KP Sets Historic Benchmark with IPSAS-Compliant Local Council Accounting Rules

PESHAWAR: The Khyber Pakhtunkhwa government has finalized the Local Council Board Accounting and Financial Reporting Rules, 2026, marking a major reform aimed at strengthening financial discipline, transparency and modern public financial management at the local-government level.

The rules have been prepared by the Reforms and Monitoring Unit of the Local Government, Elections & Rural Development Department (LGE&RDD). The framework is currently undergoing legal vetting by the Law Department and is expected to be submitted to the Provincial Cabinet in the first week of September.

According to the government handout, the initiative represents Pakistan's first municipal accounting framework aligned with International Public Sector Accounting Standards (IPSAS). It will shift local bodies away from traditional single-entry and manual cash-based systems toward standardized accrual-based accounting.

Rules to Cover 134 TMAs

The new framework will initially apply to 134 Tehsil Municipal Administrations (TMAs), the Local Governance School and the Local Council Board.

Following Cabinet approval, the Local Government Department plans to gradually extend the standardized accounting system to other local-government formations, including Village and Neighbourhood Councils, Assistant Directorate Local Government offices, Urban Area Development Authorities, the Peshawar Development Authority and other relevant institutions.

Key Financial Reforms

The 2026 rules will introduce several major measures, including:

• Accrual-based accounting: Local councils will maintain standardized records of assets and liabilities and prepare complete institutional balance sheets.
• Daily bank reconciliation: Automated daily reconciliation with commercial bank accounts will be required to reduce discrepancies and unauthorized transactions.
• Stronger internal controls: Structured internal-control mechanisms and independent internal audit functions will be introduced to reduce financial risks.
• Public disclosure: Monthly and annual financial statements, balance sheets and budget-execution reports will be published online for public and civil-society scrutiny.

A senior official of the Local Government Department said genuine municipal autonomy requires strong financial integrity and accountability. The official said the new system would help ensure that public funds are properly recorded, protected from leakages and directed toward civic development.

The department said the new accounting rules will also provide a foundation for its wider digital transformation program. The Computerized Financial Management Information System (CFMIS) has already been launched, while further details about its province-wide rollout are expected to be announced in the coming weeks.