Chapter - 10



Pakistan is a federation consisting of four Provinces with a two tier system of Government. The nature of the relationship between the Federal and Provincial Governments, i.e. the provisions regulating financial matters, legislative powers and responsibilities of the respective governments, have been prescribed in the Constitution of the Islamic Republic of Pakistan. The Federal Legislature may make laws on any subject for the entire federation, including laws for extra-territorial operations, whereas Provincial Legislatures may make laws for that particular Province only. The matters of common interest listed in Part-ll of the Federal Legislative list are dealt with and settled by the Council of Common Interest appointed by the President of Pakistan. The Council consists of the Chief Minister of each Province and an equal number of members from the Federal Government nominated by the Prime Minister as the members of this Council and is chaired by the Prime Minister himself, if he is the member of the Council, or by a person nominated by the President.

All aspects of public sector finance-such as currency, public debt, financial and accounting procedures-are solely Federal matters. Accordingly relevant laws and regulations are issued by the Federal Government. The Auditor General of Pakistan is the auditor of both the Federal and Provincial Governments and his duties and powers have been given in the Pakistan Audit and Accounts) Order 1973.

The collection of major taxes such as income tax, custom duties, excise duties and sales tax and borrowings from external sources rests with the Federal Government, while the collection of revenues from local resources such as land revenue, sale of land, and sale of water for irrigation are assigned to the Provinces. The proceeds of some taxes specified in the Constitution are divided between the Provinces after deducting a percentage of collection charges by the Federal Government. In order to distribute these taxes and coşordinate important matters of Federal and Provincial finance, the Constitution provides for a National Finance Commission consisting of the Minister of Finance of the Federal Government and Ministers of Finance of the various Provincial Governments. This commission allocates a share for each Province from the divisible pool of taxes collected. In addition, the Provincial Governments receive grants from the Federal Government.

As regards expenditure, each Provincial Government incurs outlays according to the commitments made in individual budget estimates. Because of commonality in the financial provisions of the Federal and Provincial Governments, procedures and practice in budgeting and accounting are similar and vary only in detail.


The executive authority of the Federation of Pakistan vests with the President and is exercised by the Federal Government consisting of the Prime Minister and Federal Ministers. The Prime Minister is the Chief Executive of the Federal Government and manages public funds, while those of the Provinces are managed by the Chief Ministers. The Prime Minister is assisted by the Cabinet and, in financial matters, by the Finance Minister. Similarly, for the Provinces, Chief Ministers are the Chief Executives who are assisted by the Provincial Ministers.

The Prime Minister makes known to the National Assembly each year the financial needs of the Federal Government. The financial needs of the Provincial Governments are made known to the Provincial Assemblies by the Chief Ministers. These are discussed and funded from revenues raised from taxes and other sources. No tax or duty can be imposed nor any expenditure can be incurred without the authority of the National Assembly or by the Provincial Assembly, as the case may be.


In Pakistan the Government accounts are mentioned in two parts, viz the Federal and Provincial Consolidated Fund and Public Accounts. Revenue receipts, moneys received in repayment of loans given by Government, and the loans raised by Government are credited to the particular Federal/Provincial Consolidated Fund. The current and development expenditure along with expenditure on debt servicing is debited to Government account. The Public Account comprises all moneys received by or on behalf of Government or those deposited with courts of law such as civil and criminal court Deposits.

The Federal and Provincial Governments keep their own separate accounts with the State Bank of Pakistan. The Federal Government generally uses all branches of the State Bank, or National Bank of Pakistan acting as an agent of the State Bank. The Provincial Governments are restricted however, to the branches of the two banks in their respective jurisdictions.



Before the commencement of each financial year 1st July), the Federal and Provincial Governments prepare their annual estimates of revenues and expenditures on various activities for submission to the National/Provincial

Assembly to obtain legislatural appropriations. These estimates, known as the Annual Budget Statement, detail the sums required to meet the expenditure "charged" and "other than charged" upon the Consolidated Fund. The expenditure "charged" upon the Consolidated Fund has been specified in the Constitution and is discussed in, but not submitted to the vote of,the National/ Provincial Assembly. The expenditure "other than charged" is submitted to the vote of the National/Provincial Assembly in the form of Demands for Grants.

The National/Provincial Assembly has the power to assent to any demand, or to reduce the amount specified therein. Therefore a schedule of Authorised Expenditure specifying the approved total of each grant is authenticated over the signature of the Prime Minister or Chief Minister, as the case may be. No expenditure from the Consolidated Fund is deemed to be authorised unless it is specified in the schedule so authenticated.


While preparing the budget estimates of the ensuing financial year, the estimates of the current financial year are also reviewed. The Federal and Provincial Governments prepare a Supplementary Budget Statement for submission to the National/Provincial Assembly provided that:

  1. amounts authorised for a particular service are insufficient, or that a need has arisen for expenditure on some new service; or
  2. any expenditure has been incurred on any service in excess of the amounts authorised for that service.

The Supplementary Budget Statement is approved in the same manner as the Annual Budget Statement discused in para 2.1.


There are exceptions to the foregoing financial provisions relating to the public sector of Pakistan. For example, the National and Provincial Assemblies have the power to make any grant in advance for an estimated expenditure for four months pending vote approval in accordance with constitutional provisions. Similarly when National or Provincial Assemblies are dissolved, the Federal and Provincial Governments have the power to authorise expenditure from the Consolidated Fund for estimated expenditure for a period not exceeding four months in any financial year pending completion of vote approval and authentication of the Schedule of Authorised Expenditure on the formation of new Assemblies.


Responsibility for revenues and expenditures regarding the various economic activities of the Government of Pakistan lies with different executive agencies. The Secretary of each Ministry and Division of the Government at Federal level is the Principal Accounting Officer, who is thus responsible for the collection of all receipts and incurrence of expenditure falling within his jurisdiction. There are similar arrangements in each of the Provincial Governments at Karachi, Lahore, Peshawar and Quetta. The Ministries and Divisions prepare their Budget Estimates and obtain legislatural approval through the Federal Ministry of Finance in the case of national agencies, and through the Provincial Finance Departments where the various Provinces are concerned.


The financial management system of Pakistan's public sector consists of three tiers, i.e. Finance, Accounts and Audit. The Ministry of Finance at the Federal level is the custodian of all revenues and the central agency which disburses the pooled finances to the Provinces. The Federal Ministry of Finance through the Central Board of Revenue collects taxes, both direct and indirect. The Ministry raises local and foreign loans through the banking system, while budgetary deficits are financed using various techniques of financial management.

The Provincial Finance Departments are also authorised to collect revenues in their respective Provinces in accordance with the individual resource base available to each, and formulate annual budgets in accordance with their particular development and non-development programmes. The Provincial budgetary deficit is met by the Federal Government. The accounts at both Federal and Provincial levels are audited by the Auditor General, except in the case of some departmental accounts as explained later in Section 10.


The Federal Ministry of Finance is the agency that controls the public sector finances of Pakistan. The central agencies which assist the Ministry in carrying out its financial management responsibilities are:

  1. CENTRAL BOARD OF REVENUE: The Central Board of Revenue is an attached Department of the Ministry and collects all direct and indirect taxes of the Federation through its Commissioners of Income Tax and Collectors of Central Excise and Land Customs based at various locations throughout Pakistan.
  2. AUDITOR GENERAL OF PAKISTAN: The Auditor General of Pakistan holds a constitutional position. However, his Department is attached administratively to the Ministry of Finance. The Auditor General of Pakistan compiles, maintains and audits most of the Federal and Provincial Accounts through its field offices headed by the Accountants General and Directors General of Audit.
  3. CENTRAL STATISTICAL ORGANISATION: The role Of this organisation is to collect all types of statistics for the Federal Ministry of Finance that can be used for fiscal and monetary management of the federation.
  4. NATIONAL SAVINGS ORGANISATION NSO): The NSO mobilises public savings for the Federal Government through National Savings Schemes operated by its various savings centres throughout the federation.
  5. PAKISTAN MINT: The Metallic coins of small denomination are minted and circulated in the country by the Pakistan Mint.
  6. STATE BANK OF PAKISTAN: The State Bank of Pakistan is an autonomous body working under the overall framework of the Ministry of Finance. The Bank is headed by a Governor who is selected by the Government and is appointed with tenure. The Bank plays a vital role in regulating the monetary policy of the Government.


The State Bank of Pakistan is the central bank which acts as banker to the Federal and Provincial Governments. Each Government maintains its accounts with this bank and all payments on behalf of any Government are made by the bank. The central bank issues currency notes and regulates the money supply of Pakistan. The central bank also keeps control over the scheduled/ commercial banks in the country, both directly and through the Pakistan Banking Council. The central bank declares the daily rate of exchange of Pakistani rupee against other world currencies.

The central bank has also some public saving incentive schemes such as Prize Bonds, the draws of which give lucrative prizes periodically. The central bank is the custodian of foreign exchange in Pakistan and is responsible for its effective management. However the foreign exchange restrictions, as imposed in Pakistan over the years have been generally relaxed to promote the mobility of capital. The central bank keeps a watch over the resource position of each government and, in case of emergency, acts as lender of the last resort. The traditional activities of a central bank such as buying and selling of securities, open market operations and the fixing of reserve limits are carried out by the State Bank of Pakistan as central bank.


Pakistan nationalised a range of banks, industries and even some medium-size enterprises in the early 1970s. This venture into nationalisation was not completely successful, mainly because the state enterprises were generally mismanaged and resulted in large losses for the Government over the decade. Accordingly, the move to privatisation, which started in the late 1970s, is being vigorously pursued.


In Pakistan the Supreme Audit Institution SAI) is known as the Auditor General. The President, in exercising the powers vested in him by Article 168 of the Constitution, appoints trie-Auditor General. In order to determine the terms and conditions of service, the tenure of office and the powers and functions of the Auditor General, the President issued the Pakistan Audit and Accounts) Order 1973 under Article 169 of the Constitution. This order serves as the charter of the Auditor General, with Articles 9 and 11 of that order spelling out the functions and powers of the Auditor General in relation to the accounts and audit of the public sector.

The Auditor General is responsible for keeping the accounts of the Federation and of the four Provinces. However, in regard to the accounts of the Federation, the President and in respect of the accounts of a Province, the Governor) may, after consultation with the Auditor General, make rules for relieving the Auditor General of the responsibility for keeping accounts of any particular service or department.

As regards the constitutional function of audit, it is the duty of the Auditor General i) to audit all expenditure from the revenues of the Federation and of the Provinces, ii) to audit all transactions of the Federation and of the Provinces relating to debt, deposits, sinking funds, advances, suspense accounts and remittance business, iii) to audit all trading, manufacturing, profit and loss accounts and balance sheets kept in any department of the Federal Government or of a Province; and iv) to audit the accounts of any authority or body established by the Federation or a Province and in each case to report to the President or, as the case may be, to the Governor on the expenditure, transactions or accounts involved. The Auditor General may, with the approval of, and shall if so required by the President or the Governor of any Province, audit and report on a) the receipts of any department of the Federal Government or, as the case may be, of the Province; and b) the accounts of stores and stock kept in any office or department of the Federal Government or, as the case may be, of the Province.

Constitutionally, audit and accounting functions are combined in the Auditor General of Pakistan. He can, however, be relieved from the accounting functions if it is so agreed by the President. Accordingly the Auditor General has been relieved of the responsibility to maintain accounts of the Pakistan Railways, the Defence Services and a few other major departments. This relief process is continuing.

The audit mandate of the Auditor General is restricted to expenditures. As stated earlier, the audit of revenue receipts is undertaken only under agreed arrangements. State audit covers not only Government accounts but also the accounts of other public sector organisations. The purpose of audit includes the assurance that "moneys shown in the accounts as having been disbursed were legally available for and applicable to the service or purpose to which they have been applied or charged and whether the expenditure conforms to the authority which governs it". Accordingly the main objectives of audit by the Auditor General are:

  1. to judge and report whether the financial statements of the Government are properly presented;
  2. to see whether the auditees follow the rules and regulations prescribed by the Parliament and the Government;
  3. to determine whether the audited entities follow the canons of financial propriety in carrying out various transactions;
  4. to reveal violations of authority; and
  5. to ascertain whether the auditees manage human and material resources with due regard for economy, efficiency and effectiveness.

After the Federal Accounts for a given financial year are consolidated by the Auditor General and he has finalised his reports thereon, sets of these accounts are printed in book form and along with the reports are forwarded to the Federal. Ministry of Finance. In terms of Article 171 of the Constitution, the Ministry of Finance submits both the accounts and reports to the President for presentation to the Parliament. As regards the Provincial Accounts and Reports, these are submitted by the Auditor General to the Governor of the particular Province, who submits them to the Provincial Assembly involved.


The public sector auditing function is an important element in the accountability cycle, which has four elements: a) the legislature, b) the executive, c) the Auditor General, and d) the Public Accounts Committee PAC). Conceptually, accountability refers to the supreme authority of the legislature to authorise the levy of taxes and approve the budget of the executive.

The budget proposal is prepared by the executive and is submitted to the legislature for approval. After approval of the budget, the executive is responsible for its implementation and accounting. The Auditor General is required to audit the accounts and report back to the legislature through the PAC. This committee examines the Auditor General's Report and requests the executive departments involved to explain any ommissions or other irregularities. After listening to their explanations, the PAC makes recommendations to the legislature for the future. This element completes the accountability cycle.

The PAC comprises selected members of Parliament. The main function of the committee is to examine the accounts and reports laid before the Parliament. In scrutinising these accounts and reports the committee has to satisfy itself that a) moneys shown in the accounts as disbursed were legally available for the purpose on which they were spent, b) expenditure conformed to the authority governing it, and c) reappropriations have been made in accordance with the relevant regulations.

The Auditor General is a very important adjunct to the PAC. When official witnesses are being examined by the PAC during the course of its periodical sessions, the Auditor General assists the PAC. With the permission of the Chairman of the PAC, the Auditor General may ask a witness to clarify a point and, further, may make a statement on the facts of the case. It is also one of the responsibilities of the Auditor General to verify executive compliance of PAC directives where required and then report back to the PAC during its next session.


The Constitution of Pakistan provides only the framework for establishing the office of the Auditor General and for performance of his functions. According to the Constitution, Parliament has the responsibility to determine the terms and conditions of the Auditor General's appointment, his detailed functions and operating powers. However these matters have not yet been determined by the legislature. To date they have been mandated by the President under a Presidential Order "The Pakistan Audit and Accounts) Order". However, the auditing standards adopted and followed in the public sector audit function are the prerogative of the Auditor General. Accordingly the SAI formulates the Audit Code, Audit Manual and Departmental Manuals of Audit Offices as the instruments of conventional audit, transaction audit and financial audit. Recently, in addition to compliance and financial auditing standards, the auditing standards applicable to value for money audit i.e. performance audit, as developed by the US General Accounting Office and UK National Audit Office) have been adopted with the view to enhancing the public sector auditing function gradually.



Pakistan is still preparing line-item national budgets, despite changes elsewhere. The budget contains an estimate of receipts and expenditure under different heads of accounts as provided by the classification chart issued by the Federal Ministry of Finance in consultation with the Auditor General. The budget heads are termed "objects", divided into sub-objects. The budget of a government organisation, or of a public sector project indicates expenses and outlays for various activities as approved by the legislature and disbursed by the Ministry of Finance in the case of the Federation, and by the Finance Departments in the case of the Provinces.

The appropriations allocated by the legislature under various objects for different activities are monitored by the Accountant General a field Accounts Officer of the Auditor General) as and when the expenditures are incurred. The Appropriation Accounts of each government department are compiled by the Accountant General with reference to the original allocation.


The major sources of revenue for the federal budget comprises customs and excise duties, income taxes; television and radio broadcasting fees, and motor vehicle licence fees, interest and returns from investments, and service fees and receipts from other government agencies.

The expenditure budget of the federal government has two main and distinct components, viz. current expenditure non-development expenditure) and development expenditure. This has further been classified into voted and charged expenditure. Voted expenditure, which is provided for under the Constitution, includes all budgetary appropriations for services and goods and for transfer payments to statutory funds and expenditure for federally administered tribal areas. Charged expenditure such as statutory grants to provincial governments, pensions, debt charges, remuneration of the President, Judges of the Supreme Courts, Chief Election Commissioner, Chairman and Deputy Chairman of the Senate, the Speaker and Deputy Speaker of the National Assembly, the Auditor General and related administrative expenditures) are obligatory payments under the law and, therefore, do not require to be appropriated by the National Assembly.

Development expenditure is met from the development fund which consists mainly of loans borrowed for development, proceeds of recovery of loans from the fund and contributions from the revenue account of the consolidated fund. Expenditure from the fund is only for development purposes and includes grants, loans and investments for development purposes.



A budget is a proposed work programme, with estimates of the funds necessary to execute it. A work programme is a plan. The process of preparing estimates and organising them into a coherent agency budget necessarily involves planning. The budget may, therefore, be said to represent a plan or a considerable number of plans in different areas of public functions.

The plan represented in a set of annual or biennial estimates is not, however, a complete plan. It is the annual segment of a plan that normally may require two, three, five, or ten years to bring to fruition. It is consequently related to the annual segments of a plan that was represented in previous budgets, and that will be represented in future budgets. It must be planned in the light of security, economic and budgetary goals-not for the ensuing year but for three and even four years ahead.

It follows that the budget for any fiscal year is an expression both of a part of programme for that year and also of parts of programmes for several years ahead. The planning that is represented in budget estimates is the product of

the departments and their subordinate offices, not the work of the Ministry of Finance. No budget agency can do more than review and scrutinise the plans of the operating establishments. The initiative does not lie among the budget examiners.

Planning and budgeting are, therefore, complementary operations. Policy and programme planning come first; the translation of annual or biennial segments of a plan into figures follows. The departments take the initiative; the budget examiners review and criticise; and the legislatural bodies decide on both the plans and estimates.

Much budget making, however, hardly represents a plan beyond the mere projection of presently available figures into the following fiscal year. Because the legislature challenges estimates which vary from the existing level of expenditure, many figures are "justified" because they are identical with the preceding ones. Such reasoning avoids the question whether they should be more or less. Indeed, in the broader sense of the term, the opportunity for planning on a comprehensive scale, with a genuine decision on the relative values of spending more or less, and on relative priorities, hardly exists. However, some agencies can and do plan for long-range goals within their particular jurisdiction. Whether afforestation or soil conservation, or civil defence is entitled to priority in an overall evaluation of social plans and necessities is a problem for the final resolution of which no institutional means exist, or probably could exist, other than those found in the National Assembly.


The organisational structure of the Finance Division envisages the establishment of a separate but related Budget Wing, Expenditure Wing, External Finance Wing, Internal Finance Wing and Development Wing, each headed by a Joint Secretary. The role of Finance Division is to analyse all proposed financial plans and programmes of government agencies to ensure that they are in accordance with the prescribed national objectives and that the resources are applied in an economical, efficient and effective manner to promote stable economic growth.


The budget year is from 1st July to 30th June. Estimates of current expenditure are required to be prepared in two parts, viz-

Part-I. These relate to standing charges which vary from year to year but are nevertheless not dependent on the volition of the head of department. Examples of such charges are permanent establishments both officers and staff), travelling and other fixed allowances, and ordinary contingent expenditure.

Part-ll. These relate to charges which may include new objects of expenditure, such as temporary additions to existing establishments or to services, facilities and organisations which are either continued from year to year on a temporary basis or have been newly sanctioned and have not been provided for in the current year's budget.

Part-11 estimates are based on the proposals already cleared by Finance Division. They should be submitted by administrative Ministries/Divisions through their Financial Advisers in the form of self-contained memoranda, accompanied by supporting details to facilitate financial scrutiny and examination.

The budget estimates of non-development expenditure for the ensuing year should be accompanied by such details as nominal rolls in the prescribed form, calculation of allowances, and other charges so as to permit proper scrutiny. The estimates should be supported further by a comparative statement showing the position of past three year's actuals, the sanctioned grant and the revised estimates for the current year and the proposed budget estimates for next year.


Budget implementation, reporting and evaluation are the responsibility of departmental secretaries. This recognises the fact that due regard cannot be paid to financial considerations if finance is kept separate from other factors which enter into policy decisions. Accordingly it was decided at the outset that finance would be regarded as an essential element in the consideration of all policy questions. The administrative head of the Ministry/Division would ensure, as a prerequisite for efficient and economic administration, that financial considerations are taken into account at all stages by his Ministry/ Division in framing and reaching decisions of policy and their execution. Moreover, as a Principal Accounting Officer, he must be prepared to answer for the efficient and economical conduct of business assigned to the Ministry/ Division as a whole.

The main principles observed by the Principal Accounting Officers are economy and regularity, because the success of any system depends upon the implementation of these two principles in day-to-day administration. Economy means getting the full value for money and by regularity is meant the spending of money for-the purposes prescribed by law. The two are not necessarily the same, for it is to spend money without constitutional irregularity, and yet the expenditure may be wasteful. The requirement that the funds allocated to a Ministry/Division are spent for the purposes for which they are allocated constitutes an important part of the legislatural control over expenditure. This control would be nullified where the executive authority sanctioned the application of funds for purposes other than those authorised by the legislature. It is, therefore, the duty of the Principal Accounting Officer to ensure that the expenditure falls within the ambit of a grant or an appropriation. In approving expenditure he should ensure, by issuing necessary instructions to subordinates, that the requirements of the relevant rules and regulations are fully met and that permission of the Ministry of Finance is obtained where necessary.

The appropriation accounts of the Federal Government are considered by the Public Accounts Committee, which has responsibility for detecting cases of apparent waste and extravagance in administration. The members of this committee normally expect the Principal Accounting Officer to satisfy them that policies approved by the legislature have been implemented economically, and to explain any reported cases of waste and extravagance.

The principle of personal accountability is not applicable in a case where the Principal Accounting Officer is over-ruled by the Minister. This may occur where the Principal Accounting Officer is required to take a course of action which he regards as inconsistent with his legal duties. In such cases the Principal Accounting Officer is entitled to inform the Minister-in-Charge of the relevant details, explaining how that particular course of action is inconsistent with his duties as the Principal Accounting Officer involved.


According to para 10 of the Pakistan Audit and Accounts) Order 1973, the Auditor General is required to submit annually to the President a General Financial Statement incorporating a summary of the accounts of the Federation and of the four Provinces.


The following is a brief general description of the structure of the Government accounts :

  1. The accounts of the Government are based mainly on the single entry system. However double entry is used for closing entries for Debt, and for Deposit, Advances, Suspense and Remittance Heads.
  2. Government accounts are kept in two parts, viz:
  1. Consolidated Fund, and
  2. Public Account.

All revenues received by the Government, all loans raised by the Government and all the moneys received in repayment of any loan, form part of the Consolidated Fund. The receipts and payments in respect of which the Government incurs a liability to recover the amounts paid, together with Adjusting, Remittance and Suspense Heads, form part of the Public Account.

  1. Under agreements made by the Federal and Provincial Governments with the State Bank of Pakistan, the Treasury business of each Government is conducted through the State Bank. Accordingly the Federal and Provincial Governments keep separate accounts and balances with the State Bank.
  2. The initial recording of Government receipts and payments, and compilation of the relevant accounts, occur at the various Treasuries/ District Accounts Offices and pre-audit counters of the Accountants General or its sub-offices. Where accounts are departmentalised as in the Railways, Defence, Post Office, Telegraph and Telephone, Public Works, Forests, the Pakistan Mint and other Departments, the receipts are paid into a Treasury or the bank in a lump sum. Detailed accounts of receipts and payments are kept by the departmental officers.
  3. The Treasury Officers/District Accounts Officers and Departmental Officers render accounts of their transactions monthly to their respective Accounts Officers who submit monthly accounts to the particular Government concerned. The accounts relating to Defence, Railways, Telegraph and Telephone, and Post Office Departments are compiled separately and submitted to the Government. Other accounts prepared by Departmental Officers are merged into the monthly civil accounts of the relevant Governments.
  4. From these monthly accounts the annual accounts are prepared and, federally, the accounts of the Defence, Railways, Telegraph and Telephone, and Post Office Departments are merged at this stage. Each Accounts Officer works out the progressive figures of his accounts for the year and submits them in the form of working sheets to the Auditor General.
  5. The annual account of all Accounts Officers are consolidated into one annual account, viz. the Combined Finance and Revenues Accounts of the Federal and Provincial Governments in Pakistan. This financial statement, which reports information contained in the Finance Accounts of the Federal and Provincial Governments in Pakistan, is subject to audit. The detailed accounts of these transactions are available in the respective Finance Accounts.

The consolidated accounts have been so designed as to present the accounts of all the Governments in Pakistan on a common and comparable basis, and are made up of:

Part-I   The General Accounts. These show receipts and disbursements of the Governments during the year, by major and minor heads/ functions.
Part-ll   The Subsidiary Accounts. These contain the details by minor heads/functions of the figures shown in the General Accounts, with a note explaining the accounts and the nature of transactions dealt with. They also show the balances at the commencement and close of the year, and the progressive figures of the capital outlay and investments of the Governments.


The national accounting system is based on the provisions of the Constitution and the Pakistan Audit and Accounts) Order 1973. Articles 78 and 79 of the Constitution require that:

  1. All revenues received by the Federal Government, all loans raised by that Government, and all moneys received by it for the repayment of any loan, shall form part of a consolidated fund, to be known as the Federal Consolidated Fund.
  2. All other moneys -
  1. received by or on behalf of the Federal Government; or
  2. received by or deposited with the Supreme Court or any other court, or any other court established under the authority of the Federation;

shall be credited to the Public Account of the Federation.

The constitution further provides that the custody of the Federal Consolidated Fund, the payment of moneys into that Fund, the withdrawal of moneys therefrom, the custody of other moneys received by or on behalf of the Federal Government, their payment into, and withdrawal from, the Public Account of the Federation, and all matters connected with or ancillary to the above matters, shall be regulated by Act of Parliament or, until provision for regulation is made, by rules made by the President.

Similar provisions in the Constitution exist for the Provincial Consolidated Fund vide Articles 118 and 119.


Since September 1977 the accounts of the Government have been supplemented with performance evaluation reports of public sector commercial enterprises according to sound commercial and business standards. The methodology used is directed towards examining the particular company's financial position, assessing its business trends, identifying its weaknesses, and recommending corrective action where necessary.


According to Article 94) of the Pakistan Audit and Accounts) Order 1973, the Auditor General shall, from the accounts kept by him and by other persons

responsible for keeping public accounts, prepare yearly accounts including in the case of accounts kept by him, appropriation accounts) showing the annual receipts and disbursements for the purposes of the Federation and of each Province, distinguished under their respective heads. These accounts shall be submitted to the Federal Government-or to the Government of the Province- on such dates as the SAI may, with the concurrence of the Government concerned, determine. The existing dates for submission of accounts to Federal Provincial Governments are 31st March and 30th April respectively of the following year to which the accounts relate.



The legislature approves the national policies, including fiscal policy. Responsibility for budget performance rests with the executive, while the SAI has the responsibility of checking the accuracy of budgetary operations and reporting to the Parliament through the Public Accounts Committee. The Federal Finance Ministry/Provincial Finance Departments work in close coşoperation with the SAI to ensure propriety and regularity in public expenditure. Generally, the Finance Ministry/Department is the authority primarily responsible for i) administering the financial rules of the Government, and ii) seeing that appropriate accounts are maintained by other departments and establishments subordinate to it. The SAI renders all legitimate assistance to the Finance Ministry/ Department, and gives advice where requested on the application of particular financial rules or orders. Factually, monitoring of achievement of planned policies is the responsibility of the Federal Finance Ministry/Provincial Finance Department.


Although the functions of the PAC do not require the detailed examination of individual accounts, the PAC appraises the reports of the Auditor General on such accounts, investigates specific cases of losses, nugatory expenditure or financial irregularities. Also, the PAC ascertains whether the policies approved by the Parliament were followed by the executive with due economy and efficiency. The PAC monitors budget performance and reports to the Parliament on the operations of the budget.


The Pakistan Audit Department discharges the dual functions of accounting and auditing. Previously the system of payment and accounting through a centrally controlled mechanism appeared increasingly antiquated and the need for decentralisation was being strongly felt. Therefore, under a phased program, the Auditor General of Pakistan is being progressively relieved of the payment and accounting responsibility, shifting this responsibility to the

executive departments. Further, to keep pace with rapidly changing national needs during the last two decades, the government auditing and accounting activities in Pakistan have undergone major changes. In 1978 the Auditor General took the initiative in starting the performance evaluation of public enterprises. Having gained valuable experience, it was decided in 1981 to extend the performance auditing technique to government managed development projects as well. Performance auditing in Pakistan, however, is still in its evolutionary phase. Its concepts, techniques of examination and reporting pattern are not yet standardised.

Alongside these developments, modern technology has been adopted by automating the payments and financial reporting network in the Pakistan Audit Department. Concerted efforts towards computerisation of the national accounting system have been launched to accomodate user needs. The training function has come to assume a pivotal role in this process of transformation. Staff are trained from the grassroots upwards in the new disciplines, in order to consolidate and modernise departmental operations. Further the Reports and Accounts prepared by the Auditor General for submission to the Parliament have undergone several improvements in format, presentation and disclosure to enhance their utility. The dynamics of change that are the essence of on enlightened society imposes upon all its institutions a strict regimen of efficiency and accountability. The Pakistan Audit Department, is fully aware of its responsibilities in promoting and monitoring financial accountability in response to the challenges of the twenty-first century.