Management & Professional Development Department

BUDGETARY PROCESS

09th December, 2015

CONCEPTUAL FRAMEWORK

CONCEPTUAL FRAMEWORK OF PROVINCIAL

BUDGET
Simply conceptualized, a budget is an estimate of an
organisations receipt and expenditure over a given
period, normally a financial year of Gregorian
Calendar, as defined in Article 240 and 262 of the
Constitution
Although macroeconomic policy is essentially the
domain of the Federal Government, however, the
Provincial Government Budgets must also be wellaligned with federal governments objectives to promote
economic
stability,
create
employment
opportunities, control inflation, accelerate the pace of
economic development and alleviate poverty
The budget provides the fiscal mechanism to achieve
these goals

CONSTITUTIONAL PROVISIONS

CONSOLIDATED FUND

All revenues received by the

Provincial Government, all loans
raised by that government, and all
monies received by it in repayment of
any loan, shall form part of a
Consolidated Fund, to be known as
Provincial Consolidated Fund (PCF)
Article 118 of the Constitution

CONSOLIDATED FUND

Continued

All other monies;

a) received by or on behalf of the
Provincial Government
b) received by or deposited with the High
Court or any other Court established
under the authority of the Province
shall be credited to the Public Account
(PA)
Article118 of the Constitution

MANAGEMENT OF PUBLIC FUND

The
custody
of
the
Provincial
Consolidated Fund, the payment of
moneys into that Fund, the withdrawal of
moneys there from, the custody of other
moneys received by or on behalf of the
Provincial Government, their payment
into, and withdrawal from, the Public
Account of the Province,
Continued

MANAGEMENT OF PUBLIC FUND

and all matters connected with or
ancillary to the matters aforesaid,
shall be regulated by Act of
Provincial
Assembly
or,
until
provision in that behalf is so made,
by rules made by the Governor.

Article119 of the Constitution

ANNUAL BUDGET STATEMENT

ANNUAL BUDGET STATEMENT
(ABS)
1) The Provincial Government shall, in
respect of every financial year, cause to
be laid before the Provincial Assembly a
statement of the estimated receipts and
expenditure of the Provincial
Government for that year, in this Chapter
referred to as the Annual Budget
Statement
continued

ANNUAL BUDGET STATEMENT

ANNUAL BUDGET STATEMENT (ABS)
2) The Annual
separately:-

Budget

Statement

shall

show

a) the sums required to meet expenditure

described by the Constitution as expenditure
charged upon the Provincial Consolidated
Fund; and
b) the sums required to meet other expenditure
proposed to be made from the Provincial
Consolidated Fund;
and shall distinguish expenditure on revenue
Article120 of the Constitution
account from other expenditure

CHARGED EXPENDITURE
Expenditure charged upon Federal Consolidated Fund

The following expenditure shall be expenditure charged

upon the Federal Consolidated Fund:(a) the remuneration payable to the President and
other expenditure relating to his office, and the
remuneration payable toi) the Judges of the Supreme Court;
ii) the Chief Election Commissioner;
iii) the Chairman and the Deputy Chairman;
iv) the Speaker and the Deputy Speaker of
the
National Assembly;
v) the Auditor-General;
Articles 81 of the Constitution

CHARGED EXPENDITURE

Continued

b) the administrative expenses, including the

remuneration payable to officers and servants of the
Supreme Court, the department of the AuditorGeneral and the Office of the Chief Election
Commissioner and of the Election Commission and
the Secretariats of the Senate and the National
Assembly;
c) all debt charges for which the Federal Government
is liable, including interest, sinking fund charges, the
repayment or amortization of capital, and other
expenditure in connection
with the raising of
loans, and the service and redemption of debt on
the security of the Federal Consolidated Fund;
Articles 81 of the Constitution

CHARGED EXPENDITURE

Continued

d) any sums required to satisfy any

judgment, decree or award against
Pakistan by any court or tribunal; and
e) any other sums declared by the
Constitution or by Act of [Majlis-e- Shoora
(Parliament)] to be so charged.

Articles 81 of the Constitution

CHARGED EXPENDITURE

Continued

Expenditure charged upon Provincial Consolidated Fund

The following expenditure shall be expenditure charged

upon the Provincial Consolidated Fund:
a) the remuneration payable to the Governor and other
expenditure relating to his office, and the
remuneration payable to :i) the Judges of the High Court; and
ii) the Speaker and Deputy Speaker of the
Provincial Assembly;
b) the administrative expenses, including the
remuneration payable to officers and servants, of the
High Court and the Secretariat of the Provincial
Assembly;
Articles 121 of the Constitution

CHARGED EXPENDITURE

Continued

Expenditure charged upon Provincial Consolidated Fund.

c) all debt charges for which the Provincial Government
is liable, including interest, sinking fund charges, the
repayment or amortization of capital, and other
expenditure in connection with the raising of loans, and
the service and redemption of debt on the security of the
Provincial Consolidation Fund;
d) any sums required to satisfy any judgment, decree
or award against the Province by any Court or tribunal;
and
e) any other sums declared by the Constitution or by Act
of the Provincial Assembly to be so charged.
Articles 121 of the Constitution

DESCRIPTION
BUDGET ESTIMATES
The statement of the estimated receipts
into, and the estimated expenditure from,
the Provincial Consolidated Fund, for a
financial year, required to be laid before the
Provincial
Assembly,
before
the
commencement of that year, under
Article120 (1) of the Constitution.

DESCRIPTION
CURRENT BUDGET ESTIMATES
Current Budget means the requirements
of funds to run the daily business of
government e.g. Salary of the employees,
Pension, Debt Servicing, Utilities, POL,
Stationery, stipend, Repair & Maintenance
of public buildings, roads and irrigation
network etc.

DESCRIPTION
DEVELOPMENT BUDGET ESTIMATES
The development budget reflects investment with
the following basic characteristics:(i) It is designed to keep intact, enlarge
and improve the physical resources
of
the country;
(ii) It improves the knowledge, skill, and
productivity (Training) of the Human
Resource; and
(iii) Encourages efficiency in utilization
of available resources.

DESCRIPTION
DEVELOPMENT BUDGET ESTIMATES
However, some expenditures, particularly relating to
Education and Health, which despite their having the
development characteristics, are not treated as
development expenditure, e.g. expenditure on staff for
newly established schools or colleges, which can be
considered as investment in human resource, is not
treated as development expenditure, although it has the
basic characteristics of development expenditure. The
reasons for deviation in such cases is that such
expenditure is treated as normal activities of the
department, and is, primarily, of permanent nature and is,
therefore, met from current budget.

DESCRIPTION
DEVELOPMENT BUDGET (REVENUE)

The funds allocated under development

budget and the expenditure incurred on
account of establishment charges or
procurement of goods & services etc is
termed
Budget

as

Development

Revenue

DESCRIPTION
DEVELOPMENT BUDGET (CAPITAL)

The funds allocated and expenditure

incurred

there

against

with

the

objective of increasing concrete assets

of a material and permanent character
is termed as Development Capital
Budget

DESCRIPTION
CURRENT BUDGET (CAPITAL)

The funds allocated and expenditure

incurred against the receipts of capital
in nature or intended to be applied as
set-off to capital expenditure is termed
as Current Capital Budget and also
known as Capital Account. Only the
net of Capital Account is accounted for
as resource in the Budget Estimates

What is a Budget?
Previously the Budget was referred to
Kings bag
Represented the resources available to
King for public use, if so desired
Expended according to State Priorities,
(as per Kings will)
Now in modern era this term extends to:
Estimating Revenues
Planning Expenditures
Matching Expenditures with Revenues

PUBLIC SERVICE MANAGERS PERSPECTIVE

Objective

Effective and efficient service delivery

Focus

Efficient service delivery from existing

network

Expenditure

Prioritized in relevance to its impact on

service delivery

Manage competing demands from:

Public served
Program Personnel
Higher management
Funding agencies (Including Governments)

BUDGET- GOVERNMENTS PERSPECTIVE

Used as a tool for implementing policy decisions;

Analyzing policies implemented;
Ensuring public service delivery;
Meeting socio-economic objectives and tackling
poverty related issues, etc.

Budget Estimates FY 2012-13

Summary
RECEIPT
Description

EXPENDITURE

BE 2011-12

RE 2011-12

Revenue Receipt

654.674

667.442

Federal Transfers *

536.952

541.994

Provincial Receipts

114.222

125.448

03.500

0.000

306.260

208.408

Privatization Receipts

Capital Receipts
Recoveries of Loans A/C - I

(Rs in million)

BE 2012-13

Description

780.675 Revenue Expenditure

BE 2011-12

RE 2011-12

654.750

633.504

782.860

657.321 Revenue Expenditure

434.750

467.993

532.860

123.354 Development Expenditure

220.000

165.511

250.000

305.868

242.994

268.523
35.465

0.000

270.530 Capital Expenditure

5.218

0.547

6.816 Repayment of Principal A/C I

32.447

31.092

30.097

2.257

8.742 Investments

11.000

7.000
0.000

153.589

92.226

107.578 Loans and Advances (Principal)

0.100

Cash Credit A/C-II

97.721

101.981

105.906 State Trading in Medical Stores

0.024

Foreign Project Assistance

18.610

11.397

1.025

0.000

Foreign Loans
Recoveries of Investment A/C-II

Grants (Foreign)

BE 2012-13

11.488 Loans to MCs

30.000 Domestic Debt Account-II

8.500
0.100

0.022
10.073

10.987

0.027
10.947

251.310

194.207

213.484

0.316

---

---

0.316

---

---

0.178
Public Account Credits

0.048

Public Account Credits

0.048

Public Account
0.178 Public Account Debits

Total Receipts A/C-I

709.624

681.691

837.899 Total Expenditure A/C-I

709.624

681.691

837.899

Total Receipts A/C-II

251.310

194.207

213.484 Total Expenditure A/C-II

251.310

193.207

213.484

960.934

875.898

1,050.383 Grand Total Expenditure

960.934

875.898

1,051.383

Grand Total Receipts

* Federal Transfers includes Receipts from Federal Divisible Pool Taxes, Straight Transfers and Federal Grants

CHALLENGES IN
BUDGETING

CHALLENGES IN BUDGETING
Lack of information on
Programs and Services

costing

of

Policies,

Primary focus on inputs instead of outputs

Short-term horizon for budget making ignoring
long-term costs and benefits
Lack of strategic focus and articulation of sectoral
priorities in budgetary process
Performance judged largely by matching spending
with budget appropriation

CHALLENGES IN BUDGETING
Human resource (capacity issues)
Weak forecasting (scarcity of qualified staff)
Capacity to generate monthly and quarterly reports
Ad hoc commitments to targets
Input based budgeting (incremental budget)

HOW TO BUDGET?

HOW TO BUDGET?
Determine what you want to do or achieve
Analyze Activities
Identify Outputs versus Inputs
Assign Costs to activities

TOOLS FOR BUDGET MAKING

BUDGET MAKING TOOLs

1

Project to Improve Deals with the budgeting,

Financial Reporting accounting and auditing
& Auditing (PIFRA) reforms

Punjab Procurement Deals with procurement

Regulatory Authority reforms
(PPRA)

Medium
Budgetary
Framework
(MTBF)

Term Budgetary reforms for

estimation
of
Budget
Estimates as multi year
planning, normally three
years.

BUDGET MAKING TOOLs

MTBF

PIFRA

PPRA

BUDGET CYCLE
Consideration of macroeconomic framework
Preparation of Budget Call Circular containing
ceilings and guidelines
Preparation
of
budget
Administrative Departments

proposals

by

Budgetary negotiation between Administrative

Departments and Finance Department.
Finalisation of draft budget by the cabinet
Submission to the legislature

BUDGET CALL CIRCULAR

BUDGET CALL CIRCULAR

Customized Budget Call Circular to be issued by
Finance Department, containing;
Two Sections :
i) Guidelines, and
ii) Budget Forms (Applicable to both
Current & Development Budget)

BUDGET CALL CIRCULAR

Contents of BCC;
Covering Letter
Glossary of terms
Introduction to MTBF
MTBF Process & Specific Guidelines to DDO
Calendar of Activities
Budget Forms & Form filling instructions

CALENDAR OF KEY ACTIVITIES

Sr. #

Activities

Completion
Dates (Approx.)

Issuance of MTBF Budget Call Circular to Pilot 20th August

each year
Departments

Issuance of indicative Budget Ceilings for Current 10th November

each year
and Development Budget

Identification of Sector Priorities (as part of Rapid 12th December

each year
Sector Review)

Completion of meetings between FD, P&D, Pilot 26th December

Departments/ DDOs and MTBF Team for preparation each year
of MTBF Baseline Budgets.

Submission of scheme-wise and preliminary MTBF 31st December

Baseline Budgets by the DDOs / Development each year
Schemes to the Pilot Departments

Consolidation of MTBF Baseline Budget proposals 31st December

each year
at the Planning Section of the Pilot Departments

CALENDAR OF KEY ACTIVITIES

Sr. #

Activities

Completion
Dates (Approx.)

Determination of MTBF Baseline Budget

10th January
each year.

Submission of scheme-wise and preliminary MTBF 10th January

Baseline Budgets by the Pilot Departments to the each year.
P&D Department / FD

Agreed Budget Ceilings

15th February
each year

10

Finalization of Development Budget under MTBF 15th April each

and ADP
year

11

Completion of all Budget documents, schedules 10th June each

and summaries for cabinet etc.
year.

12

Presentation of Budget for the next year and MTB 10th June each
Budget to Cabinet
year.

13

Preparation of MTBF Statement

10th June each

year.

New Accounting Model

NEW ACCOUNTING MODEL

SALIENT FEATURES

Modified cash basis of accounting

Double entry book keeping

Commitment accounting

Fixed asset accounting

Asset register

Chart of Accounts (CoA)

CHART OF ACCOUNTS
The Chart of Accounts (CoA) was introduced from
FY 2004-05 in Federal Government & KPK,
whereas, it was adopted in Punjab and other
Provinces from FY 2006-07, by replacing the
Chart of Classification (CoC), it meets all
financial / fiscal requirements and comprises on
following five elements:1. Entity
2. Function
3. Object
4. Fund
5. Project

ENTITY ELEMENT
The entity means the organizational structure or
unit which create the transactions.
The organizational highest level is Government &
lowest level is Drawing & Disbursing Officer (DDO)/
Collecting Officer (CO)

ENTITY ELEMENT CODES

P 50 Agriculture Deptt. 5001

Agriculture

5002

DG Agri. (Extension)

5003

DG Agri. (Field)

5004

DG Agri. (Research)

5005
P 51 CM Secretariat

5025

DG Agri. (Water
Management)
CM Secretariat

P 52 CM Inspection
Team
P 53 Colonies Deptt.

5050

CM Inspection Team

5075

Colonies Deptt.

ENTITY ELEMENT CODES

P 54 Communication
& Works Deptt.

5100

Communication &
Works

5101

Chief Architect,
Punjab

5102

Chief Engineer
Building (North)

5103

Chief Engineer
Building (South)

5104

Chief Engineer
Highways (North)

5105

Chief Engineer
Highways (South)

FUNCTION ELEMENT
The economic function, relating to the provision of
a particular service, activity or Government
program. The function code have been designed
conforming
requirements

to

IMF

public

sector

reporting

FUNCTION ELEMENT - CODES

01

General Public Service

02

Public Order and Safety Affairs

03

Defense Affairs

04

Economic Affairs

05

Environment Protection

06

Housing and Community Amenities

07

Health

08

Recreation, Culture and Religion

09

Education Affairs and Services

10

Social Protection

FUNCTION ELEMENT HIERARCHY

The Function Element is further divided into following
components;
Major Function
Minor Function
Detailed Function
Sub-Detailed Function
Programme

FUNCTION ELEMENT - EXAMPLE

An example of the Function Element is shown as under;
Major Function

01

General Public Services

Minor Function

011

Financial & Fiscal Affairs

Detail Function
0112
Sub Detail Function 011204
Financial Affairs

Financial & Fiscal Affairs

Administration of

OBJECT ELEMENT
The accounting classification, describing the item
of expenditure, receipt, asset or liability. Each
accounting classification is further sub-divided
into a hierarchy, down to the level of detailed
object head.

OBJECT ELEMENT - CODES

Expenditure
A 01 Employee Related Expenses
A 02 Project Pre-investment Analysis
A 03 Operating Expenses
A 04 Employees Retirement Benefits
A 05 Grants, Subsidies and Write off of Loans /

Advances / Others
A 06 Transfers
A 07 Interest Payment
A 08 Loans and Advances
A 09 Expenditure on Acquiring of Physical Assets

OBJECT ELEMENT - CODES

Expenditure
A 10
A 11
A 12

Principal Repayments of Loans

Investments
Civil Works

A 13
A 14

Repairs and Maintenance

Suspense and Clearing

OBJECT ELEMENT - CODES

Receipts
Tax-Receipts
B 01
B 02

Direct Taxes
Indirect Taxes

B 03

Other Indirect Taxes

Non Tax-Receipts
C 01 Income from Property and Enterprise
C 02 Receipts from Civil Administration and
Other Functions
C 03

Miscellaneous Receipts

OBJECT ELEMENT - CODES

Receipts
Capital Receipts
E 01
E 02
E 03

Recoveries of Investment
Recoveries of Loans and Advances
Debt

Assets
F 01

Cash and Bank Balances

F 02

Receivables

F 03
F 04
F 05

Physical Assets
Investments
Other Assets

OBJECT ELEMENT - CODES

Liabilities
G 01
Current Liabilities
G 02
Loans
G 03
Deferred Liabilities
G 04
Other Liabilities
G 05
Control Accounts
G 06
Trust Account-Fund
G 07
Trust Account-Post Office
G 08
Trust Account-Railways
G 09

Trust Account-T&T

G 10

Trust Account-Other

G 11

Special Deposit Investment

OBJECT ELEMENT - CODES

Liabilities
G 12

Special Deposit Fund

G 13

Special Deposit Grant

G 14

Mint Account

Equity
H 01

Equities

OBJECT ELEMENT-- EXAMPLE

Accounting Element

A Expenditure

Major Object

A01-Employee related expenses

Minor Object

A011 -Pay

Detailed Object

A01101- Basic Pay of Officers

FUND ELEMENT
The pool of money from which budgetary
allocation is made (e.g. Consolidated Fund), and
is further sub-divided into grants (in the case of
Consolidated Fund) or Public Account detailed
heads.

FUND ELEMENT
FUND
Fun d could be either consolidated or Public
Account (C & P)

SOURCE
This indicates the source of Fund from where the
expenditure is being met. This could be Capital or
Revenue, denoted by 1or 2

SUB-FUND
This indicates whether the expenditure is voted /
charged. This also indicates whether the
expenditure
is Current, Development or Capital in nature

FUND ELEMENT
C

Consolidated
Capital
Fund

Voted Current Expenditure

Voted Development Expenditure
Voted Capital Expenditure

Revenue

Charged Current Expenditure

Charged Development Expenditure
Charged Capital Expenditure

Public Account

FUND ELEMENT - COMPONENTS

The Fund Element is further divided into following
components;
Funddenoted by alpha character
Sourcedenoted by one numeric character
Sub-Funddenoted by one numeric character
Grant Nodenoted by three numeric character

SUBFUND & SUB-ELEMENT

The different SubFund / SubElements of Consolidated
Fund are as follows:

1 Voted Current Expenditure

2 Voted Development Expenditure

3 Voted Capital Expenditure

4 Charged Current Expenditure

5 Charged Development Expenditure

6 Charged Capital Expenditure

FUND ELEMENT - EXAMPLE

Fund
Source
Sub Fund
Grant Number

C - Consolidated Fund
2
Revenue, 1-Capital
1 - Voted current expenditure
018 - Agriculture

Fund No. PC 21018- Agriculture.

(PROVINCIAL)

GRANT NUMBER

It is indicated by 3 Numeric Characters for Provincial

Government and 2 Numeric characters for District
Governments

PROJECT ELEMENT
Project is indicated by 4 Numeric characters,
allotted to each Development Project. The project
element enables transactions to be aggregated
and reported at a project level. Each project will
have a unique project number

GRANT NUMBER DEVELOPMENT

REVENUE EXPENITURE
The entire provision shown on Revenue Account
is accounted, under the appropriate minor /
detailed function / objects under the Grant No.
PC22036 - Development. This grant is common
for all departments

GRANT NUMBERS FOR DEVELOPMENT

CAPITAL EXPENDITURE
Capital Account is, accommodated under the relevant
minor/detailed function under the following grants: PC 12037-Irrigation Works.
PC 12038-Agricultural Improvement and Research.
PC 12039-Industrial Development.
PC 12040-Town Development.
PC 12041-Roads and Bridges.
PC 12042-Government Buildings.
PC 12043- Loans to Municipalities.

BUDGET ESTIMATE
Development Budget
Formulated on the basis of ADP prepared by the
Planning & Development Department by the
Finance Department
Allocations are reflected on the basis of functioncum-object classification (minor object level) & schemewise
The Revenue & Capital expenditures are
allocated under separate grants.

APPROVAL OF BUDGET
ESTIMATES

APPROVAL OF BUDGET ESTIMATES

Under Article 122(3) of the Constitution, Demands
for Grants should not be presented to the Provincial
Assembly, except on the recommendations of the
Provincial Government (after 18th Constitutional
amendment the Provincial Government has been
defined as Chief Minister in Cabinet)

APPROVAL OF BUDGET ESTIMATES

Under Rule 23(1) of the Punjab Rules of Business,
2006 the budgetary proposals of the Provincial
Government, to be presented to the Provincial
Assembly, are first brought before the Cabinet,
seeking its final approval

APPROVAL OF BUDGET ESTIMATES

The Budget Estimates, after approval by the Cabinet,
are laid before the Assembly, for discussion / vote, on
the date fixed for the purpose, which should be
sufficiently earlier than the date of commencement of
the financial year to which it relate

SCHEDULE OF AUTHORIZED
EXPENDITURE

SCHEDULE OF AUTHORIZED EXPENDITURE

Following consideration of the Annual Budget
Statement in respect of a financial year by the
Provincial Assembly, the Finance Department shall:
a)

prepare a schedule in the same form as of Annual

Budget Statement, in so far as it relates to
expenditure, specifying:
i. the grants made or deemed to have been made
by the Parliament / Provincial Assembly under
Article 122 (2) of the Constitution; and
ii. the sums required to meet expenditure charged
upon the Provincial Consolidated Fund;

SCHEDULE OF AUTHORIZED EXPENDITURE

b)

under Article 123(i) of the Constitution, get

it authenticated by the Chief Minister

c)

After authentication, it shall be laid before

the Provincial Assembly, but under Article
123 (2) of the Constitution shall not be
open to discussion or vote thereon

d)

The allocations are released to the

respective Administrative Departments on 1 st
July

DISTRIBUTION OF BUDGET
AND GRANTS

DISTRIBUTION OF BUDGET AND GRANTS

On approval of the Budget Estimates by the
provincial Assembly, the allocations against a grant
are placed at the disposal of the Head of
Department on 1st July for its further disbursement
to the lower tiers.
On implementation of the WAN under PIFRA, the
allocations would be placed on-line through SAP
system at the disposal of the Head of Departments
(controlling DDOs) for further placing it on-line at
the disposal of the spending DDOs.

BUDGET PUBLICATIONS

BUDGET PUBLICATIONS
Following books are published by the Finance
Department as explanatory memoranda to the
Annual Budget Statement (ABS) of a financial year;
a)
b)
c)
d)

Estimates of Receipts
Estimates of Charged Expenditure and
Demand for Grants (Current)
Estimates of Charged Expenditure and
Demands for Grants (Development)
Annual Development Programme (ADP)

BUDGET PUBLICATIONS
e)

White Paper-explanation of financial

position of provincial government, activities
of
various
functions/departments
&
detailed notes on receipts/expenditure

f)

Budget Speech

g)

Supplementary Budget

h)

Schedule of Continued and New

Expenditure (Current)

(Para 3.2 of Budget Manual)

Thank You