Implementation of IPSAS Strategy 2 The objective of the Grant is to establish of an adequate institutional framework for adoption of the accrual basis International Public Sector Accounting Standards (IPSAS) in Armenia. There are no any accounting standards currently followed in the public sector in Armenia. Specifically the Grant will support the Ministry of Finance in (1) large scale piloting of the Armenian public sector accounting standards and manual based on IPSAS (developed under first phase of the grant), with time-bound implementation plan, and (2) designing of the automated accounting system to support the accounting manual and chart of accounts developed. This is a follow up IDF grant request, as the IDF committee advised to break the initial IDF grant proposal into two phases and to reapply for subsequent funding once the first phase is nearing successful completion. The reason behind splitting the initial proposal was relatively short period covered by an IDF. As the activities split under the first phase have been successfully completed the grant proposal for the second phase is being submitted. The first phase IDF grant supported to deliver the following: "   Public Sector Accounting Standards based on IPSAS; "   Accounting Manual and Chart of Accounts for Public Sector Entities; "   Accounting Policy model for Public Sector Entities; "   Accounting Reform Implementation Strategy; "   Instructions for transition from the old Chart of Accounts Applicable for the Public Sector Entities to the new Chart of Accounts; "   Draft Law on Public Sector Accounting. The grant will be build up on the ongoing reform on implementation of cash basis IPSAS in the public sector, with the purpose of eventual transition to the accrual basis IPSAS, which will provide understandable, reliable and, most importantly, comparable Government's financial statements that will be prepared based on the recognized international standards. The grant will support advancing the reforms in accounting via large scale piloting of the accounting standards, accounting policy and manual, and other documents developed during the first phase under initial IDF grant. The grant will also fund design/customization of the accounting software to support the accounting manual and chart of accounts developed, to be used during piloting and be available for wider implementation after the IDF grant completion. The grant will help to proceed with implementation of the initial steps of the long-term strategy to bring the accounting and financial reporting framework into compliance with international standards, which would drive a much wider reform in the public sector and contribute to the improved accountability, transparency and efficiency in the use of public funds. The grant is going to address the key weaknesses identified in recent PEFA assessment (October 2008) particularly indicators PI 23, 24 and 25. In addition, the CPS for 2009-2012 has identified strengthened accountability, transparency and efficiency in the use of public funds as one of the outcomes under of Strategic Objective 2: Strengthening Competitiveness for Post-Crisis Growth. The grant will help to pilot the accounting standards and manual in practice, which would be considered for rolling out under the new Public Financial Management and Corporate Accounting and Auditing project. The objective of the Grant is to prepare the framework for adoption of the accrual basis International Public Sector Accounting Standards (IPSAS) in Armenia.