ISLAMABAD: In the run-up to the finalisation of the federal budget for 2024-25, the Ministry of Finance has asked all ministries, divisions, departments, and self-governing entities to surrender by May 15 the funds that they think cannot be utilised within the current fiscal year, ending June 30, 2024.

Under the Public Finance Management Act (PFMA) of 2019, all entities established or operated with public funds are required to surrender their surplus funds each year by May 31 for the closing of fiscal year books. This surrender of funds serves as the basis for the approval and allocation of funds for the subsequent fiscal year.

However, the Accounting Policies and Procedures Manual (APPM) of the federal government requires that such un-utilised funds or those anticipated to remain un-utilised should be surrendered latest by May 15 each year. Therefore, the finance secretary has instructed all counterparts in other ministries to adhere to the APPM for greater clarity.

As a result, the deadline for surrendering unutilised funds has been advanced to May 15, in view of upcoming negotiations with the Inter­national Monetary Fund (IMF) for a 24th bailout programme. The allocations for both development and non-development expenditures for the next fiscal year will be based on actual expenditures in the current year.

IMF negotiations prompt deadline shift to surrender unused funds

In an order, the finance ministry has asked all the principal accounting officers “to ensure that all surrender orders are issued and communicated to” the director of budget computerisation latest by May 15 for entry into the central budget software system, SAP. The order applies to all ministries, divisions, their attached departments and subordinate offices, and autonomous organisations as required under Section 12 of the PFMA.

Under the financial rules and PFMA 2019, an amount included in the original approved budget is required to be given back to the Ministry of Finance as the custodian of the federal finances “because it has not or will not be spent in the financial year by the entity”.

Section 12 of the PFMA 2019 binds that “all ministries, divisions, their atta­ched departments, and sub-ordinate offices and autonomous organisations shall surrender to the Finance Divi­sion [by thirty-first day of May each year], all anticipated savings in the grants or assignment accounts, or grant-in-aid controlled by them”.

In an exceptional case of exigency, the Finance Division has the power to extend the prescribed time limit before the close of the financial year. The Finance Division is also required, under the section to communicate the acceptance of such surrenders before close of the financial year and where requirement is justified, shall provide for equivalent amount in the next financial year’s budget.

Under the APPM, any spending entity required to undertake work or incur expenditure on behalf of another must exercise proper bud­g­etary control over the funds provided by the principal authority.

It is mandatory for the entity incurring the expenditure to ensure that the funds provided by the principal entity are not exceeded, the money is spent for the intended purpose, and any anticipated savings are promptly surrendered back to the principal entity. The principal entity is then required to communicate the grant within which expenditure may be incurred to the concerned spending entity and issue the required approval for expenditure to be incurred by a nominated authority in that entity.

APPM’s Section 3.3.12.6 binds all such entities to surrender all anticipated savings to the government immediately as they are foreseen, but no later than May 15 each year.

“Savings from funds provided after May 15 must be surrendered no later than 30 June,” it reads, instructing the principal accounting officers to exercise stringent controls in the spending of all potential or actual savings.

Under these rules, no savings could “be held in reserve for possible future excesses”, and expenditure postponed could not be reallocated to meet new items of expenditure, or expenditure must not be incurred simply because funds may be available within a particular grant. “Grants that cannot be properly utilised must be surrendered,” it said.

Earlier last year, as required under the PFMA 2019, the government compelled all ministries, divisions, the four provinces, Azad Kashmir, and Gilgit-Baltistan to immediately surrender their working capital and surplus funds kept for investment, and deposit the money into the single treasury account of the federation.

Article 78 of the Constitution stipulates that all funds received by or on behalf of the federal government are deposited either as part of the Federal Consolidated Fund (FCF) or the Public Account of the Federation (PAF). The cash balances of both FCF and PAF are mai­ntained under central account No.1 (non-food) at the State Bank of Pakistan, while Article 79 requires the custody and payment of moneys from and to the central account to be regulated by an act of parliament.

The Public Finance Mana­gement Act (PFMA), passed by the parliament in 2019 at the requirement of lending agencies, now governs all matters related to the FCF and PAF. It requires the operations of the FCF and PAF to vest in the finance division under the overall supervision of the federal government.

Furthermore, Section 23(2) of the Act also “requires that no authority shall transfer public moneys for investment or deposit from the government account, including the assignment accounts, to any other bank account without prior approval of the federal government”.

On top of that, Section 45 of the Act provides overriding effect over all other laws, and any law inconsistent with this Act, while Rule 4(4) of Cash Management and Treasury Single Account Rules 2020 stipulate that no authority shall transfer public money in contravention of sub-section (2) of Section 23.

Published in Dawn, April 22nd, 2024