Budgetting dsd -latest.pptx

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2. 2

3. Cash Flow
BUDGETING
FINANCING and
Taxation
By
Muhammad Arshad Baig
Director (Audit)
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4. SEQUENCE OF PRESENTATION
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1) What is Finance and Public Finance
2) Public Finance Management
3) Financial provisions of the Constitution
4) Planning (Budgetary Mechanism)
5) Kinds of Funds
6) Control Mechanism
7) Taxation System
8) Legislative Accountability

5. Public Finance
 “Finances” refers to provision of funds
and authority to collect, withdraw and
payment
 ‘Public Finance’ is a sum of resources
owned by and available to a public
sector Organization / Government for
running its business and providing
valuable goods and services to the
public.
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6. Public Finance Management
 Public Finance Management (PFM)
basically deals with all aspects of
resource mobilization and expenditure
management in government. Just as
managing finances is a critical function
of management in any organization,
similarly public finance management is
an essential part of the governance
process.
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7. Public Finance Management
 Public finance management includes:
Resource Mobilization,
Prioritization of Programmes,
The Budgetary Process,
Efficient Management of
Resources, and
Exercising Controls
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8. DISTRIBUTION OF RESOURCES
 NFC (Award)
 PFC (Award)
 Budgeting
 What do you do in case of your own
Financial Management
 Is distribution of your resources are fair at
family level
 Example of best Distribution of Wealth
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9. Constitutional provision of NFC
 Article 160
 President shall constitute NFC
 Minister of Finance of the Federal Government,
 the Ministers of Finance of the Provincial
Governments, and
 such other persons after consultation with the
Governors of the Provinces
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10. NFC-duties
 the distribution between the Federation and
the Provinces of the net proceeds of the
taxes;
 grants-in-aid by the FG and PGs;
 The use of borrowing powers
 any other matter relating to finance referred
to the Commission by the President.
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11. NFC- What to distribute
 taxes on income, including corporation tax,;
 taxes on the sales and purchases of goods
imported, exported, produced,
manufactured or consumed;
 export duties on cotton,
 such duties
 such other taxes as may be specified by the
President.
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12. NFC – Not less than
 Under Article 3A, the share of the Provinces
in each Award of National Finance
Commission shall not be less than the share
given to the Provinces in the previous
Award.
As amended in 2010 in Article 160 (3A).
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13. Salient Features of 7th NFC Award 2010
 Size of Divisible Pool enhanced by Rs. 68
billion
 Share of Provinces was approx Rs.39 billion
 Collection charges decreased from 5.2% to
1%.
 Provincial share increased from 48.75% to
56% in the first year.
 The provincial share increased to 57.5% after
the first year.
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14. NFC Award
 Horizontal Distribution
1 Population 82%
2 Poverty 10.30%
3 Revenue 5.00%
4 IPD (Inverse Population Density) 2.70%
 Province Wise Weightage
1. Punjab 51.74 %
2. Sindh 24.55 % ,
3. Khayber Pakhtonkhwa 14.62 %
4. Balochistan 9.09 %
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15. BORROWING
 Borrowing by Federal Government. The
executive authority of the Federation may
borrow upon the security of the Federal
Consolidated Fund (Parliament)
 Borrowing by Provincial Government. The
executive authority of a Province may
borrow upon the security of the Provincial
Consolidated Fund
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16. IPD
 A situation where an environmental factor
which affects population density inversely
changes when the population density
changes, such that an increase in population
density will cause the population to grow
better, or not to grow .
 Generally the environmental factor affects
birth and death rates to cause this to occur.
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 To achieve the objectives of the Governments.
 To earn revenue for running the affairs of
Government.
 To expend money for providing services to tax
payers.
 To prepare Accounts
 To make Public servants accountable.
NEED FOR PUBLIC FINANCIE
Introduction to Financial Management

18. 18
Financial Management in Pakistan
An Overview of Stakeholders
Parliaments
MOF / FDs
CBR
AGPR/CGA / AG/DAO
AGP
EAD
Defence Federal and
Provincial Govts
SBP/NBP
Revenue Deptts.
Line
Ministries
DDO Railways
Planning Div &
Departments
Self Accounting
Entities
Distt.Govts
Introduction to Financial Management

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ELEMENTS OF FINANCIAL
MANAGEMENT
BUDGETING
ACCOUNTING
AUDITING
REPORTING

20. Budgetary
Mechanism
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21. What is Budget?
Financial statement containing the
estimated receipts into, and the estimated
expenditure from, the Provincial
Consolidated Fund (PCF) for that year,
required to be laid before the Provincial
Assembly, before the commencement of
that year, in terms of the Article 120 (1) of
the Constitution, is known as Budget
[Annual Budget Statement (ABS)]
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22. 22
What budget tells?
 What your department can or cannot do?
 What support your office will need to meet
the goals?
 What steps you need to follow to achieve
those goals ?
 To whom you need to communicate?
 In what areas you need to do more
deliberations?

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Why Budget?
 A budget is a plan for future activities. It
shows what resources are needed and how
they will be used.
 Budgeting is a useful tool for:
 Planning- efficient uses of resources, time and effort
 Strategy- to reach that goal
 Coordination- team must work together
 Communication- organize their thoughts, actions
and responsibilities
 Feedback- weakness – re-approriate or revise

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BUDGETARY PROCESS - SEVEN PHASES
6. Management and monitoring of the Annual Budget
7. Review of the Annual Budget
1. Priority formulation / Budget Preparation
2. Consideration of Budget by Provincial Assembly
3. Authorization of expenditure by Chief Minister
4. Distribution of grants by Finance Department
5. Communication of allocated funds Administrative Deptt.
7. Review of the Annual Budget

25. The New Chart of Accounts (CoA) meets all
financial requirements and having
following elements:-
1. Entity
2. Function
3. Object
4. Fund
5. Project
NEW CHART OF ACCOUNTS
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26. NEW CHART
OF ACCOUNTS
ENTITY OBJECT FUND PROJECT
FUNCTION
GOVERNMENT
MINISTRY
DIVISION
DEPARTMENT
ATTACHED
DEPARTMENT
DISTRICT
DDO
MAJOR
MINOR
DETAIL
SOURCE
SUB FUND
MAJOR
MINOR
DETAIL
PROJECT
NUMBER

27. ENTITY ELEMENT - EXAMPLE
• Entity Provincial Government P
• Department Finance Department 60
• Attached Department Provincial Director LFA 5251
• District Lahore LE
• DDO Director LFA 4003
Account Code: P 60 5251 LE 4003
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28. FUNCTION ELEMENT - EXAMPLE
An example of the Function Element in terms of
the actual code is shown as under;
Major Function 01 General Public Services
Minor Function 011 Financial & Fiscal Affairs
Detail Function 0112 Financial & Fiscal Affairs
Sub Detail Function 011204 Administration of
Financial Affairs
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29. OBJECT ELEMENT-- E XAMPLE
Accounting Element A – Expenditure
Major Object A01-Employee related expenses
Minor Object A011 -Pay
Detailed Object A01101- Basic Pay of Officers
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30. CHART OF ACCOUNTS-FUND ELEMENT
 FUND
 Consolidated FCF/PCF
 Public Account (PA)
 SOURCE
 Capital -1
 Revenue -2
 SUB-FUND
 voted or charged
 Current or Development or Capital in nature
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31. CHART OF ACCOUNTS PROVINCIAL FUND ELEMENT
Fund C -Consolidated Fund
Source 2 –Revenue, 1-Capital
Sub Fund 1 -Voted current expenditure
Grant Number O18 -Agriculture
Fund No. PC 21018- Agriculture.
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32. Charged
expenditure
Receipts
Revenue
expenditure
Charged
expenditure
Voted
expenditure
CONSOLIDATED FUND
Expenditure
Capital
expenditure
Voted
expenditure
Other
receipts
Capital
receipts
Current Development Capital
Grants Grants Grants 32
NFC Award Provincial
Own Receipt

33. Annual Budget Statement
 The PG shall, in respect of every financial
year, cause to be laid before the Provincial
Assembly a statement of the estimated
receipts and expenditure (ABS)
 (2) The ABS shall show separately :-
 charged expenditure upon the PCF; and
 expenditure proposed to be made from the Provincial
Consolidated Fund;
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34. KIND OF FUNDS
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Type of Funds
 Government Fund
 Federal Consolidated Fund (FCF)
 Provincial Consolidated Fund (PCF)
 District Government Fund (DGF)
 Tehsil Local Fund
 Town Local Fund
 Union Local Fund
 School Council Fund
 FTF
 Local Fund (LF)- University Fund
 Public Account- Refundable Security A/c

36. IMPORTANT DIMENSIONS OF DDO
1) Duties & Role of DDOs in Financial
Matters
 Budget– Preparation, Frame Work & Control
 Procurements
 General Principles and Restrictions relating to
expenditure
 According/Obtaining Sanctions
 Payment Vouchers / Documentation
 Deductions on Payments
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37. Cont… Major Areas:-
 Cash matters
 Maintenance of Accounts- Cash Book
 Reconciliation of Payments & Receipts –
Verification exercise
 Stores account and fixed assets matters
2) DDOs under accountability regime:-
 Control Framework for Prevention of frauds,
losses, miscellaneous irregularities bogus
payments
 Fraud and culpable negligence proceed able
under Cr.Pc & PEEDA Act simultaneously
 Accountability through Audit
Cont…
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38. Cont… Major Areas:-
3) Service and Administrative Matters
 Attendance, joining, charge, leave, ACR
 Correspondence and smooth working
 Promotions, taking over the charge
4) Social Dimension of DDOs
Role & Responsibility towards the public at large /
community under its jurisdiction
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40. WHAT, WHEN, HOW, WHOM
 What to Procure (Budget/Grant/PC-1)
 Purchase of Goods
 Hiring of Services
 Execution of Works
 When to Procure (Planning)
 How to Procure (Method & Procedure)
 From whom to Procure
(Manufacturer/whole Seller/retailer/
importer (Private Sector or public sector)
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41. 41
Cont… Terminology
“value for money” means best returns for each
rupee spent in terms of:
 quality,
 timeliness,
 reliability,
 after sales service,
 up-grade ability,
 price,
 source,
 the combination of whole-life cost and
quality to meet the procuring agency’s
requirements.

43. ANNUAL PROCUREMENT PLANNING
(Under Rule Punjab Procurement Rules 2014)
Name of the Procuring Agency:
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Sr. No. NAME OF THE
PROCUREMENT
Estimated Cost PROCUREM
ENT
METHOD &
Procedure
Tentative
date of
Procuremen
t notice/RFQ
Tentative
date for
Award of
Contract
Tentative
date of
Completion
Remarks (If
any)
1 Stationary 150000/- Competitive
One stage
one
envelope
20-7-2014 (15+10=25
days)
13-08-2014
Delivery
time
31-08-2014
2 Stationary 150000/- Competitive
One stage
one
envelope
22-10-2014 (15+10=25
days)
15-11-2014
Delivery
time
30-11-2014

44. It is the ‘Record’
Which is against
or for you.
Definition of Audit
Critical and objective
appreciation of accounts and
services and reporting thereof
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45. STATUTORY AUTHORITY
The Auditor General shall conduct the
audit of the Accounts of the Provincial
Government Departments in accordance
with the Auditor General Ordinance,
2001 read with Article 169 (a) of the
constitution.
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46. Accountability Cycle
Legislature
Authorization of
Budget
Allocation of
Budget
Budget Execution
by Department’s
Auditor General
Audit Reports
PAC
Reports Back
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47. Proper Maintenance of Record / Accounts
 It must exhibit the true picture
 It must be recorded regularly and promptly
 It must be authenticated
 It must be cross referred.
 It must be legible and without cutting
 It must be under safe custody & charge
 It must be reconciled
 It must be produced to audit
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48. Income Protocols
 Recover in time as per schedule
 Full Recovery (No installments)
 Deposit in to the proper head of revenues on
the same day or the next
 Promptly record entry to that effect in the
books of accounts
 Keep the credit slip in tact in files
 Get the record authenticated
 Reconcile the Income periodically
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49. Expenditure Protocols
 Rates
 Budget Provision
 Sanction of the Competent Authority
 Documentation (stock entry and taxation)
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50. How to verify the validity
 Validity of the Company
 Validity of Person
 Validity of Specification
 Validity of Rates – (Reasonable Price)
 Price Mechanism
 Level of Supply Chain Command
 Manufacture-Distributor-whole seller-retailer-
consumer
 Validity of Documents
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51. 51

52. Pillars of Accountability
 Political Will- Assembly Questions
 Parliament- Standing Committee
 Administrative Inspections
 The Judiciary
 The Media
 Public Awareness
 Audit Agencies and DAC, SDAC and PAC
 Anti-Corruption
 NAB
 Transparency International Organization
 Peerness 52

53. TAXATION
MECHANISM
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54. 54

55. Payment Chart (Registered)
 Total Amount of the Voucher Rs. 1000/-
inclusive of GST. Prepare the payment Chart:
 Payable to Supplier =
 Payable to Sales Tax Deptt. =
 Payable to Income Tax Deptt.=
 Total = 1000/-
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56. Payment Chart (Un-registered)
 Total Amount of the Voucher Rs. 1000/-
inclusive of GST. Prepare Payment Chart:
 Payable to Supplier =
 Payable to Sales Tax Deptt. =
 Payable to Income Tax Deptt.=
 Total = 1000/-
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57. GENERAL SALES TAX
 @17% of all the items are Sales Taxed
except for example… mentioned in sixth
schedule to the Sales Tax Act, 1990.
 @19% from the non-registered supplier
 @Zero rated sale taxed items. (Sec. 4 of STO,1990)
 Deduction of 1/5th of Sales Tax at source
 1/10th from Distributors and Whole sellers
 Deduction at Full Rates i.e. @ 17% from
non-registered by Withholding Agent
(Govt. Dept., Autonomous Body, public
sector Org. ) otherwise 19%
 Specified Goods are only taxed at
Manufacturer level Special Rules / (withholding) Rules, 2007)
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58. 58
DEDUCTIONS ON PAYMENTS
Deductions at approved rates on payments:-
 Professional Tax
 Contractors:
 Less than 1 million
 Less than 10 employees Rs. 1000/-
 More than 10 employees Rs. 2000/-
 Exceeding 1 million Rs. 3000/-
 10 million to 50 million Rs. 5000/-
 Exceeding 50 million Rs. 10000/-
 Engineer consultants Rs. 3000/-
 Rs. 200/- per year for civil servant whose income is
taxable
 (See Finance Act, 2000 for companies and firms and
Individuals)
 Token Tax on Vehicles before 31st July

59. 59
Federal levies
Income Tax :
 In case of salaried as per slabs
 On supplies @ 4% (6% non-filer)for Company &
 @ 4.5% (6.5% non-filer) (for others) exceeding
Rs. 25000/- in a financial year.
 For services @ 8% filer (12% non-filer) for
Company &
 @10% filer (15% non-filer) for others exceeding
Rs. 10000/- with in a financial year.
 For Contracts @ 7%% for Company &
 @7.5% for others 10% in case of non-filer
(Sec.153 ITO, 2001 as amended)

60. Sales Tax on Services (Punjab) 2012
 Services provided by: @ 16% …
 hotels, clubs and caterers
 Contractors
 Advertisement of TV, cables and Net
 Consultants
 Security providing agencies
 Stock Brokers
 Shipping agents etc
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61. Sales Tax on Services Chart (FD letter dated 08-10-2013) After
this date full deduction of STS
Withholding Agent
(Service recipient)
Service Provider Status of Service
Provider
Withholding of
Tax
Fed, Provincial
Govt. LG, ABs Org.
Registered with PRA Company Exempted (except
advertising services)
Registered with PRA Firm, AOP,
Individual
16% withhold
Non-Registered with
PRA
All 16% withhold
Telecom, banking,
courier, Insurance
All Exempted
LTU Registered with PRA
other than LTU
Firm, AOP,
Individual
16% withhold
Company Exempted
Non-Registered with
PRA
All 16% withhold
Recipient of Ad
service who are Reg.
All persons All persons 16% withhold
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62. Stamp duties
 Stamp Duty
 0.25% of the Contractual amount of the procurement
 Works upto 50000/- Rs. 200/-
 Rs. 50000/- to 5,00000/- Rs. 500/-
 Rs. 500000/- 15,00000/- Rs. 1000/-
 Rs. 1500000/- 25,00000/- Rs. 1500/-
 Rs. 2500000/- and above Rs. 2000/-
 Revenue Stamps on payments:
 Rs. 20 to Rs. 2000/- Rs. 1
 Rs. 2001 to 10000/- Rs. 2
 Over 10001/- Rs. 5
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63. WEBSITES TO BE VISITED
 www.fbr.gov.pk
 www.ppra.gov.pk
 www.punjab.pra.gov.pk
 www.punjablaws.gov.pk
 www.punjab.gov.pk
 www.finance.punjab.gov.pk
 www.excise-punjab.gov.pk/professional-
tax.html
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64. Proper Maintenance of Record / Accounts
 It must exhibit the true picture
 It must be recorded regularly and promptly
 It must be authenticated
 It must be cross referred.
 It must be legible and without cutting etc.
 It must be in safe custody
 Its placement
 It must be reconciled
 It must be produced to audited
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65. Expenditure Protocols
 Rates
 Budget Provision
 Sanction of the Competent Authority
 Documentation (stock entry and taxation)
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66. Documentation
 Demand/Requisition/Indent
 Permission of the Competent Authority to proceed
 Administrative Approval & Technical sanction
 Quotation Notice/Tender Notice
 Advertisement/PPRA’s (Punjab) & Entity’s website
 Pre-Qualification of Suppliers/Contractors-amended
 Issue of Tender Documents
 Terms & Conditions/Instructions
 Specifications/BOQ
 Cost of Tenders (Bank Challan)
 Submission & Safe Custody of Quotations/Tenders in
the Tender Box
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67. Cont… Documentation
 Meeting of the Purchase Committee
 Attendance of Participants/Bidders
 Opening of Quotations/Tenders
 Evaluation of Tenders/Quotations
 Technical Proposal/Financial Bid
 Terminologies of C&F/FOR
 Conversion of Rates in One Currency
 Arithmetic Verification
 CDR/Earnest Money on %age rate (Not Fixed)
 Preparation of Comparative Statement in the
same ceremony & Recommendation of the
Purchase Committee
 Execution of Contract
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68. Cont… Documentation
 Supply/Work Order/Letter of Award of Contract
 Delivery Challan
 Inspection Report by the Inspection Committee
 Commercial/Sales Invoice/Sales Tax Invoice /
Bill/ Cash Memo /Receipt
 Bill of Entry/ Lading
 Warranty/ Guaranty
 Accessories & Tools
 Seal Pack/Packing
 Instructions Books/Manuals/Training Material/
Packing List
 Installation Instructions/Safety Manuals/SOPs
 Budget Provision/Commitment Accounting
 Stock Register
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69. Cont… Documentation
 Sanction to Incur Expenditure
 Revenue Stamps
 Contingent Bill Passed for Payment
 Pre-Audit of Payment/ Payment Break-up
 Issuance of Cheque
 Verification of Actual Payee
 Actual Payee Receipt (APR)
 Security Deduction Certificates
 Tax Deduction Certificates
 Refund of Security on the basis of Certificates of
successful completion
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70. Cont… Documentation
 Permanent Advance/Impressed and
Recoupment thereof
 Temporary Advance and its adjustment
 Procurement through Letter of Credit (LC)
 Purchase of Books
 Repairs
 Auctions
70

71. What and How to Get Rid of
Accountability?
71

72. Thanks
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