Minimizing Accumulation of Expenditure Arrears: Finance Division Approves Commitment Control Guidelines

ISLAMABAD: The Finance Division has approved the Commitment Control Guidelines in consultation with the Auditor General of Pakistan issued to minimize the accumulation of government expenditure arrears, major fiscal indiscipline and low fiscal credibility.

A notification to this effect uploaded by the Finance Division on its website on Tuesday and sent to all Principal Accountants (PAO), AGP and others, states that the Public Financial Management Act 2019 requires the Finance Division, in consultation with the AGP approves and enacts the guidelines relating to the systems for controlling annual and multi-annual commitments. The notification further stated that while expenditure arrears from previous years are a major source of fiscal indiscipline and low fiscal credibility in government. These arrears are accumulating due to the lack of an effective commitment control system due to which the general government incurs expenditure without corresponding allocations to discharge its debts.

Therefore, the guidelines are issued to minimize the accumulation of expenditure arrears within the government. The guidelines will contribute to improving budgetary discipline.

The notification states that in exercising the powers of the Financial Management Act 2019, the Finance Division approves these guidelines, namely the Commitment Control Guidelines, 2022. These guidelines apply to all Divisions , executives, departments, attached departments and subordinate offices of the federal government and public entities and offices established and controlled by the federal government receiving grants or public funds from the federal government.

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The government will also incorporate these guidelines into its accounting and budgetary frameworks and they will take effect immediately. The scope and criteria for recording the annual commitment must be recorded for the operating and development budgets for the purchase of goods, services and the execution of civil works. Such commitments should be recorded where there is a duly authorized obligation, contract or purchase order, to make payment against a budget allocation worth Rs 1 million or more and for which (i) the amount of the transaction is known; (ii) the supplier has been appointed; (iii) the officer concerned has authorized the contract for the purchase of goods, services or civil works in accordance with the financial management and powers of the ODP Regulations, 2021 and has given approval on (iv) a contract legal or a purchase order has been concluded with the supplier.

The officer sanctioning or authorizing a contract for the procurement of goods, works, services above the threshold of Rs1 million will be personally responsible for communicating the commitment to the respective accounting office within one week of contract approval using the form. The relevant accounting office is responsible for registering the commitment in accordance with the provisions of the Accounting Policies and Procedures Manual (APPM) within one week of receipt of the sanctioning officer’s request. Commitments will be reconciled between the Accounting Office, PAO and CF&AO as an additional activity with the monthly expenditure reconciliation. The AGPR will provide the Finance Division, on a monthly basis, with a consolidated statement showing the consolidated commitments and monthly cash requirements of all divisions, departments and offices. This will be in addition to the financial reporting required for the Financial Accounting and Budgeting System (FASS) and the RAAST instant payment system will be used by accounting offices for commitment control as per instructions issued by the Comptroller General of Accounts (CGA ) and the State Bank of Pakistan (SBP).

Annual commitments will be adjusted upon payment; all annual commitments expire with the budget allocation at the end of a financial year; when preparing the revised estimate for a financial year, Divisions, Departments and Bureaux assess the liabilities likely to expire at the end of a financial year and add the amount necessary to meet these liabilities in the budget estimates for the following financial year.

The Department of Defense may, if necessary, issue separate commitment control guidelines for Defense Services, with the approval of the Finance Division.

Copyright Business Recorder, 2022

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