Treatment of profits earned on funds withdrawn from Provincial Consolidated Fund and Public Account 01.02.2024
OFFICE MEMORANDUM
Subject: profits earned on funds
I am directed to refer to the subject noted above and to state that Section 32 of the Punjab PFM Act, 2022 stipulates the banking arrangements and regulation of conditions and process of commercial bank accounts allowed / opened with the permission of the Finance Department. Specifically, Section 31 of the Punjab PFM Act, 2022 mandates devising policy guidelines for treatment of profits accrued on public money placed in commercial bank accounts. In pursuance thereof, and approval of the Provincial Cabinet in its 7th meeting held on 22 December 2022, these policy guidelines are being issued.
2.Foremost, attention is invited to Rule 2.10 (b) (5) of PFR Volume-1 reproduced below:
“2.10 (b) (5). That no money is withdrawn from the treasury unless it is required for immediate disbursement or has already been paid out of the permanent advance and that it is not permissible to draw advances from the treasury for the execution of works the completion of which is likely to take a considerable time”.
Afore-mentioned rule clearly stipulates that the money would only be withdrawn from the PCF/Public Account when required for its immediate disbursement (to discharge validly accrued liabilities) and withdrawal of public money in advance and parking in a commercial bank account is not permissible subject to certain exceptions.
3. However, the Finance Department, in consideration of the requirements of Provincial Government entities, creates exception to the above rule based on sound justification of the exigencies, and allows advance withdrawal of money from the PCF/ Public Account for placement in a commercial bank account for undertaking expenditure in due course on case-to-case basis.
4. As withdrawal from PCF / Public Account is only permissible for immediate disbursement, therefore, money withdrawn in advance from the Government Treasury and deposited in a commercial bank account is public money till finally disbursed to discharge validly accrued liabilities. So, for public money(s) placed in profit-bearing commercial bank accounts the profit accrued on such money(s) shall remain public money of the Province.
5. Accordingly, these policy guidelines (hereinafter referred to as “the policy”) have been devised to govern the treatment of profits earned on the funds, provided from the Provincial Consolidated Fund (PCF) / Public Account, and deposited in profit bearing commercial bank accounts for various purposes such as to execute schemes, render services on behalf of the Provincial Government or discharge validly accrued liabilities by Provincial Government Administrative Departments, Attached Departments, special institutions, statutory bodies, autonomous bodies, special institutions, public sector companies and executing agencies etc., of the Government of the Punjab. The commercial bank accounts being operated by various entities of the Provincial Government shall be shifted to the Asaan Assignment Accounts (LC) through a separate policy / procedure by Finance Department in due course. Till such time, this policy shall govern the subject treatment.
Foregoing in consideration, regarding public money placed in the profit-bearing commercial bank accounts, the profit on the money so placed, opened and operated with the approval of Finance Department, can accrue in one of the following situations and their profit shall be treated in the manner hereinafter provided:
| S# | Categories | Treatment of Profit |
|---|---|---|
| i | Profit accrued against the money(s) withdrawn from PCF / Public Account, placed at the disposal of any executing agency, executing the provincial ADP schemes and deposited in profit bearing commercial bank accounts by the executing agency, till its disbursement to discharge validly accrued liabilities; thus, the profit accrues on public money. | Profit so accrued shall be deposited in the government treasury in the following manner: a) In case the money is provided for execution of ADP scheme to the execution agency, expected to be completed in a financial year, the amount received as profit on close of financial year by the executing agency, shall be deposited with the Finance Department through a cheque in the designated head of account. b) In case the money is provided for the ADP schemes to be executed during more than one financial year, the profit accrued till 30th June shall be intimated to the Finance Department, the amount of such profit shall be deducted at source by the Finance Department while releasing funds for next financial year by advising the Accounts Officer to receive said money as book transfer against the indicated receipt head of account. |
| ii | Profit accrued against the money(s) provided to Provincial Government entities such as Administrative Departments, Attached Departments, special institutions, statutory bodies, autonomous bodies, special institutions, public sector companies etc., as grant in aid or loan, to support specific delivery or for other operational purposes etc. and deposited in profit bearing commercial bank accounts by these entities, till its utilization. | Profit so accrued shall be deposited in the government treasury by the recipient entity via the Finance Department through a cheque. In case of loan, the profit so accrued and deposited in government treasury shall offset the amount of interest the recipient entity is liable to pay to Finance Department based on terms and conditions on which loan has been sanctioned. |
| iii | Distribution of Provincial Allocable Amount is carried out through an Award by the Provincial Finance Commission (PFC). In such case, the money is released and transferred to the Local Fund, maintained in dedicated commercial bank accounts, of the Local Governments concerned. As provided under Law / Rules, the Local Governments may invest their surplus money; thus, profit accrues on the local fund. | Under Article 140A of the Constitution of Pakistan, Local Governments have a special status as third tier of the government. The law envisages the split of provincial revenues into two components, viz. Provincial Retained Amount and Provincial Allocable Amount, distribution of which is carried out by the Provincial Finance Commission, through an Award. In case of money transferred to Local Governments as part of PFC Award, the public money shall become part of the Local Fund and income, if any, accruing from surplus would also be part of the Local Fund. The profit so earned shall be retained by the Local Government concerned. |
| iv | Money from PCF or the Public Account provided to a Special Purpose Fund, established under specific law or under Punjab PFM Act, for example Punjab Pension Fund, Punjab GP Fund, Punjab Labor Workers Welfare Fund and Punjab Mines Labor Welfare Fund etc., and placed in profit-bearing commercial bank account; thus profit accrues on public money. | Profit so accrued shall be retained by the “Fund” and utilized as provided in the respective governing law / rules / policies. |
7. These policy guidelines shall apply to the public funds provided during FY 2023-24 onwards and placed in the profit bearing commercial bank accounts.
8. Under the relevant provisions of the Punjab PFM Act 2022, it is mandatory for ALL Provincial Government entities (Administrative Departments, Attached Departments, special institutions, statutory bodies, autonomous bodies, public sector companies etc.) to make adequate disclosures to the Finance Department of the balance funds of public money and profits accrued on such public money placed in the commercial bank accounts at the time of Budget preparation for reconciliation purposes. Finance Department shall ONLY entertain budget proposals for inclusion in the Budget which are accompanied by these mandatory disclosures.
9. It is requested that above instructions may be adhered to in letter and spirit. It is further requested that profits to be deposited in Provincial Consolidated Fund (PCF) under the categories mentioned above may be immediately deposited through bank Challan Form 32-A under receipt head of account C-Non Tax Revenue, C01-Income from Property and Enterprise, C010-Profit, C01070-Others and this office may be informed along with details of commercial bank account accordingly. Any profits accruing on such public money in future shall be deposited in the PCF at the time of the discharge of validity accrued liabilities.
10. The Bank of Punjab is requested to intimate the details of all accounts of such categories under which profit is to be deposited in PCF along with the balance amount of public funds and profit accrued thus far, on priority, to the Finance Department.
