Pakistan is a federal country. Distribution of resources has a profound impact on income, development, backwardness, and poverty. The paper briefly discusses the federation, its needs and importance in general. The National Finance Commission (NFC) award is considered as a step towards federalism. In the historical perspective of the NFC awards, the salient features of the recent 7th NFC award, the weightings, and the criteria adopted in the national as well as provincial Finance Commission award s are described. Major issues faced by the Provincial as well as Federal governments regarding the award and its implementation are discussed in detail. Good practice lessons to be derived from it are also pointed out. The conclusion includes recommendations for a strong federation and effective use of the NFC award.