10 Project Accounting
Table of Contents
10.1 Introduction 10.3
10.2 General Policies 10.4
10.2.1 Definition 10.4
10.2.2 Responsibilities 10.4
10.2.3 Classification of
development projects 10.4
10.3 Accounting Policies 10.6
10.3.1 Mode of payment 10.6
10.3.2 Basis of accounting 10.6
10.3.3 Recognition of
project expenditure 10.6
10.3.4 Commitment
accounting 10.7
10.3.5 Recognition of
revenue 10.7
10.4 Accounting for
Project Expenditures 10.8
10.4.1 Accounting records 10.8
10.4.2 Commitment
accounting records 10.8
10.4.3 Accounting entries 10.8
10.4.4 Reporting and
consolidation of project expenditure 10.8
10.4.5 Reconciliation of
project expenditure 10.9
10.4.6 Reporting of project
expenditures 10.9
Introduction
10.1.1.1 This chapter covers the accounting policies and procedures applicable to the management of development projects. It is of key importance to the Government, donor agencies and other users, that the cost of all development projects undertaken by the Government be accurately measured and progressively reported.
10.1.1.2 Unless otherwise specified in this chapter, the general policies and procedures relating to development projects are the same as those set out in chapter 4 of this Manual, ‘Expenditures’.
10.1.1.3 This chapter does not address the detailed procedures required for the preparation, appraisal and approval of development projects. Such procedures are set out in the ‘Manual for Development Projects’ and other directions issued by Ministry of Finance (Planning Commission).
10.1.1.4 General policies and procedures for the preparation of development project budgets are included in chapter 3 of this Manual, ‘Budgetary Control Procedures’. Project managers are also required to comply with detailed guidelines for project budgeting issued by individual ministries and departments.
10.1.1.5 Policies and procedures for the use of assignment and personal ledger accounts, which may apply to development projects in certain instances, is provided in Chapter 17.
10.2 General Policies
10.2.1 Definition
10.2.1.1 A development project is defined as a scheme or activity provided within a development expenditure grant included in the Schedule of Authorised Expenditure. Development projects typically exhibit the following characteristics:
·
a finite project life
·
a nominated project manager
·
a specified source of funding
·
an approved project plan and budget
·
specified deliverables
10.2.2 Responsibilities
10.2.2.1 A project manager shall be appointed for each development project. This officer is responsible for both the operational and administrative components of the project. The financial powers delegated to a project manager are laid down in the ‘Delegation of Financial Powers’ issued by MoF.
10.2.2.2 The Project Managers are primarily responsible for the recording and accounting of the project expenditure on a daily basis. On a periodic basis the Project Manager report to the AGPR/AG in the form as prescribed in the FRM. The AGPR/AG include these project expenditure in the monthly consolidation.
10.2.2.3 The Finance Division, through the Planning Commission, is responsible for administering the project submission and approval process, through the various project approval bodies.
10.2.2.4 Ministry of Finance, through Economic Affairs Division, is responsible for the management of external and other borrowings obtained to fund development projects.
10.2.3 Classification of development projects
10.2.3.1 All development project expenditure shall be recorded in the Consolidated Fund of the respective Federal and Provincial Governments.
10.2.3.2 Each development project shall be classified according to the elements contained in the Chart of Accounts. Specifically, the following classification requirements shall be followed:
·
development expenditure out of revenue account
is distinguished from development expenditure out of capital account
·
development expenditure of each ministry or
department is classified by grant number
(as given in the ‘fund’ code in the Chart of Accounts)
·
each grant is further classified into the
particular development projects under the administrative control of the
ministry or department. Each development project is represented by a
project number as provided in the Chart
of Accounts.
·
the expenditure incurred on each development
project is further classified by detailed function and object
10.2.3.3 An example of this hierarchy is as follows:
§ Ministry
of Food, Agriculture and Livestock
§ Grant
152: Development Expenditure on Food and Agriculture (out of revenue account)
§ Project 143: Pakistan Cotton Research &
Development Project
§ Detailed
function-object
10.3 Accounting Policies
10.3.1 Mode of payment
10.3.1.1 The mode of payment for development expenditures shall be in accordance with the directions laid down in Chapter 4 of this Manual, ‘Expenditures’ (refer to Section 4.3). These directions require that all claims for payment be duly prepared, approved by a delegated authority, certified and authorised, before payment can be issued. For further clarification refer to Chapter 17, where payment is made through Assignment Account and Personal Ledger Accounts.
10.3.2 Basis of accounting
10.3.2.1 Expenditure on development projects shall be accounted for on a cash or as committed basis, in accordance with the Manual of Accounting Principles.
10.3.3 Recognition of project expenditure
10.3.3.1 Expenditure on development projects will be recognised in accordance with the Directions laid down in Chapter 4 of this Manual, ‘Expenditures’ (refer Section 4.3). Payments made by cheque will be recognised and recorded in the accounts of the Government on the date the cheque is issued.
10.3.3.2 All expenditures incurred under development projects included under the Schedule of Authorised Expenditure must be recorded in the Government accounting system, regardless of the source of funding. Direct funding arrangements between donors and project managers must still be recorded and reported by the Government, if the expenditure is included in the Schedule of Authorised Expenditure.
10.3.3.3 The expenditure of a development project must include all direct costs of undertaking the project. The following items are to be included in development project expenditures:
·
the cost of establishment, that is, salaries and
allowances of permanent and temporary staff, including that of the project
manager. Where a staff member is only
engaged on the project on a part-time basis, a suitable proportion of his/her
time should be charged to the project
·
direct purchases of materials and items of plant
and equipment acquired exclusively for the project
·
direct services purchased exclusively for the
project such as training, casual labour and other contract work
·
any direct costs incurred and passed on from
other departments or governments that relate to the project, as agreed between
the Principal Accounting Officers of the concerned ministries and departments
·
any other costs set out in the development
project budget, included as part of the Schedule of Authorised Expenditure that
have been incurred
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