Guidelines – Commitment Accounting –AG dt 08.03.2011
Effective financial management within governmental operations is paramount for ensuring accuracy and accountability in the budgeting process. On March 8, 2011, the Accountant General (AG) issued comprehensive guidelines regarding Commitment Accounting, a crucial system designed to align expenditures with appropriations. This system, implemented across Punjab’s districts and the AG office since December 15, 2009, aims to enhance financial control and provide a clearer picture of outstanding liabilities throughout the fiscal year.
Overview of Commitment Accounting
Commitment Accounting is an essential component of financial management that enables precise tracking of expenditures against budget allocations. By recording commitments at the time a Purchase Order (PO) is issued, the system helps prevent budget overruns and facilitates better financial planning. The primary goal is to ensure that financial commitments are accurately reflected in the accounting system, thereby maintaining budgetary control and preventing unauthorized expenditures.
Implementation Procedure
1. Purchase Order and Commitment Advice Form
When a department issues a Purchase Order (PO) amounting to Rs. 500,000 or more, a Commitment Advice Form (Form 4C) must be completed. This form is a critical document that formalizes the financial commitment and ensures that it is recorded in the accounting system. The procedure requires:
- Completion of Form 4C: The DDO (Drawing and Disbursing Officer) must fill out this form, detailing the PO and any associated contracts or agreements.
- Approval Process: The completed form must be approved by the delegated authority, typically an approving officer, to confirm its validity.
- Submission to DAO/AG Office: Once approved, the form, along with a copy of the PO and any relevant contracts, must be submitted to the District Accounts Office (DAO) or the Accountant General’s Office (AGPR) for recording.
2. Importance of Timely Submission
It is crucial that Form 4C is submitted at the time of issuing the PO rather than at the submission of claims. Delays or deviations from this procedure compromise the integrity of the Commitment Accounting system and can lead to financial mismanagement. All bills or claims related to Commitment Accounting will be rejected if received without the prior booking of the PO.
Enhancing Financial Control
Commitment Accounting enhances financial control and provides significant benefits for management:
- Real-Time Financial Tracking: The system allows for real-time tracking of outstanding commitments and liabilities, giving management the ability to monitor financial health continuously.
- Improved Budgetary Control: By recording and managing commitments, departments can better control expenditures and avoid budgetary overruns.
- System Access and Reporting: With SAP R/3 system access, administrative departments can generate reports on outstanding commitments, facilitating informed decision-making.
Addressing Non-Compliance
Despite its implementation since December 2009, issues with adherence to Commitment Accounting procedures have been observed. Deviations, such as the submission of Form 4C with claims rather than at the PO issuance stage, undermine the system’s effectiveness. To address this:
- Instruction to DDOs: DDOs are instructed to follow the prescribed procedure strictly. Any deviations will result in claims being rejected, and the concerned officials will be held accountable.
- Monitoring and Compliance: Detailed guidelines are provided to ensure all DDOs comply with the Commitment Accounting procedures. Non-compliance will lead to disciplinary actions under relevant rules.
Commitment Accounting Guidelines
The detailed procedure for commitment accounting is outlined in Chapter 04, Section 4.3.3 of the Accounting Policies and Procedures Manual. Key aspects include:
Criteria for Recognizing Commitments:
- Purchase Order and Contract: A valid PO and, if applicable, a legally binding contract must be in place, clearly stating the amount involved.
- Approval by Delegated Authority: The commitment must be authorized by an officer with the appropriate financial delegation.
- Expenditure Threshold: Commitments should only be recorded for amounts exceeding Rs. 100,000 or 10% of the total budget head, whichever is higher.
- Exclusions: Certain payments, such as salaries, pensions, GP fund contributions, and loans or advances to employees, are excluded from this procedure.
Procedure for Recording and Accounting:
- Entering Commitments: Once a commitment is approved, it must be recorded by the DDO. Only commitments expected to be settled within the current financial year should be recorded.
- Completion of Form 4C: The DDO must complete Form 4C and send it to the DAO/AGPR office along with the PO and relevant contracts.
Conclusion
The Commitment Accounting guidelines issued on March 8, 2011, emphasize the importance of adhering to established procedures to ensure accurate financial reporting and budgetary control. By following these guidelines, departments can prevent unauthorized expenditures, maintain financial integrity, and support effective budget management. Compliance with these procedures will be strictly monitored, and any lapses will be addressed through appropriate actions to uphold the standards of financial accountability.
Additional Copies:
- Additional Secretary (Budget), Finance Department: Instructions will be issued to all administrative departments to ensure compliance.
- Mr. S.M. Arif, PIG/Advisor to CGA: Reference to his office letter regarding commitment accounting.
- P.S to Deputy Controller General of Accounts, CGA Complex: Notification and implementation updates.
- All District Accounts Offices: Ensure adherence to Commitment Accounting procedures.
- DAG Payrolls: Ensure Form 4C is received and POs are recorded before claims submission.
By following these guidelines and adhering to the prescribed procedures, the Commitment Accounting system will function effectively, providing enhanced control and accuracy in financial management.
