Foreign donor-assisted projects: MoF revises accounting procedure for revolving fund accounts

ISLAMABAD: The Ministry of Finance has revised accounting procedure for revolving fund accounts (foreign aid assignment accounts) for which separate revolving fund accounts (RFAs) for each project shall be established - the project management at the National Bank of Pakistan (NBP).

According to Finance Ministry, for a foreign donor-assisted project, a Revolving Fund Account (RFA) in respect of donor financing under loan/credit grant shall be established at a branch of the National Bank of Pakistan (NBP) separately from the account to be established for the government’s share of project financing (counterpart funds), if any required.

Such accounts shall be in the nature of Assignment Accounts. The Revolving Fund Account shall be part of Federal Consolidated Fund at Federal Government’s level and part of respective Provincial Government’s Consolidated Fund at Provincial levels.

General Instructions: (i) the Finance Division shall approve the opening and change of signatories of the Revolving Fund Accounts. The following pre-conditions shall be completed by the Ministries/Divisions before forwarding the case to Finance Division for opening and change of signatories of Revolving Fund Account (a) approval of the administrative Secretary/Principal Accounting Officer (PAO) of the administrative Division for opening/change of signatories of Revolving Fund Account; (b) administrative approval of the project or loan agreement in case of program duly signed by the Economic Affairs Division (EAD). The Project Director shall be in place and the project should have the cost centre and allocation of budget/rupee cover against the foreign aid/grant; (c) copies of following documents are mandatory for submission of request to Finance Division duly attested by an officer not below the rank of BPS-17 or above.

(ii) NBP shall be the designated bank for handling all transactions of Revolving Fund Accounts. The foreign currency amounts received under a foreign credit loan/ grant for RFAs shall be translated/ converted into Pak Rupees at the State Bank of Pakistan’s (SBP) Weighted Average Buying Rate of exchange prevailing on the date of transfer of funds by the donors.

(iii) payments out of RFAs by way of reimbursement to NBP would be translated notionally at the SBP rate of exchange at which the foreign currency was purchased by SBP (date of receipt of funds from the donor in SBP). The RFAs at NBP branches shall show debits, credits and balance in PAK Rupees as the funds available to the project management would be in Pak Rupees.

(iv) the rate of exchange used for donor reporting purposes by the project authorities would be the rate of exchange applied by State Bank of Pakistan for converting foreign currency into Pak. Rupees for that tranche at the time of receipt of funds in the SBP from the donor. In case of more than one tranches. The rate applied for each tranche will be used for donor for reporting purposes and funds received in the first tranche will be utilized first and the unutilized balance shall be attributed to the last tranche.

NBP Funds achieves another milestone

(v) foreign currency for the purposes of this procedure would mean the United State Dollars (USD), Euro (EUR), Pound Sterling (GBP), Japanese Yen (JPY), Australian Dollar (ASD), Canadian Dollar (CAD), Swiss Franc (CHF) and any other foreign currency which may be permitted especially or generally later on by the Finance Division (Budget Wing) in consultation with SBP (Finance Department, Karachi).

(vi) Separate Revolving Fund Accounts for each project shall be established by the project management at the NBP for each of the loans/credits/grants, and each Revolving Fund Account will be designated a special Sub-Fund Identification Number upon establishment of the account.

(vii) individual sub-accounts will together constitute a single but separate account (Child Account)under Central Government Account No.1 (non-food) held presently with the SBP.

(viii) The CGA will be responsible to issue a Code Classification in the Chart of Account for RFA’s and Assignment Accounts for the Government counterpart funding.

(ix) RFA shall be lapsable at the end of each financial year. However, the lapsed balance in one financial year will be protected through budgetary allocation in next financial year.

(x) in case of receipts on account of projects under the control of Provincial Governments or Local Governments, Financial and Non-Financial institutions under the administrative control of the Provincial Governments, the SBP will simultaneously transfer the funds for credit to the concerned Provincial Government Account. The Provincial Finance Department shall ensure that the Budget allocations are available in the Provincial Schedule of Authorized Expenditure.

(xi) all payments from the Revolving Fund Accounts shall be effected through NBP cheques/authorizations issued by at least two persons authorized as signatories.

(xii) the officers of BS-17 or above on payroll or user organization concerned shall be nominated by the Secretary/PAO of the administrative Division as signatories. A signatory of current/acting charge of BS-17 or equivalent may operate the account till he/she holds current charge BS-17 and shall no more operate the account on the completion of period of current charge.

(xiii) any officer or person attached with a project or unit as honorary officers or board members or on attachment drawing salary from another may become a signatory. However, in cases where a project, or unit does not have any other officer or BS-17 or above on its payroll the Secretary PAO of the administrative Division may allow signatories from controlling officers or entities Board of Directors, till such officers are appointed.

(xiv) a standby signatory may also be approved by the Secretary/PAO of the administrative Division to operate the account during the leave or if a signatory is away or on tours.

(xv) all payments, except for an authorized petty-cash to be notified in writing by the Project Directoar to the relevant NBP branch, shall be made directly to the recipients through crossed-cheques.

(xvi) cash payments or funds transfers from Assignment Accounts to any DDO-account or any other account for the sake of onwards disbursements shall be strictly prohibited.

(xvii) audit of all the Revolving Fund Accounts shall be conducted by the Auditor General of Pakistan.