Explainer: How does Federal Consolidated Fund work?

ISLAMABAD: The Supreme Court (SC) has directed the State Bank of Pakistan (SBP) to release Rs21 billion amount from the Federal Consolidated Fund (FCF), whose operational authority rests with the Finance Division, under the Public Finance Management (PFM) Act 2019, for holding elections in Punjab and Khyber-Pakhtunkhwa.

Without the consent of the Economic Coordination Committee of the Cabinet and Federal Cabinet, the Finance Ministry cannot approve and release a supplementary grant for which the National Assembly’s post facto approval was required subsequently, says the law.

The PFM Act 2019 clearly says that under the title of Custody of the Federal Consolidated Fund and Public Account of the Federation, the operation of the Federal Consolidated Fund and the Public Account of the Federation shall vest in the Finance Division under the overall supervision of the Federal Government.

It further states that no authority shall incur or commit any expenditure or enter into any liability involving expenditure from the FCF and Public Account of the Federation until the same has been sanctioned by a competent authority duly empowered and the expenditure has been provided for the financial year through— (a) schedule of authorised expenditure; or (b) supplementary grant and technical supplementary grant as per Article 84 of the Constitution; or (c) re-appropriation as per section.

(2) No authority shall transfer public money for investment or deposit from government account 1 [including the assignment accounts] to other bank account without prior approval from the Federal Government 2 [:] 3 [Provided that the principal accounting officer in respect of all the spending units under his control shall submit a certificate to the Finance Division on half yearly basis.] (3) Every grant approved by the National Assembly for a financial year and every other authority or sanction issued under this Act in respect of a financial year, shall lapse and cease to have any effect at the close of that financial year.

Excess expenditure.—(1) The expenditure in excess of the amount of budget grant as well as the expenditure not falling within the scope or intention of any budget grant, unless regularised by a supplementary grant, shall be treated as excess expenditure. (2) Excess expenditure shall not become a charge against the Federal Consolidated Fund except when— (a) The National Assembly approves an additional amount equivalent to overspending as a direct charge against the Federal Consolidated Fund as voted or charged expenditure; or (b) it decides— (i) to recover the excess expenditure from the public servants who are found to be involved to incur such an expenditure. In this case, the Finance Division may take appropriate measures; or (ii) to take disciplinary proceedings against the principal accounting officer.

(3) If the Public Accounts Committee recommends the excess expenditure to stand as a charge to Federal Consolidated Fund, then it shall be included in the statement of excess expenditure required under Article 84 of the Constitution.

Now the SC, in its verdict, stated that with the assistance of the Attorney General of Pakistan and the team from the Finance, the court also examined the relevant provisions of the Constitution relating to the allocation of these funds. “It was confirmed by the officials of the Finance Ministry that in terms of Article 84 of the Constitution, the Federal Government was fully authorised to make expenditures from the Federal Consolidated Fund for, inter alia, “expenditure upon some new service not included in the Annual Budget Statement” for the relevant financial year here being the year ending on 30-6-2023. For such expenditure the Federal Government obtains ex post facto approval and authorisation from the National Assembly in terms of the procedure laid down in the Articles of the Constitution immediately preceding Article 84,” it stated.

“On a consideration of all of the foregoing it is our view that there is absolutely no difficulty or hitch, either financially or procedurally or in terms of the relevant authorization by and under the Constitution, for the immediate release of Rs21 billion to the Election Commission for fulfilling its constitutional mandate for the holding of general elections to the Punjab and KP Assemblies,” the SC directive added. Commenting on the Federal Consolidated Fund situation, and the court order, Dr Khaqan Najeeb, former advisor to the Ministry of Finance, explained that the FCF is a Fund held by the Federal Government with the State Bank of Pakistan. All ministries, other offices and public entities as required by their statutes, remit money in FCF including all revenues, grants and local and foreign loans. He said the operation of FCF vests with the Finance Division under the supervision of the Federal Government. Expenditure from the FCF and Public Account of the Federation can only be made when authorised by competent authority and the said expenditure is provided for during the financial year in the schedule of authorised expenditure more commonly understood as the Budget; or managed through a supplementary grant done through the procedure laid under article 84 (a) of the Constitution; or through re-appropriation of funds.