Accounting Policies and Procedures Manual

Budgetary Control

3 Budgetary Control

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Table of Contents

3 BUDGETARY CONTROL
3.1 Introduction 3.2 General Policies 3!"!1 #esponsibilities $or budgeting 3!"!" &eneral budget classi$ications 3!"!3 Met'od o$ budgeting 3!"!) Budget $or at 3.3 Detailed Procedures 3!3!1 Introduction 3!3!" Budgeting procedure + o,er,ie3!3!3 Policy setting and issue o$ Budget Call Circular . /etter 3!3!) Preparation o$ non-de,elop ent budget 3!3!5 Preparation o$ non-de,elop ent 0per anent1 budget 3!3!% Preparation o$ non-de,elop ent 0te porary1 budget 3!3!( Preparation o$ de,elop ent budget 3!3!* Preparation o$ receipt esti ates 3!3!9 Consolidation o$ budget data 3!3!10 Aut'orisation 3!3!11 I ple entation 3!3!1" #eporting and onitoring 3!3!13 2upple entary &rants 3!3!1) #e,ie3.4 !ecific Budgetary Procedures 3!)!1 Introduction 3!)!" C'arged 34penditures 3!)!3 Centrally pro,ided $or e4penditures

1
3 6 % % ( * 9 9 10 1" 13 13 15 1% 19 "0 "0 "0 "1 "3 "3 2" "5 "5 "5

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3.1

Introduction 3!1!1!1 In t'e public sector5 t'e Budget is an instru ent by -'ic' t'e &o,ern ent e4presses its priorities and allocates resources to i ple ent its policies! 6'e Budget is a tool by -'ic' planned e4penditures are controlled5 at all le,els o$ &o,ern ent5 including spending inistries5 depart ents and units! 3!1!1!" 6'e Budget applies only to t'e Consolidated Fund! 3!1!1!3 7nder t'e Constitution5 t'e Federal.Pro,incial &o,ern ent is re8uired annually to lay be$ore t'e 9ational.Pro,incial Asse bly5 a state ent o$ esti ated receipts and e4penditure $or t'e $ort'co ing $inancial year! 6'is is re$erred to as t'e Annual Budget 2tate ent! 6'is state ent indicates separately t'e su s re8uired to eet e4penditure c'arged upon t'e Federal.Pro,incial Consolidated Fund . /ocal Fund and ot'er e4penditure to be ade $ro t'e Federal.Pro,incial Consolidated Fund . /ocal Fund! 3!1!1!) 6'e budgeting cycle consists o$ si4 p'ases broadly categorised as $ollo-s: setting of budget policy and initiatives: t'e Cabinet eets to deter ine budget policy5 initiati,es and priorities! 6'ese are t'en co unicated to inistries and depart ents ,ia t'e Finance :i,ision.:epart ent and Financial Ad,isors in t'e case o$ Federal &o,ern ent! preparation: t'is stage includes t'e preparation and sub ission o$ budget esti ates o$ e4penditure and receipts by entities and subse8uent re,ie- and consolidation o$ esti ates by t'e Financial Ad,isors 0in t'e case o$ Federal &o,ern ent15 by ;ead o$ o$$ices + 3:<s in case o$ /ocal &o,ern ents and t'e Finance :i,ision.:epart ent! authorisation: t'is stage in,ol,es sub ission o$ t'e Annual Budget 2tate ent be$ore t'e 9ational.Pro,incial Asse bly! 6'is consists o$ t-o stages= appro,al by t'e 9ational.Pro,incial Asse bly5 and aut'entication by t'e Pri e Minister.C'ie$ Minister! 6'e appro,ed budget is re$erred to as t'e >2c'edule o$ Aut'orised 34penditure?! implementation: t'is stage re$ers to t'e co unication o$ t'e budgets to t'e spending inistries and depart ents ,ia t'e Finance :i,ision.:epart ent5 and t'e Financial Ad,isor in t'e case o$ Federal &o,ern ent and 3:< Finance in case o$ /ocal &o,ern ents! <n i ple entation o$ t'e Budget5 t'e entity can carry out acti,ities and incur e4penditure5 $or -'ic' $unding 'as been gi,en in t'at period! reporting and monitoring: actual re,enues and e4penditures 0including co it ents1 are recorded and reported to onitor progress against budget t'roug'out t'e $inancial year!

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#eporting assists anagers in decision a@ing and in particular re-allocation o$ $unds -'ere re8uired 0C'apter (1! 6'is includes t'e pro,ision o$ bot' internal and e4ternal reports! review: t'e periodical re,ie- o$ $inancial per$or ance and t'e ac'ie,e ent o$ policy obAecti,es by spending agencies and e4ternal re,ie- bodies! 6'is includes audit acti,ities and re,ie- by Public Accounts Co ittee! At year end outstanding co it ents are re,ie-ed and budget pro,ision 0t'roug' supple entary grant1 ade $or t'e $ollo-ing year! For #e,ised Budget 3sti ates see 3!3!5!3 and 3!3!13! 3!1!1!5 6'e budgetary cycle is represented in t'e $ollo-ing diagra !

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Overview of the B !"etar# C#$le

%reparation
MoF/FD/EDO finance Spending Ministries

%oli$# &ettin"
Cabinet

A thori'ation
Cabinet National Assembly/ Provincial Assembly

Review
PAD Spending Ministries Public Accounts Committee

Implementation
MoF/FD Spending Ministries

Spending Ministries PAD

Reportin" an! (onitorin"

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3.2

General Policies 3.2.1 #es!onsibilities for budgeting 3!"!1!1 2pending inistries are responsible $or t'e preparation o$ t'eir o-n budget esti ates! In eac' inistry t'ere is a Financial Ad,isor -'o is under t'e ad inistrati,e control o$ t'e Finance :i,ision. :epart ent! 6'is o$$icer guides t'e preparation o$ esti ates by spending entities -it'in t'e inistry and co-ordinates t'e budget -it' t'e Finance :i,ision.:epart ent and ,arious ot'er bodies as re8uired t'roug'out t'e budget cycle! In /ocal &o,ern ents5 ;ead o$ o$$ices - 3:<s e4ercises t'is ad inistrati,e control! 3!"!1!" A nu ber o$ ot'er &o,ern ent entities pro,ide support during t'e budget process! 6'ese include ,arious co ittees responsible $or t'e re,ie- and appro,al o$ budget proposals 0as no inated $ro ti e to ti e by t'e Ministry o$ Finance15 including: t'e Planning Co ission t'e 3cono ic A$$airs :i,ision t'e Accountant &eneral! 3.2.2 General budget classifications 3!"!"!1 6'e esti ates pro,ided in t'e Annual Budget 2tate ent ust be s'o-n in accordance -it' Constitutional re8uire ents! 7nder t'e Constitution t'e budget esti ates ust s'o- separately: t'e su s re8uired to eet e4penditure c'arged upon t'e Federal.Pro,incial Consolidated Fund and /ocal Fund 0re$er to :irection 3!)!"!1! $or a list o$ ite s included as c'arged e4penditures1 t'e su s re8uired to eet ot'er e4penditure5 ot'er t'an c'arged5 proposed to be ade $ro t'e Federal.Pro,incial Consolidated Fund and /ocal Fund! 3!"!"!" Bit'in t'ese o,erall re8uire ents5 spending inistries and depart ents are re8uired to sub it budget esti ates in prescribed classi$ications! <n t'e e4penditure side5 separate esti ates are prepared $or current and de,elop ent e4penditures! 2eparate $orecasts are also prepared $or receipts! 6'e classi$ication o$ current and de,elop ent e4penditure needs to be sub-classi$ied into t'eir Foreign 34c'ange and #upee co ponents bot' deno inated in rupees! 3!"!"!3 9on-de,elop ent e4penditures re$er to t'e on-going ad inistrati,e operations -it'in a inistry or depart ent5 in $ul$illing its policy obAecti,es! 6'ese include salaries and

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allo-ances o$ o$$icers and sta$$! 6'ere are t-o types o$ nonde,elop ent budget= per anent and te porary: permanent budget: t'ese are non-de,elop ent e4penditures t'at 'a,e pre,iously been appro,ed and are continuing! 6'ese include per anent sta$$ing establis' ents5 tra,elling5 $i4ed allo-ances and contingent e4penditure! 6'is is sub itted as t'e >Part I? budget temporary budget: t'ese are ne- ite s o$ non-de,elop ent e4penditure suc' as te porary additions to e4isting establis' ents or ser,ices t'at 'a,e eit'er continued on $ro year to year on a te porary basis or 'a,e been ne-ly sanctioned and not included in t'e current year?s budget! 6'is is sub itted as t'e >9e- Ite s 2tate ent? 09I21 or >Part II? budget! 3!"!"!) :e,elop ent e4penditure re$ers to acti,ities conducted and anaged distinctly as indi,idual proAects5 -it' $inite start and end dates and clearly speci$ied deli,erables! :e,elop ent proAects typically in,ol,e t'e construction or i pro,e ent o$ p'ysical assets or t'e de,elop ent o$ 'u an resources! :e,elop ent proAects are sub itted as >9e- Ite 2tate ents?! :e,elop ent budgets s'ould 'a,e a $lo--on e$$ect to t'e nonde,elop ent budget! B'en a de,elop ent proAect is co pleted it s'ould result in ne- ite s o$ non-de,elop ent e4penditure5 suc' as salaries5 aintenance and utilities! 3!"!"!5 Forecasts o$ re,enue s'all be prepared by t'ose entities responsible $or ad inistration o$ t'ose re,enues! 6'is includes ta4 aut'orities suc' as t'e Central Board o$ #e,enue in t'e Federal &o,ern ent5 and t'e respecti,e 34cise and 6a4ation :epart ents in t'e Pro,inces and :istricts! 3.2.3 $et%od of budgeting 3!"!3!1 6'e et'od used by inistries and depart ents $or preparing budget esti ates -ill be deter ined by t'e Finance :i,ision. :epart ent.3:< $inance! Irrespecti,e o$ t'e type o$ e4penditure or et'od o$ budgeting used5 t'e esti ates pro,ided to t'e Finance :i,ision. :epart ent.3:< $inance ust be $ully substantiated! 3!"!3!" Ministries and t'eir subordinate spending entities s'ould $ra e t'eir budgets according to planned outco es and not inputs! For e4a ple5 a inistry s'ould $irst consider -'at outco es it -is'es to ac'ie,e against a particular $unction or progra 5 rat'er t'an 'o- any ne- sta$$ it -is'es to e ploy! :e,elop ent and nonde,elop ent budget esti ates s'ould be considered Aointly5 in order to deter ine -'et'er t'e planned outco es o$ t'e entity 0and t'ose o$ t'e &o,ern ent as a -'ole15 can be et!

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3!"!3!3 3sti ates o$ e4penditure are to be pro,ided on a cas' basis5 t'at is5 e4penditure incurred -'en pay ent is ade -it'in t'e $inancial year! 6'is is consistent -it' t'e accounting policy $or t'e recognition o$ e4penditure! 3!"!3!) Forecasts o$ re,enue are to be prepared on a cas' basis5 t'at is5 based on -'at can reasonably be e4pected to be paid and collected in t'e $inancial year! 6'is -ill be calculated $ro prior year collection $igures5 adAusted $or c'anges in re,enue collection policy! 6'e $orecasts -ill be pro,ided in gross a ounts 0e!g! re,enues -ill not be s'o-n net o$ any related costs1! 6'is is also consistent -it' t'e related accounting policy $or t'e recognition o$ re,enues! 3.2.4 Budget for&at 3!"!)!1 6'e $or at by -'ic' budget esti ates are to be sub itted5 consolidated and ulti ately presented be$ore t'e 9ational .and Pro,incial Asse blies and /ocal Bodies -ill be t'e sa e5 as deter ined by Finance :i,ision5 in consultation -it' t'e respecti,e Pro,incial Finance :epart ents and 3:<s $inance! 3!"!)!" 6'e budget -ill be co piled to be consistent -it' t'e C'art o$ Accounts speci$ications!

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3.3

Detailed Procedures 3.3.1 Introduction 3!3!1!1 6'is section describes steps to be $ollo-ed in t'e budgetary procedure5 based on t'e co ponents o$ t'e budgetary cycle as outlined in t'e Introduction 0:irection 3!1!1!)1! 3!3!1!" 6'ese procedures re$er to t'e budgeting process in general and5 unless ot'er-ise speci$ied are applicable to all spending entities! Ministries and depart ents -ill ensure procedures $or t'e collection o$ subsidiary details and t'e preparation and scrutiny o$ budget esti ates are laid do-n in depart ental regulations o$ t'e inistries and depart ents! 3!3!1!3 Fro ti e to ti e t'e Finance :i,ision. :epart ent -ill issue orders pertaining to budgetary procedures! 6'ese include speci$ic orders $or a $inancial year or a particular class o$ e4penditure! 2uc' instructions are to be $ollo-ed in conAunction -it' t'e procedures contained in t'is Manual! 3!3!1!) 6'e $ollo-ing @ey controls are essential to t'e budgeting process: all budget esti ates $or a inistry or depart ent ust be appro,ed and signed o$$ as e,idence by t'e Financial Ad,isor be$ore it is sub itted to t'e Finance :i,ision. :epart ent in case o$ /ocal &o,ern ents5 all budget esti ates $or a depart ent ust be appro,ed and signed o$$ by t'e 3:< $inance budget esti ates and supporting sc'edules ust be prepared in a prescribed $or at t'e budgets Asse bly ust be aut'orised by t'e 9ational.Pro,incial

aut'orised budgets ust be co unicated to t'e Accountant &eneral and :A<s so t'at a co plete record is aintained $or ,eri$ication and aut'orisation o$ pay ent t'e Finance :i,ision.:epart ent.3:< $inance ust co unicate t'e aut'orised budgets to t'e spending inistries and depart ents t'roug' release letters t'e pro,incial Finance :epart ents ust trans$er t'e $unds e,ery ont' to /ocal &o,ern ents t'roug' ad inistrati,e orders

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t'e Principal Accounting <$$icer $or eac' entity ust actual transactions against budget! 3.3.2 Budgeting !rocedure ' o(er(ie)

onitor

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'pen!in" (ini'trie')Department' an! ' *or!inate entitie' prepare estimates' part , #permanent& prepare estimates' part ,, #temporary& prepare estimates ( development

reven e $olle$tion a thoritie' prepare preliminary estimates' revenue

+inan$ial A!vi'or e%amine current estimates #pt ,& Approve! *# %AO e%amine current estimates #pt ,,& e%amine development estimates e%amine revenue estimates

submit budget orders' #parts - and ,,&

submit Ne) ,tem Statements

submit preliminary . final revenue estimates

(o+)+D

determine si+e of annual development programme

revie) current estimates

revie) development estimates/ prioritise pro*ects

revie) final revenue estimates

prepare Demands for $rants' Non(development section #by Ministry&

prepare Demands for $rants ( Development section

prepare consolidated estimates of revenue

!e "udget #consolidated Demands for $rants and Sc!edule of Aut!orised E%penditure&

update accounting/ funds control records

AG%R) AG

communicate budgets to Ministries and Departments

(o+)+D

Approval by NA/PA and aut!enticated by PM/CM

3.3.3 Policy setting and issue of Budget Call Circular * +etter 3!3!3!1 3ac' year5 t'e Cabinet ust eet and set out t'e budget policy5 including ne- initiati,es5 targets and priorities! 6'e budget policy -ill establis' t'e planned surplus or de$icit5 -it' underlying assu ptions on econo ic gro-t'5 in$lation and ot'er planning para eters! 3!3!3!" A$ter t'e Cabinet 'as set t'e budget policy5 t'e Finance :i,ision. :epart ent -ill prepare and issue t'e Budget Call Circular -'ereas t'e 3:< $inance -ill issue t'e Budget Call /etter! 6'is

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docu ent sets out t'e ti etable in -'ic' budget esti ates are to be pro,ided by t'e spending inistries and depart ents and any ot'er rele,ant instructions to be $ollo-ed! 3!3!3!3 6'e deadlines $or sub ission o$ esti ates s'o-n in t'e $ollo-ing sections are indicati,e only5 as t'ey -ill ,ary $ro year to year and bet-een indi,idual pro,inces and districts! In all cases t'e dates s'o-n in t'e Budget Call Circular . /etter s'all be ad'ered to! 3.3.4 Pre!aration of non,de(elo!&ent budget 3!3!)!1 A$ter t'e Budget Call Circular . /etter is issued5 inistries and depart ents s'all prepare detailed esti ates o$ t'eir nonde,elop ent e4penditure $or t'e $ort'co ing $inancial year! 3!3!)!" :e,elop ent budgets ust be prepared on an integrated basis! per anent and te porary budget esti ates ust not be prepared independently o$ one anot'er! 3!3!)!3 3sti ates o$ non-de,elop ent e4penditure -it'in eac' grant: ust s'o- separately5

>c'arged? and >ot'er t'an c'arged? e4penditure e4penditure on re,enue account and e4penditure on capital account! 3!3!)!) 6'e Principal Accounting <$$icers budgets rele,ant to t'eir entities! ust appro,e and sign o$$ t'e

3!3!)!5 For eac' spending entity -it'in a inistry5 t'e le,el at -'ic' nonde,elop ent esti ates are to be sub itted is as $ollo-s: $or eac' grant5 t'e grant and units o$ appropriation $or eac' pri ary unit o$ appropriation5 to t'e detailed le,els o$ bot' $unction and obAect 'eads 3.3." Pre!aration of non,de(elo!&ent -!er&anent. budget 3!3!5!1 3sti ates pro,ided under t'e per anent 0or Part I1 budget5 as de$ined in :irection 3!"!"!35 ust only include ite s -'ic' 'a,e already been cleared by t'e Finance :i,ision. :epart ent. 3:< $inance! I$ an ite appears in t'ese esti ates $or t'e $irst ti e5 it ust be supported by a copy o$ t'e appro,al $or continuation o$ t'at ite on a per anent basis! 3!3!5!" It s'ould not be assu ed t'at esti ates pro,ided under t'e per anent budget are $i4ed ite s! 2pending inistries and depart ents s'ould re,ie- t'eir o,erall establis' ent re8uire ents and patterns o$ contingent e4penditure to identi$y potential sa,ings -'en preparing t'eir budget!

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3!3!5!3 In order to $or t'e basis $or t'e $ollo-ing year budget esti ates5 re,ised esti ates ust be prepared $or t'e current $inancial year! #e,ised esti ates s'ould be deter ined in lig't o$: actuals $or t'e $irst ) ont's o$ t'e current $inancial year plus actuals $or t'e last * ont's o$ t'e pre,ious $inancial year co it ents entered into and e4pected to be paid in t'e current $inancial year 1" ont's actuals $or t'e pre,ious t-o years re-appropriations -it'in particular grants during t'e current $inancial year ne- ite s o$ e4penditure appro,ed t'roug' 2upple entary Budget during t'e current $inancial year surrenders ade or e4pected to be current $inancial year! any ot'er rele,ant $actors t'e i pact o$ de,elop ent and non-de,elop ent $actors! 3!3!5!) B'ere t'e re,ised budget e4ceeds t'e appro,ed grant5 t'e inistry or depart ent ust indicate 'o- t'e e4cess is proposed to be et and t'e delegated aut'ority -'o aut'orised t'e increase! 3!3!5!5 B'ere t'e re,ised budget is less t'an t'e appro,ed grant by ore t'an 5C5 an e4planation o$ t'e sa,ing ust be pro,ided by t'e inistry or depart ent! 3!3!5!% Budget esti ates $or t'e ne4t $inancial year are t'en prepared $or eac' detailed 'ead 0detailed $unction and obAect -it'in eac' unit o$ appropriation1! For per anent budgets5 t'e $ollo-ing in$or ation ust be pro,ided at detailed 'ead le,el: actuals $or t'e last $inancial year and budget ,ariances $or t'at year budget esti ate $or t'e current $inancial year re,ised esti ate $or t'e current $inancial year budget esti ate $or t'e $ort'co ing $inancial year! 3!3!5!( Fro t'e in$or ation collected abo,e5 a state ent -ill be prepared co paring t'e di$$erences bet-een: current year?s appro,ed grant and t'e re,ised esti ate t'e budget esti ate sub itted $or t'e current year and t'e esti ate $or ne4t year! ade during t'e adAust ents arising $ro :

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3!3!5!* Budget esti ates s'ould be prepared to include subsidiary details in t'e prescribed $or 0e!g! no inal rolls5 calculation o$ allo-ances etc!15 and ade a,ailable $or scrutiny by t'e Ministry o$ Finance5 i$ re8uested! 3!3!5!9 <t'er rele,ant $actors s'ould also be considered in de,eloping an esti ate $or ne4t year?s budget! 6'ese include t'e $ollo-ing: adAust ent $or e4pected in$lation as pro,ided5 increase in salary costs and any ot'er planning assu ptions pro,ided in t'e budget call circular . letter! @no-n de$erred liabilities5 as recorded on t'e /iabilities #egister5 $or t'e ne4t year! anticipated sa,ings arising $ro producti,ity gains5 and reduction or ter ination o$ speci$ic progra s!

3!3!5!10 3sti ates relating to appro,ed establis' ents5 bot' per anent and te porary5 s'ould ta@e into account pro,isions $or lea,e5 e4pected ,acancies and allo-ances payable to e ployees5 based on past actuals and ot'er rele,ant $actors! 2ubstantiation ust be pro,ided $or ,ariations $ro t'e pre,ious year?s establis' ent! posts -'ic' -ill not be $illed ust not be pro,ided $or! 6'is includes pro,ision $or sta$$ on long-ter trans$er or lea,e! esti ates o$ salaries ust be supported by t'e nu ber o$ posts against eac' establis' ent5 and an e4planation o$ any ,ariation bet-een t'e ne4t year and t'e current year?s posts! 3!3!5!11 /u p su pro,ision in t'e budget ust not be ade unless in e4ceptional circu stances! For e4a ple5 t'e use o$ >ot'er? e4penditure 'eads s'ould be a,oided5 in $a,our o$ ore clearly de$ined 'eads! 3!3!5!1" Per anent budget esti ates ust be sub itted by t'e concerned spending entities to t'e Financial Ad,isor . ;ead o$ o$$ices + 3:<s in case o$ /ocal &o,ern ents no later t'an 1 December eac' year! 2ubse8uently t'e Budget <rders pertaining to t'e per anent 0Part I1 budget ust be sub itted to t'e Budget Bing o$ t'e Finance :i,ision.:epart ent.3:< $inance and copied to t'e Accountant &eneral . :A< o$$ice5 no later t'an 1 January 3!3!5!13 6'e dates detailed are applicable unless ot'er-ise noti$ied by t'e Ministry o$ Finance.Finance :epart ents! 3.3.6 Pre!aration of non,de(elo!&ent -te&!orary. budget 3!3!%!1 6e porary budget esti ates5 as de$ined in :irection 3!"!"!35 s'all only be included in t'is section o$ t'e budget -'ere already agreed -it' Finance :i,ision. :epart ent.3:< $inance! 9o sc'e e o$

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$res' ite s can be included in t'e Budget unless it is co plete and appro,ed! 3!3!%!" 6'e re8uire ents $or preparation o$ re,ised esti ates and e4cesses and surrenders as gi,en in :irections 3!3!5!3 to 3!3!5!5 also apply to te porary budgets! 3!3!%!3 6e porary budget esti ates ust be sub itted by spending entities to t'eir respecti,e inistries $or e4a ination no later t'an 1 November eac' year! B'ere clearance o$ $res' c'arge proposals is re8uired by ot'er inistries or depart ents5 it s'ould be obtained prior to sub ission ! 3!3!%!) 6e porary budget esti ates ust be sub itted to t'e Financial Ad,isor . ;ead o$ o$$ices + 3:<s no later t'an 1 December eac' year! 2ubse8uently t'e budget orders pertaining to t'e te porary 0Part II1 budget ust be sub itted to t'e Budget Bing o$ Finance :i,ision. :epart ent.3:< $inance -it' a copy to t'e Accountant &eneral . :A< o$$ice no later t'an 1 February. 3!3!%!5 6'e co parati,e analysis o$ re,ised esti ates -it' sanctioned grants and budget esti ates $or t'e current year and ne4t year pro,ided $or in :irection 3!3!5!(5 s'ould also be sub itted! 3!3!%!% 6'e dates detailed are applicable unless ot'er-ise noti$ied by t'e Ministry o$ Finance! 3.3./ Pre!aration of de(elo!&ent budget 3!3!(!1 :etailed procedures $or t'e preparation5 appraisal and appro,al o$ de,elop ent proAect proposals are set out in t'e >Manual $or :e,elop ent ProAects? issued by t'e Planning Co ission and are applicable to all spending entities! :e,elop ent proAect esti ates ust only be prepared $or proAects appro,ed in accordance -it' t'ose procedures! 3!3!(!" B'en spending entities sub it t'eir proposals to t'e Planning Co ission . Budget D :e,elop ent Co ittee in case o$ /ocal &o,ern ents $or t'e Annual :e,elop ent Progra e5 a copy o$ t'is sub ission ust be $or-arded to t'e respecti,e Financial Ad,isor . 3:< Planning D :e,elop ent in case o$ /ocal &o,ern ents! 6'is -ill include detailed esti ates $or indi,idual proAects! 3!3!(!3 3sti ates o$ de,elop ent e4penditure $or eac' proAect.sc'e e ust be $urnis'ed by spending entities to t'e Financial Ad,isor . 3:< Planning D :e,elop ent no later t'an 1 December eac' year! 6'e $ollo-ing in$or ation $or eac' proAect.sc'e e ust be pro,ided: na e o$ proAect.sc'e e e4pected date o$ co pletion

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accu ulated e4penditure and percentage o$ co pletion up to t'e end o$ t'e pre,ious year re,ised budget esti ate and p'ysical targets $or t'e current $inancial year budget esti ate $or ne4t $inancial year targets proposed $or ne4t $inancial year and basis $or deter ining target! 3!3!(!) 6'e le,el at -'ic' de,elop ent proAect budgets -ill be sub itted is as $ollo-s: de,elop ent grant and sc'e e 0proAect1 -it'in eac' grant at detailed $unction and obAect le,el $or t'ose 'eads pertaining to proAect e4penditures -it'in eac' pri ary unit o$ appropriation! 3!3!(!5 2pending entities s'all pro,ide details o$ p'ysical targets to be ac'ie,ed by t'e proAect5 along -it' budget esti ates! 3!3!(!% I$ a proAect is ne-5 and a budget esti ate is sub itted $or t'e $irst ti e5 it s'ould be acco panied by copies o$ t'e rele,ant PCI and PCII 0proAect de$inition and $easibility1 $or s! 3!3!(!( Proposals sub itted to Bor@s :i,ision.:epart ent $or -or@s e4penditure to be incurred under a de,elop ent proAect5 s'all be co piled by Bor@s :i,ision.:epart ent on a proAect--ise basis and sub itted to Finance :i,ision. :epart ent! 3!3!(!* 2pending entities ust ensure t'at t'ere is no o,erlap o$ budgets bet-een indi,idual de,elop ent proAects or bet-een de,elop ent and non-de,elop ent e4penditures! 3!3!(!9 6'e local currency co ponent o$ t'e de,elop ent proAect esti ate ust be s'o-n separately $ro t'e $oreign currency co ponent! In addition5 t'ese co ponents o$ t'e de,elop ent proAect budget are not interc'angeable t'roug'out any stage o$ t'e proAect! 3!3!(!10 In relation to t'e esti ate o$ $oreign aid $or a proAect5 t'e $ollo-ing rules s'all apply: all $oreign aid5 in bot' loans and grants5 s'all be incorporated into esti ates o$ de,elop ent proAects! 2uc' esti ates o$ $oreign aid ust $irst be cleared by t'e 3cono ic A$$airs :i,ision t'e $oreign currency co ponent o$ a de,elop ent proAect esti ate ust be s'o-n distinctly -it' t'e source and type o$ aid 0e!g! Foreign aid5 loan or grant1! 6'is in$or ation s'all be pro,ided in a separate state ent to t'e Financial Ad,isor

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$oreign aid in t'e $or o$ co odity assistance5 -'ere it is utilised under a de,elop ent proAect5 s'all be pro,ided $or in t'e local currency co ponent o$ t'e proAect esti ate t'e esti ated #upee e8ui,alent o$ $oreign currency loans to be repaid5 s'all be retained by t'e Ministry o$ Finance to co,er suc' pay ents! 6'is is re$erred to as >#upee co,er?! 3!3!(!11 <nce satis$ied -it' t'ese esti ates5 t'e Financial Ad,isor . 3:< Planning D :e,elop ent ust obtain appro,al $ro t'e Principal Accounting <$$icer5 -'o -ill sign o$$ t'e budgets! 3!3!(!1" 2ubse8uently t'e esti ates o$ de,elop ent e4penditure ust be sub itted to t'e Budget Bing o$ t'e Finance :i,ision. :epart ent.3:< $inance5 in t'e $or o$ a 9e- Ite 2tate ent5 no later t'an 17 December eac' year! 6'e ne- ite state ent5 countersigned by t'e delegated tec'nical aut'ority in t'e Planning Co ission.Budget D :e,elop ent Co ittee5 s'ould include distinct in$or ation $or t'e $oreign currency co ponent o$ eac' de,elop ent proAect as to its source and type o$ aid 0i!e! $oreign aid5 loan or grant1! 6'is in$or ation s'ould be s'o-n in t'e budget boo@!

3!3!(!13 A$ter sub ission to t'e Finance :i,ision. :epart ent.3:< $inance5 a nu ber o$ re,ie- processes ust be initiated to establis' t'e a,ailable resources $or de,elop ent e4penditure and e4a ine de ands o$ indi,idual proAects! 6'e re,ie- o$ eac' proAect ust be ade in lig't o$ t'e $ollo-ing $actors: o,erall resource position 0resources a,ailable $ro t'e Budget to $inance t'e Annual :e,elop ent Progra 1 sectoral priorities p'asing o$ proAects status o$ proAects a,ailability o$ $oreign aid li@eli'ood o$ co pletion in t'e $ort'co ing $inancial year 3!3!(!1) 6'e Federal Public 2ector Annual :e,elop ent Progra 5 consisting o$ sc'e e--ise budget allocation5 by sector5 to eac' Ministry ust be prepared by t'e Inter-Ministerial Priorities Co ittee! 6'is is t'en sub itted to t'e Annual Plan Coordination Co ittee $or re,ie- and $inal appro,al by t'e 9ational 3cono ic Council! 6'is docu ent incorporates pro,incial progra and pro,incial $oreign aid re8uire ents and $or s t'e basis $or t'e co pilation o$ t'e de,elop ent portion o$ t'e Federal Budget!

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Accounting Policies and Procedures Manual 3.3.0 Pre!aration of recei!t esti&ates

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3!3!*!1 3sti ates o$ receipts ust be prepared by t'ose aut'orities responsible $or ad inistering re,enues! Preli inary re,enue esti ates ust be sub itted to t'e Financial Ad,isor . ;ead o$ o$$ices + 3:<s $or scrutiny and $or-arded to t'e Budget Bing o$ Finance :i,ision. :epart ent . 3:< $inance no later t'an 1 December eac' year! 6'is enables t'e o,erall resource position to be deter ined $or $inancing o$ t'e Public 2ector :e,elop ent Progra ! Final esti ates5 -it' e4planatory notes5 s'all be recei,ed by 1 March eac' year! 3!3!*!" 6'e aut'orities re8uired to sub it receipt esti ates are t'e Central Board o$ #e,enue and t'e respecti,e 34cise and 6a4ation :epart ents $or direct and indirect ta4 receipts5 3cono ic A$$airs :i,ision $or $oreign aid receipts and ad inistrati,e inistries and depart ents $or ot'er receipts!

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3.3.9 Consolidation of budget data 3!3!9!1 A$ter budget esti ates 'a,e been re,ie-ed by t'e Financial Ad,isor . ;ead o$ o$$ices + 3:<s and appro,ed by t'e Principal Accounting <$$icer5 t'e de ands $or grants pertaining to t'at inistry or depart ent ust be prepared and sub itted5 0along -it' t'e supporting Budget <rders and 9e- Ite 2tate ents1 to t'e Budget Bing o$ t'e Finance :i,ision.:epart ent.3:< $inance! 3!3!9!" 6'e Finance :i,ision.:epart ent.3:< $inance s'all re,ie- and consolidate t'e de ands $or grants sub itted by t'e respecti,e inistries and depart ents! B'ere in place5 co puterised budget anage ent syste s s'ould be used to capture5 ,eri$y and consolidate t'e budget data! 3!3!9!3 6'e Finance :i,ision.:epart ent.3:< $inance ust re,ie- t'e consolidated esti ates to ensure t'e o,erall budget policy and obAecti,es 'a,e been et5 and a@e adAust ents in consultation -it' inistries and depart ents -'ere re8uired! 3!3!9!) Budgets $or /ocal &o,ern ents o$ any pro,ince appear as one line ite in t'e pro,incial go,ern ent budget boo@s! 3!3!9!5 7pon co pletion o$ t'e consolidation and re,ie- process t'e $inal budget docu ents -ill be produced5 $or tabling be$ore t'e 9ational.Pro,incial Asse bly! 3.3.11 2ut%orisation 3!3!10!1 Budgets appro,ed in procedures as detailed earlier ust subse8uently be tabled be$ore t'e 9ational.Pro,incial Asse bly $or aut'orisation! 3!3!10!" Aut'orised budgets ust be recorded in t'e 2c'edule o$ Aut'orised 34penditure5 -it' subsidiary in$or ation contained in t'e :etails o$ :e ands $or &rants and Appropriations annual publication 0current and de,elop ent e4penditure1! 3.3.11 I&!le&entation 3!3!11!1 A$ter t'e budget is passed by t'e legislature5 toget'er -it' su s tabled $or c'arged e4penditure5 t'e Finance :i,ision.:epart ent.3:< $inance ust $or ally co unicate t'e budgets5 as set out in t'e 2c'edule o$ Aut'orised 34penditure5 to eac' inistry and to t'e respecti,e Accountant &enerals.:A< o$$ices! 3!3!11!" A separate release letter ust be sent by t'e Finance :i,ision.:epart ent to t'e spending inistries and depart ents5 -it' copies to t'e respecti,e Accountant &enerals5 to ad,ise on t'e $unds ade a,ailable against t'ese budgets! 6'e Accountant
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&enerals ust co unicate t'is in$or ation to t'e :istrict Accounts <$$ices! 6'e pro,incial Finance :epart ents ust trans$er t'e $unds e,ery ont' to /ocal &o,ern ents t'roug' ad inistrati,e orders! 3!3!11!3 An appropriation ledger ust be aintained by t'e Finance :i,ision.:epart ent.3:< $inance to record t'e initial distributions o$ budgets ade to spending entities and any subse8uent adAust ents ade t'roug'out t'e year! 3!3!11!) It is t'e responsibility o$ t'e Principal Accounting <$$icer to ensure t'e budgets applicable to 'is.'er spending entity are properly co unicated to t'e ,arious delegated o$$icers in t'at entity! 6'e Principal Accounting <$$icer -ill aintain a record o$ suc' distributions! 3.3.12 #e!orting and &onitoring 3!3!1"!1 6'e Principal Accounting <$$icer o$ eac' spending entity is responsible $or controlling e4penditure $ro t'e grants a,ailable and -ill e4ercise t'is control t'roug' 'is.'er delegated aut'orities! 3!3!1"!" At a transaction le,el5 :ra-ing and :isbursing <$$icers ust ensure clai s $or pay ent are properly prepared and duly appro,ed5 as per t'e 2c'edule o$ Aut'orised 34penditure5 classi$ied5 and recorded according to t'e rules procedures $or e4penditures laid do-n in c'apter ) o$ t'is Manual!

3!3!1"!3 9o transaction e4ceeding t'e ,alue o$ a,ailable $unds can be passed $or pay ent! ;o-e,er5 i$ t'e clai is ine,itably payable under legal contracts and insu$$icient $unds e4ist5 t'e de and $or pay ent ay be 'onoured! 6'e disbursing o$$icer ust report t'e atter to a delegated aut'ority be$ore appro,ing t'e clai 0:irection 3!3!1"!(1! In suc' circu stances t'e Principal Accounting <$$icer ust ta@e appropriate actions to $ind t'e e4tra $unds $or suc' pay ents! 3!3!1"!) Any spending entity re8uired to underta@e -or@ or incur e4penditure on be'al$ o$ anot'er is re8uired to e4ercise proper budgetary control o,er t'e $unds pro,ided by t'e principal aut'ority! 6'e entity incurring t'e e4penditure ust ensure: t'e $unds pro,ided by t'e principal entity are not e4ceeded t'e oney is spent $or t'e purpose intended any anticipated sa,ings are pro ptly surrendered bac@ to t'e principal entity! 6'e principal entity -ill co unicate t'e grant -it'in -'ic' e4penditure ay be incurred to t'e concerned spending entity and issue t'e re8uired appro,al $or e4penditure to be incurred by a no inated aut'ority in t'at entity!

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3!3!1"!5 6'e Principal Accounting <$$icer in eac' spending entity5 as part o$ 'is.'er responsibility $or onitoring e4penditures5 ust sub it a state ent o$ e4cesses and surrenders to t'e Finance :i,ision.:epart ent.3:< $inance at prescribed dates5 and in a $or at set do-n by t'e Finance :i,ision.:epart ent.3:< $inance! 3!3!1"!% All anticipated sa,ings ust be surrendered to t'e &o,ern ent i ediately as t'ey are $oreseen5 but no later t'an 15t' May eac' year! 2a,ings $ro $unds pro,ided a$ter 15t' May ust be surrendered no later t'an ! June! 2tringent controls s'ould be e4ercised in t'e spending o$ all potential or actual sa,ings! In addition: no sa,ings s'ould be 'eld in reser,e $or possible $uture e4cesses e4penditure postponed ite s o$ e4penditure ust not be re-allocated to eet ne-

e4penditure ust not be incurred si ply because $unds ay be a,ailable -it'in a particular grant! &rants t'at cannot be properly utilised ust be surrendered! 3!3!1"!( 34cesses 0i!e! e4penditure $or -'ic' no pro,ision 'as been ade in t'e current year?s original budget1 s'ould not nor ally be incurred! ;o-e,er5 in certain cases -'ere budgetary $actors 'a,e c'anged abnor ally or 'a,e been under-esti ated 0suc' as gro-t' rates and in$lation1 it is possible $or t'e Principal Accounting <$$icer to re-allocate $unds5 pro,ided t'ey are a,ailable $ro sa,ings arising in t'e sa e grant! In t'is case t'e Principal Accounting <$$icer or 'is.'er delegated o$$icer is per itted to reallocate $unds bet-een t'e indi,idual allot ents ade to delegated o$$icers or bet-een detailed obAect 'eads o$ t'e sa e pri ary unit o$ appropriation -it'in a particular grant5 pro,ided t'e: re-allocation is not to or $ro allo-ances1 budget t'e establis' ent 0salaries and

delegated aut'ority is also an aut'ority co petent to appro,e e4penditure under t'ese 'eads re-allocation is aut'orised be$ore t'e e4piry o$ t'e $inancial year to -'ic' t'e budget relates a ount re-allocated does not e4ceed any $inancial li its as deter ined by t'e Finance :i,ision. :epart ent. 3:< $inance! 3!3!1"!* #e-allocation bet-een pri ary units 0 aAor obAect1 o$ appropriation and bet-een di$$erent grants ust be appro,ed by t'e Finance :i,ision.:epart ent.3:< $inance! 6'e speci$ic aut'orities $or suc' trans$ers are set out in t'e >:elegation o$ Financial Po-ers? issued by t'e Federal &o,ern ent and eac' o$ t'e Pro,incial &o,ern ents!

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3!3!1"!9 6'e Principal Accounting <$$icer is not per itted to reallocate $unds bet-een aAor and inor $unction 'eads -it'in t'e entity! 3!3!1"!10 In all cases o$ $unds re-allocation5 t'e Accountant &eneral?s . :A< o$$ices ust be i ediately in$or ed once it 'as ta@en place! 3!3!1"!11 #e-allocation o$ $unds bet-een ,oted and c'arged co ponents o$ t'e Budget is not per itted! 3.3.13 u!!le&entary Grants 3!3!13!1 I$ $unds are still not a,ailable -it'in t'e grants a,ailable to t'e spending entity5 it s'ould t'en consider -'et'er t'e e4penditure can be postponed! I$ it cannot be postponed5 t'e spending entity can t'en apply to t'e Finance :i,ision.:epart ent.Budget D :e,elop ent Co ittee $or a 2upple entary &rant! 3!3!13!" A sub ission to t'e Finance :i,ision.:epart ent.Budget D :e,elop ent Co ittee $or a 2upple entary &rant -ill not be accepted unless t'e e4cess is due to a cause beyond t'e control o$ t'e spending entity concerned and e4penditure cannot be legiti ately postponed! 3!3!13!3 34penditure on ne- ser,ices or progra s in -'ic' no pro,ision in t'e budget 'as been ade -ill not nor ally be ad itted as a 2upple entary &rant and s'ould be et $ro sa,ings! 3!3!13!) 6'e Finance :i,ision.:epart ent.Budget D :e,elop ent Co ittee -ill need to gi,e t'eir consent $or t'e 2upple entary &rant application! ;o-e,er5 t'e 2upple entary &rant application can only be appro,ed by t'e 9ational Asse bly.Pro,incial Asse bly during t'e budgetary cycle $or t'e $ollo-ing year! 34penditure during t'e interi period in respect o$ t'e additional appropriation applied $or t'roug' t'e 2upple entary &rant application co encing $ro t'e MoF.F:.Budget D :e,elop ent Co ittee?s consent to t'e appro,al by t'e 9ational Asse bly . Pro,incial Asse bly -ill be go,erned by MoF.F:.Budget D :e,elop ent Co ittee circulation and standing orders issued $ro ti e to ti e! 3.3.14 #e(ie) 3!3!1)!1 An annual state ent o$ e4penditures against budget 0appropriation15 re$erred to as t'e Annual Appropriation Accounts5 is prepared and publis'ed by t'e Accountant &eneral Pa@istan #e,enues and respecti,e pro,incial Accountant &enerals! All t'e sel$-accounting entities prepare and publis' t'eir o-n

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Annual Appropriation Accounts5 duly certi$ied by t'e :&s o$ Audit! 3!3!1)!" 6'is report co pleted: ust pro,ide5 $or t'e -'ole $inancial year Aust

a co parison o$ actual e4penditure -it' original and supple entary budget! details o$ e4cesses and surrenders and supporting e4planatory notes 0as pro,ided by spending di,isions and depart ents1 co parison o$ actual e4penditure -it' pre,ious year actual! 6'is in$or ation -ill be pro,ided $or eac' grant5 do-n to inor $unction and obAect le,el! 3!3!1)!3 6'e re,ie- process also includes t'e auditing $unction5 -'ic' ay be bot' e4ternal 0i!e! by t'e Auditor &eneral?s :epart ent1 and internal 0by t'e inistry or depart ent itsel$1! Internal re,ie- processes ay assess per$or ance against budget5 and ac'ie,e ent o$ planning obAecti,es against $inancial and non$inancial per$or ance easures! 3!3!1)!) 6'e Public Accounts Co ittee s'ould in,estigate t'ose cases in -'ic' a inistry or depart ent 'as incurred a aterial de,iation $ro budget and a@e reco endations to t'e 9ational.Pro,incial Asse bly! 6'e 9ational.Pro,incial Asse bly appro,e t'e aterial de,iations $ro budget reco ended by t'e Public Accounts Co ittee 0e4cess e4penditures1 and publis' t'e appro,al in t'e $or o$ an 34cess Budget 2tate ent! 3!3!1)!5 In$or ation and $eedbac@ obtained $ro t'e abo,e re,ieprocesses -ill be used in de,eloping ne4t years budget5 t'us co pleting t'e budgetary cycle 0:irection 3!3!5!31!

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3.4

!ecific Budgetary Procedures 3.4.1 Introduction 3!)!1!1 6'is section discusses speci$ic aspects o$ t'e budgeting process t'at need to be considered in addition to t'e :etailed Procedures set out in t'e pre,ious section! 3.4.2 C%arged 34!enditures 3!)!"!1 Article *1 o$ t'e Constitution sets out t'ose ite s -'ic' are to be c'arged upon t'e Federal Consolidated Fund! 2i ilarly5 Article 1"1 o$ t'e Constitution sets out related ite s to be c'arged upon t'e Pro,incial Consolidated Fund -'ereas /ocal &o,ern ents <rdinance "001 sets out t'e e4penditure c'arged to /ocal &o,ern ent Fund and is broadly in line -it' t'e abo,e! 6'ese ite s are: t'e re uneration payable to t'e President and ot'er e4penditure relating to 'is o$$ice re uneration payable to t'e Eudges o$ t'e 2upre e Court5 t'e C'ie$ 3lection Co issioner5 t'e C'air an and :eputy C'air an5 t'e 2pea@er and :eputy 2pea@er o$ t'e 9ational Asse bly and t'e Auditor &eneral t'e ad inistrati,e e4penses o$ t'e abo,e o$$ices all debt c'arges $or -'ic' t'e Federal &o,ern ent is liable including interest5 repay ent o$ capital and ot'er e4penditure connected -it' t'e raising o$ loans5 and t'e ser,icing and rede ption o$ debt on t'e security o$ t'e Federal Consolidated Fund any su s re8uired to satis$y any Audge ents5 decrees or a-ards against Pa@istan by any court any ot'er su s declared by t'e Constitution or by Act o$ Parlia ent to be so c'arged 0e!g! Ba$a8i Mo'tasib1! 3.4.3 Centrally !ro(ided for e4!enditures 3!)!3!1 6'e $ollo-ing e4penditures s'all be centrally pro,ided $or by t'e Accountant &eneral under instructions issued by t'e &o,ern ent! 6'ese esti ates are to be sub itted to t'e Finance :i,ision.:epart ent by t'e prescribed date $or inclusion in t'e Annual Budget 2tate ent: e4penditure on pensions &P $und e4penditures loans and ad,ances interest on iscellaneous debts!

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