Khyber Pakhtunkhwa.  PIFRA is funding maintenance of the project. Training has already been imparted to all provincial level DDOs of non-devolved departments.