Process of Budget Preparation, forecasting, and Budget planning in Govt Departments in Pakistan.

1. 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

2. In Economics & Public Sector
Financial Management (PFM):
2
 “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

3. 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

4. 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

5. 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

6. 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

7. Sections of BCC:
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BCC has two (02) Sections:
 Section-I:
 Section-II

8. 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)

9. 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

10. 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

11. 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
 Upon completion 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

12. 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

13. Continued…
 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
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14. Appendix B: Budget Calendar
 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)
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15. Appendix C: Budget Preparation Process
 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
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16. Continued…
 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)
16

17. Continued…
 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)
 Review and approval of budget estimates and
additional demands (current + development) by the
Priorities Committee
17

18. Continued…
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
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19. Continued…
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
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20. Computerization of Budget:
 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
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21. Two (02) Modules of SAP:
 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.
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22. Chart of Accounts (CoA): Coding Structure;
Five (05) Elements:
 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
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23. Object Codes:
 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
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24. SECTION-I of BCC:
 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
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25. ANNEX – I; Procedure for Receipts:
 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)
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26. ANNEX – II; Procedure for Current &
Development Expenditure:
 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
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27. ANNEX – III; Instructions to Fill
BO/NIS:
 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
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28. ANNEX – IV; Format of BO/NIS:
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29. ANNEX – IV; Format of BO/NIS:
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30. ANNEX – V; Posts Proforma:
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31. ANNEX – VI; Spending DDOs:
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32. ANNEX – VI; Spending DDOs:
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33. ANNEX – VI; Spending DDOs:
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34. ANNEX – VI; Spending DDOs:
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35. 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.

36. 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

37. 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)

38. Download Links: Federal Budget
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39. Federal Budget Publications 2019-20
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40. Federal Budget Publications 2018-19
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41. BCC 2019-20
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42. Pak. Economic Survey 2018-19
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43. 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’

44. Thanks