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ISLAMABAD: The Finance Division has approved the guidelines on commitment control in consultation with the Auditor General of Pakistan issued to minimise the build-up of expenditure arrears in the government, a major fiscal indiscipline and poor budget credibility.

A notification to this effect uploaded by the Finance Division on its website on Tuesday and sent to all the Principal Accounting Officer (PAOs), AGP, and others, read that the Public Financial Management Act, 2019 requires that the Finance Division, in consultation with the AGP approves and issue guidelines related to annual and multi-annual commitment control systems. The notification further stated that whereas, expenditure arrears from the previous financial years are a major source of fiscal indiscipline and poor budget credibility in the government. These arrears build up because of absence of an effective system of commitment control due to which government offices incur expenditure without matching allocations to discharge their liabilities.

Therefore, the guidelines are being issued to minimize the build-up of expenditure arrears in the government. The guidelines will help improve fiscal discipline.

Notification read that in exercise of the powers of the Public Financial Management Act, 2019, the Finance Division approves these guidelines namely Commitment Control Guidelines, 2022. These guidelines shall apply to all federal government’s Divisions, Executive, Departments, Attached Departments and Subordinate Offices and public entities and offices established and controlled by the federal government receiving grant-in-aid or public money from the Federal.

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The government would also incorporate these guidelines in their accounting and budgeting frameworks and it shall come into force at once. Scope and criteria for recording annual commitment shall be recorded for both recurrent and development budgets for procurement of goods, services and carrying out civil works. These commitments shall be recorded when there is a properly authorized obligation, a contract or purchase order, to make a payment against a budget allocation with a value of Rs1 million or more and for which (i) the amount of transaction is known; (ii) the supplier has been nominated; (iii) relevant officer has authorized the contract for procurement of goods, services or for civil works in accordance with financial management and powers of PAOs Regulations, 2021 and accorded approval on (iv) a legal contract or purchase order has been entered with supplier.

The officer sanctioning or authorizing a contract for procurement of goods, works, services above the threshold of Rs1 million shall be personally responsible for communicating the commitment to the respective accounting office within one week of approving the contract using the form. The concerned Accounting Office shall be responsible for recording the commitment in accordance with the provisions of Accounting Policies and Procedures Manual (APPM) within one week of receiving the request from the sanctioning officer. The commitments will be reconciled among Accounting Office, PAO, and CF&AO as an additional activity along with monthly expender reconciliation. The AGPR will provide to Finance Division, ona monthly basis, a summary statement showing consolidated commitments and monthly cash requirements of all Divisions, Departments, and Offices. This will be in addition to financial reports required to be Financial Accounting and Budgeting System (FASS) and RAAST Instant Payment System shall be used by the Accounting Offices for commitment control in accordance with the instructions issued by Controller General of Accounts (CGA) and the State Bank of Pakistan (SBP).

Annual commitments shall be adjusted when the payment is made; all annual commitments shall lapse along with the budgetary allocation at the end of a financial year; while preparing the revised estimate for a financial year, the Divisions, Departments and Offices shall estimate the commitments likely to lapse at the end of a financial year and add the amount required to meet such commitments in the budget estimates for the next financial year.

The Ministry of Defence may issue separate commitment control guidelines for defence services if required, with the concurrence of the Finance Division.

Copyright Business Recorder, 2022

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