Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
March 2004
CNTR 012269
Major findings
Historically and to date, there have been major weaknesses in the area of bank
reconciliation. These weaknesses range from organisation and ownership control issues
through to procedural guidance control issues. However, to counter these findings,
there now appears to be strong support for improving the current situation, particularly
arising from the increased interest by senior CGA officers in this area as well as from
the Ministry of Finance. The findings and recommendations of this report have been
discussed with CGA officers and as a result, the CGA officers have requested that the
recommendations be taken forward in FMRP Component 4 year 2 work plans.
The major recommendations made in light of this are, in the shorter term:
• To further strengthen the Ministry focus for accounts data and, building on the
increased responsibility for CAO offices, to route all transactions directly
through Ministry-facing bank accounts.
• To separately identify on the face of the bank statement the current liability for
domestic floating debt.
• To functionalise all transactions (including Public Account) to the specific
Ministry responsible and through this measure, to clearly allocate transactions
on a cash or non-cash basis.
• To amend the current accounting practices at local treasury offices to enable
accounts to be prepared on an individual Ministry basis.
These measures, in conjunction with the other recommendations detailed in the report,
support the government’s strategy of strengthening financial management along
Ministry lines and should enable sustainable and improved quality of accounts through
increased control and ownership over bank account reconciliation.
It is the opinion of this report that the attainment of a fully reconciled annual account is
achievable, through the implementation of the recommendations made. This
reconciliation will be achievable on both a national and local treasury office level for
each individual Ministry or Department and therefore also for government as a whole.
The reconciliation will enable the movement from gross expenditure or revenue through
to cash movement to be clearly identified and agreed with the individual bank account
movement as reported by Bangladesh Bank.
Effective bank reconciliation is the cornerstone of any accounting system where there is
movement of cash. It is required not only to ensure the successful guardianship of the
Public Funds, but it also provides a solid basis upon which the quality of accounting
information may be assessed - bank reconciliation is a key feature in ensuring the
integrity of financial accounting data by providing an external reference for government
accounting data.
Current situation
During the course of this study, no evidence has been found of an effective
reconciliation between the government’s main bank account and the government
accounting records. Attempts have been made by the CGA office, but without the
guidance and understanding required for complete and accurate reconciliation. This
lack of reconciliation presents a serious risk to the integrity and quality of accounting
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Baseline report on bank reconciliation
records and reports –this in turn results in lack of confidence, by users of the accounts,
in government accounting reports.
Since Independence in 1971, the government cash balances held at Bangladesh Bank
have not matched the reported cash balances in the government accounts, and hence the
government financial statements. Similarly, the balances of outstanding claims against
the government used to finance the government overdraft position have been
inconsistently reported when compared to figures reported by Bangladesh Bank.
Primary responsibility for the government’s financial statements of accounts lies with
the CGA. However, historically, the position with respect to the lack of reconciliation
to the bank account appears to have been unchallenged within CGA. This has resulted
in a lack of responsibility, and accountability, with respect to bank account
reconciliation in CGA. This can also be applied to other sources of data that should be
reconciled, and thereby increase the integrity of, the government accounts, e.g. National
Board of Revenues, Foreign Aid projects etc.
The lack of reconciliation, to bank data or other sources, leads to a lack of confidence
that users have in CGA accounts. Clearly, where possible, accounts should be
reconciled with external sources of data to provide additional confidence – CGA are
now demonstrating their commitment to improve this situation and such areas are under
increasing review from both the Ministry of Finance and senior CGA officers.
Historically, in addition to the lack of overall responsibility taken for bank account
reconciliation, there has been an apparent general lack of understanding as to the
purpose, importance or techniques required for effective bank reconciliation. There also
has been no clear delegation of responsibility or written procedures for bank
reconciliation.
It is clear that the bank statements from Bangladesh Bank cause increased difficulty in
undertaking the reconciliation with CGA records of account. Bangladesh Bank reports
often contain balance and transaction errors, present inconsistent balances, are often
delayed, and present bank data in a format that is not user-friendly. These types of
errors further hinder bank reconciliation for government accounts.
It should also be noted that the Report on the Observance of Standards and Codes
(ROSC) prepared by the International Monetary Fund in June 2003 contains the
following recommended measures:
This will require a considerable change in focus for the CGA accounting officers, but
the CGA, with the assistance of FMRP, is now in a position to initiate these essential
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Baseline report on bank reconciliation
measures. Through this activity, CGA officers are now keen to improve the historic
situation with regard to bank reconciliation and are committed to taking these
recommendations forward.
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Baseline report on bank reconciliation
Table of Contents
1 INTRODUCTION........................................................................................................8
1.1 OBJECTIVE..................................................................................................................8
1.2 BACKGROUND..............................................................................................................8
1.3 APPROACH................................................................................................................10
2 BANGLADESH BANK AND SONALI BANK.......................................................14
2.1 BACKGROUND............................................................................................................14
2.2 OBSERVATIONS..........................................................................................................18
3 LOCAL TREASURY ACCOUNTING OFFICES..................................................26
3.1 BACKGROUND............................................................................................................26
3.2 OBSERVATIONS..........................................................................................................32
4 CHIEF ACCOUNTS OFFICERS.............................................................................34
4.1 BACKGROUND............................................................................................................34
4.2 PRESIDENCY ACCOUNTING REGION – CENTRAL RECONCILIATION UNIT.............................34
4.3 OBSERVATIONS..........................................................................................................35
5 FOREIGN AID...........................................................................................................39
5.1 OVERVIEW................................................................................................................39
5.2 OBSERVATIONS..........................................................................................................41
6 DISTRICT ACCOUNTS OFFICE DHAKA...........................................................42
6.1 BACKGROUND............................................................................................................42
6.2 OBSERVATIONS..........................................................................................................42
7 NATIONAL BOARD OF REVENUE......................................................................43
7.1 BACKGROUND............................................................................................................43
7.2 OBSERVATIONS..........................................................................................................45
8 CGA RECONCILIATION PROCEDURES............................................................50
8.1 BACKGROUND............................................................................................................50
8.2 CURRENT RECONCILIATION PROCESS..............................................................................51
8.3 OBSERVATIONS..........................................................................................................53
9 MINISTRY WISE BANK ACCOUNTS..................................................................59
9.1 OBSERVATIONS..........................................................................................................59
9.2 PROPOSALS FOR MOVING FORWARD WITH MINISTRY ACCOUNTS.........................................65
10 FUTURE DEVELOPMENTS.................................................................................71
10.1 BANGLADESH BANK.................................................................................................71
10.2 SONALI BANK.........................................................................................................72
10.3 NATIONAL BOARD OF REVENUE.................................................................................72
10.4 CONTROLLER GENERAL OF ACCOUNTS .......................................................................73
11 RECOMMENDATIONS.........................................................................................74
11.1 SHORT TERM RECOMMENDATIONS..............................................................................74
11.2 MEDIUM TERM RECOMMENDATIONS...........................................................................82
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Baseline report on bank reconciliation
List of Abbreviations
Abbreviation Meaning
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Baseline report on bank reconciliation
1 Introduction
1.1 Objective
As part of the Financial Management Reform Programme (FMRP), the following report
has been produced to provide a baseline assessment of bank reconciliation within the
finances of the Government of Bangladesh. Bank reconciliation must be seen as the
fundamental control mechanism under which the preparation of quality accounting
information is carried out within the Government of Bangladesh. The International
Federation of Accountants (IFAC) states in their 2003 IFAC Handbook of International
Public Sector Accounting Pronouncements “ When the cash basis of accounting
underlies the preparation of financial statements, the principal financial statement is the
cash flow statement.” This is simply not possible without effective bank reconciliation
processes.
While it is generally accepted that there are serious concerns in relation to the
completeness and accuracy of bank reconciliation, there is not currently a coherent plan
to address this issue. This report is therefore intended to provide a starting point upon
which Government may more clearly identify areas of concern and take the required
remedial action where available.
It follows therefore that the report is designed as an initial diagnostic tool with the
emphasis placed on identification of strengths and weaknesses, rather than providing
definitive and detailed solutions to all of the problems in the current system. It is
accepted that successfully addressing all of the weaknesses surrounding bank
reconciliation at this stage would require a much larger resource allocation than is
currently available through year 1 of the FMRP project. However, where appropriate,
the issues and recommendations identified should be incorporated into future work
plans of the FMRP project to assist in the FMRP Component 4 aim of improving the
quality of accounts and to further underpin the overall aim of FMRP, being to improve
the financial management capability within government.
1.2 Background
When Bangladesh gained independence, the opening bank balance in the government
accounts was restated as nil as at 16th December 1971. However, at the same time,
Bangladesh Bank recorded a negative balance of approximately 7 crore 44 lakh Taka
( or 7,44,00,000 Taka). This difference has never been amended and over subsequent
years has been extended to the point that the difference stated (on 21st January 2004) for
closing balances in June 2003 by the Controller General of Accounts (CGA) and
Bangladesh Bank stood at approximately 130 Crore 73 lakh taka. As may be seen in
the following diagrams, this difference fluctuates greatly, even over successive months.
Given the pressures both internally within Government and from outside agencies, a
principal aim of the CGA should therefore be to reduce or eliminate this fluctuation and
eventually get to the position where it is appropriate to eliminate the remaining
differences altogether.
The accounts of Bangladesh are designed in such a way that the reported cash balances
from the CGA office should exactly match those reported by Bangladesh Bank. The
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Baseline report on bank reconciliation
0
1998-99 1999-00 2000-01 2001-02 2002-03
-1000000
Taka ( in Thousand )
-2000000
-3000000
-4000000
-5000000
-6000000
-7000000
Financial Years 1998 - 2003
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Baseline report on bank reconciliation
2000000
1000000
Taka ( in Thousand )
0
July
March
June
December
-1000000 September
-2000000
-3000000
-4000000
-5000000
Financial Year July 2002 to June 2003
1.3 Approach
The approach taken in the preparation of this report has been fourfold:
• To assess the wider processes and controls currently in place
• To carry out a detailed study on the financial data available for a specified
month
• To obtain feedback from a wide variety of stakeholders to gain a clearer
understanding of the particular issues identified at each stage of the
reconciliation process. A comprehensive list of the stakeholders assisting in the
preparation of this report is included as annex A.
• To attempt reconciliation at various stages of the CGA process to assess the
feasibility of successful reconciliation under current systems
The month identified for detailed examination in the preparation of this report was
March 2003. As explained more fully later in the report, the principal reason for
choosing March 2003 was that this was the last month that the CGA office had
attempted to carry out a detailed reconciliation, prior to FMRP commencing the
preparation of this report in December 2003. Given the time delays identified within
the flows of financial data from Bangladesh Bank, delays in compilation and
reconciliation and the slow pace of procedural change within government it was
considered appropriate to examine data relating to a period eight months previous.
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Baseline report on bank reconciliation
There are several parties that play significant roles in the bank reconciliation process.
For this reason, detailed analysis has been carried out on each of the following:
The flows of both cash and reporting information in relation to the current banking
systems are very complex. The following diagram provides a simplified overview of
the current flows and areas identified for potential improvements in reconciliation
between inter-related organizations.
The highlighted bodies are those where attention has been most closely focused for the
purposes of this report.
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Baseline report on bank reconciliation
Overview of current cash flows, reporting and potential for reconciliation
CGA
Potential reconciliation
Potential reconciliation
Ministries
NBR Copies
Monthly MoF
of
challans accounts
CRU data Daily
statement DCA Departmental
Monthly DAO Monthly s Officers
Pre-audit
accounts
cheques
Dhaka statements Potential
data reconciliation
issued Debit & credit scrolls and
supporting papers Monthly accounts
CAO data
PAD GAD
Paid Presidency cheques DAO UAO
Pre-audit
cheques Bangladesh
Bank
Payee Head Office
Daily and monthly Daily
Revenue challans cash movement Bangladesh statements Sonali
Depositor Consolidated Bank & Bank
data supporting
Revenue challans
Consolidated branches documents
branches
data
Sonali Bank
Sonali Head Office Sonali Bank Daily and monthly cash movements
Bank Daily and monthly cash movements Head Office
Foreign Aid
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Baseline report on bank reconciliation
The report details the current responsibilities and actual findings for each of these areas.
Additional details are provided in relation to the current treatment of foreign aid as well
as a brief assessment of the implications presented as a result of the well-documented
issues at what was previously, District Accounts Office, Dhaka. The report then
summarises possible future developments that may impact on the bank reconciliation
processes and then concludes with detailed recommendations addressing both the short
and medium terms.
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Baseline report on bank reconciliation
2.1 Background
Bangladesh Bank is the Central Bank of Bangladesh and as such acts as custodian of the
Government’s monies, (not including those held in commercial bank accounts). The
legal framework for this arrangement is contained in the Bangladesh Bank Order 1972,
which may be summarised for the purpose of this report as follows:
Article 2. To hold the cash balances of the Government as it’s sole Banker in
Bangladesh.
Article 3. To manage Public Debt and the issuance of new loans by the
Government.
Article 6. To make Ways and Means advances to the Government and automatic
payment thereof at intervals not exceeding three months from the date of
making the advances.
Article 8. To maintain the currency chests of the Bank’s Issue Department at such
places as the Government may prescribe with sufficient notes and coins
to provide currency for the transactions of the Government.
Bangladesh Bank currently has 9 branches that deal with Government accounts as
treasury banks. To enable it to successfully carry out its duties as outlined above,
Bangladesh Bank has contracted an agreement with Sonali Bank. Sonali Bank has 561
branches, which carry out duties in relation to Government transactions. Of these, 101
branches collect receipts only and report directly to Bangladesh Bank. The remaining
460 branches of Sonali Bank act as treasury banks transacting receipts and payments on
behalf of Government and report to Sonali Bank Head Office. As detailed below, these
flows are subsequently reported to Bangladesh Bank.
There are currently plans for Sonali Bank to take over all responsibilities for accepting
receipts from members of the public. However, Secretary of Finance has raised
concerns over the ability of Sonali Bank to manage this increase in turnover in such a
short period of time. Therefore, a committee has been established, under the
Chairmanship of Controller General of Accounts to investigate this issue and report to
the Secretary of Finance. Until this committee returns their recommendations,
Bangladesh Bank will be instructed to continue their current receipting duties.
Finance’s lack of confidence in the centrally prepared monthly and annual accounts
produced by CGA, it was felt at that time that greater reliance could be placed on the
receipt and expenditure figures for each Ministry or Department provided by
Bangladesh Bank.
The main accounts of Government held at Bangladesh Bank are listed in full in annex
B, but may be summarised as follows:
General account 1
CAO Offices 51
NBR Fiscal Reporting 4
Debt Management 5
Foreign Aid incl. Food Aid 9
Food Operation 1
Public Account Others 1
Railway 1
Telephone & Telegraph 1
Postal 1
Pension 1
National Savings Scheme 1
General Provident Fund 1
Total 78
In addition to the above main accounts, there are balances held in Commercial Banks
relating to Foreign Aided projects. These accounts are operated by the respective
Project Directors and the balances are currently held outside of the Government’s cash
balances in the accounts. The reconciliation and control procedures in relation to these
accounts are detailed in the Project Accounting Manual. Due to the significant value of
balances in these accounts, the compliance with reconciliation procedures has been
included in the scope of this report.
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Baseline report on bank reconciliation
Outside the standard accounting network of UAO, DAO, DCA and CAO Offices, the
following transactions take place and are reported on a daily basis to the Accounts and
Budgeting Department of Bangladesh Bank through other Departments of Bangladesh
Bank:
These transactions are informed to the CGA by the Accounts and Budgeting
Department of Bangladesh Bank and entered onto the CDPU system directly from the
Bangladesh Bank Clearance Memorandum. There is no effective reconciliation of the
individual balances reported.
As the Government of Bangladesh has been financing its operations through issuing
floating debt for many years, it is logical that there should never be a significant cash
balance left in its bank account while this debt remains outstanding. The initial access
to overdraft is met by Ways and Means Advance (current limit Tk 64 Crore), which is
regularized by a simple pre-printed Promissory Note signed by the Joint Secretary
Budget.
If the overdraft goes beyond the limit of Tk 64 Crores, Bangladesh bank is authorized to
issue Special Treasury Bills as per Finance Ministry’s authorization letter No 6 of dated
17.01.1974. Initially Bangladesh Bank absorbs all treasury bills and then offloads them
to the commercial banks at a weekly auction. CGA in its accounts does not take
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Baseline report on bank reconciliation
account of the spilt in the holding of treasury bills between Bangladesh Bank (Monetary
Authority) and Commercial Banks (Deposit Money Banks).
Every day, Government Accounts Branch of the Accounts and Budgeting Department
of Bangladesh Bank calculates the effects of transactions in the banking treasuries and
information received from the various Departments of Bangladesh Bank. It then works
out one single cash balance and adjust the overall cash deficit or surplus by the issue or
purchase of Treasury Bills or Ways and Means Advances. As Treasury Bills are
rounded to Tk 1 Crore, a nominal cash balance will always remain in the account of
Government.
Reporting Requirements
The currently prescribed procedures, detailed in the Account Code Volume I (updated
version of C&AG September 9, 1996) Articles 9 & 10 may be summarised as follows:
1. Daily Reporting:
2. Monthly Reporting:
All transactions regarding Public Accounts taking place in the offices and branches of
Bangladesh Bank and designated branches of Sonali Bank are consolidated in the
Government Accounts Department of Bangladesh Bank. At the close of the accounts of
each month, a statement of closing balances of the Government on the books of the
Bank after taking into account all cash transactions in all of the offices, branches and
agencies of the Bank and the adjusting transactions in it’s own books is forwarded by
the Head Office of Bangladesh Bank to the Controller General of Accounts.
Under articles 3 and 6 of the Bangladesh Bank Order 1972, three copies of the daily, 78
account-wise closing balances are prepared by the Government Accounts Branch of the
Accounts and Budgeting Department of Bangladesh Bank. These are sent to the
Finance Division for the attention of the Secretary, Joint Secretary and Deputy
Secretary respectively.
The daily figures for sales and retirement of treasury bills and issued and retired Ways
and Means Advances is noted underneath the daily balance figure. This is the financing
that Bangladesh Bank has arranged to fund the movement in Government deficit. The
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Baseline report on bank reconciliation
overall outstanding claims on the Government in respect of Treasury Bills and Ways
and Means Advances are stated at the bottom of the daily statement.
Given the limited confidence that some stakeholders have in the accounts data produced
by the CGA, this daily statement is often seen as the most accurate representation of
actual bank balances that is available.
The current banking arrangement between Bangladesh Bank and Sonali Bank is that
Sonali Bank Head Office should receive the daily transaction statements from all
branches acting as agents for Bangladesh Bank and send these to Bangladesh bank
within 16 days of the day in question. This information should then be consolidated
with Bangladesh Bank branch information and communicated to Government.
Government has now ordered that Sonali Bank issue the daily transaction statements
within 7 days.
At year-end, the 78 account-wise closing balances are reported to the Finance Secretary
and a copy is also sent to the Controller General of Accounts.
2.2 Observations
The activities undertaken during the course of this work highlighted the following
weaknesses in the processes undertaken to prepare bank statements from Bangladesh
Bank and Sonali Bank and in the use of these statements.
b) A statement showing the daily movement in each account for the date
specified. The movement in financing of that day is based on the total
net movement on the daily statement. There is no detail given on the
daily movement statement to inform users as to which bank branches
have been incorporated into the account or for days the individual returns
relate to.
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Baseline report on bank reconciliation
reports the actual cash balances on the date stated. This is not however actually
found to be the case.
It was found that the balance shown on the Daily Cumulative Balance statement
relates to an approximation of the balance two weeks earlier than the date on the
statement, but the financing information is the actual movement on the date
recorded on the daily statement. Any daily figures received by Sonali Bank
from its branches on a given day are compiled together and sent to Bangladesh
Bank for reimbursement. This will therefore include transactions from a number
of different days and will not necessarily be a comprehensive collection from all
branches.
It is only after several months that Bangladesh Bank reports the actual 78
account wise monthly opening balance, receipts during the month, payments
during the month and closing balance at the end of the month. This statement is
supported by the monthly cash inflow and outflow of all banking treasuries.
There are two different figures appearing in statements of closing balances for
one date tested, both signed by Bangladesh Bank.
Bangladesh Bank had not explained the reason for the variation in its statements
to CGA. It should be noted that CGA had not requested an explanation.
Using the example of the daily statement received by Finance Division for 30 th
June 2003, the timing of information flows and subsequent confusion caused
becomes apparent.
30th June Bangladesh Bank creates Ways & Means Advance of Tk 64 Crore
and issues Treasury Bills of Tk 51 Crore.
17th November: CGA record Ways and Means and Treasury Bills issued on 30th June
into the June accounts.
The relevant sections of the monthly statement are then copied to the following
20 recipients:
This list is outdated, especially as there are now a total of 51 CAO offices that
should receive a copy of the monthly statement. The General Manager of the
Accounts and Budgeting Department stated that the statement was still only
being sent to the original CAOs, further evidencing the acute lack of
communication.
5. The monthly statement identifies the total receipts and payments for each Sonali
Bank branch and also further reports these into receipts and payments for each
individual bank account. The opening balance, total monthly movement and
closing balance are then reported for each individual account.
This monthly statement does not include single figures for receipts and payments
for the 9 branches of Bangladesh Bank. Rather, the receipts and payments are
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Baseline report on bank reconciliation
6. During the analysis of data relating to March 2003, it became clear that there are
some errors in the financial information provided by Bangladesh Bank, due to
the manual reporting in operation.
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Baseline report on bank reconciliation
The following example was found in the Bank statement for account no. 153 –
Civil Aviation.
It is clear from the above that the following misreporting occurred on the bank
statement
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Baseline report on bank reconciliation
bank statement to the correct figure, yet no mention was made of the adjustment
on the statement or any supporting documentation.
7. Bangladesh Bank recognises that the manual nature of their accounts preparation
process and the increased number of individual accounts has increased the
possibility of errors being made in their reporting. In recognising the potential
for errors during the manual compilation of statements, it is noteworthy that all
Bangladesh Bank monthly account statements contain the following wording:
“We are informing you of the month-end closing balance of this account for
March and you are requested to inform us of its correctness.”
This implies a transfer of additional responsibility onto CGA, to inform the bank
of any errors that are detected. No testing is currently carried out by the CGA
Office to identify misreporting by Bangladesh Bank and this will remain to be
the case until an effective and sustainable reconciliation process is in place.
8. It was not possible to obtain a copy of the year-end bank statement that
Bangladesh Bank send to the CGA office. However, the annual accounts
include the identical figures that appear on the books of Bangladesh Bank. This
is despite significant errors being made in monthly calculations at CGA, or in
some cases, no monthly calculations being carried out at all, as detailed later in
the report. It therefore appears that the statement has been used in some manner
within the CGA Office during the preparation of the annual accounts.
10. The CGA office does not record the (belated) reporting of Treasury Bills and
Ways and Means Advances movements on a daily basis. Rather, it waits for a
monthly bundle to be sent from Bangladesh Bank and simply makes one
monthly journal entry. As stated above, the recording in the June accounts of
financing movements was not carried out until mid November. This will result
in the reported figures of both bank balances and government liability being
significantly misreported during the year.
12. In the Governments books of account, most revenue and expenditure balances in
the Consolidated Fund, except for some loans and advances balances, are
“Closed to Government” at the end of the financial year. Other balances, termed
as “Closed to Balances” are carried over from one financial year to the next.
Bangladesh Bank, under instruction of MoF carries over balances of some of the
78 individual accounts into the following year. At the end of each financial
year, most account balances are reduced to zero and the balances transferred to
the general account number 100. The accounts that are carried over from one
year to the next are shown below as at July 2003, with the corresponding
balances that appeared in the Governments Accounts.
It is clear, possibly due to the abrupt changes in bank accounts, that there is no
correlation between the figures held in the Governments books of account and those that
appear every month on the Bangladesh Bank statement. Due to some conditionality
imposed on loan agreements, some accounts, included in the above table, were required
to be shown independently on the bank statement. The Bank was in effect to operate as
both banker and accountant. There are however no separate cash balances held in
Bangladesh Bank for these accounts and given the large discrepancies identified above,
it is not only incorrect for the bank statement to show them, but also highly misleading.
The role and purpose of the monthly bank statement must be agreed and amendments
made accordingly.
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Baseline report on bank reconciliation
3.1 Background
The local bank should send a hand written daily bank statement to the concerned DAO,
detailing all of the debit and credit transactions that have been recorded by the bank for
that DAO on that particular day. Each of the transactions should be correctly recorded
by the bank under the appropriate 13-digit government code. Additionally, the
statement shows the total for receipts and payments in each of the individual 78 bank
accounts for the day in question. A copy of all supporting challans, vouchers and
cheques are to be sent with the daily statement.
When the accounting office receives the daily bank scrolls, the total receipts and
payments for the day are to be entered into register DAO 1 – Register of Cash Flow.
This register is used to record the total of credit scrolls in respect of receipts and debit
scrolls in respect of payments as received from the bank, to work out cash flow during
the month under the code “Bangladesh bank deposit”.
Month__________________________ Year________________________
Date Payments Receipts Initial of Remarks
Designated
(Taka) ps (Taka) ps Officer
Monthly
total
Signature of DAO_________________________________
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Baseline report on bank reconciliation
At the end of the month the total receipts and payments recorded for the month are to be
compared to the monthly statement received from the local bank branch. Any
difference is to be identified, amendments made where appropriate to accounts office
data or the local bank informed of its error.
Register DAO 2 is used to summarise daily receipts on the basis of economic codes
under the relevant functional codes. The information source for these entries is the
challans received from the local bank and bank scrolls. Each day, the daily total is to be
compared to the corresponding credit entry in DAO 1. Any difference identified is to
be amended immediately.
Month___________________________ Year_____________________
Consolidated Fund/Public Account
Refund Previous
Transfer of month
Monthly Progressive
Date Total from revenue progressive
Function Economic total total
DCA 5 from total
code code
DCA 3
1.1.2003 2.1.2003 < 31.1.03
>
Daily
total
Initial of
DCA
All payments, including refunds of revenue are recorded on a daily basis from the debit
scroll received from the local bank on register DAO 3. As may be seen below, this
facilitates the daily reconciliation of payments that will be recorded in the summarised
accounts to the total payments recorded on the bank scroll. At month end the monthly
totals are to be transferred to registers DAO 2 and DAO 4 as appropriate.
Month__________________________Year______________________
Consolidated Fund/Public Account
Function Economi Date Monthly
code c code total
1.1.200 2.2.200 < < < < < < 31.1.200
2 2 > > > > > > 2
0921- 6301
0000
6341
4824
1051- 9101
0000
Daily total
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Baseline report on bank reconciliation
When bills are passed in a DAO office resulting in the issuance of a pre-audit cheque,
the expenditure information is to be recorded on the register DAO 4.
Layout of DAO 4
Total
Net Total
Token Name Gross deductions
Date of payment/
No & of Admissible claims with economic codes payments Deductions/recoveries with economic codes and
payment cheque Cr.
date Payee Dr. Recoverie
s
4601Pay of Estt
8241B.F
3901HB advance
VAT
8246G.I.
4501Pay of Officer
4705.House rent
8101GPF
Interest on loan
4717Medical
6821Furniture
A B
D
C
(B+C)
(A—B)
8616
Monthly total
Previous month
Progressive
This register records the amount that is to be debited against each individual economic
code for the bill in question. The DAO 4 register also records the net amount of the bill,
after all deductions have been made, and this is recorded under economic code 8616,
Cheques and Bills. The credit recorded against Cheques and Bills is the figure taken for
outstanding cheques. All of the information on DAO 4 will be consolidated at month
end to enable the preparation of consolidated monthly schedules.
When each individual cheque is prepared and issued, the particulars are to be recorded
on register DAO 15 - Cheque delivery Register.
Amount
(To be written Tick
Sl Token both in figure & Mark
Name of Payee Cheque No
No No word)
(Taka) ps
Daily
Total
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Baseline report on bank reconciliation
At the end of each day, the total number of cheques issued that day and the Taka value
of these cheques is to be recorded in register DAO 16 – Pre-Audit Cheques
Reconciliation Register, columns 4 & 5 below. A carbon copy of DAO 15 is then to be
sent to the local bank as a control measure, which may be consulted when cheques are
presented for payment.
Opening Cheques
Balance of outstanding
Cheques issued Total Cheques paid
outstanding (Closing
cheques balance)
Daily Daily Daily Daily Daily total
Date total total total total Daily total
Number. Amount No. Taka Number. Amount Number
(Taka) (Taka) Amount
(Ta
ka)
1 2 3 4 5 6 7 8 9 10 11
(1+4) (2+5) (6-8) (7-9)
Total Total
number. Taka
Total
An internal control measure has been prescribed in District offices to ensure that
misclassification and under posting of vouchers does not take place. At the end of each
day, all vouchers passed are to be compiled and sorted according to the 8-digit function
code. The total net amount of vouchers and therefore the value of cheques that should
have been issued for each function code is to be entered in register DAO 15A, (see
below), in the correct function code row, under the appropriate date.
The daily total is to be reconciled with the daily total of cheques issued recorded in
register DAO 15. Any difference is to be amended immediately.
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Baseline report on bank reconciliation
Layout of DAO 15A – Functional Code wise Summary Register for Pre-audit
cheques delivered
SL Functional Date
No Code
( 8 digits )
3 Monthly
1 2 19 20 30
1 Total
Taka Taka Taka Taka Taka Taka
1
2
3
Daily total
At month-end, the monthly total for each function code is to be reconciled with the net
amounts of cheques issued as per register DAO 5 - Register of Consolidation of
Deductions and Recoveries, (see below). This register is used to reconcile the total
monthly deductions, recoveries, and gross and net payments transferred from form DCA
4 on the basis of economic code under the relevant functional code. The consolidated
deductions data from DAO 5 will be transferred to register DAO 2 - Register of
Receipts, as above.
The number of cheques paid on each day and the total value of these cheques is to be
recorded in the DAO 16 register, in columns 8 & 9 above.
The DAO office is also to identify each individual cheque paid against the individual
entries in the current DAO 15 registers. If the details for a particular cheque are correct,
the accounts officer should enter a tick mark against the corresponding entry in DAO 15
to indicate that the cheque is no longer outstanding.
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Baseline report on bank reconciliation
Where a cheque has been paid which was issued during a pervious month, the same
process of entering a tick mark should be carried out on register DAO 17 – Register of
Outstanding Cheques.
Total
Whereas the DAO 15 register is used to record all cheques issued during the current
month, the DAO 17 register is used to record all cheques outstanding from previous
months. It is therefore the responsibility of the accounts office, at month end to transfer
any unticked, and therefore uncashed entries on the DAO 17 register to a fresh DAO 17
register. Then, any unticked and therefore uncashed entries from the current months
DAO 15 registers are to be transferred to the fresh DAO 17 register.
The number of cheques outstanding and their total value is then to be reconciled against
the completed DAO 16 register. Any difference identified is to be adjusted.
At the end of the month, the local bank will send a handwritten monthly statement,
which is to be signed by both the bank manager and the corresponding DAO or UAO.
This statement summarises all of the transactions under the Governments 13-digit code.
It is therefore the responsibility of the respective DAO/UAO to ensure that the monthly
statement corresponds with the sum of the daily statements reflected in the accounts
office monthly accounting records. This statement is to be included with the
consolidated monthly accounts forwarded to the Divisional Controller of Accounts
(DCA) office. Any discrepancy between the monthly statement and the consolidated
monthly accounts should prevent the data from being entered onto the CGA’s
consolidated accounts system. These differences are to be amended immediately.
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Baseline report on bank reconciliation
3.2 Observations
As the nature of District and Upazilla accounting is by its very nature cash based and
the source data is tied directly to the daily bank statement, it is generally understood to
be of limited risk in terms of bank reconciliation. However, several issues have been
identified which should be of concern to the CGA office in its attempts to reconcile the
bank.
2. The daily total cash movement recorded in the accounts is compared to the DAO
1 register. However, the movement in individual bank accounts is not
reconciled.
3. The local banks often compile daily statements and send many days worth of
scrolls and supporting documentation at the same time to the accounting offices,
or send daily information after significant dealy. When interviewed, DAO
Narsandi stated that they had not received a daily statement for 14 days. The
manual nature of the local banking system is the principal reason given for this
delay. This delay inevitably causes backlogs and therefore places too large a
workload on local accounting offices if they are required to reconcile all
individual transactions back to the daily statements at the same time as preparing
monthly accounts within the 10 day period after month end stipulated by CGA.
4. Although a record is maintained of banks that are late in reporting daily and
monthly transactions, the local accounting offices are limited in their ability to
influence the banks. Influence should be applied from a higher, more central
position to encourage the reporting to be carried out in a timely manner.
5. The procedures outlined earlier in this chapter are not appropriately designed to
facilitate an easy reconciliation between bank accounts and the respective
Ministry. Public Account transactions are currently coded under generic
function codes, for example under C&AG, rather than being associated to the
actual Ministry to whom the transaction relates. This inevitably records the
gross expenditure under Ministry and Net Cash Movement is lost. The
movement and balances of individual bank accounts are therefore not being
utilised to provide any reconciliation function at Ministry level.
6. Many local banks appear to be aware of the limitations in, or even lack of,
reconciliation taking place in District and to a lesser degree Upazilla accounting
offices. The lack of local and central reconciliation discussed later in the report
indicates that this opens the possibility of bank officials intentionally
manipulating daily and monthly returns. No evidence has been found in the
32
Baseline report on bank reconciliation
preparation of this report of this taking place, a risk exists for such actions to
take place.
7. Local banks are regularly making classification errors when reporting daily
receipts transactions. The current responsibility to allocate transactions
according to the Government coding structure is generally felt to be unrealistic.
Both Bangladesh Bank and Sonali Bank are primarily concerned with accurately
recording banking transactions. Therefore their principal concern is not, and
should not be expected to be, providing accurate information to Government
using the Governments internal coding structure.
8. Many accounts officials feel that many receipt transactions relating to the same
4-digit economic codes are being grouped together under single functional codes
on the daily bank statement. This means that the statement does not allocate the
receipts to the concerned Ministry or Department. Unless this is identified and
corrected by all accounts offices every month, the individual bank account
balance of each concerned Ministry or Department can never be used to
reconcile the receipts recorded in the accounts.
9. Members of the public are often required to write both the 13-digit Government
accounting code and bank account number manually on challans when making
lodgements to the Government accounts. Neither bank officials nor members of
the public are sufficiently trained to correctly identify and enter this information
and often are not given clear advice as to the correct codes to enter. The impact
that this miscoding has on the accounts could be easily avoided if the required
information were to be provided by the issuing authority at source.
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Baseline report on bank reconciliation
4.1 Background
Chief Accounts Officers (CAOs) are operating under the control of the CGA. Each
CAO has been placed facing a specific Line Ministry and in that respect is to act as
Financial Advisor to the concerned Ministry. CAOs are also charged with the function
of issuing pre-audit cheques within the Presidency region of Dhaka for the concerned
Ministry and preparing accounts for this region in relation to the transactions processed.
As stated, CAOs issue pre-audit cheques for their respective Ministry for expenditure
transactions within the Presidency region of Dhaka. In the financial year 2002-2003,
pre-audit cheques issued by the 51 CAO offices accounted for approximately 28% of
cash outflow from the main 78 bank accounts during the year. A cash control measure
has been introduced to monitor these payments through the establishment of the Central
Reconciliation Unit (CRU) within the CGA building in Dhaka. This unit was originally
designed to reconcile both payments and receipts, yet to date has only been operated for
pre-audit cheques issued by CAO offices within Dhaka. The operation on the CRU is
described briefly below.
On a daily basis, when CAOs prepare pre-audit cheques, these cheques are not
to be signed and issued until the relevant details (name of payee, date of cheque,
amount of cheque and cheque number) have been entered onto the CRU system.
If the information printed off from the CRU system is in agreement with the
passed bill data and cheques prepared, only then may the cheques be signed and
issued.
A daily advice is issued sent to Bangladesh Bank for all cheques of value greater
than Tk25000/-
At month end, the cheques issued data is transferred to the central CRU
database.
34
Baseline report on bank reconciliation
Bangladesh Bank electronically send the relevant details of all cheques actually
cashed in the Presidency region on a monthly basis and the CRU system
matches the two data sources and identifies cases of data mismatch.
Cashed cheques and the corresponding debit scroll are issued by Bangladesh
Bank to the issuing CAO to be matched against the information sent to the CRU.
The following reports are produced centrally by the CRU and issued to the
concerned CAO offices, where mismatches are to be clearly corrected by the
CAO and the reports returned to the CRU where any required amendments may
be made. The current Government Order states that these reports eare to be
produced within one week of the month end.
The treasury office responsible for recording transactions within the Presidency region
is DCA Dhaka, which incorporates what was DAO Dhaka. All CAO pre-audit cheques,
when cashed, are recorded by DCA Dhaka, not through the individual CAO office. The
system is so designed that when a CAO issues a cheque, the code for ‘Cheque and Bills’
is credited, which will be offset by the debit entry recorded by DCA Dhaka when the
cheque is cashed.
4.3 Observations
1. It appears that the CRU is not seen as a high profile unit that operates with the
required monitoring, support or authority of the CGA. This is indicated by the
following findings relating to the four-month period July 2003 to October 2003,
as reported by the CRU on 19th January
Civil Aviation and Tourism No data entered for any of the four months.
Finance No data entered for three months.
Internal Resources Division No data entered for one month.
Rural Development & Cooperative No data entered for two months.
Of the 204 individual months data that should have been recorded by all CAOs for the
four month period, 10 months, or approximately 5% showed no data entry at all.
35
Baseline report on bank reconciliation
The following tables clearly demonstrate the limited success that CRU is experiencing
in receiving amended reports from the concerned CAOs.
The following table indicates the overall position between Cheques and Bills recorded
on the CDPU system for each individual CAO office and the corresponding amounts
entered onto the CRU system by the same CAOs.
(Crore Taka)
CAO-Cheque Difference Difference
Month CAO-Cheque Cashed
Issued from CDPU from CDPU
Accounts- CRU Cheque Accounts- CRU Cheque
CDPU- Issued CDPU- Cashed
8611 9611
March 727.25 727.91 0.66 733.77 751.58 17.81
03
June 03- 3064.21 2959.72 104.49 2271.86 2307.55 35.69
Pre
July 03 408.77 407.99 0.78 975.91 981.66 5.75
36
Baseline report on bank reconciliation
and CDPU data, as errors must now be corrected at source before the data is
compiled.
3. It is found that many CAO offices are unable to enter the CRU data before
issuing cheques. This is due to a combination of lack of staff with sufficient IT
skills, pressure to issue cheques to payees and lack of respect for the CRU
function. It is therefore common for a list to be maintained of cheques issued
and for the CRU system to be updated on a weekly basis. This may lead to data
entry errors or data being omitted from the CRU system.
4. The Government Order that CRU reports are to be issued within one week of the
end of the month is not considered to be realistic. There are major delays in
Bangladesh Bank sending the electronic data for cashed cheques to the CRU.
As at the 24th January 2004, data had only been received for the month of
November 2003. Similar delays are noted in the process of CAO offices
receiving the actual cashed cheques from Bangladesh Bank. In this regard,
CAOs report that a delay of approximately two months is considered standard.
5. The CGA office is unable to reconcile the Cheques and Bills figures for
individual CAO offices. The unique accounting procedures currently in place at
DCA Dhaka are causing confusion and lack of clarity in a crucial area of
reconciliation. When DCA Dhaka receives debit scrolls from Bangladesh Bank
relating to cashed CAO pre-audit cheques, the officers entering the data into the
monthly accounts are unable to differentiate in the accounts between different
CAO offices. The Cheques and Bills figure reported, for cashed cheques is
restricted under one generic Public Account code - 9611. As the data for all
CAOs cashed cheques is entered in DCA Dhaka and therefore under one
location source code, only the total movement in Cheques and Bills may
currently be monitored. There is therefore no role for the CRU to play in
monitoring and inspecting the monthly Cheques and Bills data forwarded from
individual CAO offices with their monthly returns.
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Baseline report on bank reconciliation
It is clear from the above table that there are significant balances reported in the
government’s books of accounts that are not being controlled or reconciled. This will
inevitably have wider implications on the correctness of the Appropriation Accounts
and Finance Accounts.
The requirement for a code ‘Others’ is unclear and may cause confusion at a local level.
It is noteworthy that the opening balance, movement during the year and closing
balance are debit balances. This is unusual for outstanding cheques, which should be
the major element of a remittance code. This issue is addressed in more detail on page
62.
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Baseline report on bank reconciliation
5 Foreign Aid
5.1 Overview
Foreign Aid may be summarised for the purposes of this report into Food Aid,
Commodity Aid and Project Aid. Despite the creation of four separate bank accounts
for Food Aid and one for Commodity Aid, there was no evidence found of
reconciliation of these accounts.
The Project Director submits bills to the local accounting office as per the standard pre-
audit system. On a periodical basis, an expenditure statement is issued to the
Development Partner and whole or partial reimbursement is made directly into the main
GoB bank account.
The donor credits special project bank accounts with an imprest amount. When the
imprest balance has been expended by the project, the PD will submit a reimbursement
application to the donor. Upon approval of the expenditure statement provided, the
account will be replenished.
There are four types of account operated under Pre-financed Project Aid:
expenditure into the government accounts. The CAO office should reconcile the two
statements and ensure that the expenditure entering the accounts matches the banks
figures.
D. Imprest Account
5.2 Observations
2. Due to the use of commercial bank accounts and the lack of pre-audit
procedures, the main concern in relation to foreign aid for bank reconciliation is
PPA projects. It is required that expenditure statements for these projects be
accompanied with the corresponding bank statement to allow the concerned
CAO to reconcile with the cash movement.
A sample of CAO offices were assessed to measure the degree of compliance with this
requirement and the findings were as follows:
Total
Number
Total Foreign
CAO Office assessed of PPA Findings
Projects Aid
Projects
Projects
CAO receives expenditure statements
CAO Primary and
25 14 10 but no bank statements for any PPA
Mass Education
projects.
CAO receives expenditure statements
CAO Water
87 18 11 but no bank statements for any PPA
Resources
projects.
CAO receives expenditure statement
CAO Land 8 2 1
and bank statement for PPA project.
CAO receives expenditure statements
CAO Electricity 69 31 2 but no bank statements for any PPA
projects.
As shown in the table above, of four CAO offices sampled, only 1 out of 24 PPA
projects provided a bank statement in support of the expenditure statements. This
degree of non-compliance with prescribed procedures, and consequent lack of
reconciliation, presents a risk to the integrity of government accounts and is seen as a
significant control weakness.
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Baseline report on bank reconciliation
6.1 Background
Operating under the guidance of DCA Dhaka, the office that was previously DAO
Dhaka records all receipts for Dhaka from information received from Bangladesh Bank
on daily debit and credit scrolls. (This office is still often referred to in government as
DAO Dhaka and this distinction shall be made for the purposes of this report.) DAO
Dhaka is also responsible for processing approximately 10,000 pension bills per month
as well as P.L. Account transactions.
6.2 Observations
1. In the financial year ending June 2003, DAO Dhaka was responsible for
accounting for approximately 34% of total Government receipts. However,
there are currently only 23 officers and staff posted to DAO Dhaka. This is in
sharp contract to approximately 200 employees at the Government Accounts
branch in Bangladesh Bank, which prepares the daily debit and credit scrolls
which are sent to DAO Dhaka.
2. The number of challans attached to the daily debit scrolls sent to DAO Dhaka
varies between 2,000 and 8,000 per day. Due to these high volumes, it is not
possible for the staff at DAO Dhaka to assess the accuracy of the Bangladesh
Bank debit scrolls in respect of either value or coding as compared to the
supporting documentation.
3. For various reasons, the focus of attention at DAO Dhaka is currently placed on
passing pension bills as opposed to preparing quality accounting information.
4. Working conditions at DAO Dhaka are very difficult and are not conducive to
the governments focus on producing quality accounting data. For example,
daily bank scrolls are to be maintained at the office for three years, as per
Government Order. However, it was found that they are currently being stored
for fifteen years, as there is a general fear of destroying any documentation.
These bank scrolls are found in almost every office, with no possibility of
identifying specific documentation that may be required.
Senior officers from the CGA office produced an internal report within the last
year clearly identifying the staffing and accommodation problems at DAO
Dhaka. This report has not been acted upon to date.
5. The District Accounts Officer in DAO Dhaka acknowledges that the office is
unable to produce quality accounting information, given the limitations
identified above. Information is being taken directly from the bank scrolls and
entered into the Government Accounts, without any reconciliation or controls
being exercised.
6. Morale at DAO Dhaka is understandably low and again, this has a major impact
on the quality of accounts that are produced. DAO Dhaka concerns have not
been addressed, despite the importance it holds in terms of transaction value.
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Baseline report on bank reconciliation
7.1 Background
The National Board of Revenue (NBR) is the Government body entrusted with the
assessment, collection and reconciliation of Income Tax, Customs and VAT.
Approximately 85% of Government revenue is credited through the NBR, of which
approximately 70% comes from Customs. The ability to reconcile between NBR, CGA
and Bangladesh Bank data is therefore crucially important when the Government is
aiming to produce quality accounting information.
Customs
Approximately 95% of Customs trade passes through the four main Customs Houses at
Dhaka Airport, the Inland Container Depot (ICD), Chittagong Port and Benapole
Border. These Customs Houses are all on-line with the Asycuda system, for which a
simple process is followed:
The Customs Agent, acting on behalf of the concerned Importer lodges a ‘Bill of
Entry’, describing the goods imported and this is entered onto the Asycuda
system.
The system automatically calculates the various duties and charges due and
these are printed onto the ‘Assessment Notice’.
When the Customs Agent presents the Assessment Notice to the Sonali Bank
branch associated with the Customs House and pays the total amount due, the
Assessment Notice is stamped and the payment challan given to the Agent.
Once payment is made in full to Sonali Bank, the goods in question may be
released.
A daily printout of the Customs ‘Cash Day Book’ is sent to Treasury, the
Customs Supervisor and Sonali Bank.
Sonali Bank compares the printout to their receipts figure and then signs and it,
indicating agreement of the figures.
Income Tax
Due to the high degree of tax evasion encountered, it has been necessary for the
Government to deduct Income Tax at source for several types of transactions. These
include deducting between 1% and 10% from various claims from contractors and
43
Baseline report on bank reconciliation
The Research and Statistics Directorate of NBR is responsible for collecting income tax
data for 18 income tax zones, each of which is headed by an Income Tax
Commissioner. Each Commissioner is responsible for collecting data from the Deputy
Commissioner of Taxes offices that report to them. There are 393 Deputy
Commissioner of Taxes offices, each of which is responsible for an individual income
tax circle. VAT is accounted for by NBR by means of 7 VAT Commissioners, using a
similar process.
Income Tax receipts, which impact most strongly on CGA bank reconciliation, are
treated in the following manner by NBR:
For all income tax collections for Dhaka, NBR officers from Tax Zone 1
initially collect the challans from DAO Dhaka approximately twice a week.
The challans are then segregated according to zone and all zones except Zone 2
and Survey Zone are recorded on three computers, using a foxpro database,
designed in 1995. The two zones excluded from data entry are done so on the
basis of the large number of challans received.
After data entry has taken place, the number of challans for each zone and the
date are recorded in individual registers for each zone. The same information is
then recorded on the bundles of challans before the concerned officers of each
zone collect them.
Each tax zone then distributes the challans to the concerned tax circle under their
jurisdiction, where the details of each individual challan are recorded in Register
Five.
At the end of each month, the tax circles report the monthly and cumulative
totals for Register Five to the concerned Tax Commissioner who in turn reports
the combined total to the NBR.
The same computer unit in Zone 1, which records challans, also receive
statements from Bangladesh Bank for Interest on Securities. A separate
Microsoft Access Database is maintained for this data.
Other income tax receipts, not recorded directly from challans are incorporated
at the Tax Commissioners Office
The NBR is required to reconcile its monthly revenue figures with those recorded by the
CGA in the Government accounts, the source documents of which are the challans
received by DAO Daka.
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Baseline report on bank reconciliation
7.2 Observations
1. Eight months after the 2002–03 year-end, NBR is only able to provide a
provisional figure for annual tax revenue. This figure of Taka 4372 Crore is
Taka 510 Crore higher than the figures reported by CGA for the same period.
2. No action has been instigated by either the CGA office or NBR to address the
discrepancies in reported figures. NBR officials state that they do reconcile their
monthly figures with the CGA. This consists of both parties presenting their
figures for the month in question, calculating the difference and stating that the
figures are now reconciled. This does not form the basis of a reconciliation and
should not be perceived as such.
3. Detailed information for the four main Customs Houses is readily available on
the NBR Asycuda system. This includes the Monthly Cash Report, which
details the 13-digit codes that Sonail Bank has coded the relevant receipts to for
each location. This information could be invaluable to the CGA office in
reconciling a significant proportion of the total revenue of Government in
relation to the bank receipts, government accounts and NBR reported
information.
The central Asycuda system is located in the building adjacent to the CGA
office. It is assumed therefore that CGA officers, with appropriate management
support if required, could easily obtain this detailed 13-digit code wise
information and thereby develop the reconciliation at the concerned District
offices and Sonali Bank branches.
4. Customs and Sonali Bank are not aware of the correct 13-digit codes required
for each type of revenue received. This matter could have been easily resolved
through improved communications between Customs, Sonali Bank and the CGA
office. However, this lack of communication may have resulted in serious
miscoding by Sonali Bank over recent years.
5. The CGA office does not appear to have been proactive in attempting a
reconciliation between the Customs, Treasury and CGA data.
7. Reconciliation at the field level between NBR offices and local accounting
offices is made difficult due to the different geographical areas covered by each.
There is no correlation between tax zones and circles and the District and
Upazilla regions as the income offices are located according to the
demographics of the taxpayers. This is noticeable in the fact that DAO Dhaka
accounts for taxes relating to 10 income tax zones and approximately 200
income tax circles. At the same time however, four circles reporting to Zone 3
alone lodge their receipts at district offices other than DAO Dhaka. This means
that Zone 3 figures cannot be directly compared to DAO Dhaka.
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Baseline report on bank reconciliation
9. It is claimed that software limitations currently mean that the daily monetary
total of challans being recorded on the NBR system for each zone cannot be
calculated. This results in only the number of challans sent to each zone being
recorded, which is of limited use to either party.
10. The tax zones do not appear to record the value of challans distributed to each
circle. When the monthly information is transmitted back from the Register
Five for each circle, this therefore is not compared to the sum of the batches
distributed. There is a very high degree of reliance placed on the accuracy of
information recorded in the tax circles. This reliance has led to a feeling that
reconciliation of data is not required.
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Baseline report on bank reconciliation
The following table compares the data recorded on the NBR computer system (at tax
zone 1) for tax zone 3 for the month of February 2004, against the information reported
by each circle from Register Five for the same month.
(Circles where the collection is lodged outside of Dhaka and therefore are not entered
onto the computer have been removed to allow a more realistic comparison.)
Total monthly figures for Circles within Dhaka for Zone 3 may be compared for the
period July 2003 – February 2004, from data supplied by Zones 1 & 3 as follows:
It may be seen that there are some very large variations between the figures
reported by the Zone 3 Commissioner for each circle and those recorded on the
Zone 1 computer system during the month of February 2004.
Similarly, the monthly total variations are very large, especially when
considering that both sets of data are primarily from the same source documents,
namely income tax challans received during the month.
It is clear therefore that the computer data maintained at Zone 1 is not being
utilised for reconciliation processes and other basic reconciliation procedures are
similarly not being carried out within the income sections.
One interesting point to note however is that for the cumulative figure from July
2003 to February 2004, the amount reported by the Commissioner of Taxes as
per all Dhaka circles register 5s, is only 92% of the total amount recorded in the
Zone 1 computer system for same period.
Contrary to the opinions of some officers in the CGA, that income tax data is
often opaque, exaggerated and unreliable, the Commissioner of Taxes
interviewed during the course of this work, was very open and transparent when
information was requested. The source of all information requested was clearly
explained and documentary evidence provided.
11. The current practice of setting strict monthly and annual tax collection targets
for the NBR and individual zones and circles may be adding to the lack of trust
in reported income tax figures. It is seen that where targets are not met, the
target is often adjusted downwards, resulting in the reporting that targets are
consistently attained or very nearly attained. There is clearly manipulation of
figures between months to smooth the reported collections and to avoid targets
being increased inappropriately, however no evidence was found while
preparing this report that total figures are not sincerely reported. Manipulation
of figures would however have a detrimental effect on any bank reconciliation
efforts that incorporate the reported figures.
12. There is a duplication of challan recording at both the Sonali and Bangladesh
Banks and the NBR. It should be investigated whether the information recorded
at the banks could be expanded to include the additional fields of tax zone and
TIN number. If this were possible, a simple data transfer system would remove
the current problems of data limitations at NBR and dramatically improve the
possibility of reconciling receipts recorded through the bank and the
corresponding data held at NBR.
13. There still remains a certain degree of discretion and potential manipulation of
tax assessments received from NBR. Frequent adjustment of assessments may
seriously undermine any future attempts to reconcile receipts through the bank
to a database of assessments received from NBR.
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Baseline report on bank reconciliation
14. Challans used for payment of income tax assessments are, in many cases,
completed by the members of the public themselves. It is therefore highly likely
that incorrect bank account and 13-digit codes will be entered, limiting the
CGA’s ability to reconcile data with the NBR.
15. There are many instances where the incorrect bank account has been credited by
the local bank for tax receipts, as shown in Chapter 9 Ministry Wise Bank
Accounts, on page 59. Until there is an effective bridge table produced between
Ministry codes and individual bank accounts, these mistakes will persist,
limiting the CGA’s ability to reconcile its data to the specific bank account
movements.
16. There is an individual bank account established for IRD, which is often confused
with NBR revenue by local banks and members of the public. Bank account
number 189 – NBR, is made up of specific bank accounts for each revenue type,
yet the cumulative account is not blocked in all bank branches. The additional
accounts, created for Income Tax, VAT and Import Duty etc, have not to date,
been officially numbered. The resulting misclassification is found in most
monthly accounts bundles examined.
17. There is clearly a dual system of classification currently operating between NBR
and CGA that needs to be addressed before detailed reconciliation of revenues
may be considered. An example of this may be seen when considering
Supplementary Duty, which may be collected from either imports or domestic
products. NBR classifies SD from import as a sub item under import duty and
SD from local products under VAT. The CGA offices however have
subdivisions of SD for import and local.
18. Tax deducted at source as a book adjustment through the CGA accounting
network is currently not distinguishable in the accounts from tax collected
through the bank. All tax is currently recorded under the function code of IRD
and this has a serious impact on the CGA office’s ability to reconcile its reported
tax revenue figures with those reported by Bangladesh Bank. This in turn
reduces the confidence with which the MoF views the CGA data when
comparing it to that of the NBR.
49
Baseline report on bank reconciliation
8.1 Background
This reconciliation provides a basic control measure that should be achievable every
month by CGA Officers. The local accounting offices record movement in the
economic codes 8901 and 9901 for cash only upon receipts of debit or credit scrolls
from the local bank. As shown in the diagram below, the source of financial
information that feeds into the CGA accounts is the same that forms the foundation of
the Bangladesh Bank monthly statement.
CGA
Bangladesh Bank
DAO DAO DAO Head Office
Daily and
Monthly
Statements
Flow
1 Local Local Local
Sonali Sonali Bangladesh
Bank Bank Bank
Flow 2
Sonali Bank Head Office
Daily and Monthly
Statements
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Baseline report on bank reconciliation
The basic layout of the monthly summary reconciliation certificate (as printed on 21/01/04 for this
report) is shown below.
Certificate
This is to certify that the attached abstract of Accounts of the Government of Bangladesh for the
month of March and year 2002-03 has been compiled in my office and signed by me on 21/01/04
TOTAL 7917,77,14
It is certified that the closing balance of deposit in Bangladesh Bank as shown in the list of balances
furnished by the Manager, Bangladesh Bank, Central Branch, Dhaka of Tk. 328188 has been
reconciled.
The explanation of the difference of the amount, Tk. 620008 has been shown in the enclosure.
51
Baseline report on bank reconciliation
The March 2003 reconciliation spreadsheet prepared within CGA was analysed in detail
and the following observations were made.
The column totals as per Accounts Office and Bangladesh Bank that appear on the final
page, page 21 are as follows:
The column totals for the Status of difference of cash balances are as follows:
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Baseline report on bank reconciliation
8.3 Observations
1. The CGA office has not attempted bank reconciliation since March 2003. No
action has been taken to date to address this critical lack of control.
2. The Government bank account has not, since Independence in 1971, been
effectively reconciled. This has resulted in a generally accepted feeling that
bank reconciliation will only be achievable by the introduction of wide scale
computerisation. As a result, no serious and concerted effort has been made to
do this.
5. Within several lines of the column totals, two different figures are both stated as
‘Difference of cash balance in current month’, Tk 7,54,26,14,869 (000) and Tk
7,25,75,74,869 (000). No explanation is provided on the report for this change.
53
Baseline report on bank reconciliation
9. All figures are in thousands of Taka, yet this is not stated anywhere on the
report.
10. The cash inflows and outflows as per the accounts are generated directly from
the CDPU system. The inflows and outflows for Sonali Bank branches are
entered using the summary information on the monthly bank statement.
The 9 Bangladesh Bank branches are more difficult to calculate. The monthly
statement received by the CGA Office does not summarise the overall cash
inflow and outflow for each branch. Instead, a data input operator at the CDPU
is required to calculate these figures by adding 156 figures for each branch,
being receipts and payments for each of the 78 individual bank accounts. This
amounts to 1404 individual entries that are clearly prone to error. Bangladesh
Bank should be instructed with immediate effect to provide the receipt and
payment figures for the nine branches as part of the standard statement.
Further difficulties arose in preparing the Bangladesh Bank branch figures for
March 2003, as there was some confusion over whether the amounts appearing
on the statement were net or gross figures.
11. Of the 469 offices assessed, there were significant differences in the figures for
26 offices and the Railway account as shown in the tables below.
Movement of
Sonali Bank Movement as Sonali Bank as
Difference % Difference
branch per CDPU per CGA
spreadsheet
Taka Taka Taka
Lohajang -3,902,792 -5,002,792 1,100,000 -28.18
Singair -3,880,362 -3,920,367 40,005 -1.03
Daulatpur -5,017,051 -5,037,771 20,720 -0.41
Shariatpur Dist -24,763,570 -24,663,570 100,000 -0.40
Noria -4,674,387 -4,695,584 21,197 -0.45
Basail -4,546,568 -4,561,778 15,210 -0.33
Netrokona Dist -45,017,153 -44,839,741 177,412 -0.39
Nikli -1,548,058 -1,538,058 10,000 -0.65
Naniarchar -3,595,900 -3,580,140 15,760 -0.44
Panchhari -6,363,798 -6,343,975 19,823 -0.31
Manikchhari -4,668,467 -4,539,353 129,114 -2.77
Gurudaspur -4,123,391 -4,149,012 25,621 -0.62
Dinajpur Dist -83,281,936 -82,781,936 500,000 -0.60
Goinghat -3,305,758 -3,099,152 206,606 -6.25
Boralekha -2,897,513 -2,837,137 60,376 -2.08
Lohagora -9,531,997 -9,463,950 68,047 -0.71
Chhattak 2,768,688 2,738,689 29,999 1.08
Doarabazar -3,153,812 -3,138,309 15,503 -0.49
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Baseline report on bank reconciliation
Movement of
Bangladesh
Bangladesh Bank Movement as
Bank as per Difference % Difference
branch per CDPU
CGA
spreadsheet
Taka Taka Taka
Dhaka District 650,256,646 1,380,808,208 730,551,562 112.35
Chittagong District 8,975,420,742 161,569,984 8,813,850,758 98.20
Rajshahi District -245,191,804 71,672,004 316,863,808 -129.23
Bogra District -251,278,474 -38,877,229 212,401,245 -84.53
Rangpur District -34,070,890 95,108,147 129,179,037 -379.15
Khulna District 137,380,197 162,504,459 25,124,262 18.29
Barisal District -21,763,266 63,908,604 85,671,870 -393.65
Sylhet District 254,793,857 93,226,781 161,567,076 63.41
12. After the reconciliation report was produced identifying the above differences
between the CGA accounts and Bangladesh Bank, CGA Officers took no further
action.
13. Before the CGA became computerised, a similar report was produced manually
at the CGA Office. Due to the limitations of operating a manual system, it was
the accepted procedure to identify the differences between movement shown in
the CGA accounts and Bangladesh Bank statement for the first ten or twelve
accounts offices. After this small number of differences had been calculated, the
remaining difference between total cash movement was simply identified as
Other Balances. It was assumed at the time that if the same procedure had been
carried out on all of the accounting offices, the total of the differences would
equal the total difference between the two sources.
14. Total movement in the Bangladesh Bank statement for the month of March 2003
was a reduction in cash of Taka 35,87,47 (thousand)
Total movement in the bank as per the reconciliation statement for March 2003
was a reduction in cash of Taka 7,88,75,40 (thousand)
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Baseline report on bank reconciliation
If these two figures had been compared directly on the final page of the
reconciliation spreadsheet, errors relating to data input would have been more
easily identifiable. The current template however does not compare these
figures and therefore the errors in the spreadsheet itself were assumed to relate
to the actual difference between the CGA accounts data and the Bangladesh
Bank monthly statement.
15. The differences identified in the movement for accounts offices serviced by
Bangladesh Bank branches has been explained above with the complexity of the
receipts and payments figures supplied by Bangladesh Bank. The differences
relating to Sonali Bank branches however required further investigation. An
examination was made of the movement shown on the monthly bank statements
sent from the local bank branches to the respective accounting offices, compared
to the movement reported by each accounts office. For all offices examined, it
was observed that the local accounts office correctly entered the cash movement
according to the original monthly statement. This is in line with the CGA order
that monthly accounts data should not be entered onto the CDPU system if it is
inconsistent with the attached monthly bank statement.
For those branches sampled, Sonali bank was reporting a different figure for
cash movement during the month on two separate bank statements.
16. While it is reassuring that Sonali Bank did adjust their figures under their own
initiative, it is of concern that the local UAO office recorded the correct
information within 15 days of month end, yet it took one and a half months for
Sonali Bank to identify the required correction and eight months for Bangladesh
bank to amend the balances.
17. The UAO was aware of the misreporting by Sonali Bank, yet CGA was not
informed of it. Therefore, given the inability of CGA to reconcile the movement
reported in each local office, no action was taken and Bangladesh Bank was also
not informed.
18. A weakness exists due to the lack of reconciliation carried out between the cash
disbursed by Sonali Bank (as reported by local accounting offices) and the
amount reimbursed by Bangladesh Bank. While no evidence has been found in
preparing this report that Sonali Bank have received any amounts for which
disbursement was not made, it is possible that this may have happened.
CGA is the office that is ideally placed to carryout this reconciliation and
immediate action should be taken to ensure that Public Funds are appropriately
safeguarded.
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Baseline report on bank reconciliation
19. No evidence was found during this study to show that any reconciliation is
carried out with Bangladesh Bank data during the preparation or data entry of
Railway monthly accounts. The CGA office must carry out a full investigation
into this issue.
20. The Central Reconciliation Unit has been compiling figures for cheques and
bills for every District Office since December 2002. This information is
compiled by the respective Divisional Controller of Accounts office and
summary information sent to the CRU. To date, nothing has been done with this
information and no comparison of the reported figures has been made with the
data held by the CDPU.
When analysed, the information held for DCA Chittagong as at December 2003
presented the following findings.
Closing net balances of cheques and bills as at December 2003 were given by
the DCA Chittagong office and CDPU (calculated as total movement from
September 1999 – December 2003) as follows:
Balances as per %
Balances as
District DCA Difference Difference
per CDPU
Chittagong
Chittagong District -551,939,866 35,681,444 587,621,310 1,646.85
Coxs Bazar District -28,843,556 2,021,041 30,864,597 1,527.16
Rangamati District 89,373,544 3,440,070 -85,933,474 -2,498.02
Bandarban District 14,839,688 1,521,042 -13,318,646 -875.63
Khagrachori District -6,503,773 684,245 7,188,018 1,050.50
Comilla District -104,589,148 11,962,395 116,551,543 974.32
Chandpur District -37,104,645 4,563,985 41,668,630 912.99
Brahmanbaria District 48,274,393 7,655,516 -40,618,877 -530.58
Noakhali District -879,183 6,636,493 7,515,676 113.25
Feni District -152,975,693 2,126,272 155,101,965 7,294.55
Lakshmipur District 32,358,593 1,356,428 -31,002,165 -2,285.57
This table indicates a major discrepancy between the CDPU data, which is used
in the preparation of the government’s accounts, and the actual value of
outstanding cheques at any given time.
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Baseline report on bank reconciliation
Monthly movements in Cheques and Bills for each District office in the month
of December 2003 as given by DCA Chittagong and CDPU is as follows:
(Amounts in Taka)
Cheques
Cheques Cheques Cheques paid
issued as per
District issued as per paid as per as per DCA Difference
DCA
CDPU CDPU Chittagong
Chittagong
160,745,39
Chittagong District 147,641,275 4 147,641,274 160,745,394 1
Cox's Bazar District 44,784,820 47,940,558 44,784,820 47,940,558 0
Rangamati District 37,496,506 36,030,591 37,496,507 36,030,591 -1
Bandarban District 15,293,616 0 15,293,616 15,346,649 15,346,649
Khagrachori District 25,100,867 26,969,461 25,100,867 26,969,461 0
165,885,20
Comilla District 157,819,716 0 157,819,716 165,885,200 0
Chandpur District 38,868,875 40,759,217 38,868,875 40,759,217 0
Brahmanbaria District 45,685,358 40,678,786 45,685,358 40,678,786 0
Noakhali District 43,510,632 42,539,906 43,510,631 42,539,906 1
Feni District 34,559,816 35,827,360 34,559,815 35,827,360 1
Lakshmipur District 23,311,559 24,873,241 23,311,559 24,873,241 0
21. It is not clear whether the DCA office obtained confirmation of the movements
and balances from the District offices or simply based their return to the CRU on
the monthly accounts data sent. No check has been carried out by the CRU into
the reliability of the DCA office returns.
22. The simple comparison carried out in the preparation of this report, where only
eleven offices were sampled for one month has identified an obvious example of
miscoding. Again this is highlights the potential for miscoding within the CGA
accounts data.
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Baseline report on bank reconciliation
9.1 Observations
It was found that Bangladesh bank is currently sending monthly statements to only a
limited number of CAO offices. This may explain why many CAOs are not willing to
be held responsible for the activities taking place in their individual bank accounts,
particularly as they are actually controlled and operated by others. The monthly
statement produced by Bangladesh Bank contains the names of all offices that are to
receive a copy of the statement. Only the original 21 CAO offices are listed and
therefore it is clear that the source information is simply not available for the newly
created 30 CAOs. No member of staff at CGA or any CAO has addressed this issue and
the resulting lack of responsibility has, to date, not been seen as a key issue at CGA.
The CGA Office in Dhaka is also currently unable to reconcile these individual
accounts to the transactions reported through the accounting offices for each Ministry.
No such reconciliation has been attempted to date by any Government unit.
The original premise upon which these additional bank accounts were introduced was
that the cash movement reported by Bangladesh Bank for each Ministry would give a
more accurate reflection of the actual receipts and expenditure for each Ministry than
the CGA accounts data. The evidence collected in the preparation of this report
suggests that this is not currently the case.
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Baseline report on bank reconciliation
UAO Naria All receipts and revenues have been allocated by the local Sonali Bank
to Bank Account No. 215 – Public Account Others.
UAO Panchari The local Sonali Bank included internal sub-divisions of Bank
Accounts that are not recognised by Bangladesh Bank, namely Bank
Account Nos. 186, 187, 188. This is an internal coding system used
within Sonali Bank. The district officials have never questioned the
inclusion of these additional accounts.
DAO Dinapur The local bank allocated Income Tax and VAT together to Bank
Account No. 189 – NBR, despite the separate columns identifying
each type of revenue on the statement. The confusion surrounding
revenue coding is exacerbated by some revenue receipts being coded
to Bank Account No. 111 – IRD.
DAO Dhaka The spreadsheet included as annex D clearly shows that the District
Accounts Office in Dhaka does not consider the Bank Account
allocation when receiving, reconciling or recording daily or monthly
receipts information from Bangladesh Bank. Payments cannot be
reconciled as CAO offices record the expenditure in their accounts and
DAO Dhaka can only record these cheque payments under the generic
Public Account code ‘Cheques and Bills’. The District Accounts
Officer has written to the CGA stating that the DAO Dhaka office is
currently unable to provide an effective accounting function. The
severe limitations under which DAO Dhaka is operating are resulting
in highly significant lack of controls or reconciliation at one of the key
government accounts offices. Given that DAO Dhaka is the office
responsible for coding and reconciling the receipts for the Presidency
region of Dhaka, which accounts for approximately 34% of all
receipts, this will inevitably significantly undermine the ability of the
CGA office to reconcile monthly or annual accounts back to the
individual bank accounts, or even individual function codes.
It was found to be the case that every bundle examined showed misallocation between
individual bank accounts.
This indicates that training is urgently required for bank officials operating in
connection with Government accounts.
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Baseline report on bank reconciliation
An in-depth examination of the 78 bank accounts maintained at DAO Dhaka was also
carried out to assess the practicality of reconciling these balances in an individual
accounts office against the unreconciled balances taken from the monthly accounts.
With the introduction of many new bank accounts in September 2002, combined with
procedural weaknesses, the reconciliation between CGA Ministry accounts data and
individual bank accounts for the financial year 2002-03 has not been achieved.
The same study was carried out for the single month of March 2003. As can be seen in
annex D, the reconciliation was not achieved, but did provide a general approximation
between the movement in CGA accounts and individual bank accounts.
There are several key reasons that give rise to the difficulty in reconciliation, even at a
local accounts office level:
When a specific Ministry voucher is passed, the gross amount is charged against
the expense codes under that Ministry’s functional code. Any deductions or
recoveries are then charged against non-Ministry specific functional codes such
as GPF, Loans and Advances etc. The net value, being gross expenses adjusted
for deductions or recoveries is then charged to economic code 8616 – Cheques
and Bills. This is the amount that the resulting cheque will be prepared for,
which is different than the amount charged to the respective Ministry functional
code. This severely complicates any attempt to reconcile between the charge
against a specific function code and the movement in the respective Ministry
bank account.
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Baseline report on bank reconciliation
The entry against the expenditure codes can be linked directly to the respective
Ministry by means of the functional code used. The movement in cheques and
bills is indicative of outstanding cheques not yet cashed, but is a non-Ministry
specific functional code.
When the payment is reported to District Accounts Offices by means of the bank
debit scroll, the office records the transaction by the following entry:
These entries cannot be tagged to specific Ministries as they are entered under
common functional codes in the Public Account.
As neither the opening balance nor movement during the month of outstanding
cheques can be disaggregated into specific Ministries, it is not possible to
reconcile cheques cashed for individual Ministries. It should however be
possible to carry out this reconciliation if we consider total movement in all
bank accounts.
D. Departmental Ministries
When the cheque is paid and the District Accounts Office receives the debit
scroll, the DAO Officers make the following entry in the accounts:
Debit: Remittance
Credit: Cash
Debit: Remittance
Credit: Income
Upon receipt of the credit scroll, the DAO Officers will record:
Debit: Cash
Credit: Remittance
Unlike Cheques and Bills, Remittance codes are specific to the respective
Ministries. The opportunity therefore should exist to reconcile the Departmental
Ministry remittance codes. However, the following was found to be the case
when two Departmental CAOs were interviewed.
The CAO Office is carrying out no reconciliation. It was found that supporting
documentation (paid cheques and challans) supplied by the local accounting
offices through the CGA was returned as it was not considered to possible for
the CAO office to carry out the reconciliation.
Primary steps have been taken by the CAO office to reconcile the monthly
movement in Remittance. This reconciliation was undertaken on the initiative
of CAO Officers, not under Government Order.
There are prescribed orders from the CGA for CAO Offices in relation to the
reconciliation of Remittance. However, there are no instructions on procedures
to be followed or on feedback required. This lack of reconciliation of
Remittance codes is widely known and is therefore seen as a significant
weakness. Given the access to bank funds that Drawing and Disbursement
Officers currently have, it is essential that a thorough reconciliation be carried
out between the accounts submitted to the respective CAO and the actual cash
movement in the bank.
The Remittance codes are clearly vulnerable to abuse, which may facilitate
inappropriate actions or defalcation of Government money.
When the above four reasons are considered together, it is clear that reconciling
individual Ministry bank accounts is currently not achievable.
Before this would be considered appropriate, there are wider reconciliation procedures
that need to be implemented and proven to be sustainable.
Monthly reconciliation between DDOs and the local treasury accounting office is a
fundamental reconciliation that is currently not undertaken. The amounts for
expenditure made or revenue received for each Ministry are not currently reconciled, in
most cases, to the accounting records generated at DAO and UAO offices. Until this
takes place in a complete and timely manner, it is not appropriate to consider attempting
to reconcile the Ministry bank account receipts and payments for each accounting office
to the details recorded by the local banks.
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Baseline report on bank reconciliation
Step 1. Drawing and Disbursement Officers are to reconcile their accounts with the
gross and net figures appearing in the DAO 4 register and register DAO
15A. The DDO net figures can be obtained from the accumulated Bill
Extracts for the month in question.
Step 2. District and Upazilla Officers maintain a record of DDOs that have not
reconciled during the quarter. This is forwarded to the Divisional
Controller of Accounts Office.
Step 3. The DCA office will record the data on a database and forward it to the CGA
where it will be compiled and distributed to the concerned CAOs.
Step 4. Each CAO will communicate this information to the Ministry, which will have
responsibility for ensuring that any defaulting DDOs reconcile their
accounts with the local accounting offices.
The success and sustainability of this reconciliation procedure will largely determine the
feasibility for reconciling the individual bank accounts maintained for each Ministry. If
this is not found to be achievable, the current system of maintaining individual bank
accounts for each Ministry may need to be re-examined.
Assuming MoF maintain the current Ministry wise focus and determine that the
reconciliation of each individual Ministry is required, incorporating Ministry, CGA and
Bangladesh Bank data, some changes will be required. These are briefly outlined
below:
65
Baseline report on bank reconciliation
on even the basic reconciliation of total cash inflow and outflow currently
achieved at accounting offices.
Only after these have been successful introduced is it possible to move towards a more
detailed reconciliation to accounting records. Two proposals for doing so are detailed
below:
The current system of accounting for the expenditure of each Ministry through
the use of the DAO 4 register should be amended only slightly. When preparing
the monthly payment schedules each month, a manual record should be taken of
the total monthly non-cash deductions, recoveries and book adjustments
recorded under each function code. The total gross expenditure is then to be
amended to incorporate this figure and the resulting net expenditure agreed with
the respective DDO. This agreed figure would then be recorded manually as the
value of cheques issued for each Ministry.
The current economic code for remittance should be separated into two
distinguishable codes, one solely for Departmental Cheques and the other for
66
Baseline report on bank reconciliation
Departmental Receipts. This measure will remove a great deal of confusion that
currently surrounds the remittance balances and will enable these codes to be
more easily reconciled.
When all of these issues have been successfully addressed, only then can the
proposed reconciliation between DDOs and local accounting offices be
expanded. When the gross, net and outstanding cheques information, gained
manually, is fed through to the concerned CAO office, the CAO will be in a
position to reconcile these figures with the Ministry or Division internal data
flow from DDOs. Thereafter, this information should be directly compared and
reconciled to the individual bank accounts operated at each bank branch.
Differences identified should be investigated and amended.
The figures that could be agreed for each Ministry or Division at either a local or
national level would be:
This proposal would be the least disruptive way to achieve this reconciliation
within the CGA office. However, it is based on the manual recording and
communication of information for deductions, outstanding cheques etc and is
therefore prone to errors. It would be confusing for accounting staff to operate
and the information provided may not carry the confidence of the users of the
accounts. Furthermore, it depends on a concerted and co-ordinated effort from
all personnel involved and may therefore not be the ideal approach to be taken at
this time.
If the MoF and CGA are prepared to develop the manual idea in 9.2.1 above further,
this may lead to a more realistic and sustainable way forward. Where the current chart
of accounts is unable to provide the information required and the bank accounts
maintained do not lend themselves to reconciling all transactions on a Ministry or
Division basis, it is appropriate to consider amendments that enable the CDPU data held
to be directly reconciled against the bank statements.
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Baseline report on bank reconciliation
It is found that further benefits would be available if all transactions, including all
Public Account transactions were to be functionalised to the relevant Ministry or
Division. This would mean that all deductions and recoveries and Bangladesh Bank
deposit transactions and balances could be directly allocated to the concerned Ministry
or Division by means of the data held in the CDPU. These transactions are effectively
‘lost’ under the current system of generic functional coding. The responsibility for each
function will remain unchanged, however, the accounting information available will be
more detailed and valuable.
In line with this measure, the bank accounts held with Bangladesh Bank could be
restructured to ensure that all transactions could be allocated to specific Ministries or
Divisions, rather than separating the cash movements between Ministry or Division
specific and generic accounts. If this were to take place, the reconciliation of individual
bank account movements with the CGA data for each office would be attainable.
The use of register DAO 4 means that the current accounting procedures allocate the
gross expenditure for a transaction to the Ministry or Division concerned. This function
code is entered at the top of the register. The fields used to record gross on the register
DAO 4 are filled below.
Total
Net Total
Token Name Gross deductions
Date of payment/
No & of Admissible claims with economic codes payments Deductions/recoveries with economic codes and
payment cheque Cr.
date Payee Dr. Recoverie
s
4501Pay of Officer
4601Pay of Estt
4705.House rent
8101GPF
8241B.F
3901HB advance
Interest on loan
VAT
8246G.I.
4717Medical
6821Furniture
A B
D
C
(B+C)
(A—B)
8616
Monthly total
Previous month
Progressive
However, when non-cash deductions are made, these are recorded under separate
columns, the totals of which are coded to a single function code that is different than
that of the gross expenditure, as filled below.
Total
Net Total
Token Name Gross deductions
Date of payment/
No & of Admissible claims with economic codes payments Deductions/recoveries with economic codes and
payment cheque Cr.
date Payee Dr. Recoverie
s
4501Pay of Officer
4601Pay of Estt
4705.House rent
8101GPF
8241B.F
3901HB advance
Interest on loan
VAT
8246G.I.
4717Medical
6821Furniture
A B
D
C
(B+C)
(A—B)
8616
Monthly total
Previous month
Progressive
68
Baseline report on bank reconciliation
If all non-cash deductions or recoveries were simply coded to the same function code as
the original transaction, this would provide a traceable Ministry or Division wise
connection between the gross expenditure, deductions or recoveries and net cheques
issued. This will simplify the work carried out at month end as the office will no longer
be required to separate the deductions into distinct function codes, but can instead
simply complete the month-end schedules directly from the DAO 4 register.
In turn, it should be possible for the local treasury accounting office to agree with the
concerned DDO, by means of DAO 4, the gross and net expenditure for the month. The
resulting figure will represent the amount of cheques issued during the month for the
concerned Ministry or Division, as indicated by the newly functionalised cheques and
bills code.
Confusion may arise when it is considered that currently, the same economic codes are
used for cash and non-cash transactions such as GPF or Income Tax, where there are
deductions at source and cash lodgements. To resolve this issue, offices could be
instructed that any non-cash deductions are to be coded in line with the functional code
of the original transaction, i.e. the function code at the top of the DAO 4 register.
However, cash lodgements should be coded to the Ministry or Division that is
responsible for the operation of that particular role and lodged into that office’s bank
account, i.e. to IRD for income tax lodgements.
a. Where a Ministry of Health employee submits a pay bill where there is a non-
cash deduction made for GPF.
In this case, the local treasury accounting office should complete the DAO 4 register
and code both the gross pay and deduction to the function code of the Ministry of
Health. When the cheque is cashed through the local bank, this should be allocated to
the bank account of the Ministry of Health.
b. Where a Ministry of Health employee lodges cash into the bank to supplement
their GPF balance.
In this case, the bank should initially allocate the lodgement to the bank account of the
C&AG. When the local treasury accounting office receives bank debit scroll, they
should code the lodgement under the function code of the C&AG, as this office is
responsible for the overall operation of the GPF.
Accounting on a daily basis must be enforced, with the individual bank account
movements recorded on a re-designed DAO 1 register and reconciled with the
supporting documentation provided by the bank. It is at this stage that the accounting
69
Baseline report on bank reconciliation
officers must ensure that the supporting documentation allocated by the bank against a
specific Ministry or Division account does relate to the Ministry or Division stated and
that any errors identified be amended by the bank immediately.
At month end, the office should reconcile the monthly bank statement against the totals
recorded on the DAO 1 registers maintained for each Ministry or Division. This should
ensure that the individual movements reported for each bank account are accurately
reported on the monthly statement.
A separate monthly account should be prepared for each Ministry and Division,
accompanied by a legal code summary sheet which should be supported by the
appropriate schedules for Consolidated Fund and Public Account receipts and payments
and may be reconciled with the appropriate bank account movement stated on the
monthly bank statement
The end result of these measures should be that the following reconciliation is
achievable, directly from the accounts data, for all Ministries and Divisions at both a
local and national level.
The measures highlighted above show that it is a realistic aim of the CGA to tie together
the Ministry and Division accounts, CGA accounts and Bangladesh Bank statements.
This will not be achieved instantly, but should in time clearly demonstrate that the
accounts produced by the CGA may be relied on with more confidence than has
previously been the case.
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Baseline report on bank reconciliation
10 Future Developments
The systems and procedures found throughout Government and private enterprise in
Bangladesh have been developing and changing at a dramatic pace over recent years.
This trend will inevitably continue with a resulting impact on the bank reconciliation
processes within the CGA office. The following issues may be seen at this time to be
the most influential in this regard and to this end a brief description and impact
assessment of each follows:
The World Bank has approved a significant project entitled the Central Bank
Strengthening Project. A World Bank press release on June 19th 2003 stated that,
“ US$ 37 million was approved for a Central Bank Strengthening Project which will
help the Bangladesh Bank more effectively perform its essential role of regulator and
supervisor for the country’s banks, as well as the conduct of Bangladesh’s monetary
policy.
Recognizing the need to help stem the continuing and significant problem of poor
governance, which is perpetuating a “default culture” within Bangladesh’s banking
system, the Government requested the World Bank to assist in the reform and
restructuring of Bangladesh Bank.
Bangladesh Bank worked closely with the World Bank on design and will also
implement the project which will focus on its functional reorganization, automation and
modernization. It will undertake human resource development, strengthening of the
legal framework, and building capacity for more effective regulation, supervision and
research. It is envisaged that, at the end of the project period, a strong and modern
Bangladesh Bank would not only be able to monitor and supervise all financial
institutions more effectively, but would also lead the design and implementation of a
medium to long-term reform program for achieving a sound and efficient financial
system in Bangladesh. The total project cost is US$ 46.13 million of which IDA will
provide US$37 million and the Government will provide US$9.13 million.”
The impact of this project for CGA bank reconciliation is not seen as significant. The
recording of accurate and timely financing information may improve, however as stated
previously, the information required by Government is currently available, although not
actively sought after by Government.
The computerisation of the main Bangladesh Bank branches will also have a limited
impact on the current processes. Bangladesh Bank, like Sonali Bank currently prepares
a separate credit scroll for all NBR receipt challans and prepares an electronic listing of
cashed cheques information for the CRU. Although the speed of information provision
may improve as a result of this project, it is unlikely to lead to any dramatic change of
proposed reconciliation processes.
The most significant improvement expected at the end of this project from the
Governments reconciliation perspective is the move away from manual record keeping
at Bangladesh Bank to a fully computerised one. This should improve the quality of
information provided to the CGA office, but any controls introduced by CGA under the
current manual system will still be required in future.
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Baseline report on bank reconciliation
Where there are computerised and non-computerised Sonali Bank branches serving a
District Accounts Office, the incomplete information provided will be of little use in
any reconciliation processes. Furthermore, it is unclear whether the realistic aim of
Sonali Bank in the short term is that detailed or only consolidated Government Account
wise receipt and payment data from each District will be sent to the Head Office. The
desired detailed information offering the opportunity to reconcile actual cheques cashed,
as is the case in Dhaka, or challans received is therefore not seen as a possibility in the
near future.
As with Bangladesh Bank, there may be useful developments resulting from this
initiative in coming years and as such, the CGA office should regularly discuss the
developments and opportunities with each bank.
There is currently a project in the Large Taxpayer Unit (LTU) of NBR funded by the
Department for International Development (DfID). The aim of this project is to pilot an
improved and computerised income tax collection, monitoring and reconciliation unit.
There have been several attempts previously to computerise the assessment and receipts
of income tax and these have, to date, proved difficult to implement successfully. It is
the considered opinion of this report that the CGA office should not consider amending
any reconciliation procedures in anticipation of developments arising out of this project.
This does not in any way assume that the pilot will not be successful, but is a realistic
assessment of the time and resources required to ensure confidence in the figures
produced over coming years and that the LTU accounts for approximately 1/3 of
income tax not collected at source.
There appear to be no other plans to further computerise any other areas of NBR
operations in the short term. This means that while CGA may be able to exert some
influence in implementing some improvements and expansion of the current Zone 1
data collection systems, there is likely to be little significant impact on bank
reconciliation arising from new developments in NBR in the coming years. As stated
previously, there are currently significant opportunities for reconciliation through the
customs projects within NBR that should be utilised by the CGA office immediately.
The CGA office should closely monitor and discuss any future developments in NBR to
identify possibilities presented for improved reconciliation.
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Baseline report on bank reconciliation
The piloting, implementation and roll out of Transaction Accounting through local
accounting offices should dramatically improve the quality and detail of information
relating to bank movement for each individual office where the system is introduced.
This will in turn lead to major improvements in the quality of bank reconciliation that
may be carried out, including the possibility of system operated bank reconciliation at a
local level.
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Baseline report on bank reconciliation
11 Recommendations
The following recommendations have been considered with both a short and medium-term
perspective. These should be considered by key stakeholders and agreement reached as to the
most appropriate recommendations to be adopted. Recommendations will be followed up in
future years of FMRP to assess progress and review outcomes.
1. The MoF and CGA offices should ensure that all documents received from Bangladesh
Bank clearly explain the information actually contained within them. The title of ‘Bank
Statement’ or ‘Bank Balance’ must be prudently restricted to those documents that
represent actual cash balances on a stated date.
2. The CGA office should establish a high level working group incorporating MoF and
CGA Officers on the Government side and Bangladesh Bank and Sonali Bank
representatives. This working group must establish the information requirements of
Government and detail the status and suitability of all information currently provided.
4. An independent Banking Unit should be established within the CGA and should be
totally outside of the control of the CDPU. This unit should establish a communication
channel with the Government Accounts Department at Bangladesh Bank. All daily
information received from GAD relating to financial data not reported through UAO,
DAO or DCA offices, except that relating to Treasury Bills and Ways & Means should
be recorded in a register and distributed to the concerned CAOs. Information relating to
the movement in Treasury Bills and Ways & Means Advances should be recorded
directly by the Banking Unit.
5. The Banking Unit should reconcile its monthly figures with Bangladesh Bank and ensure
that these are accurately entered onto the CDPU system within a few days of month end.
6. The CRU should be upgraded to become a fully independent Central Reconciliation Unit,
not limited to the current CRU operations. This unit must be given sufficient resources,
authority and support from the CGA to enable it to carry out all central reconciliation
procedures required. The Central Reconciliation Unit Officers should be trained in the
specific reconciliation procedures required and given general accountancy training to
enable them to fully understand the importance, consequence and general principles of
bank reconciliation.
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Baseline report on bank reconciliation
7. A sustainable and comprehensive reconciliation should be carried out by the CRU for
total monthly cash movement at each of the 469 treasury accounting offices and direct
transactions from GAD. The same reconciliation spreadsheet, which was used for
previous attempts, should be slightly amended to clearly show the cash movement as per
the actual bank statement as a separate figure that may be compared on the spreadsheet to
the calculated movement. The following table provides a simple format for the required
calculation. The reconciliation of differences relating to individual accounting offices
should only proceed once:
a) The total net cash movement as per Bangladesh Bank calculated on the
spreadsheet equals that taken from the bank statement.
b) The total net cash movement as per CGA calculated on the spreadsheet
equals that taken from the table below.
c) The total difference in net movement between CGA data and Bangladesh
Bank data calculated on the reconciliation spreadsheet (currently titled as
‘Difference of cash balance in current month’) equals the difference
calculated in the table.
FMRP should assist in this reconciliation by providing guidance and training to the
officers responsible.
8. The CGA should sign all monthly accounts prepared only upon the accurate completion
of a genuine bank reconciliation. This would ensure that all CGA employees saw the
bank reconciliation as a fundamental control mechanism and this would greatly improve
the prospects for future reconciliations.
9. The CGA office should carry out a full investigation into the Railways accounts
preparation and bank reconciliation procedures. Action must be taken on the findings of
this investigation.
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Baseline report on bank reconciliation
10. The CRU should be adequately supported by the CGA in carrying out the current
operation of CAO outstanding cheques reconciliation. CAOs must be compelled by the
CGA to co-operate with amending mismatches identified in the monthly reports and with
complying with the procedural requirements of balancing outstanding cheques and
Cheques and Bills as per the monthly accounts.
11. The duties and responsibilities of the Central Data Processing Unit should be strictly
confined to the consolidation of monthly data. Other than to correct data input errors,
this unit should not make any amendments to data or journal entries into the accounts
without the authorisation of a senior officer responsible for the affected source data. Any
journals entered centrally must be recorded on the prescribed journal forms and
maintained for inspection at a later date.
12. The CGA office should contact both Bangladesh Bank and Sonali Bank to ensure that all
bank branches reporting to local accounting offices do so within the required time and to
the required standard. This means that daily scrolls are received on a daily basis, with
sufficient time to prepare quality monthly accounts and that supporting documentation is
accurately recorded and provided in the optimal order to assist the local accounting office
to fulfil its reconciliation obligations. This should be monitored by accounting offices
and persistently late submissions escalated through the CGA hierarchy.
13. When there is confidence in the total cash and financing information entering the
Governments accounts by accurate reconciliation of monthly movements, the actual
balances for cash held and Treasury Bills and Ways & Means outstanding claims should
be calculated. The differences between stated balances in the accounts and actual
balances should be written off, either directly to the Consolidated Fund, or in the short-
term to suspense in the Governments Accounts, awaiting a possible retrospective
reconciliation. The CGA office should be given a definite time period of one year after
the creation of this suspense account balance to carry out the retrospective reconciliation
and agree changes with Bangladesh Bank. Any remaining balance at the end of this
period must then be authorised appropriately and written of to the Consolidated Fund.
While this measure may not be seen as optimal, it is the necessary course of action to
ensure that accounts presented by government are seen to provide quality information in
the coming months and years. Once this recommendation is acted upon, it is essential
that CGA ensure 100% monthly reconciliation for cash and financing movements.
14. As a short-term measure, pending a final decision from the Ministry of Finance on its
future, DAO Dhaka should be instructed and trained to carry out sample inspections on
the daily bank scrolls and supporting documentation received from Bangladesh Bank.
This limited control measure should examine the cash movement against challans
received and sample checks of the accuracy of Bangladesh Bank coding should be carried
out. Bangladesh Bank should be officially informed of all errors identified and
amendments made to the bank statements.
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Baseline report on bank reconciliation
15. A study should be carried out to ascertain whether DAO Dhaka and the NBR could, on a
sustainable basis, compare the cash receipt figures reported on the computer generated
credit scrolls that accompany the NBR challans taken to Zone 1 with the relevant figures
reported in the accounts by DAO Dhaka. Any differences identified may then be
reconciled and agreed by both parties. If successful, the total cash generated figures
reported by NBR through the Register 5s of each circle may be able to be reconciled with
the CGA accounts data.
16. All Government agencies interacting with members of the public or banks for receipts or
payments should provide the accurate 13-digit code and relevant bank account number
for any receipts or payments to be made.
17. The CGA office should instruct Bangladesh Bank to provide the monthly cash flow
statement in a layout that is more tailored to the needs of the CGA office.
As may be seen below, the figures appearing in each of these proposed statements may
be directly compared to the information in the other statements. In this way, any errors in
reporting by Bangladesh Bank will be immediately identified by the CGA office and
amendments ordered.
If these statements are provided to the CGA office, it should dramatically improve the
ability of the CGA office to carry out bank accurate and reliable reconciliation
procedures.
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Baseline report on bank reconciliation
This new information provided to the CGA should include the following four statements:
i. Total Opening Balance, Receipts, Payments, Net Movement and Closing Balance of the
Government. This summary cover page should provide succinct and easily
understandable information for all users of the actual movements and resultant balances
during the month in question.
Opening Balance A
Net Movement E
Closing Balance F
ii. Total Opening Balance, Receipts, Payments, Net Movement and Closing Balance for
each of the 78 accounts.
Bangladesh Sonali
Opening GAD Net Closing
Account Bank Net Bank Net
Balance Movement Balance
Movement Movement
100 – General
xxxx
xxxx
xxxx
Total A B C D F
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Baseline report on bank reconciliation
iii. Receipts, Payments and Net Movement for each bank branch reporting to local
accounting offices
iv. Receipts, Payments and Net Movement for each bank branch, detailed by individual bank
account.
Net Movement
Bank Account Total Receipt Total Payment
for Month
100 – General
xxxx
xxxx
xxxx
Total G1 G2 G3
The detailed account wise information for each local accounting office should be made
available in an electronic format to assist the CGA in its reconciliation process.
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Baseline report on bank reconciliation
18. A comprehensive bridge table should be prepared and distributed detailing the correct
bank account in which to post each type of revenue or expenditure. This should be
distributed to all bank branches, Government agencies and local accounting offices. If all
banks are instructed to consult the bridge table to confirm the appropriateness of coding
and bank account for all receipts and payments processed, this should greatly improve the
accuracy of bank coding and reporting. This recommendation will not only improve
reporting in the short-term, but should be considered in the light of the long-term
recommendations made and the inevitable consequence that this improvement will have
on the success of future bank reconciliation developments.
19. All bank personnel should be thoroughly trained, not only in the correct use of the bridge
table, but in any other issues identified in the operation of the Government account.
20. Each local accounting office should be instructed to compare the individual account wise
movements reported on the daily bank statement to the accounts information produced.
Where differences are observed, any errors made by either the local bank or the
accounting office are to be identified and reconciled between the Bank Manager and
Accounts Officers and relevant amendments made. The cumulative total of daily figures
should be reconciled against the individual movements identified on the monthly bank
statement. Recommendations made in this report for the longer-term will greatly
simplify this reconciliation and prove the long-term benefits of this detailed daily
reconciliation.
21. A database should be designed and implemented at all Divisional Controller of Accounts
offices. The receipts and payments for each individual bank account of each reporting
office, as stated on the monthly bank statement, should be entered and this data may later
be utilised by the CRU. If Bangladesh Bank provide the above statement showing
detailed account wise information for each local accounting office in an electronic
format, the computer may then identify discrepancies in reporting of individual bank
accounts by Bangladesh Bank. This database will also provide a valuable data source for
the DCA, CGA or concerned CAO to monitor and investigate unusual movements in
individual bank accounts.
22. The MoF should ensure that all Drawing and Disbursement Officers comply with the
currently prescribed requirement to reconcile data with the concerned District or Upazilla
office. The degree of compliance should be monitored by the CGA office (and DCA
office) and corrective action taken where required.
23. All departmental CAOs should be given responsibility for, and assistance in reconciling
the movement in Public Account codes for their respective Ministry. This should reduce
the detrimental impact of codes that are viewed by many as ‘black holes’ in the accounts.
In the absence of any detailed bank reconciliation procedures, these uncontrolled
balances are a serious concern for the Government. The degree of compliance with this
recommendation should be monitored by the CGA office.
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Baseline report on bank reconciliation
24. Remittance codes should be replaced with individual codes for Departmental Cheques,
Departmental Receipts and if required, other specific codes. This will provide clarity as
to the items that should be coded and provide the opportunity to more easily reconcile the
balances each month.
25. A computerised reconciliation program based on the current CRU cheque reconciliation
system should be implemented at all Departmental CAO offices to reconcile outstanding
departmental cheques.
26. Training needs at Accounting Offices and centrally within the CGA office need to be
continually assessed and subsequent training in bank reconciliation at both a local and
national level provided.
27. Responsibility for accounting, monitoring and reconciling Foreign Aid projects should be
clearly placed on Chief Accounts Officers.
28. The detailed instructions to be contained in the final CAO Accounts Procedures Manual
should be discussed, agreed by key stakeholders and implemented as soon as possible.
This should ensure that all CAO personnel are fully aware of and trained in the correct
and required accounting procedures for Foreign Aid projects. Reconciliation of Foreign
Aid cash balances are an integral part of this process.
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Baseline report on bank reconciliation
1. The individual bank accounts maintained at Bangladesh Bank and Sonali Bank should be
brought in line with the Governments long-term aim of decentralisation along a Line
Ministries axis. It is therefore recommended that:
Each Ministry and Division should maintain one bank account, with sub-accounts if
required, feeding into the total balance of the main account. The individual
Ministry and Division bank accounts should be numbered in line with the current
Government coding structure to assist in the accurate allocation of cash. The first
two digits of the account number should be the 2-digit ministry or division code,
with any sub-accounts required taking the final digit i.e. Ministry of Commerce is
Ministry code 17. The main bank account should therefore be 170, with sub-
accounts, if required, being accounts 171, 172 etc.
In addition to these 52 main Ministry and Division accounts, there should be one
account maintained solely for Governments Floating Debt. This account should
record the daily movements in outstanding claims against the Government as a
result of Treasury Bills and Ways & Means adjustments.
The final account recommended should enable the annual transfer of all Ministry
balances at year-end into one single balance brought forward representing
cumulative cash surplus or cash deficit resulting from all non-floating debt
Government transactions. This will act in the same way as the current account
number ‘100 – General’ was initially designed. The only other balance that should
roll forward into the following year should be the Government Floating Debt
account. The balance reported in this account should be regularly reconciled to
ensure that it accurately reflects the outstanding claims against the Government that
generated the balance. Ideally, both of these accounts rolled forward should offset
each other, with only a minimal credit balance remaining on the account. Any
excess financing should then be easily identifiable from the year-end bank
statement.
2. It is recommended that all transactions, for both Consolidated Fund and Public Account
should be directly attributable to a specific Ministry or Division. Ministry and Division
wise function codes should therefore be implemented for all deductions at source,
cheques and bills balances and any other balances currently coded under generic codes.
(A detailed examination of the issues addressed is available in chapter 9, Ministry Wise
Bank Accounts.)
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Baseline report on bank reconciliation
All DDOs should prepare accounts using the DAO 4 register format to allow an effective
reconciliation between Ministry or Division data at a local level, with the respective
District or Upazilla office.
Where non-cash deductions at source or recoveries are recorded for a particular Ministry
or Division on register DAO 4, these should simply be coded using the same Ministry or
Division function code as the gross expenditure or receipt. However, where a cash
lodgement or payment is made for an economic code relating to deductions or recoveries,
these should be coded to the function code relating to the Ministry responsible for the
overall operation of that code.
Accounting at local accounting offices should be carried out on a Ministry and Division
wise basis. Separate registers should be maintained for each Ministry and Division and
monthly accounts should be prepared on this basis. A separate legal code summary sheet
for each Ministry or Division should be supported by the appropriate schedules for
Consolidated Fund and Public Account receipts and payments and may be reconciled
with the appropriate bank account movement stated on the monthly bank statement. One
total legal code summary sheet should also be prepared which may reconciled with the
total movement on the monthly bank statement.
Cash outflow under economic code 8901 and inflow under economic code 9901 may now
be reconciled for each Ministry and Division with the movement recorded on the bank
statement at both a local and national level. Discrepancies could be immediately
identified and traced to the concerned accounting office by means of the detailed
information held under short-term recommendations 16 & 19.
Accounting on a daily basis must be enforced, with the individual bank account
movements recorded on a re-designed DAO 1 register and reconciled with the supporting
documentation provided by the bank. It is at this stage that the accounting officers must
ensure that the supporting documentation allocated by the bank against a specific
Ministry or Division does relate to the Ministry or Division stated and that any errors
identified be amended by the bank immediately. If these entries are assessed and
recorded on a daily basis, the individual bank account movements reported on the
monthly bank statement may be directly compared to the totals recorded on the DAO 1
Register.
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Baseline report on bank reconciliation
The end result of these measures should be that the following reconciliation is
achievable, directly from the accounts data, for all Ministries and Divisions at both a
local and national level and for government as a whole.
If these changes are agreed, piloted and successfully introduced, this should allow a much
more robust comparison of CGA data with that of each individual Ministry and Division,
where the CGA data will be considered significantly more reliable than previously
thought. Although this will necessarily require some changes to the working practices at
local accounting offices, it will produce benefits that far outweigh the extra efforts
required.
5. A unit within CGA should establish procedures to monitor that all Foreign Aid projects
are accurately accounted for, that all required reconciliations are carried out and that all
supporting documentation required by CAOs is provided. Figures generated by this unit
should be reconciled with the relevant data held by the Economic Relations Department
(ERD).
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Baseline report on bank reconciliation
Annex A
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Annex B
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Baseline report on bank reconciliation
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Baseline report on bank reconciliation
Annex C
FOREIGN AID
Background
These foreign aid grants and loans are provided by development partner organisations
that share the common objective of global prosperity.
Development projects that are funded by domestic resources all pass through the normal
pre-audit system. The project costs are therefore recorded in the accounting records of
the local accounting office concerned and thereby enter the information stream of the
Government accounts.
However, only a limited number of foreign aid projects are recorded in this way. For
other projects, the expenditure will remain outside of the Governments accounts, unless
the Project Director specifically informs the CAO about project expenditure.
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Baseline report on bank reconciliation
There are three main categories of Foreign Aid that fall under the general terms of either
Grants or Loans:
A. Food Aid
B. Commodity Aid
C. Project Aid
Food Aid
Food aid is principally provided in the form of grants, however it may also be a loan. It
provides food under programmes such as “Food for Works”, “Food for Education”,
“Test Relief” and “Vulnerable Group Development”, “Vulnerable Group Feeding” etc.
The office of the Director General of Food initially receives the food donated. With the
exception of “Test Relief”, donated food is sold in either:
The funds generated from the sale are then utilised to meet the costs of projects as
agreed with the development partners.
Various Chief Accounts Offices are directly involved in accounting for Food Aid.
CAO Food
CAO Relief
Other offices such as CAO Local Government & Rural Development
CAO Food
A. Receipt of Food
Upon receipt of the donated food, the Ministry of Food issues an adjustment order in
favour of CAO Food. The order is for the value of the food donated. The Ministry of
Food orders that the adjustment is carried out as follows:
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Baseline report on bank reconciliation
B. Sale of Food
When donated food is sold, the cash is deposited into the bank. Upon receipt of the
credit memo from the bank, the District and Upazilla accounts offices make the
following accounting adjustment:
Debit: Cash
Credit: 1-4823-0020-(3001-3007)
C. Relief Ministry
When the Relief Officer takes delivery of the food from the food stores of the Food
Department, The Food department should inform the District and Upazilla accounts
offices which will then make the following accounting adjustment:
D. Subsidy
The subsidiary is calculated as the difference between the imported value, inclusive of
the distribution costs and the issue price. Based on actual distribution of food grain at
subsidised rates, the subsidy is calculated by the Ministry of Food. CAO Food should
ensure that the Government Order in this respect is issued by the Finance Division
before the June closing.
When the Ministry of Finance issues a Government Order in favour of CAO Food for
the subsidy to the Ministry of Food, the CAO Food will request the CGA office to send
an advice to Bangladesh Bank. Bangladesh Bank then sends a debit and credit memo to
the CGA office, where the following accounting adjustment is made:
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Baseline report on bank reconciliation
When the invested amount is returned from American Express Bank, Bangladesh Bank
will send a credit memo to the CGA office, where the following accounting adjustment
will be made:
Debit: Cash
Credit: 6-1051-0000-8460 Short-term investment Amex
* Note: A new Economic Code is to be opened for Short-term investment Amex under
the Public Account of the Republic to accommodate this entry.
CAO Relief
As stated above, when Relief Officers take delivery of food from the stores of the Food
Department, this is accounted for by the local District or Upazilla accounts offices. It
will therefore be seen that the CAO Relief has no accounting function in relation to Test
Relief, but should monitor the progress of expenditure in relation to release orders
issued to unit offices.
Other Ministries
Other Ministries, such as Local Government & Rural Development execute many
projects that are funded through the proceeds of the sale of donated food. The sale
proceeds form part of the general cash balance of Government. Therefore, funds
utilised by these Ministries will be accounted or by the CAO, DAO or UAO offices in
the following manner:
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Baseline report on bank reconciliation
Food Aid
American Express
Bank – Short-term
Investment
Non-moneterised Moneterised
Test Relief Vulnerable Vulnerable Food for Food for Other Projects
Group Group Education Works as per budget
Development Feeding provisions from
food aid
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Baseline report on bank reconciliation
Commodity Aid
Commodity Aid (which also includes program credit) may also take the form of a grant
or loan. Under Commodity Aid, the development partners provide a certain commodity
to be imported by public or private bodies. The importer then deposits the value of the
commodity in taka into Bangladesh Bank. A portion of this is then referred to as a
counterpart fund. This fund is generally utilised for executing specific development
projects.
Bangladesh Bank sends a credit memo in relation to Commodity Aid to the concerned
District Accounts Office where the accounting entries are to be made. For this reason,
Commodity Aid does not form part of the duties of the CAO office.
Project Aid
Project Aid is provided for development programmes that cover a wide range of areas.
As above, Project Aid may be in the form of a loan or grant.
These RPA projects are directly channelled through local accounting offices by means
of the normal pre-audit procedures. This means that the Project Director submits bills
to the local CAO, DAO or UAO office. The accounts officers will then examine that
there is a budget provision for the expenditure and authority from the concerned CAO
before the bills will be passed for payment. The local accounting office will therefore
record the expenditure and so incorporate the project in the overall Government
Accounts.
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Baseline report on bank reconciliation
There are four types of account operated under Pre-financed Project Aid:
This account has been operated through Bangladesh Bank since 1985. To operate the
account the development partner deposits an initial advance. Subsequent deposits are
made on the basis of claims for replenishment by the Project Directors. The amounts
deposited by the development partner are credited to the SAFE account and the Project
Director opens an account for the project in a commercial bank. The Ministry of
Finance issues an authorisation letter to Bangladesh Bank based on the budget provision
for the relevant project. This letter instructs Bangladesh Bank to transfer the
appropriate amount into the project’s bank account. Bangladesh Bank sends debit and
credit memos to the office of the CGA to allow these transactions to be incorporated
into the government accounts.
As per Government Order MF/DD/Dev Wing16/93/234 dated 5th August 1993, the
Bangladesh Bank is to send a monthly report concerning the SAFE account to the
concerned CAO and Project Director. The Project Director is then to send the Account
Statement of Project’s Special Account, as attached, to the concerned Chief Accounts
Office to incorporate the expenditure into the government accounts. The CAO office
should reconcile the two statements and ensure that the expenditure entering the
accounts matches the banks figures.
The specific accounting adjustment entry to be made by the CAO upon receipt of the
Statement of Expenditure is as follows:
Dr 5-xxxx-xxxx-xxxx Cr 6-1051-0000-8746
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Baseline report on bank reconciliation
Developmen
t Partner
Organisation
CGA CGA
Cash Development Partner
Statement of
Expenditure CGA CGA
issued to allow Cash Foreign Aid Suspense
replenishment Debit Credit Debit Credit
Money transferred
to commercial STEP 2
STEP 3a bank account XXX XXX
CAO CAO
Foreign Aid Suspense Expenditure
Account Statement
Debit Credit Debit Credit
of Project’s Special
STEP 3b
Account received by
CAO XXX XXX
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Baseline report on bank reconciliation
Finance Division issues a letter of authorisation to the bank showing the budget
allocation against the project and the Project Director can then incur expenditure. A
Statement of Expenditure is sent to the IDA for subsequent replenishment of the
account.
The specific accounting adjustment entry to be made by the CAO upon receipt of the
Account Statement of Project’s Special Account is as follows:
Dr 5-xxxx-xxxx-xxxx Cr 1-1321-xxxx-xxxx
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Baseline report on bank reconciliation
International
Development
Association
(IDA)
CAO CAO
Development Partner Expenditure
Account Statement of Debit Credit Debit Credit
Project’s Special STEP 1
Account received by
CAO
XXX XXX
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Baseline report on bank reconciliation
The specific accounting adjustment entry to be made by the CAO upon receipt of the
Account Statement of Project’s Special Account is as follows:
Dr 5-xxxx-xxxx-xxxx Cr 1-1321-xxxx-xxxx
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Baseline report on bank reconciliation
International
Development
Association
(IDA)
CAO CAO
Development Partner Expenditure
Account Statement of Debit Credit Debit Credit
Project’s Special STEP 1
Account received by
CAO
XXX XXX
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Baseline report on bank reconciliation
D. Imprest Account
To facilitate the receipt of Asian Development Bank (ADB) aided projects, the
Government of Bangladesh opens imprest accounts with commercial banks. The
Executing Agencies submit a Withdrawal Application and Estimate of Expenditure
Sheet for the initial advance to the ADB. At the beginning of each financial year, the
Ministry of Finance issues an advice to the commercial bank to inform them of the
Annual Development Program allocation for the project with the imprest account. This
will authorise the release of funds from the imprest account to the Executing Agency. It
is the responsibility of the Executing Agency to ensure that they do not apply to the
ADB for withdrawals that exceed the current years ADP allocation.
The Executing Agency can make all local payments and foreign exchange payments
directly up to a limit of US$ 50,000 equivalent per payment without going through
commitment letter procedures. The Executing Agency will submit a withdrawal
application along with a bank statement for the imprest account on a monthly basis to
the ADB to facilitate replenishment of the account.
The specific accounting adjustment entry to be made by the CAO upon receipt of the
Account Statement of Project’s Special Account is as follows:
Dr 5-xxxx-xxxx-xxxx Cr 1-1321-xxxx-xxxx
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Asian
Development
Bank (ADB)
CAO CAO
Development Partner Expenditure
Account Statement of Debit Credit Debit Credit
Project’s Special STEP 1
Account received by
CAO
XXX XXX
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Baseline report on bank reconciliation
Direct Project Aid is supplied is such a manner that the development partner has direct
control over expenditure. This may be incurred either outside or outside Bangladesh.
Previously therefore, the transactions were very rarely incorporated into the
Government Accounts, as the source data was not directly available to the concerned
Chief Accounts Offices. However, as per Order of the CGA, CGA/Accounts
Compilation Section/18(2nd Part/1/51) dated 2nd July 2003 the Project Director to send
the Statement of Direct Project Aid to the concerned Chief Accounts Office to
incorporate the expenditure into the government accounts. This places the
responsibility for gathering the relevant information onto the Project Director. The
CAO offices should therefore request the Project Director to supply this information on
a monthly basis, in line with RPA accounting procedures.
The specific accounting adjustment entry to be made by the CAO upon receipt of the
Statement of Direct Aid Project is as follows:
Dr 5-xxxx-xxxx-xxxx Cr 1-1321-xxxx-xxxx
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Baseline report on bank reconciliation
GRANT LOAN
THROUGH
THROUGH GOVERNMENT
PRE-FINANCED PROJECT
GOVERNMENT OF OF
AID - PPA
BANGLADESH BANGLADESH
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Baseline report on bank reconciliation
The first duty of the CAO office is to consult the Budget to identify the number of
projects that relate to the particular Ministry or Division. This information is then to be
recorded and prepared in the following manner:
Ste Procedure
p
Identify all projects relating to the concerned Ministry or Division under
1.
Development Projects in the Budget
Enter all of the project codes into the “Log Sheet of Adjustments of PPA and
2. DPA in the Monthly Accounts”. These project codes are to be found in the
Budget.
Identify the Project Directors for every project listed above. A close working
3.
relationship is to be established with the Project Directors.
For every project listed on the above Log Sheet, prepare an individual
4.
“Register of Adjustment of PPA and DPA in the Monthly Accounts”.
The following information is to be obtained from every Project Director and
5. entered onto the individual Registers as per the attached Register: Source of
Fund, Type of Aid, Loan Agreement No., Address and Telephone No.
The following information is to be obtained from the Budget and entered onto
6. every individual Register as per the attached Register: Project Code, Name of
Project, Financial Year, Budget/Revised Budget, GoB, Foreign Aid and Total.
The Accounts officer should ensure that all relevant projects in the Budget
appear on the Log Sheet of Adjustments of PPA and DPA in the Monthly
7.
Accounts. The officer should then ensure that a completed Register of
Adjustment supports every project on the Log Sheet.
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Baseline report on bank reconciliation
The total budget for the year 2003-04 of the above project amounts to Tk 414200 (thousand) (a). Out of this, the Government of Bangladesh amount is
Tk 14200 (thousand) (b) and the Foreign Aid amount is 400000 (thousand) (c). The Foreign Aid may be broken down into Reimbursable Project Aid
(RPA) or Pre-financed Project Aid (PPA) of Tk 260000 (thousand) (d), being the figure shown in brackets, with the remaining Tk 140000 (thousand)
(c-d) being Direct Project Aid (DPA).
105
9.
8.
7.
6.
5.
4.
3.
2.
1.
10.
Sl No.
Code
Project
Date of Receipt
July
Date of Data Entry
Date of Receipt
Sept
Date of Receipt
Oct
Accounts Officer_____________________________________
Date of Receipt
Nov
Date of Receipt
106
Dec
Date of Receipt
Jan
Date of Receipt
Feb
Date of Receipt
Mar
Date of Receipt
Apr
Date of Receipt
Log sheet of Adjustments of PPA and DPA in the Monthly Accounts
May
Date of Receipt
June
Register of Adjustment of PPA and DPA in the Monthly Accounts Serial No. Of Log Sheet
Amount Adjusted
Period Budget of PPA PPA DPA Total PPA & DPA % of Adjustment Initial of Data Remarks
& DPA Entry Operator
1 2 3 4 5 6 7(3+5) 8(4+6) 9 10 11
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Baseline report on bank reconciliation
The CAO office should record all the relevant Foreign Aid information on a monthly basis and
incorporate the information into the monthly accounts in the following way:
Ste Procedure
p
The CAO should request all Project Directors to send the Account Statement of Project’s
Special Account (as per 11.2) or the Statement of Direct Project Aid (as per 11.2) to the CAO
office every month. The Accounts Officer is to enter the date that the above statements are
1.
received, on the Log sheet of Adjustments of PPA and DPA in the Monthly Accounts (as per
11.2). A nil statement is to be sent where no expenditure has been incurred in relation to PPA
or DPA during the month,
Where the CAO office has not received the Account Statement of Project’s Special Account, the
Statement of Direct Project Aid or the Nil Statement within 10 days of the end of the
2. month/quarter in question, the CAO should contact the Project Director and request the
information to be issued. The CAO should inform the Secretary of all Project Directors that
have failed to supply the required information within the above timeframe.
Where any Project Director fails to supply the information by the end of the following month,
3.
the CAO should again inform the Secretary.
The Accounts Officer is to enter the economic code level information obtained from the above
4.
statements onto the CAO 6 Register, Register of Book Adjustment for each individual project.
When the Accounts Officer has entered the information into CAO 6, the relevant Register of
Adjustment of PPA and DPA in the Monthly Accounts (as per 11.2) should be updated to
5.
incorporate the information obtained on the Account Statement of Project’s Special Account or
the Statement of Direct Project Aid.
The Accounts Officer is to record the date that CAO 6 has been updated for each project on the
6.
Log Sheet of Adjustments of PPA and DPA in the Monthly Accounts.
Where the Log Sheet of Adjustments of PPA and DPA in the Monthly Accounts shows any
project where the CAO office has received the required information but not yet entered it onto
CAO 6, the Accounts Officer should investigate whether CAO 6 has actually been updated. If
7.
CAO 6 has not been updated, this should be done. If CAO 6 had been updated, the date that the
entry was made should be entered onto the Log Sheet of Adjustments of PPA and DPA in the
Monthly Accounts
On a quarterly basis, the CAO office should send a copy of the Register of Adjustment of PPA
and DPA in the Monthly Accounts to the concerned Project Director.
The CAO should request the Project Director to agree or reconcile the information contained
on the Register of Adjustment of PPA and DPA in the Monthly Accounts with the Project
Director’s own data.
Any differences should be reconciled and amended at the CAO office by means of journals.
It is the responsibility of every Chief Accounts Officer to ensure that all Foreign Aid projects operated
under the jurisdiction of their concerned Ministry are incorporated completely and accurately in the
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Baseline report on bank reconciliation
Government Accounts. The CAO should also work closely with the concerned Project Directors to
ensure that there is no double accounting for any foreign aid receipts and expenditure.
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Baseline report on bank reconciliation
Receipt Expenditure
Bank Economic Amount Economic Description Current Financial Year
Code Code Budget Monthly Cumulative
Project Aid (Taka Portion) Expenditure
(A) Revenue Expenditure
5900 Subsidies and current transfers
6600 Block allocations
(A) Total Revenue Expenditure
(B) Capital Expenditure
6800 Acquisition of Assets
6900 Acquisition of Land
7000 Construction and Works
7100 Investment in Shares and Equity
7200 Capital Grants
7300 Lending and Advances
7900-7979 CD/VAT
7980-7998 Miscellaneous
(B) Total Capital Expenditure
Grant Total
• 4500 – 7998 Detail economic code Closing Balance Cash in hand ………………………….
to be shown Cash at Bank ………………………….
Total …………………………. Name & Seal of the officer
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Baseline report on bank reconciliation
Month……………………………..……………… Year………………..
Ministry and Implementing Agency Code No. and Name………………………………………… Code No. & Name of the Project…………………………….…………….…….
Receipt Repayment/Expenditure
Economic Description Month Cumulative Economic Description Month Cumulative
Code No. Taka Taka Code No. Taka Taka
*3700 (1) Foreign Aid-Grants (1)
*4200 (2) Foreign Aid-Loans (2)
(3)
(4)
Total:-
Total:-
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Baseline report on bank reconciliation
CAO offices are required to complete the following Foreign Aid Loan
Reconciliation Sheet on a quarterly basis for every project that is funded by
means of a loan.
This sheet is to be sent electronically to the office of the CGA within one month
of the end of the quarter.
The CGA office will then be in a position to consolidate this information and
provide a complete analysis to the Economic Relations Division (ERD) to allow
a comprehensive reconciliation to take place between the expenditure that is
being incorporated in the Government Accounts and the amount of capital
provided for each loan
Ste Procedure
p
Identify all projects that relate to the concerned CAO office that are funded by
1.
means of loan.
2. Enter the name of the CAO Office
3. Enter the quarter number, e.g. Quarter 1, Quarter 2 etc
4. Enter the financial year
Obtain the Loan Agreement Number for each and enter these numbers in the
5.
Loan Agreement column.
Total the expenditure under each project on the Foreign Aid Loan
6. Reconciliation Sheet for the three months of the quarter and enter these
amounts against the appropriate Loan Agreement Number.
Calculate the progressive total to date for the current financial year for each
7.
project and enter against the appropriate Loan Agreement Number.
Where any Project Director has not provided the complete three months data
for a relevant loan funded project, the Accounts Officer is to contact the Project
Director and request the information to be sent urgently. The Accounts Officer
8.
is also to contact the Secretary and detail the information required and the
Project Directors defaulting. An “N” should be entered in the Complete Data
Y/N column. If the three months data is provided, enter a “Y”.
Once all of the loan-funded projects have been entered on the Foreign Aid
Loan Reconciliation Sheet, the sheet is to be sent electronically to the office of
9.
the CGA. The CAO is to undertake to provide this information in a complete
manner to the CGA office within one month of the end of the quarter.
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Baseline report on bank reconciliation
CAO Office:
Quarter:
Financial Year:
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Baseline report on bank reconciliation
Annex D
CONSOLIDATED FUND
100 Bangladesh Bank General
101 Office of the President 01 0 0 0 0 1491 -1,491 1491
102 Parliament 02 19 0 19 0 18752 -18,752 18771
103 Prime Minister's Office 03 3 674 -671 0 39628 -39,628 38957
104 Cabinet Division 04 1 11 -10 0 20928 -20,928 20918
106 Election Commission 06 11 28 -17 0 3467 -3,467 3450
107 Ministry of Establishment 07 3021 4020 -999 0 134205 -134,205 133206
108 Public Service Commission 08 1052 462 590 0 2315 -2,315 2905
109 Finance Div - Except C&AG 09 1518771 1186648 332123 963,940 69909 894,031 -561908
193 Pension 0 0 326510 -326,510 326510
196 Interest on domestic debt 2841 -2841 932250 -932,250 929409
217 T.B, W&M, Dom Debt 516236 -516236 282868 -282,868 -233368
110 Comptroller & Auditor General 10 0 168 -168 0 23752 -23,752 23584
111 Internal Resources Division 11 6797942 119755 6678187 2,812 746300 -743,488 7421675
189 National Board of Revenue 0 0 0 0 0
VAT 1960059 -1960059 0 0 -1960059
Income Tax 2130541 -2130541 0 0 -2130541
Import Duty 597545 -597545 0 0 -597545
NBR- Other 2218093 -2218093 282706 -282,706 -1935387
Banking Division 0 0 0 0 0
113 ERD 13 640061 0 640061 0 3412 -3,412 643473
194 DSL- Foreign-Principal 0 0 0 0 0
195 DSL- Foreign-Interest 0 0 0 0 0
197 Foreign Aid Grants 450788 -450788 0 0 -450788
198 Foreign Aid -Grants 0 0 320280 -320,280 320280
114
Baseline report on bank reconciliation
115
Baseline report on bank reconciliation
PUBLIC ACCOUNT
C&AG 14231271 14231271 23662878 23,662,878 -9431607
Less : Adjustment Bangladesh Bank deposit -12963671 -12963671 -13613928 -13,613,928 650257
213 GPF 2814 -2814 89183 -89,183 86369
215 Other 625321 -625321 219919 -219,919 -405402
219 Savings Scheme 2464264 2019479 444785 1619265 1337038 282,227 162558
3731864 2647614 1084250 11668215 1646140 10,022,075 -8937825
13332381 13613923 -281542 12682127 13120813 -438,686 157144
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Baseline report on bank reconciliation
Annex E
Ministries and Divisions under separate function codes within current Chart of
Accounts structure
Ministry /
Division Description
Code
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Baseline report on bank reconciliation
118