The Government of Bihar (GOB) hasadopted various reform measures to modernize fiscal andfinancial management such as passing of the FiscalResponsibility and Budget Management Act, adoption ofGovernment of India's general financial rules anddecentralization of financial powers to respectivedepartments with a view to increasing the pace ofexpenditure and implementation of plan schemes. However, fordecentralization to be effective the supporting publicfinancial management systems need to be also modernized.Accordingly, the Government had entrusted a project'modernization of budget and financial rules andprocedures' to Centre for Good Governance (CGG),Hyderabad. The project requires CGG to comprehensivelyrevise the treasury code, financial rules and budget manual,and to provide a roadmap to modernize and strengtheninternal audit function in the government. CGG has firstlystudied the existing organization structure of the internalaudit function in GOB, the skills and capacity of theinternal audit staff, the working conditions in the mainoffice and divisional offices, the perception of othersabout internal audit and so on. They have visited the mainoffice in Patna and the divisional office in Gaya. Afteridentifying the strengths and weaknesses of the system, aroad map has been prepared for strengthening the internalaudit in the government.