8 Loss and Recoveries of Public Money
Table of Contents
8.1 Introduction 8.3
8.2 General Policies 8.4
8.2.1 Loss of or
deficiency in public monies 8.4
8.2.2 Reporting of losses
and deficiencies 8.4
8.2.3 Responsibility for
losses and deficiencies 8.5
8.2.4 Write-off and
waiver of losses 8.5
8.2.5 Overpayments 8.6
8.2.6 Recovery of loans
and advances 8.6
8.3 Accounting for Losses
and Recoveries 8.7
8.3.1 Recording
overpayments 8.7
8.3.2 Recording losses
and deficiencies 8.7
8.3.3 Accounting
treatment where recoveries are certain 8.7
8.3.4 Accounting
treatment where recoveries are uncertain 8.7
8.3.5 Accounting
treatment where recoveries are received in following or subsequent financial
year 8.8
8.3.6 Accounting
treatment where recoveries are received more than the loss amount 8.8
8.3.7 Accounting entries 8.8
8.1 Introduction
8.1.1.1 This chapter covers the accounting policies and procedures applicable to write-offs and recoveries of public money.
8.1.1.2 This chapter also sets out policies for recovery of amounts owed on account of outstanding loans and advances given to the Provincial Governments, local bodies and government employees.
8.1.1.3 This chapter should also be read in conjunction with chapter 11 Accounting for Liabilities.
8.2 General Policies
8.2.1 Loss of or deficiency in public monies
8.2.1.1 A loss of or deficiency in public monies is a physical loss, caused by any reason, of any government asset or cash, or cash equivalent which is readily convertible to cash.
8.2.1.2 A loss of or deficiency in money could be due to:
·
a loan becomes doubtful (e.g. due to death of an
employee or bankruptcy of an entity)
·
theft/misappropriation/fraud
·
fire, theft or robbery
·
overpayment or less recovery established as a
result of audit/management review
·
overpayment due to incorrect interpretation of
rules
·
negligence of government employee
·
transit losses in commodity trade
·
any other reason.
8.2.2 Reporting of losses and deficiencies
8.2.2.1 Any loss of or deficiency in public monies caused by theft or otherwise, shall be immediately reported by the officer concerned (the custodian of public monies) to his/her superior officer as well as to the officer who has authority to write-off losses.
8.2.2.2 Such loss of or deficiency in public monies shall also be reported by the officer concerned to the Accountant General (apart from the following exceptions).
8.2.2.3 The exceptions are:
·
in the case of Customs Revenue, mistakes in
assessments or under assessments which are discovered too late to allow a
supplementary claim being made
·
petty cases, involving losses below Rs 1,000
each.
The
above exceptions need not be reported to the Accountant General unless there
are important features which merit detailed investigation and consideration.
8.2.2.4 The following action shall be taken in reporting losses of or deficiencies in public monies, known or suspected to be the result of theft, robbery or fraud committed by an officer.
·
the PAO of the concerned Division/Department
shall advise the Department of Finance of all such losses and deficiencies as
soon as they become known
·
the PAO shall also, as soon as practicable,
provide the Department of Finance with a detailed report of such losses
·
the Accountant General shall be advised, by the
PAO, as soon as possible of a loss or deficiency where there are implications
that the loss was caused or facilitated by a breakdown or weakness in accounting
or control systems operating within the Division/Department.
8.2.2.5 The reporting to the Accountant General shall be carried out even when the loss or deficiency has been made good (i.e. when it is not a loss any more).
8.2.3 Responsibility for losses and deficiencies
8.2.3.1 Government employees shall be held personally responsible for any loss or deficiency sustained by the Government through their theft, robbery, fraud or negligence.
8.2.3.2 Government employees shall also be held personally responsible for any loss or deficiency arising from theft, robbery, fraud or negligence on the part of any other government officer, to the extent to which it may be shown that the officer concerned contributed to the loss or deficiency by his/her own action or negligence.
8.2.4 Write-off and waiver of losses
8.2.4.1 Subject to the limits and conditions specified in the Delegation of Financial Powers, a delegated officer may approve the write-off or waiver of irrecoverable public money lost by fraud, mistake, negligence of individuals or other causes, provided that:
·
the loss does not disclose a defect of system,
the amendment of which requires the orders of higher authority, and
·
there has not been any serious negligence on the
part of some government officer or officers which may possibly call for
disciplinary action requiring the orders of higher authority.
In
the case of above, the delegated officer can only approve the write-off or
waiver once the orders of higher authority are received or the officers found
responsible for negligence have been proceeded against.
8.2.4.2 All approvals to the write-off or waiver of public monies will be communicated in writing to the Accountant General.
8.2.5 Overpayments
8.2.5.1 All overpayments, immediately they are discovered, shall be informed to the delegated authority and will be communicated in writing to the Accountant General.
8.2.6 Recovery of loans and advances
8.2.6.1 Recoveries of loans and advances from the Federal Governments to the Provincial Governments and local bodies are governed by special orders of the Government which must specify the terms and conditions under which loans are to be granted and repaid in each case.
8.2.6.2 Any default in the payment of interest upon a loan or advance, or in the repayment of the principal, will be promptly reported by the Accountant General to the authority which approved the loan or the advance.
8.2.6.3 On receipt of such report from the Accountant General, the authority concerned shall immediately take steps/actions to get the default remedied.
8.2.6.4 Recoveries of advances given to government employees shall be subject to periodic adjustments from their salaries in accordance with the rules applicable to each case. The approving authority (if it is within their powers) may in exceptional cases (as defined or guidelines given by the MoF) order a reduction in the amount of the monthly instalment.
8.2.6.5 Any such reduction shall be immediately communicated in writing to the Accountant General.
8.2.6.6 For detailed procedures on recovery of loans and advances, refer to Section 4.10 of Chapter 4.
8.3 Accounting for Losses and Recoveries
8.3.1 Recording overpayments
8.3.1.1 Where an overpayment has been made against a head of expenditure other than Loan Account and is irrecoverable, the overpayment will remain a charge to that expenditure head.
8.3.2 Recording losses and deficiencies
8.3.2.1 All losses of or deficiencies in public monies shall be recorded by a delegated officer within the department/entity, in the “Register of Losses” (form 8A) kept for the purpose. The record will show, where appropriate:
·
gross value of the loss
·
cause of each loss
·
the action taken
·
amount recovered
·
amount waived or written off and its date
·
authority for adjustment.
8.3.2.2 The Accountant General shall consolidate the above information on a monthly basis in the form of Losses Report. The format of Losses Report is prescribed in section 2.2.10 of the Financial Reporting Manual.
8.3.2.3 The Accountant General shall also report the losses in the Annual Accounts as an annual statement showing the accumulated losses by category, detailing amount recovered and amount written off.
8.3.3 Accounting treatment where recoveries are certain
8.3.3.1 Where during a financial year the recovery amount of losses or deficiencies is known and recoveries are certain, the amount recovered (i.e. when recovery amount received) shall be credited to the original expenditure head.
8.3.4 Accounting treatment where recoveries are uncertain
8.3.4.1 In cases where the circumstances and ultimate amount of a loss is uncertain and the account for the financial year is still open, the amount shall be transferred to a suspense loss account pending the investigation.
8.3.4.2 Any sums recovered while the account for the financial year remains open shall be credited to that suspense loss account.
8.3.4.3 Any balance of a loss remaining in the suspense loss account when the account for the financial year is closed shall be regarded as the final amount of the loss and charged to the unrecovered losses (expenditure) head and noted accordingly.
8.3.5 Accounting treatment where recoveries are received in following or subsequent financial year
8.3.5.1 Where any recoveries are made after the account for the financial year is closed, they shall be treated as other revenue in the financial year in which recovery amount is received.
8.3.6 Accounting treatment where recoveries are received more than the loss amount
8.3.6.1 Where recovery amount received is more than the loss amount shown in the Register of Losses, the excess amount recovered shall be treated as other income in the financial year in which excess recovery amount is received.
8.3.7 Accounting entries
8.3.7.1 The following double entries shall be carried out in relation to disclosures of recoveries of losses.
·
Where
recoveries are certain during a financial year
Dr Bank account
Cr Expenditure
head account
[to record recoveries received
during a financial year]
·
Where
account for the financial year is still open
Dr Suspense loss account
Cr Expenditure head
account
[to
transfer the loss to suspense loss account where ultimate amount of a loss is
uncertain]
Dr Bank account
Cr Suspense loss
account
[to
record recoveries received]
·
On
closure of account for the financial year
Dr Unrecovered losses
(expenditure) account
Cr Suspense loss
account
[to
record any net loss not recovered at the financial year end]
·
Where
account for the financial year is closed
Dr Bank account
Cr Other revenue
account
[to
record recoveries received after the account for the financial year is closed]
·
Where
recoveries received are more than the loss (excess recoveries)
Dr Bank account
Cr Other revenue
account
[to
record excess recoveries in the financial year in which the amount is received]
No comments:
Post a Comment