An Overview of Public Sector Financial Management

Framework
‡ Constitution of Islamic Republic of Pakistan ‡ Rules of Business, Government of Punjab ‡ Chart of Accounts ‡ New Accounting Model (NAM) ‡ Other relevant acts, rules, procedures notified for financial management ‡ Circulars / instructions issued from time to time

Functions Assigned to Finance Department
‡ Some of the important functions assigned to the
Finance Department under Rules of Business 1974 are: a) Preparation, approval and management of Provincial Budget both upstream and downstream budgeting b) Supervision and control of provincial finances c) Examination and advice on matters affecting the finances of the province directly or indirectly d) Creation of new posts e) Examination of Schedule of New Expenditure f) Other functions ancillary to the functions listed above

Organizational Setup / Functional Distribution of the Department
‡ Budget Wing 
Budget  Resource  Inspectorate of Treasures  LFA  Monitoring

‡ Expenditure Wings 
Economic Services  Social Services  Local Government Finance

‡ Regulation Wing

in respect of every financial year. cause to be laid before the Provincial Assembly a statement of the estimated receipts and expenditure of the Provincial Government for that year.Important Definitions ‡ Budget Statement of estimated receipt and expenditure of the government for a particular period ‡ Annual Budget Statement 1) The Provincial Government shall. in this Chapter referred to as the Annual Budget Statement .

and shall distinguish expenditure on revenue account from other expenditure Article 120 of the Constitution . and b) the sums required to meet other expenditure proposed to be made from the Provincial Consolidated Fund.(Contd«) 2) The Annual Budget Statement shall show in summarized form separately:a) the sums required to meet the expenditure described by the Constitution as expenditure charged upon the Provincial Consolidated Fund.

to be known as provincial consolidated fund. shall form part of a Consolidated Fund. a) Received by or on behalf of the Provincial Government b) received by or deposited with the High Court or any other Court established under the authority of the province shall be credited to the Public Account Article 118 of the Constitution . and all monies received by it in repayment of any loan. 2) All other monies.(Contd«) ‡ Provincial Consolidated Fund and Public Account 1) All revenues received by the Provincial Government. all loans raised by that government.

(Contd«) ‡ Schedule of Authorized Expenditure The scheduled prepared after the approval by the Assembly of the Annual Budget Statement and Supplementary Budget Statement in respect of a financial year duly authenticated by the Chief Minister ‡ Supplementary Grant For a financial year means an amount provided in addition to the original grant or appropriation approved by the Assembly ‡ Surrender An amount included in the budget which is taken back and is not available for spending in that financial year .

(Contd«) ‡ Charged Expenditure Such items of expenditure which may be discussed by the Assembly but are not subject to the vote of the Provincial Legislature ‡ Voted Expenditure Expenditure that is submitted for the vote of the Assembly .

and withdrawal from. the custody of other moneys received by or on behalf of the Provincial Government. until provision in that behalf is so made. and all matters connected with or ancillary to the matters aforesaid. the payment of moneys into that Fund. the withdrawal of moneys there from. the Public Account of the Province. Article 119 of the Constitution . shall be regulated by Act of the Provincial Assembly or. their payment into. by rules made by the Governor.(Contd«) ‡ Management of Public Fund The custody of the Provincial Consolidated Fund.

General Sales Tax.Financing Sources Resources General Revenue Receipts Capital Receipts Public Accounts Federal Transfers Federal Divisible Pool Income Tax. others Straight Transfers Development Surcharge/ excise duty hydroelectricity profits Federal Grants Provincial Own Receipts . Export Duties. Federal Excise Duties.

Professional Tax Indirect Taxes: Motor Vehicle Tax. Misc.) Resources General Revenue Receipt Provincial Own Receipts Non Tax Receipts Tax Receipts Income from Properties & Enterprises.(Contd. Social Services. Law & Order Community Service. Land Revenue. Stamp Duty. Receipts Others Direct Taxes: Property Tax. GST on Services . Agriculture Income Tax.. Civil Administration.

CDLS Loans from multinational donor agencies for development purpose .) Resources Capital Receipts Current Loans From: Federal Governments Bond.(Contd..

Expenditure Classification Expenditure Provincial Consolidated Fund Public Account District Provincial Current Salary Pension Non Salary Development Revenue Capital Salary Non Salary Construction Cost .

BF Securities .) Expenditure Public Account PLAs Assignment Account Revenue Deposits Land Acquisition GP Fund.(Contd. GI..

Issues / References Processed with Finance Department ‡ Creation of new posts ‡ Sanction of funds through supplementary grant both in respect of development / non development budget ‡ Sanction / authorization for cases relating to financial assistance ‡ Examination / approval of Schedule of New Expenditure ‡ Re-appropriation of funds .

(Contd«) ‡ Issuance / authentication of Administrative approval ‡ Clearance of posts of development projects approved by DDSC / PDWP ‡ Advance drawl of funds ‡ Ex-post facto expenditure sanction / regularization of ‡ Time barred claims relating to TA / medical bills ‡ Re-imbursement of medical charges ‡ Other issues involving financial implications .

Budgetary Process 1. 3. Preparation / Examination / Consolidation Approval / Authorization Execution / Implementation Reporting and monitoring Feedback / Review . 2. 5. 4.

maintenance of vehicles. operational expenditure. Examples:  Personnel emoluments. purchase of goods and services for current consumption or for benefits expected to terminate within the fiscal year. operating expenses. maintenance of property.  Special allowances. supplies and materials. retirement benefits. interest on loans.  Travel.  Utilities.  Medical benefits. etc.Classification of Expenditure Current Expenditure ± These include appropriations for the payments related to employees related expense.  Rental of property. .

 Rehabilitation or opening of new Canals. etc. buildings and structures.  Land improvements. the benefits of which extend beyond the fiscal year and which add value to the existing assets or result in creation of new assets. .(Contd«) Development Expenditure Capital These include appropriations for the acquisition of goods and services. plants. Examples:  Acquisition of land and buildings.  Construction of Roads.

(Contd«) Revenue The development expenditure incurred on account of establishment charges or procurement of goods & services etc for implementation of ADP scheme is classified under Development Revenue Expenditure .

New Accounting Model Salient Features ‡ ‡ ‡ ‡ ‡ Modified cash basis of accounting A step towards double entry accounting Commitment accounting Recording of fixed asset New Chart of Accounts (CoA) .

Entity 2. by replacing the CoC. Project . Fund 5. Function 3. Object 4.Chart of Accounts ‡ The New Chart of Accounts (CoA) was introduced in Punjab from FY 2005-06. comprising the following five elements:1.

Entity Element ‡ The entity means the organizational structure or unit which creates a transaction. ‡ The organizational highest level is Government & lowest level is Drawing & Disbursing Officer (DDO)/ Collecting Officer (CO) .

‡ The ³function code´ is directly related to IMF public sector reporting requirements .Function Element ‡ The economic function. relating to the provision of a particular service. activity or Government program.

(Contd«) The ³Function Element´ is further divided into following components.  Major Function  Minor Function  Detailed Function  Sub-Detailed Function  Programme .

Culture and Religion Education Affairs and Services Social Protection .Functions Major Description 01 02 03 04 05 06 07 08 09 10 General Public Service Public Order and Safety Affairs Defense Affairs Economic Affairs Environment Protection Housing and Community Amenities Health Recreation.Chart of Accounts.

Example An example of the ³Function Element´ in terms of the actual code is shown as under. Major Function Minor Function Detail Function Sub Detail Function 01 015 0152 015202 General Public Services General Services Planning Services Population Planning Administration .Function Element .

Each accounting classification is further sub-divided into a hierarchy. . describing the item of expenditure.Object Element The economic classification. down to the level of detailed object head. asset or liability in known as Object Code. receipt.

Subsidies and Write off of loans/Advances/Others Transfers Interest Payment Loans and Advances Expenditure on Acquiring of Physical Assets Principal Repayments of Loans Investments Civil Works Repairs and Maintenance Suspense and Clearing .Chart of Accounts ± Objects Expenditure A01 A02 A03 A04 A05 A06 A07 A08 A09 A10 A11 A12 A13 A14 Employee Related Expenses Project Pre-investment Analysis Operating Expenses Employees Retirement Benefits Grants.

(Contd«) Tax-Receipts B01 B02 B03 C01 C02 C03 E01 E02 E03 Direct Taxes Indirect Taxes Other Indirect Taxes Income from Property and Enterprise Receipts from Civil Administration and Other Functions Miscellaneous Receipts Recoveries of Investment Recoveries of Loans and Advances Debt Non-Tax Receipts Capital Receipts .

(Contd«) Assets F01 F02 F03 F04 F05 G01 G02 G03 G04 G05 G06 Cash and Bank Balances Receivables Physical Assets Investments Other Assets Current Liabilities Loans Deferred Liabilities Other Liabilities Control Accounts Trust Account-Fund Liabilities .

(Contd«) G07 G08 G09 G10 G11 G12 G13 G14 Equities H01 Trust Account-Post Office Trust Account-Railways Trust Account-T&T Trust Account-Other Special Deposit Investment Special Deposit Fund Special Deposit Grant Mint Account Equities .

Basic Pay of Officers .Object Element ± Example Accounting Element Major Object Minor Object Detailed Object A ± Expenditure A01-Employee related expenses A011 -Pay A01101.

Chart of Accounts ± Fund Element ‡ Fund Fund could be either Consolidated or Public Account (C & P) ‡ Source This indicates the source of Fund from where the expenditure is being met. denoted by 1or 2 ‡ Sub Fund This indicates whether the expenditure is voted / charged. Development or Capital in nature . This also indicates whether the expenditure is Current. This could be Capital or Revenue.

. Consolidated Fund).g. and is further sub-divided into grants (in the case of Consolidated Fund) or Public Account detailed heads.Fund Element The ³pool of money´ from which budgetary allocation is made (e.

denoted by alpha character .denoted by one numeric character ‡ Grant No . ‡ Fund ‡ Source .denoted by three numeric character .denoted by one numeric character ‡ Sub-Fund .Chart of Accounts ± Fund Element The ³Fund Element´ is further divided into following sub-components.

Chart of Accounts ± Fund Element C Consolidated Fund Capital Revenue Voted Current Expenditure Voted Development Expenditure Voted Capital Expenditure Charged Current Expenditure Charged Development Expenditure Charged Capital Expenditure P Public Account .

Chart of Accounts ± (Provincial Fund Element) Fund Source Sub Fund C ± Consolidated Fund 1 ± Capital 2 ± Revenue 1 ± Voted current expenditure 2 ± Voted development expenditure 3 ± Voted capital expenditure 4 ± Charged current expenditure 5 ± Charged development expenditure 6 ± Charged capital expenditure 018 ± Agriculture Grant Number Grant No. PC21018.Agriculture .

Grant Number Grant is indicated by 3 numeric characters for Provincial Government and 2 numeric characters for District Governments .

Grant Numbers for Current Expenditure ‡ PC21001-Opium ‡ PC21002-Land Revenue ‡ PC21003-Provincial Excise ‡ PC21004-Stamps ‡ PC21005-Forests ‡ PC21006-Registration ‡ PC21007-Charges on Account of Motor Vehicles Acts ‡ PC21008-Other Taxes and Duties ‡ PC21009-Irrigation and Land Reclamation ‡ PC21010-General Administration ‡ PC24010-General Administration .

Grant Number for Development Revenue Expenditure The entire provision shown on µRevenue Account¶ is accounted for. This grant is common for all departments .Development¶. under the appropriate minor/detailed function under the Grant No. µPC22036 .

‡ PC12043. . ‡ PC12041-Roads and Bridges.Grant Number for Development Capital Expenditure Capital expenditure is. ‡ PC12042-Government Buildings. ‡ PC12039-Industrial Development. accommodated under the relevant minor/detailed functions under the following grants: ‡ PC12037-Irrigation Works. ‡ PC12038-Agricultural Improvement and Research. ‡ PC12040-Town Development.Loans to Municipalities.

Each project will have a unique project number .Project Element Project will be indicated by 4 Numeric characters. The project element enables transactions to be aggregated and reported at a project level. allotted to each Development Project.

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