Accounting for Taminat_VIERNUM

Document Number: IC-G0I_SDU002
Islamic Republic of Afghanistan
Ministry of Finance
Treasury Department
Accounting Brief
Taminat Accounting and Control

Title:
Originating Office:
Ministry of Finance -
Treasury
Guideline Number:
SDU02
Page Number 2 of 16
Supersedes:
New Document
Approved By:
Treasury
Date Issued:
01 XXXX 201x
Date Effective:
01 XXXX 201x
1. Purpose
The purpose of this document is to provide direction on the process with respect to Taminat payments,
accounting and control.
This document is to assist new employee or temporary worker substituting for employees normally
engaged in these activities.
This document is prepared on the basis of a review of existing payment process, available records and
accounting procedure followed as of May 2013.
2. Definition – Taminat
Taminat represents holdbacks on vendor payments made by the GoIRA to assist in assuring compliance
to contractual commitments. This practice does not occur with all contracts, however when applied the
percentages withheld normally amounts to 10% of the transactions gross value. It is routine that Taminat
is withheld in one fiscal year and paid in a later year. Often times, the application for payments occurs
several years after withholding has occurred.
Taminat is deducted from payments to the contractor. The contractor receives the Taminat payment only
after the end of guarantee period and if there are no defects or problems with goods and services
received according to the terms of the contract.
The guarantee period is the contracted period of time within which a buyer may lay claim against the
supplier if a deficiency in product, work or service is detected.
It is the responsibility of the implementing agency to deduct the Taminat and to refund it to the contractor
upon successful performance.
3. Accounting Procedure-Existing Process

Title:
Originating Office:
Treasury
Guideline Number:
SDU02
Page Number 3 of 16
Supersedes:
New Document
Approved By:
Treasury
Date Issued:
01 XXXX 201x
Date Effective:
01 XXXX 201x
3.1 For Development Budget
Accounting of Taminat is done on accrual basis. Liability for Taminat is created initially at the time of
payment to the contractor.
Accounting Entry
Scenario 1 # In Case Grant/ Program not closed.
Step 1: Posting of M16
Step 2: At the time of payment (Check Print)
Step 3: Payment of Taminat
Scenario # 2: Closure of Grant
# Object Description Object Code - e.g. Debit Credit Effect on Account
Expense - Construction of
Building
25105 1000 ▲ Increase
Tax Liability-Company Tax
@2%
41202 20 ▲ Increase
Taminat @10% 42104 1 100 ▲ Increase
Account Payable 41150 880 ▼ Increase
For Payment to Vendor
1 Account Payable -Net 41150 880 ▼ Decrease
Bank –Special Account 27232 880 ▼ Decrease
For Payment of Tax Liability
2 Tax Payable 41202 20 ▼ Decrease
Bank –Special Account 27232 20 ▼ Decrease
1 Taminat @10% 41202 100 ▼ Decrease
Bank – Special Account 27232 100 ▼ Decrease

Title:
Originating Office:
Treasury
Guideline Number:
SDU02
Page Number 4 of 16
Supersedes:
New Document
Approved By:
Treasury
Date Issued:
01 XXXX 201x
Date Effective:
01 XXXX 201x
The Taminat deducted is transferred from the special account of grantee/ donor to the Taminat account of
the Treasury.
Step 1: For transfer of Taminat amount as well as Taminat liability
Step 2: Payment of Liability
3.2 For Operating Budget
Step 1: Posting of M16
Step 2: At the time of Payment (Check Print)
1 Taminat 42104 100 ▼ Decrease
Bank - Special Account 27232 100 ▼ Decrease
2 Bank – Dev. Budget
Taminat Account
Taminat 42104 100 ▼ Increases
1 Taminat 42104 100 ▼ Decrease
Bank – Dev. Budget
Taminat Account
100 ▼ Decrease
# Object Description Object Code – e.g. Debit Credit Effect on Account
For Booking of Liability
1 Expenses 22201 1000 ▲ Increase
Tax Liability 2% 41214 20 ▲ Increase
Taminat Liability 42104 100 ▲ Increase
Account Payable-Net 41132 880 ▲ Increase
For Payment to Vendor
1 Account Payable -Net 41132 880 ▼ Decrease
Bank TSA 880 ▼ Decrease

Title:
Originating Office:
Treasury
Guideline Number:
SDU02
Page Number 5 of 16
Supersedes:
New Document
Approved By:
Treasury
Date Issued:
01 XXXX 201x
Date Effective:
01 XXXX 201x
Step 3: Transfer of Taminat to Line Ministry Revenue Bank Account (Sweep Account)
The Taminat deducted is transferred to line ministry revenue account which is swept back to the Treasury
TSA account at end of week.
Essentially, the amount remains with the TSA account.
Step 4: Payment of Taminat
4. Record Keeping
 A data base is available only for those Taminat transferred to the development budget Taminat
account due to closure of grant/ program to track the Taminat paid and outstanding. In all other
cases, no such database is available.
For Payment of Tax Liability
2 Tax Payable 41214 20 ▼ Decrease
For Reversal of Taminat Liability Booked and Transfer to Line Ministry Revenue Account
1 Taminat Liability 42104 100 ▼ Decrease
Account Payable 41132 100 ▲ Increase
2 Account Payable 41132 100 ▼ Decrease
For amount Swept back in TSA Account
1 Bank TSA 100 ▲ Increase
Trust Repayment-Taminat
Liability
1 Trust Repayment-Taminat
Liability
42106 100 ▼ Decrease

Title:
Originating Office:
Treasury
Guideline Number:
SDU02
Page Number 6 of 16
Supersedes:
New Document
Approved By:
Treasury
Date Issued:
01 XXXX 201x
Date Effective:
01 XXXX 201x
 In all other case, at the end of each year, the transaction recorded in the AFMIS object code 42104
used for recording Taminat liability is imported in the excel spread sheet and saved. Whenever
request for payment (M16) is received, the detail of M16 is tracked to these Excel spread sheet for
ascertaining that the Taminat was deducted in the past. The corresponding entry in the Excel sheet
is highlighted green to record that the Taminat is paid. The transactions in the spread sheet are
highlighted to avoid the payment of the same Taminat again in future claim.
5. Review Observations and Recommendations
The objective of the examination was to assess present activities as they relate to financial control over
Taminat. As part of this undertaking, practices were compared with the requirements of the GoIRA Public
Finance and Expenditure Management Law to validate compliancei.
The current primary point of control resides with field program managers responsible for submission of
claims for payment of Taminat. As an oversight to this the SDU maintains a control spread sheet with the
objective of accounting for all outstanding Taminat.
Control over the validity of requests for payment of Taminat would be increased by implementation of the
following actions:
 Copies of the detailed bank statements for closed accounts must be retained by the SDU and be
readily available. Potentially these can be retained in a “searchable” electronic form.
As part of the procedure when paying prior period Taminat, before releasing such payments, an
independent search of these bank statements must be made by the SDU to confirm that the amount
being claimed has previously been paid.
 The supplementary spread sheets1 maintained by the SDU must be independently reconciled to
the AFMIS Taminat liability control accounts on regular basis, not less than quarterly.
1 Maintenance of this separate record cannot be avoided currently. The process of booking out and rebooking in
individual transactions year-over-year would be arduous and prone to error. There could be a possibility to control
Taminat via Vendor Records within AFMIS, this however would require 1. Multi-year data being retained 2. An
improvement in the orderliness of using vendor names and numbers in disbursements. It was noted that often times
M-16s are processed using bank account numbers as opposed to the vendor names and numbers. Being able to
access multi-year vendor activity however would still require reconciliation and analysis to extract the open / unpaid
amounts in vendor accounts representing “unpaid” Taminat.

Title:
Originating Office:
Treasury
Guideline Number:
SDU02
Page Number 7 of 16
Supersedes:
New Document
Approved By:
Treasury
Date Issued:
01 XXXX 201x
Date Effective:
01 XXXX 201x
As part of this process an aging analysis should be prepared. Items which appear to be extra ordinarily
old or otherwise noteworthy should be specifically queried to source to determine if they remain active.
Items which are inactive must be reversed.
Additional recommendations resulting from the review are:
Item
Nr
Finding / Observation Recommendation
1 Accounting for Taminat is not GoIRA Public
Finance and Expenditure Management Law
(PFEML) which requires reporting of financial
information compliant with GFS Cash Basis
Accounting.
Current practices resulted in the
overstatement of expenses in 1391 by
approximately 272.5 million AFN.
Accounting practices must be modified to
insure compliance with the Law. This would
require an account analysis be performed on
Account 42104 Taminat.
To be compliant with the PFEML Cash Basis
Accounting all amount which does not
represent disbursements of cash during the
fiscal year would have to be reversedii.
2 Manual Journal Voucher/ Entries examined
were noted to be not compliant to principles of
orderly bookkeeping.
Specifically:
1. There was no indication of secondary
review and approval
2. There was no indication of the posting of
entries
3. Explanations of entries on the face of the
JV document were unspecific 2
All entries to the books of account should be
reviewed by one person other than the
originator. This should be documented both on
the supporting documentation as well as within
the system. Once posted all supporting
documentation should indicate this. In
addition, clear, specific descriptions of the
nature of journal entries should be used. Use
of short text for posting into the Free Balance
system does not preclude more
comprehensive descriptions being included as
part of the journal voucher package of
information.
3 Transfer of closed project / grant specific
bank account balances is done in summary.
Detail concerning which particular bank
accounts is lost in consolidation.
So that the continuity of documentation can be
preserved, the closing of project / grant specific
bank accounts should be journalized as
individual line items.
2 The observation relates to the examination of JV Nr. 44 for 96.8 Billion AFN posted to A/C 42104. This was a
singular A4 page. The narration was generic: “Transfer of Taminat upon closure of Grant”. Supplementary supporting
documentation and a verbal explanation was located quickly; however neither provided details on which grants had
been closed – when and in what amount. There were a further 10 such entries to the account totaling 189.2 billion
AFN, they were not examined.

Title:
Originating Office:
Treasury
Guideline Number:
SDU02
Page Number 8 of 16
Supersedes:
New Document
Approved By:
Treasury
Date Issued:
01 XXXX 201x
Date Effective:
01 XXXX 201x
The observations and recommendations above are equally applicable to development as well as
operational budget activates as they represent both compliance issues and accuracy of budget execution
reporting3.
Examination Process:
As part of the process the following accounts were examined in detail. In most cases activities from FY
1391 and 1392 were reviewed to insure a comprehensive understanding was obtained.
42104 Taminat Liability 31970 Taminat Payable to Province
42108 Prior 1381 Taminat 31980 Taminat Receivable from
Treasury
31589 27371-Dev Bud Taminat USD A/C 31554 27313-93962ARTF EQUIP II
31151 Taminat Bank Account – Parwan 31510 27293-H398 EIRP
31818 09765-Dev Bud Taminat Afs A/C
The following was noted:
 Account 42104 Taminat has the following uses :
o Number 1 To account for current fiscal period withholdings of Taminats.
These system generated credit entries occur by processing an M-16. One example of this type of
transaction follows, further examples are found in the analysis which accompanied this document:
o Number 2 To account for most payouts4 of Taminat.
3 Although the 1391 analysis indicated an over statement of expenses, depending on the flows and level of activities
with Taminat, it is entirely possible that an understatement could occur. In every case however the cash accounts
general and restricted must be as a matter of consequence, incorrectly stated under the current system.
4 Approximately 5.1 million AFN represented by 43 transactions was debited to the Account 42108 Prior 1381
Taminat
EV Object Description Object
Code - e.g.
Debit Credit Effect on
Account
0000019534 Construction of buildings 25105 1,416,878.00 ▲ Increase
Unregistered company
Tax 2%
41202 28,337.56 ▲ Increase
Taminat 42104 141,688.00 ▲ Increase
Bank 31XXX 1,246,852.44 ▲ Increase

Title:
Originating Office:
Treasury
Guideline Number:
SDU02
Page Number 9 of 16
Supersedes:
New Document
Approved By:
Treasury
Date Issued:
01 XXXX 201x
Date Effective:
01 XXXX 201x
These items include disbursements of Taminat withholdings during the current fiscal year 5as well as
those from prior fiscal years. Within the items review there were multiple cash accounts noted as the
offsetting debit. It would appear that selection of particular accounts is a function of the specific bank
accounting related to the project be active or in active6.
Representative cash accounts included:
o Number 3 To account for Taminat amounts from most of the closed grants / projects7.
Throughout the year, as donor funded projects close, the remaining unpaid funds, representing Taminat
are transferred as lump sums into Account 42104 Taminat liability. During 1391 there were a total of 11
such individual transactions totaling 189.2 million AFN.
6. Proposed Changes
6.1 Accounting Procedure- Cash Basis
Scenario 1: When Taminat paid within the year
Step 1: To Record the M16
# Object Description Object Code –
e.g.,
Account
1 Expenses 21205 100,000 ▲ Increase
Tax liability 2% 41202 200 ▲ Increase
Taminat 42104 10,000 ▲ Increase
Account Payable-Net 41132 89,800 ▲ Increase
5 A review of all items in Account 42104 Taminat for 1391 found only four transactions that represented withholding of
Taminat and payment within the period. In 1391 there were 895 transactions representing approximately 881 billion
AFN withheld for Taminat and 256 transactions with a total value of approximately 609 billion AFN representing
disbursements of Taminat
6 All transactions examined that were debited to Account 31818 09765-Dev Bud Taminat Afs A/C were found to
represent inactive donor/program specific bank accounts.
7 Account Nr. 42108 Prior 1381 Taminat appears to be used to account for Taminat related to these periods. 43
transactions, totaling approximately 3.3 M AFN were debited to this account during 1391. No material amounts were
credited to the account during the period. The account is a liability account and should have a credit balance, 1391
activity produces a net debit balance of 3.3 M AFN.
3158
9
27371-Dev Bud Taminat USD A/C 31400 27232-Donor Discretionary
Fund
3156
3
27331-H498 3rd add fin EIRP 31818 09765-Dev Bud Taminat Afs
A/C

Title:
Originating Office:
Treasury
Guideline Number:
SDU02
Page Number 10 of 16
Supersedes:
New Document
Approved By:
Treasury
Date Issued:
01 XXXX 201x
Date Effective:
01 XXXX 201x
Step 2: To Record Payment (Check Print)
e.g.,
Account
1 Account Payable-Net 41132 89,800 ▼ Decrease
Tax Liability 2% 41202 200 ▼ Decrease
Bank TSA 90,000 ▼ Decrease
Step 3: To Record the Taminat Payment
e.g.,
Account
1 Taminat 42104 10,000 ▼ Decrease
Bank – TSA 31100 10,000 ▼ Decrease
Scenario 2: When Taminat not paid within the year
Year 1:
Step 1: To Record the M16
e.g.,
Account
1 Expenses 21205 100,000 ▲ Increase
Tax liability 2% 41202 200 ▲ Increase
Account Payable-Net 41132 89,800 ▲ Increase
Step 2: To Record Payment (Check Print)
e.g.,
Account
1 Account Payable-Net 41132 89,800 ▼ Decrease
Tax Liability 2% 41202 200 ▼ Decrease
Bank TSA 90,000 ▼ Decrease
Step 3: To Recognize the M16 – At the year end
This entry will allow the expenses to be booked at the extent of cash paid in the financial statement.
e.g.,
Account

Title:
Originating Office:
Treasury
Guideline Number:
SDU02
Supersedes:
New Document
Approved By:
Treasury
Date Issued:
01 XXXX 201x
Date Effective:
01 XXXX 201x
Expenses 21205 10,000 ▼ Decrease
Year 2:
Step 1: To recognize the M16 –Beginning of the Year
e.g.,
Account
1 Expense 21205 10,000 ▲ Increase
Step 2: To Record Payment
This will allow the expenses to be recorded in the year in which it is paid as per cash basis accounting.
Further it will carry the record forward each year and we will have updated data of unpaid Taminat.
6.2 Required Database
 As Taminat is a contingent liability to be paid upon successful completion of work and guarantee
period, a complete record of Taminat deducted is required to be maintained to track the deduction
and payment. This will help in verifying the deductions of earlier years for payment requests received
in the later years.
 A database showing the amount of Taminat deducted, paid and remaining for each M16s to be
developed.
7. Benefit
 Compliance with cash basis of accounting. It will record expenses only to the extent of cash paid.
 Compliance with PFEML. PFEML requires the details of the contingent expenditures.
 Database will ensure control over payment of Taminat in the later years.
 Provide record for earmarked government fund in respect of Taminat.
e.g.,
Account
Bank - TSA 31100 10,000 ▼ Decrease

Title:
Originating Office:
Treasury
Guideline Number:
SDU02
Supersedes:
New Document
Approved By:
Treasury
Date Issued:
01 XXXX 201x
Date Effective:
01 XXXX 201x
8. Description of Process flows of government purchases involving Taminat.

Title:
Originating Office:
Treasury
Guideline Number:
SDU02
Supersedes:
New Document
Approved By:
Treasury
Date Issued:
01 XXXX 201x
Date Effective:
01 XXXX 201x
8.1 Description of Accounting Entries
Entry Description of Entry Commentary
Fiscal Year One - Current Process Entries
A1 This entry is to record the
payment of an M-16 which has
Taminat as part of its makeup.
The journal voucher is a standard entry. However, if payment
of Taminat does not occur in the same fiscal reporting period ,
expenses reported would be overstated by the amount of the
Taminat
100% of the expense is charged to the fiscal year, 90% of the
cash has been disbursed.
Decrease in Cash does not equal the increase in Expense.
With Cash Basis accounting, expenses equal cash paid out.
Fiscal Year Two - Current Process Entries
C1 This entry is record the payment
of Taminat to a vendor
The nature of this entry causes non-compliance to the PFMEL.
The accounting does not reflect the expenditure of cash during
the financial reporting period.
Both accounts are balance sheet accounts.
Fiscal Year One - Current Process Entries
B1 This entry is to record the
payment of an M-16 which has
Taminat as part of its makeup.
This entry is identical under both process flows. It is a standard
entry
B2 This is an adjusting journal entry
(AJE) to recognize those “non-
payments” of Taminat during the
financial reporting period
This AJE is made as part of the
closing of the fiscal year
This is a proposed new journal entry.
This AJE is required to correct books of account to document
compliance for a cash basis of reporting.
The entry would be made at the end of each period to account
for all unpaid Taminat for active grants.
A separate accounting process is required to account for
Taminat associated with closed grants.
Cash based accounting recognizes expenses only when cash
leave control of the reporting entity. In the example illustrated,
the Taminat has not been paid out during the Fiscal Year One.

Title:
Originating Office:
Treasury
Guideline Number:
SDU02
Supersedes:
New Document
Approved By:
Treasury
Date Issued:
01 XXXX 201x
Date Effective:
01 XXXX 201x
Cash outflows for the reporting period equals expenses
recognized for the period.
Fiscal Year Two - Current Process Entries
D1 This AJE is made at the
beginning of the fiscal year. It is
a reversal of the entry B2 above.
This is a proposed new journal entry.
The entry is a reversal of B2.
It reestablishes the Taminat as expenses until they are paid out
or until the grant, that they represent is closed. In the case of
closure of grants, a particular process is followed to account for
funds.
D2 This entry is record the payment
of Taminat to a vendor
This entry is identical in both the current and the proposed
processes.
It removes the Taminat from the un-paid Taminat list.
8.2 Description of Accounting Entries impact on Financial Reporting
Current Process Proposed Process for Compliance
Fiscal Year One
Under the current processes
annually, reported expenditures
would be overstated by the amount
of the Taminat withheld but not
paid.
The amounts reported as
expenses would be equal to the
balance of the account 21XXX.
However, this amount does not
correspond to the decrease in the
cash accounts. The decrease in
cash accounts represents cash
expenses.
Reports prepared based on figures
compiled in under the current
process would be non-compliant to
the PFMEL.
The propose process adjusts expenses to equal the decrease in
cash that occurred during the period.
Increase in expenses equals the decrease in cash.
This causes the reports to be compliant with the international
reporting standards required by the PFMEL.
In the GFS Cash basis accounting which “… in effect means that
transactions are captured when cash is received or when cash
payments are made.”
As per IPSAS on Cash basis accounting, “The measurement focus
in the financial statements is balances of cash and changes therein.
Notes to the financial statements may provide additional information
about liabilities, such as payable…”
The open / unpaid Taminat represents a restriction on cash
available to the GoIRA. This would require a note comprehensive a
noteiii
to the financial statements for both active and in-active grants,
representing all amounts, which are contingent liabilities against the
GoIRA arising from Taminat.

Title:
Originating Office:
Treasury
Guideline Number:
SDU02
Supersedes:
New Document
Approved By:
Treasury
Date Issued:
01 XXXX 201x
Date Effective:
01 XXXX 201x
Fiscal Year Two
No expenses are recognized
during the year. Expenses are
understated. Accounting entries
bypass those accounts which are
represented in the Statement of
Sources and Uses of Cash
The cash out flow represented by
payment of the Taminat does not
pass through the expenditure
reporting.
By booking AJE D1 discussed above, expenses associated with the
unpaid / open Taminat are recognized during the period.
8 The decrease in cash for payment these Taminat during the
reporting period corresponds an increase in expense.
Reporting on this basis is compliant to the GFS Cash basis
accounting which “… in effect means that transactions are captured
when cash is received or when cash payments are made.”
1
An example of such a Note to the Financial Statements for cash balances would be:
As of FY 1391, the GoIRA had cash in bank balances of AFN 10,000,000.
Of this amount, AFN 9,000,000 (90%) represents amounts freely available to the GoIRA for use in funding
operations; AFN 1,000,000 (10%) represents amounts reserved for unpaid Taminat.
Within the amount of unpaid Taminat, there is an amount of AFN 350,000 representing amounts payable to suppliers
under grants that have expired. The GoIRA undertook all necessary steps to insure that funds had been received
from Grantees and that these funds have been set aside to pay these obligations when presented. Under current
GoIRA procurement, law claims for payment of Taminat never expire, as long as contractors are incompliance with
delivery terms and conditions. Contractors may claim payment at any time.
During the reporting period there were no instances were GoIRA exercised its rights to withhold Taminat based on
contractual non-performance.
8
Should a Taminat not be paid during the period, the expense would be reversed out by execution of an AJE B2 at
the end of the period. Such an entry would be made either until such time as the Taminat is paid, is cancelled or
until its validity expires.

Title:
Originating Office:
Treasury
Guideline Number:
SDU02
Supersedes:
New Document
Approved By:
Treasury
Date Issued:
01 XXXX 201x
Date Effective:
01 XXXX 201x
i Legal and Regulatory References:
Per GoIRA / PFMEL
Article 53. Classification of budget records
1. The Ministry of Finance shall establish classification systems for budget and accounting records in observance
of the following:
(1) To facilitate the control of expenditures by state administrations; [and]
(2) To permit analysis of expenditure by organization, function, and economic category according to the
Government Financial Statistics cash basis classification requirements as set out by the International
Monetary Fund.
Per GFS
The Statement of Sources and Uses of Cash reflects a cash basis of recording. This in effect means that transactions
are captured when cash is received or when cash payments are made.
IPSAS
Cash Basis of Accounting
1.2.2 The cash basis of accounting recognizes transactions and events only when cash (including cash equivalents)
is received or paid by the entity. Financial statements prepared under the cash basis provide readers with information
about the sources of cash raised during the period, the purposes for which cash was used and the cash balances at
the reporting date. The measurement focus in the financial statements is balances of cash and changes therein.
Notes to the financial statements may provide additional information about liabilities, such as payables and
borrowings, and some non-cash assets, such as receivables, investments and property, plant and equipment.
To accomplish this it would be necessary analyze A/C 42104 identifying all Taminats withheld which remain unpaid.
At year end a summary booking by block code would be made reversing the expenses. At the beginning of the
following year, this entry would be reversed. At the end of each fiscal year, the same process would be followed.
The analysis would be attached as support to the JV.
An illustration of the above procedure along with the current procedure is shown in section 8.
Pending implementation of a Free Balance based solution (i.e. Vendor Master Files) the detailed excel sheets
maintained by the SDU should agree to the entry summary amounts.

Accounting for Taminat_VIERNUM

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