PREFACE The internship program grows the student’s potential and energetic activity to done the work in better
manner. Student can learn more through internship program to enhance their working abilities to compete the market, to assume responsibilities, cooperation, team work and hallmarks of modern management. I got a chance to join the “District Accounts Office” to perform my internship. During the internship program I learned about its functions, working and objectives and especially dealing with subscriber which are useful tools for an organizational structure. However, during my internship I was to grasp the process, procedures and the basic functions of the entire office working for the Pakistan professionals to raise the organizational stricture.
ACKNOWLEDGEMENTS First of all I want to express all my humble to Allah Ta’la that these are only prayers and heeds of my Peer Sahb that I reached to this stage and completed my internship report. Secondly, I am grateful to my honorable teacher Mr. Saeed Ahmed for providing me the opportunity of doing internship in District Accounts Office, Bhakkar. I am also thankful to all the staff of DAO Bhakkar especially both the Assistant Accounts Officers namely Mr. Mehboob Alam and Mr. Choudhry Sagheer Ahmed for their cooperation, valuable guidance and support throughout the internship period. Moreover all other officers and staff members of office deserve thankfulness for their cooperation and guidance during the course of my internship.
TABLE OF CONTENTS 1 1.1 1.2 1.3 1.4 1.5 2 2.1 2.2 2.3 2.4 2.5 3 4 5 5.1 5.2 5.3 6 6.1 6.2 7 8 8.1 8.2 8.3 8.4 9 10 10.2 10.4 Introduction Government Accounting District Accounts Office (Bhakkar) Objectives of Accounts Office Features of Accounting System of Pakistan Organizational Chart Functions of Accounts Office Government Provident Fund Section Contributory Provident Fund Index and Closed Register Contingent Expenditures Stock Register Gad Section Pension Section Compilation of Accounts Section Personal Deposit Account Appropriation Account Compilation of Account Pre Audit Section 4 P’s Circulation of Bill Counter Section Computer Section PIFRA (Project Improvement for Financial Reporting & Auditing) PIFRA In Sindh SAP (System Applicants Product) Automation Solution Treasury Section Financial Administration in Pakistan Sources of Public Finance Why Public Finance Needed?
Page No 6 8 8 8 11 13 16 16 18 18 18 21 23 24 25 25 26 26 27 27 27 28 29 29 34 37 38 40 41 43 44
11 11.1 11.2 11.3 12
Role of Pakistan Audit & Accounts Department Pakistan Audit & Accounts Department Reasons for Keeping Huge Record Purpose of Audit & Accounts Department Functions & Powers of Auditor General of Pakistan
47 47 48 51 53
DEDICATION I dedicate all my efforts to my venerable & Honorable Sheikh E Tareqat Ustad-Ul-Hufaaz Faqeer Ahmed Yar Sarsi Damat Brakat uhu mul Alia
Chapter 1 DISTRICT ACCOUNTS OFFICE Introduction Prior to 1970, only Audit and Accounts office which is called Accountant General Office was functioning at provincial level. The claim pertaining to office, civil employees serving in district were sent to that office which take much time in disposal only treasury function was performed in each district. Only monthly pay of civil employees was admitted by the treasury in a district. That pay was further post audited in AG’s office. Payment of Government Provident Fund final settlement, pension payment, loan & advances and payment of Gazetted government servants were made and when payment authorities were issued by the AG’s office and received in treasury. The civil employees were facing hardship and they had to pay many visits in AG’s office at provincial headquarter to get their claim stalled. They government of Pakistan felt these hardships of the civil employees of district as well as work load in AG’s office and accordingly the government introduced the District Accounts Office scheme in each district in Pakistan to save the employees from hardships in settlement of their financial problems as well as to streamline the Accounts of Provincial government. That was the reason; the government introduced the district accounts office scheme under a technical term “E-Modernization and Mechanization of system of Accounts in Pakistan.” In June, 1969 some district accounts offices were established in Baluchistan and NWFP and thereafter on success of these offices, more accounts offices were opened in all the provinces of Pakistan. In 1970, the scheme was established fully at all district levels. Since these offices were meant for the early solution of financial problem of the civil servant of provincial governments therefore the expenditure on this scheme is being borne by the
each provincial government of Pakistan. However, the expenditure on this account at district level is being borne by the federal government. The treasuries which were functioning prior to the introduction of this scheme in each district were merged with the district accounts offices and treasury officers were predestinated as district accounts officers and ministerial staffs of former treasuries were also merged in district accounts offices. Accordingly the post of district accounts officer and all posts of ministerial staff, formerly called treasury staff are still under the administrative control of finance department of provincial government appointment, promotion and transfer posting of such staff is done by the provincial finance department. The ministerial staff of the provincial government is doing former treasury function i.e. Compilation of Accounts under the supervision of the district officer. Posting and transfer of district accounts officer is administrated by the provincial finance department 50% through treasury staff on qualifying the S.A.S examination, seniority and Fitness basis. While 50% posts are filled through the Accountant general’s qualified staff on his recommendation. In some districts, where work load is greater, an additional district accounts officer is posted by the accountant general of the respective province for the assistance of the district accounts officer. This post along with the posts of junior Auditors, senior auditors and Assistant accounts officer are administrated by the accountant general of province. In short the district and agency accounts officer has its two wings i.e. one for the accounts and other for the editorial function. The former is funded by the finance department and the other through audit and accounts funds. The federal exchequer is for audit staff and provincial exchequer for the accounts staff.
Government Accounting: Government of every country has to perform variety of functions. It has to defend the country from foreign aggression, maintain Law and Order in the country provide educational and health facilities to the people and also to finance several development projects. All these objectives require heavy expenditure. Those are met by imposing taxes on the people of country. It is the duty of executive government to maintain a record of all its income and expenditure. This recording of government receipts and expenditures is called government accounting. These are done by Accounts Offices which are located at all the four provinces of Pakistan called District Accounts Offices. District Accounts Office (Bhakkar) It is situated near district courts Bhakkar city. Where did my Internship. It is the place where accounts of government employees, government receipts and payments or expenditures are maintained. District Accounts offices from all over the country collect and compile the data about government employees, government receipts and payments. These offices are controlled by the District Accounts Officer which is the head of these offices. Assistant Accounts officer (AAO) assists him. Assistant Accounts Officer is assisted by the Senior Auditors and Junior Auditors. District accounts offices makes closings of accounts on yearly, half yearly and on monthly basis. Financial year starts from 30 June and ends on 1 July. I saw the yearly closings during my Internship. This was very busy period for both accounts office staff and the other government employees of various government departments who are concerned with it. OBJECTIVES OF ACCOUNTS OFFICE Following are the main objectives of district accounts offices. Those are discussed below. (I) Provide Basic Data for Budgeting A budget is a proposed work programmed, with estimates of the funds 8
necessary to execute it. A work programmed is a plan. The process of preparing estimates and organizing them into a coherent agency budget necessarily involves planning. The budget may, therefore, be said to represent a plan or a considerable number of plans in different areas of public functions. The treasury officers/district accounts officers and departmental officers render accounts of their transactions monthly to their respective accounts offices. The accounts relating to Defense, Railways and other departmentalized accounts are compiled by the departments themselves and submitted monthly to the AccountantGeneral Pakistan Revenues for amalgamation in the monthly Civil Account of the Federal Government. From these monthly accounts the annual accounts, i.e. the Finance and Appropriation Accounts of the Federal and Provincial Governments are prepared. The Appropriation Account of Defense, Railways & other departmentalized accounts are prepared by the concerned departments/ministries and submitted to the Auditor-General for certification and onward submission to the Government. The annual accounts of the Federal and Provincial Governments are consolidated in the Combined Finance & Revenue Accounts (i.e., General Financial Statement). This is prepared from the audited Finance Accounts of the Federal and Provincial Governments. (ii) Provide Basic Data for Policy Making As DAO’s helps in preparing budget for financial year they also provide help in policy making of the executive government. On basis of provided facts and figures the government decides what is needed to government organizations or departments and what areas are left for preference and what steps should be taken to improve those areas in the next budget. Due to the budget is a plan itself. Although plan is another operation but budget gives base to plan. For example, if a government gives 9 Billion to education sector or department and the next year the facts and figures provided, states that some areas of technical education was remained undeveloped therefore more financial support would be required to fulfill such
requirement then it would be consulted and government would decide to remove such deficiency in the fore coming budget.
Establishment of Government Financial Propriety Government wants that DAO’s should use government property i.e. pubic finance as they are the owner of it. This means as they try to use their money with protection and proper management and not to misuse of their money. Moreover they want to invest their money in those areas where from they can get more benefits rather investing in wrong areas. Such qualities government expects from DAO’s. Public finance is that which is given to DAO's in order to fulfill the individual requirement other than eating, drinking and clothing, etc. Such as protection of life, construction of roads, railways, bridges and irrigation canals and establishment of hospitals, universities and ordinance factories, etc. These are those requirements of individuals which cannot be bear by the individuals themselves, therefore the state done it by providing Public Finance by means of raising revenues and then incurring expenditure to district Accounts offices. (iv) Treasury functions Governments need to ensure both efficient implementation of their budgets and good management of their financial resources. Spending agencies must be provided with the funds needed to implement the budget in a timely manner, and the cost of government borrowing must be minimized. Sound management of financial Assets and Liabilities are also required. Financial management within the government includes various activities: formulation of fiscal policy; budget preparation; budget execution; management of financial operations; accounting; and auditing and evaluation. Within this broad financial management function, the Treasury function is to achieve the set of specific objectives mentioned above. It covers the following activities: 1. Cash management; 2. Management of government bank accounts; 3. Financial planning and forecasting of cash flows;
4. Public debt management; 5. Administration of foreign grants and counterpart funds from international aid; 6. Financial assets management Accountant General is the head of a District Accounts Office, who keep the accounts of the Federal Government and when used in relation to treasury, the head of DAO to whom the accounts of treasury are rendered. FEATURES OF ACCOUNTING SYSTEM OF PAKISTAN: Accounting system of Pakistan has several features discussed as under. (I) Cash Book: Accounting system of Pakistan is based on actual receipts and payments of cash and not on the basis of accruals of right and obligations. This book is maintained at District Accounts Office. (II) Single Entry System: Accounting transactions are recorded on single entry system. Now Government developing its system to New Accounting Model and doing double entry system with help of computer software SAP. Now accounting transactions are recording on double entry system. (III) Basic Accounting Unit: DAO’s of civil Government are the basic accounting units in Pakistan. These offices perform the dual function of maintaining the accounts and auditing. Therefore DAO’s are consisting of Audit staff under the AGP (Auditor General of Pakistan) and Account staff under the Control of Finance Department of provincial Government. (IV) Closing the Accounts: Formally accounts of the Government of Pakistan are closed annually or at the end of each financial year. But DAO’s closed its accounts on half yearly and monthly basis which helps the DAO’s to constitute annually closing. Government financial year starts from 1st July and ends on 30th June 11
every year. (V) Compilation and Consolidation of Accounts: After the basic accounting units have put together the figures of Expenditures and receipts etc. In different heads of accounts these are sent to the accounts and audit department for compilation. After compilation of accounts these are sent to executive government. (VI) Centralization of Accounts: The government accounts of Pakistan are centralized in the sense that while the receipts are made by the administrative departments. The need to remove this anomaly has been felt and duty of maintaining the initial and intermediate accounts is being entrusted to the department concerned. So far this process has been completed in respect of Defense, Pwd, Foreign affairs, Railways, Forest, National savings, Post office, Telephones and Telegraphs etc. Same process prevails in other departments and is under review and study. (VII) New Accounting Model NAM has been adopted as the accounting model for Pakistan. Recording of commitments, fixed assets and certain Assets and Liabilities are the aspects and features of NAM. (I) Commitments Recording of commitments did not have an immediate impact on the cash position but do have effect on the budget availability. (ii) Fixed Assets NAM introduces recording of Fixed Assets which would help in effective maintenance and monitoring. The availability of a list of Fixed Assets and their value would greatly help in assigning responsibility for the care and maintenance of accounts. (iii) Certain Assets & Liabilities The recording of certain Assets and Liabilities as part of modified cash basis of accounting will help in providing useful information for decision making and for disclosure in the financial statements. The difference 12
should be noted that using the cash basis of accounting or previous system of accounting helps in controlling the cash against budget amounts and allows only the statement of receipts & payments to be generated. The Modified Cash Basis of accounting or NAM on the other hand helps in controlling not only cash but also commitments against budget allowing the production of statement of Assets and Liabilities and a cash flow statement.
ORGANIZATIONAL CHART Provincial Finance Secretary Additional Finance Secretary Chief Inspector Treasury Assistant Chief Inspector Treasury Director General DAO's Additional Accountant General Deputy Auditor General Assistant Auditor General District Accounts Officer Assistant Treasury Officer Assistant Accountant Sub Accountant Assistant Accounts Officer Senior Auditors Junior Auditors 13 Auditor General of Pakistan Comptroller General of Accounts Accountant General of (Prov)
Overview of Administrative Arrangements: This section provides an overview of how the Government of Pakistan is organized administratively to record, compile and reporting financial information. 1. Auditor General: The Auditor General’s role and powers are established in the constitution of Pakistan 1973 (Articles 168 to 171) and defined further in Pakistan (Audit and Accounts) Order 1973. While retaining overall responsibility for the accounts of the Federation and Provinces, this responsibility is delegated to the Comptroller or controller-General, in order to maintain independence between the audit function and the accounting function. 2. Controller-General or Comptroller-General: The Controller-General is responsible for matters of accounting policy and procedure in relation to the accounts of the Federation and Provinces, as delegated by the Auditor-General. The Controller-General is responsible for the overall operations of the accounting offices within Pakistan Audit department and for the production of timely financial reports of the Government and its accounting entities. ControllerGeneral is now called Comptroller-General due to the computerized accounting system. 3. Accountant Generals: The Accountant Generals are established in each Province and the Federal government, and each report to the Controller-General. These officers are responsible for the overall operations of accounting offices within their jurisdiction (e.g. a Province), and deal with matters of accounting policy and procedure in those areas. In case of Federal Government the AGPR (Accountant General Pakistan Revenues) is located in Islamabad with Sub-Office in each of the Provincial capitals and other designated areas. All AGPR Sub-Offices (Now referred to as Deputy General Pakistan Revenues), report monthly accounting information, in respect of Federal transactions to AGPR Islamabad. As well as performing a consolidation
function, each AG Office and the AGPR have their own accounting offices for processing accounting transactions arising within the locality of their office. 4. District Accounts Officer: Each Province is further divided into districts. Each district contains its own District Accounts Office. The DAO’s are responsible for processing all accounting transactions from the various departments in that district. The DAO’s maintains records of payment and receipts for Federal and Provincial transactions (In separate ledgers) and submit consolidated monthly accounts to the respective AGPR sub-office or AG office. In Bhakkar DAO’s branch Mr. Tasawur Ali is District Accounts Officer. 5. Assistant Accounts Officer: Accounts officer works under the District Accounts Officer. In Bhakkar DAO branch Mr. Choudhry Sagheer Ahmed is Assistant Accounts Officer. Senior and Junior auditors work under his command. Or he deals with them. Assistant Accounts Officer and Assistant Treasury Officer both are the subordinates of District Accounts Officer. AAO is the federal employer and his head is the Auditor General. Where as Assistant Treasury Officer is the Provincial Government employer. His head is Accountant General of Province. There are five Accountant Generals in Pakistan. These all are responsible to transfer complete reports to Auditor General of Pakistan. And Auditor General is answerable and responsible to President of Pakistan. He also deals with trainees. For instance, NIP trainees and as I went there for my 6 to 8 weeks MBA internship program.
FUNCTIONS OF ACCOUNTS OFFICE The district accounts offices in Pakistan are mini Accountant General’s Offices in each district. These offices perform same function at district level as performs by the Accountant General’s Office at provincial headquarter. The claims of G.P funds, pay and allowances, loans, advances, pension and refund of revenue are pre-audited for payment to civil employees posted at district. The account of federal/provincial government are compiled at district level and monthly account after consolidation is submitted to the accountant general’s office at provincial headquarter for merge in provincial account. Various functions of accounts office are categorized and divided or converted into different sections due to huge amount of work. These sections are discussed chapter wise one by one below. Government Provident Fund Section The district accounts officer is responsible to maintain Government Provident Fund accounts of civil employees of his district like a banker. G.P Fund is a compulsory saving scheme for the benefit of civil employees. A monthly deduction at fixed rate, pay scale wise is made on this account form on the basis of salaries of employees. These monthly deductions are maintained in the individual ledger account in district account office. The total accumulation along with interest accrued thereon is paid to employee on his retirement from service. G.P Fund Advance During the service an employee ca take advance from his G.P Fund account for some immediate reason i.e. on prolonged illnesses; repair of house and for other obligatory expenses. These advances are refundable by the civil employee and accounted for in his ledger account. A civil employee can take three times 80% non refundable advances during
his entire service on reaching the age of 45years, 50 years and 55 years. These advances are treated part of final payment of his G.P Fund account. The district accounts officer is responsible to maintain accurate accounts in ledger account of subscriber. Deductions made from pay bills are regularly posted in ledger account by the concerned auditor posted in G.P Fund section under the supervision of assistant account officer. A Subscriber is a person who desires an advance out of his G.P Fund. Accounts officer, the head of accounts office is a person who sanctions such advancer in his favor if admissible to him. A bill on proper form is prepared by the department. The bill along with sanction letter is deposed at pre audit counter of district accounts office. The counter section issues a token to the department in like of claim. And sends claim in G.P Fund section. This sanction passes bill in ledger account of the subscriber and record a payment order on it. The D.A.O signs this payment order. D.A.O and special seal is embossed know. This passed bill is sent to the counter section and hater record payment order No on it as well as in advice sheet. It is then delivered to department and token is received back. G.P Fund Balance Sheet The district accounts officer is required to issue a G.P Fund balance sheet in each year after closing of yearly account showing G.P Fund balance up to 30th June each year and interest earned by the subscriber. This balance sheet is for the satisfaction of a subscriber. G.P Fund Final payment On retirement of a subscriber his G.P Fund final payment case is prepared by the department and sent to the district accounts office for final settlement of his account. The district accounts officer after the rough verification of his account issues a G.P Fund final payment authority in his favor. On the basis of that authority the
department sends claim and it is passed by the recording pay order as per procedure mentioned above. C.P (Contributory Provident) Fund Now a day’s contract employment system is applied in Pakistan. So Contributory Provident (C.P) Fund is deducted from the pays of employees. There is no pension for the contract employees. In budget announcement 2008-09 the government did permanent all the contract employees but there is no a correct decision about their CPF/GPF deduction because GPF deduction is compulsory on permanent employees. CPF is started in 1935 in NWFP in 1970. Index and closed Register Every employ have its own GP Fund number. GP Fund start from Index register in which the name of employee, father name, CNIC No. Job code and department is mentioned. In GP Fund nomination is necessary in case of death of employee. The nominator can draw the GP Fund after the death of employee. When employee goes on retirement his account is closed in closed register. CONTINGENT EXPENDITURES The term contingent expenditure or contingent charges mean the amount spent for management of an office or an accounts office. E.g. the payments of office rent, purchase of consumable and permanent stores, payment of expenses for heating, lighting, water, repair etc. The contingent charges may be divided into following kinds. i) Contract Contingent Charges These are the expenditures for which a lump sum amount is placed annually at the disposal of the drawing officer. The drawing officer can utilize this amount for the special purpose without any prior approval of the higher authorities. ii) Self Regulated Contingencies These include the contingent charges as may be regulated by scale
limits and drawn by the competent authority. iii) Special Contingencies These include such contingent charges (recurring or non-recurring) which can not be incurred without the prior approval of the competent authority. iv) Fully Vouched Contingencies It comprises of the contingencies requires no special sanction or countersignature of the higher authorities but may be incurred by the head of office. RULES REGARDING THE INCURRING THE CONTINGENT EXPENSES The drawing and distribution officer should follow the following rules while incurring the contingent expenditures. 1. He should exercise such vigilance in respect of contingent charges as a man of ordinary prudence would do in his own case, while spending money. 2. 3. The drawing Officer must see that the rules governing to a particular type of contingent expenditure are fulfilled. He should draw amounts from the treasury, which is required for immediate disbursements or has already been paid from the permanent advance. 4. 5. The drawing officer must see that the expenditures are necessary for efficient running of the office. The calculation of the vouchers and bill should be checked carefully.
PROCEDURE TO INCUR THE CONTINGENT EXPENDITURES Following procedure is adopted for incurring the contingent expenditures. 1. 2. The request for purchase of any article of expenditure is initiated by the store In charge. ON receipt of the request the drawing officer/head of office examine the budget allocation. If the funds are available to meet the expenditures 19
allows incurring such expenditures. Sometimes, the sanction of higher competent authority is obtained. This is done when the expenditures to be incurred are of the heavy amounts. 3. A committee comprising of senior officials of the office is constituted to look after the procedure of incurring the contingent expenditures and assist the head of office for these purposes. 4. Quotations and tenders are invited where necessary. Quotations are invited if the amount is more than Rs.10, 000. Tender in the press are invited for Rs. 100,000 and above. 5. On the receipts of tenders/quotations, these are opened by the head of office, in the presence of purchasing committee. All the members of the committee are to analyses the different offers. The lowest offer is to be accepted. However, if the head of office think it justified, he can reject all the offers and call fresh tenders/quotations. 6. A comparative statement is prepared and signed by all the members of committee. Then the orders for supply of articles are placed to the supplier so selected. 7. The supplier issues, bill or invoice to the office. This bill is entered and a contingent bill is prepared in the prescribed form for withdrawal of amount from the treasury. Sometimes the amount (if available) is paid out of permanent advance, and article is acquired. 8. When bill is passed by the DAO, the amount is drawn from the bank and payment is made to supplier. The article so acquired is entered into the stock register (if applicable), if the amount had been paid out of permanent advance, it is adjusted in the Contingent Charges Register and cash book. 9. The amount is entered in the cash book, when the amount is drawn and payment is made.
STOCK REGISTER The articles purchased for the purpose of use in government accounts offices
are called as Stocks. Proper record of such stocks purchased and disposed is essential for effective control of such articles. For this purpose stock registers are maintained in which all the purchases and disposal of articles are entered. The stocks purchased may be of the following two types. i) ii) i) Permanent Articles Consumable Articles Permanent Articles It means the articles whose life is long enough to be used for number of years. These articles can be shown as used or consumed. But when they become unserviceable they are written off or disposed off. For this purpose a report is prepared and sent to the controlling officer. The controlling officer after inspection can order for writing off these articles. Sometimes these articles are sold off at the auction. It is called disposal of these articles. All type of machinery and plant, equipments, furniture & fixes, electric appliances etc. REGISTER FOR PERMANENT ARTICLES A separate register is maintained by each department for the record of permanent articles. This register is called as Stock Register for permanent articles. The pages for this register are consecutively numbered and each page is used for writing one article. A certificate to the total pages of the register is given at the beginning. An index is also given in this register at the beginning to make the tracing of particular page easy. Method of Filling Stock Register 1. Year of Account The calendar year in which the transaction for the purchase or sale of article Balance Brought Forward The number of articles available before the transaction takes place is recorded Date of Purchase This means the date on which the article is purchased from the suppliers and
takes place is recorded under this column. 2.
under this column. 3.
received in the office. 21
Bill in Which Charges It refers to the No. and date of the contingent bill in which the cost of article Nos. of Articles Total numbers of articles purchased is written under column 5. Price This means the total amount of articles purchased. for Which Use Under this column, the purpose for which the article is to be used or being used is written. Total The total numbers of articles are recorded in this column. The total is obtained by adding the balance and purchased. No. of Articles Disposed This means how many articles in number disposed i.e. 1, 2 or 3 etc Why & How Disposed? This means the reason for disposal of articles along with the means of disposal. Sale Price The amount realized by the sale of articles (if any) is written in this column. When Credited to Government In this column, the date on which the amount realized is deposited in treasury/bank is written. Original Price This means the price which was paid when the asset was acquired. Balance Carried Over The numbers of articles in this accounts office after the transaction is written in this column. It is equal to total articles minus articles disposed. Initial of Govt Servant In this column the controlling officer initials when he verifies the entries. Remarks An explanatory note is recorded in this column.
was drawn from the treasury. 5. 6. 7.
9. 10. 11. 12.
Chapter 3 GAD SECTION Payment of salaries, TA (traveling Allowance), Medical charges etc pertaining to the gazette officer posted in district are pre-audited in this section. The claims of gazette officers are presented at pre audited by the concerned auditors and after recording payment orders thereon these bills are sent to the district accounts officer for signing of pay order and after embossing special seal thereon these are sent back to the counter section for delivery to the claimants. All personal record relating to a gazette officer is available and maintained in this section.
PENSION SECTION Pension claim of a retired official is prepared by his department on prescribed forms and duty sanction is forwarded to pension section of district accounts officer. The auditor in this section the auditor on receipt of pension papers applies checks, length of services, no demand certificates, of pay correctness drawn by him from time to time and entitlement of pension are verified minutely. After due check, pension payment order is prepared and put up to the district accounts officer for final signature. Pension payment order in favor of pensioner is finally issued to the bank for payment. First payment to the pensioner is always made on due verification and identifications by the district accounts officer. In order to facilitate pensioners, they are authorized to draw pension from any bank of their choice.
COMPILATION OF ACCOUNTS SECTION All vouchers on which payment is make to government department both federal and provincial and all challan on which money is received on behalf of the government by the bank are forwarded by the banks to the district accounts office daily. Daily scrolls (debit & Credit) of the state bank are compiled in this section in the proper accounts. Receipts and Payments On receipt of these payments and receipts vouchers, the compilation section of accounts office posts them in Daily Cash Book and at close of the month consolidate all the payment and receipt department wise. Thereafter a monthly consolidated account is prepared and sent to the accountant general office of province for further consolidation of accounts at provincial level. The figures of monthly account both for Receipts and Payments are intimated to finance department/auditor general of Pakistan. Closing of the Year At the close of each financial year, the yearly account is prepared by the accountant general reflecting the figures of receipts and payments of the whole province. Personal Deposit Account Besides, the preparation of monthly account, the compilation section of DAO also performs the duties of maintenance of personal deposit, accounts of courts and payment against those personal accounts. Personal ledger accounts of some departments are also kept in compilation section. The payment against these personal ledger accounts are made on tendering cheques by the departments. Record of Advances Advances of house building, Motor car, Motorcycle and cycle made to
government servants are accounted for in compilation section. Broad sheets showing principle amount of advances and recovery against them is watched and its monthly as well as yearly account is compiled in this section. The accounts for pension and commutation paid to Ex Civil servants are also maintained in this section. Appropriation Account At the end of each financial year the compilation section prepares the Appropriation Account signed by the District Nazim is send to the provincial government and then to the finance department. The format of appropriation account is as under. Department Head Name Original Grant Final Grant Expenditure Saving
The finance department analyzes the appropriation account and prepares the next budget for every department of the country. Compilation of Account There are major three types of accounts in compilation section that are daily compiled or adjusted. 1. For the provincial government there is Account 1. 2. For the non food there is Account 2. 3. For the district government there is Account 4. All the transactions are compiled in its proper account.
Chapter 6 PRE AUDIT SECTION This section deals with the audit of personal claims of non gazette civil servants and claims of contingencies of departments. The claim of an office regarding purchases of officer equipment, utilities and commodities are pre audited in this section. All claims after mentioning their nature are submitted to this section by the departments through pre audit counter. 4 P’s The auditor conducts the audit of the bills on four P’s bases. 1. Provision: The auditor checks that there is any budget for the department or not then send a bill. 2. Procedure: The department has adopted a specific procedure or not. 3. Power The auditor checks that the DDO (District Disbursing Officer), that prepared the bill have the authority for certain expenditure or not. 4. Purpose: He checks the purpose of expenditure that for which purpose the fund is utilized. Claims are checked by the auditors posted in this section with reference to the availability of budget, conformity to the rules and sanction accorded by the competent authorities and supporting vouchers. Similarly, claims of non-gazette civil servants on account of pay, T.A, Medical etc. also scrutinized with reference to entitlement of pay scale prescribed for them Circulation of Bill After the claims are admitted, necessary pay orders are recorded thereon and submitted to the district accounts officer for signings the pay orders and embossing special seal. These passed claims are returned to the department through pre audit counter. If the auditor is not satisfied about the information are given in the bill then he did not pass the bill and returns that bill to the concerned department.
Chapter 7 COUNTER SECTION 1. Receipt of Claims All kinds of claims in this section on receipt of a claim that the auditor posted in this section issues a brass token in line of claim. All the receipts of bills in a day is distributed amount relevant sections for pre audit and recording pay orders these bills are received back in counter section. These passed/uncased bills are delivered to persons on return of token issued to them. 2. Daily Sheet A daily advice sheet of payment orders is prepared in this section and sent to bank in support of pay orders recorded on bill. 3. Token Census On the end of every month a Token Census Report is prepared in which issued token and in hand tokens are mentioned. If the tokens are lost then the token issuer is responsible for it.
Chapter 8 COMPUTER SECTION The present age is of scientific age and every being is done through electronic media. The federal & provincial government desire facts and figures immediately. Moreover, the volume of work is greater as compared to the past. It is very difficult to do jobs manually. Therefore to meet the day to day requirements the government has installed Computers in each accounts office to avoid manual labor as well as to have immediate information. In district accounts office all the primary accounts have been feed in computer and benefit is being taken gradually with the operation of these machines and with the passage of time manual work will be totally stopped and every account maintained by the computer. PIFRA (Project Improvement for Financial Reporting & Auditing) The World Bank and developed countries provides financial aid to developing countries. But they were not ready to provide more aid. They said that the system of preparation of accounts and audit is not proper in Pakistan. They said that there is misuse of financial aids and chances of manipulation are high. Now World Bank gave a project named as PIFRA which stands for Project Improvement for Financial Reporting and Auditing. So they prepare software for this purpose. The Govt. of Pakistan took an initiative to address the shortcomings of the financial reporting system and to ensure good governance. The IMF carried out a survey in Government Accounting in early 1990s, followed by a diagnostic study sponsored by the World Bank. As a result, the Project to Improve Financial Reporting and Auditing (PIFRA) was introduced by the Auditor General of Pakistan in 1994.
The main objective of this project is to computerize the whole accounting and auditing system of the country. The idea behind computerizing the whole system is to 29
generate timely, accurate and reliable financial statements; to monitor fiscal deficit; to forecast flow of cash; to manage public debt and to achieve effective financial controls. The accounting system of Pakistan was inherited from the century old accounting system of the Indian govt. The old accounting system lacks timeliness, accuracy and most importantly transparency. Accounts of any organization, large or small, are the most important tool for curbing the corruption by keeping an eye on ins and outs of the money and more importantly they give the overall inner picture of the organization to the stakeholders which helps them take better financial decisions. While talking about the country as an organization the importance of the accounts becomes much more vital. The stakeholders are everyone, be that any foreign aid entity, any govt. department, govt. employees, provincial or district govt., any bank, any foreign govt. etc. You name it and they are there. So the importance of these accounts increases manifolds. Furthermore, the old manual system was like a haunting monster also for a common government employee. There are three main things which a common govt. employee comes to an accounts office for, viz. salary, general provident fund and pension. Our experience shows that in the old system a common man had a series of unlimited problems and hurdles to face in order to get his financial claims. His fever started a week before he had to visit the accounts office for any of the financial claims. But, unfortunately, till the recent past our governments did not pay proper attention to overcome these problems. Due to which the exact and clear picture of the economy of the country is still not visible to virtually anybody and on the other hand common man face enormous difficulties in receiving his financial claims. After the introduction of PIFRA this ultimate goal would be achieved soon. That is why this project was introduced. The main objectives are to achieve timely, accurate and complete accounts with transparency and most importantly to facilitate the common govt. employee regarding their financial claims. But, there is a lot more to be done to achieve this goal.
NEED OF PIFRA 1. The assessment of public sector accounting and auditing is generally meant to help implement a more effective public financial management (PFM) through better quality accounting and public audit Processes in Pakistan and to provide greater stimulus for more cost effective outcomes of government spending. More specific objectives are: (a) to provide the country's accounting and audit authorities and other interested stakeholders with a common, sound knowledge as to where local practices stand in accordance with international standards of financial reporting and auditing; (b) to assess the prevailing variances; (c) to chart paths for improving the accordance with international standards; and (d) to provide a continuing basis for measuring improvements. 2. As part of the general support program in South Asia for assessment and improvement of public sector accounting and auditing, the World Bank, with the cooperation of member governments, is conducting a Review of Public Sector Accounting and Auditing Practices in member countries. In conducting this assessment, a set of diagnostic questionnaires [developed to be consistent with the context of the PFM Performance Measurement Framework used by the Public Expenditure and Financial Accountability (PEFA) Program ], was used to gather substantial insight into country performance with regard to the external auditing and financial statement reporting PFM indicators. Annex A discusses the methodology used for conducting the assessment in this report. 3. The diagnostic questionnaire was used to gather information on national standards and practices for accounting, financial reporting, and auditing in the government budget sector and in the state-owned enterprise (SOE) sector. Conducted in cooperation with country authorities, the diagnostic questionnaires incorporate the principles contained in the public sector accounting and auditing standards promulgated by the International Federation of Accountants (IFAC) and the International Organization of Supreme Audit Institutions (INTOSAI). Annex B summarizes the international accounting and auditing frameworks that were used in
this assessment. The responses to these questionnaires stimulated further discussions among the World Bank team and senior staff in the offices of the Auditor General of Pakistan (AGP) and Controller General of Accounts (CGA). These discussions examined accounts and audit reports and working papers as a means to jointly explore the quality of processes and products. 4. The maintenance system for public accounts in Pakistan is long standing. Since 1997, the World Bank Project for Improvement of Financial Reporting and Auditing (PIFRA) has supported the comprehensive reform efforts by the Government of Pakistan to streamline its accounting and auditing systems and procedures, while developing the institutional and individual capacities for better public financial management. The initial reforms included some separation of audit and accounts activities through promulgation of legislation relating to separate roles for the Auditor General and the Controller General of Accounts. They also included designing modern accounting and auditing processes and devising a comprehensive human resource management plan. The replacement of inefficient manual and outdated accounting processes in the general government sector by faster and updated computerized programs (using the accounting software package SAP R/3) is underway with a program to computerize all district accounting offices by the end of 2007. Annex C includes excerpts from Pakistan auditing and accounting legislation. 5. The second phase of the PIFRA project, PIFRA II, will help the government to build capacity to improve the accuracy, comprehensiveness, reliability, and timeliness of intra-year and year-end government financial reports at federal and provincial levels. The PIFRA II will also initiate the process at district and sub district levels thereby strengthening the financial accountability cycle. The project would therefore directly support the commitment of the Government of Pakistan in improving public financial management, accountability, and transparency, and enhance the capacity of public sector managers to meaningfully use credible financial information for better and informed decision-making. It will facilitate public oversight of the use of public monies, and increase the national and international credibility of the national and provincial governments' financial statements and assurance processes.
6. The reform efforts need to include identification of the relevant international standards of accounting and auditing applicable to the public sector and help achieve compliance with those standards. Adoption of International Public Sector Accounting Standards (IPSAS) for accounting and financial reporting and the IFAC-issued International Standards on Auditing (ISA) in addition to the INTOSAI Auditing Standards are important steps in improving the basis for adequate public financial management.
PIFRA Components FABS (Financial Accounting & Budgeting System Government Auditing Training Change Management (HRM) In order to achieve the targets of PIFRA, New Accounting Model (NAM) was introduced to replace the old accounting practices. This system is mainly bases on the modified cash basis accounting. The bases of the Modified Cash basis accounting are: Double Entry Bookkeeping system Recording of Commitments Fixed Assets Recording The Salient features of NAM are: Integration of Budget & Expenditure Flow Accurate andν Timely Reporting Cash Forecasting International Credibility Assets will be recorded Commitments will be Recorded What PIFRA means to us? National Level Integration of Budget & Expenditure information flow 33
Accuracy and timeliness in Reporting Cash Forecasting International credibility Transparency in accounting system Good governance Elimination of fraudulent activities Individual Level Integration of Salary Network Pension / Commutation Calculation through system Consolidated Personal Information Updated GP Fund Accounts GP Fund calculation through the system
PIFRA in Sindh This project is being carried out in phases throughout the country. There are number of steps in which the project is implemented in the provinces. The first and most important phase is to computerize the accounting offices and then implement various prescribed modules. There are 23 District in Sindh province. PIFRA is being implemented District wise. The implementation was divided in phases. Initially, Two Districts were selected as Pilot Sites viz. Karachi and Hyderabad. After the successful start of the PIFRA on these sites, three more sites were selected as Rollout Sites, namely, Sukkur, Nawabshah & Larkana. The system here was also started with success. In these sites, initially, the salaries of the govt. employees were computerized through HR Module and then other financial claims from various offices were entered into the computerized system through FI Module. Before starting the project at rest of the Replication sites, the system of Workflow (Electronically Generated Cheque System) was implemented at the already productive (online) sites, at the initiative of the Accountant General Sindh.
The target was to make all the sites productive by the end of January 2008, but due to province wide riots after the sudden death of Ms. Benazir Bhutto, some of the District Accounts Offices were severely damaged and the plan was revised. The Accountant General Sindh succeeded to bring one site i.e. Ghotki, online in December 2007 and on site i.e. Thatta in January 2008. According to the revised plan four sites viz. Tando M. Khan, Matiari and Sanghar were made productive in the month of February 2008. Moreover, Shikarpur, Jacobabad, Khairpur, Tando Allah Yar, Mirpurkhas, Umarkot, Mithhi and Badin were inaugurated by the Accountant General Sindh in March 2008. This was one of the greatest achievements of the Accountant General Sindh and PIFRA. Pension and GP Fund Functionalities (HR Module) HR Module covers Salary, Pension and GP Fund Functionalities or govt. employees. It has been mentioned above that when the site (District Accounts Office) is made productive/online the salary of the employees of that district is paid through the system. As for the Pension and GP Fund Modules, they are being currently in the implementation phase. These functionalities are started after a reasonable time is elapsed after the productivity of district, so that the users become more acclimatize with the system. The pension and GPF Functionalities have been successfully started at AG Sindh and District Accounts Office Hyderabad, so far. Currently these functionalities are being extended in DAOs Sukkur, Nawabshah and Larkana. As soon as they are successfully implemented in these sites, the rest of the sites will also be brought on the same system. In these functionalities one of the most important tasks is to update the past information regarding their Provident Fund deduction of the employees who are in the service well before the system was introduced. This updating will ultimately facilitate the employee at the time of their retirement. Budget Availability Check (FI Module) There are numerous functionalities in FI Module. So far, several functionalities have been implemented in AG Sindh and its DAOs, e.g. Civil Accounts, Workflow, etc. But there are still some which are in the implementation phase.
One of the most important functionalities is Budget Availability Check. In fact, this functionality shows the beauty of the system. The idea is that no financial claim is entertained through the system if the budget in the relevant head of account is not available. This prevents any wrong payment, intentionally or unintentionally. Moreover, it also keeps the accounts updated and error-free. This system has been successfully implemented in the AG Sindh office, being the pilot site. The next target is to implement this functionality at all the productive sites. Capacity Building PIFRA revolutionized the accounting system by introducing the New Accounting Model and computerized environment in the govt. accounting offices throughout the country. The most difficult task in the implementation of the project was to change the behavior and mindset of the working staff. The staff was highly expert in the current accounting system and well versed with the relevant regulations. But, most of them were not knowledgeable about the computers and its working. So, implementing such an advanced computerized solution in these offices was a gigantic task and a great challenge. The only way to achieve the desired goal was to impart proper training in the existing staff. PIFRA organized exhaustive training programs throughout the country and trained hundreds of employees of not only the accounting offices but also the DDOs (Drawing and Disbursing Officers) of all the departments. In AG Sindh, initially, PIFRA trained 25 staff members, who then extended their expertise and trained more than 500 officers/officials of the office, and the practice is still going on. Currently, the trainings from PIFRA are also being carried out and a number of officers/officials of various District Accounts Offices are being trained for the successful implementation of the project. Its important to mention that the AG Sindh, himself, took initiative to organize various capacity building programs for not only its own officers/officials but also the Nazims, District Coordination Officers and Executive District Officers (Finance & Planning). The AG office organized a series of workshop regarding District Budgeting 36
and Expenditure Authorization. In the first two phases the EDOs of all the Districts were given comprehensive training regarding preparation of District Govt. Budget. As a result all the District Governments of Sindh prepared their own budget for the first time in FY 2005-06. In the third and final phase a grand workshop was organized in which the Nazims, DCOs and EDOs of all Districts were given the overview of the District Budgeting, the Schedule of Authorized Expenditure and PIFRA. Moreover, two very important workshops were organized by the AG Sindh for the staff of the District Accounts Offices vis-à-vis Monthly Civil Accounts through SAP System. The workshops were arranged at two remotest sites of Sindh i.e. Mithhi and Ghotki. The Accountant General Sindh himself attended the meeting which depicts the seriousness and importance of the events. Furthermore, five District Accounts Officers Conferences have been organized in the last four years. The purpose of these conferences is to discuss the problems and issues regarding the implementation of the project and to find the solutions then and there. Besides, the DAOs, themselves, are also given brief training on diverse activities. As a result, the PIFRA has been so far a successful project in Sindh regarding the FABS component. The World Bank has paid number of visits to the AG Sindh and always applauded the efforts of this office and appreciated the outcomes.
(System Applicants Product) SAP was founded in 1972 in Walldorf, Germany. It stands for Systems,
Applications and Products in Data Processing. Over the years, it has grown and evolved to become the world premier provider of client/server business solutions for which it is so well known today. The SAP R/3 enterprise application suite for open client/server systems has established a new standard for providing business information management solutions. SAP products are considered excellent but not perfect. The main problems with software product are that it can never be perfect. The main advantage of using SAP as your company ERP system is that SAP have a very high level of integration among its 37
individual applications which guarantee consistency of data throughout the system and the company itself. In a standard SAP project system, it is divided into three environments, Development, Quality Assurance and Production The development system is where most of the implementation work takes place. The quality assurance system is where all the final testing is conducted before moving the transports to the production environment. The production system is where all the daily business activities occur. It is also the client that all the end users use to perform their daily job functions. To all company, the production system should only contain transport that has passed all the tests. SAP is table drive customization software. It allows businesses to make rapid changes in their business requirements with a common set of programs. User-exits are provided for business to add in additional source code. Tools such as screen variants are provided to let you set fields attributes whether to hide, display and make them mandatory fields. SAP is using in all accounts offices of Pakistan and fulfills the needs of compilation of accounts and audit. It is especially designed and prepared for the field of accounting and auditing. So in this way the chances of frauds and manipulation in accounts are low.WAPDA, PIA and some other big organizations are also using SAP.
Automation Solution (SAP) In order to keep the uniformity a common automation solution has been chosen for the whole country under this project. The world-renowned state-of-the-art integrated software SAP is the Enterprise Resource Plan (ERP) which is being implemented at all the accounting entities overall the country. There are number of functionalities available in this ERP, which are highly flexible in nature and can be modified according to the requirements of the particular organization. Keeping in view the requirements at the country level, the Govt. of Pakistan has purchased three most essential modules of SAP. They are: Basis (System Administration) Module 38
This module covers the overall system administration. The user authorization, the working of the main servers, the roles of particular users, the connectivity between all the sites in the country and various server-related issues are covered in this module. Financial Module This module covers the financial side of the system. The generation of various financial reports, like monthly, quarterly and annual accounts, etc.; the budget preparation and maintenance and expenditure booking into the system, project & commitment accounting are some of the tasks which are performed using this module. Human Resource (HR) Module In HR module, the update record of the employee, the updated GP Fund account, its calculation and payment; the pension/commutation calculation and payment; and salaries of the govt. employees are operated through the system.
TREASURY SECTION The treasury of district is conducted under the supervision of district accounts officer. A contract staff has been employed in treasury who deals with the public on account of sale of different kinds of stamps and stamp papers. The controller of stamps Karachi supplies stamps papers and other stamps to district accounts officer and then later after sale deposits & sale proceeds with the government account. All kind of valuables which are detected by the police department are also kept in treasury for safe custody in double locks and returned as when demanded. The Treasury function covers the following activities. 1. Cash management; 2. Management of government bank accounts; 3. Financial planning and forecasting of cash flows; 4. Public debt management; 5. Administration of foreign grants and counterpart funds from international aid; 6. Financial assets management
FINANCIAL ADMINISTRATION The Financial administration means the operations designed to make funds available to the officials and to ensure their lawful and efficient use. The principle parties involved are: 1. The executive which needs funds. 2. The legislative bodies which grant funds. 3. The executive officials which controls the expenditure of funds and, 4. The audit and accounts offices which determine the legality and propriety of the use of the funds. In a small organization, the financial management is simple but in big organizations like federal government, provincial governments and autonomous bodies the setup, procedures and problems are complex. The financial management deals with all the money aspects. The earnings, savings, borrowings, spending and investing of monetary funds are parts of this financial management. It also consists of providing and utilizing the money, capital rights, credits and funds of any period which are required in the operation of an organization. Executive The executive is responsible for the formulation of the financial policy of the government; questions of policy may arise at any time in the day to day administration but the questions specifically arise when budget is under preparation. After the budget estimates for a year have been consolidated by the finance division/department. They are placed before the cabinet which has to decide as to what new schemes, proposed by the operating agencies should be admitted, how funds are to be obtained to meet the expenditure, which taxation policy is to be followed and so on.
Parliament According to the democratic principle, no tax can be levied or
collected and no expenditure can be incurred by the government unless it is first consented by the parliament. Therefore, before the government can work on the budget plan, it has to get it passed by the parliament. This is known as enactment of the budget. ADMINISTRATIVE CONTROL The administrative control is exercised by the executive through ministry of finance/finance department. The budget is prepared by various administrative units; it is finally consolidated by ministry of finance/finance department and then presented to parliament. After the budget is passed, the execution thereof is the responsibility of ministry of finance/finance department. It is concerned not only with the supervision of all aspects of the nation’s finances but also with the economic planning. The control of the ministry of finance/finance department is all pervasive characteristics of the public administration. Public Expenditure The public expenditure may be categorized as under. 1 2 3 4 5 6 7 Maintenance and equipment of Armed Forces including police in peace and war. Administration of justice. Maintenance of the ceremonial head of state and diplomatic representative abroad. Maintenance of machinery of civil government including ministries, legislative and civil servants. Public debt charges including payment of principle and interest. Expenditure directly devoted in formation of industry and commerce. Social welfare, health, education, old age pension etc.
Sources of Public Finance
Public revenue has been classified into three broad categories namely: 1. Gratuitous revenue 2. Contractual revenue 3. Compulsory revenue 1. Gratuitous Revenue It consists of gifts, donations and gratuitous made without any direst or indirect demands. They did not carry any obligations for goods and services to be paid in return. Such income is neither very certain not uniform. 2. Contractual Revenue It consists of income derived from public property and industry. The state owns property in the form of land and buildings. All rents received from such sources constitute “Contractual Revenue”. The state may own industries such as Railway, Post, Telegraphs and Irrigation canals etc. The income received from these industries is also contractual revenue. 3. Compulsory Revenue The income under this category is mainly derived by the use of panels and taxing powers of the state. The taxes are the most important source of revenues of state. Fee such as court fee, registration fee and license fees also a source of revenue. Organization of Financial Administration When a structure of administrative vessel has been completed and a well trained crew supplied then we have to supply it a “Motive Power” so as to enable it to move. Such motive power is “Finance” without which not a link of this vessel can move. Our chief concern here is with financial administration i.e. why public finance is needed, how collected, how it is spent, who collected, how it is spent, who collect it, who spent it. First of all, we have to understand that what is public finance and why it is needed.
The term Public Finance comprises of two words. The word “Public” is a
collective noun and means collections of people and as an adjective it implies belonging to people. The word Finance means money. It also signifies “Money Matters” and their “Management” by taking together these terms means “Money Matters pertains to a State”. Public finance is one of those subject which lie in between economic and politics and it signifies the income and expenditure of public authorities and adjustment with one another. The term “Public Authorities” broadly speaking includes federal government, provincial government, autonomous organizations and local bodies. Why Public Finance Needed? One can ask why a state wants the finance. The answer is not very far to seek. As human beings have certain wants for their satisfactions such as eating, drinking and clothing etc. but there are certain wants such as protection of life and property, construction of railways, roads, bridges and irrigation canals, hospitals, universities and ordinance factories etc. which one can’t do in his individual capacity and has to look to the state for doing the needful. So in order to perform this task, the state does require finance and that is done by collecting revenues and then incurring expenditure. The best system of public finance is one that secures the maximum social advantages-greatest good of greatest number from the operation which it conducts. The proper role of government provides a starting point for the analysis of public finance. In theory, private markets will allocate goods and services among individuals efficiently (in the sense that no waste occurs and that individual tastes are matching with the economy's productive abilities). If private markets were able to provide efficient outcomes and if the distribution of income were socially acceptable, then there would be little or no scope for government. In many cases, however, conditions for private market efficiency are violated. For example, if many people can enjoy the same good at the same time (non-rival, non-excludable consumption), then private markets may supply too little of that good. National defense is one example of nonrival consumption, or of a public good. "Market failure" occurs when private markets do not allocate goods or services efficiently. The existence of market failure provides an efficiency-based rationale for collective or governmental provision of goods and services. Externalities, public 44
goods, informational advantages, strong economies of scale, and network effects can cause market failures. Public provision via a government or a voluntary association, however, is subject to other inefficiencies, termed "government failure." Under broad assumptions, government decisions about the efficient scope and level of activities can be efficiently separated from decisions about the design of taxation systems (Diamond-Mir lees separation). In this view, public sector programs should be designed to maximize social benefits minus costs (cost-benefit analysis), and then revenues needed to pay for those expenditures should be raised through a taxation system that creates the fewest efficiency losses caused by distortion of economic activity as possible. In practice, government budgeting is substantially more complicated and often results in inefficient practices. Government can pay for spending by borrowing (borrowing), although borrowing is a method of distributing tax burdens through time rather than a replacement for taxes. A deficit is the difference between government spending and revenues. The accumulation of deficits over time is the total public debt. Deficit finance allows governments to smooth tax burdens over time, and gives governments an important fiscal policy tool. Deficits can also narrow the options of successor governments. Public finance is closely connected to issues of income distribution and social equity. Governments can reallocate income through transfer payments or by designing tax systems that treat high-income and low-income households differently. The "Public Choice" approach to public finance seeks to explain how selfinterested voters, politicians, and bureaucrats actually operate, rather than how they should operate. Government expenditures Economists classify government expenditures into three main types. Government purchases of goods and services for current use are classed as government consumption. Government purchases of goods and services intended to create future benefits--- such as infrastructure investment or research spending--- are classed as
government investment. Government expenditures that are not purchases of goods and services, and instead just represent transfers of money--- such as social security payments--- are called transfer payments. Government operations Government operations are those activities involved in the running of a state or a functional equivalent of a state (for example, tribes, secessionist movements or revolutionary movements) for the purpose of producing value for the citizens. Government operations have the power to make, and the authority to enforce rules and laws within a civil, corporate, religious, academic, or other organization or group. In its broadest sense, "to govern" means to rule over or supervise, whether over a state, a set group of people, or a collection of people. Income distribution Some forms of government expenditure are specifically intended to transfer income from some groups to others. For example, governments sometimes transfer income to people that have suffered a loss due to natural disaster. Likewise, public pension programs transfer wealth from the young to the old. Other forms of government expenditure which represent purchases of goods and services also have the effect of changing the income distribution. For example, engaging in a war may transfer wealth to certain sectors of society. Public education transfers wealth to families with children in these schools. Public road construction transfers wealth from people that do not use the roads to those people that do (and to those that build the roads).
• • •
Income Security Employment insurance Health Care
Chapter 11 46
ROLE OF AUDIT & ACCOUNTS DEPARTMENTS IN PAKISTAN “And the servants of the most Gracious are those who, when they spend, are not extravagant and not rigidly but hold a balance between these.” Al-Quran Pakistan Audit and Accounts Department In many cases the origin of many troubles in private life as well as the “Public Administration can be traced back to the fact that money was not spent discreetly so it is not difficult to earn money as to spend it well”. It is a fundamental principle that every public officer should exercise same vigilance in respect of expenditure incurred from public fund as a person of ordinary prudence would exercise in respect of expenditure out of his own purse. Management of public funds and its control are a task of magnitude and delicacy. A secretary to the government who is the principle accounting officer in respect of his Ministry/Department and his subordinate small offices are responsible to ensure that the funds controlled by him are spent in accordance with the Financial Rules and Regulations. Financial powers are delegated to the head of department, head of the offices and drawing & disbursing officers for the purpose. If these powers are not exercised correctly due to non-observance of rules of financial propriety then there is a danger for misappropriation and embezzlement or undue delays in payment causing misery to the persons concerned. Even the money has been sanctioned by the parliament, it has to see that the government does not misuse the money or does not go beyond the sanctioned Limits. For this purpose, there is appointed an Auditor General who exercises external control over expenditure and audits the government accounts. Who is accountable to whom and for what? In matters of financial accountability both for money and property, such
accountability not only to the officers of high ranks but also to subordinates. This problem of accountability pervades all activities where funds and property involved whether the institution is a small shop, a big store, a corporation or a government department. A store manager must see that his store inventory conforms to the record of income and sale, a cashier must balance his cash, and a pharmacist must all times account for his supply of medicines. Accountability of such type is accomplished by a system of internal checks based upon record keeping. Thus when a store keeper receives an order to issue a particular item of store, he makes an entry to that effect in the Issue register and obtains acknowledgement of the person concerned. Similarly, if a cashier has to pay some money, he has to get acknowledgement for it and to make necessary entry in cash book. These entries are checked and rechecked by the supervisors. This procedure may seem quiet elaborate to call for shortening the red-tap. But it should be remembered that unless there is a system of internal check the correct amount can not be vouch saved. For these reasons in matter of financial transactions, there is a tremendous amount of record keeping whether in a private business houses or in government offices. Government environment, however, required and to tolerate more record keeping than private businesses. This is because government departments are accountable to the public for the details of their operations and do not have the degree of internal freedom as it is enjoyed in private firms. The public business is every body’s business, whereas the private business is concerned to an individual or a group of individuals. REASONS FOR KEEPING HUGE RECORD The main reasons for the government to keep a large number of records are explained below. I. II. Many government records are required by law rather than the needs of management. There may be more record keeping for its own sake in government because
of their satisfaction. III. There may be more record keeping for its own sake in government record keeping a holy rite, because the rite has the sanction of time and was approved by the fore-fathers, only the profane would suggest abolition or alterations and IV. A vested interest record keeping may be easier to defend in government what is the primary purpose of fiscal accountability namely democratic responsibility to the public at large. A public official has two types of such accountability: 1. Fiduciary, & 2. Accountability for the exercises of wisdom and judgment in making fiscal decision. Fiduciary refers to faith, trust and confidence. This is a quality expected of bankers, trustees and treasures. Such accountability plays a very important role in these areas where custodianship predominates, the work of treasurer and cashiers investment of trust funds and warehousing. Loss in these areas is fairly well-guarded by traditional bonding, auditing, record keeping, reporting and regulations by law. The other type of accountability involves more discretion. It goes further than custody and stewardship and enlists the dynamic policy determining quality of management. In other words this kind of accountability asks whether the fiscal officers are “good managers”. Much of the business of any government is conducted away from the capital in the field offices and establishment, army installation and civilian institutions. Some of the business of federal government has always been carried on overseas. In any case, it is convenient and usually necessary to advance funds to disbursing officers to pay for current services, supplies and equipment. They are accountable for the funds they receive.
Collection of public revenue also occurs at many points out side the capital. Collectors of customs, taxation officers and other receivers of public money are scattered far and wide. They are accountable for the funds they collect. The general rule is that every official or employee receiving, collecting or using public money is accountable for its proper application. A head of department is as accountable as a lower In modern times, the first accountability is to the employing agency by means already described involving agency accounting and fiscal officers. The second and conclusive accountability is to an independent audit. Finally every one is accountable to Almighty Allah. Fiscal accountability in simple terms means that a receiving officer must demonstrate that his collection was authorized by law, was correct, was supported by authenticating documents and was deposited in full, all in accordance with statutory requirements. Similarly, a disbursing officer must demonstrate that the payments he made were authorized by law, authenticated by supporting documents, correct and in strict accord with all formalities. The proof of each case must be complete and must satisfy an independent auditing officer whose business is to detect errors, irregularities or misappropriation. Financial transactions must not only be correct in fact but must e supported by proper documentary proof. For example, To determine the validity of a payment, an auditor will have an evidence of the authority of the disbursing officer, the funds on the basis of which the payment was made and the effect of any relevant statutory language in appropriation act, the receipt of money by the proper person was made was actually performed, proof that charge was not excessive and presence of the signature of disbursing officer and such of his superior as may be required. The auditor will also ascertain that funds were available in proper Head, that all the papers were in order that the arithmetic Calculations were correct and that claims were not duplicate.
PURPOSE OF AUDIT & ACOOUNTS DEPARTMENT Now we discuss the purpose of accounts and audit departments. Audit Department The term “Pakistan Audit department” means the officers and establishment, subordinate to the Auditor General of Pakistan, that are employed upon the audit or upon the keeping of accounts of the federal government and of provincial governments. It is very essential that a watch should be maintained over the financial transactions of government and that the agency employed for the purpose should be independent of the servants of government who are entrusted with the realization and utilization of public money or properties. The task is entrusted in Pakistan to “Pakistan Audit and Accounts department” Accounts Department So far as its audit duties are concerned, the position of the Pakistan Audit department in relation to government transactions is exactly the same as that of an “Auditor”. It must ensure that the accounts maintained truly represent facts that the rules and order framed by competent authority in regard to financial matters have been followed and that the expenditure has been incurred with due regularity and propriety, and must bring to the notice of competent authority and irregularity in connection therewith. In order to achieve the object stated above, it is laid down in article 168 of the constitution of “Islamic Republic of Pakistan”, 1973 that I.There shall be an Auditor General of Pakistan who shall be appointed by the president. II.Before entering upon office, the Auditor General shall make before the chief justice of Pakistan oath in the form as set out in the constitution. III.The terms and conditions of service including the term of office of the Auditor General shall be determined by an Act of parliament and until so determined by the order of the president.
IV.A person who has held office as Auditor General shall not be eligible for further appointment in the service of Pakistan before the expiration of two years, after he has ceased to hold that office. V.The Auditor General shall not be removed from office except in the like manner and on the like grounds as a judge of the Supreme Court. VI.At any time, when the office of the Auditor General is vacant or the Auditor General is absent or unable to perform functions of his office due to any reason, such other person as the president may direct shall act as Auditor General and perform the functions of that office.
Chapter 12 FUNCTIONS & POWERS OF AUDITOR GENERAL OF PAKISTAN The auditor General of Pakistan performs two fold responsibilities with regard
to Accounts and Audit. He performs his duties through his subordinate Audit and Accounts offices. Accounts: 1. The auditor general shall be responsible for keeping of the accounts of the federation and of each province other than accounts relating to defense and railway. 2. The auditor general shall prepare annual accounts showing the annual receipts and disbursement for the purpose of federation and of each province and these annual reports are submitted to the president and the governor of each province respectively. Audit: The Auditor General is empowered: 1. He audit all expenditure incurred from the revenues of federal government and of provinces to ascertain whether moneys shown in the accounts as disbursed were legally available for and applicable to the service or purpose to which the have been applied or charged and whether the expenditure conforms to the authority which govern it. 2. The audit all transactions of federal government and of the provinces relating to debts, deposits, sinking funds, advances and remittance business. 3. To audit all training, manufacturing and profit and loss account and balance sheet in any department of central or provincial governments. 4. The receipts of any department of federal or provincial governments. 5. The accounts of stores and stock kept in any office of the federal or provincial governments. He is empowered to make rules as to the nature and extent of audit to be followed in the raising and pursuing objections. He has authority to inspect any office of accounts in Pakistan which is under the control of federal government or provincial government including treasuries and such offices responsible for keeping initial accounts which are submitted to him. The Auditor General has authority to require that any book or documents relating to the transactions to which the duties in respect of audit entrusted to him.
The Audit Reports prepared by the Auditor General relating to the accounts of federal government are submitted to the president who cause them to be laid down before the National Assembly and the reports of a province is submitted to the governor of province who causes that to submit to the provincial Assembly for further discussion and action through Public Accounts Committees. The Auditor General of Pakistan performs his above mentioned duties and Responsibilities through his subordinate office as depicted in the organizational chart. The audit of the accounts of federal & provincial governments is conducted by the director general audit according to schedule and at the end of a year after discussion in the departmental accounts committee meetings necessary audit reports are prepared. In these audit reports serious irregularities committed by the departments are pointed out. These audit reports after thorough scrutiny are submitted by the Auditor General to the federal and provincial governments as the case may be for placement before the Public Accounts Committee in the National/Provincial legislative for further action and advice. The function of the Pakistan Audit department is strictly based on the Fundamental principle of audit, that its primary function is to verify the accuracy and completeness of accounts to secure that all revenues and receipts collected are bought to accounts under proper heads of accounts and that all expenditure and disbursements are authorized, vouched and correctly clarified. Principle of government audit is to recognize the clear distinction between additional and administrative functions.