country focus: Pakistan | 3

SAI Pakistan
COUNTRY FOCUS

Pakistan is a vibrant multicultural country of 140 million and three types of organizations (those on the central
people located in a strategically significant region of accounting network, self-accounting entities budgeted
South Asia. It gained independence in 1947 and is spread by the government and public sector entities). Financial
over an area of 796,095 square kilometres divided into assurance is provided at all tiers and for all categories
four provinces. With the stark mountain peaks of the except those entities whose accounts are, by law, audited
Himalayan range in the north, lush green valleys and arid by private sector auditors.
deserts terminating at the Arabian Sea in the south, it is a
country with varying seasons and beautiful scenery. Regularity and Compliance Audits are conducted
under roll over planning for all organizations at all tiers.
The Department of the Auditor General of Pakistan Performance Audit focuses on outcomes of various
(DAGP) is the SAI of Pakistan. It has a long history of projects and programmes with a special emphasis on
being at the centre of public accountability which goes social sectors.
back to the 19th century when the financial codes and
manual for public financial management in the region Training and research are the main tools of the SAI
were first drafted. Since the independence of the country, Pakistan to keep abreast of developments in the
SAI Pakistan has enjoyed a constitutional status that profession. It has a network of training establishments
ensures that it can continue to promote transparency in spread across the country, where public servants
governmental operations. are trained in auditing, accounting, and financial
management. A large number of officers have been
The Auditor-General of Pakistan is the head of the SAI and trained abroad attached to the UK National Audit Office
is appointed under Article 168 of the Constitution. His (NAO), the US General Accountability Office (GAO) and the
reports are laid before the National, Provincial and District Canadian Comprehensive Auditing Foundation. The SAI
legislatures comprising the elected public representatives also participates in workshops and seminars organized by
and are considered in the respective Public Accounts INTOSAI, ASOSAI, the Economic Co-operation Organisation
Committees. His mandate, set out in the Constitution of Supreme Audit Institutions (ECOSAI), the NAO, the
and supported by subsidiary legislation, enables him Chinese National Audit Office, the World Bank and the IMF.
to develop independent and objective assessments The research operations of the SAI have produced a Public
of the process of governance, which augment the Audit Manual, an internationally recognized Performance
legislative oversight of the peoples’ representatives over Audit Methodology with 13 sector specific Guidelines and
governmental operations. a series of Research Papers. ‘Performit’ a quarterly magazine
published by the SAI Pakistan is known in the state
The budget of the Auditor General is classified as auditing circles for its quality.
“charged” expenditure, that is expenditures not voted
upon by the Parliament. This arrangement lends this SAI Pakistan has always been active in international
institution a degree of independence. About 1500 forums. It served on the Board of the UN Auditors for
qualified officers assist the Auditor General in the 15 years (1961-76). It has been re-appointed as the
discharge of his responsibilities. The SAI Pakistan is an external auditor of the Organization for the Prohibition
equal opportunity employer. of Chemical Weapons (OPCW) for the term 2006-08 after
successfully completing the term for 2003-05. The SAI
Financial assurance provided by SAI Pakistan covers a organizes international seminars and trainings regularly
very broad range of governmental operations. There are besides mutual cooperation with various SAIs. It is also the
three tiers of government (Federal, Provincial and District) permanent Secretariat of ECOSAI.

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Some Developments at As a result a New Accounting Model (NAM), in line with

international standards, has replaced the century old codes
SAI Pakistan that were in use since the country gained its independence
in 1947. The accounting model previously in use within the
Today more than ever, the success of national budgets federal and provincial accounting bodies was cash based
depend to a great extent on the efficiency of the for transaction recording and for most of the reporting
Accounting and Auditing functions. Public sector audit and purposes. The balances were not produced from a double
accounting practices in Pakistan are currently undergoing entry accounting system and as such lacked reliability. The
major reform aimed at increasing transparency, streamlining modified model adopts a modified cash basis of accounting,
accountability and improving overall financial management which is in line with generally accepted accounting
in line with international standards and practices. These principles. It will record the cash transactions while taking
changes are in response to, and complement, broader into account commitments, and acquisitions of fixed assets
socio-economic reforms underway in Pakistan, such as and liabilities during an accounting period.
the drive for greater accountability of public funds and
the need for increased involvement of communities in the
allocation and use of spending. The enhancement of local
government and the devolution of political power from
provincial to local government mean that accountants and
auditors will work in a new administrative environment, in
which there are greater demands for accountability by the
public. Improvements in information technology have also
provided the incentive to adopt more cost-effective tools for
managing government accounts and providing information
to government decision makers, essential for effective and
efficient financial management. A diagnostic study in the
early 1990s revealed basic weaknesses in the existing Public
Financial system that needed to be addressed to ensure
good governance through improved public accountability.

The Government of Pakistan (GOP) launched the Project for

Improvement of Financial Reporting and Auditing (PIFRA) in
1996, with the assistance of the International Development
Association (IDA). Some key legislative changes were
introduced, such as separation of the accounting and audit
functions, decentralization and devolution of financial
management and accountability to local governments
via various newly formed agencies. The project (PIFRA)
was to work in tandem with these reforms. In order to
make the transition from the old system to the new and
improved one, major changes were required. A phased
plan was adopted for this transition as not only new models
for audit and accounts functions were required but also
developments in human resource and infrastructure were to
be put in place for a modernized and improved Accounting
and Auditing setup to emerge on completion of the project.

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Secondly, a revised five element Chart of Accounts was required. Over a thousand technology requirements
(COA) was developed to replace the old two element were identified and finally a comprehensive design covering
classification code. This measure will bring about modules on Payments, Tax/Capital Receipts, Loans/Grants,
transparency in fiscal information as well as making the Projects, Fixed Assets, Inter-Equity Transactions, Budgets,
system IMF/GFS compliant and to finally cater for a full Cash Flow, Payroll, GP Fund1, Commitments, Staff Expenses,
accruals basis of accounting from an initial installation of Petty Cash and Pensions, feeding into the General Ledger,
a modified cash basis accounting model. was built. The IT network/connectivity was to be initiated
between the root accounting unit i.e. the District and Tehsil2
These changes affect the financial management of all the Accounts Offices/Treasury Offices spread all over Pakistan,
four provinces of the country therefore the new paradigm and respectively attached to each of the four Provincial
was approved by the President of Pakistan under the Accountant Generals and the Controller General Accounts
umbrella of an Integrated Financial Management System. (CGA) and the Finance Department/Ministry of Finance.
For efficient recording of transactions and for effective audit, Within the Province, a Local Area Network (LAN) is used
a functional design to implement NAM in an IT Environment and is presently being switched to a wireless system.
The provinces are connected to the centre via a Wide Area
Network (WAN). Thus the new SAP based accounting
and budgeting system set up under PIFRA I is operating
on a Province based centralized architecture with central
servers located at the Federal Capital, Islamabad, and each
of the Provincial capitals. District Account Offices connect
to servers at these offices through remote telecom links. In
addition, servers are also located at the Federal Ministry of
Finance and each of the Provincial Finance departments.
This comprises the Financial Accounting and Budgeting
System (FABS).

The output of the CGA and the Department of the

Auditor-General of Pakistan (DAGP), comprises the
Appropriation accounts and the finance accounts, and
the respective audit reports. Besides these the finance
managers in the government require analytical reports
such as forecasts of the costs, service and repayment of
outstanding debt, projection of pension liabilities, etc.
These reports require information gathered from different
sources, and hence take a long time to produce. With the
implementation of FABS, transaction data pertaining to
expenditures and receipts will be readily available and
may be used for reporting and decision making purposes.
The new system will in fact form the key transaction
processing layer of the GOP MIS information pyramid.

1 GP Fund: General Provident Fund is the contribution made by employees, it also includes contributions from employers (in this case the GOP) in the form
of a rate of interest. A running account of the fund is maintained for each employee on a monthly basis.
2 Tehsils are sub divisions in a district.

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These changes will also implement interfaces with The DAGP has acquired ACL as its CAATs software
other governmental systems such as the National and and ADM Plus for management of its audit function.
Central banks and the Central Board of Revenue which Training in CAATS and ADM Plus for all levels of auditors
are intimately involved in the processing of government is underway. Presently arrangements are being made to
receipts and payments. Thus the IT base will allow install a web portal which will improve communications
individual payments and receipts to be recorded in the between the field auditors and their managers as well as
National Bank/State Bank of Pakistan systems. The new IT various other functions such as an on line library, making
base will also allow a multi year budgeting process under updates and audit information available locally and
a Medium Term Budgetary Framework (MTBF) Programme internationally and for facilitating public interaction.
for the government of Pakistan. Thus government finance
managers will have access to a variety of information. The These developments have opened new challenges, as
Federal and Provincial budgets are now being successfully now the auditors have to audit the accounts prepared
prepared according to the new COA using SAP systems. An on ERP systems aided by the use of ACL. In addition a
increasing number of sites (so far 52) have been activated comprehensive IT plan for strategic top down control of
under the Financial Accounting and Budgeting System. audit is being put in place. Strategic Audit Management
in the DAGP will provide the basis for top-down control of
After the separation of the audit and accounts functions the Audit Department by the Auditor General of Pakistan
the next step was to improve the Audit Systems and and senior management. This will require macro level
procedures. An Audit Manual and a number of specialized data for planning Federal, Provincial and District accounts,
audit guides which implement Computer Assisted and budget information which will be provided through
Audit Techniques (CAATs) and new audit standards have the FABS databases. This information will be analyzed to
been compiled and tested. Development of software study changes in spending priorities, new organizations
for Computerized Auditing will ultimately result in the in the budget, entities receiving more than the normal
acquisition of two types of computer software: budget increase, problems of budget management and
n Software for analyzing and auditing accounting data expenditure on items beyond a certain threshold level.
(CAATs) and The other major parameters of the MIS will emerge from
the cumulative build up of audit information such as
n management information software for planning and audit plans, organizations covered in one audit year and
monitoring the status of audits (AIMS). organizations remaining uncovered, previous audit history
of organizations, types of audit observations made by
different teams, emerging from different organizations,
auditee management response and responsiveness,
PAC decisions and their follow-up. This information will
link up with Field Audit Office information to provide a
comprehensive perspective of audit resources as well as
Human Resource and Training information to establish a
comprehensive information base. The information base
will be converted into an MIS for structured information
and will also provide the basis for a decision support
system (DSS) to meet unstructured information needs.

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For the appropriate operation of information systems n All DAGP standards, guidance and polices
discussed above there should be access to an adequate
information base. One huge system of databases will n All relevant guidance, best practice reference works
emerge from the budgeting and accounting data (of over available elsewhere pertaining to audit
100 government sites) including, but not limited to, the
n Details of all courses, workshops, seminars offered by the
data that will be brought on the NAM / FABS systems.
DAGP internally and through outsourcing
The powerful new system of classification / COA (Chart
of Accounts), the integration between core accounting n Archiving of audit-related records, including digital
systems and the outreach of the network extending imaging of essential audit evidence
to district and sub-district levels will give tremendous
breadth and depth to this body of information that will n Database of Audit Plans and operations
continue to grow with daily transaction processing.
n Database of the departmental budgeting and
In addition there will be a need to establish counterpart administration going down to Field Audit Office level.
audit databases in the following areas:
n Auditee profiles (on countrywide basis over 100,000
large and small entities may be involved). The Infrastructure Base for the
development of this database will be facilitated by
budget and accounts data discussed above.
Integrated Audit MIS
The four tier information architecture with its linkages with
n All audit reports from the stage of draft audit reports to
FABS and beyond with various other networks such as of
the stage of action taken on the directives of the PAC.
National Bank/State Bank, Central Board of Revenue (CBR)
The audit findings being ‘searchable’ not only by audit
etc., and the audit focused data bases as discussed above
related parameters like reference audit report, year of
taken together are called the ‘Integrated Audit Management
account etc, but by suitable heads of the classification
Information System’ (A-MIS). The A-MIS will require host
system, making macro views of audit findings and
hardware, software, communication network and proper
linkage with budgetary accounting data possible.
physical premises to house the facilities.
n All rules, regulations, policies, relevant laws under which
The nerve centre of A-MIS will be Audit House, the Head
audited organizations operate.
Quarters of DAGP in Islamabad. The DAGP HQ will undergo
n Comprehensive HR data of all staff of DAGP and related change through strategic planning of audit operations and
entities like CGA, the Military Accountant General the establishment of linkages between HRM and
(MAG) and officers on deputation etc including such audit operations.
information as training, audits conducted / supervised,
subject specializations etc.

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The nerve centre of A-MIS at Islamabad will have a dual

role. It will be central point of the entire audit IT network. It
Some caveats for SAIs aspiring
will have on-line linkage with the FABS systems and other for IT based MIS
government databases that can be linked up such as the
Ministry of Finance, Planning Division etc. It will establish The crucial role played by communication and change
a comprehensive computer centre manned by technical management can not be emphasized enough for the
IT people. The centre will access and analyze all types of success of any project, especially one that unleashes
data for top level planning, monitoring and control. At reforms as well. The greatest challenges the SAI Pakistan
the same time the centre will provide A-MIS access to the has faced during this reform involving computerization
local field audit offices like Director Generals Audit Federal stem from change management issues which need to
Government, or Defence, or Zakat Audit3. A comprehensive be instutionalised for a successful transition especially
training centre will be attached to the nerve centre. when reform is not driven by a crisis but is a radical
change from half a century worth of ancient practices.
Each of the field offices will have their server attached to The reform is further hindered by a social set up where a
the central nerve centre and an appropriate sized network majority of operations are performed manually, and the
of workstations. electronic media like computerization has to spread more
widely. In such a scenario electronic networking to the
Networked to the central nerve centre of A-MIS will be extent undertaken by PIFRA is only an oasis of activity for
provincial A-MIS nerve centres at each provincial capital. which strong linkages have to be developed with rest of
The centres will function under the Central A-MIS and the society (especially those it has to interface with) for
will serve the field offices through main cities like Lahore, sustainability. We also face many issues that stem from our
Karachi, Peshawar and Quetta. In each case a training unit political system, which is also evolving thereby generating
will be attached and the Field Offices Training Centres frequent legal and administrative changes which may
(FOTC clusters) will be linked by video conferencing once disrupt the reform process, which in turn may require
they are fully operational. updating from time to time. The SAI’s problems mainly
concern: Communication and propagation of the reform
Below this upper network will be the linkages going
programme and Human Resource Management:
down to the district and finally the Tehsil level. This
network system would operate through the Director
Propagation of the rationale:
General District Audit of each province and will link up to
the local nerve centre through that route. Under the four n Understanding of the new system and related
Director Generals District Audit located in provincial head changes at all levels
quarters there will be a cluster of Directors of Audit spread
n Inculcating commitment and ownership of the
out around the province. For field communication at this
programme at all levels
level dial-up connections or Internet will be used. If there
is a requirement due to information flow congestion, the
human resource management:
Director General District Audit could be upgraded to the
status of a Nerve Centre. n Preplanning the new job assignments and
responsibilities

n Changing the transfer policy of officials to aid

the transition

3 Zakat Audit: Zakat is the Islamic system of taxation on movable and immoveable property of Muslims. It is collected by the Department of Zakat,
who distribute it to the needy in accordance with Islamic Principles. The federal auditors have to audit this expenditure.

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n Setting a system of incentive compatibilities for let the changes be absorbed, thus extending the project
initiating and then sustaining the adoption of the new time and reducing the agenda of change appropriately.
practices via rewards and bindings. Wide ranging intensive training activity has also
helped. We have tried to keep the programme flexible
n Considering the double work that is often involved in to accommodate any updates or government policy
transitions which triggers stress and demotivation. changes like the devolvement plan for local government.

socio-political environment:
n Dealing with cultural resistance and parochialism Summary
n Dealing with provincial disparities The SAI has a tradition of keeping abreast of the changing
times and has always met its challenges head on.
n Dealing with frequent policy changes Although the current initiatives of the SAI are ambitious,
in truth these reforms are now demanded by the
changing times. As always, its leadership and work force
institutionalizing the change:
are fully prepared to contribute and participate in all of
n Timely budgetary provisions the modern approaches and they will take on a leadership
n Effective and timely decision making role in Public Financial Management.

n Appropriate changes in the system The Project will have very far reaching effects. Radical
improvement in public accountability is the major aim of
this project, which in turn will impact the whole of public
Timeliness of Training activity: finances since both auditing and accounting functions are
n Neither too early nor too late covered. We fully expect that this will eradicate corruption,
delays and other malpractices from the system.
n Bridging the gap

n Reiterative-learning and constant training

Author
Although the project was phased, coordination problems
have cropped up frequently. It has amply made clear Dr Talat Imtiaz,
the need to have strategic functions ready before each (working as Director
reform/improvement activity is launched. We have dealt Commercial Audit
with the change management and communication issues and Evaluation) in
by setting up a communications programme which collaboration with
conducts seminars, change management workshops the Department of
and circulation of documentation about the project, and the Auditor-General
by developing videos for wide exposure of the project’s of Pakistan.
intentions, activities and achievements, multiple poster
materials, newsletters and a variety of project related
mementoes. For greater social and cultural acceptability
the project has slowed down wherever possible so as to

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