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SESM Leadership Training Program Assignment of Module 4 Public Finance Management

Khalid Mehmood DOE Quality Assurance District Education Department District Badin, Sindh Contact # 0331-3501698

Q # 1
DISCUSS THE CURRENT ACCOUNTING AND AUDITING PARACTICES WITH REFRENCES TO SINDH EDUCATION SECTOR ALSO HIGHLIGHTS THE ISSUES AND CHALLENGES FACED BY THE EDUCATION MANAGERS AND EXPLORE THE ALERTERNATIVE SOLUTIONS OVERCOME THESE CHALENGES

CURRENT ACCOUNTING PRACTICES IN SINDH EDUCATION SECTOR


1. Introduction This section details the current and proposed Public Sector accounting procedures. Under the Public Education Sector Project for Improvement to financial Reporting and Auditing (PIFRA), it is recommended that a modified cash basis used for the accounts and it recommended a move towards full accrual at appropriate time. Public Sector Guidelines for Accounting Standards have been into consideration when framing the Government Accounting Model. 2. Current Public Sector Accounting Accounting Basis and Procedures In accordance with paragraph 10 of the Pakistan (Audit & Accounts) order, 1976, the Auditor General is required to submit to the President a General Financial Statement incorporating a summary of the accounts of the federation and the provinces annually. The Government accounts are kept into two parts: 1. Consolidated Funds and 2. Public Accounts All revenues received, all loans raised, all monies received in repayment of any loan and payments, form part of the consolidated funds of the Government. The receipts and payments in respect of which the Government incurs a liability to repay the money received or has a claim to recover the amounts paid form part of public Accounts. The Government accounts are maintained on cash basis. The accounts of the consolidated fund are kept on single entry system and closed off to Government. Under agreements made by the federal and each Provincial
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Government with the state Bank of Pakistan the treasury business of each Government is conducted by the state bank. The federal and provincial governments keep their own separate balance and separate account with the state bank. 3. Financial Reporting Requirements. Introduction This part outlines the major financial reports required to be submitted by the Public Sector and futures reports recommended by PIFRA. Public Sector Reports The public sector major financial reports for the federal and Provincial Government are the Annual Budget Statement and the National Accounts. The Annual Budget Statement is issued in total format and summary style to the National and Provincial Assemblies. The Annual Budget Statement of Education Sector includes the following information:

The overall Budgetary Position of the previous financial year including original and revised budget figures for Resources and Expenditure, Revenue Receipts, Capital Receipts, Development Expenditure and a Summary of the salient features.

A comparative Budgetary Position including details for the previous years original budget, the previous years revised budget and current years budget for the following o Resources both Internal and External o Expenditure Both Current and Development
o o o

Resources Position Revenue Receipts Summary Detailed Information on Revenue Receipts

o Capital Receipts and Public Account o Current Expenditure including debt servicing o Law & Order. o Community Services o Social & Economic Activities
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o Subsidies and Current Loans o Development loans and advances by the federal Government o Institution & Budget at a Glance.

Appropriation Accounts for each Division and Department detailed under functional and object classifications.

Finance Accounts which consist of a Summary at a Glance, Balance Sheet, Receipts and Payments Accounts, Audit Certificate and fiscal Account. Details are provided for Consolidated fund (Revenue Receipts and Expenditures and Capital Expenditures), Public Accounts and Accounts of Reserve Bank. Project Expenditure Statement will also be prepared from Monthly Accounts and will include o Brief description of the project o Life to date cost at the start of the reporting period o Costs during the period o Year to date costs at the reporting date
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Budget for the Project (including re-appropriations and supplementary budget) and budget for the reporting period.

The Annual Financial Statements of the federation, Provinces will include the following:

o Summary Financial Statement o Statement of Assets and Liabilities o Statement of Revenues and Expenditures o Statement of Cash flows o Analysis of Surplus/Deficit o Notes to the financial statement o Analysis of Revenues by Division / Departments
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Summary of Appropriation Accounts by Grants and Appropriations

o Appropriation Accounts by Grant.


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All these reports are made by Educational Manager or Education financial officer and also related another statement are made. The draft Public Sector Accounting Standards Guidelines produced by the Public Sector Committee of the International Federation of Accountants (IFAC) have been taken into consideration when preparing these drafts Annual Financial Statement. 4. Challenges of an Accounting Job The accounting industry offers many different types of possibilities when it comes to a career. Accounting jobs are numerous in nature and range from entry level to executive. Many accounting jobs offer challenges to those working them. Accountants tend to be highly organized individuals and people who are very precise and meticulous. Consistency and Accuracy One enormous challenge an accountant faces is consistency. Accountants post any transactions daily, and transactions must be posted consistently and accurately. Government Organization have standard procedures employees adhere to, and it is extremely important for an accountant to follow the procedures in the same way daily. An example of this is posting transactions for accounts receivable. When customers are billed, an accountant follows standard procedures to keep billing consistent. This includes offering discounts and including the correct terms of the bill on the invoice. Deadlines Deadlines are another huge challenge in most accounting jobs. Accountants work diligently, posting transactions as they occur. This is extremely important in accounting, because at the end of each month, accountants are responsible for preparing financial statements. Governmental Educational organization typically like getting these statements as fast as possible after the month ends. This puts pressure on accountants to ensure all transactions are posted accurately, promptly and consistently. In order to prepare financial statements, all information from the month must be posted.

CURRENT AUDITING PRACTICES IN SINDH EDUCATION SECTOR


1. Introduction The Auditor-General is appointed by the President and is responsible for the accounting function and auditing function of the federation and provinces. His department is nominated as the Supreme Audit Institute of Pakistan. In the Private Sector, members of Institute of Chartered Accounts of Pakistan (ICAP) and Institute of Cost & Management Accountants of Pakistan (ICMAP) usually
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perform audits. No independent international body exists for the audit profession as distinct from accounting bodies. 2. Audit in Educational Institution An audit of an educational institution requires a specialized set of skills and expertise from an auditor. The financial statements of an educational institution is typically consists of a Statement of Financial Position (also known as a Balance Sheet, a Statement of Financial Performance (also known as an Income and Expenditure Statement), a Statement of Cash Flows, a Statement of Changes in the Accumulated Equity/Fund, and notes supporting the statements mentioned here plus some nonfinancial information. The Statement of Financial Position shows the financial status of the assets, liabilities, and the equity (accumulated funds) at a particular date (at a particular time). The assets of an educational institution can be normally classified into long-term and current assets. The long-term assets include the school building, capital work in progress, the furniture and fixtures, computer equipment, books, motor vehicles, etc. The current assets include fee receivables from students, receivables from staff, cash and bank balances, etc. Note that a Trust may be running more than one campuses at the same time. The liabilities of a typical educational institution include refundable deposits from students, financing from banks, accounts payable for services. As most schools are managed by trusts, hence there is no equity as such, but an accumulated fund. The surplus or losses during the financial year are a part of this fund. The Statement of Financial Performance shows the revenue generated and expenditure incurred. For example, the revenue generation model of an educational institution is the monthly fee collected from its students. In addition, there is an admission fee also charged from those who join the school during the period. Depending on the fee structure of the school, there may be other sources of revenue as well, such as, leasing out the space for the canteen, fee for schoolprovided conveyance to students, examination fee, etc. Similarly, expenditure is incurred in maintaining the facilities, paying the faculty, administrative cost.
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In the first part of the Statement of Financial Performance, the surplus or loss from the core activity related to making education available is determined. Income other than from core operations is included in its second part. The Statement of Cash Flows shows the movement in the cash and bank balances. This is prepared on direct basis.

3. Common Audit Challenges or Problems and how to deal with them We often perform audits and wonder why, when theyre complete, they didnt go very well. This article will offer insight on how to better anticipate and solve the common problems that all auditors face. This is going to take some personal work on the readers part. My hope is that after reading this article, you can apply these insights to your auditing practices to make you a better auditor and ultimately get more out of the audit process. There are a multitude of issues and problems auditors will encounter during auditing that must be addressed individually. As we cannot discuss every one of them, I have highlighted common problems that auditors experience. Throughout my auditing career, I have had the opportunity to observe different auditing styles, from Food and Drug Administration (FDA) inspectors to third-party auditors for International Organization for Standardization (ISO) certifications. Many of the problems Ive observed boil down to the following four causes:

Management doesnt support the audit program. No audit preparation. Difficult or obtuse Auditees. Writing and publishing audit reports in a timely manner.

Of course, this isnt a complete list; you may already be thinking of other issues that youve encountered. The remainder of the article will discuss the listed problems, the resulting struggles for auditors, and some solutions on how to deal with them constructively. NO MANAGEMENT SUPPORT When starting an audit, the first question we ask ourselves is, Why are we doing this? We may be performing the audit for compliance reasons, financial reasons, or because a procedure tells us that we must. All of these are good reasons, though we must understand that conducting audits is a business tool that improves our quality system. How do we then convey to Educational management, the DEOs, Administrative Officer, or Principals and Teachers that audits are an essential part of education sector processes and not something to resent and neglect?
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According to ISO 19011, the executive management team is required to set the audit criteria and support the audit program. How many of your executive managers have read ISO 19011? Probably not many. Our obligation as audit program managers is to explain this to them and help them understand the reasons for performing internal audits, supplier audits, or other quality audits. Still, we often struggle with knowing that our management team relies on us to tell them what needs to be done. With some time, encouragement, and understanding, individual companies may change this aspect. To gain management support, we auditors must help managers understand that auditing is an important process that can help them. Below are some ways to help encourage executive managers to support the audit program:

Communicate the cost of audit observations. Explain the regulatory effects of nonconforming processes. Educate by stating or restating managements role in the audit program. Distribute audit reports to management. Have a member of management participate in an audit.

Communication is key. We often perceive internal audits or supplier audits as just part of our job, but we need to understand that they play a much larger role. If we can communicate to upper management that audits lower the regulatory risk, help improve processes, find waste, and ultimately save the company money, they start to pay attention. This communication occurs in the form of audit reports. How can we make these audit reports stand out? Try to associate a cost to the observations on the report or to a specific regulatory risk. During reviews of audit findings in monthly or semiannual management meetings, take the opportunity to reemphasize managements role in the audit process. NO AUDIT PREPARATION When the audit schedule is published in the beginning of each New Year, we auditors often promise ourselves that this years audits will be different and better. Then the first scheduled audit comes around and we realize that the audit has to be performed tomorrow. What happened to our good intentions? This is something that even I have experienced and see often with auditors: too little audit prep time. When were slammed to get an audit ready, we must take the procedure(s) home and stay up all night writing a checklist and audit questions. External audits are typically easier to prepare, as we have to make travel arrangements and dont have immediate access to the Audi tees procedures. Audit preparation is the most crucial part of an audit program. So how do we make sure that we are prepared for our audits? It all boils down to time. This is something we never seem to have enough of, especially when it comes to any type of planning. There needs to be a schedule and time allotted for conducting audit
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preparation. A week before the audit is to be performed, schedule time for an hour on Monday morning to prepare for the audit. Audits that are performed haphazardly are the result of no preparation, planning, or process review. Auditees will know that proper planning wasnt completed when you read their procedures during interviews or ask irrelevant questions. The worst that can happen is the auditor goes off on tangents outside of the audit scope. Proper audit preparation allows you to generate checklists, a list of questions, and review the procedure(s) prior to starting the audit. The first time auditing a process is generally the most difficult; as there are no checklists and its procedures must be read carefully. Below are some additional ways to assist you in properly preparing for an audit:

Schedule time in Outlook or another calendar program. Allot the time in your work schedule for preparation. Require checklists and questions. This forces preparation. Dont let other work tasks interfere. Close your office door. Take your procedures and pad of paper to cafeteria. DEALING WITH DIFFICULT AUDITEES

To get the most out of any audit, you must successfully interact with the owner of the process while reviewing his or her processes, procedures, and records. In some instances, you may encounter Auditees who exhibit difficult behaviors. These can be anything from auditing a person who is too busy for the audit, to someone that doesnt care about it, to someone thats aggressive because youre interrupting his or her schedule. In my experience, the most difficult Auditees are those who just dont care about the audit. They answer questions with a disinterested or nonchalant Yes or No, revealing nothing insightful about the process. Audits are supposed to be preventive actions to help organizations find nonconformities and areas for improvement. If the auditees are challenging the auditor at each question or are disinterested in the process, there is no benefit to conducting the audit. There are many ways you can manage difficult auditees:

Take a communication class on verbal and nonverbal skills. Get training on dealing with difficult people. Understand cultural differences. Explain to the auditee the benefit or requirement to the company. Ask open-ended questions from checklist. Stop an audit during difficult situations with auditees.

As an auditor, it may seem as though you have to receive training by the Federal Bureau of Investigation. However, you should obtain training in communication skills, dealing with difficult people, and interview techniques. If an auditee is being negative or overly aggressive with you, stop the audit and notify the audit program manager, the Auditees supervisor, or the company president. There is no benefit from an audit process when the situation is confrontational. Take a class from the local university or a seminar on communication skills. I have found these classes invaluable in understanding how to diffuse difficult situations, understanding nonverbal communications, and even cultural differences in worldwide business applications. There are also interview techniques that you can learn that will help you gain valuable information from the audit. For example, starting off a sentence with Do almost always leads to a yes or no answer. As discussed previously, properly preparing for an audit lets you generate questions on your checklist that begin with How do you, Tell me, or What does this An auditor must literally become an expert in communication skills to ensure that his or her interviewing techniques can overcome difficult situations. PUBLISHING AUDIT REPORTS Audit reports are often one of the least-liked aspects of an auditors job. Audit reports take more time to complete than was planned for, which usually results in them being published later than expected. A common expectation is that audit reports are formally published no more than a week after the audit has been performed. This may be easier for organizations that include their audit checklists in the audit report. However, for frequent supplier audits or external audits, there is an expectation of a formal report, not just a checklist. The audit report must be generated to clearly communicate audit findings to managers so they can make appropriate decisions. Following are some techniques to assist in publishing an audit report in a timely manner:

Create a standardized audit report form that can be used by all auditors. These audit reports can be fill in the blank so that any observations or nonconformities observed can be entered efficiently. Try to refrain from publishing a checklist as the audit report as these usually dont convey the information properly. Consider generating a checklist that is the audit report, but be sure that nonconformities, observations, and opportunities for improvement are clearly identified. As with audit preparation, schedule plenty of time to complete the audit report. I have found that if the report is submitted more than a week after the audit, the information is usually forgotten by the auditee and doesnt benefit the organization.

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CONCLUSION Many auditors struggle with problems they encounter during the audit process without understanding how to deal with them. Hopefully this article provided some solutions and insight into ways that you can make your auditing process more productive, less stressful, and more beneficial. The key knows that the audit process is designed to help the organization find issues or nonconformities before someone else does or before they become major issues. These problems or issues could result in regulatory action by an outside agency or cost the company thousands (or millions) of dollars in wasted expense. An issue not found during an audit of a company may even result in costly recalls. An auditor can work through getting management support, preparing for an audit, dealing with difficult auditees, and properly reporting the audit results in a much more proficient audit process. Q # 02 DISCUSS SOME OF THE CRITICAL ISSUES FACED IN PUBLIC FINANCIAL MANANGEMENT IN PUBLIC SECTOR EDUCATION SYSTEM WHAT ARE THE CORE PFM FUNCTIONS & DISCUSS ITS ASSOCIATED TOOLS SUCH AS MTFF, MTFF AND MTBF.

PUBLIC FINANCE MANAGEMENT Public finance is a field of economics concerned with paying for collective or governmental activities, and with administration and design of those activities. The field is often divided into questions of what the government or collective organizations should do or are doing, and questions of how to pay for those activities. The broader term (Public Economics) and narrow term (Government Finance) are also often used. And it is also deals with the budgeting the revenues and expenditures of public sector entity. PFM in Ministry of Education is key to improving the education sector. MoE has implemented PFM reform, reorganized its structure and established an internal audit unit.

CRITICAL ISSUES FACED IN PFM IN PUBLIC SECTOR EDUCATION SYSTEM


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Objectives
The government aims to have the best education system possible and has set ambitious objectives. For example, MoE is aiming for developed country-standard teacher qualifications and classroom sizes. However there are major challenges to reaching these goals in the short term. This Annex assesses the extent to which the government spends public resources on education in an appropriate and effective manner. More specifically, this Annex: - Outlines the institutional framework and current status of the education system in Pakistan. - Reviews the progress of the PFM Review policy recommendations. - Reviews government strategies and policies. - Assesses the current expenditure framework. - Analyses the fiscal situation and assesses future financing requirements

Quantity and quality of education data


Analysis of the education sector is hampered by the lack of reliable data including population statistics, limiting for example, the calculation of net and gross enrollment rates. Key measures of equity and efficiency, and the information needed to project future budget requirements are not readily available. Significant improvements in information regarding students, schools and teachers have been made but the data remains flawed. Budget reporting has also improved but the data needs to be treated with caution.

Lack of Prioritization
The National Education Strategic Plan (NESPs) financial estimates relate mainly to development investments. The significant effort and resources required simply to operate existing schools and manage teachers are not included. A particular problem is the lack of prioritization between different activities and targets. In fact, funding has not been forthcoming in either the core or external development budget for a large number of NESP activities.

Shifting focus to longer-term education development needed.


There are differences of opinion on whether the education system should be regarded as still in an emergency phase or whether the focus should shift to longer12

term development. High demand, lack of school buildings, large numbers of unqualified teachers and serious security challenges suggest elements of the emergency situation remain. So the government is shifting its focus away from the numbers of students and classrooms, to what happens in those classrooms and whether children benefit from school attendance.

PFM in MoE is a key aspect of effective management and the improvement of education delivery.
MoE has made significant improvements in PFM, integrating the development and operating budgets, and decentralizing budget and administration authority to Provincial Education Department. And Ministry of Education, on the other hand, continues to operate a highly centralized budget management system. Individual tertiary institutions have little input into budget preparation and limited discretion over the use of resources. Development projects are managed separately from the operating budget and are largely driven by donors.

Financing the education sector.


Increased financing will require: (i) a significant increase in domestic revenues; (ii) prioritization of the education sector, and (iii) assistance from the international community. A projection of future financing requirements, based on realistic participation targets integrated into the MTFF is the first step to fully financing the education sector

MoE continues to face challenges in effective budget execution


Despite the improvements of budget formulation. Operating budget execution is slow and erratic and the execution rates of core development budgets are very low. Program/provincial budgeting is of little benefit if the budget cannot be effectively executed.

Conclusion
So, PFM has developed tools for school districts of all sizes to use for long-term budget planning and forecasting. We have found that our clients need access to information to allow them to make informed decisions today that will impact their school district for the next five to ten years and to retain solid credit ratings

CORE FUNCTIONS OF PFM


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The core functions of PFM is to regulate financial Management in the national government and provincial government ; to ensure that all revenue , expenditures, assets and liabilities of those governments are managed efficiently and effectively; to provide for the responsibilities of persons entrusted with financial management in those governments; and to provide for matters connected therewith. MEDIUM TERM BUDGETAY FRAMEWORK The annual budget of the Federal Government is based on a medium term budgetary framework (MTBF). The MTBF is an approach to budgeting that integrates policy-making, planning and budgeting within a mediumterm framework. The MTBF has provided the framework for budget preparation in all ministries, department and agencies of the federal government since 2009. The Cabinet in its meeting held on 21st January, 2009 approved the adoption of MTBF across the Federal Government.

Objective
The MTBF has three main objectives:

To further strengthen fiscal discipline by creating and orderly framework for management of the annual budget over the medium term; To strengthen the alignment of federal resources by the government to the governments policies and strategies; To build the capacity in federal ministries to prepare and manage their budgets in a manner which provides cost-effective service delivery (outputs) and efficient use of public funds (value for money).

The MTBF will help ensure macroeconomic and fiscal Stability and will enable the government to align Resources more effectively around stated policy objectives.

MEDIUM TERM BUDGETAY FRAMEWORK (MTBF) INTRODUCTION


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The rolling Medium Term Fiscal Framework (MTFF) is being revised this year in response to a number of hallmark developments that have occurred during the course of 2009-10 and 2010-11. These developments are likely to have major consequences which will alter finances of the Government of Punjab. Some of these changes are in the nature of opportunities while others are challenges which the provincial government will have to face.

OBJECTIVES AND PURPOSE OF MTFF 2010-13 The MTFF is an important policy document that lays down estimates of income and expenditure of the Government in medium term. In other words MTFF is an advance statement of Government policies and priorities. Dissemination of these priorities enhances predictability of resource commitment to different sectors, thus promoting greater confidence, continuity and sustainability in economic and social policies and interventions by the Government. As alluded to in the previous MTFF, the Government of Punjab intends to achieve the following objectives by presenting the medium term fiscal outlook: i. Align policies and funding in a sustainable manner over the medium term ii. Strengthen fiscal discipline iii. Provide resources for development priorities iv. Try to establish a linkage between outcomes, outputs and costs. . MEDIUM TERM EXPENDITURE FRAMEWORK (MTEF) Introduction This brief paper explains why many developing country government have introduced the reform to the planning and budgeting process known as the Medium Term Expenditure Framework (MTEF), it also explains what is involved in the process, including an increased focus in performance, the key success factors for the implementation of an MTEF, the benefits for donor organization and how they can support the MTEF process. What does the MTEF involve? Government needs will always exceed available resources and the MTEF is process for ensuring that the limited resources are allocated to the highest priority
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areas of need. Thus it involves making choices between competing needs, and trade-offs between different options. Step 1: Define the Resources Envelop over the Medium Term Ministries of finance will develop a macro-economics framework which includes projections of revenues, expenditures and debt over the medium term, including donor finding. These projections will be based in governments monetary and fiscal polices. Step 2: Ministries Assess their Needs Ministries assess their needs by preparing a strategic plan in which they define their objectives, policies, programmes, output activities are costed, both those in Recurrent Budget and those in the capital budget to arrive at a total budget for a three year period. Therefore the budget of the Ministry is based in achievement of specific objectives, unlike the previous practice. Each Ministry presents its needs to the Ministry of finance setting out the: Objectives of the Ministry Existing and proposed policy changes The three year estimates of the funds required to implement plan An explanation of proposed policy changes and their expenditure implications. Step 3: Ministry Needs are reviewed and Trade-offs made between Competing Needs Ministries have defined their needs there is a process of making choices and trade offs between ministries as the needs of all ministries will exceed the total resources. In order for government to remain with in the project resources availability, providing additional funds to one ministry can only be achieved by reducing funds to others. However these choices can now be made on the basis of more meaning full information provided through the strategic planning and cost process. The MTEF has involved the introduction of performance based budgeting in many countries through which Ministries prepare their budgets on the basis of achieving the agreed objectives and producing the agreed outputs. Q # 3,
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CLARIFY THE CONCEPTS OF BUDGET, PURPOSE OF BUDGET, AND COMMONLY USED TYPES OF BUDGET ALSO DISCUSS BUDGETARY CYCLE PROCESS AND ITS ROLE OF STAKEHOLDERS INVOLVED IN IT CONCEPT OF BUDGET A budget (from old French bougette means purse) is a financial plan and a list of all planned expenses and revenues. It is a plan for saving, borrowing and spending. A budget is an important concept in microeconomics, which uses a budget line to illustrate the trade-offs between two or more goods. In other terms, a budget is an organizational plan stated in monetary terms. The budget of a government is a summary or plan of the intended revenues and expenditures of that government. PURPOSE OF BUDGET In concise way, the purpose of budgeting is to:

Provide a forecast of revenues and expenditures, that is, construct a model of how our business might perform financially if certain strategies, events and plans are carried out.

Enable the actual financial operation of the business to be measured against the forecast.

Establish the cost constraint for a project, program, or operation. TYPES OF BUDGET

There are several types of Budget: REVENUE BUDGET: The revenue budget is a forecast because it is based on projecting future sales. Managers must take into consideration their competitors. Advertising budget sales forces effectiveness and other relevant factors, they must make an estimate of sales volume. Then based in estimates pf demand at various prices, managers must select an appropriate sales price. The result is the revenue budget. EXPENSE BUDGET / OPERATING BUDGETS: An operating budget for a specific period is the detailed projection of all estimated income and expenses during a given future period. At Pak electron limited the
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operating budget covers, records Sales, Production costs, & other related activities. The operating budget must be reviewed, discussed, and coordinated by a presss director, financial manager, and department managers. The directors involvement in the budgeting process is extremely important. The director should provide subordinates with initial guidelines, review all proposals as originally submitted, request revisions, resolve differences between subordinate managers, and ensure balance and consistency in the final budget. Budgeting should be essentially a line function carried out by line managers. The financial manager and staff should provide information and other technical support, but budget negotiation and decision making should involve only those managers who are in some way responsible for a particular function. CASH BUDGETS / CASH FLOWS: A prediction of future cash receipts and expenditures for a particular time period. It usually covers a period in the short term future. The cash flow budget helps the business determine when income will be sufficient to cover expenses and when the company will need to seek outside financing. CAPITAL EXPENDITURES BUDGET: Capital Expenditures is referred as amount of money needed to spend on capital items or fixed assets such as land, buildings, roads, equipment, etc. that are projected to generate income in the future. Capital expenditures to be budgeted include replacement, or construction of plants and major equipment. Plan prepared for individual capital expenditure projects. The time span of this budget depends upon the project. Capital expenditures to be budgeted include replacement, acquisition, or construction of plants and major equipment. ROLE OF STAKEHOLDER INVOLVED IN IT Stakeholders play role and interact at multiple levelsfrom local to global level and their role and interaction determine the effectiveness of a development intervention. Therefore, analysis and exploration of stakeholder interaction, their role in decision making process according to their relative position and power relations is obligatory for the success of any extension project. Stakeholder in making the budget process effective in Pakistan and main role is involved with the help of budget is to make proper decision making. If the budget of any organization is strong than financial manager is take decision efficiently. Q # 4,

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WHAT IS PIFRA AND ITS ROLE IN EDUCATION SECTOR INTRODUCTION: PIFRA STAND: Project for the Improvement of Financial Reporting and Auditing. In the last two decades we have seen various global trends including convergence of public and private Accounting and Auditing standards, widespread use of Enterprise Resource Planning for business processes, common use of Auditing and Accounting software, and promulgation of legislation requiring compliance with Internal Controls for enhancing accountability etc. PIFRA has helped the Government of Pakistan keep up with such global changes and has brought a paradigm shift in Public Sector Financial Management in line with best international practices. The primary function of public sector accounting is to provide relevant, reliable and accurate financial information to its stakeholders allowing them to make critical resource allocation decisions. PIFRA helped introduce the New Accounting Model (NAM) for Public Sector Accounting consistent with constitutional and international accounting standards requirements while conforming to the requirements of IMFs GFS Manual. NAM is based on Modified Cash Basis which proposes the following additional concepts in cash basis of accounting:

Commitment Accounting Physical and Financial Assets Accounting Liabilities Accounting

OBJECTIVES AND ROLES It will help produce accurate, timely and meaningful accounts which cater to the needs of the users. The project will help produce analysis of budgeted data reported in monthly accounts producing significant deviation between actual budgeted account and total actual expenditures and receipts. This would help budget formulation in a more constructive manner and promote the idea of good governance. The improvements envisaged in the Audit component would help in enhancing accountability on the part of the Government of Pakistan and, consequently, more effective and efficient government. More specific benefits to be expected of this project can be summarized as follows: 1. Modernized government audit procedures and adoption of internationally accepted auditing standards will eradicate program oversights and improve evaluation capabilities.
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Effective accounting and reporting systems will enable the government to better formulate, control, and monitor its budget. Strengthened financial management practices will increase the impact of development programs and related external assistance. Financial information generated by the improved accounting and information systems will be more useful, complete, reliable and timely. Improved data will facilitate program management by government decisionmakers. Tighter internal controls will lessen the occurrence of errors and irregularities in the processing of payments and receipts.

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6. Related training programs will build staff capabilities and enhance utilization of human resources. Q # 5 WHAT IS INTERNAL CONTROL SYSTEM AND HOW IT HELPS TO PREVENT FRAUD In ACCOUNTING and AUDITING, Internal control is defined as a process affected by an organization's structure, work and authority flows, people and MANAGEMENT INFORMATION SYSTEMS, designed to help the organization accomplish specific goals or objectives. It is a means by which an organization's resources are directed, monitored, and measured. It plays an important role in preventing and detecting FRAUD and protecting the organization's resources, both physical (e.g., machinery and property) and intangible (e.g., reputation or intellectual property such as trademarks). DEFINES INTERNAL CONTROL AS HAVING FIVE COMPONENTS : Control Environment-sets the tone for the organization, influencing the control consciousness of its people. It is the foundation for all other components of internal control. 2. Risk Assessment-the identification and analysis of relevant risks to the achievement of objectives, forming a basis for how the risks should be managed
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3. Information and Communication-systems or processes that support the identification, capture, and exchange of information in a form and time frame that enable people to carry out their responsibilities 4. Control Activities-the policies and procedures that help ensure management directives are carried out. 5. Monitoring-processes used to assess the quality of internal control performance over time.

Internal control is broadly defined as a process, affected by an entity's board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories: effectiveness and efficiency of operations, reliability of financial reporting and compliance with applicable laws and regulations
HOW ITS HELP TO FRAUD PREVENTION Internal control plays an important role in the prevention and detection of fraud. Under the Sarbanes-Oxley Act, companies are required to perform a fraud risk assessment and assess related controls. This typically involves identifying scenarios in which theft or loss could occur and determining if existing control procedures effectively manages the risk to an acceptable level. The risk that senior management might override important financial controls to manipulate financial reporting is also a key area of focus in fraud risk assessment. There are several keys to effective fraud prevention, but some of the most important tools in the corporate toolbox are strong internal controls. Equally important, though, are the company's attitude towards fraud, internal controls and an ethical organizational culture. Internal controls should not be thought of as "static." They are a dynamic and fluid set of tools which evolve over time as the business, technology and fraud environment changes in response to competition, industry practices, legislation, regulation and current economic conditions.

10 Ways to Improve Internal Controls and Prevent Fraud


Here is my top 10 list of ways you can improve your internal controls and hopefully help prevent fraud before it happens. Some of these make perfect sense and fall in the duhh category (to quote one of my favorite teenagers!) while others may be a little more subtle. 1. Review and approve monthly bank reconciliations
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2. Review Payroll registers 3. Review and approve vendor master file changes 4. Have a policy on personal use of company property 5. Monitor company credit cards 6. Have a formal purchasing policy 7. Ensure transparency and oversight 8. Review your monthly financial statements in a timely fashion 9. Have a policy on conflicts of interest and enforce it 10. Use a lockbox for inbound checks These are the techniques to improve internal control process that are help to prevent from fraud and in Government we can say prevent from corruption in public organization.

Q # 6
WHY WE NEED PETS AND QSDS IN ADDITION TO ACCOUNTING AND AUDITING SYSTEM PUBLIC EXPENDITURE TRACKING SURVEY (PETS) The Public Expenditure Tracking Survey (PETS) is a quantitative survey of the supply side of public services. The unit of observation is typically a service facility and/or local government i.e. frontline providers like schools and clinics. The survey collects information on facility characteristics, financial flows, outputs (services delivered), accountability arrangements, etc. If carefully and competently collected, the PETS data can have multiple uses. They can serve as powerful simple diagnostic tool in the absence of reliable administrative or financial data. They trace the flow of resources from origin to destination and determine the location and scale of anomaly. They are distinct, but complimentary to qualitative surveys on the perception of users to service delivery. They highlight not only the use and abuse of public money, but also give insights into cost efficiency, decentralization and accountability. While there is no standard formula, typically some of the steps involved in such a survey are:
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Identification of scope, purpose and actors Design of questionnaires Sampling Execution of survey Data analysis Dissemination Institutionalization

The first systematic PETS was carried out in Uganda in 1996 to track the funding budgeted for schooling and clinics QUANTITATIVE SERVICE DELIVERY SURVEY (QSDS) QSDS go beyond the PETS focus of tracking funds. It examines the efficacy of spending, as well as incentives oversight, and the relationship between those who contract for a service and those who deliver it (for example, the relationship between parents and school administrators). In QSDS the facility or service provider is typically the main unit of observation, just as the household is the unit of observation in household surveys. QSDS can be applied to government and private (for-profit and not-for-profit) service providers. In each case, data are collected both through interviews with managers and staff and from the service provider's records. In some cases, beneficiaries are also surveyed. Triangulating the data collection allows crossvalidation of information. However, such information collection is timeconsuming.
NEED PETS & QSDS IN ADDITION TO ACCOUNTING AND AUDITING SYSTEM

Public Expenditure Tracking System (PSTs) and Quantitative Service delivery Survey (QSDS) are play very important or vital role in Accounting and Auditing System. These instruments have proved to be important tools for diagnosing various efficiency and equity problems in public expenditures, in particular governance and incentive problems, rent capture and leakage of public resources. These all activities are come in accounting and auditing system. Several rationales or used could motivate the undertaking of PETS/QSDS in accounting and auditing system.

Need to understand the problems include low quality of services, problems of access to services to specific groups especially the poor, low quality of infrastructure, lack of basic material, poor accountability of providers, corruption and rent seeking in the supply chain,
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and population dissatisfaction with the way services are delivered that are checked by auditing system.

PETS and QSDS can expect to achieve a range of results. PETS can shed significant light on the actual functioning of public expenditure systems, in particular, evaluating financial and institutional constraints on improving services in sectors, identifying the rules and mechanisms in practice for allocating resources within sectors, planning and management capacities of ministries; delays in disbursements, leakage of resources; equity in allocation; and accountability mechanisms. By focusing on the operational impact of budgets, PETS studies can help reveal whether spending from higher levels of government meets its intended budget allocations within the government administrative system and at the point of frontline service delivery. Hence, one tangible impact of a PETS process may be to institute greater transparency as to what frontline facilities are actually entitled to in the public budget and the effective allocation, and in turn, provide an entry point for citizens and civil society to hold government to account.

In the context of budget support operations especially, donors could be required to ensure the reliability and adequacy of public administrative systems in managing and allocating donor funding. PETS/QSDS in such contexts could help to reduce fiduciary risk of donor programs by providing detailed information to monitor usage of funds and the attainment of programs objectives

PETS could also be useful for evaluating specific policy reforms designed to improve service delivery performance. They can be designed to examine the impact of a specific government program or policy. PETS can also provide baseline data for impact evaluations if properly designed to be integrated as part of an intervention evaluation. Proposing plan of actions to revise budget allocations to improve efficiency, effectiveness and equity of public expenditure;

Improving budget execution by obtaining information on various problems in budget execution (capacity, reallocation, etc) at different stages; Enhancing government systems of recording, reporting and information systems at various levels in the administrative system toward service providers (for financial and non financial resources);

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Strengthening relationships of accountability between the government, providers and citizens by improving information on actual resource flows and quality of service delivery;

Strengthening domestic capacity, inside and outside government, to facilitate monitoring and evaluation activities. Improve accountability and fill the gap in information on public expenditure and resource use at the decentralized level by tracing expenditure flows toward end users of resources; Auditing and monitoring specific programs and expenditure allocations, such as pro-poor expenditures, by collecting quantitative information Identifying the constraints in the expenditure and resource allocation system that impede the efficiency, quantity, and quality of service delivery (including budget execution and allocation, compliance with procedures, account keeping, and usage) to generate recommendations for solving them;

Tracking the flows of public resources across various administrative levels of government to identify malfunctions in service delivery systems, such as delays, leakage and capture of funds by bureaucratic and political actors, corruption, and inequity in the allocation of resources; CONCLUSION All above need and activities are relate with the Accounting and Auditing System that why the PETs and QSDs are very much important in this terms and PETs and QSDs are two closely related survey instruments that are used to find out whether funds and other resources are being disbursed honestly, efficiently, and equitably. Both surveys achieve their best results when their explorations and analysis go beyond mere accounting and traditional auditing system. __________________________________________________________________

BIBLOGRAPHY
Some references is taken for Support to make this Assignment Books: Principal of Auditing
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By Prof: Dr. Khuwaja Amjad Saeed. Financial & Managerial Accounting By Willium, Haka, Bettner. PETs and QSDs (Study Guide) By Bernard Gauthier & Zafer Ahmed. Supporting Character: ZEESHAN QAZI, BADIN

References on web:
http://www.pgexchange.org/index.php? option=com_content&view=article&id=161&Itemid=156 http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTSOCIALDEVELOPMENT/EXTPC ENG/0,,contentMDK:20507700~pagePK:148956~piPK:216618~theSitePK:410306,00. html http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTPOVERTY/EXTPSIA/0,,content MDK:20467190~isCURL:Y~menuPK:1108016~pagePK:148956~piPK:216618~theSite PK:490130,00.html http://findarticles.com/p/articles/mi_m0ICC/is_3_74/ai_n15693664/ http://www.cafm.vt.edu/dbmg/internal_controls.php http://www.csoonline.com/article/678375/fraud-prevention-improving-internalcontrolshttp://en.wikipedia.org/wiki/Internal_control#Fraud_and_internal_control http://www.ignitingyourbusiness.com/Documents/10waystoimprovecontrolsandreduce fraud.pdf http://www.scribd.com http://www.investopedia.com http://www.steward.com http://www.google.com

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