Accounting Policies & Procedures Mannual Chap 9

9 Self-accounting Entities

Table of Contents

 

 

9.1 Introduction                                                                                                                                                                      9.

9.1.1 Overview                                                                                                                                                                    9.

9.1.2 Definition of self-accounting entities                                                                                                                    9.

9.1.3 Self-accounting entities                                                                                                                                           9.

9.1.4 Independent entities                                                                                                                                                9.

9.1.5 Commercial undertakings                                                                                                                                        9.

9.2 General Policies                                                                                                                                                              9.

9.2.1 Responsibilities                                                                                                                                                         9.

9.2.2 Expenditures and Receipts                                                                                                                                      9.

9.2.3 Transactions with other government entities                                                                                                      9.

9.3 Accounting Policies                                                                                                                                                       9.

9.3.1 General                                                                                                                                                                        9.

9.3.2 Basis of accounting                                                                                                                                                  9.

9.3.3 Recognition of expenditures and receipts                                                                                                            9.

9.3.4 Transactions with other government entities                                                                                                      9.

9.3.5 Classification principles                                                                                                                                           9.

9.3.6 Financial reporting requirements                                                                                                                            9.

9.3.7 Consolidation of self-accounting entities                                                                                                             9.

9.4 Accounting for Self-accounting Entity Transactions                                                                                              9.

9.4.1 Manual accounting records                                                                                                                                    9.

9.4.2 Computer records                                                                                                                                                     9.

9.4.3 Accounting entries for self-accounting entity transactions                                                                              9.

9.5 Detailed Procedures                                                                                                                                                     9.

9.5.1 Introduction                                                                                                                                                             9.

9.5.2 Budgetary control procedures                                                                                                                              9.

9.5.3 Receipts                                                                                                                                                                    9.

9.5.4 Authorisation of expenditures                                                                                                                              9.

9.5.5 Control of expenditures                                                                                                                                         9.

9.5.6 Recording of fixed assets                                                                                                                                      9.

9.5.7 Recording of inter-entity transactions                                                                                                                9.

9.5.8 Reconciliation of self-accounting entity transactions                                                                                      9.

9.5.9 Reporting of self-accounting entity transactions                                                                                              9.

9.5.10 Consolidation of self-accounting entity transactions                                                                                    9.

9.1          Introduction

9.1.1    Overview

9.1.1.1 This chapter deals with the policies, accounting treatment and procedures for self-accounting entities.

9.1.1.2 The policies include both general policies and accounting policies for self-accounting entities. The general policies provide guidance on the responsibilities and banking arrangements of a self-accounting entity.  The accounting policies deal with the basis of accounting, recognition, classification, reporting and consolidation of self-accounting entity transactions.

9.1.1.3 The accounting treatment details the records, which need to be maintained for complete and accurate recording of self-accounting entity transactions and the appropriate double entries for recording the transactions in the General Ledger.

9.1.1.4  The general procedures cover the budgetary control, authorisation, recording, consolidation, reporting and reconciliation of transactions generally.

9.1.1.5  The policies and procedures set out in other chapters of the Manual shall be applicable to self-accounting entities.  This Manual highlights references in the other chapters for the key policies and procedures, which need to be followed.

9.1.1.6 Where a specific issue needs to be addressed the self-accounting entity shall refer to the relevant specific chapter, for example for the purchase of goods refer to Chapter 13 ‘Procurement and Asset Management’ and Chapter 4 ‘Expenditures’.

9.1.1.7 Detailed procedures may additionally be maintained by the individual self-accounting entities.

9.1.1.8 The policies and procedures contained in the relevant Departmental Code, Manual or Regulations shall continue to be followed.  Where these conflict with the Accounting Policies and Procedures Manual, this Manual shall prevail.

9.1.1.9 Wherever a government department requires the maintenance of accounting records, which are not detailed in this manual the form of the records shall be decided by the entity in consultation with the Auditor-General.

9.1.2    Definition of self-accounting entities

9.1.2.1 Self-accounting entities are those spending entities whose accounting and financial operations authority has been delegated to them, whether at Federal or Provincial Government level.

9.1.2.2 Self-accounting entities consequently maintain their own accounting records.  They are required to report summarised financial information to the Accountant General’s office on a monthly basis.

9.1.2.3 There are other government entities (e.g. Defence and Railways) which are within the budget sector but are independent.  These entities maintain their own accounting records and submit monthly accounts to the AGPR’s office for consolidation.  For the purpose of accounting procedures, these entities are outside the scope of this Manual.

9.1.2.4 In addition there are a number of commercial undertakings in which the government has a stake.  These entities shall submit quarterly financial accounts to the controlling government entity in the format required by the Auditor-General.  For the purpose of accounting procedures, these entities are also outside the scope of this Manual.

9.1.3    Self-accounting entities

9.1.3.1 Refer to the Rule of Business for a full list of the current status of self-accounting  entities.

9.1.3.2 Examples of self-accounting entities, at the date of issue of this Manual, are as follows (these may change over time as instructed by the Ministry of Finance and the Auditor-General):

·        Ministry of Foreign Affairs

·        Forest Department (Provincial)

·        Public Works Department.

9.1.4    Independent entities

9.1.4.1 Examples of independent entities (which are self accounting entities), at the date of issue of this Manual, are:

·        Ministry of Railways

·        Ministry of Defence.

9.1.4.2 These independent entities shall follow the broad accounting principles as described in the MAP and shall report monthly to the AG/AGPR in the form prescribed by the Auditor-General.

9.1.4.3 These independent entities shall also reconcile their receipts and expenditures figures with the NBP/SBP on monthly basis and shall send a reconciliation statement in the form prescribed by the Auditor-General.

9.1.5    Commercial undertakings (Exempt Entities)

9.1.5.1 Examples of commercial undertakings existing at the date of issue of this manual, are:

·        National Highways Authority

·        Karachi Electricity Supply Corporation

·        WAPDA

9.1.5.2 These undertaking shall report, on annual basis, to the AG/AGPR in accordance with section 1.2.5 of the Manual of External Reporting (MERR). The form of reporting shall be in accordance with section 1.4 of the MERR or as prescribed by the Auditor-General.

9.2       General Policies

9.2.1    Responsibilities

9.2.1.1 Each self-accounting entity is responsible for all aspects of its own financial transactions from budgetary control, approval, certification, authorisation through to recording, reconciliation reporting and monitoring of transactions.

9.2.1.2 The Principal Accounting Officers in the self-accounting entities shall themselves be responsible for ensuring that adequate controls and corporate governance exist over transactions within the entity.  This shall be evidenced by the PAO signing off each set of monthly summarised financial information.

9.2.1.3 The Accountant General’s office shall be responsible for the consolidation of the monthly summarised financial information from self-accounting entities.  The Accountant General shall also be responsible for overseeing that the prescribed accounting system is generally in place, and that the data provided by self-accounting entities is based on proper classification.

9.2.2    Expenditures and Receipts

9.2.2.1 Self-accounting entities shall follow the general policies as detailed in Chapter 4 ‘Expenditures’ (Section 4.2) and Chapter 5 ‘Receipts’ (Section 5.2).

9.2.3    Transactions with other government entities

9.2.3.1 Transactions involving self-accounting entities and other government entities shall follow the general policies set out in Chapter 12 ‘Transactions between Government Entities’ (Section 12.2).

9.3       Accounting Policies

9.3.1    General

9.3.1.1 Unless otherwise specified, the same accounting policies applicable to centralised entities also apply to self-accounting entities (Sections 4.3, 5.3 and 12.3).

9.3.2    Basis of accounting

9.3.2.1 Transactions forming the basis for the monthly summarised financial information reported to the Accountant General must be recorded on a modified cash basis (see Section 9.3.3) in accordance with the policies applied to centralised accounting entities.

9.3.3    Recognition of expenditures and receipts

9.3.3.1 Recognition of expenditures and receipts shall be on a modified cash basis in accordance with the policies detailed in Chapter 4 ‘Expenditures’ (Section 4.3) and Chapter 5 ‘Receipts’ (Section 5.3).

9.3.3.2 Expenditures shall be recognised by the entities on the date of cheque or transfer advice issue. All payments issued will be entered in the cashbook of the disbursing officer.  In addition, commitments of Rs 10,000 or 10% of the budget head, whichever is higher, shall be recognised in accordance with Chapter 4.

9.3.3.3 Revenues shall be recorded on a cash basis.

9.3.4    Transactions with other government entities

9.3.4.1 Transactions involving self-accounting entities and other government entities shall follow the accounting policies set out in Chapter 12 ‘Transactions between Government Entities’.

9.3.5    Classification principles

9.3.5.1 Self-accounting entities are required to apply the same common Chart of Accounts as prescribed by the Auditor-General in the Chart of Accounts Manual and classification principles as detailed in the accounting policy sections of chapters in this Manual.  The principles are detailed in this section and are applicable to all self-accounting entities where relevant.

9.3.6    Financial reporting requirements

9.3.6.1 All self-accounting entities shall report monthly summarised financial information with supporting schedules and vouchers to the relevant Accountant General.

9.3.6.2 The form in which this summarised financial information and supporting accounts is reported shall prescribed by the Auditor-General, in accordance with the ‘Financial Reporting Requirements’.

9.3.6.3 Self-accounting entities may prepare additional management information for their internal use, but these need not be submitted to the Accountant General unless specifically requested. 

9.3.7    Consolidation of self-accounting entities

9.3.7.1 The monthly summarised financial information shall be consolidated into the Consolidated Monthly Accounts by the Accountant General’s office.

9.4       Accounting for Self-accounting Entity Transactions

9.4.1    Manual accounting records

9.4.1.1 Manual accounting records must be maintained for expenditures and revenues as detailed in Chapters 4 and 5 (Sections 4.4 and 5.4), including:

·        cash accounts shall be maintained in a cashbook to keep a record of all receipts and disbursements arising in each entity, along with supporting registers.  These registers shall include the imprest cash account (refer to Section 4.2.8 of Chapter 4 ‘Expenditures’), temporary advance account and settlement account.  The cashbook shall be supported by the Cheque Register.  The Auditor-General shall prescribe the form in which these accounts are to be kept

·        other supporting accounts shall be kept in the form prescribed by the Auditor-General

·        additional accounts may be maintained by individual self-accounting entities for internal control purposes, but maintenance of these accounts is not a requirement of the Auditor-General. 

9.4.2    Computer records

9.4.2.1 Computerised records shall function for expenditures and receipts as detailed in Sections 4.4.2 and 5.4.2 of Chapters 4 and 5, respectively.

9.4.3    Accounting entries for self-accounting entity transactions

9.4.3.1 Transactions reported in the monthly accounts to the Accountant General shall be in accordance with treatment detailed in the appropriate chapters of this manual.

9.4.3.2 Self-accounting entities shall follow the policies as detailed in Chapter 4 ‘Expenditures’ (Sections 4.4) and Chapter 5 ‘Receipts’ (Section 5.4).

9.4.3.3 Transactions involving self-accounting entities and other government entities shall be accounted for in accordance with Chapter 12 ‘Transactions between Government Entities’.

9.5       Detailed Procedures

9.5.1    Introduction

9.5.1.1 This section describes the procedures and key controls to be performed by self-accounting entities.

9.5.1.2 The processing of self-accounting entity transactions must comply with the directions laid down in previous sections of this chapter.

9.5.1.3 The following key internal controls must be observed for self-accounting entities:

·        budgetary control shall be exercised over self-accounting entity funds

·        money shall in general be received at SBP / NBP's

·        segregation of duties between officers raising bills for payment, receiving money and recording money

·        all claim vouchers must be authorised by a delegated officer within the entity incurring the expenditure

·        segregation of duties between claim approval, certification, authorisation, cheque preparation and cheque signing.

·        all fixed assets shall be recorded in the Fixed Asset Register

·        a regular, complete and up-to-date bank reconciliation shall be performed

·        source documents, registers and sub-ledgers shall be reconciled with transactions recorded in the General Ledger

·        monthly financial reports must be prepared by each self-accounting entity and signed off by the PAO, for submission to the appropriate Accountant General for consolidation.

9.5.2    Budgetary control procedures

9.5.2.1 All self-accounting entities are required to exercise proper budgetary control over funds, as detailed in Chapter 3 ‘Budgetary Control’.

9.5.3    Receipts

9.5.3.1 Payments to self-accounting entities should in general be made through the State Bank and National Bank of Pakistan, in accordance with the procedures detailed in Chapter 5 ‘Receipts’ (Section 5.5.3).

9.5.3.2 Where money is received by the Post Office these shall be in accordance with the procedures detailed in Chapter 5 ‘Receipts’ (Section 5.5.4).

9.5.3.3 Where money is received by self-accounting entities these shall be in accordance with the procedures detailed in Chapter 5 ‘Receipts’ (Section 5.5.5).

9.5.3.4 There shall be segregation of duties between those officers raising demands for payment, those receiving monies and those recording the transaction.

9.5.4    Authorisation of expenditures

9.5.4.1 All expenditure shall be approved, certified and authorised by delegated officers within the self-accounting entity, in accordance with the policies and procedures detailed in Chapter 4 ‘Expenditures’.

9.5.4.2 There shall be segregation of duties between those officers involved in the processing of the expenditure claim and those signing the payment.

9.5.5    Control of expenditures

9.5.5.1 The Detailed procedures for expenditure control, outlined in the Chapter  4 ‘Expenditures’ (Section 4.5) apply equally to self-accounting entity payments.

9.5.5.2 Payroll shall be operated in accordance with Chapter 4 ‘Expenditures’ (Section 4.6).

9.5.5.3 Cash advances shall be in accordance with Chapter 4 ‘Expenditures’ (Section 4.10).

9.5.6    Recording of fixed assets

9.5.6.1 The details of fixed assets shall be recorded in a Fixed Asset Register (as detailed in Chapter 13) including assets such as property and equipment both purchased and constructed by the entity.

9.5.7    Recording of inter-entity transactions

9.5.7.1 The policies, accounting treatment and procedures for transactions between self-accounting entities and other Government entities are detailed in Chapter 12 ‘Transactions between Government entities’.

9.5.8    Reconciliation of self-accounting entity transactions

9.5.8.1 The delegated accounts officer in self-accounting entities shall perform the same daily and monthly banking procedures undertaken by the DAO's for centrally accounted entities, as detailed in Chapter 6.  The ‘DAO Monthly Reconciliation Statement’ shall be the ‘SE Monthly Reconciliation Statement’ (form 6D) .

9.5.8.2 Supporting sub-ledgers/registers/vouchers/forms shall be reconciled with transactions reported in the monthly accounts to ensure complete and accurate reporting.

9.5.9    Reporting of self-accounting entity transactions

9.5.9.1 The PAO shall produce monthly consolidated financial information in accordance with the procedures set out in Chapter 7 ‘Financial Reporting Procedures’ (Section 7.4.2)

9.5.9.2 All self-accounting entities shall submit monthly accounts to the Accountant General (AGPR/Provincial AG).  Supporting schedules and vouchers shall be provided as requested by the Accountant General.

9.5.9.3 The accounts shall be submitted in a standard format along with the supporting accounts.  This shall be prescribed by the Auditor-General.

9.5.9.4 The information provided to the Accountant General must be classified according to the Chart of Accounts.

9.5.10  Consolidation of self-accounting entity transactions

9.5.10.1 The summarised financial information reported each month shall be consolidated into the Consolidated Monthly Accounts by the Accountant General’s office.