PIFRA II – FINANCIAL MANAGEMENT MANUAL

1. INTRODUCTION

1.1 Background

1.1.1 The financial management system used for PIFRA II has been prepared to
meet the reporting requirements of the Project because of the expended scope of the
Project.

1.2 Purpose of the Manual

1.2.1 The purpose of this Manual is to provide guidelines to the Project

Management in setting the accounting and financial management system and policies
and procedures, which were developed to meet broadly the Government Financial
Rules (GFRs) and reporting requirements of the World Bank.

1.2.2 This Manual is a guide to functionaries in the accounting section on the

operation of double entry accounting system in accordance with IPSAS, and ensures
uniformity in accounting process. It lays down detailed procedures to be used for
generating financial information, formats for financial reporting and defines the
auditing arrangements to meet the World Bank requirements.

1.3 The objectives of the Manual

1.3.1 The main objectives of this Manual are as follows:

a) To enhance transparency for approving and accounting of financial transactions in

clear, simple, user-friendly and consistent form. The improve transparency would
enables the management to actively use program financial statements as
management tool to improve accountability and to review policies and procedures
for better implementation of the program.

b) To improve timeliness in reporting system so as to enhances the effectiveness of

financial statements.

c) To ensure application of sources of funds are used only for the purposes for which
they were granted, with due attention to considerations of economy and efficiency
and without regard to political or other non-economic influences or considerations.

d) To ensure that Report based disbursement procedure – submission of Quarterly

Financial Management Reports (FMRs) and financial reporting are prepared in
accordance with the requirements of IDA/World Bank.

e) To improve credibility and control over data integrity.

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1.4 Scope

1.4.1 The Manual is intended to:

a) Address those topics most likely to affect the Project activities.

b) Provide general guidance as to how treatment is meted in case of a given issue and,
where alternatives exists, to specifies which policies are to be used.
c) Acquaint the user with the fund flow mechanism and reporting formats and
procedures. However, the Manual does not provide step-by-step accounting
treatment of accounting transaction. It is expected that the user of this Manual shall
have some accounting knowledge.
d) Provides necessary chart of accounts for classifying expenditures.

1.5 Organization of the Manual

1.5.1 Organization of each section of the Manual is shown in the table of content.

1.5.2 First two sections provide purpose of the Manual; and the Project profile.

1.5.3 The next section of this Manual is on the human resource requirements to manage the
financial management system of the Project and job responsibilities of key accounting
staff.

1.5.4 Next two sections address the accounting controls, policies and procedures and formats
of accounting records.

1.5.4 Following five sections cover the chart of accounts; fund flow process and
disbursement procedures; Budgeting and financial forecasting system; Project financial
statements and reports required by the World Bank/IDA; and project procurement and
contract administration.

1.5.5 The section 11 is on auditing arrangements, Terms of Reference of external auditors

for conducting independent audit of the Project financial statements on annual basis.

1.6 Applicability

1.6.1 This Manual shall be applicable only to PIFRA II Project. The rules, policies and
procedures illustrated in this Manual are applicable only for this Project and do not
apply to any other government transactions or project.

1.7 Updating/changes

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1.7.1 The Consultant (B&A) in consultation with Internal Auditor (IA) should
periodically review this Manual. The changes need to be confirmed by the Project
Director under information to the World Bank.

1.7.2 The head of accounting section is responsible for timely sending the up-
dated material to the holders of this Manual.

1.8 Computerization

1.8.1 The Project Accounting and reporting system uses SAP software.

1.9 Manual Holders

1.9.1 The following officers are to be provided with a copy of this manual;

a) Project Director;
b) Director General (A&P);
c) All finance and accounting staff and internal auditor;
d) Concerned officials of CGA/AG; and
e) Any other official/person responsible for the implementation of accounting
system.

1.10 Adoption of the Manual

1.10.1 The Project Director had approved this Manual for adoption and implementation. The
Manual and amendments (if any) shall remain applicable throughout the life of the
Project.

1.11 Structuring of the Manual

1.11.1 Each chapter of the Manual has four levels of heading:

Level 1 - Chapter
Level 2 - Section
Level 3 - Sub-Section
Level 4 - Bullet Points

1.11.2 A list of abbreviations used in this Manual is included for reference

purposes.

1.11.3 The title of the Manual and chapter number is displayed in the left and
right corners of each page respectively. The footer for each page contains the page
number.

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1.11.4 The appendix includes reporting formats, books and registers to be used
in the application of this Manual.

1.12 Abbreviations

1.12.1 The following abbreviations are used in this Manual.

OAGP Office of the Auditor General of Pakistan

CGA Controller General Accounts
GoP Government of Pakistan
IDA International Development Association
QA Quality Assurance
Rs Rupees
TA Technical Assistance
TORs Terms of Reference
US$ U.S. Dollar
WB World Bank

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