Government Sector Accounting:

Q#1 Introduction to Government Sector Accounting

Definition and Introduction
Government sector accounting refers to the process of recording, classifying, summarizing, and reporting financial
transactions and events related to public sector entities, such as federal, state, and local governments. It involves the
application of accounting principles and practices that are specifically designed to meet the needs of public sector
financial management, ensuring transparency, accountability, and efficient use of public resources.

Unlike private sector accounting, which focuses on profitability, government sector accounting emphasizes the
stewardship of public funds, budget compliance, and the efficient delivery of public services. It helps governments
track revenues (such as taxes and grants) and expenditures, assess financial performance, and make informed
decisions about resource allocation. Adhering to established standards, such as the International Public Sector
Accounting Standards (IPSAS) or Governmental Accounting Standards Board (GASB) guidelines, ensures that financial
reporting is consistent, transparent, and reliable for stakeholders, including citizens, policymakers, and oversight
bodies

Government sector accounting is a crucial financial practice that focuses on the management of public funds by
governmental entities. It plays a vital role in ensuring that governments remain transparent, accountable, and
efficient in their financial operations. Here’s a detailed explanation with six key objectives and features:

Objectives

1. Accountability: Ensures that government officials and agencies are responsible for the management and use
of public funds.
2. Transparency: Promotes open and accessible financial reporting, allowing the public to understand how
funds are utilized and managed.
3. Budgetary Control: Monitors compliance with approved budgets to prevent overspending and ensure that
resources are used as intended.
4. Efficient Resource Allocation: Aids in the optimal allocation of limited public resources to meet community
needs and priorities.
5. Financial Reporting: Provides accurate and timely financial information to stakeholders, such as taxpayers,
policymakers, and oversight agencies.
6. Compliance with Legal Requirements: Ensures adherence to relevant laws, regulations, and accounting
standards governing public finance management.

Role of Government Sector Accounting

Public sector accounting plays a crucial role in the management of public resources and the provision of public
services. Some of the strategic roles of public sector accounting include:
1. Budgeting and Financial Planning.
Public sector accounting helps in the development of budgets and financial plans, which are essential tools for
managing public resources. For example, the government can use public sector accounting to create a budget for the
provision of public services such as healthcare,
education, and infrastructure.
2. Financial Reporting and Accountability.
Public sector accounting provides the framework for financial reporting and accountability to stakeholders, including
citizens and investors. This ensures that public resources are used appropriately and transparently. For example, the
government can use public sector accounting to report on the use of public funds for specific projects.
3. Performance Measurement and Evaluation.
Public sector accounting helps in measuring and evaluating the performance of public sector entities. For example,
the government can use public sector accounting to evaluate the effectiveness of a public service program such as
poverty alleviation or environmental
protection.
4. Risk Management.
Public sector accounting helps in identifying and managing financial risks in public sector entities. For example, the
government can use public sector accounting to identify and mitigate risks associated with public investments or
procurement activities.
5. Decision Making.
Public sector accounting provides decision-makers with the information needed to make informed decisions
regarding the allocation of public resources. For example, the government can use public sector accounting to make
decisions regarding the funding of public services such as healthcare, education, and infrastructure

Organization, Powers and Functioning of Auditor General of Pakistan

Q# 2 Explain in Detail Organization, Powers and Functioning of Auditor General of Pakistan?

Definition and Introduction

The Auditor General of Pakistan (AGP)is the supreme audit institution in Pakistan responsible for ensuring
transparency, accountability, and efficiency in the management of public funds by the federal and provincial
governments. Established under the Constitution of Pakistan, the AGP plays a crucial role in the country's financial
management system by conducting audits of public accounts and providing independent reports to the legislature.
Below is a detailed explanation of the organization, procedure, and functioning of the Auditor General of Pakistan.
Constitutional and Legal Framework
The office of the Auditor General of Pakistan is a constitutional entity established under Article 168 to 171 of the
Constitution of Pakistan, 1973. It is further governed by the Auditor General’s (Functions, Powers, and Terms and
Conditions of Service) Ordinance, 2001. The AGP is responsible for auditing and reporting on the accounts of the
federation, provinces, autonomous bodies, and state-owned enterprises (SOEs).

- Independence: The AGP is an autonomous and independent office, functioning separately from the executive
branch of the government. The independence of the AGP is crucial for maintaining objectivity and impartiality in
audits.
- Appointment: The Auditor General is appointed by the President of Pakistan for a nonrenewable term of four years.
The Auditor General cannot be removed from office except in the manner and on grounds similar to the removal of a
judge of the Supreme Court.

Organizational Structure of the Auditor General's Office

The AGP operates under a structured organizational setup to fulfill its mandate effectively.The key components of
its organizational structure include:
a. Auditor General of Pakistan (AGP)
- The AGP is the head of the institution and holds the ultimate authority and responsibility for overseeing the audit
activities and reporting on public sector financial management. The AGP reports directly to the Public Accounts
Committees (PAC) at both the federal and provincial levels.
b. Deputy Auditors General (DAG)
- The AGP is assisted by Deputy Auditors General at the federal level, each responsible for overseeing specific areas
of auditing. They may manage audits related to specific sectors like defence, public enterprises, development
projects, or other sectors.
c. Director Generals (DGs) Audit
- There are Director Generals (DGs) Audit for various regions and sectors. These DGs are responsible for conducting
field audits of ministries, divisions, departments, and other public sector entities. The DGs manage teams of auditors
who are deployed for specific audit
assignments.
d. Field Offices - The AGP operates through a network of regional and sectoral audit offices. These field offices are
responsible for auditing the accounts of federal and provincial ministries, departments, and autonomous bodies
located within their jurisdiction.
e. Specialized Audit Wings
- The AGP also has specialized audit wings such as the Defence Audit Wing, Revenue Audit Wing, Foreign Aided
Projects Wing, and Public Sector Enterprises Wing, which focus on auditing specific sectors or types of financial
transactions.

Powers of the Auditor General of Pakistan (AGP)

The AGP is vested with several powers to execute its mandate effectively:

Constitutional Authority: As per the Constitution of Pakistan, the AGP has the authority to conduct audits of
accounts related to the federation, provinces, autonomous bodies, and other entities financed by the public
exchequer.

Access to Records: The AGP has the power to access all relevant documents, books, and records of
government departments, agencies, and public enterprises to carry out audits. This access ensures that no
information is withheld, promoting transparency.

Summoning and Inquiry Powers: The AGP can summon government officials and employees to provide
information, explanations, or clarifications related to financial transactions and records.

Reporting Authority: The AGP has the power to submit audit reports to the President of Pakistan, which are
then presented to the National Assembly and the Public Accounts Committee (PAC) for review and action.

Auditing of Funds: The AGP has the authority to audit various funds, including federal, provincial, public
accounts, and any other funds established by the government or financed by public resources.

Functions of the Auditor General of Pakistan (AGP)

The AGP performs a wide range of functions to ensure accountability and transparency in the management of public
funds:

a) Financial Auditing

The AGP conducts financial audits to examine whether the financial statements of government departments and
entities are accurate, complete, and comply with applicable laws, regulations, and standards.This audit ensures
that public funds are managed in accordance with the approved budget and financial policies.

b) Compliance Auditing

The AGP performs compliance audits to determine whether government entities have adhered to relevant laws,
regulations, policies, and procedures in their financial activities.It ensures that government departments comply
with financial rules and prevent unauthorized or wasteful expenditures.

c) Performance Auditing

Performance audits assess the efficiency, effectiveness, and economy of government programs and projects. This
type of audit evaluates whether public resources are being used optimally to achieve intended outcomes.It helps
identify areas for improvement and ensures value for money in public spending.

d) Special Audits and Investigations

The AGP can conduct special audits and investigations on specific issues, projects, or government departments,
either on its initiative or based on requests from the government, PAC, or other bodies.These audits focus on areas
where there are concerns about financial mismanagement, corruption, or inefficiency.

e) Certification of Public Accounts

The AGP certifies the annual accounts of the federal and provincial governments, ensuring their accuracy and
reliability.This certification is crucial for maintaining public confidence in the financial statements of the government.

f) Advisory Role

The AGP provides advice and guidance to government departments on financial management practices, internal
controls, and audit procedures. This role helps improve financial governance across the public sector.

Public Sector Developmental and Non-Developmental Budgeting.

Q# 3 Explain in Detail the process, Procedure and Policies of Public Sector Developmental and Non-
Developmental Budgeting.

Budgeting
Budgeting in the context of public sector accounting refers to the process of planning, allocating, and managing
public funds to meet the needs of the government and its agencies. It involves forecasting expected revenues and
expenditures for a specific period, typically a fiscal year, and ensuring that the government’s financial resources are
used effectively to achieve public objectives, such as delivering services, infrastructure development, and social
programs.

A. Developmental budgeting
Developmental budgeting refers to the process of allocating and managing funds specifically for projects and
programs that promote long-term economic growth and improve the infrastructure and social welfare of a country.
In the public sector, developmental budgeting focuses on investments in areas like infrastructure, education, health,
and other initiatives that lead to sustainable development and improve the quality of life for citizens.

1) Developmental Budgeting Process

Identification of Developmental Needs: The process begins with identifying the key developmental priorities based
on the country’s economic goals, sectoral needs, and long-term plans such as five-year development plans or
national development strategies.

Proposal Submission: Government ministries, departments, and agencies prepare and submit detailed project
proposals, outlining objectives, expected outcomes, and estimated costs.

Project Appraisal and Evaluation: The proposed projects undergo an evaluation process, where their feasibility,
cost-effectiveness, and potential impact are assessed. This ensures that only projects with significant socio-economic
benefits are considered.

Preparation of the Development Budget: The Ministry of Planning or Finance compiles the approved projects and
prepares a draft development budget, which includes funding allocations for each project.

Approval and Integration: The development budget is integrated with the overall budget and submitted to the
government and legislative body for approval. Any necessary adjustments are made based on feedback from
policymakers and stakeholders.

Implementation and Monitoring: Once approved, funds are released for project implementation. Regular
monitoring and evaluation are conducted to ensure that projects are completed on time and within the allocated
budget.

2) Procedure of Developmental Budgeting

The procedure for both developmental and non-developmental budgeting involves key stages that ensure
transparency, accountability, and efficiency. These stages include:
  Project Initiation: Government agencies identify projects that align with national development goals.
 Project Planning and Feasibility Study: Detailed project plans, feasibility studies, and cost-benefit analyses
are conducted to evaluate the viability of proposed projects.
 Prioritization and Selection: Projects are prioritized based on urgency, impact, and alignment with
development objectives.
 Allocation of Funds: Funds are allocated to approved projects based on the available budget and projected
costs.
 Implementation and Monitoring: Project implementation is monitored through regular progress reports and
site visits to ensure adherence to timelines and budgets.

3) Policies of Developmental Budget

Priority to National Development Goals: Projects included in the developmental budget must align with the
country's long-term development goals, such as poverty reduction, infrastructure development, and
sustainable growth.

Cost-Benefit Analysis: All proposed projects undergo rigorous cost-benefit analysis to ensure they deliver
maximum socio-economic benefits.

Public-Private Partnerships (PPPs): To optimize resources, the government may encourage partnerships
with the private sector in financing and implementing development projects.

Sectoral Allocation: Funds are allocated to different sectors (e.g., health, education, infrastructure) based on
priority and potential impact on socio-economic development.

Monitoring and Evaluation: Regular monitoring and evaluation policies ensure that developmental projects
are completed on time, within budget, and meet their intended objectives.

Transparent Reporting: The government ensures transparent reporting of development expenditures,

promoting accountability and public trust.

B. Non-developmental budgeting
Non-developmental budgeting refers to the allocation of funds for the routine, operational, and administrative
expenses of the government. These expenses do not directly contribute to long-term economic growth or
infrastructure development. Instead, they cover the costs of running government offices, paying salaries,
maintaining public services, and servicing debt. Non-developmental budgets focus on recurring expenses necessary
for day-to-day government operations rather than investments in future growth.

1. Non-Developmental Budgeting Process

Estimation of Non-Developmental Expenditures: Government departments and agencies estimate their recurrent
expenses, including salaries, pensions, interest payments, maintenance costs, and other operational expenses for
the upcoming fiscal year.

Compilation of Budget Estimates: Each department submits its budget estimates to the Ministry of Finance. These
estimates are reviewed and compiled into a consolidated non-developmental budget.

Review and Adjustments: The Ministry of Finance reviews the budget estimates, making adjustments to ensure
fiscal discipline and adherence to budgetary constraints.

Presentation and Approval: The consolidated non-developmental budget is presented to the Cabinet and legislative
body for approval. After thorough discussions and necessary amendments, the budget is approved.
Execution and Monitoring: Once approved, the funds are disbursed to various departments for their non-
developmental activities. The Ministry of Finance monitors expenditures to ensure that funds are used efficiently
and appropriately.

2. Non-Developmental Budgeting Procedure

 Estimation of Recurring Costs: Departments estimate their recurring expenses for the upcoming fiscal year.
 Submission and Review: These estimates are submitted to the Ministry of Finance, where they are reviewed
for accuracy and relevance.
 Approval Process: The non-developmental budget is discussed and approved by the Cabinet and legislature.
 Disbursement and Monitoring: Approved funds are released to departments, and their expenditures are
monitored to prevent overspending

3. Non-Developmental Budget Policies

Fiscal Responsibility: The government adheres to fiscal responsibility policies to ensure that non-
developmental expenditures do not exceed available resources, preventing budget deficits.

Expenditure Rationalization: Efforts are made to control and rationalize recurring expenditures, such as
reducing unnecessary administrative costs and ensuring efficient resource utilization.

Salary and Pension Reforms: Policies are implemented to manage salary and pension costs, preventing them
from consuming a disproportionate share of the budget.

Debt Servicing: A significant portion of the non-developmental budget is allocated for debt servicing, with
policies in place to manage and reduce the national debt burden over time.

Performance-Based Budgeting: Non-developmental budgets are linked to performance outcomes, ensuring

that departments are accountable for achieving their goals and delivering services efficiently.

Internal Controls and Audits: Strict internal controls and regular audits are conducted to ensure that non-
developmental expenditures are legitimate, appropriate, and in compliance with regulations.

Explain in Detail Processes, procedures and policies regarding public sector Expenditures.

In Pakistan, public sector expenditures refer to the government’s spending on various services, projects, and
administrative tasks that benefit the public. These expenditures are guided by strict processes, procedures, and
policies to ensure that government funds are used responsibly, transparently, and in line with national goals. Public
sector accounting plays a crucial role in tracking and managing these expenditures, making sure that all spending is
recorded accurately and in a way that can be easily reviewed and audited.

Public sector expenditures are divided into two main types:

 Current (Non-Developmental) Expenditures: These cover daily government expenses like salaries, utilities,
maintenance, and administrative costs.
 Developmental Expenditures: These are long-term investments in infrastructure, health, education, and other
areas that contribute to the country’s growth. In Pakistan, these are often planned through the Public Sector
Development Program (PSDP).
 The Process of Managing Public Sector Expenditures

The process for managing public sector expenditures in Pakistan involves several steps to ensure responsible use of
public funds. Public sector accounting ensures each step is transparent, controlled, and aligned with approved
policies.

1) Budget Preparation

Each government department first evaluates its financial needs for the upcoming year, estimating how much funding
it will need for both regular operations and development projects.Departments submit their budget requests to the
Ministry of Finance, where they justify the requested amounts based on planned activities and objectives.

2) Approval of Budget

The consolidated budget goes to Parliament for review, where it is discussed in detail and adjusted as
necessary.After approval by Parliament, the budget becomes law through an Appropriation Bill, which officially
authorizes departments to spend the approved amounts.

3) Executing Expenditures

Once approved, the Ministry of Finance allocates funds to each department. Departments then begin spending
according to their budget. For each expense, departments must follow a series of checks and authorizations,
including verifying that the expenditure is valid, necessary, and within the budget limit.

4) Monitoring and Controlling Spending

To avoid overspending or misuse, departments have internal controls in place that monitor how funds are spent and
ensure compliance with budget limits.The Auditor General of Pakistan and internal audit departments regularly
review expenditures, checking for any errors or misuse.

5) Reporting and Evaluation

Departments submit regular financial reports, detailing actual spending compared to the approved budget. These
reports help evaluate how well funds are used and highlight areas that need improvement.

Procedures for Public Sector Expenditures

To ensure proper handling of public funds, public sector expenditures follow specific procedures, all of which
emphasize control, accuracy, and transparency.

1) Authorization and Approval

Funds must be used only for approved purposes. Each department must stick to its budget and only spend within
authorized limits. Each expense must be supported by a voucher (official receipt or invoice) that is reviewed and
signed off by authorized officers.

2) Procurement and Spending Control

All purchases must follow the Public Procurement Regulatory Authority (PPRA) guidelines, which help ensure that
goods and services are bought at a fair price and from reliable sources.Before committing to any expenditure,
departments confirm that funds are available, preventing overspending.

3) Payment and Record Maintenance

Payments are processed through the government’s financial system (such as the GFMIS), which automatically
records them in the central accounting system.Each transaction must have supporting documents, like receipts and
contracts, which help maintain a clear audit trail and prove that funds were used appropriately.

4) Compliance and Regular Reporting

Monthly, Quarterly, and Annual Reports: Departments regularly submit expenditure reports, which are reviewed by
the Ministry of Finance to check for compliance with financial regulations.Records are kept ready for review by the
Auditor General of Pakistan, which ensures that funds are spent as per approved plans and regulations.

Policies Governing Public Sector Expenditures

Public sector expenditures in Pakistan follow specific policies that ensure spending is managed responsibly,
transparently, and in line with the law.

a) Financial Responsibility and Control

The General Financial Rules (GFR) rules guide all government spending, ensuring funds are used efficiently and
legally. Departments must follow GFR when making any expenditure decisions.To avoid overspending, the
government maintains policies that control deficits and debt, supporting long-term economic stability.

b) Transparency and Accountability

Pakistan follows International Public Sector Accounting Standards (IPSAS), which ensure that all financial reporting is
consistent, accurate, and comparable across departments.Citizens have access to government spending information,
ensuring public accountability.

c) Fair Procurement and Value for Money

All public sector purchases must follow PPRA guidelines, which are designed to promote competition, transparency,
and value for money.Many procurement processes are now conducted electronically, reducing opportunities for
fraud and improving efficiency.

d) Performance and Results-Based Budgeting

Especially for development projects, the government emphasizes measurable results, such as improved
infrastructure or healthcare services, ensuring that public funds have a positive impact.

e) Anti-Corruption Policies

Whistleblower Protections: Employees are encouraged to report any misuse of funds or corruption, and laws protect
them from retaliation.The government’s internal and external audits help detect and prevent any misuse of funds,
promoting a culture of integrity and transparency.

Explain in Detail Processes, procedures and policies regarding public sector Receipts.
Public Sector Receipts in Pakistan: Overview of Processes, Procedures, and Policies in Public Sector Accounting
Public sector receipts refer to the money collected by the government from various sources, including taxes, fees,
grants, and other income. These funds are essential for financing government activities, paying for public services,
and supporting development projects. Managing public sector receipts is a vital part of public sector accounting, and
it involves specific processes, procedures, and policies to ensure that all funds are collected, recorded, and reported
accurately.
Public sector receipts in Pakistan include all funds collected by the government, primarily in two categories:

 Revenue Receipts: These are the funds the government collects through regular income sources like taxes,
fees, fines, and service charges.

 Capital Receipts: These include funds raised through loans, grants, aid, and other non-recurring sources, often
used to finance long-term projects or repay debts.

Process of Managing Public Sector Receipts

The process of handling public sector receipts is designed to ensure that all collected funds are accurately recorded
and go directly into the government’s accounts.
Identifying Revenue Sources:
The government first identifies all potential revenue sources, such as taxes on income, sales, customs, and excise
duties. Non-tax revenues, like fees from services and fines, are also collected by various government departments.

1) Collection by Relevant Agencies:

Tax revenue is mainly collected by the Federal Board of Revenue (FBR) at the federal level, while provincial tax
authorities handle provincial taxes. Non-tax receipts are collected by different government agencies based on their
services and activities.

2) Recording Receipts
Once collected, all receipts are recorded according to International Public Sector Accounting Standards (IPSAS),
ensuring accuracy and transparency.

3) Revenue Classification:
Each receipt is categorized into specific revenue and capital accounts, helping the government track income sources
accurately. For example, income tax, customs duty, and sales tax are classified separately.

4) Depositing Receipts
Deposit into Government Accounts: All collected funds are deposited into the government’s main account, usually
with the State Bank of Pakistan (SBP). This central account is managed by the Ministry of Finance.

5) Reporting Receipts
The Ministry of Finance compiles and publishes regular reports on public sector receipts, providing a clear view of
the government’s income and helping in budget planning.At the end of each fiscal year, the actual receipts are
compared with budget estimates, helping evaluate collection efficiency and address any shortfalls.

Procedures for Managing Public Sector Receipts

The government follows strict procedures to handle receipts securely and transparently. These procedures ensure
funds are collected properly, deposited accurately, and available for public spending.

1) Authorization and Collection

The collection of public funds is backed by law. For example, taxes are authorized under the Income Tax Ordinance,
Sales Tax Act, and other legal frameworks. Receipts are collected through authorized banks, government offices, and
online platforms. This helps prevent unauthorized collection and ensures all funds go directly to the government.

2) Receipt Documentation
Upon collecting money, a receipt is issued to the payer. This document confirms the payment and records the
amount, type of payment, and purpose.All receipts are documented in government records, with detailed
information about the payer, amount, and revenue type. This helps track funds and makes audits easier.

3) Deposit and Reconciliation

All collected funds must be deposited daily or as per the stipulated time into government accounts. This prevents
funds from sitting in unauthorized accounts and ensures they’re readily available. Departments reconcile collected
receipts with bank deposits frequently to catch any discrepancies and ensure accurate reporting. This is part of
internal controls.

4) Financial Reporting and Compliance

Financial statements are prepared regularly, showing all receipts and detailing sources of income. These statements
follow IPSAS standards for transparency. Government departments ensure all receipts follow accounting regulations,
which outline procedures for managing public funds. This ensures consistency in handling receipts across
departments.

Policies Governing Public Sector Receipts in Pakistan

Public sector receipts are guided by policies that ensure funds are collected efficiently, deposited securely, and
tracked accurately. These policies support accountability, transparency, and effective use of public funds.

1) Legal Framework and Compliance

The Income Tax Ordinance, Sales Tax Act, and other tax laws provide a legal basis for collecting taxes and other
public funds. These laws ensure receipts are collected fairly and within legal limits.
Public Financial Management Act outlines policies for the management of public finances, ensuring funds are
properly collected, recorded, and reported.

2) Transparency and Accountability

Public sector accounting requires that all government receipts be reported to the public, ensuring transparency in
how funds are collected and managed. Citizens have access to government financial information, including details on
public sector receipts. This openness promotes accountability and builds public trust.

3) Revenue Collection Efficiency

The government is increasingly adopting automated systems like e-filing and online payment platforms to make
revenue collection more efficient, reducing errors and improving accessibility. Collection agencies regularly review
their performance to ensure receipts align with targets. This helps identify shortfalls and strengthens collection
efforts.
4) Anti-Corruption Policies
Strict internal controls and regular audits help detect and prevent corruption, ensuring collected funds reach the
government’s accounts.Policies encourage reporting any misuse or mismanagement in the collection of receipts,
with protections for individuals who report wrongdoings.

Explain in Detail Processes, procedures and policies regarding public sector Assets.
Public Sector Assets in Pakistan: Overview of Processes, Procedures, and Policies in Public Sector Accounting
In Pakistan, public sector assets refer to all resources owned or controlled by the government that have economic
value, such as land, buildings, vehicles, machinery, equipment, and infrastructure. These assets are crucial for
delivering public services and supporting economic growth. Effective management and accounting of these assets
ensure their value is preserved, used efficiently, and reported transparently. In public sector accounting, specific
processes, procedures, and policies help track and manage these assets to ensure accountability and maximize
public benefit.
Public sector assets are the properties and resources held by the government, which can be divided into various
types:

 Fixed Assets: These include long-term assets like land, buildings, infrastructure (roads, bridges), and equipment.

 Current Assets: Short-term assets, like cash and inventories, which can be converted to cash within a year.

 Intangible Assets: Non-physical assets such as licenses, patents, and copyrights that hold value.
 Process of Managing Public Sector Assets
Managing public sector assets involves several key steps to ensure each asset is recorded, maintained, and used
efficiently. Public sector accounting principles and standards guide these processes, ensuring transparency and
accountability.

1) Asset Identification:
Each government department identifies all assets under its control, recording details like location, description,
purpose, and condition.

2) Asset Classification:
Assets are categorized by type (fixed, current, intangible) and usage, which helps in tracking and managing them
accurately. For example, buildings, machinery, and vehicles are classified under fixed assets.

3) Initial Valuation:
Each asset is valued at its purchase price or fair market value when acquired. For assets obtained through donation
or transfer, fair value is estimated based on market conditions. Asset values are reviewed periodically to account for
depreciation (decline in value over time) or appreciation, ensuring accurate records for financial statements.

4) Recording in Asset Register:

All assets are documented in an asset register, which lists each asset’s details, value, location, and current condition.
This is crucial for tracking and accountability.

5) Maintenance and Management of Assets

Maintenance schedules are set to ensure that assets remain in good condition and continue to serve their purpose
effectively. This includes repairs and replacements as needed.Government departments monitor how assets are
used to ensure they support public service delivery efficiently. Underutilized assets are identified for repurposing or
disposal.

6) Disposal of Assets
Assessment for Disposal: When assets are no longer useful or have become obsolete, they are evaluated for disposal.
This involves checking if the asset is still functional, repairable, or has any residual value.

7) Reporting and Auditing

Government departments submit regular reports on their assets, detailing their condition, usage, and any changes in
value. These reports are essential for financial statements and decision-making.The Auditor General of Pakistan
conducts regular audits of public sector assets, reviewing asset records, usage, and disposal practices to ensure
compliance with accounting standards and regulations.

Procedures for Managing Public Sector Assets

The management of public sector assets follows specific procedures to ensure proper recording, maintenance, and
utilization. These procedures help maintain accountability, protect asset value, and promote efficient use.

1) Authorized Control:
Each department designates officers responsible for controlling and managing assets. Only authorized personnel can
approve asset acquisition, usage, or disposal.

2) Detailed Documentation:
Every asset transaction, whether acquisition, maintenance, or disposal, must be documented. This documentation
ensures that all asset-related activities are traceable and transparent.

3) Asset Register Maintenance

The asset register is maintained by each department and includes details such as the asset’s identification number,
description, purchase date, cost, current condition, and location.The asset register is updated whenever there’s a
change in asset status, such as revaluation, maintenance, or transfer to another department.
4) Valuation and Depreciation
Assets are initially valued at purchase cost, but ongoing valuations consider depreciation. For instance, buildings and
equipment gradually lose value over time, which is accounted for in the financial statements.Depreciation is
calculated using standard accounting methods (e.g., straight-line or declining balance methods) to ensure
consistency in reporting. This helps reflect the true value of assets over time.

5) Disposal Protocols
Before disposal, assets are assessed to determine whether they should be repaired, sold, donated, or scrapped. This
ensures responsible asset management and maximizes potential returns.

Policies Governing Public Sector Assets

Public sector assets are managed under specific policies that provide clear guidelines on how to acquire, maintain,
and dispose of assets responsibly. These policies support transparency, accountability, and efficient asset use.

1) Asset Management Standards

International Public Sector Accounting Standards (IPSAS): Pakistan follows IPSAS for asset accounting, ensuring
standardized procedures for recording, valuing, and reporting assets.

2) Asset Utilization and Efficiency

Government policies encourage the efficient use of assets, discouraging departments from keeping underused or
redundant assets. Departments are encouraged to share resources where possible to reduce costs.Each department
regularly assesses asset utilization to identify opportunities for efficiency. Underutilized assets are either reassigned
to areas with higher need or disposed of responsibly.

3) Public Asset Register:

Government departments maintain a public asset register, which is accessible for auditing and inspection. This
ensures transparency in how public resources are managed.

4) Annual Asset Reports:

Departments are required to submit detailed annual reports on asset status, usage, and any disposal activities. These
reports are critical for financial accountability.

5) Anti-Corruption and Audit Policies

Strong internal controls prevent unauthorized access or misuse of assets. These controls include asset checks, secure
storage, and restriction of asset access to authorized personnel.The Auditor General of Pakistan conducts audits to
ensure compliance with asset management policies and regulations, detecting any irregularities or misuse.

20 Definitions(Mids)

1. Government sector accounting: Government sector accounting refers to the process of recording,
classifying, summarizing, and reporting financial transactions and events related to public sector entities, such
as federal, state, and local governments. It involves the application of accounting principles and practices that
arespecifically designed to meet the needs of public sector financial management, ensuringtransparency,
accountability, and efficient use of public resources.

2. Accounting Model: Accounting Model refers to the method used to keep track of all the money coming in
and going out of government accounts. It shows how public funds, like taxes, are collected and spent on
services for citizens.There are two main types of accounting models: cash-based and accrual-based. This model
helps ensure proper use of public funds, allowing the government to manage finances effectively.
3. Budget : Defined in article 80 of the Constitution, a statement of the estimated receipts and expenditure of
the Government for a financial year, referred to as the Annual Budget Statement. Budgeting helps governments
decide how to use limited resources to fund essential services like education, healthcare, and infrastructure.

4. Advice note : A list of authorised payments sent by an accounts office to a branch of the SBP or NBP.
(includes daily advice, payroll advice, pension advice, direct credit advice)

5. Authorisation : (i) In accounting terms, the approval given by an authority or a delegated authority for a
particular payment to be made.
(ii) In the context of the Budget, the process of passing the Annual Budget Statement through the legislature for
approval.

6. Bank scroll : A daily advice received from a designated branch of the National Bank of Pakistan or State Bank
of Pakistan, listing receipt collected and payments disbursed on behalf of the Government, against each of the
Government bank accounts.

7. Chart of accounts : A listing of codes on the basis of which accounting transactions are classified to provide
meaningful financial information. Each account represents a specific category, such as assets, liabilities,
revenues, or expenses, and is given a unique code. This helps organize financial data and makes it easier to track
and report on different types of income and expenses.

8. Consolidated Fund : Defined in Articles 78 and 118 of the Constitution, refers to all revenues received by
the Federal/ Provincial Government, all loans raised and all moneys received in repayment of any loan by that
Government.

9. Contingent expenditure : All non-development expenditure, other than salaries and salary related
expenditure. These expenses are typically unplanned and occur only if specific events happen, such as
emergency repairs or unexpected legal costs. In public sector budgeting, a reserve may be set aside to cover
such potential costs.

10. Disclosure : Display of financial information in a supplementary note to the financial statements, rather than
in its main body, in order to provide further detail about a particular item.

11. Memorandum account : An account maintained separately to the General Ledger but still operated
within the internal control process. Information recorded in memorandum accounts is used to provide
supplementary information to the Financial Statements.

12. Supplementary Budget : Provided in Article 84 of the Constitution, an additional budget statement laid
before Parliament, where funding for an existing service is insufficient, or the need for a new services has arisen
which was not included in the original budget.

13. D.D.O (Drawing and Disbursing Officer): This officer is tasked with drawing money from the
government treasury and ensuring the funds are disbursed for the purposes specified in the budget. They also
maintain records of all transactions and ensure that expenditure stays within the allocated budget. The DDO is
key to financial control within a government department.

14. D.A.O (District Accounts Office/Officer): The District Accounts Officer is responsible for managing
the financial records of all government expenditures at the district level. They ensure all payments and receipts
are correctly documented and reported. The DAO ensures compliance with accounting rules and provides
reports to higher authorities for auditing purposes.
15. MAP (Management and Accounting Procedures): These procedures standardize how government
entities manage and account for financial transactions. MAPs ensure transparency, consistency, and compliance
with established guidelines in the public sector. Proper implementation of MAPs helps avoid mismanagement of
funds and supports accurate financial reporting.

16. PAC (Public Accounts Committee): The PAC is a key body in the accountability process of the
government. It reviews the Auditor General’s reports on government spending and investigates any
discrepancies or misuse of public funds. The PAC ensures that taxpayer money is used efficiently and lawfully,
holding public officials accountable for their actions.

17. NIS (National Insurance Scheme): The NIS is a social security program designed to provide financial
protection to workers and their families. It collects contributions from employees and employers to fund
pensions, health insurance, and other welfare benefits. The scheme ensures financial support for workers
during retirement, illness, or unemployment.

18. AGPR (Accountant General Pakistan Revenues): The AGPR office manages the federal
government's finances, including processing payments, maintaining accounts, and auditing expenses. This office
plays a crucial role in ensuring that government revenue and expenditure are accurately accounted for, and that
the financial operations are in line with legal and regulatory frameworks.

19. CG (Controller General): The Controller General is responsible for overseeing the financial control
mechanisms of the government, ensuring all transactions are recorded accurately and funds are disbursed as
intended. This role is critical in preventing fraud and ensuring that financial operations align with government
policies and laws.

20. MoF (Ministry of Finance): The Ministry of Finance is central to the government’s fiscal policy,
overseeing the national budget, public debt, and financial regulations. It ensures the allocation of resources
across different government sectors, monitors economic trends, and develops strategies to promote
sustainable economic growth and financial stability.