INTERNAL CONTROL ASSESSMENT AT THE PRIMARY HEALTH CARE CENTERS IN PAKISTAN Options to Improve the Flow of Funds for Front-line Health Workers June 2022 CONTENTS Acronyms......................................................................................................................................................... 5 Definitions........................................................................................................................................................ 6 Acknowledgements.......................................................................................................................................... 7 Foreword.......................................................................................................................................................... 7 Executive Summary.......................................................................................................................................... 8 1. Background.. ................................................................................................................................................. 12 1.1  Outline and Scope............................................................................................................................................................................................. 12 1.2  Goals, Objectives and expected outcomes............................................................................................................................................ 12 1.3  Methodology....................................................................................................................................................................................................... 12 1.4  Limiting and delimiting factors/issues................................................................................................................................................... 13 2. Current process analysis/Findings............................................................................................................... 13 2.1  Current process description......................................................................................................................................................................... 13   2.1.1  Current Process Flow Diagram.......................................................................................................................................................... 15 2.2  Data Analysis.....................................................................................................................................................................................................16    2.2.1  Variance Analysis....................................................................................................................................................................................16   2.2.2 Breakdown of Operating Expenses................................................................................................................................................19   2.2.3  AGPR Bill Processing Efficiency......................................................................................................................................................20   2.2.4 Transaction Slabs Analysis................................................................................................................................................................ 21   2.2.5  Potential Effort Savings.................................................................................................................................................................... 22   2.2.6 Unutilized Provisions of the APPM................................................................................................................................................ 23 3. Options Analysis......................................................................................................................................... 24 3.1  Quick wins requiring no investment........................................................................................................................................................ 24   3.1.1  Provide a Traceable Imprest Account to the BHUs.................................................................................................................. 24   3.1.2 Register Utilities and Official Phone Bills on the NBP Platform......................................................................................... 25   3.1.3  Mandate e-Payments via the NBP................................................................................................................................................. 25 3.2  Technology interventions requiring investment................................................................................................................................ 25    3.2.1  Customized Online Bill Submission System............................................................................................................................. 26   3.2.2 High-Level Business Requirements...............................................................................................................................................27   3.2.3  Vendor Creation Screen......................................................................................................................................................................27   3.2.4 PO Creation Screen.............................................................................................................................................................................. 28   3.2.5  Bill Submission Screen...................................................................................................................................................................... 28   3.2.6 Integration Requirements................................................................................................................................................................. 28   3.2.7 Opportunity to Introduce Output-based Budgeting............................................................................................................. 29 2 3.3  Process Changes.............................................................................................................................................................................................29 3.4  Other options...................................................................................................................................................................................................29   3.4.1  Extending FABS (SAP) to the SUs.................................................................................................................................................. 29   3.4.2 Implementing a Third-Party Solution..........................................................................................................................................30 4. Annexes. . ...................................................................................................................................................... 31 4.1  Annex 1: Cost center expenditure analysis............................................................................................................................................. 31 4.2  Annex 2: Operating expenses details for Layyah province............................................................................................................ 32 4.3  Annex 3: Operating Expense Details for Rawalpindi province..................................................................................................... 33 4.4  Annex 4: AGPR Token.................................................................................................................................................................................... 34 4.5  Annex 5: Cash Register................................................................................................................................................................................. 34 4.7  Annex 7: Vendor Creation Form.................................................................................................................................................................36 4.7  Annex 8: Sample Budget Status Report to be produced by OBSS.............................................................................................37 BOXES Findings 1-4..............................................................................................................................................................................................................................................14 Findings 5-6............................................................................................................................................................................................................................................ 16 Finding 7.................................................................................................................................................................................................................................................... 19 Finding 8................................................................................................................................................................................................................................................... 20 Finding 9..................................................................................................................................................................................................................................................... 21 Finding 10..................................................................................................................................................................................................................................................23 Finding 11...................................................................................................................................................................................................................................................23 The Financial Accounting and Budgeting System .......................................................................................................................................................25 3 FIGURES Figure 1: Implementation Road Map........................................................................................................................................................................................ 11 Figure 2: Primary health care– Bill to Payment Process Flow...............................................................................................................................15 Figure 3: HCE: A Comparison of Layyah and Rawalpindi Districts (FY 2018/19).......................................................................................18 Figure 4: HCE: A Comparison of Layyah and Rawalpindi Districts (FY 2019/20).....................................................................................18 Figure 5: Layyah District Comparison (FY 2018/19 and 2019/20).....................................................................................................................18 Figure 6: HCE: Rawalpindi District Comparison (FY 2018/19 and 2019/20)...............................................................................................18 Figure 7: Layyah: Top-5 Operating Expenses (FY 2018/19 and 2019/20)..................................................................................................... 19 Figure 8: District Rawalpindi Top-5 Operating Expenses (FY 2018/19 and 2019/20).......................................................................... 19 Figure 9: AGPR Bill Processing Efficiency.......................................................................................................................................................................... 20 Figure 10: Primary and Basic Health Care: Expenditure Value Interval / Volume Analysis................................................................21 Figure 11: Potential Effort Savings by Transaction Slabs.........................................................................................................................................22 Figure 12: Materiality Analysis and Percentage of Total Expenditures by Transaction Slabs..........................................................22 Figure 13: NBP Digital Service Offerings.............................................................................................................................................................................24 Figure 14: OBSS High-Level Architecture......................................................................................................................................................................... 26 Figure 15: Pre-Audit Volume Flow Reduction: Scenario PKR 50,000 as Specified Limit................................................................. 30 Figure 16: Indicative Third Party Solutions...................................................................................................................................................................... 30 Figure 17: AGPR Token.....................................................................................................................................................................................................................34 Figure 18: Cash Register at the DHO.....................................................................................................................................................................................34 Figure 19: Vendor Creation Form............................................................................................................................................................................................ 36 Figure 20: Sample Budget Report.......................................................................................................................................................................................... 37 TABLES Table 1: Districts - Volume/Value Analysis (PKR)........................................................................................................................................................... 17 Table 2: AGPR Bill Processing Efficiency............................................................................................................................................................................. 20 Table 3: Value/Volume/Effort Analysis using Consolidated Data......................................................................................................................23 Table 4: Value/Volume Analysis of Electricity and Telephone Expenses........................................................................................................25 Table 5: OBSS: High-Level Requirements.......................................................................................................................................................................... 27 Table 6: Indicative List of Forms to be Replaced by the OBSS ........................................................................................................................... 29 Table 7: Cost Center Details........................................................................................................................................................................................................31 Table 8: HCE Expense Details: Layyah District (FY 2018/19 and 2019/20) ................................................................................................32 Table 9: HCE Expense Details: Rawalpindi District (FY 2018/19 and 2019/20) .......................................................................................33 4 ACRONYMS AAO Assistant Accounts Officer IBFT Inter-Bank Fund Transfer ABS Annual Budget Statement JS Joint Secretary ADHO Assistant District Health Officer Ministry of National Health Services, MoNHSR&C AG Accountant General Regulations, and Coordination AGP Auditor General of Pakistan NA National Assembly Accountant General of Pakistan NAM New Accounting Model AGPR Revenues NBP National Bank of Pakistan AO Accounts Officer OBB Output-Based Budgeting Accounting Policies and Procedures OBSS Online Bill Submission System APPM Manual OGEs Other Government Entities AS Additional Secretary PA Provincial Assembly BHU Basic Health Unit PAC Public Accounts Committee CAAT Computer-Assisted Audit Technique PAO Principal Accounting Officer CFAO Chief Finance and Accounts Officer PFM Public Financial Management CGA Controller General of Accounts PHC Primary Health Center CM Chief Minister Project to improve Financial PIFRA DAG Deputy Auditor General Reporting and Auditing DAO District Accounts Officer PKR Pakistani Rupee DDO Drawing and Disbursement Officer PM Prime Minister DG Director General POL Petrol, oil and lubricant DHO District Health Officer Public Procuremenet Regulatory PPRA Authority DOA Delegation of Authority Preparation, Review and Sanction, DS Deputy Secretary Approval, Certification and EFT Electronic Funds Transfer PRACAP Authorization, before a Payment can ERP Enterprise Resource Planning be made Financial Accounting and Budgeting RFP Request for proposal FABS System System, Application, Products for SAP Financial Management and Powers data processing FMP of Principal Accounting Officers SBP State Bank of Pakistan FY Fiscal Year SO Sanction Officer Goverment Financial Management SU Spending Unit GFMIS Information System Traveling allowance/Dearness TA/DA GFR General Financial Rules allowance HCE Health Care Expenditure USD United State Dollars Integrated Financial Management VFM Value for Money IFMIS Information System WB World Bank 5 DEFINITIONS A District Health Office, a project, cost center or any other entity authorized Spending Unit (SU) to enter into commitments, and/or to sanction and approve expenditures. A standard manual form (Form-B) required to summarize the claim details (including amounts, PO reference if applicable, payee, and so on) with Bill associated approvals/stamps. A Bill is prepared for a claim, such as an invoice or for expenses such as travel reimbursements. Invoices for goods/services from suppliers. In most cases, it requires a Invoice purchase order (PO) or a contract reference number. It usually results from the competitive bidding process in accordance with Contract the Public Procurement Regulatory Authority (PPRA) rules. As such, it relates mostly to development expenditures. It is used for expenditures below a certain threshold value. An approved Purchase Order request for supplies or goods or services which will result in an obligation to pay once goods/services are received. These are used for petty day-to-day work/needs, such as stationary, travel Expense Claims expense, refreshments for official meetings, and so on. An obligation to make a future payment, the funds for which are reserved Commitment against the allocated budget of an entity. The secretary of a division or any official notified as the principal accounting officer, responsible for exercising financial propriety in the Principal Accounting Officer management of public funds and having accountability to Parliament for the economic, efficient and effective use of resources. Re-appropriation Transfer of funds from one head of account of appropriation to another. 6 ACKNOWLEDGEMENTS The report was prepared as one of the deliverables of the Public Financial Management and Health Financing Pillar of the World Bank’s Pakistan Health Support Programmatic Advisory Services and Analytics (ASA) (P175571). This report was led by Qurat ul Ain Hadi (Financial Management Specialist, ESAG1). The report’s development was supported by a World Bank governance team including: Hammad Yunus (Consultant) and Badar Mahmood (Consultant). It was funded by G4GFF (that is, the Governance Window of the Global Financing Facility) and the Global Alliance for Vaccines and Immunization (GAVI) The team gratefully acknowledges Najy Benhassine (Country Director for Pakistan), Hisham Waly (Governance Practice Manager, ESAG1) and E. Gail Richardson (Operations Manager, LCC3C). The report also benefited from the valuable inputs provided by Jahanzaib Sohail, (Health Specialist, HSAHP) Raymond Muhula (Senior Governance Specialist, ESAG 1), Aleksandar Kocevski (Senior Operation Officer, ESAG 1) and Akmal Minallah (Senior Financial Management Specialist, ESAG 1) and comments of peer reviewers: Michael Kent Ranson (Senior Health Economist, HHNGE), Timothy Stephen Williamson (Senior Governance and public sector specialist), EPSPF Richard Anthony Sutherland (Governance Specialist, EPSPF) and Juliette Puret, (Senior Health financing expert GAVI). We also gratefully acknowledge the partnership and support of the Ministry of National Health Services, Regulation and Coordination (MONHSRC), the Finance Division and the Provincial Finance Departments, the District Health Offices, the Primary Health Care Centers and the Controller General of Accounts (CGA). They helped the Bank team to complete this task and provided useful comments and insights throughout the process. The team would also like to acknowledge the support provided by the staff of the Ministry of National Health Services, Regulation and Coordination (MONHSRC) and the World Bank, in particular Dr. Sabeen Afzal (Deputy Director), who provided guidance and facilitated the whole process, including communications with provincial authorities. We would also like to thank the staff of the (including Ms. Lubna Yaqoob and Dr. Raza Zaidi) and other key officials at the Ministry of Health, provincial departments, United Nations agencies, non-governmental organizations/international non-governmental organizations (NGOs/INGOs) and other stakeholders. FOREWORD This document presents a summary of the findings that have been collected from: An Internal Control Assessment: This is a review of existing business processes to identify gaps, as well as redundant, repetitive and duplicate controls in processing claims submitted by the Primary Health Care Centers (PHCs). An Options Analysis for enhancing bill processing efficiency at the District and Primary Health Care Centers. 7 EXECUTIVE SUMMARY This report reflects on the findings from an internal control assessment of health service delivery units for primary health care, as well as a subsequent options analysis. Together, they show significant opportunities for improved systemic efficiency, as low-value, frequent transactions (that are primarily non-salary expenditures including fuel and travel allowances) comprise over fifty percent of total health expenditure transactions in Pakistan. However, they make up only two-three percent of the total health budget. Although minor in size and value, these multiple transactions go through the complete approval cycle, causing delayed payments and resulting in an increased administrative burden — with a considerable negative impact on service delivery. The World Bank team conducted an assessment of redundancy, duplication, and the extent of utilization of risk-based internal controls exercised in processing expenditure transactions for the Primary health care units. The assessment produced: ● A list of options for enhancing payment efficiency ● An overview of the high-level requirements for an online bill submission process which would allow for real-time reporting to the Financial Accounting and Budgeting System (FABS) (the national compute- rized financial management system) Fieldwork was carried out between February 2021 and August 2021. Observation visits to and interviews with the Ministry of National Health Services Regulation & Coordination (MONHSR&C) in Islamabad, the District Health Officers (DHOs) in Islamabad and Hyderabad, and the Accountant General Pakistan Revenues (AGPR) in Sindh were held. In addition, online meetings took place with the Financial Accounting and Budgeting Systems (FABS) team to discuss the FABS environment, as well as to obtain detailed expenditure data for the Districts of Layyah and Rawalpindi for the fiscal years (FYs) 2018/19 and 2019/20. Current Process Analysis/Findings Primary health care units do not have any spending power. All bills for operating expenses, such as utilities, telephones, TA/DA, and so on, are sent to the relevant District Health Office for centralized submission to the District Accounts Officer (DAO). Procurement, for items such as for drugs and medicines, is conducted centrally by the District Health Offices. Once supplies are received, they are distributed onwards to the primary health care units.  The combination of current financial management policies, procedures, and practices – some of which require urgent revisions – has resulted in a system that is completely blind as to how long the District Health Offices take to submit bills to the DAO. This can result in claims that are stuck at the DHO for months awaiting approval. Also, in the absence of any recording or monitoring of the dates pertaining to bills submission to the DHO by the primary health care units, service delivery can be severely impacted. No recording takes place as bills are received. Hence, reconciliation of how many claims were received by the DHO, and how many were approved, parked, rejected or processed, cannot be done. An entry in the cash/check register is only made when approved bills are taken to the DAO after the necessary approvals have been made at the DHO. It is only when a bill has been submitted to the DAO and enters the FABS system boundary that dates can begin to be recorded for each step of the approval cycle, thereby allowing bill processing efficiency to be measured.  A bill of Pakistani Rupee (PKR) 200 or USD 1.291 (undergoes the same level of scrutiny as a bill larger than millions of rupees. This involves duplicate internal controls exercised by six different officers in two different entities. The process is a large administrative burden, requiring budgets, supporting documents, claims authentication, and multiple approvals during bill preparation, review and sanction, approval certification, authorization for payment (referred to hereafter as the PRACAP cycle) before checks are printed and handed over to the authorized staff of the DHO for onward distribution. Applying the same stringent procedures for each transaction, irrespective of value, is against the principles of transaction cost economics, that is, it does not make sense to spend more to save less. The FABS’ Accounting Policies and Procedures Manual (APPM) considers this and lays the foundation for exercising risk-based controls to facilitate speedier payments by allowing the spending units to maintain a replenishable imprest2 for petty expenses below a specified limit.  These provisions, however, remain unutilized. The fact that there is no petty cash imprest, coupled with a transaction limit of as low as PKR 200 (USD 1.29), dramatically increases the volume of bills prepared for 1 USD equivalent to PKR 154.4 average for FY 2020. 2 An imprest is a replenishment account set on set threshold. 8 physical submission by the DHOs, as well as subsequent detailed scrutiny by the AGPR. In addition, there is a complete lack of visibility regarding the efficiency or delays in bill submission by the DHO to the DAO and check distribution to claimants by the DHO. This can have a direct impact on service delivery, which cannot be measured without technology intervention, associated process changes, and legislative cover. Transactions below PKR 50,000 (USD 323.83) constitute over seventy percent of all health care transactions, but they are less than eighteen percent of the value of total expenditures. The AGPR is capable of processing ninety-five percent of all bills within 14 days (eighty-five percent within 7 days). Therefore, the opportunity cost of the sheer human effort required to prepare bills below PKR 50,000 (USD 323.83) — coupled with the nominal but significant saving in stationery costs3 (currently about 2 percent of total expenditures) — when extrapolated over all districts, justifies the business case of introducing controlled and well-planned process changes. These changes can utilize existing and other potential technological solutions to positively impact primary health care service delivery. Key Findings ● The system is blind as to the massive number of bills received, processed, parked, rejected, sanc- tioned, and approved within the boundaries of the District Health Offices. ● The National Bank of Pakistan’s e-banking channels, although available, are not used for making ex- penditure payments to vendors, even though the payroll is completely automated. Therefore, checks must be printed manually. ● Contrary to the APPM stipulations, which require only handing checks over to claimants or to their au- thorized representatives, the checks are handed over to the DHO for further distribution to claimants. This increases direct interactions between vendors and DHO staff, thus increasing the rent-seeking. Risk. It also frustrates the segregation control (which requires the requisitioning, purchasing and pay- ment function responsibility to be different). ● Operating expenses constitute the highest volume/ proportion of total expenditures. ● Bills of PKR 200 (USD 1.29) or more undergo the complete PRACAP cycle. ● The purchase of drugs and medicines (A03927), electricity (A03308), POL charges (A03807), travelling allowances (A03805), printing and publication (A03902), stipends (A03959) and cost of stores (A03942) were among the top operating expenses in both the Layyah and Rawalpindi Provinces (Figures 6 and 7). ● Bill processing efficiency can only be measured once bills enter the AGPR system boundary where ninety-seven percent of bills are processed within 14 days. ● The seventy-three percent of bills constituting twenty-one percent of value are under 50,000 PKR, whereas the eighty-seven percent of bills constituting thirty-four percent of total expenditures are under 100,000 PKR (USD 648). ● There exists a business case for utilizing transaction thresholds while supporting risk-based controls. Setting the specified limit to PKR 50,000 (USD 323.83) could potentially save 130 days of effort in each district ● Provisions exist in the current financial management regulations allowing the use of imprest and set- ting of transaction thresholds to bypass the complete PRACAP cycle. Recommendations/Options Quick Wins – requiring no investment Allow Basic Health Units to use an imprest account Allow the Basic Health Units (BHUs) to maintain an imprest account to process bills below the value of at least PKR 50,000 (USD 323.83) — without having to go through the complete approval process. In compliance with the APPM manual, the imprest will be reimbursed upon submission of the bills. Total bills and balances in banks should always equal PKR 50,000 (USD 323.83). Whether the PKR 50,000 (USD 323.83) limit is to be a monthly limit or replenishable each time the funds fall below a certain value, for example, PKR 5,000 (USD 32), is a matter requiring a policy decision. 3 The APPM was written in 1993 and has not been updated since then. For example, a bill of PKR 8000 (USD 52) for reimbursement of travel expenses was found to have almost 150 pages of supporting documents. These are all printed on official stationery. However, according to the Drawing and Disbursement Officer (DDO), only 2 pages were required. 9 Utilize the National Bank of Pakistan’s e-Banking Services for Electronic Funds Transfer (EFT) to Claimants Make use of the Inter-Bank Fund Transfer (IBFT) Facility at the National Bank of Pakistan (NBP) to make payments directly to claimants. The Bank allows payments to other accounts in the NBP, an account in a bank other than the NBP, a payment against an ID card, and a payment against a phone number, among others. Utilize NBP e-Banking Services for Utility and Telephone Bill Payments Make use of the NBP facility for online payments of utility bills. Using a carefully planned naming convention for utility bills, such as electricity bills4 — and by including the BHU identifier — the BHU-wide expenditure detail can be produced. This would reduce the overall bill volume by five-ten percent. Similarly registering and paying telephone expenses (that constitute less than one percent of total expenditures) via the e-bank services can reduce the workload by between three-six percent. Establish Transaction Thresholds The introduction of the PFM Act of 2019 allowed for greater financial management freedom, albeit with increased accountability and responsibility to the Principal Accounting Officer (PAO), within a structure that includes the Chief Financial Officer (CFO) and the Chief Internal Auditor (CIA). Within this framework, introduce a process change that allows bills below the value of at least PKR 50,000(USD 323.83) to bypass the DAO bill certification requirement, if approved by the PAO or an officer with delegated authority, such as the Controlling Officer. Introduce a technology-based solution The public financial management (PFM) regulatory landscape in Pakistan is evolving rapidly. The year 2019 saw the promulgation of the PFM Act, and PFM regulations were issued in 2021. These changes provide the PAO with more freedom. They also increase the PAO’s responsibility for: (i) ensuring budgetary controls before exercising their authority to sanction expenditures; (ii) safeguarding and maintaining assets and inventory registers; (iii) monitoring the budget execution process; (iv) controlling contingent liabilities; and (v) maintaining a proper record of all assets, liabilities, commitments, revenues and expenditures in accordance with regulations and approved formats. In addition, the PAO and other officers, such as department heads, are now jointly responsible for financial propriety, performance-based budgeting, and expenditure controls. To address the ‘elephant in the room’5, the obstacles facing the implementation of the evolving PFM regulations require acknowledgment of the fact that the information necessitated by the current policies and procedures is not always produced by the Spending Units (SUs) due to capacity issues and cumbersome manual procedures. Maintenance of age-old manual registers is often required. All of this results in an inability to produce any meaningful financial management information. The FABS is currently not designed to directly capture Primary Health Center (PHC)-level budgets or expenditures, let alone output-based budgeting, which rules out the option of extending the SAP to the District Health Offices. To practically empower and enable the PAOs to carry out their roles, as required by the evolving regulations, it is critical to introduce an innovative technology-based Online Bill Submission system (OBSS). This would be designed to simplify bill submission against the government exchequer, while also capturing all the information required by the relevant rules, regulations and procedures using electronically designed forms. These forms are accessible by smartphones and computers, thus providing an ability to upload electronic copies/scans of needed documentation. An OBSS would receive budget and other controlled information (such as vendor IDs and Purchase Order [PO] references) from the FABS for control and passing on the approved bills electronically to the DAO (eliminating the need for physical trips). It would also provide much more pertinent financial management information necessary to aid the PAO in its duties. With carefully articulated requirements, a solution for capturing the PHC-level budget, expenditures, and output-based budgeting (OBB) can be included in the scope of the OBSS (see section 3.2.7). The introduction of the OBSS does not mean that source document record management would no longer be required. Instead, rather than the current practice of one hundred percent scrutiny of each and every claim, the DAO would use focused and risk-based review approach. The OBSS will also facilitate IT based audit for DHO and PHC facilities. This will allow auditors using sampling and analysis drawn by applying (CAATs).6 Controller General of Accounts (CGA) have started the process of linking central office of Ministry of Health Service Regulation Coordination (MNHSR&C) and one of the major tertiary care hospitals in federal capital with IFMIS for online bill processing. However, it is yet to be devolved to service delivery units. 4 For FY 2018/19, electricity bills constituted the following percentages of expenditures: Rawalpindi: 7.33 to 7.36 percent in terms of value; 10.15 to 10.51 percent of volume; and Layyah: 1.9 to 4.29 percent of value and 2.96 to 4.4 percent of volume. 5 That is, something that everyone knows, but no one talks about. 6 The Auditor General of Pakistan is already using the CAAT for payroll audit. 10 Next Steps/Implementation Roadmap Figure1 presents an implementation roadmap for the interventions suggested in this report. We strongly recommend the urgent implementation of the quick wins described above: the provision of a PKR 50,000 (USD 323.83) non-cash imprest to the BHUs utilizing the NBP e-banking services; the registration and payment of all utility and telephone bills through the NBP; and the use of the NBP inter-bank transfer mechanism to make payments directly to vendor/supplier accounts. In parallel, high-level stakeholder discussions should commence regarding the piloting of the OBSS in selected districts. It is important for key stakeholders to reach an early agreement to commence detailed business requirement documentation sufficient to float a RFP, or to be shared with possible platforms. Whichever route is taken, a project management team will need to be formed to oversee the selection of the software development partner and subsequent implementation, testing, training and roll-out. After a 3-month piloting period, a stage review should be undertaken to devise the strategy for further district rollout. The introduction of the OBSS will require process and legal changes to allow for electronic bill submission. It should be noted that while both the FABS implementation project and the creation of the APPM manual were produced under the Project to Improve Financial Reporting and Auditing (PIFRA) project, the APPM manual that governs PFM makes no reference to the FABS implementation and the use of technology. Best practices require critical systems to be fully documented. Also, documentation should be maintained as the system evolves. The absence of detailed system documentation, workflow configuration flow charts, process flow diagrams, and training manuals carries significant risk. Careful, rigid discipline in keeping system documentation updated will significantly reduce the risks of key resource turnover and an over dependency on staff. In addition, having these systems in place aids in building the integration with other systems, such as e-procurement (which is in progress), as well as the OBSS proposed in this report. It is recommended that a review of licensed versus utilized functionality in the current FABS configuration also take place. It would highlight those features that the Government is paying for, but not currently using. The study should also recommend how these features can best be used to further enhance bill processing efficiency. Figure 1: Implementation Road Map Indicative Implementation Road map of recommendations to enhance Bill Processing FY2021/2022 FY2022/2023 Efficiency for Basic and Primary Health Care Service Delivery Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Jan C Activities/Milestone 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 C Implementation of Quick Wins - utilizing existing provisions in FM Regulations C WB Discussion with Secretary Health CGA and other relevant stakeholders C Issuance of notifictaion allowing BHU’s to maintain an Imprest Account with NBP C Notfication prescribing the minimum value of Bill requiring PRACAP to be aboce PKR 50,000 C All Health Care Utility Bills registered for NBP online Utility Bill payments All Official Mobile bills registered for NBP online Bill payment NBP IBFT Services configured for All government payments to Suppliers C Rollout of Online bill Submission System Formal Stakeholder Buy-in Steering Committee Formation Project Management Team Selection C Detailed Requirements Documentation & RFP Development Procurement Process (software supplir onboard) C Development C Testing & Training (acceptance test passed) Preparation and Pilot in selected Districts C Project Stage Gate Review C Rollout C Review, Revision and update of Accounting Policies and Procedures Manual 1993 SAP Implementation Review to assess utilized functionality and potential for C improvements GFMIS Documentation review and update includes training manuals, Documentation of configured processes, Approval heirarchies, Implemented modules etc. Technological Internevtions C C Recommend Completion Timeframe Process Interventions Policy and Documentation Reviews Milestone Note: BHU= Basic Health Unit; CGA= Controller General of Accounts; IFMIS= Integrated Financial Management Information System; IBFT=Inter-Bank Funds Transfer; NBP=National Bank of Pakistan; PRACAP= Preparation, Review and Sanction, Approval, Certification and Authorization, before a Payment can be made; RFP= Request for proposal 11 1. BACKGROUND The national financial management system in Pakistan is centralized for budget and expenditure controls, and especially in terms of pre-audits, bill processing and payments. The Controller General of Accounts (CGA) works through a network of District Account Offices established across the country. They have primary responsibility for pre-audit and payment functions. However, from a service delivery perspective, this existing arrangement may result in delayed payment processing, rent seeking and control duplication. This is especially true for primary health care units whose budgets are not appropriated in the official budget document (aggregated under the DHO) or tracked or reported through the FABS. Delays in payments to vendors, or for operating expenses (such as utilities or contingent salaries of these front-line health service delivery units) remain largely unnoticed. They may also result in deteriorating public health services. Further, all transactions, irrespective of amount, undergo the same level of control, thus creating inefficiencies in the throughput of payments for day-to-day operational expenditures, including fuel bills, travel allowances, and so on. Some of the possible reform approaches that might be considered include online processing of health care facility bills/claims to enable timely vendor claim settlement, as well as to provide financial oversight of fund allocation and utilization. Similarly, technology use and other efficient e-banking channels can be explored. Enabling more effective budget execution would require the following critical reforms: 1. Exploring options for enhancing payment efficiency. 2. On-line bill submission and real time reporting to the FABS. 3. Reassessing the roles and responsibilities for pre-audit functions of the DAO. 4. Policies and procedures for health managers to devise internal control and payment functions. 5. Strengthening of the CFAO and Internal Audit in the MoNHSRC. 6. Annual Financial Statement preparation procedures. This report presents an assessment of reforms mentioned in points 1 and 2. 1.1  Outline and Scope The scope of this study included an assessment of the efficiency of the internal control environment involving the «expenditure to payment process» related to bills submitted by the primary health care units in the Federal Capital Area. However, the team also reached out to the provinces and selected districts, as described below in section 1.3. Quick wins are intended to have an immediate positive impact on primary health care service delivery. However, most of the issues identified are systemic to the PFM landscape in Pakistan. Therefore, if implemented, the OBSS would have a larger impact, likely providing a nationwide solution to all centralized ministries and their attached departments. 1.2  Goals, Objectives and expected outcomes The key objective of this assignment is to generate recommendations that enable faster payments for low-risk/ low-value, yet high-volume transactions that have a direct impact on services delivered at the PHC level in Pakistan. 1.3  Methodology ● Desk-based research (APPM of 1999, PFM Act of 2019, GFR Volume 1 of 2019, CGA Ordinance 2001, and FMP Regulations of 2021). ● Data analysis (Layyah and Rawalpindi provinces for 2018-19/2019-20) of only 2 of the 8 districts data provided. ● Visits to 2 District Health Offices (Islamabad and Hyderabad) and the MoNHSRC for observation and interviews. ● Visit to the AG offfice Sindh. ● Discussions with the FABS team. ● Discussions with the World Bank (WB) Task Team. 12 1.4  Limiting and delimiting factors/issues Analysis includes expenditure details for FY 2018/19 and 2019/20 for 2 districts in the Punjab only. Data was requested from two districts (1 urban and 1 rural) in each province and the Federal Capital. The data for the remaining districts was not provided. Hence, the conclusions may be drawn differently than those that could be drawn from a more elaborate data set. 2. CURRENT PROCESS ANALYSIS/FINDINGS This section presents an analysis of the ‘as-is’ expenditure-to-approval process, with the aim of identifying the impact on primary health care service delivery and exploring improvement opportunities. This involves three key actors, that is, the claimants, the accounting and administrative staff at the spending units, and the AGPR/ DAO officers. The analysis used both primary data collection through qualitative semi-structured interviews, observations, and statistical analysis of the expenditure details for two districts in Punjab. It is divided into the following sections, highlighting key findings where relevant: ● Current Process Description ● Process Flow Diagram ● Data Analysis • Districts Rawalpindi and Layyah - Variance Analysis for FY 2018-19 and 2019/20 • Detailed Analysis of Operating Expenses • AGPR Bill Processing Efficiency • Transaction Slab Analysis 2.1 Current process description The District Health Office is the centralized hub for processing all expenditure claims for all basic and primary health care units under its administrative control. This means that all expenditure sanctions and approval authorities reside and are exercised at the DHO. None currently exists at the primary health care unit, thus requiring basic and primary health care units to send expenditure claims to the District Health Office for onward submission to the AGPR for payment. Payroll automation has significantly reduced the DHO’s accounting and administrative staff burden. Staff are generally satisfied with the AGPR’s bill processing efficiency. The AGPR processes more than eighty percent of bills within 7 days (ninety-five percent within 14 days; for details, please see table 4.4) however, as the time taken for the claim to be processed at the DHO cannot be ascertained, its impact on service delivery cannot be measured. In accordance with the current process, the following steps are taken by the DHO/SU and the AGPR/DAO staff (please read in conjunction with the process flow diagram in section 2.1.1). Processing at the District Health Office ● PHC facilities are not authorized to directly implement purchase orders. All purchasing. including for medicines, is performed centrally by the DHO, and supplies purchased are delivered to the PHCs. (See Anne x-4.1 depicting DDO/Cost Center wise bills processed at the DHO). ● Bills for contingency expenditures incurred at the PHCs, such as those for utilities, repairs, travel, and so on, are sent directly to the DHO for sanctioning, approval, and onward submission to the DAO. ● The DHO Accounts Office puts the bill on file and obtains internal approvals from delegated and competent authorities; examples include budget sanction (from the ADHO) and expenditure approval (from the DHO). ● Approved bills are entered manually in the paper-based cash/check register (see Annex-4.5) and a serial number is issued for each. The APPM requires that all gaps in serial numbers be explained.7 A DHO representative, most commonly the cashier or the Accounts Officer (AO), then physically takes all the claims to the AGPR for submission. 7 Approved bills are entered manually in the paper-based cash/check register from which no reports can be produced unless data is converted to Excel sheets requiring duplicate work. This is more error prone and repetitious. Often, it is not performed or it is performed only for the purpose of monthly reconciliations. 13 Processing at the AGPR ● Level 0 - AGPR Token Section: Only an authorized representative of the DHO can submit claims to the AGPR Token Section, which in turn issues a Token# (Annex-4.4) for each bill brought by the DHO representative. ● Transfer to Pre-Audit Section: Physical bills are then passed in batches to relevant sections within the AGPR for bill certification. ● Level 1 Certification/Pre-Audit: The AGPR certifying officer reviews the physical supporting docu- ments and marks the bill with observations and status, that is, “passed” or “un-passed”. The action is performed accordingly in the system, and certified bills are set for payment authorization. Those labelled with observations are kept for return to the DHO. ● Level 2 Payment Authorization: The officer with delegated authority for payment authorization checks the work of the certifying officer and the claim/supporting documents. The officer then either disappro- ves – with observations – or approves; if the officer finds all in order, then the payment is authorized in the system for check preparation. ● Level 3 Check Preparation: The check section prints the physical checks, obtains a second signature if the value is above PKR 100,000 (USD 648), and hands them over, along with the unpassed bills, to the authorized representative of the DHO. District Health Office Staff at the DAO ● The authorized officer (usually the cashier or the accounts officer) brings the checks/ unpassed checks to the DHO and updates the manual check register. ● The DHO distributes the checks to the claimants. ● The DHO circulates unpassed bills to the relevant individuals for provision of responses to the AGPR observations. Once responses are received, the process is started anew by the issuance of a new Bill#. The recording of the old bill number is done as a reference. It should be noted that the principles of segregation of duties require that the receiving department be separate from the procuring department. The procuring department should also be different from the paying department. Thus, the current arrangement wherein the AGPR hands over the checks to the DHO representative for onward distribution to beneficiaries results in frustrating this control. Furthermore, it opens the likelihood for rent- seeking, among other financial management risks. This is also contrary to the APPM regulations section 4.2.9, which requires the check to be given only to the payee or to an authorized representative. Findings 1-4 1: The system is blind as to the massive number of bills received, processed, parked, rejected, sanctioned, and/or approved within the boundaries of the District Health Offices. 2: Although available, the NBP’s e-banking channels are not used for making expenditure payments to the vendors. 3: Contrary to APPM stipulations, which require only handling checks over to claimants or to their authorized representative, the checks are handed over to the DHO for further distribution to the claimants. 4: Bill processing efficiency can only be measured once the bills enter the AGPR system boundary. 2.1.1 Current Process Flow Diagram The process flow diagram (figure 2) depicts how a claim — after it has been received by the DHO — flows across to the AGPR District Accounts Office. Within the columns (also known as the swim lanes), it shows the officers/staff in the approval cycle within the two entities. Each bill can be seen to be taken through the complete PRACAP cycle, irrespective of its value. All steps shown in orange are manual steps or use manual registers. Thus, it is difficult to produce reports, or reports are usually not created. The steps in blue are system-based, and allow for the generation of reports for budget/expenditure tracking, as well as bill processing efficiency. 14 Figure 2: Primary health care– Bill to Payment Process Flow Manual Processing, paper registers, lack of use SAP based processing — Processing efficiency can only Back to Index of computers, low IT capacity and skills be monitored for AGPR Token issuance to Payment process Department/Spending Unit/District Health Office E&I DHO DDO ADHO Cashier DHO DDO Puts the bills Bill moved to Cashier Start marks Bills on File for approval Yes and entered in to the DDO from DHO Manual Register Bills Recieved from BHUs Serial# Sig DDO Bill prepared on Bill# Token# Approved Yes Sanction CoA Code Date prescribed from and granted ? moved for Sanction Gross Pay Cheque# Net Pay Date No Bill Detail Bill parked No DDO Signs the Register Bills taken to AGPR Respond to Check observations on Unpassed Bills Bill status unpassed Bills online Distribute Cheques Update the cash/cheque/bill Cheques register manually End AGPR DHO-staff at AGPR L0/Token Issuance L1/Pre-Audit L2/Authorization L3/Cheque section (section wise division) Bills along with Bills received Print Cheque supporting documents with summary brought to AGPR report No LOA verified More than 100k Bill Check Returned Sanction, Records Yes Check observation on Approval, Yes No Bill and signs Write Token Given to Token number Observations authorized rep on Bill and Get 2nd stamped on Bill sign/stamp Signature Noting on file Return to DHO Bill retained Approved Yes and wait Deliver Cheque Noting on file against token Yes Delay Pre-Audit Passed No Bill entered in system Assign Receive Section wise Object Return Cheques and Summary prepared Code Unpassed Unpassed Bills and sent for Check Bill distribution Budget Note: ADHO= Assistant District Health Officer; AGPR= Accountant General of Pakistan Revenues; DDO= Drawing and Disbursement Officer; DHO= District Health Officer; E&I=Entry & Issuance 15 2.2 Data Analysis Table 1 below provides a high-level bill volume and expenditure value analysis for the Rawalpindi and Layyah districts for 2018/19 and 2019/20.8 This data analysis reveals that bills smaller than PKR 50,000 (USD 323.8) were approximately 13.36 percent (64 percent volume) and 18.17 percent (70 percent volume) of total expenditure transactions for Layyah and 25.42 percent (75 percent volume) and 12.44 percent (76.43 percent volume) for Rawalpindi (for details, please see Annex-4.2 for Layyah and Annex-4.3 for Rawalpindi). Of the total expenditures for FY 2018/19, operating expenses (A03) comprised 65 percent (86 percent volume) and 59 percent (79 percent volume) for Layyah and Rawalpindi, respectively. However, for FY 2019/20, operating expenses constituted 75.66 percent (86 percent volume) and 39.72 percent (82 percent volume) of total expenditures for these two districts. Some of the top operating expense categories for both districts include: (i) drug and medicine purchases (A03927); (ii) POL charges (A03807); (iii) electricity (A03303); (iv) travelling allowances; (v) printing and publications (A03902); and (iv) stipends/incentives (A03959). Collectively for both years, the bills in Layyah fell below the value of PKR 50,000 (USD 323.8) for operating expenses constituted about 58 percent of total volume, yet only 13 percent of total expenditures. By contrast, this compares to a volume of 62.5 percent and a value of 12.3 percent of total expenditures for Rawalpindi. These bills take on average about 6 days to be cleared by the AGPR. However, clearly, these should not undergo the detailed scrutiny expected for a bill of over PKR 1 million (USD 6,476). Implementing a more efficient payment mechanism for these low-value operating expense bills can potentially free up 265 days of work of the 365 days per day for both the staff at the AGPR and at the spending units. 2.2.1 Variance Analysis The process flow (Figure 2) and the graphical comparison (Figure 3 along with Table 1 below) show that for the Rawalpindi District, operating expenses were 79 percent volume of total claims/bills (59 percent of total value) for FY 2018/19, as compared to 82 percent of total volume (approximately 40 percent of total value) for FY 2019/20. This is similar to the Layyah District, where operating expenses were 85.71 percent of total volume (65 percent of total value) for 2018/19. This compares with data for 2019/20, where the volume slightly increased to 85.74 percent with a corresponding 10.66 percent increase, thus elevating the percentage value of these expenses to 75.66 percent of total expenditures. When compared with 2018/19, total expenditures for Rawalpindi for FY 2019/20 increased by 143 percent (11.43 percent increase in volume of bills/claims). This included an operating expense increase of 63 percent (a corresponding 16 percent increase in the number of bills), which was possibly due to a corresponding 1,043 percent rise in employee-related expenses. This was possibly due to healthcare-related COVID-19 interventions. The province of Layyah experienced a 12.64 percent reduction in total expenditures, which included a 17 percent reduction in employee retirement benefits, and a 62 percent decrease in grants, subsidies and write- offs. Repairs, maintenance and operating expenses still rose by 26 percent and 1 percent, respectively. The total bill volume decreased by a little over 4 percent. The smallest bill value was observed to be PKR 200 (USD 1.29), and the largest bill value was about PKR 6.86 million (USD 44,430). This is clearly indicative of an absence of control rationalization from an efficiency perspective. Spending the same amount of time and effort — from at least six different officers in two different departments — on a bill of PKR 200 (USD 1.29) as is spent on a bill of PKR 6 million (USD 38,860) signals a clear need to introduce changes to enhance processing efficiency and reduce the administrative overhead (Box 2). Findings 5-6 5: Operating expenses constitute the highest volume and proportion of total expenditures. 6: Bills for PKR 200 (USD 1.29) or more undergo the complete PRACAP cycle, that is, the same amount of time and effort as bills for PKR 6 million (USD 38,860). 8 Data for eight districts was requested for a more thorough comparison, but it was not received. 16 Table 1: Districts - Volume/Value Analysis (PKR) District/ Expenditure 2018-2019 2019-2020 Variance from 2018/19 Classification Total Value Val Smallest Largest Total Vol Total Value Val Smallest Largest Total Vol Value Val Vol Vol % Bill Bill Bills % % Bill Bill Bills % % Var % Rawalpindi 114,485,105 1688 278,139,303 1881 163,654,198 143% 193 11% A03-Operating 67,655,594 59% 200 2,080,000 1335 79% 110,487,126 40% 540 6,978,056 1550 82% 42,831,532 63% 215 16% Expenses A01-Employee 11,989,546 10% 4,744 6,859,231 35 2% 138,136,969 50% 18,700 49,911,160 34 2% 126,147,423 1052% -1 -3% Related Expenses A04-Employees 25,666,620 22% 41,133 999,240 89 5% 15,877,044 6% 115,920 1,296,120 39 2% (9,789,576) -38% -50 -56% Retirment Benefits A13-Repairs and 6,084,582 5% 1,200 500,000 158 9% 6,461,401 2% 1,200 98,402 183 10% 376,819 6% 25 16% Maintenance A09-Physical 2,892,003 3% 4,500 479,000 65 4% 7,176,763 3% 7,488 499,590 75 4% 4,284,760 148% 10 15% Assets A06-Transters 196,760 0% 24,640 49,600 6 0% 0% 0% (196,760) -6 Layyah 75,117,090 4.000.000 630 65,623,087 603 (9,494,003) -13% -27 -4% A03-Operating 49,178,876 65% 849 1,980,000 540 86% 49,652,312 76% 691 2,760,000 517 86% 473,436 1% -23 -4% Expenses A04-Employees 11,013,700 15% 167,160 4,000,000 22 3% 9,134,325 14% 221,447 4,000,000 17 3% (1,879,375) -17% -5 -23% Retirment Benefits A05-Grants, 12,300,000 16% 600,000 1,900,000 8 1% 4,700,000 7% 400,000 1,900,000 7 1% (7,600,000) -62% -1 -13% Subisidies and Writeoffs A13-Repairs and 1,663,608 2% 2,900 97,520 55 9% 2,094,096 3% 5,000 95,794 60 10% 430,488 26% 5 9% Maintenance A01-Employee 910,947 1% 14,931 622,908 4 1% 0% 0% (910,947) -4 Related Expenses A09-Physical 49,959 0% 49,959 49,959 1 0% 42,354 0% 19,890 22,464 2 0% (7,605) -15% 1 100% Assets Grand Total 189,602,195 200 6,859,231 2318 343,762,390 540 49,911,160 2484 154,160,195 81.31% 166 7.16% Source: FABS Shown below are the following figures comparing the Major Object Code level as a percentage of total expenditures: ● Rawalpindi and Layyah District Comparison: • Figure 4: Year 2018/19 • Figure 5: Year 2019/20 ● Comparison of FY 2018/19 and 2019/20: • Figure 6: For Layyah • Figure 7: For Rawalpindi 17 Figure 3: HCE: A Comparison of Layyah and Rawalpindi Districts (FY 2018/19) Health Care Expenditure Analysis Rawalpindi Rawapindi & Layyah Comaprison (2018-2019) Lavyah 65.47% 59.10% 22.42% 14.66% 16.37% 10.47% 5.31% 2.21% 2.53% 0.07% 1.21% A03-Operating A01-Employee A04-Employees A05-Grants, Subisidies A13-Repairs A09-Expenditure Expenses Related Expenses Retirment Benefits and Writeoffs of Loans/ and Maintenance on Acquiring Advances/Others of Physical Assets Source: FABS Figure 4: HCE: A Comparison of Layyah and Rawalpindi Districts (FY 2019/20) Health Care Expenditure Analysis Rawalpindi Rawapindi & Layyah Comaprison (2019-2020) Lavyah 75.66% 49.66% 39.72% 13.92% 2.32% 5.71% 3.19% 7.16% 0.00% 2.58% 0.06% A03-Operating A01-Employee A04-Employees A13-Repairs A09-Expenditure A05-Grants, Subisidies Expenses Related Expenses Retirment Benefits and Maintenance on Acquiring and Writeoffs of Loans/ of Physical Assets Advances/Others Source: FABS Figure 5: HCE: Layyah District Comparison (FY 2018/19 and 2019/20) Health Care Expenditure Analysis 2018-2019 Layyah Comaprison (2018-2019 & 2019-2020) 2019-2020 75.66% 65.47% 14.66% 13.92% 16.37% 5.71% 7.16% 2.21% 3.19% 1.21% 0.00% 0.07% 0.06% A03-Operating A04-Employees A05-Grants, Subisidies A13-Repairs A01-Emplovee A09-Expenditure Expenses Retirment Benefits and Writeoffs of Loans/ and Maintenance Related Expenses on Acquiring Advances/Others of Physical Assets Source: FABS Figure 6: HCE: Rawalpindi District Comparison (FY 2018/19 and 2019/20) Health Care Expenditure Analysis 2018-2019 Rawalpindi Comaprison (2018-2019 & 2019-2020) 2019-2020 59.10% 49.66% 39.72% 22.42% 10.47% 5.71% 5.31% 2.32% 2.53% 2.58% 0.17% 0.00% A03-Operating A01-Emplovee A04-Employees A13-Repairs A09-Expenditure A06-Transfers Expenses Related Expenses Retirment Benefits and Maintenance on Acquiring of Physical Assets Source: FABS 18 2.2.2 Breakdown of Operating Expenses Finding 7 The purchase of drugs and medicines (A03927), electricity (A03308), POL charges (A03807), travelling allowances (A03805), printing and publication (A03902), stipends (A03959), and the cost of stores (A03942) were among the top operating expenses for both the Layyah and Rawalpindi districts (Figures 8 and 9). Figure 7: Layyah: Top-5 Operating Expenses (FY 2018-19 and 2019-20) Top 5 Operating Expenses % age of Layyah (2018-2019) Layyah (2019-2020) Operating Expenses Value (Millions PKR) A03902-Printing 8.88 A03805- 8 and Publication 4.37 Travelling Allowance 3.88 11.19 13 A03303-Electricity A03303-Electricity 5.50 6.66 A03959-Stipend, 12.67 17 A03942- Incentives, Awards 6.23 Cost of Other Stores 8.39 and Allied Expenditure A03807-P.O.L Charges, 19.78 A03807-P.O.L Charges, 17 Aeroplanes, Helicoptors, Aeroplanes, Helicoptors, Staff Cars, Motor Cycles 9.73 Staff Cars, Motor Cycles 8.43 A03927-Purchase 24.43 A03927-Purchase 21 of Drugs and Medicines 12.01 of Drugs and Medicines 10.38 0 5 10 15 20 25 30 0 5 10 15 20 25 Source: FABS Figure 8: District Rawalpindi Top-5 Operating Expenses (FY 2018-19 and 2019-20) Top 5 Operating Expenses % age of Rawalpindi (2018-2019) Rawalpindi (2019-2020) Operating Expenses Value (Millions PKR) 7 A03805- 10 A03303-Electricity 4.91 Travelling Allowance 10.82 A03959-Stipend, 8 11 A03942- Incentives, Awards 5.25 Cost of Other Stores 12.48 and Allied Expenditure A03805- 14 13 A03970-Others Travelling Allowance 9.18 14.58 A03807-P.O.L Charges, 23 A03807-P.O.L Charges, 16 Aeroplanes, Helicoptors, Aeroplanes, Helicoptors, Staff Cars, Motor Cycles 15.75 Staff Cars, Motor Cycles 17.55 A03927-Purchase 29 A03902- 24 of Drugs and Medicines 19.32 Printing and Publication 26.57 0 5 10 15 20 25 30 0 5 10 15 20 25 30 Source: FABS 19 2.2.3 AGPR Bill Processing Efficiency A consolidated review of all bills (Table 2 and Figure 2 above) revealed that the AGPR processes between 84 to 86.5 percent of bills within 7 days of receipt. However, 11.5 percent of bills take between 7 to 14 days to process, which means that about 95 percent of all bills are processed within 14 days. Finding 8 The AGPR processes 97 percent of bills within 14 days. Table 2: AGPR Bill Processing Efficiency Bill Processing Number of Bills Percentage of Bills Efficiency Layyah Rawalpindi Layyah Rawalpindi 7 Days or less 1,064 3,022 86.29 84.67 8-14 Days 140 402 11.35 11.26 15-21 Days 23 109 1.87 3.05 22-28 Days 3 19 0.24 0.53 29-35 Days 1 10 0.08 0.28 36+Days 2 7 0.16 0.20 Grand Total 1,233 3,569 100.00 100.00 Source: FABS Figure 9: AGPR Bill Processing Efficiency Number of Bills/Days to Process Lavyah Rawalpindi 3 500 3 022 3 000 2 500 2 000 1 500 1 064 1 000 500 402 140 23 109 3 19 1 10 2 7 0 7 Days or less 8-14 Days 15-21 Days 22-28 Days 29-35 Days 36+Days Percentage of Bills/Days to Process Lavyah Rawalpindi 100 86.29 84.67 80 60 40 20 11.35 11.26 1.87 3.05 0.24 0.53 0.08 0.28 0.16 0.20 0 7 Days or less 8-14 Days 15-21 Days 22-28 Days 29-35 Days 36+Days Source: FABS 20 2.2.4 Transaction Slabs Analysis These analyses reveal that there is an opportunity to simplify the payment process for these low-value bills, which have a direct impact on service delivery. They should not have to undergo the complete PRACAP cycle involving at least six different officers in at least two government departments. Figure 10: Primary and Basic Health Care: Expenditure Value Interval / Volume Analysis % of Total Value 4% 6-7 MLN % of Total Volume 0% 2% 3-4 MLN 0% 3% 2-3 MLN 0% 1-2 MLN 11% 1% 12% 500k - 1MLN 1% Value in PKR 6% 400k - 500k 1% 6% 300k - 400k 2% 13% 200k - 300k 4% 8% 100k - 200k 4% 14% 50 - 100 K 14% 21% Less than 50 K 73% 0% 10% 20% 30% 40% 50% 60% 70% 80% Volume/Value Analysis Layyah and Rawalpindi (2018-2019) Count % of Total Cumulative Sum of Gross % of Total Cumulative Transaction Slabs (PKR) of Bill# Volume Volume Amount (PKR) Value Value % 01 Less than 50 K 1687 73% 73% 39,138,499 21% 21% 02 Between 50 and 100 K 321 14% 87% 26,150,793 14% 34% 03 Between 100k and 200k 104 4% 91% 15,558,416 8% 43% 04 Between 200k and 300k 98 4% 95% 23,740,992 13% 55% 05 Between 300k and 400k 35 2% 97% 12,279,987 6% 62% 06 Between 400k and 500k 24 1% 98% 10,670,474 6% 67% 07 Between 500kand 1MLN 31 1% 99% 23,378,852 12% 80% 08 Between 1 & 2 MLN 13 1% 100% 21,668,077 11% 91% 09 Between 2 & 3 MLN 3 0% 100% 6,156,874 3% 94% 13 Between 6&7 MLN 1 0% 100% 6,859,231 4% 98% 10 Between 3 & 4 MLN 1 0% 100% 4,000,000 2% 100% Grand Total 2,318 189,602,195 Source: FABS Finding 9 Seventy-three percent of the bills constituting 21 percent of the value are under PKR 50,000 (USD 323.8), whereas 87 percent of the bills constituting 34 percent of total expenditures are under PKR 100,000 (USD 648). 21 2.2.5 Potential Effort Savings As can be seen from Figures 12 and 13, as well as Table 3, if a transaction threshold of PKR 50,000 (USD 323.8) is set, it can deliver dramatic savings in terms of a government officer’s time and effort. There is also a potential to reduce the current workload by as much as 65-75 percent by establishing a more efficient mechanism to manage low-value, high-volume transactions. The freed-up resources can significantly contribute toward improving service delivery. Figure 11: Potential Effort Savings by Transaction Slabs Quantum of Volume/Effort by Transaction Slabs 2019-2020 2018-2019 Rawalpindi 23.23% More than 50K 24.41% 76.77% Less than 50K Value in PKR 75.59% Layyah 29.02% More than 50K 34.76% 70.98% Less than 50K 65.24% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Source: FABS Figure 12: Materiality Analysis and Percentage of Total Expenditures by Transaction Slabs Percentage of Total Expenditure by Transaction Slabs 2019-2020 2018-2019 Rawalpindi 87.56% More than 50K 74.58% 12.44% Less than 50K Value in PKR 25.42% Layyah 81.83% More than 50K 86.64% 18.17% Less than 50K 13.36% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Source: FABS 22 Table 3: Value/Volume/Effort Analysis using Consolidated Data Total Days 365 261 Slab (PKR) Total Bills per Day 6.35 8.88 Bills Saving Cumulative Saving Cumulative Saving Saving 01 Less than 50 K 1,687 265.64 265.64 189.95 189.95 02 Between 50 K and 100 K 321 50.55 316.19 36.14 226.09 03 Between 100 K and 200 K 104 16.38 332.56 11.71 237.81 04 Between 200 K and 300 K 98 15.43 347.99 11.03 248.84 05 Between 300 K and 400 K 35 5.51 353.51 3.94 252.78 06 Between 400 K and 500 K 24 3.78 357.28 2.70 255.48 07 Between 500 K and 1MLN 31 4.88 362.17 3.49 258.97 08 Between 1 & 2 MLN 13 2.05 364.21 1.46 260.44 09 Between 2 & 3 MLN 3 0.47 364.69 0.34 260.77 10 Between 3 & 4 MLN 1 0.16 364.84 0.11 260.89 13 Between 6 & 7 MLN 1 0.16 365.00 0.11 261.00 2,318 365 261 Source: FABS Finding 10 There exists a business case for utilizing transaction thresholds augmented by risk-based controls. Setting the specified limit of PKR 50,000 (USD 323.8) could potentially save 130 days of effort in each District (265/2). 2.2.6 Unutilized Provisions of the APPM Sections 4.3.5 and 4.5.3 of the APPM manual outlined the detailed accounting procedures for claims above the specified limit (see Annex-4.6). For claims below the specified limit, Section 4.2.9 of the APPM states the following: ● All expenditures below the specified limit shall be paid by the DDO through the imprest account and shall follow directions as detailed in APPM section 4.2.10. ● Advances from petty cash will be recorded in a register and signed by the recipient of advance. ● The DDO will submit an imprest account claim (Form 4K) bearing the approval of a delegated officer within the department/entity. ● Although the remainder of the procedure remains the same, the check will be made in the name of the DDO. Finding 11 Provisions exist in the current financial management regulations that allow the use of the imprest and setting of transaction thresholds to bypass the complete PRACAP cycle. 23 3. OPTIONS ANALYSIS There are a number of options that can be implemented, including both immediate and medium-term interventions to help expedite bill processing for transactions that are low-value/high-volume and that have a direct impact on health care service delivery at the primary and basic health care units. They could be used to create a system to provide greater visibility into bill processing efficiency, such as the quantum of bill in the pipeline, as well as the financial impact. In the immediate term, there are options that require no investment — only an efficient and well-planned use of the existing legal provisions, such as use of the imprest and the setting of the prescribed limit for transactions requiring the complete PRACAP cycle. 3.1 Quick wins requiring no investment The NBP is now at par with commercial banks in offering digital services to its customers. As can be seen from Figure 13, the NBP allows utility and mobile bill payments via its online banking channels. It also provides traceable fund transfer services to other bank accounts, as well as to the computerized national identity card (CNICs) for petty transfers. Furthermore, security controls, such as device authentication through one-time password and authorization PINs, for all transactions can be used to assign responsibility and custody of the enabled devices to officers with delegated authority. In the same manner as check signatories are identified to banks — when staff are reassigned to other districts — the credentials of the staff assuming duty can be provided to the NBP to enable digital banking on their devices. Figure 13: NBP Digital Service Offerings Welcome to the world of Digital Banking where financial services are available to NBP Conventional & NBP Aitemad (Islamic Banking) Customers 24/7. Now equipped with new features with enhanced security controls including: ● Self-Registration New ● Funds Transfer to/From NBP Conventional/NBP Aitemaad (Islamic Banking) Accounts New ● Device Authentication through One Time Password (OTP) & Device Binding Option New ● 4 Digit Mobile PIN (MPIN) for all Financial Transactions New ● Add Multiple Accounts New ● Improved Beneficiary Management & Beneficiary Payments New ● Union Pay QR, NFC Payment & QR Code Generation New ● School Fee Payments, Utility Bill Payment, Mobile Bill payments/Top up & Others ● Funds Transfers services i.e. Inter Bank Funds Transfer, Local Funds Transfer & CNIC Transfer ● Biometric Login (Touch ID/Face ID) and many more Source: nbp.com.pk 3.1.1 Provide a Traceable Imprest Account to the BHUs Providing an imprest account to be utilized at the discretion of the Head of the BHU can expedite the payments and positively impact basic and primary health care service delivery. This does not require ‘cash’ to be handed out; rather, the NBP online payment mechanism is utilized to maintain an audit trail of the payments made. The following control mechanisms are proposed for this intervention: ● The imprest is to be maintained at the NBP and is not to be handed out in cash. ● The upper limit of the imprest accounts maintained at the NBP will be PKR 50,000 (USD 323.8). ● Audit trails will automatically be established and maintained as payments are to be made only via the NBP banking app. This app allows payments against registered vendors or ID cards and phone numbers. ● The notes/comments field can be used to input the object code against which payments are being made, thus allowing for reconciliation and submission of expenditure details required to replenish the imprest. The KP and Punjab governments have recently introduced imprest accounts to health facilities managed by health committees. This now requires building fiduciary capacity at the PHC facilities. 24 3.1.2 Register Utilities and Official Phone Bills on the NBP Platform As can be seen from Table 4, utility bill payments and mobile bill payments through the NBP channels can reduce at least 10 percent of the volume of the total workload from both the SUs and the AGPR. This is also true for other utilities, such as water and gas, in which case the efficiency gains will be slightly higher. The benefit is the automatic update of each registered utility bill as soon as the invoice is generated from utility suppliers. Table 4: Value/Volume Analysis of Electricity and Telephone Expenses District Layyah Rawalpindi Year 2018-2019 2019-2020 2018-2019 2019-2020 Account Head Vol % Value % Vol % Value % Vol % Value % Vol % Value % Electricity 10.5 7.33 7.36 10.15 4.16 4.29 2.96 1.91 Telephone & Trunk 3.86 0.26 3.11 0.35 6.45 0.92 6.25 0.42 Calls Total 14.36 7.59 10.47 10.5 10.61 5.21 9.21 2.33 Source: FABS 3.1.3 Mandate e-Payments via the NBP This recommendation can and should be implemented across all payments made by the AGPR — and not just for the health sector. The APPM requires all payments to be made via the SBP or the NBP. Utilizing the NBP’s electronic services will result not only in efficiency gains, but it will also circumvent the risk/gap in the current process in which checks are handed over to the SUs for onward distribution to claimants. This will also align the process with the APPM regulations, which require the checks to be handed over only to the claimant or his/ her authorized representative, which is not the current practice. 3.2 Technology interventions requiring investment Box 8: The Financial Accounting and Budgeting System The FABS represents one of the largest SAP-based public sector implementations of an integrated management information system (MIS) in the world. The budgets and financial reports of the federal, provincial and district tiers of the government are processed through the FABS. Monthly salaries, General Provident fund payments and pensions of nearly 3 million public sector employees and thousands of daily contingent payments and receipts of government entities are also processed through the system. Essentially, the FABS is comprised of the New Accounting Model (NAM) and a SAP-ERP-based information technology platform. The New Accounting Model (NAM) was introduced in the year 2000 by the approval of the Auditor General of Pakistan. It aims to improve the traditional government accounting system by introducing a shift towards modified cash-basis of accounting, double-entry book-keeping, commitment accounting, fixed asset accounting, and a new multi-dimensional Chart of Accounts. Source: https://fabs.gov.pk/ Three technology intervention options exist to address the issues highlighted in this report: (i) creating a customized online bill submission system (OBSS); (ii) extending the FABS to spending units; and (iii) utilizing a third-party, off-the-shelf, or a cloud-based solution. The first option is recommended, as the other two options entail significant licensing costs, as well as ownership, change management and implementation challenges. 25 3.2.1 Customized Online Bill Submission System The current process contains a design deficiency in that it fails to mandate the production of key reports at the SU level. These form the very basic building blocks of an effective financial management system. The only dates that can be measured are the day the bill was submitted to the AGPR, the day it was certified, the day it was authorized for payment, and the day the check was printed. The following are not recorded and therefore not measured: how long the bill waited at the DHO; and how much time after collecting the check from the AGPR did the DHO staff spend before handing the check over to the claimant. The key requirement necessary to bridge the current gaps and lay a solid foundation for efficient financial management of public funds with a direct impact on health service delivery is the introduction of an innovative customized solution that is an easily accessible (both by a PC/laptop and by smartphones) system. This system must be user friendly and allow any level in the health care hierarchy, such as primary health care centers, to submit bills online — without having to go through the existing manual processes (as previously described in this report). The New Accounting Model (NAM) CoA currently cannot classify transactions beyond the district level. The cost center segment of the CoA is utilized to classify transactions by the District Health Offices and not the BHUs (see Annex-4.1). In addition to being integrated with the FABS at the cost-center level, the OBSS will provide a further level of detail that is not currently available in the FABS. Specifically, it concerns the ability to capture BHU-level bills, build realistic budgets from the bottom-up, and potentially link them to output-based indicators. Figure 14: OBSS High-Level Architecture Budget Approved Budget Call Review & PC1 Codes Circular Approval Supp. Budget Grant Releases Awarded Contract Details Vendor, Amounts, Delivery dates, milestones etc Approved contract/PO Codes & links to Scanned Total Budget and Release copies in e-Proc/SAP information Login System automatically determins User Integrated OBSS Department and Cost Centre based on UserID Real-time Budget check with Approved Bills forwarded to EFT to each entered Bill SAP for payment claimants Only approved/authorized PO’s, Contracts, Vendors Key features for any system that addresses the identified gaps should include the following: 1. Budget to be checked from an authorized and verified source, that is, the FABS. A vendors list to be created through a controlled process. 2. 3. Applicable payments can only be made against approved purchase orders/contracts. Note: For all options: ● An implementation strategy/road-map will be required. ● A review of the FABS implementation landscape, implemented modules, and license usage audits must be performed to assess licensed functionality that is not being used. This is causing lost invest- ment and unutilized potential for process improvement. 26 3.2.2 High-Level Business Requirements High-level business requirements for the introduction of the OBSS are presented Table -5 below. These will require detailed formal documentation to be translated into document soliciting proposals. Table 5: OBSS: High-Level Requirements Functionality Requirements Notes Vendor Creation Screen Mandatory The OBSS will be replicated with vendor data from the SAP. Purchase Order Screen Mandatory Can only be entered for approved vendors. Bill Submission Screen Mandatory Record ALL bills (not just approved bills). Facilities to Check against Mandatory Will be done by way of an import of the approved budget from Budget in Real Time the SAP to the OBSS. Facilities to Pass Approved Bills Mandatory Role-based permissions. to the AGPR Facilities to Request Budget Optional Role-based permissions. Appropriations via the OBSS User Profiles Mandatory The system should be able to automatically populate user profiles, such as cost centers, budgets, vendors, and POs based on user credentials. Administrative Module Mandatory Establish users and import master data and other administrative tasks. Audit Trails Mandatory The system should have built-in order trails for each transaction. Reports and Reconciliations Mandatory Standardized reports to be made available based on user needs/permissions. Such a system should allow for the capture of the basic — and currently unavailable — information produced within the system boundary of the SUS. It forms the basic building blocks for financial management and includes reports (see sample in Annex 4.8) that provide summaries and details for: 1. Total claims received at the DHO. 2. Total claims rejected. 3. Total claims in process. 4. Total claims sent to the AGPR for processing. 5. Total claims returned by the AGPR. 6. Total claims paid. 7. Total commitments. 8. Forecasts for a given number of months, for example, a 3-month forecast. 3.2.3 Vendor Creation Screen All payment recipients need to be registered into the FABS, requiring completion of vendor creation forms by the SUS (see Annex 4.7). This allows the vendor’s master data to be entered in a controlled manner and tracked. The OBSS will require an initial import of all the necessary vendor data from the FABS, thereby enabling the entering of claims against approved vendors. However, new vendors can be requested electronically and via the OBSS vendor creation request screen. Submitting a “Vendor Creation” request will create a file ready to be read by the FABS. It can then create a new vendor or enable an existing vendor for the respective SU. Once a vendor has been created and reflected in the OBSS, the bills can be entered. Once tested, the frequency of information exchange can be scheduled to the desired frequency or kept on demand. This will allow for POs, contracts, and invoices/claims to be submitted once goods/services have been received. 27 3.2.4 PO Creation Screen The APPM specifies an approved purchase order as a prerequisite for payment for certain kinds of expenditures, such as civil works. The OBSS will allow for the submission of approved POs to FABS along-with PDF versions of the original contract. Subsequent bills will allow the appropriate PO to be picked up from a drop-down list and will automatically display the vendor. By entering PO details, such as expected delivery dates and payment terms, the system will be able to automatically generate commitments. These will then be considered in the numerous budget reports that the OBSS will also provide. 3.2.5 Bill Submission Screen The aim of the OBSS is to provide an easily available, user-friendly facility that allows all claimants to submit claims against the government exchequer electronically, that is, without having to go through any direct physical interaction. Vendors having created an account will be able to view their active contracts/POs linked to the respective SU. They will also have the ability to attach scanned copies of the required documents. This will reduce direct interaction between the department and suppliers. Likewise, it will reduce the risks of rent-seeking, while also significantly enhancing efficiency. The OBSS will direct each bill to the respective unit for further processing. Once approved, it will be submitted to the FABS for payment. At any given time, the system will be able to provide a summary of the status of bills received, parked, approved, submitted, or rejected against the budget. A sample report has been provided as Annex 4.8. 3.2.6 Integration Requirements This system should include the approved budget, which can be extracted from the AGPR’s SAP System (FABS), thereby enabling real-time budgetary control. The data will be one way, that is, it can only be entered by the automated process between the OBSS and the FABS. The frequency of updates will be very low, that is, once a year after the budget has been approved and uploaded into the FABS, as well as with subsequent supplementary budgets or as a result of reappropriations. This will have no licensing implications, as the budget extraction from the FABS and input into the OBSS will be by way of a report for which licenses are not needed. The FABS and the e-procurement system (under development) should also be linked, whereby all public procurements should include reference to the approved PC1 code. This PC1 code should already be available under the project segment of the NAM CoA as part of the approved development budget. Once the procurement process has been completed in the e-procurement system, it should pass on the copy (pdf version) of the finalized contract to the FABS. This will eliminate the need to attach a copy of the contract with each progressive bill. The OBSS should also be populated with all of the vendor’s master data relevant for the health sector that is available in the form of drop-down lists, rather than having to input any information manually. This will be necessary to eliminate the possibility of errors. With the approved budget and a synchronous vendor/payee list, it will be possible for staff anywhere in the field to access the OBSS. This can be done either by their smartphones or laptops, which will automatically determine each user’s cost center based on verified credentials. Thus, it will allow them to input expenditure claims online, as well as attach a snapshot or scan of the receipts taken either by phone or computer. Such a system will provide visibility into bill processing efficiency. In addition, due to increased visibility and understanding, the system will enable planning and forecasting finances for the department. The system will allow authorized approvers within the SU to approve bills using the OBSS, as well as to submit bills to the AGPR system for further processing. Once the submission to the AGPR occurs, it will generate a file that can then be read by an automated process and fed into the FABS system. Payments made — either by way of check (under the current process) or by way of EFT (once this technical option is possible) — will trigger the creation of a report. The report will then be imported by the OBSS to update the status of the bills accordingly. 28 3.2.7 Opportunity to Introduce Output-based Budgeting The concepts presented in sections 3.2.1 to 3.2.6 will need to be elaborated into a formal business and functional requirement document. This presents an opportunity to streamline and introduce a robust coding nomenclature for all current and future basic and primary health care units. Currently, this is not possible due to the limitations in the current FABS CoA. This will allow the PHC-level details to be maintained in the OBSS, while simultaneously providing information at an aggregate level that can be integrated with the FABS. The OBSS provides an opportunity to introduce an output-based budgeting framework and link it to each primary health care center. Examples include the number of Immunizations targeted for various healthcare initiatives at the major, minor, detail or sub-function levels, such as mother and child, dispensaries, immunizations, and so on. 3.3 Process Changes The OBSS will eliminate the need to maintain any paper-based records at the DHOs. Therefore, the following forms, in accordance with the APPM of 1993, will no longer be needed (Table 6). Table 6: Indicative List of Forms to be Replaced by the OBSS Form# Purpose APPM Form-4 A Purchase Order Form 4.2.4 Form4-AA Budget Availability Review Clearance form 4.2.3 Form4-B Claim Voucher 4.5.3 Voucher Preparation Form4-C Commitment advice form Source: APPM 3.4 Other options Two other possible options exist, but the cost determination should be done carefully. However, before those options are described, it is pertinent to provide a bit of background about the FABS. The configured FABS is a SAP ECC 6 system comprised of 5 servers, including 1 in the capital and one in each of the four provinces (running SAP ECC6) + 1 development and 1 QA server. Professional and limited professional licenses have been acquired (license costs are for data entry points, not for viewing reports/ extracted data). The FABS only ensures that the servers are made available on a 24-hour, 7 day per week basis for technical support and some report development. Bill processing and related functions are dealt with by the system users in the Accountant General offices. The processes there are largely similar, albeit with some slight differences between provinces/capital and ministries. The system comes with a built-in workflow, which allows for different approval routes based on pre-defined rules. Among others, the rules include different processing based on transaction thresholds. The added benefit is that the budget is available in the same system and for each requisition, PO or invoices. Thus, the budget can be checked instantaneously. A comprehensive list of vendors providing goods/services to government entities is also available in the SAP. 3.4.1 Extending FABS (SAP) to the SUs Extending the SAP to the SUs might be the easiest technical change to implement; however, the cost needs to be carefully estimated. As can be seen from Figure 15, extending the SAP to the SUs and configuring the workflow to allow automatic payment authorization for payments below PKR 50,000 (USD 323.8) would dramatically reduce the effort involved in bill processing. 29 Figure 15: Pre-Audit Volume Flow Reduction: Scenario PKR 50,000 (USD 323.8) as Specified Limit ~73% Vol / 16% Value < 50 K Payment Authorization Claim EFT to Claim Claimant/Vendor submitted Value to AGPR Bank Accounts > 50 K Pre-Audit/ Certification 27% Vol / 84% Value However, implementing this option, that is, extending the FABS to the Spending Units, will not only be the most cost-effective option in terms of the complicated licensing terms and conditions and the high licensing costs — even to pilot in a few sectors, such as health care. Furthermore, it will require extensive training and capacity building to enable the staff in the SUs to begin using the system. Whether or not this option is explored, a thorough review should be carried out to identify gaps between the implemented functionality versus the functionality that the government is already paying for in terms of license fees. This will help to ascertain how the maximum value can be driven from the existing investments made each year in terms of licensing fees. ● For example, it appears that the «attach document» functionality, which is a given in all modern ERPs, is not being utilized for storing and online availability of key documents, such as ( the PDFs of ap- proved contracts, approved POs, and so on. –Such documents are needed at various stages of the approval process and require the physical submission of physical documents as supporting evidence. This functionality should be explored within the SAP, as the SAP is the best of the ERPs, it can be utilized to eliminate the need to move paper-based files, reduce stationary costs, and derive the maxi- mum value-for-money from the payment of the SAP license fees. ● Although exceptions exist, in accordance with the PFM regulations, the development expenditures related to capital procurement must have an approved PC1. The PC1s should be allocated codes under the project segment of the NAM CoA and all procurements — whether for goods or services — should contain this project code as a reference. For example, according to the current APPM, each progressive bill requires a copy of the original PO, which should not be the case if a secure electronic version, such as a PDF of the original file and each subsequent amendment, is stored with the tran- saction record. 3.4.2 Implementing a Third-Party Solution It is also possible for a third party, off-the-shelf solution to be implemented for real time integration with the FABS. Significant low-cost solutions exist, such as Odoo, SAP Concur and Appian (Figure 16). With some variations, they provide both cloud-based as well as in-house solutions. However, they are not recommended due to SAP licensing and related cost implications. Figure 16: Indicative third-party solutions API’s : Budget Check, Approved Bills, Payment Status All Bills Captured Comments/Audit observations Audit evidence Payment Authorizations Supporting Documents available online EFT/Cheque issuance System based Audit trail of Approvals at SU 30 4. ANNEXES 4.1 Annex 1: Cost centEr expenditure analysis There are 18 cost centers in the Rawalpindi District and 11 cost centers in the Layyah District. Table 7 depicts the cost centers with the highest expenditure values first, as well as a comparison of the volume of bills for each over two years. Table 7: Cost Center Details District/Cost Centre Exepnditure Analysis 2018-2019 2018-2019 Total Value Total Volume Total Value Total Volume Value (PKR) % Bills % Value (PKR) % Bills % Rawalpindi 114.485.105 100.00% 1688 100.00% 278.139.303 100.00% 1881 100.00% RV9022-DHORWP (PREVMEASURES) 28,107,164 24.55% 281 16.47% 204,531,932 73.54% 471 24.93% RV9017-DHORWP (GHCRHCBHU) 35,865,691 31.33% 211 13.35% 28,248,242 10.16% 197 10.87% RV9037 - NATIONAL MNCH PROGRAM 14,743,080 12.88% 238 13.95% 5,679,407 2.04% 122 6.46% RAWALPINDI RV9030-DIST HEALTH OFFICE RWP 7,785,974 6.80% 160 9.47% 6,206,391 2.23% 169 8.94% RV9024 - DISTT OFFICER (HEALTH-II) 3,588,474 3.13% 39 2.29% 5,073,419 1.82% 31 1.64% RAWALPINDI RV9023-DISTT OFFICE (HEALTH-III) 5,482,780 4.79% 59 3.46% 2,411,849 0.87% 78 4.13% RAWALPINDI RV9034 - DEPUTY DISTRICT OFFICER (HEALTH) CANTONEMENT BOARD 1,999,432 1.75% 63 3.69% 3,214,907 1.16% 77 4.08% RAWALPINDI RV9026-DYD H O GUJAR KHAN 2,560,292 2.24% 78 4.57% 2,127,407 0.76% 73 3.86% RV9016 - D H O RWP (HOSPITAL CLINICS) 2,083,176 1.82% 40 2.34% 2,453,101 0.88% 39 2.06% RV9028 - DY DHO MURREE (ADHO EST ) 1,475,586 1.29% 32 1.88% 3,035,077 1.09% 67 3.55% RV9029-DYD H O RWP 1,545,673 1.35% 55 3.22% 2,639,711 0.95% 88 4.66% RV9036 - ADHO I C DHDC RWP 2,428,966 2.12% 119 6.97% 1,749,901 0.63% 100 5.29% RV9027-DY D H O (ESTT ) KAHUTA 1,150,308 1.00% 55 3.22% 2,637,511 0.95% 78 4.13% RV9031-DY. DISTRICT OFFICER HEALTH 1,855,805 1.62% 81 4.75% 1,871,446 0.67% 81 4.29% KALAR SYEDAN RV9033-DY. DISTRICT OFFICER HEALTH 967,821 0.85% 47 2.75% 2,540,939 0.91% 73 3.86% Taxial RV9032-DY. DISTRICT OFFICE HEALTHKotli 1,001,393 0.87% 64 3.75% 1,974,306 0.71% 70 3.70% Sattian RV9035 - DEPUTY DISTRICT OFFICER 859,121 0.75% 42 2.46% 1,358,318 0.49% 54 2.86% (HEALTH) RAWAL TOWN RAWALPINDI RV9020-DHORWP (MOTHER CHILD CNTR) 894,734 0.78% 20 1.17% 385.439 0.14% 13 0.69% 0 89,635 0.08% 4 0.23% 0.00% 0.00% Layyah 75,117,090 100.00% 630 100.00% 65,623,087 100.00% 603 100.00% LL9008 - DO (HEALTH) LAYYAH (BHU) 30,793,140 40.99% 204 34.14% 32,575,122 49.64% 218 37.03% LL9019 - DO (HEALTH) LAYYAH 24,328,319 32.39% 201 31.07% 18,182,653 27.71% 211 34.51% LL9601 - District Coordinator IRMNCH & NP 10,961,315 14.59% 70 10.82% 2,750,318 4.19% 18 2.94% LL9024-ZHO LAYYAH 4,347,818 5.79% 11 1.70% 5,698,566 8.68% 24 3.93% LL9020 - DO (HEALTH) LAYYAH (HOSPITAL & DISP) 821,809 1.09% 15 2.32% 1,903,443 2.90% 25 4.09% LL9023-Deputy District Office (Health)Choubara 1,157,670 1.54% 47 7.27% 1,319,298 2.01% 32 5.23% LL9021 - Deputy District Officer (Health) Layyah 892,794 1.19% 29 4,48% 882,629 1.34% 36 5.89% LL9018 - DO (HEALTH) LAYYAH (OTHER) 549,990 0.73% 10 1.55% 1,075,971 1.64% 10 1.64% LL9022 - Deputy District Officer (Health) Karor 963,316 1.28% 27 4.17% 648,624 0.99% 20 3.27% LL9025-ZHOLAYYAH (MCH) 120,454 0.16% 7 1.08% 482,450 0.74% 5 0.82% LL9017 - DO (HEALTH) LAYYAH (MCH) 180,465 0.24% 9 1.39% 104,013 0.16% 4 0.65% Grand Total 189,602,195 2318 343,762,390 2484 Source: FABS 31 4.2 Annex 2: Operating expenses details for Layyah province Table 8: HCE Expense Details: Layyah District (FY 2018/19 and 2019/20) District/Transaction Slabes 2018-2019 2019-2020 Total Value Total Volume Total Value Total Volume Value (PKR) % Bills % Value (PKR) % Bills % Layyah 75,117,090 100.00% 630 100.00% 65,623,087 100.00% 603 100.00% Less than 50K 10,033,190 13.36% 411 63.54% 11,921,872 18.17% 428 70.00% A03805-Travelling Allowance 1,646,385 2.19% 88 13.60% 2,393,067 3.65% 136 22.24% A03942-Cost of Other Stores 1,756,958 2.34% 49 7.58% 1,659,342 2.53% 45 7.36% A03970-Others 1,249,712 1.66% 45 6.96% 1,713,334 2.61% 46 7.52% A03902-Printing and Publication 738,369 0.98% 19 2.94% 996,159 1.52% 25 4.09% A13001-Transport 736,632 0.98% 32 4.95% 792,138 1.21% 28 4.58% A03907-Advertising and Publicity 243,244 0.32% 8 1.24% 1,179,520 1.80% 28 4.58% A03807-P.O.L Charges, Aeroplanes, 742,820 0.99% 28 4.33% 482,960 0.74% 15 2.45% Helicoptors, Staff Cars, MotorCycles A03303-Electricity 711,236 0.95% 29 4.48% 157,174 0.24% 11 1.80% A03901-Stationery 364,811 0.49% 29 4.48% 498,170 0.76% 22 3.60% A13201-Furniture and Fixture 308,108 0.41% 9 1.39% 485,345 0.74% 12 1.96% A13101-Machinery and Equipment 295,158 0.39% 10 1.55% 484,736 0.74% 14 2.29% A03304-Hot and Cold Weather Charges 262,237 0.35% 6 0.93% 286,944 0.44% 6 0.98% A03806-Transportation of Goods 376,690 0.50% 15 2.32% 168,700 0.26% 6 0.98% A03202-Telephone and Trunk Calls 197,865 0.26% 25 3.86% 232,569 0.35% 19 3.11% A03201-Postage and Telegraph 100,000 0.13% 2 0.31% 129,000 0.20% 3 0.49% A03918-Exhibitions, Fairs and other 142,683 0.19% 5 0.77% 0.00% 0.00% National Celebrations A03903-Conferences/Seminars/ 0.00% 0.00% 95,146 0.14% 2 0.33% Workshops/Symposia A13301-Office Buildings 0.00% 0.00% 59,085 0.09% 2 0.33% A09203-I.T. Equipment 49,959 0.07% 1 0.15% 0.00% 0.00% A03927-Purchase of Drugs and 0.00% 0.00% 45,574 0.07% 2 0.33% Medicines A01274-Medical Charges 40,298 0.05% 2 0.31% 0.00% 0.00% A03205-Courier and Pilot Service 19,200 0.03% 3 0.46% 12,745 0.02% 3 0.49% A03905-Newspapers, Periodicals and 21,825 0.03% 5 0.77% 7,810 0.01% 1 0.16% Books A03407-Rates and Taxes 29,000 0.04% 1 0.15% 0.00% 0.00% A09701-Purchase of Furniture and 0.00% 0.00% 22,464 0.03% 1 0.16% Fixture A09201-Hardware 0.00% 0.00% 19,890 0.03% 1 0.16% More than 50K 65.083.900 86.64% 219 36.45% 53.701,215 81.83% 175 30.00% Source: FABS 32 4.3 Annex 3: Operating Expense Details for Rawalpindi province Table 9: HCE Expense Details: Rawalpindi District (FY 2018/19 and 2019/20) District/Transaction Slabes 2018-2019 2019-2020 Total Value Total Volume Total Value Total Volume Value % Value % (PKR) Bills % (PKR) Bills % Rawalpindi 114,485,105 100.00% 1688 100.00% 278,139,303 100.00% 1,881 100.00% Less than 50K 29,105,309 25.42% 1276 74.77% 34,598,616 12.44% 1,444 76.43% A03805-Travelling Allowance 5,218,708 4.56% 288 16.88% 6,788,105 2.44% 382 20.22% A03807-P.O.L Charges, Aeroplanes, 4,743,802 4.14% 168 9.84% 4,765,859 1.71% 175 9.26% Helicoptors, Staff Cars, MotorCycles A13001-Transport 3,775,591 3.30% 100 5.86% 4,045,116 1.45% 110 5.82% AD3901-Stationery 1,859,646 1.62% 71 4.16% 2,941,462 1.06% 105 5.56% A03970-Others 2,269,170 1.98% 81 4.75% 1,919,021 0.69% 67 3.55% A03942-Cost of Other Stores 1,125,524 0.98% 38 2.23% 2,560,031 0.92% 77 4.08% A09701-Purchase of Furniture and 1,413,997 1.24% 40 2.34% 1,490,914 0.54% 142 2.22% Fixture A03902-Printing and Publication 715,195 0.62% 30 1.76% 1,727,918 0.62% 47 2.49% A03907-Advertising and Publicity 886,541 0.77% 37 2.17% 1,412,423 0.51% 43 2.28% A03927-Purchase of Drugs and 1,136,033 0.99% 36 2.11% 919,331 0.33% 28 1.48% Medicines AD3202-Telephone and Trunk Calls 1,002,064 0.88% 109 6.39% 1,033,722 0.37% 116 6.14% A09601-Purchase of Plant and 597,456 0.52% 19 1.11% 700,197 0.25% 19 1.01% Machinery A13101-Machinery and Equipment 441,302 0.39% 30 1.76% 784,096 0.28% 38 2.01% A03806-Transportation of Goods 493,150 0.43% 22 1.29% 621,050 0.22% 21 1.11% A03303-Electricity 549,799 0.48% 48 2.81% 546,624 0.20% 32 1.69% A13201-Furniture and Fixture 521,030 0.46% 16 0.94% 405,942 0.15% 20 1.06% A03201-Postage and Telegraph 310,000 0.27% 19 1.11% 437,500 0.16% 22 1.16% A03906-Uniforms and Protective 306,968 0.27% 19 1.11% 339,937 0.12% 18 0.95% Clothing A01277-Contingent Paid Staff 549,245 0.48% 21 1.23% 0.00% 0.00% A03402-Rent for Office Building 290,500 0.25% 19 1.11% 111,320 0.04% 5 0.26% A03301-Gas 180,185 0.16% 22 1.29% 207,814 0.07% 24 1.27% A03304-Hot and Cold Weather Charges 131,735 0.12% 9 0.53% 184,170 0.07% 8 0.42% A01273-Honoraria 0.00% 0.00% 281,990 0.10% 8 0.42% A03918-Exhibitions, Fairs and other 123,858 0.11% 6 0.35% 144,290 0.05% 6 0.32% National Celebrations A06301-Entertainments & Gifts 196,760 0.17% 6 0.35% 0.00% 0.00% A04114-Superannuation Encashment 123,612 0.11% 3 0.18% 0.00% 0.00% on L.P.R A03903-Conferences/Seminars/ 0.00% 0.00% 98,584 0.04% 6 0.32% Workshops/Symposia A03905-Newspapers, Periodicals and 35,705 0.03% 11 0.64% 50,609 0.02% 23 1.22% Books A03302-Water 30,000 0.03% 4 0.23% 30,000 0.01% 1 0.05% A03305-POL for Generator 0.00% 0.00% 49,591 0.02% 1 0.05% A03959-Stipend, Incentives, Awards and 30,000 0.03% 1 0.06% 0.00% 0.00% Allied Expenditure A03407-Rates and Taxes 25,793 0.02% 1 0.06% 0.00% 0.00% A03904-Hire of Vehicles 20,000 0.02% 1 0.06% 0.00% 0.00% A03205-Courier and Pilot Service 3,940 0.00% 1 0.06% 0.00% 0.00% More than 50k 85,379,796 74.58% 412 25.23% 243,540,687 87.56% 437 23.57% Source: FABS 33 4.4 Annex 4: AGPR Token Figure 17: AGPR Token 4.5 Annex 5: Cash Register Figure 18: Cash Register at the DHO Source: BHU 34 Approval of Expenditure Registration of PO/ Voucher preparation (4.5.3) by a delegated officer Claim Voucher (4.5.5) in the same department (4.5.4) Form B must be prepared for all Bills above • •Approving Officer shall approve the claim A DDO wise «Claim Register» (form 4H) shall • the specified limit if under his/her delegated financial powers be kept by a delegated officer in AGPR Details of Officer making the claim ‣ ‣Review Claim voucher, When a sequential PO is submitted to AGPR • Name of supplier with NTN and full ‣ ‣Review all supporting documents, the sequence number will be checked against postal address ‣Review Purchase Order the PO for the relevant DDO by checking with Actual dates of supply of service or ‣ •E very delegated Officer must have an the Claim Register goods with all supporting documentation Official Stamp for the department whcih  ill to be returned if the Sequence number ‣B Reference number of contract account ‣ must be stamped on each approved bill of PO is incorrect For Civil works ‣ •E nsure Account to be charged is Correct •Bill to be resubmitted by the DDO with Full contract amount • and Visible on the face of the Voucher the correct Seq# and/or reason for Progress payments supported • •E nsure service or supplies have been missing PO in writing by certificates from engineers recieved  hen Po Seq# is correct it will be entered in •W Deductions ‣ •W here Advance is necessary to be paid, the Claim register by the delegated officer and 2nd copy of the sequential PO attached ‣ it is legitimate the PO will be forwarded to the certifying officer to the cclaim voucher  ach time a bill is submitted/resubmitted •E •If not satsisfied, return the claim with the All claim vouchers shall be issued by the • reasons to the person who prepared the the delegated officer in AGPR will check the department with a unique sequential number claim Seq# of claim voucher for the relevant DDO ‣ Gaps in sequence numbers will have •Once rectified, the claim can be resubmitted against the claim Register to be justified •If satisfied Claim Voucher to be returned if Seq# ‣ • Officer making the claim must provide is incorrect ‣Sign the Claim voucher a statement for the staisfcatory receipt If correct, the sequential number will be ‣ ‣Initial all documents supporting the claim of Goods/Service and entry into assets entered in the Claim Register ‣Indicate the capaacity in which the register/stock register The delegated Officer shall then give its ‣ approving offcier has signed own (DAO) unique claim number being the Where the payment is relatedto a commitment • ‣Date of signing next number in the sequence with the date previously registered, the voucher will have • S  end the following documents alongwith of receipt of claim in the claim register. the reference number of the commitment orginal claim to AGPR The claim will then be forwarded to ‣ advice form already sent to the AGPR ‣Original approved PO the certifying officer, dealing with the The claim voucher will then be presented • ‣Attested Copy of approved Contract Department/Entity/DDO to a delegated officer within the same ‣Original approved bill (invoices) from If the claim is returned, it shall be recorded ‣ department/entity for approval the supplier with the date of return Expenditure Preparation and Payments Timing and Priority Authorization of payment (4.5.7) dispatch of cheques below a Certain of CLaim (4.5.10) (4.5.8) Limit (4.5.9) AuthOff will follow policies laid out in Section 4.2.8 • A delegated officer shall • All expenditures • A delegated Officer in AGPR • • Ensure that the claim Voucher/Bill bears evidence prepare and dispatch below the specified shall monitor the timing of that preparation, approval and certification the cheques (as per 4.2.9) limit shall be paid by claims submitted to ensure has been properly carried out ‘Issue of Payment’ the DDO through the •C liams not rejected or Ensure Funds are available to make the payment/ • All cheques must be serially • imprest account and returned are paid withing entertain the commitment numbered and have the shall follow directions 7 working daysof recording identity of the issuers office as laid down in the claims register If not satisified he will not Authorize payment • •C  heques shall be either hand Section 4.2.10. •Priority is given to claims and return the entire file to the certifying officer with reasons for refusal. The Claim voucher written or typed; made to Advances from • in view of their due date of will be endorsed as Rejected order, crossed and marked petty cash will be payment and the date on Not Negotiable excpet those recorded in a register which the claim is recieved If CO is able to rectify the reasons for refusal he/she • drawin the name of DDO for and signed by the by AGPR will do so and resubmit the claim to the AuthOff impresnt and for salaries recipient of advance Recording of Expendditure If CO cannot rectify the reasons, he/she will • paid in cash  DO will subit an •D (4.4.15) return to the person who originally submitted •C  heques to be entered in imprest account •Once a cheque has been the claim with written reason for refusal cheque register, should not be claim (Form 4K) dispacthed the Payee the ‣Once the DelAuth in Department/Entity retifies bearing approval back dated and the amount voucher shall be forwarded the reasons for refusal the officer shall resubmit of a delegated officer should be expressed in both to the Account Section the claim to AGPR under a new claim number within Department/ numbers and words of AGPR When the CO forwards a commitment to the • Entity The claim voucher shall be • •In the A/C section the AuthOff, the latter will enter the commitment While the remainder • marked as PAID and relevant delegated A/C Officer shall into commitment control regiister (form 4D) of the procedure details of payment i.e. record details of expenditure in accordance with Section 4.2.2 remains the same, Cheque#, Date, Amount as stated on the clai voucher Where the AuthOff is satisfied with the claim • the cheque will be A cheque before being • in the sub-ledgeras per voucher he/she shall Authorize the claim voicher made in the name released to the Payee or directions in section 4.4 for payment, sign and date the Certification of the DDO his/her authorized agent, •Once the expenditure and Authorization Register and pass the claim will be recorded as PAID has been recorded, voucher to the relevant officer for the issue in the clai register alongwith the claim voucher and of a cheque. the date it is posted to or all supporting u shall Simultaneously the AuthOff will update the • collected by the payee. be filed by the A/C officer Appropriation Control Register and in doing so reverse andy commitments that may have been previously established Source: APPM 35 4.6 Annex 7: Vendor Creation Form Figure 19: Vendor Creation Form Source: AGPR website 36 4.7 Annex 8: Sample Budget Status Report to be produced by OBSS Figure 20: Sample Budget Report Budget and Bill/Claim Detail District: Rawalpindi — Cost Centre: ID6241 - T.B.Centre, Rawalpindi — From 01 July 2020 to 30 September 2020 Certified Approved Total Total Claims/Invoices Budget Budget Budget Maior Obiect Code Rejected Parked awaiting awaiting Paid Budget Releases Received Check Check Check approval payment # of Count Value Value Count Value Count Value Count Value Count Value Bills  mployee A01 E 1,000,000 - - related expense  roject A02 P 100,000 25,000 1 20,000 5,000 5,000 5,000 1 20,000 Preinvestment An. Operating A03  3,284,716 821,179 17 621,000 200,179 1 11,000 211,179 4 33,000 244,179 9 398,000 3 179,000 Expenses  mployee A04 E - - - - Contributions  rants subsidies A05 G - - - - & Write A06 Transfers - - - - A07 Interest Payment - - - - Loans A08  750,000 187,500 3 187,500 - - - 3 187,500 and Advances A09 Physical Assets 3,654,376 913,594 4 900,000 13,594 1 225,000 238,594 1 225,000 463,594 2 450,000 Principal A10  - - - - Repayments A11 Investment - - - - A12 Civil Works 500.000 125,000 7 136,000 (11,000) (11,000) 1 11,000 - 3 22,000 1 56,000 2 47,000  epairs A13 R 1,345,692 336,473 20 425,000 (88,577) 2 25,000 (63,577) 7 88,577 25,000 6 90,000 2 47,000 3 174,423 and Maintenance Suspense A14  - - - - and Clearing Total 2,408,696 52 2,289,500 119,196 4 261,000 380,196 13 357 577 737,773 19 530,000 6 282,000 10 858,923 Budget Availbility/Review Report Quarter Wise Budget Availbility/ based on Date Paratemers Review Report District: Rawalpindi District: Rawalpindi Cost Centre: ID6241 - T.B.Centre, Rawalpindi — ProiectID: N/A Cost Centre: ID6241 - T.B.Centre, Rawalpindi — ProiectID: N/A Total Budget: 10,634,784 Total Releases: 2,408,696 Total Budget: 10,634,784 Supplementary grant: 0 #of Bills Amount Remaining Total Releases Commitments Expenditure Remaining Claims Recieved 52 2,289,500 119,196 Q1 2,408,696 200,000 1,670,923 537,773 Claims Rejected 4 261,000 380,196 Q2 357,577 (357.577) Claims Parked/Deferred 13 357,577 737,773 Q3 Commitments 3 200,000 537,773 Q4 Claims in Process Remaining 8,226,088 • Certified Awaiting Approval 19 530,000 Surrendered • Approved Awaiting Payment 6 282,000 Supplementary Grant • Paid 10 858,923 Committed Budget 28 1,012,000 Expenditure incurred (Cheque) 10 858,923 Total Releases 2,408,696 Availabe for spending 537,773 37 INTERNAL CONTROL ASSESSMENT AT THE PRIMARY HEALTH CARE Options to Improve the Flow of Funds for Front-line Health Workers June 2022 2022 © GFF/The World Bank Group. 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