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Punjab Local Government (Fiscal Transfers) Rules 2017.



February 07,2017


No.SOR(LG)38-22/2015.-In exercise of powers conferred under section 144 of the Punjab Local government Act 2013 (XVIII of 2013) and after previous publication, Governor of the Punjab is pleased to make the following rules:

1.     Short title commencement.- (1) These rules may be cited as the Punjab Local Governments (Fiscal Transfers) Rules 2017.

(2)    They shall come into force at once.

2.     Definition.- (1) In these rules:

  • “Act” means the Punjab Local Government Act 2013 (XVIII of 2013);
  • “accounts” means the includes monthly and annual statement of accounts, appropriation accounts, appropriation accounts and finance accounts;
  • “accounts statement” means and includes monthly and annual statement of accounts, appropriation accounts and finance accounts;
  • “Accountant General, Punjab” means the office of the Accountant General, Punjab, responsible for maintenance of the accounts of the local government;
  • “annual report” means the report submitted by the Punjab Finance Commission within the meaning of subsection (7) of section 112 of the Act;
  • “appropriation” means an allocation of funds to an office of the local government on the basis of its Schedule of authorized expenditure;
  • “appropriation accounts  of the local government” means a statement of expenditure of original or modified budgetary allocation;
  • “bank” means State Bank of Pakistan or any of its offices or branches and includes National Bank of Pakistan acting as the agent of the State Bank of Pakistan or a scheduled bank approved and notified by the Finance Department for purposes of collection of Government receipts;
  • “calculated share of the local government” means the share of the local government calculated by the Finance Department at the commencement of a calendar month using the available allocable amount based on actual or pro-rata estimated provincial receipts and in accordance with Punjab Finance Commission Award;
  • “cash balance” means the aggregate amount held by the local government in its account at a given point in time;
  • “determined share of the local government” means the share of the local government determined by Punjab Finance Commission in its Award based on the estimated revenues for a year;
  • “district” accounts office” means an office in the district, other than District Lahore, responsible for maintenance of accounts of the local government;
  • “fiscal transfers” or “transfers” means the funds transferred to the account of the local government by the Government as a share the Provincial Allocable Amount but does not include the amounts paid in lieu of services of goods provided by the recipient local government to the Government;
  • “Government” means Government of the Punjab;
  • “local government accounts office” means an office of Punjab Local Fund Audit Department and a Union Secretary responsible for maintenance of accounts of the local government other than the District Health Authority and the District Education Authority;
  • “local government expenditure” means the amount expended by the designated functionaries of a local government, in the prescribed manner;
  • “local government finance office” means offices responsible for administering budget and finances of a local government;
  • “local government revenue-expenditure statement” means a statement of accounts separately showing the classified receipts and expenditures of the local government in accordance with Chart of Accounts;
  • “own source revenue” means the revenues collected by the local government from the proceeds of taxes or charges levied by such local government and other proceeds vested in it under the Act;
  • “Provincial Consolidated Fund” means the Fund as described in Article 118 of the Constitution of Islamic Republic of Pakistan, 1973;
  • “reporting officer” means an officer responsible for submitting a report under the rules;
  • “rules” means the Punjab Local Government (Fiscal Transfers) Rules 2017; and
  • “Schedule means a Schedule appended to the rules.

(2)    An expression used but not defined in these rules shall have the same meaning as is assigned to it in the Act.

3.     Function of the Punjab Finance Commission.- (1) The Punjab Finance Commission shall make recommendations to the Government on:

(a)    a formula for resource distribution including:

  • Vertical distribution between the Government and the local governments out of the proceeds of Provincial Consolidated Fund into the Provincial Retained Amount and the Provincial Allocable Amount to be called Punjab Finance Commission Award;
  • Horizontal distribution of provincial allocable amount amongst the local governments as share of each local government; and
  • Distribution of amounts of general sales tax received by the Government in lieu of the abolition of the Octroi and Zila Tax;

(b)        mattes relating to the local government finance referred to Punjab Finance Commission by the Government or a local government.

Explanation.- The grant in lieu of the abolished Octroi

and Zila Tax shall be in addition to the Punjab Finance Commission Award.

            (2)  Punjab Finance Commission may, before making recommendation, consult a body or person, and shall take into account the principles of best practices and the relevant factors including population, backwardness, requirements and performance of a local government.

            (3)        The Provincial Allocable Amount and shares of the local governments shall be determined by the Award which shall remain in force for a period of five years.

            (4)        In case, the recommendations are not finalized before the expiry of the period of the Award, the award in force shall continue to serve as the determinant of the Provincial Allocable Amount and the shares of the local governments till the time a new Award is approved.

4.         Fiscal transfers.- (1)      Punjab Finance Commission, in consultation with the Government, shall determine the requirements for certification of fiscal transfers.

(2)    The certifications under sub-rule (1) shall include the following:

(a)    Provincial Allocable Amount and its calculation;

(b)    transfers of funds in accordance with the determined         shares of the local governments;

(c)    transfer of funds in accordance with the Award and   reference made to Punjab Finance Commission; and

(d)    revenues and expenditures of the Government and local         governments.

          (3)  Punjab Finance Commission, for purposes of certification, may obtain data from the Government, a local government or any relevant agency connected with the Government or from the Federal Government.

5.       Powers of Punjab Finance Commission.- For Purposes of calling for any information relating to fiscal transfer formula and transfer of funds, Punjab Finance Commission shall have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 (V of 1908).

6.       Secretariat of Punjab Finance Commission.- (1) The Finance Department shall act as the Secretariat of Punjab Finance Commission.

          (2)  The Finance Department shall set up a designated establishment of officers and staff, with adequate resources and equipment necessary for the efficient functioning of Punjab Finance Commission Secretariat.

7.       Functions and duties of the Secretariat.- (1) Without prejudice to any other law, the functions and duties of the Secretariat of Punjab Finance Commission shall include:

(a)    preparation of technical briefs for the meetings of the        Punjab Finance Commission;

(b)    provision of all the prescribed documents to the Punjab      Finance Commission for its meetings;

(c)    carrying out simulations, development of formula options   and study of differential impact of various options on local        government finance;

(d)    maintenance of inter-governmental database in such forms        and of such standards as may be ascertained by Punjab   Finance Commission;

(e)    carrying out monitoring of the receipt of funds by the local         governments and by the Government.

(f)     receipt of such reports from the local governments as may be determined by Punjab Finance Commission;

(g)    undertake analysis of the local government finance or, if so         required, of the provincial finances;

(h)    evaluation of impact of fiscal transfers on the local    governments and other relevant matters;

(i)     commissioning of special research and studies relating to   inter-governmental finance;

(j)     preparation and publishing of Annual Report;

(k)    provision of periodic reports on the local government         finance to the Finance Department; and

(l)     receive and compile the complaints made by the local         governments and cause them to be laid before Punjab       Finance Commission for consideration.

          (2)  The Punjab Finance Commission undertake such activities as mentioned in First Schedule.

8.       Communication and access to information.- Nothing contained in these rules shall be deemed to impose any limits on the powers of the Secretariat to carry out timely communication of information on any matters relating to fiscal transfers to a local government, Government agency or any other person or providing access to information to any citizen in accordance with law.

9.       Budget.- (1)    The annual budget of the Secretariat shall be prepared separately as part of the budget estimates of the Finance Department.

          (2)  The Government may allocate separate funds for understanding research based studies and analysis.

10.     Inter-governmental fiscal database.- An inter-governmental fiscal database shall be set up and collected in the Secretariat in such form or in view of the available technological options on the following principles:

  • The inter-governmental fiscal database shall consist of and         be maintained in the form of date on under various heads, all kinds of fiscal transfers made to local governments   besides data pertaining to specific issues peculiar to Punjab   Finance Commission award for the time being in force, or     any other data required and listed in Part A of Second     Schedule.
  • The database shall be updated on monthly basis, provided that for certain categories, a different schedule, approved by the Punjab Finance Commission, may be observed.
  •     Inter-governmental database may include inter alia all the elements described in Part B of Second Schedule and the    reports may be provided to the Punjab Finance Commission for analysis, review and deliberation on        formula options or for purpose of any other functions,       duties and exercise of powers by the Punjab Finance     Commission;
  • The data and reports from the inter-governmental fiscal     database may be provided to any local government,   Governmental agency, person or organization for any   academic or other purpose on written requires and   payment of such fee as may be prescribed by the and     collected with express permission of the Finance       Department.
  • The fees collected in accordance with the provisions of sub rule (d) shall be deposited in the Government Treasury.

11.   Dissemination of formula.- (1) As soon as may be, after the formula of Punjab Finance Commission is published in the Punjab Gazette under the Act, the Secretariat shall make all suitable and necessary arrangements for dissemination of such formula to the concerned Government agencies and local governments in the Province.

        (2)        Where grant systems seek to achieve specific objectives through action by the local governments, the Secretariat shall make special arrangements for dissemination and wider understanding of the conditionally and incentive.

12.   Notification of Provincial Consolidated Fund and its distribution.- (1) The Secretariat shall notify the provincial size of Provincial Consolidate Fund, Provincial Retained amount and Provincial Allocable Amount in accordance with the formula of Punjab Finance Commission, for the time being in force, based on the estimated revenues of the Province, in the month of March every year for the next fiscal year.

        (2)        The Secretariat shall notify the revised size of Provincial Consolidated Fund, Provincial Retained Amount and Provincial Allocable Amount for an on-going fiscal year not later than May each year and such notification shall be based on the revised estimates of revenue of the Province.  

13.   Notification of Shares of the local governments.- (1) The respective shares of the local governments shall be notified by the Secretariat in the light of the formula set by or applicable under the decision of the Punjab Finance Commission, not later than 30 June of each year.

        (2)     Notification of the shares for the period of the formula shall be made in accordance with the provincial revenues of the province at the beginning of each period of time specifies in the formula.

        (3)     The notification of the shares shall be made in the Forms given in Third Schedule.

        (4)     All notification under the rules shall be published in the Punjab Gazette.

14.   Copies of Notifications.- The copies of all notifications issued under the rules shall be provided to the local governments, members of Punjab Finance Commission and to the other concerned Government agencies.

15.   Authorization of Fiscal Transfers.- (1) Subsequent to any approval required under rules, the Secretariat shall authorize shares under fiscal transfers of each local government, as calculated at the beginning of every calendar month but not later than the third day of that month.

        (2)     Such authorization shall be communicated to State Back of Pakistan Karachi or any other authority responsible for transferring the amount to the local governments and a copy of such authorization.

        (3)     The transfer of the share shall be made, as far as possible to the account of the local government ‘on-line’ through Direct Credit System (DCS).

        (4)     A certification of fiscal transfer, as prescribed in form FTR-6 of Third Schedule shall be issued by the local government accounts office to the local government concerned, on completion of the transfer stating the total amount and the date of receipt.

        (5)     A copy of the certification shall be provided to the Secretariat and to such other office as the Government may direct.

17.   Banks.- (1) The Finance Department may notify a bank or banks to undertake functions for making over, holding or reporting of the fiscal transfers.

        (2)     If any function is entrusted to a bank under sub-rule (1), the bank shall provide all such information and reports as may be required by the Finance Department.

18.   Cash balance.- (1)     The cash balance in a local government account, in Form FTR 7 given in Third Schedule, shall be communicated to the Secretariat as and when required by the Finance Department.

        (2) The cash balance or any amount thereof in a local government account shall not be transferable to any Government account, unless provided otherwise in the Act.

19.   Discrepancy in the transfer.- (1) Any transfer which is less than the share of the local government, as calculated, shall be deemed as ‘discrepancy’.

        (2)     Any discrepancy in the transfer of the share of the local government shall be reported to Punjab Finance Commission before the end of each quarter by the Secretariat and the Commission may take such action as it deems appropriate.

20.   Delay in the transfer.- (1) In case, a transfer due to a local government in accordance with the share, as calculated, is not made within the prescribed time, it shall be construed as ‘delay’.

        (2)     Any delay in the transfer for which a local government is eligible in accordance with the notification, for whatsoever reason, shall be recorded by the Secretariat and reported to Punjab Finance Commission in its forthcoming meeting and the Commission may take appropriate necessary action.

21.   Reporting.- The Government and a local government shall provide reports to Punjab Finance Commission on the timeframe and methodology for the flow of funds determined by the Commission.

22.   Expenditure-revenue statement.- (1) The local governments shall provide monthly expenditure-revenue statement to the Secretariat in the Forms given in Third Schedule.

23.   Own source revenues.- A statement of own source revenues as assessed and collected by the local government shall be provided to the Secretariat at the end of each quarter of a fiscal year.

24.   Other transfers and amount received.- On receipt of any funds other than the formula based transfers from the Province or own source revenues, the local governments shall report to the Secretariat within a period of three months or as and when required by the Secretariat.

25.   Project funds and investments.- A local government shall report all expenditures incurred on the development projects and investments made by such local government each year, to the Secretariat in the Forms given in Third Schedule but the expenditures carried out under the approved budget of the local government shall not form part of the report.

26.   Accounts reports.- (1) The local government account office shall forward appropriation accounts and finance account statements to the Secretariat in Forms 14 to 14-F of Third Schedule.

        (2)     In case a certified account is pending finalization, a report based on the draft accounts may be provided.

        (3)     In case a report is based on the draft accounts, it shall specifically be mentioned in that report.

        (4)     In case a report has been provided on the basis of draft accounts, a second report shall be provided, on certification accounts, with an appropriate reference made to the earlier report.

27.   Reporting officers.- (1) Unless otherwise provided, a reporting officer, while submitting a report under the rules, shall submit report to the Secretariat within the prescribed time period.

        (2)     No disciplinary or administrative proceedings shall be admissible against a reporting officer for submission of a report unless it is made in derogation of the rules.

28.   Duties of Finance office and Accounts office.- (1) The duties of the local government finance and accounts offices shall include maintenance of the record of monthly and periodic transfers in the Forms given in Third Schedule.

        (2)     A copy of the record shall be provided to the Secretariat at the end of each fiscal year but not later than the expiry of the first calendar month of the following fiscal year.

29.   Responsibility for the accuracy of the reports.- (1) The Chief Officer or, as the case may be, the Chief Exertive Officer shall be responsible for accuracy and authenticity of all reports submitted by the local government offices to the Secretariat.

        (2)     The Chairman and Secretary of the Union Council shall be responsible for the accuracy and authenticity of all reports submitted to the Secretariat.

30.   Timely submission of Reports.- (1) After the receipt from the local government accounts offices and district accounts offices, the Provincial Director, Local Fund Audit and Accountant General, Punjab shall ensure timely submission of accurate and authenticated reports, to the Secretariat in the Forms given in Third Schedule of local governments, including District Authorities regarding.

  • Monthly accounts;
  • appropriation accounts; and
  •     finance accounts

        (2)     The Secretariat, for purpose of facilitating the discharge of the functions by Punjab Finance Commission and accomplishing its objectives, may require any information from any agency carrying out functions in the Province relating to the local government finance.

        (3)     The annual report shall comprise but not limited, to the following:

  • Details of expenditure made by the respective local   governments, identifying the source of funds released by   the Federal Government and other agencies and the     respective shares provided to the local governments   through Punjab Finance Commission Award by the     Government.
  • Details on the financial condition of the Province and local     governments such as budget balances, results of audit,      liabilities carried over, ending balances of the local     governments and figures for helping elucidate the level of     disparity in overall fiscal health of the Province;
  •     Information enabling the policy makers to compare with     fiscal policies of other Provincial Governments and help identifying the disparities in economic growth amongst       various local governments or regions of the Province, thus,         to help policy makers gauge the differences and suggest    reforms in fiscal policy of the Province;
  • an analysis of expenditure patterns for each level of government for the purpose of clear identification of areas   of growth or stagnation and public employment levels and    its patterns;  
  • an analysis of revenue patterns of each level of        government, showing revenue growth by source i.e. own source revenues and an analysis of their dependence on fiscal transfers;
  •     indicators for impact and analysis of the transfer formula,   which shall be used to change and adjust, if required, the      

    inter-governmental fiscal transfer system;

  • Special studies on innovative ideas and practices to   facilitate the generation of dialogue on the subjects such as:
  • Equalization evaluation;
  • alternatives for own revenue mobilization;
  • public employment levels and disparities;
  • challenges and issues in developing an inter-governmental fiscal system that shall match the objectives of the provincial policy with an aim to resolve the issues such as poor fiscal management by some local governments, growing disparities, relationship between the Province and the Federal Governments in matters such as a proposed new revenue sharing scheme or legislation on natural resource and the taxation that might affect the Provincial and local government budgets.

        (4)     After the report is approved by the Provincial Cabinet, the Secretariat shall prepare and publish sufficient number of copies, and arrange to lay the Annual Report in Provincial Assembly of the Punjab at the earliest.

        (5)     The Secretariat shall also provide copies of the Annual Report to all the each local governments for laying it before their respective House.

32.   Time frame for submission of reports.- The reporting officers and other agencies shall be responsible for submission of reports or completion of actions, as the case may be, in accordance with the time frame specified by Punjab Finance Commission or otherwise given in First Schedule.

33.   Redressal of grievances.- (1)     A local government may seek redressal of grievances relating to any matter connected with fiscal transfers by the Government by making a reference to Punjab Finance Commission along with the grounds of such grievance and the Commission may take appropriate action to redress the grievances.

        (2)     The grievance petition shall be addressed to the Secretary of the Commission.

34.   Relaxation of rules.- The Government may, after recording reasons, may relax any rule.


[The administrative department may kindly add accurate transcript of the Schedules (Forms) before submitting the draft rules before the cabinet



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