Case Study: "The New Accounting Model (NAM) Implementation:
Bridging Vision with Ground Reality in Pakistan's Public Sector"
Executive Overview
This case study examines the implementation of the New Accounting Model (NAM) within
Pakistan's public sector accounting system, focusing on the transition from the legacy cash-based
system to a modern, accrual-based framework aligned with International Public Sector
Accounting Standards (IPSAS). Based on the Appropriation Accounts and NAM, the
analysis the ambitious reform journey spearheaded by the Controller General of Accounts
(CGA) office, its achievements, and persistent challenges.
Part 1: The Legacy System & the Burning Platform
Context:
For decades, Pakistan's public sector accounting operated on a manual, single-entry cash-based
system inherited from British colonial administration. By the 1990s, this system was in crisis:
Delays: Months-long delays in compiling government accounts
Fraud: Rs. 45 billion ghost employee scandal (1999)
Opacity: No real-time financial information for decision-makers
Weak Controls: Insufficient audit trails and accountability mechanisms
The constitutional mandate (Articles 168-171) required proper accounting of public funds, but
the system was failing to deliver.
The Catalyst:
In 1997, the Project to Improve Financial Reporting & Auditing (PIFRA) was launched with
World Bank support. Its centerpiece: the New Accounting Model (NAM) - a complete overhaul
aiming to shift from cash to accrual accounting, implement double-entry bookkeeping, and adopt
IPSAS standards.
Part 2: The NAM Vision vs. Implementation Reality
The Vision (As Promised):
NAM envisaged a transformative change:
Dynamic Chart of Accounts with 7 supporting manuals
SAP-ERP implementation across federal and provincial governments
Real-time reporting on expenditures and receipts
Electronic payroll for 2.2 million government employees
Fixed asset accounting and commitment recording
Automated budget controls at disbursement point
The Implementation Timeline:
Phase Period Key Developments Challenges
PIFRA Launch 1997- World Bank funding secured, Cultural resistance, legacy
2000 conceptual design system dependency
SAP 2001- FMIS rolled out, voucher Technical glitches, user
Implementation 2005 processing reduced from 30 days to adaptation
72 hours
NAM Rollout 2006- 7 manuals developed, payroll Interface gaps with SBP,
2015 automation achieved FBR, Planning Commission
IPSAS Pilot 2016- 5 ministries piloted accrual Resistance from line
2018 accounting, revealed Rs. 1.8 trillion ministries fearing negative
pension liability performance indicators
PFMA 2019- Public Finance Management Act Structural hurdles persist
Enforcement Present mandated IPSAS compliance, block despite legal framework
chain E-UCs introduced
Part 3: The Core Dilemma - Appropriation Accounts vs. Accrual
Accounting
The Tension:
NAM introduced a fundamental conflict between two accounting philosophies:
Traditional Appropriation Accounting:
Focus: Budget compliance and parliamentary control
Measurement: Cash flows (when money moves)
Primary tool: Form 10 monthly submissions
Objective: Ensure grants are spent as authorized by Parliament
New Accrual Accounting (IPSAS-based):
Focus: True financial position and performance measurement
Measurement: Economic events (when transactions occur)
Primary tool: Financial statements (balance sheet, income statement)
Objective: Show assets, liabilities, and actual cost of services
Real-World Conflict Example:
The Ministry of Public Works historically reported only cash spent on road maintenance. Under
NAM/IPPAS, they must:
1. Capitalize road networks as assets worth trillions
2. Charge annual depreciation expense
3. Recognize future maintenance as provisions
Result: Their "costs" appear higher without additional cash outlay, making performance metrics
look worse - a political nightmare.
Part 4: Structural Analysis - Why Implementation Stumbles
The "Four Disconnects":
1. Technical-Operational Disconnect:
1. SAP-FMIS implemented, but 5 critical interfaces missing (SBP,
NBP, Planning Commission, FBR, EAD)
2. Without these, real-time reporting remains theoretical
2. Central-Peripheral Disconnect:
1. CGA headquarters pushes NAM, but DAOs/TOs/AG offices lack
capacity
2. Field offices still depend on manual processes for multi-purpose
reports
3. Legal-Procedural Disconnect:
1. PFMA 2019 mandates IPSAS, but General Financial Rules still
cash-oriented
2. Appropriation process (Article 80-84) conflicts with accrual
principles
4. Capacity-Aspiration Disconnect:
1. System capable of generating complex reports, but decision-
makers lack training to use them
2. "Exception reports" generated but not acted upon
Part 5: The Current State (2024) - Progress Amidst Persisting
Gaps
Achievements:
Largest public sector SAP payroll covering 2.2 million employees
Monthly Financial Statements submitted to President within 3 months (was 12+
months)
Blockchain E-UCs reduced ghost projects by 72%
10-year budget data uploaded for trend analysis
GB & AJK implementation commenced
Persistent Gaps:
Commitment accounting not fully implemented
Fixed asset registers incomplete
Real-time aggregation hampered by missing interfaces
District-level financial information still not readily available
"AGP-only project" perception limits ministry ownership
Case Analysis Questions
GROUP A: TECHNICAL IMPLEMENTATION CHALLENGES
(For Systems & Accounting Specialists)
The Interface Prioritization Exercise:
You are the lead technical consultant for CGA. The budget allows for completing only
TWO of the five critical missing interfaces (SBP, NBP, Planning Commission, FBR,
EAD) in the next fiscal year.
Which two would you prioritize and why?
Create a 1-page implementation roadmap for your chosen interfaces, including estimated
timelines, resource requirements, and success metrics.
The Data Migration Dilemma:
During NAM implementation, your team discovers that 40% of legacy fixed asset data is
either missing, contradictory, or exists only in physical registers at district offices. The
Finance Secretary demands complete asset capitalization by year-end to comply with
PFMA 2019.
Design a practical 6-month data remediation plan that balances accuracy with the
compliance deadline.
What level of data quality would you consider "acceptable" for initial capitalization, and
how would you document data gaps for future resolution?
______________________________________
GROUP B: CHANGE MANAGEMENT & CAPACITY BUILDING
(For Training Directors & HR Managers)
The Multi-Generational Training Challenge:
Your training pool includes: (a) Senior officers (25+ years experience) resistant to
change, (b) Mid-career officers familiar with partial systems, (c) New recruits with IT
skills but no accounting experience.
Design a differentiated training curriculum for each group that addresses their specific
barriers to NAM adoption.
Propose one innovative method (beyond traditional workshops) to build cross-
generational knowledge sharing and system ownership.
The "AGP-Only Project" Perception:
Despite years of implementation, line ministries still view NAM as an "AGP/CGA
compliance burden" rather than a management tool.
Develop a 3-month communication campaign targeting Secretaries of key spending
ministries (Health, Education, Public Works) to rebrand NAM as a performance enabler.
Create two concrete examples showing how NAM data could help each Secretary: (i)
defend their budget requests, (ii) improve service delivery in their sector.
________________________________________
GROUP C: POLICY & PROCEDURAL REFORMS
(For Policy Makers & Legal Advisors)
The Legal Reconciliation Task:
You chair a committee to harmonize General Financial Rules (cash-based) with PFMA
2019 (accrual-based). Key conflict: GFR requires monthly Form 10 cash reports, while
PFMA requires quarterly accrual-based financial statements.
Draft specific amendments to the GFR that maintain parliamentary control while
enabling accrual accounting.
Propose a transitional mechanism for the next 3 years where both systems run parallel
without duplicating work for field offices.
The Appropriation-Accrual Bridge:
The case highlights how accrual accounting makes ministries "look worse" (e.g.,
depreciation on roads). PAC members are concerned this will reduce infrastructure
spending.
Design a new "Performance Appropriation Account" format that shows both: (a) Cash
utilization vs. budget (traditional), and (b) Asset creation/maintenance vs. long-term plan
(accrual-based).
How would you explain to a Parliamentary committee that higher "costs" under accrual
accounting actually represent better asset management?
________________________________________
GROUP E: STRATEGIC LEADERSHIP
(For Senior Management & Decision Makers)
The "Big Bet" Investment Decision:
The Finance Minister must decide whether to approve Rs. 5 billion for: (a) Completing
all NAM interfaces, OR (b) Nationwide capacity building, OR (c) Legacy system cleanup
and data digitization.
As CGA, prepare a 1-page briefing note recommending ONE option with cost-benefit
analysis.
What political and operational trade-offs would you highlight in your presentation to the
Minister?
The Federal-Provincial Coordination Challenge:
Punjab is advanced in NAM implementation, Sindh is lagging, while GB/AJK are just
starting. This threatens consolidated national reporting.
Propose a "Differentiated Yet Integrated" framework that allows provinces to move at
their own pace while ensuring standardized data for federal consolidation.
What incentives (carrots) and requirements (sticks) would you include to ensure
minimum standards are met?