BUDGET PREPARATION PROCESS

(OVERVIEW)

by M. Imran Shaukat
MS, FCMA, MBA
SAP FI Certified Associate
SAP HCM Certified Associate
IPSAS Certified Associate
Email: imranfcma@yahoo.com
What’s App/Cell: 0321-5083543
In Economics & Public Sector
Financial Management (PFM):
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 “Scarce/Limited Resources but Unlimited Wants/Wishes”

 Economics of Choice and Opportunity Cost
 Persistent Increase in Population of the World and Individual Needs
(Demand & Supply concepts)
 Community, Society, Town and Urban Planning & Development
 Public Education & Health; Social Welfare
 Research & Development ( R & D); Information Technology
 Optimal Utilization of scarce resources to bring Prosperity,
Socio-economic well-being of common people & economic growth
Budget (Estimate of Income/Revenue &
Expense/Expenditure) of a:
3

 Student/Person (Male/Female) {Rich,

Middle/Avg. Income & Poor Individual}
 Family (Parents/Teachers)

 School/Institute/College/University

 Project/Sub-ordinate Department/Attached

Department/Division/Ministry
 Town/City/Province/State/Federal Govt.

 Developing Countries & Developed Countries

Budget in Public Sector Organizations:
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 A Planned Activity
 In Every Financial Year by all Public Sector Entities

(Ministries/Divisions/Departments/Projects)
 An Estimate of Revenues/Receipts and

Expenditure/Expenses
 A Planning of Next FY

 Revised Estimate(s) of Current FY, Budget

Estimate(s) of Next FY and Forecast for Next Two

(02) Years
Budget Call Circular (BCC):
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 Issued by Budget Wing, Finance Division in Federal Govt.

 In each Province by Finance Department
 Tentative date: in last week of December of each FY
 Can be Downloaded from respective website (
http://www.finance.gov.pk/downloads.html)
 Currently BCC for the Year 2019-20 already issued by FD
 Method of Budgeting: Output Based Budgeting
 For Expenses/Expenditure: Normally in practice: Incremental
Budgeting; 5 to 10% increase of Previous Year Figures
Budget Estimates:
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BCC directs to submit:

Revised Budget Estimates for FY 2018-19

Budget Estimates for FY 2019-20

 Medium Term Budget Estimates for FY 2019-2022 {Next

three (03) Years} i.e 2019-20, 2020-21, 2021-22
Sections of BCC:
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BCC has two (02) Sections:

 Section-I:

 Section-II
Section-I includes:
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 Budget Preparation Forms

 Instructions ‘How to Fill Forms’
 Procedure for Preparation and Submission of Detailed
Budget-Revised Estimates (2018-19) and Budget
Estimates (2019-20) in respect of:
i. Receipts (Federal/Provincial)
ii. Current Expenditure (For Employee Related &
Contingencies)
iii. Development Expenditure (For Development
Schemes/Projects)
Section-II includes:
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Forms and Instructions for Allocation of Indicative Budget

Ceilings (IBCs) to ‘Output’ (Services) and for the
development of Output-based Budgets (presented in MTBF
Green Book)
Line Ministry (LM)- Forms to be completed by the PAOs
Fund Centre Form to be completed by their Attached
Departments and Sub-ordinate offices to prepare Medium
Term Budget 2019-22
Appendices to BCC:
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Following three (03) appendices with BCC:

 Appendix A: Special Instructions

 Appendix B: Budget Calendar

 Appendix C: Budget Preparation Process

Appendix A: Special Instructions
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 When IBCs from FD are received for three (03) years, Forms
in Section II (Strategic Overview and LM Forms) to be
completed by the office of the PAOs
 Uponcompletion of LM Forms, the following will be
forwarded by the PAOs to relevant Fund Centres:
a. Section I Forms
b. Section II Forms and Fund Centre Form
c. Three (03) years Ceilings to prepare their budgets
d. List of Standard Output Indicators related to that Fund Centre

 Section I forms will be submitted to Budget Wing of FD

Continued…
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 In Section I, RE 2018-19 for Current and Development Expenditure

must include:
a. Appropriations (Charged Expenditure) or Re-appropriations (+
or -) within the Sanctioned Grant
b. New Items of Expenditure sanctioned through Supplementary
Grants, and
c. Surrenders made or likely to be made during the year (Last
Date May 15th each year or as conveyed by the FD)
 Budget Provisions to be made under Relevant Cost Centres and
Circles of Accounts (AGPR and its sub offices)
 If no budget provision then AG offices will not authorize/make
payment
Continued…
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 Expenditure over and above the printed budget 2019-20

will not be allowed by AG offices
 No lump provision will be made
 All items under Object Classification to be made as per
prescribed Detailed Object Heads of Accounts
 Organizations/ entities that use Single-line budget will
provide detailed budget info i.e. on detailed object
classification
 Approved Green Book 2019-22 will be submitted to the
MTBF Secretariat, Budget Wing, FD by
Ministry/Division
Appendix B: Budget Calendar
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 It mentions the specific/last dates/deadlines for budget activities

 BCC 2019-20 by FD (till 21st December)
 Budget Strategy Paper by FD (till 1st February)
 Time Schedule for BE on CoA:
 Receipts (By 14th March)

 Current Expenditure (BO/NIS on CoA; By 15th March)

 Development Expenditure (BO/NIS on CoA; By 22nd March)

 Completion of All Budget Documents (By Last Week of April)

 Presentation of the Budget to Cabinet and Parliament by Finance
Minister (FM) (May or 1st week of June 2019; tentative date)
Appendix C: Budget Preparation Process
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 All Federal Ministries/Divisions will prepare budget on ‘Output Based

Budgeting System’ also known as MTBF
 The process for Medium Term Budget (MTB) for 2019-20 to 2021-22
consists of fourteen (14) steps:
 Issuance of BCC

 Preparation of Budget Strategy Paper by FD and its presentation

to Cabinet for approval; It contains:
 Macroeconomic and Medium Term Fiscal Framework
 Macro-Fiscal Projections in interaction with Stakeholders (FBR,
P & D, EAD & SBP)
 Issuance of IBCs for Current Budget by FD and Development
Budget by P & D through FD to all PAOs
Continued…
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 Preparation of Medium Term Strategic Plan:

 After Receiving Ceilings, office of the PAO will
conduct in-house meetings to develop a Strategic Plan
for upcoming three (03) years
 The Core Teams of LMs are responsible for Planning,
Budgeting and Monitoring Processes
 Filling of the Budget Forms
 Submission of Section I and Section II forms by
Ministries /Divisions for current budget to FAs / DFAs
for Quality Assurance (Now FA Organizations disbanded
in light of PFM Act, 2019)
Continued…
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 Submission of Section I and Section II forms by

Ministries /Divisions for development budget to Sector
Chiefs in Planning Commission and copy to FAs/DFAs
(FA Organization now disbanded)
 Submission
of Section I Forms (BO/NIS) for recurrent
and development expenditure budget to Budget
Computerization (Budget Wing- Finance Division)
 Reviewand approval of budget estimates and additional
demands (current + development) by the Priorities
Committee
Continued…
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Completion of budget review and approval

process- Annual Planning Co-ordination Committee
(APCC) meeting by P & D and FD

Completion of budget review and approval process

– National Economic Council (NEC) meeting by P
& D and FD
Continued…
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 Finalisation and Submission of Final ‘Medium Term

Budget Estimates for Service Delivery’ (Green Book)
report (as per format given in Section II) by the
Ministries/Division to Finance Division
 Completion of all Budget Documents (including
‘Green Book’), Schedules and Summaries for
Cabinet etc.
 Presentation of Budget (including ‘Green Book’) to
the Cabinet and Parliament
Computerization of Budget:
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 the Govt. of Pakistan initiated World Bank funded Project-

Project to Improve Financial Reporting and Auditing (PIFRA)
 Implemented New Accounting Model (commonly known as
NAM) so introduced New Chart of Accounts (CoA)
 To start Computerized Financial Accounting and Budgeting
System (FABS) implemented Enterprise Resource Planning
(ERP) Software-SAP (Systems, Applications & Products); a
product of SAP AG Germany
 Two (02) modules of SAP implemented
Two (02) Modules of SAP:
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 SAP Financial Accounting (FI): To record transactions

from Journal Entry to prepare Financial Statements; To
implement Computerized Budgeting System
 SAP Human Capital Management (HCM): To process
Employees Related Claims such as Computerized
monthly Payroll, GPF, Loans & Advances and Pension
payments of Govt. Servants
Note: SAP Basis (System Administration): To allow Roles
and Authorizations to Users as per Duties assigned to
them.
Chart of Accounts (CoA): Coding Structure;
Five (05) Elements:
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 Entity Element; Entity Codes:

 Government; Federal or Provincial
 Federal Government - Division and Attached department and
Districts (DAOs)
 Fund Element; Fund Codes
 Consolidated Fund
 Public Account
 Function Element: Ten (10) functions of Govt.
 Project Element

 Object Element; Object Codes

Object Codes:
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 Accounting Elements (To classify transactions):

 A Expenditure
 B Tax Revenue
 C Non-Tax Revenue
 E Capital Receipts
 F Assets
 G Liabilities
 H Equity
 Account Numbers; a Five (05) Numeric character; e.g. A03901-Purchase
of Stationery
 A further internal structure: Major, Minor & Detailed Object


SECTION-I of BCC:
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 Budget Preparation Forms

 Instructions and Procedure for Preparation and
Submission of:
 Revised Estimates 2018-19 and
 Budget Estimates 2019-20
 Federal/(Provincial) Government’s
 Current Expenditure
 Development Expenditure and
 Receipts
 Annexures I to VI
ANNEX – I; Procedure for Receipts:
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 Administrative Divisions to co-ordinate with different

estimating authorities to submit the verified and
consolidated estimates to Financial Advisers (FAs) {FA
Organization now disbanded in light of PFM Act, 2019}
 FD to formulate an estimate of overall resources likely to
be available in the year 2019-20 for financing the Public
Sector Development Programme (PSDP)
 The estimates of Foreign Aid Receipts for both 2018-19
(Revised) and 2019-20 (Budget), together with actuals for
the years 2016-17 and 2017-18 to be furnished by the
Economic Affairs Division (EAD)
ANNEX – II; Procedure for Current &
Development Expenditure:
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 Current Expenditure: to be broken down into:

 Charged expenditure (written in italics and can neither be
discussed not voted in Parliament)
 Voted expenditure ( will be discussed and can be reduced by
the Parliament by Cut-motion)
 Development Expenditure:
 Not to include any scheme which is not approved
 Detailed expenditure estimates for budget provision
 Must be supported by relevant PC-I or PC-II (Survey &
Feasibility Studies) Forms
 Works expenditure on PPWD Form 4 separately for the Housing and
Works Division
ANNEX – III; Instructions to Fill
BO/NIS:
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 Budget Order (BO) and New Item Statement (NIS)

 Separate BO/NIS for Charged and Voted Exp.
 No column to be left blank. In case any column is not applicable,
it may be marked N.A.
 BO/NIS should be prepared in ‘thousands’
 Object code: Letter ‘A’ is pre-printed. Budget should be entered
at all:
 Major, Minor and Detailed levels. Consult CoA and fill all the
required five (05) digits carefully
 No. of Posts must match with the posts details as mentioned in
Annex V, Posts Proforma
ANNEX – IV; Format of BO/NIS:
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ANNEX – IV; Format of BO/NIS:
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ANNEX – V; Posts Proforma:
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ANNEX – VI; Spending DDOs:
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ANNEX – VI; Spending DDOs:
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ANNEX – VI; Spending DDOs:
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ANNEX – VI; Spending DDOs:
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Instructions for Filling Fund Centre
Form:
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 Write Fund Centre Code for your Fund Centre (e.g. ID

2684)
 Write full name of your Fund Centre (Spending Unit)
 Write the amounts in thousands, which means that you
don’t have to write the last three (03) zeros
 If a code is not applicable to your Fund Centre, please
delete the entire row
 All indicators that relate to service delivered to
individuals should be gender-disaggregated.
Final Products; Publications by FD
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At the end, following publications are printed by FD:

Pink Book {Volume-I & II of Current Exp., Vol-III of

Development Ex.}
Demands for Grants and Appropriations

Supplementary Demands for Grants and Appropriations

Medium Term Budgetary Statements (Summary of next 3 years

budget forecasts)
Green Book (MTBF for next 3 years budget projections)

Explanatory Memorandum on Federal Receipts

Estimates of Foreign Assistance

Continued…
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 Annual Budget Statement (estimated Receipts and Exp. for

Next Year in English & Urdu)
 Budget in Brief (aggregated info on Revenues and
Expenditure for the Next Fiscal Year along with Budget
Estimates and Revised Estimates for Current FY) (in English
& Urdu)
 Supplementary Schedule of Authorized Expenditure (in
English & Urdu)
 Schedule of Authorized Expenditure (in English & Urdu)
 Budget Speech of FM (in English & Urdu)
Download Links: Federal Budget
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Federal Budget Publications 2019-20
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Federal Budget Publications 2018-19
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BCC 2019-20
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Pak. Economic Survey 2018-19
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Home Assignment:
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 Please Download in Soft Form: Act No. V of 2019

 Then Please Understand ‘Income Tax Rates

applicable to Head of Income: Salary’

 Calculate Income Tax on Your Annual

Income/Salary for FY 2019-20

 T-Code in SAP: ZHR139_Annual Income Tax

Deduction Statement
 Read Carefully ‘Public Finance Management (PFM)

Act, 2019’
Thanks