Cash Payments to DDOs above the prescribed limit – AG -14.09.2021
In alignment with the State Bank of Pakistan’s latest directives aimed at curbing cash payments through Drawing and Disbursing Officers (DDOs), an important shift in financial procedures has been mandated. This policy change is intended to bolster financial discipline and transparency in public sector transactions. On September 14, 2021, the Accountant General (AG) Punjab issued a crucial order addressing the non-compliance issues observed in cash payments exceeding the prescribed limits. This article provides a comprehensive overview of the new directives, highlights the implications of non-compliance, and offers guidance for adhering to these updated procedures.
Background and Policy Directive
The State Bank of Pakistan, through its policy directives, has emphasized the necessity of reducing cash transactions within governmental departments to improve financial management and accountability. As per the office order No. TM-1/235 dated August 10, 2021, the primary goal is to curtail cash payments made through DDOs and encourage electronic transactions to enhance transparency and reduce the risk of financial discrepancies.
However, recent SAP-generated reports have revealed discrepancies in compliance with these directives. The reports indicated substantial cash payments made to DDOs, despite clear instructions to restrict such transactions. This non-compliance undermines the policy’s effectiveness and highlights the need for immediate corrective measures.
Issues Identified
- Contravention of Policy Directives: The observed practice of issuing large cash payments to DDOs, contrary to the State Bank’s directives, signifies a serious lapse in adhering to the updated financial procedures. Such discrepancies not only violate established policies but also expose the system to potential misuse and financial irregularities.
- Financial Discipline and Transparency: Cash payments, especially in large amounts, can lead to issues of accountability and transparency. By circumventing the prescribed limits, there is an increased risk of mismanagement and fraudulent activities. This non-compliance compromises the integrity of the financial system and undermines the trust in public sector financial operations.
- Impact on Financial Reporting: The continuation of cash payments beyond the limits disrupts accurate financial reporting and tracking. Accurate and timely financial records are crucial for effective budget management, auditing, and financial planning. Discrepancies in these records can lead to significant administrative challenges and hinder the efficiency of financial oversight.
Directives for Compliance
In response to these concerns, the Accountant General Punjab has issued a clear directive to address the observed discrepancies:
- Clarification Required: Departments are required to provide a detailed explanation for the cash payments made to DDOs despite the clear directives against such practices. This clarification should outline the reasons for non-compliance and the measures taken to rectify the situation.
- Restricting Cash Payments: Effective immediately, the Cheque Section is instructed to cease the issuance of open cheques in favor of DDOs. All future transactions should adhere to the prescribed limits and comply with the State Bank of Pakistan’s directives.
- Enhanced Monitoring and Reporting: To prevent further non-compliance, departments must implement stricter monitoring mechanisms. Regular audits and reviews should be conducted to ensure adherence to the new cash payment policies and to identify and address any deviations promptly.
Steps for Implementation
- Review and Update Procedures: Departments should review and update their internal procedures to align with the new policy directives. This includes revising financial transaction protocols and ensuring that all staff members are aware of and comply with the updated procedures.
- Training and Awareness: Conduct training sessions for relevant personnel to familiarize them with the new policy requirements and procedures. Increasing awareness among staff will help in better adherence to the directives and minimize the chances of inadvertent non-compliance.
- Strengthening Internal Controls: Enhance internal controls and reporting mechanisms to monitor cash transactions effectively. Implement robust checks and balances to prevent unauthorized or excessive cash payments and to ensure accurate financial reporting.
- Regular Audits: Schedule regular audits to review compliance with the new cash payment policies. Audits should focus on identifying any discrepancies, evaluating the effectiveness of the new procedures, and making necessary adjustments based on audit findings.
Conclusion
The recent directive from the Accountant General Punjab emphasizes the importance of adhering to the State Bank of Pakistan’s policy on cash payments through DDOs. Compliance with these directives is essential for maintaining financial discipline, transparency, and integrity within governmental financial operations. By addressing the identified issues and implementing the recommended measures, departments can ensure effective adherence to the new policies and contribute to the overall improvement of financial management in the public sector.
It is imperative for all concerned parties to take immediate action to rectify the observed discrepancies and prevent future non-compliance. Through diligent implementation of the new procedures and enhanced monitoring, departments can uphold the standards of financial accountability and transparency required for efficient public sector financial management.