DDO Endorsement on Pre Audit Cheques

DDO Endorsement on Pre Audit Cheques

OFFICE MEMORANDUM

Subject: Pre Audit Cheques

Please refer to the subject cited above.

• It has been observed that a letter was issued by your office to Chief Manager State Bank of Pakistan (BSC) Bahawalpur vide No. DAO/BWP/Cheque/HM dated 15.11.2022 without any instructions from this office or from Punjab Finance Department regarding affixing of additional stamps on cheques.
• You are advised to explain your position in this regard as the State Bank of Pakistan has not been formally communicated about this new arrangement through competent forum and how a unilateral arrangement has been put in place without clear agreed SOPs between the government and the bank.
• The matter may be treated as most urgent.

This is with reference to your letter No. DAO/BWP/CHEQUE/HM/631 dated 24-11-2022 on the captioned subject.

• In this regard, it should be noted that SBP BSC only registers Drawing and Disbursing Officers (DDO) who actually draw the instruments on SBP BSC Field Offices and withdraw cash. As such, SBP BSC cannot register departmental DDOs, as there are no instructions available e.g. Federal Treasury Rules, which bind SBP BSC vis-à-vis aforementioned stamps.
• It is pertinent to mention here that the matter has also been taken up with DGDAO – Office of the Director General Pakistan Revenue Lahore and final decision will be communicated as and when received (letter attached). Meanwhile, this Office will clear cheques presented for payment stamped “Vendor Payment through DDO Endorsement Only”, without checking either presence of DDO signatures or genuineness / authenticity of the same. DAO Bahawalpur may also take up the matter with DG – DAO for instructions / clarity.

With reference to the captioned subject, it has been observed that some District Accounts Offices have adopted a new practice of affixing a new stamp on the face of the Pre-Audit Cheques. As per cheques received so far, two different stamps have been affixed namely “Payable After Endorsement of Concerned DDO” and “Vendor Payment through DDO Endorsement Only”. As the stamps appear to be a requirement to pay these cheques, coordination has already been undertaken with concerned DAOs for clarification (copies attached).

2. In this regard, it should be noted that SBP BSC only registers Drawing and Disbursing Officers (DDO) who actually draw the instruments on SBP BSC Field Offices and withdraw cash. The instruments are cleared after verifying the signatures of DDOs that are registered with concerned SBP BSC Office. The brief information that drawer of the instrument has to know is provided below;

• DDOs that are indicated or implied in the new stamp are neither the DDO who draw the cheques and collect cash nor are they registered with SBP BSC for particular account;
• As these cheques are presented in clearing, SBP BSC does not need to register them as DDOs.

3. Given the aforementioned details, we request clarification about the new practice adopted by DAOs, specifically:

• What treatment will be given to cheques if they bear the stamp “Payable after Endorsement of Concerned DDO” but endorsement of DDO is missing on the back of the cheque – whether to clear or return the cheque? Any FTRs or other instructions.

4. It is pertinent to mention here that if DDO endorsement is mandatory, SBP BSC can only check the availability of the stamp on the face of the instrument but cannot verify the authenticity or genuineness of his/her signature. It is also pertinent to mention here that as per our understanding, there are no instructions available e.g. Federal Treasury Rules, which bind SBP BSC vis-à-vis aforementioned stamps.

An early response in this regard will be highly appreciated.

Kindly refer to your kind office letter No. TM-I/H-3-4/Pt-II/2016-2022/3097, dated 24-11-2022 on the subject noted above.

It is submitted that prior to all payments through vendor, the Drawing & Disbursing Officer drew Cheques from the State Bank of Pakistan after recording endorsement under his signature for making payment to the authorized officials. As per Treasury Rule 29 (Annexure-A), all the DDOs are responsible to submit the Specimen Signatures to the Treasury Officer and the Bank, as the case may be.

The Rule 4.157 (Annexure-B) for payment to a drawer of a bill endorsing it for payment to a messenger and, when a bill is endorsed, the bank will be responsible for seeing that the endorsement is signed by the drawer of the bill and for taking the acknowledgment of the messenger in token of payment to him.

It is submitted that Cash Payment at counter to the DDO / Representative OR payment to the vendor through Bank clearance are only two different modes of payment but governed under the same rules & policies. Hence, issuance of by name cheques in favor of employees, vendors but withdraw from the State Bank of Pakistan without endorsement of the DDO is not only contrary to instructions / rules mentioned above but also may lead unauthorized withdrawal of Cheques without endorsement of the DDO and make cause variation during reconciliation of expenditure.

In this regard, a meeting with the State Bank of Pakistan, Bahawalpur has already been held on 22-11-2022 and the State Bank of Pakistan reluctant to accept the responsibility regarding genuineness of signature (endorsement) by the DDO. There is no other issue with the Bank.

The adoption of procedure by issuing by name cheques in favour of officials / vendors and withdrawal from the State Bank of Pakistan (by Bank Clearance) is same as it is done in case of payment through Cash Counter. The adoption of procedure is not only requirement of above named rules but also essential to make safe payments only to the lawful claimants and to avoid serious irregularities. The contention of State of Bank of Pakistan, Bahawalpur regarding non-acceptance of genuineness of signature of the DDO is not justified. The Bank is responsible for verification signatures of DDO on Cheques presented for Cash Payment and the same rules are applicable for payment through Cheques presented for payment through Clearance.

In view of the above humble submissions, provision of rules, to make safe and lawful payment, it is, requested that reply of this office may please be considered or necessary directions may please be issued to this office to proceed further in the matter.

Kindly find enclosed a letter from State Bank of Pakistan bearing No. AD (Policy)/62/68453/2022, dated 18.11.2022 and subsequent reminder dated 07.12.2022 which is self-explanatory, may kindly be perused.

2. State Bank of Pakistan referred the matter that some District Accounts Offices have started to affix stamps on cheques with the following statement, “Payable after endorsement of concerned DDO”. State Bank vide the above referred letter pointed out that the unilateral stamp of endorsement on cheques by the DDO is not available in the Govt. instructions STR/FTR etc. therefore the action of District Accounts Offices cannot be acknowledged being not a mandatory requirement until and unless it is provided in the rules.
3. As per current procedure of payment, the DDOs submit claims of expenditure in favor of a vendor to the A.G. Pb/DAOs on Contingent Bill Form (STR-30) along with sanction of expenditure by the competent authority & related vouchers etc. with the direction to issue cheque in the name of specified vendor. After the preparation of cheque, the DDO collects cheques himself or through authorized representative from the cheque counter of A.G. Punjab/DAOs, make entry in the cash book and delivers it to the concerned vendor under proper acknowledgement.
4. The need for affixing of stamps for endorsement by DDOs was inquired from the DAOs. The DAOs stated that this additional check will ensure involvement of the DDOs after issuance of cheques to assure authenticity of payment. In the recent past cases of fraudulent withdrawal of payments occurred in which during trial by the investigation agencies/courts, DDOs refused to own their signatures made on the bills submitted at the pre-audit counter Accountant General Punjab/DAOs. Hence the need felt by cheque signing officer to get cheques endorsed by DDOs.

5. Recently Rule 4.49 of STR Punjab has been revised vide Notification No.SO(TT)12-2/2014.Pt-II dated 24.08.2022 but the concern of DAOs as explained above is not removed. In the light of the position explained above, it will be better for safeguarding of Govt. exchequer, as well as to address the concerns of the cheque signing officer that the following may be added in the Rule 4.49(1) (c):

5. The above proposal may kindly be considered as a control for protection of government funds, otherwise, the decision of the Government in this regard may kindly be conveyed.

No. SO(TT)12-2/2014.Pt-II. In exercise of powers conferred under Article 119 of the Constitution of Islamic Republic of Pakistan, Governor of the Punjab is pleased to make the following amendment in the Subsidiary Treasury Rules issued under the Treasury Rules (Punjab), with immediate effect:

AMENDMENT

In the Subsidiary Treasury Rules issued under the Treasury Rules (Punjab), for rule 4.49, the following shall be substituted:

“4.49. (1) The Drawing and Disbursing Officer shall:

(a) not make any payment in cash to discharge accrued liability against a department;

(b) before submitting the bill for pre-audit, make an endorsement on it by requiring the Account Officer to make direct payment to the vendor through his bank account, or as the case may be, issue a separate cheque in favor of the vendor; and

(c) after collecting the cheque, deliver it to such vendor, against proper acknowledgement.

(2) The cheque against expenditure on account of secret service fund shall be issued in favour of the Drawing and Disbursing Officer.”

Kindly refer to the above noted subject.

It is submitted that Rule 4.49 (a) of Punjab Subsidiary Treasury Rules stipulates that payment of Rs.100,000/- and above to the contractors and suppliers shall not be made in cash by Drawing and Disbursing officers. It further elaborates that the DDO, while submitting the bills at the pre-audit counter of the Accountant General/DAO, shall record an endorsement on the bills requiring separate crossed cheques to be issued in favor of the suppliers/contractors.

Keeping in view the above quoted rule position and to bring transparency in disbursements in line with the FATF requirements and State Bank of Pakistan’s insistence to avoid cash payments, it is requested that all the DDOs under your command may kindly be advised to follow the rules and procedure for payment through crossed cheques and to get vendor numbers for all the suppliers/contractors to whom payments are to be made. It is further apprised that payment to the Contingent Paid Staff, currently being made in cash also needs a change in payment procedure.

It is proposed that this office will issue “Payees Account Cheques” in favor of the DDO concerned who shall be required to ensure the transfer of that amount into the bank accounts of the concerned employee for whom payment had been drawn instead of drawing cash.

In this regard, your personal cooperation is solicited to make this change a success for the sake of the interest of the country. We will extend full cooperation, in case of any functional difficulty occurs in the process please.

(This issues with the approval of Accountant General Punjab)