Govt bodies told to restrict assignment accounts to NBP

ISLAMABAD: The government has tightened its fiscal controls by restricting the federal and provincial entities to ensure that all their assignment accounts for development projects and non-development expenditures are opened and operated only through the National Bank of Pakistan (NBP), which would be treated as part of the Treasury Single Account (TSA) of the federal government.

To conduct this exercise as required by the Inter­national Monetary Fund (IMF), the government has issued fresh guidelines for opening and operating the so-called Asaan (Easy) Assignment Accounts.

Under the Asaan Assign­ment Account Procedure (Local Curr­ency) Amended 2023 (AAAP 2023), the assignment accounts for both development projects and non-development expenditures would be part of the TSA (Account No. 1).

The assignment acco­unts of the provincial entities would be part of the consolidated funds of the respective provincial governments.

The Treasury Single Account is a unified structure of government bank accounts enabling consolidation and optimum utilisation of government cash resources.

Article 78 of the Constitution requires that all revenues, loan receipts and all other funds received by or on behalf of the government of Pakistan are either part of the federal consolidated fund (FCF) or the public account of the federation (PAF).

The cash balances of both FCF and PAF are maintained in central account No. 1 (non-food) at the State Bank of Pakistan (SBP). Under the Public Finance Management (PFM) Act of 2019, the FCF and PAF are operated by the finance division.

The new guidelines have directed all the ministries, divisions, corporations, projects and entities that the unspent budget at the close of a financial year will be surrendered by the respective offices or else would be treated as lapsed.

Besides, their main assignment accounts would be opened only in the main NBP branch in Islamabad for the federal government offices across the country, while their sub-assignment accounts could be opened at the branches linked with internet banking for project authorities or entities.

The organisations and entities already submitting their claims for development and non-development expenditures to accounting offices for pre-audit shall not be allowed assignment accounts under any circumstances.

The rules also specify how the principal accounting officers of the respective ministries or entities would designate, replace or nominate the signatories for operating the accounts.

The NBP would be required to comply with policy instructions of the government and regulatory requirements of the SBP, including ‘know your customer’ (KYC) to meet standards of Anti-Money Laundering and Financial Action Task Force for all accounts and their signatories through requisite documentation and biometric verification.

These accounts would not be available for making deposits but are overdraft facility accounts in nature for payments made on behalf of the government by the bank, followed by reimbursement claims from the SBP.

The AAAP 2023 will also apply to all the existing assignment accounts for all future banking. However, the opening of an assignment account would not be required for funds allocated as ‘one-time seed money’.

The assignment accounts would stand closed upon completion of the project or the programme or if the relevant expenditures are shifted to a pre-audit system of accounting offices. Cash withdrawals or transfer of funds to any bank account would not be allowed except for employees related deductions like pension contributions, provident funds or GP funds, etc. Payments shall only be made through crossed cheques to contractors, vendors, suppliers, employees, etc.

The principal accounting officers would be required to meet certain preconditions before approving the opening and closing of such accounts or changing signatories. These include the administrative approval of the development project, appointment of a project director and allocation of funds in the budget.

There shall be a separate assignment account for every development project and sub-accounts would be allowed only when payment is required outside the accounting jurisdiction of the accounting office where budget allocation had been made.

In the case of the current budget expenditure, the principal accounting officers would submit a certificate to the finance ministry on a half-yearly basis that public money had not been transferred from the assignment account of any other bank account.

The NBP would be required to close dormant assignment accounts or sub-accounts with no transactions for the last three years with intimation to the principal accounting officers and the accounting offices concerned.

It will also be required to provide the finance ministry with complete information every month, including the list of assignment accounts.

Earlier last year, the government ordered all federal and provincial entities, including those of Azad Jammu and Kashmir and Gilgit-Baltistan, to surrender their working capital and surplus funds for investment into a single treasury account of the federation.

The government has already notified that under Cash Management and Treasury Single Account Policy 2019-29 and Cash Management and Treasury Single Account Rules 2020, no government office could open, operate or maintain any bank account in scheduled banks for any purpose.

All ministries, divisions and other entities have been directed to reconcile their respective expenditures with the Ministry of Finance and the Accountant General of Pakistan Revenue each month to limit financial discrepancies, which went beyond a whopping Rs315bn in the first half (July to December) of the current fiscal year.

Published in Dawn, March 13th, 2023