BUDGET

HISTORY OF BUDGET:

2.1 The institution of budget originated in the West. During the days of absolute monarchy the treasury was at the disposal of the king, who spent out of it in any manner he liked. There was no control whatsoever on the purse strings. It is a well-known historical fact that struggle for representative government in England began with the right to control the purse. When this was acquired, the right to control expenditure through appropriation was asserted. By and by the executive was required to produce for the approval of the Parliament every year a complete plan of income and expenditure. Nearer home in the Indo-Pakistan sub-continent there was the same story. There was no better way of asserting that control than to require the government to submit a comprehensive plan for the approval of the legislature showing how much money they needed for any one year and how they proposed to raise and spend it. This plan was called the BUDGET.

ORIGIN OF THE WORD "BUDGET":

2.2 The word ' Budget' is derived from the French word ' Bougette' a diminutive of the old French word 'Bouge' meaning a small bag or wallet. In its present sense the word was first used in 1733 in connection with Sir Robert Walpole's financial scheme in an anonymous pamphlet entitled "The Budget Opened' in which Walpole was ridiculed as a conjurer, the budget being his wallet or bag of tricks and deceptions. The phrase, however, stuck. The meaning of the word 'budget' has now shifted from the bag to the documents containing the financial proposals and is accepted as such in the parliamentary phraseology.

BUDGET AND BUDGET ADMINISTRATION:

2.3 Gladstone, whose advance in British politics rested in large measure on the brilliant way in which he filled the office of Chancellor of the Exchequer, once said 'Budgets are not merely affairs of Arithmetic, but in a thousand ways go to the root of prosperity of individuals, the relation of classes and the strength of kingdoms'. To this observation might be added another: "The efficiency, the reputation and the development of the programme of the government of the day are advanced or retarded by the effectiveness not only of budget procedures but of devices of fiscal control".

THE PURPOSE OF BUDGET:

2.4 'No man' said Swift "will take counsel, but every man will take money. Therefore, money is better than counsel". The aphorism with some modification applies to government agencies. Just as the eventual control of government activities by the legislature stems from the power of the purse (the revenue system and the appropriation system), so the direction by the chief executive is aided by his authority over projected and actual expenditure.

2.5 The budget is a fiscal blue-print of projected government activity put side by side with the record of past years and joined to an estimate of public revenues. It has been referred to as "the direction of public expenditure with the purpose of obtaining the maximum estimated social income". The budget is not only an estimate but a justification. Nor is it merely a loose leaf compila­tion of separate expense sheets; it is correlated master-plan of government outlays. Its preparation is not the work of isolated agencies; it is a centrally supervised operation.

2.6 Nor does the budget system end with the drafting of the document. It is followed by a thorough consideration at the hands of the legislative branch. For it is here that the action of the executive department must be subjected to scrutiny. Approved, the budget becomes a handbook of administrators, guiding their courses and fencing their ambitions, behind a wall of rupee signs—or dollars or pounds, or francs or roubles.

BUDGET STRATEGY AND TACTICS:

2.7 The story of budget procedure and practice gives little indication of the complex inter-play of powerful forces that are involved in reaching budget decisions. These forces are continuously at work, through the whole process of government policy-making programme planning, financing and executing —and shift their emphasis from the executive to the legislative branch and back again, or at times seek to build strength by cultivating a favourable public opinion..

THE BUDGET AS EQUILIBRIUM OF COMPETING FORCES:

2.8 A budget as finally approved by a chief executive and submitted to a legislative body is a momentary balance between two sets of forces, one for spending, and one against. The appropriation act or acts represent another equilibrium achieved by the balance of the same pressures at work in legislative chambers. The balance is only a temporary one, destined to stand at most for a year or two and once painfully achieved is already an object of sapping and mining. Intertwined with the equilibrium is another balance between competing expenditure groups. The pressures in favour of spending are very great; they arise out of acutely felt needs by considerable number of the people who seek advantages from publicly supported programmes. One large group of such pressures stems from the demand for improved services or for new services. Characteristic of the first type are the frequent campaigns for better police -work—more effective training, more complete utilization of present resources, friendlier relations with the public. These may mean a bigger police budget, but the main pressure on public expenditure arises from the claim for more police, higher salaries, and modern equipment.

2.9 Demands for new services (and new expenditures) are always pushing forward in varying degrees of readiness for action. The history 4of government at all levels has been one of expanding functions and of new programmes. Over a hundred years ago a frustrated member of the American Congress exclaimed, "Sir, there are two things that never go back: one the increase of officers, the other the increase of their salaries. We never decrease officers; we never decrease salaries.

THE ETERNAL PROBLEM OF VALUES:

2.10 Although not denying the progress that has been made in the technical realm, critics would have the budgeters grapple more effectively with values. They would bring into the budgetary process those who could deal with the fundamental problems, of economics, political theories and social sciences. Answers must be found to questions such as the following. What is the effect of different levels of public expenditure upon the private economy?1s it more desirable from the standpoint of the nation as a whole to spend money on guns or butter, atomic research or social welfare? What would be the relative effect of financing through borrowing or a new tax? Are the claims of pressure groups in favour of additional appropriations sound from a technical and "public interest" standpoint? Is too much expenditure going into special project because of the political strength of their sponsors? What are alternatives to the present allocation of funds, and what are the factual data to support such alternatives?

PERFORMANCE BUDGET:

2.11 Performance budgeting entails adoption of the budget based upon functions, activities and projects. The essence of this is the development of work load statistics. The argument in favour of this type of budgeting is that it permits administrators, legislators, and tax-payers to know what the money is buying and to make some fairly accurate estimates of whether they are getting value received. It replaces flying by guesswork with flying by navigation instruments, and thereby provides guide-posts that indicate general direction. This approach should make budget 'padding' more difficult, particularly after there has been sufficient experience to establish norms. It should make far happier relations between the legislature and administrative agencies because administrators will be able to present their budget requests in terms of alternate work programme. The legislature that wants to reduce expenses will be told how it can do so in terms of work units rather than by a flat percentage cut. The basis for controversy will then be what work is to be done in terms of the funds available. It puts political decisions in the hands of the political authorities where they should be. Of course, there will still be plenty of rooms for argument as to the correctness of the work units, but that should produce beneficial results by encouraging budget staff agencies to carry on current research There would be constant efforts to ascertain better ways of doing things, with the result that a common reservoir of work performance information would be available Under such circumstances it would be rather difficult for agencies to get out of line.

2.12 The difficulty with this type of budgeting is that people resist its introduction. There are numbers of reasons for this, but perhaps the chief one is the insecurity aroused when one's job is studied. It is the same type of resistance encountered in all efforts to study and analyse work in administrative research and work simplification. Functionaries right from the head of department down to the level of a B-l employee are apprehensive that they will be required to do more work, will have to learn new methods, will be criticized or will lose their jobs. Performance budgeting actually does imply continuous study and reappraisal of jobs and methods. From an overall management view-point, this is all to the good, but individuals resist it. Thus a great deal of orientation is required to induce an organization to accept a continuous work review and measurement.

2.13 Budget planning as well as all other types of planning must be based upon information which can be obtained by an orderly gathering of statistical data. Performance budgeting requires statistical data relative to production and productivity, which in turn is tied into fiscal accounting. The more complete and accurate these data are, the more effective the planning will be. But this requires considerable record-keeping.

DECENTRALIZATION:

2.14 Another advantage of performance budgeting is that it will force decentralization which is generally regarded as desirable because it pushes decision-making down to the operating level. It will do this because the performance units which go into budget planning and control must be developed at the level where direct production takes place. These performances will be based upon study of actual job experience. Delegation will be encouraged by removing one of its principal obstacles, namely lack of information at headquarters about performance at the grass roots. Delegation and decentralization, perhaps the dominant goals of modem administrative management, are nourished by performance standards. The formula stated above runs as follows: headquarters says: (i) what is to be done (ii) what services are to be performed at stated levels of quality (iii) headquarters develops standards of performance on the basis of field studies, historical experience, and professional training; (iv) authority commensurate with responsibility is delegated to the work level, whether at the centre or in the field. The people on the production level proceed to make the decision necessary to carry out objectives. In doing so they are guided by standards set by headquarters, these standards being general guide-posts rather than minute sanctions. Headquarters control by knowing what is going on rather than by making day to day operating decisions. It obtains the knowledge necessary for such control by means of written report and by planned inspection visit to the field.

2.15 The pattern of budget planning in most jurisdictions, however, is one of detailed decisions being made by the Ministry of Finance. It has been held that greater emphasis should be put on the development of policies to govern the preparation of estimates and on "the development of adequate budget work in the departments, themselves, and comparatively less on the review by its own staff of the review of departmental estimates". The notion that they could obtain a balanced budget only by detailed review of departmental estimates and by using a blue pencil on them does not hold ground any longer. But it is also true that it is probably, neither possible nor desirable to eliminate central scrutiny of departmental estimates. The development of performance and work load standards should reduce snap decisions made hurriedly on the basis of inadequate data.

DEMOCRATIC BUDGETING:

2.16 Modern management philosophy tends strongly towards democratic concept and practices. People understand how and why budget decisions were made even though they may have been adversely affected.

2.17 It is highly desirable that the budgetary process be democratized for two reasons: (i) it is the heart of administrative management (ii) there is a tendency among finance officers to be authoritarian. As to the first, if one believes in the new philosophy of democratic motivation, he must also apply it to budgeting. Traditional concepts of management that a manager was helpless unless he had unlimited power to hire fire and transfer people at will, is now yielding ground to the human relations. Organization effectiveness can be obtained only by treating each of the specialists as an integral member of the management team. Budgeting can never attain its maximum possibilities until it is regarded as a tool of management rather than the scourge of God. Moreover, it must be treated as a tool for the remote Held supervisor as well as for the Minister for Finance.

BUDGETING COD PLANNING:

2.18 A budget is a proposed work programme, with estimates of the funds necessary to execute it. A work programme is a plan. The process of preparing estimates and organizing them into a coherent agency budget necessarily involves planning. The budget may, therefore, be said to represent a plan or a considerable number of plans in different areas of public functions.

2.19 The plan represented in a set of annual or biennial estimates is not, however, a complete plan. It is the annual segment of a plan that normally may require two, three, five or ten years to bring fruition. It is consequently related to the annual segments of a plan that was represented in previous budgets, and that will be represented in future budgets. Once, President, Harry S. Truman told the Congress, "The fact is that the financial programme of the Government cannot be planned in terms of the single year. It must be planned in the light of security, economic, and budgetary goals—not for the ensuing year but for three and even four years ahead.

2.20 It follows that the budget for any fiscal year is an expression both of a part of programme for the year and also of parts of programmes for several years ahead. The planning that is represented in budget estimates is the product of the departments and their sub-ordinate offices, not the work of the Ministry of Finance. No budget agency can do more than review and criticize the plans of the operating establishments. The initiative does not lie among the budget examiners.

2.21 Planning and budgeting are, therefore, two complementary operations. Policy and programme planning come first: the translation of annual or biennial segments of a plan into figures follows. The departments take the initiative; the budget men review and criticize and the legislative bodies decide both on plans and estimates.

2.22 Much budget-making, however, hardly represents a plan beyond the mere projection of presently available sums into the next fiscal year. Since the signal for legislature's challenge of estimates is variation from the existing level of expenditure many figures are justified, because they are identical with their predecessors. Such reasoning avoids the question whether they should be more or less. Indeed, in the broader sense of the term, the opportunity for planning on a comprehensive scale, with a genuine decision on the relative values of spending more or less, or here rather than there, hardly exists Some agencies can and do plan for long-range goals within their specialty, and this is a notable advance. Whether afforestation or soil conservation, or civil defence is entitled to priority in an overall evaluation of social plans and necessities is a problem for the final resolution of which no institutional means exist, or probably could exist, other than those found in the National Assembly.

FINANCIAL PROCEDURE UNDER THE CONSTITUTION:

2.23 Federal Consolidated Fund (Article 78).—All revenues received and all loans raised by the Federal Government in repayment of any loan, shall form part of a consolidated fund to be known as the Federal Consolidated Fund.

2.24 All other moneys received by or on behalf of Federal Government or received by or deposited with the Supreme Court or any other Court established under the authority of the Federation should be credited into the Public Account of the Federation.

CUSTODY, ETC. OF FEDERAL CONSOLIDATED FUND AND PUBLIC ACCOUNT (ARTICLE 79):

2.25 The custody of the Federal Consolidated Fund, payment of moneys into the fund, the withdrawal of moneys therefrom, the custody of other moneys received by or on behalf of the Federal Government, their payment into, and withdrawal from, the Public Account of the Federation and all matters connected with or ancillary to the matters aforesaid, shall be regulated by Act of Parliament or, until provision in that behalf is so made, by rules made by the President.

ANNUAL BUDGET STATEMENT (ARTICLE 80):

2.26 (i) The Federal Government shall, in respect of every financial year, cause to be laid before the National Assembly a statement of the estimated receipts and expenditure of the Federal Government for that year, in this Part referred to as the Annual Budget Statement.

         (ii) The Annual Budget Statement shall show separately—

(a) the sums required to meet expenditure described by the Constitution as                                                    expenditure charged upon the Federal Consolidated Fund ; and

(b) the sums required to meet the other expenditure proposed to be made from the Federal Consolidated Fund ;

and shall distinguish expenditure on revenue account from other expenditure

EXPENDITURE CHARGED UPON FEDERAL CONSOLIDATED FUND (ARTICLE 81):

2.27 The following expenditure shall be expenditure charged upon the Federal Consolidated Fund:

(a) the remuneration payable to the President and other expenditure relating to his office, and the remuneration payable to—

(i)            The Judges of the Supreme Court;

(ii)           The Chief Election Commissioner:

(iii)          The Chairman and the Deputy Chairman of the Senate;

(iv)          The Speaker and the Deputy Speaker of National Assembly;

(v)           The Auditor General.

(b)   the administrative expenses, including the remuneration payable to officers and servants of Supreme Court, the department of the Auditor-General and the office of the Chief Election Commis­sioner and the Election Commission and the Secretariat of the Senate and the National Assembly ;

(c)  all debt charges for which the Federal Government is liable, including interest, sinking fund charges, the repayment or amortisation of capital and other expenditure in connection with the raising of loans and the service and redemption of debt on the security of the Federal Consolidated Fund ;

(d)  any sums required to satisfy any judgment decree or award against Pakistan by any court or tribunal ; and

(e)  any other sums declared by the Constitution or by Act of Parliament to be so charged.

PROCEDURE RELATING TO ANNUAL BUDGET STATEMENT (ARTICLE 82):

2.28 (i) So much of the Annual Budget Statement as relates to expenditure charged upon the Federal Consolidated fund may be discussed in, but shall not be submitted to the vote of the National Assembly,  (ii) So much of the Annual Budget Statement as relates to other expenditure shall be submitted to the National Assembly in the form of demands for grants and the Assembly shall have power to assent to, or to refuse to, any demand, or to assent to any demand subject to a reduction of the amount specified therein       (iii) No demand for a grant shall be made except on the recommendation of the Federal Government.

AUTHENTICATION OF SCHEDULE OF AUTHORISED EXPENDITURE (ARTICLE 83):

2.29 (i) The Prime Minister shall authenticate by his signature a schedule specifying:—

(a)   the grants made or deemed to have been made by the National Assembly under Article 82; and

(b)   the several sums required to meet the expenditure charged upon Uie Federal Consolidated Fund but not exceeding, in the case of any sum, the sum shown in the statement previously laid before the National Assembly.

(ii) The schedule so authenticated shall be laid before the National Assembly, but shall not be open to discussion or vote thereon.

(iii) Subject to the constitution, no expenditure from the Federal Consolidated Fund shall be deemed to be duly authorised unless it is specified in the schedule so authenticated and such schedule is laid before the National Assembly as required by clause (ii).

SUPPLEMENTARY AND EXCESS GRANTS (ARTICLE 84):

2.30 (i) If in respect of any financial year it is found:-

(a) that the amount authorised to be expended for a particular service for the current financial year is insufficient or that a need has arisen for expenditure upon some new service not included in the Annual Budget Statement for the year ; or

(b) that any money has been spent on any service during a financial year in excess of the amount granted for that service for that year;

the Federal Government shall have power to authorise expenditure from the Federal Consolidated Fund, whether the expenditure is charged by the Constitution upon that r-und or not, and shall cause to be laid before the National Assembly a Supplementary Budget Statement or, as the case may be, an excess Budget Statement, setting out the amount of that expenditure, and the provision of Articles 80 to 83 shall apply to those statements, as they apply to the Annual Budget Statement

[1](ii) The Finance Division has clarified that if there is excess in the "Other Expenditure" (voted) the Federal Government has the power, under Article 84 of the Constitution to authorise expenditure from the Federal Consolidated Fund, and that it is immaterial whether the excess expenditure is authorised by the Federal Government out of the savings from the 'charged' expenditure. Similarly, if there is excess in the 'charged' expenditure the Federal Government has the power to authorise the excess expenditure by re-appropriation of savings from the 'voted' expenditure, there being no bar in the Constitution that the savings from the voted expenditure provided in the Budget cannot be utilized for this purpose. The only condition laid down in Constitution (Article 84) is that the Federal Government "shall cause to be laid down before the National Assembly a Supplementary Budget Statement or, as 'the case may be, an Excess Budget Statement setting out the amount of that expenditure, and the provision of Articles 80 to 83 shall apply to those statements as they apply to the Annual Budget Statements".

VOTES ON ACCOUNTS (ARTICLE. 85):

2.31 Notwithstanding anything contained in the foregoing provisions relating to financial matters, the National Assembly shall have power to make any grant in advance in respect of estimated expenditure for a part of any financial year, not exceeding four months, pending completion of the procedure prescribed in Article 82 for the voting of such grant and the authentication of the schedule of authorised expenditure in accordance with the provisions of Article 83 in relation to the expenditure.

POWER TO AUTHORISE EXPENDITURE WHEN ASSEMBLY STANDS DISSOLVED (ARTICLE 86);

2.32 Notwithstanding anything contained in the foregoing provisions relating to financial matters, at any time when the National Assembly stands dissolved, the Federal Government may authorise expenditure from the Federal Consolidated Fund in respect of the estimated expenditure for a period not exceeding four months in any financial year, pending completion of the procedure prescribed in article 82 for the voting or grants and the authentica­tion of the schedule of authorised expenditure in accordance with the provisions of Article 83 in relation to the expenditure.

REVISED SYSTEM OF FINANCIAL CONTROL AND BUDGETING:

2.33 (i) The system of financial control and budgeting which was carried over to Pakistan from the Government of India, envisaged a heavy concentration of financial powers in the Ministry of Finance with a little delegation to the administrative Divisions and Heads of Departments. The system was the product of colonial administration under which the country had no defined social objectives and bulk of expenditure related to administra­tion, with pronounced emphasis on law and order and defence. This limited purpose enabled control to be exercised by the Finance Department in two ways: budgetary control and expenditure control. The cumbersome pro­cedures for release of funds were a great impediment to the execution of the projects according to schedule. Unnecessary delays in the release of funds resulted in lapsing of the unspent funds on the close of the Financial Year. The inherent shortcomings of the system and its incompatibility with socio-economic requirements of an independent and developing nation were too soon clear to the Government.

(ii) The Administrative Reorganisation Committee (1959) which examined the system in detail concluded thus:

"(a) The system of financial control, particularly the procedure involving "expenditure sanction" is unsuited to modern administrative needs and, in particular, has a serious hampering effect on the implementation of development programmes and execution of approved projects.

(b) The Administrative Ministries at present do not share financial responsibility due to its excessive centralisation in the Ministry of Finance. They are, therefore, tempted to submit exaggerated demands to the Ministry of Finance, and to regard the exercise of sound financial judgment as none of their business.

(c) The system minimizes the importance of the budget as an effective instrument of financial control and planning".

The Committee, therefore, recommended the scraping of the outmoded system and its replacement by the 'revised system of financial control and budgeting'. The revised system, as approved by the Government, was introduced w.e.f. 1st July, 1960, and. with certain modification, is still in force.

2.34 Under the system the proposals in respect of establishments and projects submitted by the administrative Ministries are carefully scrutinized by the Ministry of Finance/Development Working Party/National Economic Council before making provision in the budget. But once the scheme has been finally approved by the competent authority and provision therefor made in the budget the Administrative Ministries have full authority to sanction expenditure subject to the powers delegated to them (within the budget grants).

2.35 The Secretary (which term includes an Acting Secretary, Additional Secretary or a Joint Secretary Incharge of a Ministry/Division) is the Principal Accounting Officer of the Ministry/Division, its Attached Departments and subordinate offices for expenditure incurred against the demand or demands controlled by his Ministry/Division. The Principal Accounting Officer is responsible for ensuring:—

(a) that the funds allotted to his Ministry/Division, its Attached Departments or subordinate offices are spent for the purpose for which they are allocated and that the expenditure falls within the ambit of a grant;

(b) that the funds are spent in accordance with the powers delegated to him under the relevant rules and regulations ;

(c) that the actual expenditure does not exceed the budget allocations, all the payments are correctly classified under the appropriate major functions, minor functions, detailed functions and major objects, minor objects and detailed objects and departmental accounts are reconciled—every month with those of the Audit; and timely action is taken for adjustments of excess and savings;

(d) that the expenditure is incurred with due regard to high standards of financial propriety ; and

(e) to ensure that in the matter of receipts pertaining to his Ministry/Division adequate machinery exists for collection and bringing to account of all receipts.

2.36 This responsibility was assigned to the Secretaries in recognition of the fact that due regard can never be paid to financial considerations if finance and administration are divorced and finance is kept separate from other factors which enter into policy decisions. It was, therefore, decided that * finance would henceforth be regarded as an essential element in the considera­tion of all policy questions from the very outset and the administrative head of the Ministry/Division would make sure, as a pre-requisite for efficient and economic administration, that the financial considerations are taken into account at all stages by his Ministry/Division in framing and reaching decisions of policy and their execution. Moreover, as a Principal Accounting Officer, he must be prepared to answer for the efficient and economical conduct of business assigned to the Ministry/Division as a whole.

2.37 The two main principles to be observed by the Principal Accounting Officers were to be the economy and regularity; as the success of any system depended upon the vigour with which they were observed in day to day examination. Economy means getting the full value for money and by regularity is meant the spending of money for the purpose prescribed by law. The two are not necessarily the same thing for it is conceivable to spend money without constitutional irregularity and yet wastefully. The requirement that the funds allocated to a Ministry/Division, etc. are spent for the purpose or purposes for which they are allocated constitutes an important part of the legislative control over expenditure. This control would be rendered nugatory if the executive authority sanctioned application of funds for purposes other than those authorized by the legislature. It was, therefore, the duty of the Principal Accounting Officer to ensure that the expenditure falls within the ambit of a grant or an appropriation. While sanctioning expenditure he should ensure by issuing necessary instructions to his subordinates that the requirements of the relevant rules and regulations are fully met and that the approval of the Ministry of Finance is obtained, where necessary

2.38 The appropriation accounts of the Federal Government are considered by the Public Accounts Committee, which inter-alia is always keen to know the case of apparent waste and extravagance in administration. The Committee normally expects that the Principal Accounting Officer would satisfy them that the polity approved by the legislature has been carried out with due regard to economy and to furnish them with explanations of any example to the contrary to which their attention might have been drawn. He should, therefore, personally look into the financial matters as he would be answerable for laxity in matters of control over expenditure including that on the part of his subordinates. For this purpose, he should ensure that neither he nor his subordinates disregard the instructions issued by Government from time to time for the proper utilisation of funds placed at his disposal. The principle of personal answerability is not applicable in a case in which the Principal Accounting Officer has been over-ruled by the Minister. It may sometimes happen that the Principal Accounting Officer is over-ruled by his Minister on a matter of importance affecting the Financial administration of his Ministry/Division and is required to take a course of action which he regards as inconsistent with his duties as Principal Accounting Officer. In such cases he would not hesitate to resubmit the case to the Minister-in-Charge explaining how that particular course of action is inconsistent with his duties as the Principal Accounting Officer. In the performance of these duties the Principal Accounting Officer should not hesitate to consult the Financial Adviser attached to the Ministry/Division. It is essential that there should be closest contact and cooperation between the administrative Ministry/Division and the Ministry of Finance.

FINANCE AND ACCOUNTS OFFICER:

2.39 In each Ministry/Division there is a Deputy Secretary or a Section Officer designated as Finance and Accounts Officer. He is responsible for advising Principal Accounting Officer on all financial, budgetary and accounts matters and is under the administrative control of the Ministry/ Division concerned. His duties and responsibilities are as under:—

(i) Coordination and internal scrutiny of the budget estimates of receipts and expenditure of the Ministry/Division including New-Item Statements in accordance with the Budget Call Circular from the Finance Division and proposals for additional funds to be met out of the supplementary grant;

(ii) Consolidation of Annual Development Programme and to ensure that the development schemes of the Ministry/Division are prepared in accordance with the prescribed procedure and instructions;

(iii) To tender advice in the delegated field, where called upon;

(iv) To process, in accordance with the prescribed procedure, all cases relating to the non-delegated field, foreign exchange and demands for supplementary grants, which are required to be referred to the main Finance Division through the Financial Adviser;

(v) proper maintenance of accounts and their timely reconciliation with the actuals of the Audit Department and maintenance of 'Liability Register* in the Ministry/Division, its Attached Departments and subordinate offices and to watch the progress of the expenditure and receipts and furnishing monthly figures of departmental expenditure to the Financial Adviser by the twenty first of the month following the month to which the data relate;

(vi) All work relating to Public Accounts Committee and audit observations on appropriation accounts and ensuring compli­ance with the Committee observations and recommendations;

(vii) to exercise internal checks on irregularities, waste and fraud in terms of para 13 of General Financial Rules, Vol. I; and

(viii) to ensure compliance of all other rules and orders contained in the Federal Treasury Rules, General Financial Rules and instruc­tions issued by the Finance Division from time to time.

REFERENCE TO FINANCIAL ADVISER/FINANCE DIVISION: ---

2.40 (a) In cases where a reference to the Financial Adviser is necessary, the Finance and Accounts Officer Should ensure that:—

(i) the reference is really necessary under the rules or instructions ;

(ii) the case is properly examined in accordance with the relevant rules and orders; and

(iii) the facts of the case and the point of reference are clearly stated in a self-contained note or office memorandum, which should be submitted in duplicate.

(b) The Finance and Accounts Officer should also furnish such further data and provide such further information as may be asked for by the Financial Adviser for the proper disposal of the issues referred to him.

(c) Similarly, in cases where the Financial Adviser has to refer a case to any other Wing of the Finance Division, he should do so, without a further reference to the administrative Ministry/Division in accordance with the instructions detailed above.

FINANCIAL ADVISER: -----

2.41  (i) For each Ministry/Division there is a Financial Adviser with such supporting officers and staff as may be necessary for advising the Secretary-in-Charge on all financial, budgetary and accounts matters. Financial Advisers are under the administrative control of the Ministry of. Finance and are paid from the Budget Grant of the Finance Division and exercise powers of Joint Secretary of that Ministry in relation to the Ministry/Division to which they are attached. The matters relating to the interpretation, application and relaxation of service regulations and allocations of foreign exchange continue to be the responsibility of the Ministry of Finance and such cases are sent directly to the Finance Division (Regulation Wing) and not routed through the Financial Advisers. On the way back cases pass through the Financial Adviser.

In the performance of his duties the Principal Accounting Officer should not hesitate to consult Financial Adviser attached to the Ministry/ Division. It is essential that there should be close contact and cooperation between the administrative Ministry/Division and the Ministry of Finance.

(ii) The main aim and object of the F.A 's scheme is to make available ready financial advice to the Principal Accounting Officers of the Ministries/Divisions and to render assistance to them in the following fields:.—

(a)   Processing of the development scheme;

(b)   Scrutiny of budget proposals;

(c)    Examination of proposals of the autonomous organizations relating to financial matters etc;

(d)   Tendering advice in cases falling outside the field of delegated powers; and

(e)   Rendering services in all matters of payment and[2] matters affecting accounts or any matter touching propriety and regularity of the transaction.

(iii) In order to make the role of the Financial Advisers more effective and meaningful it is necessary that the Financial Advisers are closely associated with the working of the concerned Ministry/Division, their Attached Departments, subordinate offices and autonomous organizations/ corporations. Also, they should be involved in important assignments, projects and matters relating to financial management of the Ministries/ Divisions; their Attached Departments, subordinate offices and autonomous organizations/corporations.

ROLE AND POWERS OF THE FINANCIAL ADVISERS:

2.42 Under the existing orders, the powers specified below are exercised by the Financial Advisers/Deputy Financial Advisers etc in respect of Ministries/Divisions to which they are attached:

(A) CURRENT (NON-DEVELOPMENT) EXPENDITURE:

(i) Proposals for Supplementary Grant in respect of unexpected expenditure.—Proposals for Supplementary Grant will be examined by the Financial Adviser concerned like other expenditure proposals.

(ii) Lumpsum Provision.—Proposal which is intended to be financed from lumpsum provision will be finally examined and disposed of by the Financial Advisers.

(iii) Re-appropriation of funds.—The powers of appropriation and re-appropriation of the Finance Division, as set out in Serial No. 4 of Annex II to the Ministry of Finance O.M. No. F. 1(5) R. 12-80 dated 11th   March, 1981, will be exercised by the Financial Advisers.

(iv) Sanction of Expenditure.—Powers of the officers of Finance Division to sanction expenditure against authorised budget provision will be as indicated below:—

Sr #		Recurring Rs.	Non-recurring Rs.
1	SOs (Expenditure)	100,000	200,000
2	Dy. Secretaries/DFAs	500,000	1,000,000
3	Joint Secretaries/FAs.		No limit, except that cases involving important issues of policy may be submitted to the Additional Finance Secretary (Exp.)/Finance Secretary/ Finance Minister.

(B) DEVELOPMENT SCHEMES:

(a) Financial Advisers will be associated with the processing of all the development schemes from beginning to end. They will be responsible for the following:—

(i) Scrutiny and approval of development schemes of the Federal Government costing below Rs. 10.00 millions (non-recurring) and Rs. 1.0 million (recurring) which does not require submission to the Central Development Working Party. Before, however, according his approval, F.A. will consult JS (Dev.) where necessary, to ensure policy coordination as in (b) below.

(ii) Scrutiny of all other Development Schemes sponsored by the Federal Ministries/Divisions for consideration of the Central Development Working Party. In case, FAs are satisfied with the financial aspects of the schemes requiring a reference to the Central Development Working Party, they would clear the schemes for submission to the Planning Commission (CDWP) and the Ministries concerned will mention this fact in the proforma of the scheme or in the covering letters with which the schemes are sent to the Planning Division. But if the FAs have some observations/comments on the schemes, these should invariably be communicated to JS (Dev)/Additional Secretary (Exp.) for presentation/discussion in the meeting of the C'DWP.

(b) The Policy coordination in regard to development work would be the responsibility of the Development Wing. The Development Wing will also ensure the following:—

(i)  The scheme fits info the overall development plan.

(ii) The scheme does not clash with any other schemes of any other Ministry/Division/Department either in principle or in detail and that there is no contradictory policy being followed in schemes of two different Ministries/Divisions/Departments.

(iii)   There is no duplication in the schemes of the various Ministries/ Divisions/Departments both in major work and in detailed working.

(c) Meetings of the Development Working Parties shall be attended by:—

(i) the Joint Secretary (Dev.) in respect of schemes costing Rs. 10.00 million or more but less than Rs. 50.00 million (non-recurring) and over 1.00 million (recurring); and

(ii) The Additional Secretary Finance (Exp.) in respect of schemes costing Rs. 50.00 million or more.

(C)   WRITE OFF OF LOSSES:

The case of writing off of losses may, on behalf of the Finance Secretary, be disposed of finally by the officers of the Finance Division as indicated below:—

(i)	Deputy Secretary/DFAs/ OSD of identical rank.	Cases of losses not exceeding Rs. 100,000
(ii)	Joint Secretary/FAs.	No limit except that cases involving important issues of policy or depar­tures from important principles may be submitted to Additional Finance Secretary (Exp.).

 (D) REPRESENTATION OF FINANCE DIVISION AT VARIOUS COMMITTEES/MEETINGS:

FAs accredited to the administrative Ministries/Divisions will represent the Finance Division, at the appropriate level, at various Committees/ meetings. Where the Finance Secretary or the Additional Finance Secretary (Exp.) may himself like to attend a particular meeting, relevant brief shall be prepared by the F.A. concerned and submitted to the Finance Secretary or the Additional Finance Secretary (Exp.).

of Finance Division O.M. No. F. 1 (5) R-12/80 dated 11th   March. 1981.

POWER OF SANCTIONING PROJECTS

2.43   The sanctioning powers of various authorities are indicated below: ---

Authority	Sanctioning Power
ECNEC	All schemes costing above Rs. 30.00 million (non-recurring).
CDWP	Federal schemes costing between Rs. 10.00 to Rs. 30.00 million (non­recurring) subject to the condition that the Ministry of Finance does not disagree.
Federal Ministries	All schemes costing below Rs. 10.00 million (non-recurring). This power will be subject to the following conditions :— (i)  The Ministry concerned shall create a proper planning and monitoring unit within the organization and set up* a departmental development working party in which a represen­tative of the Ministry of Finance should also be included. (ii)  The Ministry of Finance does not disagree with the decision of the Departmental Development Work­ing Party. In case there is a disagreement the scheme will be submitted to the CDWP/ECNEC. (iii) A copy of PC-I of the scheme shall be furnished to the Planning and Development Division at least 10 days before the meeting of the Departmental Development Work­ing Party. The Planning and Development Division will also have the right to express the right to express their views on the PC-1 and to attend the meeting of the Departmental Development Working Party. (iv) A copy of the scheme finally approved by the Departmental Development Working Party will be promptly furnished to the Planning and Development Division and Ministry of Finance (Development Wing).
Commercial Organizations having Finance Member/Director appointed in consultation with the Finance Division.	All schemes costing below Rs 10.00 million (non-recurring) and/or Rs.1.00 million (recurring) with the concurrence of the Ministry of Finance. The power is subject to the conditions mentioned against Federal Ministries.
Corporations/Non Commercial Organizations having a Director Member Finance approved by Finance Division.	All schemes costing below Rs. 4.00 million (non-recurring) and/or Rs. 1.00 million (recurring). The power is subject to the conditions mentioned against Federal Ministries.
Northern Areas Council.	All schemes costing below Rs. 10.00 million (non-recurring) and/or Rs. 2.00 million (recurring). The power will be subject to the conditions mentioned against Federal Ministries.
Islamabad Development Working party.	All schemes costing below Rs.10.00 million (non-recurring) and/or Rs. 2.00' million (recurring). The power will be subject   to   the   conditions   mentioned against Federal Ministries.
FATADC.	All schemes costing below Rs. 10.00 million (non-recurring), and/or Rs. 2.00 million (recurring). The powers will be subject to the conditions mentioned against Federal Ministries.
FATA	Governor NWFP empowered to sanction FATA scheme to the extent permissible in respect of Provincial schemes, i.e., all FATA schemes costing up to and includ­ing Rs. 30.00 million (non-recurring) after they have been processed by the PDWP.

DELEGATION OF POWERS:

2.44 Additional powers have been conferred on the Ministries and Divisions vide Annexure II to the Ministry of Finance O.M. No. F. 1(5) R. 12/80 of 11th March, 1981, as amended from time to time. These can be exercised by them subject to:—

(a) The availability of funds by valid appropriation from within the sanctioned budget grant;

(b) The foreign exchange, where required from within the allocation of foreign exchange sanctioned for them.

The financial powers already conferred on them under the F.Rs. and GFRs prior to the introduction of new system will continue to be exercised by them. These powers may be exercised by the Ministries/Divisions without consulting their Financial Advisers. The advice, if any, given by the Financial Advisers in such cases, is not binding and may be over-ruled by the Secretary of the Ministry/Division concerned.

2.45. The administrative Ministries/Divisions are also empowered to delegate such of their powers as may be appropriate to the Heads of Attached Departments and subordinate offices under them as follows:

(i) By the Secretaries of the administrative Ministries/Divisions, to the officers subordinate to them in the Ministries/Divisions, without consulting their Financial Adviser ;.

(ii) By the Secretaries of the administrative Ministries/Divisions to other officers subordinate to them in consultation with their Financial Adviser ;

(iii) By the Heads of Departments, to officers subordinate to them, in their headquarters office without consulting the Financial Adviser ;

(iv) By the Heads of Departments, to other officers subordinate to .them in consultation with the Financial Adviser.

In respect of the schemes relating to current expenditure which have been prepared in detail and included in the budget expenditure sanctions may be accorded by the administrative Ministries/Divisions without the concurrence of the Ministry of Finance. Where lumpsum provision is made in the budget expenditure sanction can be given with the concurrence of the Financial Adviser to the extent of his powers as a Joint Secretary of the Ministry of Finance. Cases which are beyond the powers of the Financial Advisers are to be submitted by him to the Finance Secretary for his concurrence.

2.46 The advice given by the Financial Advisers in cases which do not fall within the powers delegated to the administrative Ministries/Divisions is binding. In case the advice of the Financial Adviser is not acceptable to the Ministries/Divisions, the Secretary of the Ministry/Division may take up the case with Additional Finance Secretary (Exp.), Finance Secretary or the Minister concerned may take it up with the Finance Minister.

BUDGETARY PROCEDURE:

2.47 The budget is an essential instrument of financial control. The scrutiny of all expenditure proposed by the Ministries/Divisions through the Financial Adviser is undertaken by the Finance Division as a pre-budget exercise. The budget proposals should, therefore, be carefully scrutinized by the Financial Adviser before agreeing to budget provision. Once provision for expenditure has been made in the budget and the budget has become effective the Ministries/Divisions have authority to sanction expenditure from within the sanctioned budget grant and subject to the financial powers delegated to them. To enable them to issue expenditure sanction without further consulta­tion with Financial Adviser, in cases within their financial competence, the Ministries/Divisions should ensure that item-wise details are shown both in Part I and Part II Estimates. The budget procedure to be followed is as under:—

(i) Budgeting being a continuous process, the preparation of the budget should begin well ahead of the year to which it relates. The proposals for establishment and other items of expenditure should be cleared with the Financial Adviser as and when the proposals are ready.

(ii) Part I of the budget and Part II Estimates and new items statements are to be finally scrutinized by the Financial Advisor.He will issue to the Budget Wing of the Finance Division and the Accountant General, Pakistan Revenues, copies of the budget orders in respect of Part I Estimates and verified copies of new items Statements in respect of Part II Estimates. The admitted Part I & Part II estimates, should be compiled together in the 'Demands' by the Finance and Accounts Officer, and sent through the Financial Adviser to the Budget Wing of the Finance Division.

(iii) Estimates of revenue receipts and capital receipts should in the first instance be coordinated and scrutinized by the Finance and Accounts Officer and after verification and approval by the Financial Adviser sent to the Budget Wing of the Finance Division.

(iv) Lump sum provision should not be proposed except in the most exceptional circumstances which should be recorded. Where such a provision has been made expenditure therefrom should be sanctioned only with the prior concurrence of the Financial Adviser. In case a lumpsum provision for temporary posts the Financial Adviser can exercise his power to the extent available to him as Joint Secretary of the Finance Division. Cases beyond those powers have to be submitted to the Additional Finance Secretary (Expenditure)/Finance Secretary for concurrence.

[3](v) As a general policy no allocation shall be provided in the ADP for new/unapproved development schemes except in the most exceptional circumstances which shall invariably be recorded both in the Budget as well as in the ADP Books. Releases against such provisions shall, however, be made only after approval of such new schemes by the competent authority and with the prior approval of the Financial Adviser's Organization concerned.

[4](vi) Similarly no sector wise lump sum allocation shall be made in the ADP as a general policy, except in most exceptional circum­stances which shall invariably be recorded .'In respect of such lumpsum provisions, the sponsoring Ministries/Divisions/Departments concerned shall invariably furnish a list of approved Schemes indicating bifurcation of the lumpsum allocation against each scheme to F As/Planning Division and other Organization concerned. Releases against this provision will be made with the prior approval of Financial Adviser.

[5](vii) All releases against the allocation provided in the ADP for individual schemes as have already been approved formally by the competent authority or have been given anticipatory approval by the Chairman, ECNEC, will also be made with the prior approval of FA's Organization concerned.

(viii) Demands for Supplementary Grants shall not be made, except in extraordinary circumstances, for which full justification shall be furnished to the Financial Adviser/Finance Division with reasons why the additional expenditure could not be foreseen at the time of submitting of proposals for budget provision. No. expenditure shall be incurred without the prior concurrence of the Financial Adviser/Finance Division.

(ix) Foreign Exchange budget shall be prepared in accordance with the instructions issued by the External Finance Wing from time to time.

GENERAL INSTRUCTIONS REGARDING PREPARATION OF BUDGET:

2.48 The Annual Budget Statement containing the estimated annual revenue and expenditure together with the all other receipts and disbursements arising both la Pakistan and abroad, is laid before the National Assembly. The material on which the budget and Demands for Grants are based is obtained by the Ministry of Finance in the form of detailed estimates submitted by other Ministries, which in turn depend for the material on heads of departments, heads of offices and other officers, who collect the revenue or incur expenditure. The Accountant General is responsible for rendering such assistance in the preparation, check and consolidation of Budge! Estimates and Demands for Grants as may be settled by the Ministry of Finance in consultation with the Auditor General of Pakistan, The form of the budget and Demands for grants is laid down by the Ministry of Finance and no alteration of arrangement or classification can be made without their approval.

2.49 In framing budget estimates the estimating authorities should exercise the utmost foresight. All items of receipts and expenditure that can be foreseen should be provided for under the proper heads. This exhortation to show foresight should not, however, be taken as an invitation to provide for unnecessary items of expenditure. While care shall be taken to see that all items of expenditure that can be foreseen are provided for, it is equally essential that the amount of the provision is restricted to what is really necessary. The Ministry of Finance can and does exercise its right to excise or reduce the provision for any item which it thinks unjustifiable, (A scientific basis has to be evolved to scrutinise the budget proposals). The past level of actual expenditure/provision is no doubt, by and large, the usual yardstick for determining the provisions for the next year but it has its limitations when it comes to abnormal expenditure and justification, therefore, needs to be examined on merits. Pay and allowances (including recreation allowance) can be subjected to straight arithmetical calculation. In providing for stores and equipment it is necessary to ensure that the estimates are based on approved and workable norms for the supply and replacement of consumable stores and spare parts, as well as for the supply of new equipment, and that they are properly tied up with their price schedules. The estimates in all cases should take into account the items already in stock. The aim is that the budget provision should have a rational basis and should be worked out with prudence and all precaution.

2.50   The basic rules for the preparation of the detailed estimates are as follows.

(i) the estimates should be prepared on the basis of what is expected to be actually received or paid (under sanction) during the ensuing year, including arrears of previous years and not only the demands or the liability falling due within the year. In other words the estimates should include all receipts and payments during the coming year, irrespective of the fact that such receipts or payments relate to the transactions of that year or the previous years. For instance, materials to be ordered in August, 87 but not expected to be paid for till August, 88 will be provided for in the budget estimates for the year 1988-89 and not in the estimates for the year 1987-88. Similarly revenue due in August, 1987 but not expected to be received in the treasury till August, 1988 will be provided for in the receipt estimates for the year 1988-89 and not 1987-88.

(ii) The estimates should not show merely the- net receipts or net charges. The gross transaction in the case of both receipts and charges in each department should be shown separately. Receipts are to be estimated as receipts on the receipt side of the estimates and expenditure on the expenditure side. It is not permissible to deduct receipts from charges or charges from receipts and frame estimates of net receipts or net charges. The practice of framing estimates on a gross and not on a net basis enabled the Legislature to exercise control over expenditure which it could not do if the executive approached the Legislature for authority merely for that part of the expenditure which could not be met from receipts. Yet in certain cases budgeting is on a net basis. For instance, refunds of revenue are deducted from gross collection and the estimates are prepared only for the net receipts, the reason being that refunds do not really represent the expenditure.

(iii) No provision should be made in Part I for items of expenditure not covered by sanction, either general or specific. If any provision is considered necessary for any unsanctioned item, it should be included in Part II. It should on no account be incorporated in Part I (Standing and Fluctuating Charges).

(iv) Under the provision 'Pay of officers' and 'Pay of Establishment' details should be furnished in a separate form (GFR-I) showing names, designation, increments due, etc.

(v) In the case of sanctioned establishment, whether permanent or temporary, full amount of the pay-including increments which are likely to be drawn by the incumbents on duty during the period should be provided;

(vi) Where no Leave Reserve exists provision should be made for leave salary both for the officers and the establishment on the basis of past actuals,' regard being paid to any new factor.

(vii) Provision should not be made for those who are on deputation or are otherwise absent and are not likely to return in the year for which estimates are being prepared, but the names of such personnel should be shown in Form GFR I.

(viii) No provision should be made for posts which it has been decided to leave unfilled or which have been kept in abeyance as a measure of economy. If it is desired^ to revive any of such posts prior consent of the Ministry of Finance should be obtained before making any provision in the estimates on this account;

(ix) For all fixed recoveries and fixed payments (other than establish­ment charges) the sanction fixing the amount should be quoted;

(x) Every department should provide, for the whole receipts and charges with which it deals finally;

(xi) No lumpsum provision should be made except, with the concurrence of Ministry of Finance, in most exceptional circumstances, the reasons for which should be recorded in writing;

(xii) Provision for losses should not be made in the estimates. If however, the nature of work of a department is such that losses must be regarded as inevitable each year, provision may be made with the special sanction of the Ministry of Finance in each case;

(xiii) the estimates of receipts and varying charges should not be merely arithmetical average of the last three years' figures, the average is a guide, but it should not be taken absolutely; and

(xiv) a lump deduction Should be made if savings are anticipated for posts likely to remain vacant or for other reasons.

TIME TABLE AND DETAILED PROCEDURE FOR PREPARATION OF BUDGET ESTIMATES:

2.51 The annual budget estimates should be prepared in accordance with the 'Budget Call' letter issued by the Ministry of Finance in October every year. Separate estimates have to be prepared in respect of:—

(i)   Receipts;

(ii)  Non-Development Expenditure;

(iii) Development Expenditure.

The following detailed procedure is to be followed:

RECEIPTS: ---

The estimates are to be prepared in accordance with the following heads of receipts:-

Heads of Receipts	Estimating Authorities
Principal Heads of Revenue	Central Board of Revenue.
Other     Revenue     Receipts/ Capital Receipts.	Administrative Ministries/ Divisions.
Foreign Aid	Economic Affairs Division.
Debt,   Deposits and   Remit­tance Heads.	Financial Advisers, Ministries of Defence and Communica­tions, State Bank of Pakistan, Central Directorate of National Savings and Ad­ministrative Ministries/Divi­sions.

The first preliminary, second preliminary and final estimates should be submitted to the Ministry of Finance on the prescribed dates. These will include both internal and external resources and will form the basis for determining the size of Annual Development Plan for the next year.

2.52 Estimates of foreign loans and credits are required to be supported by details of individual projects and purposes and are to be drawn up separately for each of the following categories:—

Category I.	Loans for Federal Projects.
Category II.	Loans for purchase of Non-project commodities.
Category III	Loans for Provincial Projects.
Category IV.	Loans for Railways.
Category V.	Loans for Autonomous Bodies, Local Funds, etc., under the Federal Government.
Category VI	Loans for Autonomous Bodies, Local Funds etc. under the Provincial Governments.
Category VII.	Loans for credit Agencies for Private Sector Projects.

Estimates of guaranteed loans and credits are, however, to be shown separately from other foreign loans and these should also be supported by details of individual projects.

2.53 Estimates for foreign aid grants from Countries and specialised agencies such as those mentioned below are to be submitted with complete details:—

(a)  Australia,

(b) Canada,

(c)  Ford Foundation,

(d) U.N. and its specialised Agencies.

(e)  U.S. AID, and

(f)  Other countries (Agencies to be shown separately).

The estimates of foreign project assistance, both loans and grants have to be fully tied up with the relevant projects and wholly reflected in the Annual Development Programme and the budget of the concerned agencies of the Federal or Provincial or Autonomous Bodies. This aspect will need to be fully taken care of by the Economic Affairs Division by preparing the relevant estimates in close consultation with the executing agencies of those projects. The executing agencies are required to afford all assistance to the Economic Affairs Division in this regard so as to enable them to submit the estimates in time.

The projection of all financial outlays developmental or non-developmental, call's for a correct estimation of resources and that the time schedule for the various stages of budget making is strictly adhered to. These aspects should be borne in mind by all estimating authorities. Further it will facilitate the task of the Finance Division if the estimates of revenue and capital receipts are prepared and furnished in the prescribed proforma. The estimates in respect of Debt, Deposits and remittances and other capital receipts will continue to be prepared as at present.

Administrative Divisions should coordinate the estimates of the different estimating authorities under them and to submit the verified and consolidated estimates to their Financial Adviser. The Financial Advisers will scrutinize the estimates and forward them with their comments to the Budget Wing by the prescribed date addressed to Deputy Secretary (Resources).

2.54 Estimates of receipts accruing to Government by way of dividends on investments made in various autonomous bodies/corporations, etc, on preference and ordinary shares should be submitted with details mentioning the rate of dividend fixed by the Government on such shares, if any. The reasons for non-inclusion of such receipts in the estimates on any shortfall in the estimates on account of dividend receipt should be fully explained.

NON-DEVELOPMENT EXPENDITURE:

2.55 Budget preparation has to begin well ahead of the year to which it relates. The proposals for establishments and other items of expenditure are required to be cleared by the administrative agencies with their Financial Advisers as and when they are ready without waiting for the 'Budget Call' circular from the Ministry of Finance. It should be ensured that the Budget Estimates submitted to the Financial Adviser for scrutiny and acceptance contain only the agreed items of expenditure. The classification of expenditure in terms of functions and objects should be correctly shown in the NISs. Due to computerization a new format of BO/NIS has been adopted. The instructions to fill this format should be followed strictly

REVISED ESTIMATES FOR THE CURRENT YEAR:

2.56 The preparation of Revised Estimates for the current year should precede the framing of Budget Estimates for the next year. The following factors have to be taken into account in preparing the Revised Estimates:

(i)   Actuals for the first 4 months of the current year;

(ii)  The actuals for the last 8 months of the previous years;

(iii) The 12 months' actuals of the past three years;

(iv) Order issued or proposed to be issued regarding —

(a) Appropriation or reappropriation within the sanctioned grant;

(b) New items of expenditure sanctioned  through  supple­mentary grants; and

(c)   surrenders already made or likely to be made during the year.

(v)   Any other relevant factors.

Any information required from the Accountant General in connection with these estimates should be obtained from him separately.

2.57 Where Revised Estimates of expenditure for the current financial year exceed the sanctioned grant, it should be stated whether the increase has been authorised by competent authority and, if so, attested copies of the relevant orders should be appended to the estimates. It should also be indicated how the increase is proposed to be met (i.e. by reappropriation of savings within the grant or through supplementary grant). The revised estimates should be accompanied by a list of supplementary grants already sanctioned and included in the said Revised Estimates. When the revised estimates are less than the authorised grant reasons for savings should be given. These requirements are applicable to both Part I and Part II Estimates.

BUDGET .ESTIMATES FOR THE ENSUING YEAR:

2.58   The estimates are to be prepared in two parts:

Part I: Relates to standing charges which though may vary from year to year are not dependent on the volition of the Head of Department, e.g., permanent establishments (both officers and staff), travelling and other fixed allowances and other ordinary contingent expenditure.

Part II: Relates to fresh charges which may include new items of expenditure, such as temporary additions to existing establishments or to services, facilities and organizations which are either continued from year to year on a temporary basis or have been newly sanctioned and have not been provided for in the current year's budget. Only those proposals should be included which have already been cleared with the Financial Adviser. These should be submitted through the Financial Adviser in the form of self-contained note/memoranda, accompanied by support­ing details to facilitate scrutiny. Lumpsum provision in the budget should not be made or proposed except in most exceptional circumstances which should be invariably recorded. As far as possible items under the object classification should be proposed according to the prescribed detailed heads of expenditure so that the number of references to the Financial Advisers/Finance Division is reduced to the minimum.

Part I Estimates are prepared on printed forms supplied by the Accountant General in whose circle of account the expenditure is to be booked. These forms contain separate columns to show:—

(i) Code No. (Major, minor and detailed objects)

(ii) The actuals of the last three years under each sub-head and detailed head. These actuals are required to be filled in by the Accountant General.

(iii) Actuals for the last eight months of the previous year and the first four months of the current year.

(iv) The sanctioned budget for the current year,

(v)  The revised estimates for the current year; and

(vi) The budget estimates for the ensuing year.

The actuals of the last three years are noted by the Accountant General in the relevant columns of the forms sent out by him to the estimating authorities. The estimating authorities fill in the rest of the columns. Since the revised estimates, like the past actuals, are one of the material factors to be taken into account in preparing the budget estimates, the revised estimates should be prepared with great care and should include or omit the commitments that are likely to materialize or not likely to materialize during the year

The Budget Estimates of non-development expenditure for ensuing year should be accompanied by such details as nominal rolls in the prescribed form, calculation of Allowances, Honorarium, etc. and other charges so as to permit proper scrutiny. They should further be supported by a comparative statement in Form S-203 showing the position of past three years actuals, the sanctioned grant and the Revised Estimates for current year and the proposed Budget Estimates for the next year.

BREAK-DOWN OF ESTIMATES TO BE INCLUDED IN THE DEMAND .FOR GRANTS AND APPROPRIATION:

2.59. The estimates of expenditure included in the Budget Estimates should be broken down into 'Charged' and 'Other than Charged' expenditure and also should show Revenue Account Expenditure separately from Development Expenditure.

BUDGET ESTIMATES IN RESPECT OF DEVELOPMENT EXPENDITURE:

2.60 The revised estimates for the current year should not exceed the original budget, estimates, plus supplementary grants already sanctioned minus surrenders and shortfalls in utilization of foreign projects assistance. These should be accompanied by a list of supplementaries already sanctioned and included in the Revised Estimates.

2.61 The estimates should not include any scheme which has not been approved in accordance with the prescribed procedure. Simultaneously with the formulation and submission of their Annual Development Programme to the Planning Division, the administrative Ministries/Divisions should supply a copy of their programme to their respective Financial Adviser. This should be accompanied by detailed expenditure estimates for budget provision in respect of individual projects. Other relevant information or material should be supplied according to the time-table.

2.62 In the case of on-going projects, the estimates should also be accompanied by relevant files in which the budget provisions for the current year were admitted. AH new projects for which budget provision is proposed for the first time should be supported by the relevant PC-I or PC-II Form. If any provision is to be made for work§ expenditure a separate statement in PPWD Form 4 should also be submitted. The Works Division will compile them according to individual development projects included in the ADP and furnish a copy to the Budget Wing of the Finance Division within three days after the finalization of budget estimates in respect of development project.

2.63 (i) when proposing budget estimates for projects/schemes in the ADP it should be ensured that there is no overlapping as to the nature and scope of project/scheme between items proposed in the development and non-development budget. Where certain activities/operations are to be carried out partly through the development budget and partly from non-development budget a consolidated picture should be presented to the Financial Adviser while submitting the budget estimates for development expenditure. .

(ii) In order fully to support the provision for development expenditure, the estimating authorities should furnish separate information under the following headings alongwith the estimates of individual projects/scheme to their Financial Adviser who after scrutiny will pass it on to the Budget Wing :---

(a)        Name of the project/scheme.

(b)       Expected date of completion.

(c)        Physical targets envisaged in the project/scheme.

(d)       Expenditure to the end of the previous years.

(e)        Percentage of completion till 30th June of the previous year.

(f)        Revised Estimates and targets likely to be achieved.

(g)        Budget estimates for next year,

(h)       Targets proposed for next year.

(i)   Basis for determining targets for the current and next year (i.e. unit cost or any other unit of measurement).

When furnishing the above information the estimating authorities should, as far as possible, specify the physical targets in quantitative terms (e.g., road mileage to be constructed, hospital beds to be provided, number of new school seats to be made available, acreage to be covered by Plant protection measures, etc., etc.). In cases where quantitative assessment of physical targets is not feasible, the likely achievements should be specified in broad details.

2.64 (i) Fair copies of New Item Statements in respect of accepted estimates of development expenditure should be distinctly marked to indicate that the provision relates to development expenditure. The classification of expenditure in terms of functions and objects should be correctly shown on the NISs. Due to computerization a new format to N1S has been adopted. The instructions to fill this should be followed strictly.

(ii) Budget orders in respect of Part I estimates relating to all Circles of account issued by the Financial Advisers should be addressed to the Accountant General, Pakistan revenues, Islamabad. Budget orders issued thereafter, if any, should be addressed to the Finance Division (Budget Wing). Islamabad. Copies of all Budget Orders issued in respect of Part I estimates whether before or after the 15th March should invariably be sent to the Finance Division (Budget Wing) Islamabad in duplicate alongwith copies of the relevant Part I estimates and a memorandum explaining the variations between :—

(a)  Current year's sanctioned grant and the Revised Estimates as admitted; and

(b)  The admitted Budget Estimates for the current year and those for the next year.

(iii) The budget orders should not be in the form merely of modifications to the estimates Such orders on Part 1 Estimates for the next year should invariably give details of accepted provision that will appear in the Details of Demands for Grants and Appropriations and should also show :—

(a) The number of posts in each grade and related provision under the Establishment Charges;

(b) The provision for different objects of expenditure under the 'Regular Allowances' and other items of expenditure formerly classified as contingent charges ; and

(c) The details of recoveries, if any, should invariably be shown by specific nomenclature

(iv) Fair copies of all NISs should be sent to the Finance Division (Budget Wing) as well as to the Accountant General Pakistan Revenues, Islamabad, accompanied by a copy of memorandum explaining the variation between (a) the Budget Estimates and the Revised Estimates for the current year and (b) the Budget Estimates for the current year and the admitted Part I Budget Estimates for the next year. No Budget Order or N1S would be accepted without the approved Memorandum explaining the variation.

COMMUNICATION AND DISTRIBUTION OF GRANTS:

2.65 The Grants voted by the National Assembly, together with any sums sanctioned for non-votable expenditure are communicated by the Ministry of Finance to the administrative Ministries/Divisions/Departments, and the Accountant General concerned in the shape of lump sums known as primary units of appropriation. The administrative Ministries and Depart­ments then arrange the distribution of sanctioned funds, where necessary 'among the controlling and disbursing officers subordinate to them. The whole or part of the appropriation for a primary unit may be placed at the disposal of controlling or a disbursing officer. The primary units may also be broken up into a number of secondary units and the appropriation for any of these wholly or in part, may be placed at the disposal of a subordinate officer. An appropriation is intended to cover all the charge, including the liabilities of any previous year, to be paid during the year or to be adjusted in the accounts thereof. It can be authorised by competent authority at any time before, but not after the expiry of the financial year.

CONTROL OF EXPENDITURE:

2.66 The authority administering a grant is ultimately responsible for watching the progress of expenditure on public services under its control and for keeping expenditure within the grant. In order to keep an effective control over the expenditure the administrative Ministries/Departments should adopt the procedure laid down in Rule 89 of the GFRs Vol. 1, so that the position of expenditure from month to month, viz-a-viz, the appropriation may be kept under constant review and suitable action may be taken in respect of savings and excess.

SURRENDER OF ANTICIPATED SAVINGS:

2.67 During the course of financial year Head of a Department or a Disbursing Officer may find that expenditure under a particular object is likely to be less than the provision in the budget due to the following causes :—

(a) actual postponement of expenditure ;

(b) real savings due to economy ; and

(c) normal savings due to original over-estimating or on account of the usual administrative causes.

2.68 The savings under (a) above should not be utilised by re-appropriation to meet new items of expenditure without the sanction of the competent authority. If savings under (b) have been affected deliberately to provide for an unforeseen emergency, these should not ordinarily be utilized for new items of expenditure. All anticipated savings should be surrendered to the Government immediately they are foreseen [6]but not later than 31st March of each year in any case, unless they are required to meet excesses under some other unit or units which are definitely foreseen at the time (see para 98, GFR, Vol I). However, savings accruing from funds provided after 31st March shall be surrendered to Government immediately they are foreseen but not later than 30th June of each year. The savings should not be held in reserve to meet possible future excesses.

2.69 It is never desirable to spend the money in a hurry or in ill-considered matter merely because it is available or in order to avoid the lapse of a grant. It is in the interest of public service that if a grant cannot be utilised profitably it should be surrendered. A rush of expenditure particularly in the closing months of the financial year is a breach of the principles of financial propriety.

RE-APPROPRIATION OF FUNDS:

2.70 Re-appropriation means the transfer of funds from one unit of appropriation to another such unit. The reappropriation may be sanctioned by a competent authority in terms of the powers delegated to the Ministries/ Divisions vide item 4 of the Annex II to the Ministry of Finance O.M. No. F. 1(5) R-12/80,dated the 11th March, 1981.

SUPPLEMENTARY GRANTS:

2.71 (i) Normally no expenditure should be incurred for which no provision has been made in the original estimate If, however, at any stage it is found that an excess is likely to occur owing either to an unforeseen emergency or under-estimating or on account of insufficient allowance for factors leading to growth of expenditure, the expenditure, if possible, should either be postponed, or met through re-appropriation provided the officer concerned is competent to do so. If neither the savings are available nor the expenditure can be postponed, an application should be made to the Ministry of Finance ioi supplementary grant. The application should be accompanied by a I nil explanation of the reason for the excess and of the impossibility of providing funds to meet it from within the sanctioned budget grant.

(ii) The Application should be made by the date as may be prescribed by the Ministry of Finance from time' to time. The Ministries/Divisions/ Departments should not, however, hold up applications till the last date, but forward each application to the Ministry of Finance as soon as it is known that a Supplementary Grant will be necessary. On receipt of an application, the Ministry of Finance will review the position of the grant as a whole with reference to the known actuals of the year to-date and actuals and estimates for the previous years. If after the examination of the Ministry of Finance is convinced that the expenditure can neither be postponed nor can be met from savings under other objects and that a supplementary grant is necessary, a demand will be placed before the National Assembly as soon as it is practicable.

2.72 (a) Keeping in view the above principles, the request for a supplementary grant should be made in a self-contained summary to be signed by the Secretary concerned in his capacity as the Principal Accounting Officer. The summary should contain the following information:

(i) Total expenditure involved in the proposal in the current year and the following years both recurring and non-recurring.

(ii) Classification of the expenditure whether it is 'Charged on the Federal Consolidated Fund' or "Other Expenditure" and also whether it is Revenue expenditure or development expenditure

(iii) An analysis of the budget grant to which the expenditure is debitable indicating:—

(a) Amounts provided object-wise;

(b) Particulars of expenditure already incurred under each object; and

(c) Particulars of commitments (including sanctions already issued) and plan of expenditure under each object for remaining part of the financial year.

(iv) Detailed justification of the proposal and reasons why provision was not made in the budget.

(v) The reasons why some of the contemplated expenditure at (iii) (c) above cannot be dropped/curtailed to accommodate the present proposal.

(vi) The reasons why the proposed expenditure cannot be postponed to a subsequent year.

(b) The summary may be forwarded to the Financial Adviser con­cerned who will examine the proposal and submit it to the Additional Finance Secretary (Expenditure) with his recommendations. If the proposal is approved by the Ministry of Finance, necessary sanction will be issued by the Ministry/Division concerned under intimation to the Budget Wing of the Ministry of Finance. The sanction letter will state that it issues with the concurrence of the Finance Division and a copy of the sanction will be endorsed to Audit by the Deputy Financial Adviser concerned.

AUDIT REPORT AND APPROPRIATION ACCOUNTS:

2.73 (i) Under Article 171 of the Constitution, the Auditor-General of Pakistan is required to submit to the President the reports relating to the accounts of the Federation, who causes them to be laid down before the National Assembly. Accordingly an Audit Report and the audited accounts in the form of appropriation Accounts of the entire expenditure (Voted or Charged) of the Government for each financial year are prepared. The Audit Report contains such comments on the regularity and propriety of expenditure as are deemed necessary and proper as a result of audit investigations. It also brings to the notice of the Legislature the result of audit of all trading, manufacturing and profit and loss accounts and balance sheets kept in respect of Government commercial or quasi-commercial undertaking. Besides, it includes the report which the Auditor-General is required to make on his examination of any receipts and accounts of stores and stock with such comments as he may think fit on any important irregularity discovered in the course of audit of such receipts and accounts.

(ii) The appropriation accounts mainly depend on explanation furnished by the Ministries/Divisions/Departments to the Accountant General as to the cause of variations between the appropriation and expenditure. The explanation in respect of variations between appropriation and expenditure and of any apparent failure to .exercise adequate financial control over expenditure should be concise, accurate and fully informative. Vaguely worded phrases as due to "over-estimating" "covered by reappropriation" or "reappropriation proved inadequate or unnecessary" should be avoided. In any case, the Public Accounts Committee is interested to know whether the variation was inevitable and whether it could not have been foreseen.

PUBLIC ACCOUNTS COMMITTEE:

2.74 At the commencement of each session, a Standing Committee of the Legislature, at the Centre and in the Provinces respectively, is constituted for the purpose of scrutinising the appropriation accounts and the audit report thereon in terms of Article 171 of the Constitution. The Committee consists of • members elected by the Legislature. The term of office of members of the Committee is one year, but any member is eligible for re-election. The Chairman is elected by the Committee from among its members. In the case of an equality of votes on any matter, the Chairman has a second or casting vote. In England, the convention is that a well known member of the Opposition is elected as Chairman so that there may be proper opportunity for review and criticism, if necessary, of the financial proceedings of Government of the day.

2.75 The Accountant General is not a member, but is usually invited to attend the meetings of the Provincial Public Accounts Committee. In the case of the Central Public Accounts Committee the Auditor General is similarly invited.

2.76 The main function of the Committee is to see that the money granted by the Legislature has been spent by the Executive within the scope of the demand. This means that the Committee has to satisfy itself that—

(i) The money recorded as spent against the grant was actually spent and is not larger than the amount granted;

(ii) The money has not been spent for a purpose not approved by the Legislature; and

(iii) There are no other irregularities in the spending of public money by the Executive.

2.77 Strictly speaking, the Committee is concerned only with voted expenditure, but by a convention which has been observed ever since the introduction of Public Accounts Committee, the Committee deals with both voted an non-voted expenditure. In case where accounts of receipts and of stores and stock are audited by the Auditor Genera] the Committee also considers the audit reports thereon in much the same details as in the case of expenditure.

2.78 The Committee has the power to examine the representatives of the .departments concerned and to summon the officers more directly responsible whenever necessary.The  Committee is entitled to offer criticism and recommendations upon any matter discussed in an appropriation account or in the audit report thereon. But the Committee is not an executive body. It has no power, even after the minutest examination and on the clearest evidence, to disallow any item or to issue an order. It can only call attention to an irregularity of failure to deal with it adequately and express its opinion thereon and record its findings and recommendations.

2.79 After it has completed its examination of the accounts the recommendations of the Committee are embodied in a report which is laid before the Legislature. A day is usually allotted for the discussion of the report when several important points are rose which are of great interest to the general public. In respect of accounts spent over and above the grant authorised by the Legislature votes are taken in each case.

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[1] c.f Finance Division O.M No F. I (4) R. 12-81 dated 15^th April, 1981.

[2] Finance Division DO No F 1 (1) R. 12-81 dated 24th February, 1981.

[3] c..f Finance Division O.M No. F. 1(5) R. 12-80 dated 11^th March, 1981.

[4] c.f Finance division O.M. No, F. 1(5) R. 12-80 dated 11^th  March,

[5]c.f Finance division O.M. No, F. 1(5) R. 12-80 dated 11^th  March,

[6] Finance Division Notification No 3(5)-Reg 12/81 dt 20-12-84.