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Government of Bangladesh

Financial Management Reform Programme

Funded by DFID and RNE

Baseline Report on Bank Reconciliation within Government of Bangladesh

Milestone Reference: D12

March 2004

CNTR 012269

FMRP Management Office:


BTMC Building (7th Level)
7-9 Kawran Bazaar, Dhaka-1215
Tel: 8110134-7 Fax: 880-2-8117968
E-mail: fmrp@bol-online.com
Web: www.fmrp.org

Atos KPMG Consulting Limited

This report contains 84 pages

Annex A - E contain 33 pages


Executive Summary

Major findings

Historically and to date, there have been major weaknesses in the area of bank
reconciliation. These weaknesses range from organisation and ownership control issues
through to procedural guidance control issues. However, to counter these findings,
there now appears to be strong support for improving the current situation, particularly
arising from the increased interest by senior CGA officers in this area as well as from
the Ministry of Finance. The findings and recommendations of this report have been
discussed with CGA officers and as a result, the CGA officers have requested that the
recommendations be taken forward in FMRP Component 4 year 2 work plans.

Bank reconciliation in Bangladesh, as in other countries is clearly a complex issue.


There are many parties and interfaces involved, with many areas of potential weakness
in the reconciliation process.

In brief, the major findings of this exercise are:

• We found no evidence of an effective reconciliation between bank accounts and


government accounting records, other than total cash inflows and outflows at
local treasury accounting offices.
• We found no evidence of delegated responsibility for ensuring effective bank
reconciliation or anyone who felt responsible for this exercise.
• We were unable to find any procedural guidance relating to bank reconciliation.
• We were unable to find any evidence of a bank reconciliation in relation to the
Railways bank account.
• Although senior CGA officers appreciate the value of bank reconciliation, there
appears to be a wider lack of awareness about the importance of bank
reconciliation with respect to ensuring the quality and integrity of accounting
data.
• Data used to assist in bank reconciliation (e.g. bank statements) is often
inaccurate and untimely, as well as being presented in a format which is not user
friendly. Clearly this further hinders efforts in bank reconciliation.
• The current chart of accounts is designed in such a way as to significantly hinder
any attempts to reconcile anything other than total cash movement.

The major recommendations made in light of this are, in the shorter term:

• Clarify the responsibility for bank reconciliation.


• The CGA office should carry out a full investigation into the Railways accounts
preparation and bank reconciliation procedures. Action must be taken on the
findings of this investigation.
• The basic reconciliation of monthly overall cash movement and floating debt
movement should be accurately and fully carried out. It is recommended that an
adequately staffed and trained Central Reconciliation Unit take this
responsibility.
• Establish a team that takes responsibility for validating and accounting for bank
data received from Bangladesh Bank to provide data that can be more easily
used by the CRU.
Baseline report on bank reconciliation

In the medium term, the recommendations are:

• To further strengthen the Ministry focus for accounts data and, building on the
increased responsibility for CAO offices, to route all transactions directly
through Ministry-facing bank accounts.
• To separately identify on the face of the bank statement the current liability for
domestic floating debt.
• To functionalise all transactions (including Public Account) to the specific
Ministry responsible and through this measure, to clearly allocate transactions
on a cash or non-cash basis.
• To amend the current accounting practices at local treasury offices to enable
accounts to be prepared on an individual Ministry basis.

These measures, in conjunction with the other recommendations detailed in the report,
support the government’s strategy of strengthening financial management along
Ministry lines and should enable sustainable and improved quality of accounts through
increased control and ownership over bank account reconciliation.

It is the opinion of this report that the attainment of a fully reconciled annual account is
achievable, through the implementation of the recommendations made. This
reconciliation will be achievable on both a national and local treasury office level for
each individual Ministry or Department and therefore also for government as a whole.

The reconciliation will enable the movement from gross expenditure or revenue through
to cash movement to be clearly identified and agreed with the individual bank account
movement as reported by Bangladesh Bank.

It is believed that these recommendations are achievable if ownership is taken by CGA,


with Ministry of Finance providing overall sponsorship and FMRP providing guidance
and assistance to CGA in supporting these aims. These recommendations, if
implemented, should also support government in addressing some of the
recommendations made in the ROSC report.

Importance of bank reconciliation to quality accounting data

Effective bank reconciliation is the cornerstone of any accounting system where there is
movement of cash. It is required not only to ensure the successful guardianship of the
Public Funds, but it also provides a solid basis upon which the quality of accounting
information may be assessed - bank reconciliation is a key feature in ensuring the
integrity of financial accounting data by providing an external reference for government
accounting data.

Current situation

During the course of this study, no evidence has been found of an effective
reconciliation between the government’s main bank account and the government
accounting records. Attempts have been made by the CGA office, but without the
guidance and understanding required for complete and accurate reconciliation. This
lack of reconciliation presents a serious risk to the integrity and quality of accounting

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Baseline report on bank reconciliation

records and reports –this in turn results in lack of confidence, by users of the accounts,
in government accounting reports.

Since Independence in 1971, the government cash balances held at Bangladesh Bank
have not matched the reported cash balances in the government accounts, and hence the
government financial statements. Similarly, the balances of outstanding claims against
the government used to finance the government overdraft position have been
inconsistently reported when compared to figures reported by Bangladesh Bank.

Primary responsibility for the government’s financial statements of accounts lies with
the CGA. However, historically, the position with respect to the lack of reconciliation
to the bank account appears to have been unchallenged within CGA. This has resulted
in a lack of responsibility, and accountability, with respect to bank account
reconciliation in CGA. This can also be applied to other sources of data that should be
reconciled, and thereby increase the integrity of, the government accounts, e.g. National
Board of Revenues, Foreign Aid projects etc.

The lack of reconciliation, to bank data or other sources, leads to a lack of confidence
that users have in CGA accounts. Clearly, where possible, accounts should be
reconciled with external sources of data to provide additional confidence – CGA are
now demonstrating their commitment to improve this situation and such areas are under
increasing review from both the Ministry of Finance and senior CGA officers.

Historically, in addition to the lack of overall responsibility taken for bank account
reconciliation, there has been an apparent general lack of understanding as to the
purpose, importance or techniques required for effective bank reconciliation. There also
has been no clear delegation of responsibility or written procedures for bank
reconciliation.

It is clear that the bank statements from Bangladesh Bank cause increased difficulty in
undertaking the reconciliation with CGA records of account. Bangladesh Bank reports
often contain balance and transaction errors, present inconsistent balances, are often
delayed, and present bank data in a format that is not user-friendly. These types of
errors further hinder bank reconciliation for government accounts.

It should also be noted that the Report on the Observance of Standards and Codes
(ROSC) prepared by the International Monetary Fund in June 2003 contains the
following recommended measures:

• “A statement of reconciliation between CGA accounts and Bangladesh Bank


/ Commercial Bank balances – including as soon as possible, reconciliation of
ADP foreign financing flows.”
• “The CGA should provide a statement of assurance that debt records are
complete and consistent with transaction records.”
• “The C&AG, in certifying the annual accounts of government, should
comment specifically on government’s compliance with the standards of data
quality and timeliness. It should also comment on adequacy and consistency of
the debt records maintained by the CGA.”

This will require a considerable change in focus for the CGA accounting officers, but
the CGA, with the assistance of FMRP, is now in a position to initiate these essential
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Baseline report on bank reconciliation

measures. Through this activity, CGA officers are now keen to improve the historic
situation with regard to bank reconciliation and are committed to taking these
recommendations forward.

In conclusion, these problems identified in relation to bank reconciliation are certainly


not insurmountable and it is believed that the government balances should be able to be
reconciled on a sustainable and accurate basis, given the support and sponsorship from
the highest levels of government. FMRP is hopeful that it may play a significant role in
this development by providing guidance and assistance to the CGA officers and by
establishing a culture of belief in the attainment of reconciled balances within
government.

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Baseline report on bank reconciliation

Table of Contents
1 INTRODUCTION........................................................................................................8
1.1 OBJECTIVE..................................................................................................................8
1.2 BACKGROUND..............................................................................................................8
1.3 APPROACH................................................................................................................10
2 BANGLADESH BANK AND SONALI BANK.......................................................14
2.1 BACKGROUND............................................................................................................14
2.2 OBSERVATIONS..........................................................................................................18
3 LOCAL TREASURY ACCOUNTING OFFICES..................................................26
3.1 BACKGROUND............................................................................................................26
3.2 OBSERVATIONS..........................................................................................................32
4 CHIEF ACCOUNTS OFFICERS.............................................................................34
4.1 BACKGROUND............................................................................................................34
4.2 PRESIDENCY ACCOUNTING REGION – CENTRAL RECONCILIATION UNIT.............................34
4.3 OBSERVATIONS..........................................................................................................35
5 FOREIGN AID...........................................................................................................39
5.1 OVERVIEW................................................................................................................39
5.2 OBSERVATIONS..........................................................................................................41
6 DISTRICT ACCOUNTS OFFICE DHAKA...........................................................42
6.1 BACKGROUND............................................................................................................42
6.2 OBSERVATIONS..........................................................................................................42
7 NATIONAL BOARD OF REVENUE......................................................................43
7.1 BACKGROUND............................................................................................................43
7.2 OBSERVATIONS..........................................................................................................45
8 CGA RECONCILIATION PROCEDURES............................................................50
8.1 BACKGROUND............................................................................................................50
8.2 CURRENT RECONCILIATION PROCESS..............................................................................51
8.3 OBSERVATIONS..........................................................................................................53
9 MINISTRY WISE BANK ACCOUNTS..................................................................59
9.1 OBSERVATIONS..........................................................................................................59
9.2 PROPOSALS FOR MOVING FORWARD WITH MINISTRY ACCOUNTS.........................................65
10 FUTURE DEVELOPMENTS.................................................................................71
10.1 BANGLADESH BANK.................................................................................................71
10.2 SONALI BANK.........................................................................................................72
10.3 NATIONAL BOARD OF REVENUE.................................................................................72
10.4 CONTROLLER GENERAL OF ACCOUNTS .......................................................................73
11 RECOMMENDATIONS.........................................................................................74
11.1 SHORT TERM RECOMMENDATIONS..............................................................................74
11.2 MEDIUM TERM RECOMMENDATIONS...........................................................................82

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Baseline report on bank reconciliation

List of Abbreviations

Abbreviation Meaning

C&AG Comptroller and Auditor General


CAO Chief Accounts Officer
CGA Controller General of Accounts
CGDF Controller General Defence Finance
CRU Central Reconciliation Unit
DAO District Accounts Officer
DCA Divisional Controller of Accounts
DDO Drawing and Disbursement Officer
DfID Department for International Development
DPA Direct Project Aid
ERD Economic Relations Division
FMRP Financial Management Reform Project
GAD Government Accounts Department
GoB Government of Bangladesh
GPF General Provident Fund
IFAC The International Federation of Accountants
LTU Large Taxpayer Unit
MoF Ministry of Finance
PAD Public Accounts Department
PPA Pre-financed Project Aid
RIBEC Reforms In Budget and Expenditure Control
RNE Royal Netherlands Embassy
ROSC Report on the Observance of Standards and Codes
RPA Reimbursable Project Aid
SD Supplementary Duty

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Baseline report on bank reconciliation

1 Introduction

1.1 Objective

As part of the Financial Management Reform Programme (FMRP), the following report
has been produced to provide a baseline assessment of bank reconciliation within the
finances of the Government of Bangladesh. Bank reconciliation must be seen as the
fundamental control mechanism under which the preparation of quality accounting
information is carried out within the Government of Bangladesh. The International
Federation of Accountants (IFAC) states in their 2003 IFAC Handbook of International
Public Sector Accounting Pronouncements “ When the cash basis of accounting
underlies the preparation of financial statements, the principal financial statement is the
cash flow statement.” This is simply not possible without effective bank reconciliation
processes.

While it is generally accepted that there are serious concerns in relation to the
completeness and accuracy of bank reconciliation, there is not currently a coherent plan
to address this issue. This report is therefore intended to provide a starting point upon
which Government may more clearly identify areas of concern and take the required
remedial action where available.

It follows therefore that the report is designed as an initial diagnostic tool with the
emphasis placed on identification of strengths and weaknesses, rather than providing
definitive and detailed solutions to all of the problems in the current system. It is
accepted that successfully addressing all of the weaknesses surrounding bank
reconciliation at this stage would require a much larger resource allocation than is
currently available through year 1 of the FMRP project. However, where appropriate,
the issues and recommendations identified should be incorporated into future work
plans of the FMRP project to assist in the FMRP Component 4 aim of improving the
quality of accounts and to further underpin the overall aim of FMRP, being to improve
the financial management capability within government.

1.2 Background

When Bangladesh gained independence, the opening bank balance in the government
accounts was restated as nil as at 16th December 1971. However, at the same time,
Bangladesh Bank recorded a negative balance of approximately 7 crore 44 lakh Taka
( or 7,44,00,000 Taka). This difference has never been amended and over subsequent
years has been extended to the point that the difference stated (on 21st January 2004) for
closing balances in June 2003 by the Controller General of Accounts (CGA) and
Bangladesh Bank stood at approximately 130 Crore 73 lakh taka. As may be seen in
the following diagrams, this difference fluctuates greatly, even over successive months.
Given the pressures both internally within Government and from outside agencies, a
principal aim of the CGA should therefore be to reduce or eliminate this fluctuation and
eventually get to the position where it is appropriate to eliminate the remaining
differences altogether.

The accounts of Bangladesh are designed in such a way that the reported cash balances
from the CGA office should exactly match those reported by Bangladesh Bank. The
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Baseline report on bank reconciliation

current lack of bank reconciliation and therefore cash management in government is a


cause of major concern for the government generally, the Ministry of Finance and
International Development partners. It is the aim of this report to provide an initial
framework upon which the required remedial action may be agreed, designed and
implemented resulting in significant improvements in overall reconciliation and control.

Comparison of reported annual bank balances


of CGA and Bangladesh Bank.

0
1998-99 1999-00 2000-01 2001-02 2002-03
-1000000
Taka ( in Thousand )

-2000000
-3000000
-4000000
-5000000
-6000000
-7000000
Financial Years 1998 - 2003

CGA Balance Bangladesh Bank Balance

( Source: CGA Accounts Consolidation System and Bangladesh Bank Monthly


Statements)

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Baseline report on bank reconciliation

Comparison of reported monthly bank balances


of CGA and Bangladesh Bank

2000000

1000000
Taka ( in Thousand )

0
July

March

June
December
-1000000 September

-2000000

-3000000

-4000000
-5000000
Financial Year July 2002 to June 2003

CGA Balance Bangladesh Bank Balance


( Source: CGA Accounts Consolidation System and Bangladesh Bank Monthly
Statements)

1.3 Approach

The approach taken in the preparation of this report has been fourfold:
• To assess the wider processes and controls currently in place
• To carry out a detailed study on the financial data available for a specified
month
• To obtain feedback from a wide variety of stakeholders to gain a clearer
understanding of the particular issues identified at each stage of the
reconciliation process. A comprehensive list of the stakeholders assisting in the
preparation of this report is included as annex A.
• To attempt reconciliation at various stages of the CGA process to assess the
feasibility of successful reconciliation under current systems

The month identified for detailed examination in the preparation of this report was
March 2003. As explained more fully later in the report, the principal reason for
choosing March 2003 was that this was the last month that the CGA office had
attempted to carry out a detailed reconciliation, prior to FMRP commencing the
preparation of this report in December 2003. Given the time delays identified within
the flows of financial data from Bangladesh Bank, delays in compilation and
reconciliation and the slow pace of procedural change within government it was
considered appropriate to examine data relating to a period eight months previous.

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Baseline report on bank reconciliation

1.3.1 Overview of Responsibilities

There are several parties that play significant roles in the bank reconciliation process.
For this reason, detailed analysis has been carried out on each of the following:

 Bangladeh Bank / Sonali Bank


 Local Treasury Accounting Offices
 Chief Accounts Officers
 National Board of Revenue
 Controller General of Accounts

The flows of both cash and reporting information in relation to the current banking
systems are very complex. The following diagram provides a simplified overview of
the current flows and areas identified for potential improvements in reconciliation
between inter-related organizations.

The highlighted bodies are those where attention has been most closely focused for the
purposes of this report.

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Baseline report on bank reconciliation
Overview of current cash flows, reporting and potential for reconciliation

CGA

Potential reconciliation
Potential reconciliation
Ministries
NBR Copies
Monthly MoF
of
challans accounts
CRU data Daily
statement DCA Departmental
Monthly DAO Monthly s Officers
Pre-audit
accounts
cheques
Dhaka statements Potential
data reconciliation
issued Debit & credit scrolls and
supporting papers Monthly accounts
CAO data
PAD GAD
Paid Presidency cheques DAO UAO
Pre-audit
cheques Bangladesh
Bank
Payee Head Office
Daily and monthly Daily
Revenue challans cash movement Bangladesh statements Sonali
Depositor Consolidated Bank & Bank
data supporting
Revenue challans
Consolidated branches documents
branches
data
Sonali Bank
Sonali Head Office Sonali Bank Daily and monthly cash movements
Bank Daily and monthly cash movements Head Office

Dhaka – Presidency Region Accounts offices outside Dhaka


Bank transfers
Funds

Expenditure data Project Expenditure data International Funds Commercial


Directors Donors Banks

Foreign Aid
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Baseline report on bank reconciliation

1.3.2 Report structure

The report details the current responsibilities and actual findings for each of these areas.
Additional details are provided in relation to the current treatment of foreign aid as well
as a brief assessment of the implications presented as a result of the well-documented
issues at what was previously, District Accounts Office, Dhaka. The report then
summarises possible future developments that may impact on the bank reconciliation
processes and then concludes with detailed recommendations addressing both the short
and medium terms.

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Baseline report on bank reconciliation

2 Bangladesh Bank and Sonali Bank

2.1 Background

Bangladesh Bank is the Central Bank of Bangladesh and as such acts as custodian of the
Government’s monies, (not including those held in commercial bank accounts). The
legal framework for this arrangement is contained in the Bangladesh Bank Order 1972,
which may be summarised for the purpose of this report as follows:

Article 1. To carry on and transact the banking business of the Government –


payments, receipts, collection and remittance.

Article 2. To hold the cash balances of the Government as it’s sole Banker in
Bangladesh.

Article 3. To manage Public Debt and the issuance of new loans by the
Government.

Article 6. To make Ways and Means advances to the Government and automatic
payment thereof at intervals not exceeding three months from the date of
making the advances.

Article 8. To maintain the currency chests of the Bank’s Issue Department at such
places as the Government may prescribe with sufficient notes and coins
to provide currency for the transactions of the Government.

Bangladesh Bank currently has 9 branches that deal with Government accounts as
treasury banks. To enable it to successfully carry out its duties as outlined above,
Bangladesh Bank has contracted an agreement with Sonali Bank. Sonali Bank has 561
branches, which carry out duties in relation to Government transactions. Of these, 101
branches collect receipts only and report directly to Bangladesh Bank. The remaining
460 branches of Sonali Bank act as treasury banks transacting receipts and payments on
behalf of Government and report to Sonali Bank Head Office. As detailed below, these
flows are subsequently reported to Bangladesh Bank.

There are currently plans for Sonali Bank to take over all responsibilities for accepting
receipts from members of the public. However, Secretary of Finance has raised
concerns over the ability of Sonali Bank to manage this increase in turnover in such a
short period of time. Therefore, a committee has been established, under the
Chairmanship of Controller General of Accounts to investigate this issue and report to
the Secretary of Finance. Until this committee returns their recommendations,
Bangladesh Bank will be instructed to continue their current receipting duties.

The main balances of Government held at Bangladesh Bank are made up of 78


individual accounts. The number of accounts has increased dramatically over recent
years, from 5 accounts in 1971 to 29 by 1983 and then 78 by September 2002. This was
due largely to the Ministry of Finance order number FM/FD/B-1/Misc(28)/2002/1/1818
dated 01/09/02 that each Ministry was to have a separate account, which could then be
controlled by the respective Chief Accounts Officer. The principal reason for creating
these additional 51 accounts was to provide increased confidence and clarity in relation
to the receipts and expenditure of each Ministry or Department. Given the Ministry of
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Baseline report on bank reconciliation

Finance’s lack of confidence in the centrally prepared monthly and annual accounts
produced by CGA, it was felt at that time that greater reliance could be placed on the
receipt and expenditure figures for each Ministry or Department provided by
Bangladesh Bank.

The main accounts of Government held at Bangladesh Bank are listed in full in annex
B, but may be summarised as follows:

Type of account Number of accounts

General account 1
CAO Offices 51
NBR Fiscal Reporting 4
Debt Management 5
Foreign Aid incl. Food Aid 9
Food Operation 1
Public Account Others 1
Railway 1
Telephone & Telegraph 1
Postal 1
Pension 1
National Savings Scheme 1
General Provident Fund 1

Total 78

In addition to the above main accounts, there are balances held in Commercial Banks
relating to Foreign Aided projects. These accounts are operated by the respective
Project Directors and the balances are currently held outside of the Government’s cash
balances in the accounts. The reconciliation and control procedures in relation to these
accounts are detailed in the Project Accounting Manual. Due to the significant value of
balances in these accounts, the compliance with reconciliation procedures has been
included in the scope of this report.

Drawing and Disbursement Officers currently maintain individual Imprest Accounts.


The balances maintained in these accounts are not considered material in comparison to
the 78 main accounts and Commercial Bank accounts and so will remain outside of the
scope of this diagnostic report. The correct reconciliation and control of these Imprest
Accounts should be appropriately catered for however in the current audit procedures.

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Baseline report on bank reconciliation

Outside the standard accounting network of UAO, DAO, DCA and CAO Offices, the
following transactions take place and are reported on a daily basis to the Accounts and
Budgeting Department of Bangladesh Bank through other Departments of Bangladesh
Bank:

1. Forex Reserve and Treasury Management Department (FxTM) of


Bangladesh Bank

• Sale and retirement of US Dollar Investment Bonds transacted through


non-treasury commercial banks.
• Foreign Aid received in foreign exchange and then remitted to the
concerned project directors in local currency. (SAFE Account)
• Subscriptions to International Agencies in foreign exchange.
• Debt servicing of foreign loans on the authority of Director of Foreign
Aid & Budget Branch of Economic Relations Division (ERD).
• Remittance to Bangladesh Foreign Missions to fund their operations,
such as Embassy related expenses.

2. Department of Currency Management and Payment –Issue Administration

• Value of smuggled gold bar confiscated by the Customs Department.

3. Agricultural Loan & Special Program Division

• Debt servicing of subsidiary loan agreements between Government of


Bangladesh and Commercial Banks. This relates mainly to IDA and ADB
loans channelled through the Commercial Banks without reference to ERD.

4. Transactions in Accounts and Budgeting Department of Bangladesh Bank

• Interest payment to the commercial banks for holding treasury bills.

These transactions are informed to the CGA by the Accounts and Budgeting
Department of Bangladesh Bank and entered onto the CDPU system directly from the
Bangladesh Bank Clearance Memorandum. There is no effective reconciliation of the
individual balances reported.

As the Government of Bangladesh has been financing its operations through issuing
floating debt for many years, it is logical that there should never be a significant cash
balance left in its bank account while this debt remains outstanding. The initial access
to overdraft is met by Ways and Means Advance (current limit Tk 64 Crore), which is
regularized by a simple pre-printed Promissory Note signed by the Joint Secretary
Budget.

If the overdraft goes beyond the limit of Tk 64 Crores, Bangladesh bank is authorized to
issue Special Treasury Bills as per Finance Ministry’s authorization letter No 6 of dated
17.01.1974. Initially Bangladesh Bank absorbs all treasury bills and then offloads them
to the commercial banks at a weekly auction. CGA in its accounts does not take
16
Baseline report on bank reconciliation

account of the spilt in the holding of treasury bills between Bangladesh Bank (Monetary
Authority) and Commercial Banks (Deposit Money Banks).

Every day, Government Accounts Branch of the Accounts and Budgeting Department
of Bangladesh Bank calculates the effects of transactions in the banking treasuries and
information received from the various Departments of Bangladesh Bank. It then works
out one single cash balance and adjust the overall cash deficit or surplus by the issue or
purchase of Treasury Bills or Ways and Means Advances. As Treasury Bills are
rounded to Tk 1 Crore, a nominal cash balance will always remain in the account of
Government.

Reporting Requirements

The currently prescribed procedures, detailed in the Account Code Volume I (updated
version of C&AG September 9, 1996) Articles 9 & 10 may be summarised as follows:

1. Daily Reporting:

Statement of cash transactions undertaken by Bangladesh Bank on behalf of the


Government together with the supporting vouchers etc. are transmitted by each office
and branch of Bangladesh Bank daily to the respective District Accounts office, Chief
Accounts office and Controller General of Accounts office, as the case may be.
Similarly each branch of Sonali Bank transacting Government business as an agent of
Bangladesh Bank forwards a daily statement of transactions to the local Upazilla or
District Accounts office along with all supporting vouchers. The totals of such
transactions are also reported by Sonali Bank at the close of each day to the Public
Account Department of Bangladesh Bank through the head office of Sonali Bank at
Dhaka.

2. Monthly Reporting:

All transactions regarding Public Accounts taking place in the offices and branches of
Bangladesh Bank and designated branches of Sonali Bank are consolidated in the
Government Accounts Department of Bangladesh Bank. At the close of the accounts of
each month, a statement of closing balances of the Government on the books of the
Bank after taking into account all cash transactions in all of the offices, branches and
agencies of the Bank and the adjusting transactions in it’s own books is forwarded by
the Head Office of Bangladesh Bank to the Controller General of Accounts.

Under articles 3 and 6 of the Bangladesh Bank Order 1972, three copies of the daily, 78
account-wise closing balances are prepared by the Government Accounts Branch of the
Accounts and Budgeting Department of Bangladesh Bank. These are sent to the
Finance Division for the attention of the Secretary, Joint Secretary and Deputy
Secretary respectively.

The daily figures for sales and retirement of treasury bills and issued and retired Ways
and Means Advances is noted underneath the daily balance figure. This is the financing
that Bangladesh Bank has arranged to fund the movement in Government deficit. The
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Baseline report on bank reconciliation

overall outstanding claims on the Government in respect of Treasury Bills and Ways
and Means Advances are stated at the bottom of the daily statement.

Given the limited confidence that some stakeholders have in the accounts data produced
by the CGA, this daily statement is often seen as the most accurate representation of
actual bank balances that is available.

The current banking arrangement between Bangladesh Bank and Sonali Bank is that
Sonali Bank Head Office should receive the daily transaction statements from all
branches acting as agents for Bangladesh Bank and send these to Bangladesh bank
within 16 days of the day in question. This information should then be consolidated
with Bangladesh Bank branch information and communicated to Government.
Government has now ordered that Sonali Bank issue the daily transaction statements
within 7 days.

At year-end, the 78 account-wise closing balances are reported to the Finance Secretary
and a copy is also sent to the Controller General of Accounts.

2.2 Observations

The activities undertaken during the course of this work highlighted the following
weaknesses in the processes undertaken to prepare bank statements from Bangladesh
Bank and Sonali Bank and in the use of these statements.

1. Copies of the daily, 78 account-wise closing balance statement prepared by the


Government Accounts Branch of the Accounts and Budgeting Department of
Bangladesh Bank are sent to the Finance Division for the attention of the
Secretary, Joint Secretary and Deputy Secretary but not to the CGA. We
understand that the CGA office, as it found no use for the daily statement, has
unofficially requested that it not be issued to the CGA office.

2. The daily, 78 account-wise closing balance statement issued by GAD includes


the following:

a) A statement showing the cumulative balance of each account for the


current year to date. This includes the movement of Treasury Bills and
Ways & Means advances on date specified.

b) A statement showing the daily movement in each account for the date
specified. The movement in financing of that day is based on the total
net movement on the daily statement. There is no detail given on the
daily movement statement to inform users as to which bank branches
have been incorporated into the account or for days the individual returns
relate to.

3. There is a widespread misunderstanding over the usefulness of the daily


statement. This includes a lack of clarity in terms of what the information
provided by Bangladesh Bank actually represents. Statements are issued by
Bangladesh Bank stating balances for a specific date, which implies that it

18
Baseline report on bank reconciliation

reports the actual cash balances on the date stated. This is not however actually
found to be the case.

It was found that the balance shown on the Daily Cumulative Balance statement
relates to an approximation of the balance two weeks earlier than the date on the
statement, but the financing information is the actual movement on the date
recorded on the daily statement. Any daily figures received by Sonali Bank
from its branches on a given day are compiled together and sent to Bangladesh
Bank for reimbursement. This will therefore include transactions from a number
of different days and will not necessarily be a comprehensive collection from all
branches.

It is only after several months that Bangladesh Bank reports the actual 78
account wise monthly opening balance, receipts during the month, payments
during the month and closing balance at the end of the month. This statement is
supported by the monthly cash inflow and outflow of all banking treasuries.

There are two different figures appearing in statements of closing balances for
one date tested, both signed by Bangladesh Bank.

Bangladesh Bank had not explained the reason for the variation in its statements
to CGA. It should be noted that CGA had not requested an explanation.

The delay between Bangladesh Bank adjusting the financing of the


Governments overdraft and reporting these movements to Government is not
readily understandable.

Using the example of the daily statement received by Finance Division for 30 th
June 2003, the timing of information flows and subsequent confusion caused
becomes apparent.

30th June Bangladesh Bank creates Ways & Means Advance of Tk 64 Crore
and issues Treasury Bills of Tk 51 Crore.

21st July: “Daily Cumulative Balance of 30th June” statement is signed by


Bangladesh Bank stating a positive Government balance on 30th June
of Tk 1.27 Crore. Financing on 30th June is reported as Tk 64 Crore
Ways & Means and Tk 51 Crore, which clearly accommodated a net
daily movement of 113.73. However, the daily movement statement
that accompanied the cumulative balance statement reported the net
daily movement as Tk 115.22 Crore.

28th July: “Clearance Memorandum” is issued by Bangladesh Bank requesting


Promissory Note for Ways and Means Advances of Tk 64 Crore and
Treasury Bills issued of Tk 51 Crore which were issued on 30th June.
The net daily movement at 30th June however is now stated as Tk
113.73 Crore. It may be assumed that Bangladesh Bank was aware
of the initial misreporting on the daily movement statement above as
they were reporting the balance of Tk 1.27 Crore which was
calculated on the net movement of Tk 113.73 Crore.
19
Baseline report on bank reconciliation

4th September: “Monthly Closing Statement” is issued by Bangladesh Bank stating a


negative balance of Tk 434.64 Crore on 30th June 2003. Only this
final statement produced some two months after the date in question
represents the actual cash balances on the date in question.

17th November: CGA record Ways and Means and Treasury Bills issued on 30th June
into the June accounts.

4. As part of the month-end reporting process, the Government Accounts and


Budgeting Department of Bangladesh Bank receives a detailed monthly
breakdown of Sonali Bank receipts and payments by branch and individual bank
account. A copy of this breakdown is later supplied to CGA. Individual
Bangladesh Bank branch data is then added, after which the monthly statement
for the 78 individual accounts is sent to the CGA office. The statement is
addressed to Controller General of Accounts (TF-1 Branch). Following the
establishment of the CDPU, the CGA was reorganised, abolishing the Treasury
Function (TF) and creating a new section, Accounts and CDPU. Knowledge of
this restructuring is not evident in the address used by Bangladesh Bank and
may indicate a breakdown in communication between the CGA office and
Bangladesh Bank.

The relevant sections of the monthly statement are then copied to the following
20 recipients:

 Secretary, Ministry of Finance – Budget Department


 CAO Food Division
 CAO Book and Budget Bangladesh Railway, Chittagong
 Assistant Director (Finance 2) Head Office, Bangladesh T & T Board
 Secretary, Jumana Bridge Authority
 USAID
 C&AG, Audit House
 13 Original CAO Offices

This list is outdated, especially as there are now a total of 51 CAO offices that
should receive a copy of the monthly statement. The General Manager of the
Accounts and Budgeting Department stated that the statement was still only
being sent to the original CAOs, further evidencing the acute lack of
communication.

5. The monthly statement identifies the total receipts and payments for each Sonali
Bank branch and also further reports these into receipts and payments for each
individual bank account. The opening balance, total monthly movement and
closing balance are then reported for each individual account.

This monthly statement does not include single figures for receipts and payments
for the 9 branches of Bangladesh Bank. Rather, the receipts and payments are
20
Baseline report on bank reconciliation

detailed according to the 78 individual accounts. This causes difficulty in


identifying the movement reported by each bank branch and increases the
possibility of errors being introduced at the CGA office.

6. During the analysis of data relating to March 2003, it became clear that there are
some errors in the financial information provided by Bangladesh Bank, due to
the manual reporting in operation.

21
Baseline report on bank reconciliation

The following example was found in the Bank statement for account no. 153 –
Civil Aviation.

Bangladesh Bank statement extract

Account 153 – Civil Aviation March 2003

Opening Balance 143790295

Bangladesh Bank Branches Receipt Payment Movement

Dhaka 1171431 641414 530017


Sadarghat 21850 21850
Chittagong 225250 225250
Khulna 15122 15122
Bogra 15900 15900
Rajshahi 500 500
Sylhet 238450 238450
Barisal 450 450
Rangpur 500 500

Bangladesh Bank branch


movement 1689453 641414 1048039

Sonali Bank (Total) 906021 2131208 -1225187

Total for Month 2595474 2772622 -177148

It is clear from the above that the following misreporting occurred on the bank
statement

Correct Bangladesh Error in


Calculation as per: calculation Bank reporting

Opening Balance 143790295 143790295


Movement - BB 1048039 1048039
Movement - SB -1225187 -1225187
Closing balance 143613147 146063522 -2450375

This calculation error by Bangladesh Bank in manually preparing the monthly


statement was not identified by the CGA Office. No action was therefore
requested of Bangladesh Bank to amend their monthly figures. Bangladesh
Bank had themselves adjusted the opening balance in the subsequent April 2003

22
Baseline report on bank reconciliation

bank statement to the correct figure, yet no mention was made of the adjustment
on the statement or any supporting documentation.

7. Bangladesh Bank recognises that the manual nature of their accounts preparation
process and the increased number of individual accounts has increased the
possibility of errors being made in their reporting. In recognising the potential
for errors during the manual compilation of statements, it is noteworthy that all
Bangladesh Bank monthly account statements contain the following wording:

“We are informing you of the month-end closing balance of this account for
March and you are requested to inform us of its correctness.”

This implies a transfer of additional responsibility onto CGA, to inform the bank
of any errors that are detected. No testing is currently carried out by the CGA
Office to identify misreporting by Bangladesh Bank and this will remain to be
the case until an effective and sustainable reconciliation process is in place.

The practice of accepting any figures reported by Bangladesh Bank as the


definitive movement in cash is clearly shown to be unwise. The need for a
strong and independent bank reconciliation process at CGA is further underlined
in light of such findings.

8. It was not possible to obtain a copy of the year-end bank statement that
Bangladesh Bank send to the CGA office. However, the annual accounts
include the identical figures that appear on the books of Bangladesh Bank. This
is despite significant errors being made in monthly calculations at CGA, or in
some cases, no monthly calculations being carried out at all, as detailed later in
the report. It therefore appears that the statement has been used in some manner
within the CGA Office during the preparation of the annual accounts.

9. Articles 33 & 34 of Account Code Volume IV state that CGA is required to


maintain a register of daily receipts and payments reported by Bangladesh Bank.
This has not been found to be workable within CGA and therefore the procedure
of recording daily cash flow has lapsed.

10. The CGA office does not record the (belated) reporting of Treasury Bills and
Ways and Means Advances movements on a daily basis. Rather, it waits for a
monthly bundle to be sent from Bangladesh Bank and simply makes one
monthly journal entry. As stated above, the recording in the June accounts of
financing movements was not carried out until mid November. This will result
in the reported figures of both bank balances and government liability being
significantly misreported during the year.

11. There is no reconciliation of Treasury Bills or Ways and Means Advances as


stated by the Government Accounts with the respective figures of Bangladesh
Bank.

The following table indicates that no reconciliation is carried out at CGA


between the information recorded under claims against the Government
(Treasury Bills issued) and that reported by Bangladesh Bank. This is a simple,
23
Baseline report on bank reconciliation

yet fundamental reconciliation process that is central to the reporting of


liabilities of the government. The information flow is provided directly from
Bangladesh Bank, which further implies that accurate reconciliation should be
easily achievable.

Comparison of Treasury Bills Closing balances.


(Taka in Crore)
CGA Accounts Bangladesh Bank Report

Opening Balance 1.7.02 20069.00 20069.00


Net Increase (+) / Decrease (-)
-79.48 -192.00
during FY 2002-03
Closing balance 30.06.03 19989.52 19877.00

12. In the Governments books of account, most revenue and expenditure balances in
the Consolidated Fund, except for some loans and advances balances, are
“Closed to Government” at the end of the financial year. Other balances, termed
as “Closed to Balances” are carried over from one financial year to the next.

Bangladesh Bank, under instruction of MoF carries over balances of some of the
78 individual accounts into the following year. At the end of each financial
year, most account balances are reduced to zero and the balances transferred to
the general account number 100. The accounts that are carried over from one
year to the next are shown below as at July 2003, with the corresponding
balances that appeared in the Governments Accounts.

Balances of Accounts carried over in Bangladesh Bank compared to CGA reported


balances.
(Taka in Crore)
Balance as per Balance as per
A/c
Account Name CGA ( Finance Bangladesh Difference
No.
Accounts ) Bank
100 General -50585.12 1882.89 -52468.01
201 Food -12803.85 -7318.76 -5485.09
203 P.L. 480 Title 3 -76.79 0.18 -76.97
205 EEC Food Grant 0.01 273.68 -273.67
207 Japanese K.R. Grant Not available 246.17 Not available
208 Japanese K.R. 2 Not available -0.01 Not available
209 Japanese Debt Relief Grant Not available 1595.08 Not available
210 SAFE Not available 99.93 Not available
213 General Provident Fund 5142.15 464.88 4677.27
215 Public Accounts Others 4015.43 209.54 3805.89
217 Bond, Treasury Bills and Ways 24013.23 357.94
& Means 23655.29
219 National Savings Scheme 30598.06 1753.81 28844.25
24
Baseline report on bank reconciliation

It is clear, possibly due to the abrupt changes in bank accounts, that there is no
correlation between the figures held in the Governments books of account and those that
appear every month on the Bangladesh Bank statement. Due to some conditionality
imposed on loan agreements, some accounts, included in the above table, were required
to be shown independently on the bank statement. The Bank was in effect to operate as
both banker and accountant. There are however no separate cash balances held in
Bangladesh Bank for these accounts and given the large discrepancies identified above,
it is not only incorrect for the bank statement to show them, but also highly misleading.
The role and purpose of the monthly bank statement must be agreed and amendments
made accordingly.

25
Baseline report on bank reconciliation

3 Local Treasury Accounting Offices

3.1 Background

There appears to be a widespread lack of understanding of the detailed book keeping


procedures carried out in local accounting offices. The following pages therefore
provide a brief overview of accounting procedures that have been prescribed under the
RIBEC project to improve the quality of reconciliation carried out by DAOs. Similar
procedures apply to the smaller Upazilla Offices, with one basic difference, in that
Upazilla offices are not authorised to issue pre-audit cheques. Instead, passed bills are
taken to the local bank and cash payments made based on the information contained on
these bills. To avoid repetition, for the purposes of this report, a brief overview of the
accounting procedures relating to only DAO offices has been provided.

The local bank should send a hand written daily bank statement to the concerned DAO,
detailing all of the debit and credit transactions that have been recorded by the bank for
that DAO on that particular day. Each of the transactions should be correctly recorded
by the bank under the appropriate 13-digit government code. Additionally, the
statement shows the total for receipts and payments in each of the individual 78 bank
accounts for the day in question. A copy of all supporting challans, vouchers and
cheques are to be sent with the daily statement.

When the accounting office receives the daily bank scrolls, the total receipts and
payments for the day are to be entered into register DAO 1 – Register of Cash Flow.

This register is used to record the total of credit scrolls in respect of receipts and debit
scrolls in respect of payments as received from the bank, to work out cash flow during
the month under the code “Bangladesh bank deposit”.

Layout of DAO 1 - Register of Cash Flow

Name of the Office ________________

Month__________________________ Year________________________
Date Payments Receipts Initial of Remarks
Designated
(Taka) ps (Taka) ps Officer

Monthly
total

Signature of DAO_________________________________

26
Baseline report on bank reconciliation

At the end of the month the total receipts and payments recorded for the month are to be
compared to the monthly statement received from the local bank branch. Any
difference is to be identified, amendments made where appropriate to accounts office
data or the local bank informed of its error.

Register DAO 2 is used to summarise daily receipts on the basis of economic codes
under the relevant functional codes. The information source for these entries is the
challans received from the local bank and bank scrolls. Each day, the daily total is to be
compared to the corresponding credit entry in DAO 1. Any difference identified is to
be amended immediately.

Layout of DAO 2 – Register of Receipts

Month___________________________ Year_____________________
Consolidated Fund/Public Account
Refund Previous
Transfer of month
Monthly Progressive
Date Total from revenue progressive
Function Economic total total
DCA 5 from total
code code
DCA 3
1.1.2003 2.1.2003 < 31.1.03
>

Daily
total
Initial of
DCA

All payments, including refunds of revenue are recorded on a daily basis from the debit
scroll received from the local bank on register DAO 3. As may be seen below, this
facilitates the daily reconciliation of payments that will be recorded in the summarised
accounts to the total payments recorded on the bank scroll. At month end the monthly
totals are to be transferred to registers DAO 2 and DAO 4 as appropriate.

Layout of DAO 3 – Register of Summarised Bank Payments

Month__________________________Year______________________
Consolidated Fund/Public Account
Function Economi Date Monthly
code c code total
1.1.200 2.2.200 < < < < < < 31.1.200
2 2 > > > > > > 2
0921- 6301
0000
6341
4824
1051- 9101
0000
Daily total

27
Baseline report on bank reconciliation

When bills are passed in a DAO office resulting in the issuance of a pre-audit cheque,
the expenditure information is to be recorded on the register DAO 4.

Layout of DAO 4

Name of the Office_________________________


Month____________________ Year___________

Legal & Functional Code

Total
Net Total
Token Name Gross deductions
Date of payment/
No & of Admissible claims with economic codes payments Deductions/recoveries with economic codes and
payment cheque Cr.
date Payee Dr. Recoverie
s
4601Pay of Estt

8241B.F

3901HB advance

VAT
8246G.I.
4501Pay of Officer

4705.House rent

8101GPF

Interest on loan
4717Medical

6821Furniture

A B
D
C
(B+C)
(A—B)

8616

Monthly total
Previous month
Progressive

This register records the amount that is to be debited against each individual economic
code for the bill in question. The DAO 4 register also records the net amount of the bill,
after all deductions have been made, and this is recorded under economic code 8616,
Cheques and Bills. The credit recorded against Cheques and Bills is the figure taken for
outstanding cheques. All of the information on DAO 4 will be consolidated at month
end to enable the preparation of consolidated monthly schedules.

When each individual cheque is prepared and issued, the particulars are to be recorded
on register DAO 15 - Cheque delivery Register.

Layout of DAO 15 – Cheque Delivery Register

Name of the Office _________________________________


Month________________________Year____________

Amount
(To be written Tick
Sl Token both in figure & Mark
Name of Payee Cheque No
No No word)
(Taka) ps

Daily
Total

28
Baseline report on bank reconciliation

At the end of each day, the total number of cheques issued that day and the Taka value
of these cheques is to be recorded in register DAO 16 – Pre-Audit Cheques
Reconciliation Register, columns 4 & 5 below. A carbon copy of DAO 15 is then to be
sent to the local bank as a control measure, which may be consulted when cheques are
presented for payment.

Layout of DAO 16 – Pre-Audit Cheque Reconciliation Register

Name of the Office______________________________


Month_________________________Year___________

Opening Cheques
Balance of outstanding
Cheques issued Total Cheques paid
outstanding (Closing
cheques balance)
Daily Daily Daily Daily Daily total
Date total total total total Daily total
Number. Amount No. Taka Number. Amount Number
(Taka) (Taka) Amount
(Ta
ka)
1 2 3 4 5 6 7 8 9 10 11
(1+4) (2+5) (6-8) (7-9)

Total Total
number. Taka
Total

An internal control measure has been prescribed in District offices to ensure that
misclassification and under posting of vouchers does not take place. At the end of each
day, all vouchers passed are to be compiled and sorted according to the 8-digit function
code. The total net amount of vouchers and therefore the value of cheques that should
have been issued for each function code is to be entered in register DAO 15A, (see
below), in the correct function code row, under the appropriate date.

The daily total is to be reconciled with the daily total of cheques issued recorded in
register DAO 15. Any difference is to be amended immediately.

29
Baseline report on bank reconciliation

Layout of DAO 15A – Functional Code wise Summary Register for Pre-audit
cheques delivered

Name of the DCA Office_____________________________________


Month___________________________________Year_____________

SL Functional Date
No Code
( 8 digits )
3 Monthly
1 2 19 20 30
1 Total
Taka Taka Taka Taka Taka Taka
1
2
3
Daily total

At month-end, the monthly total for each function code is to be reconciled with the net
amounts of cheques issued as per register DAO 5 - Register of Consolidation of
Deductions and Recoveries, (see below). This register is used to reconcile the total
monthly deductions, recoveries, and gross and net payments transferred from form DCA
4 on the basis of economic code under the relevant functional code. The consolidated
deductions data from DAO 5 will be transferred to register DAO 2 - Register of
Receipts, as above.

It is the responsibility of the DAO office to reconcile the supporting documentation to


the daily bank statement and agree any required amendments with the bank manager.

The number of cheques paid on each day and the total value of these cheques is to be
recorded in the DAO 16 register, in columns 8 & 9 above.

The DAO office is also to identify each individual cheque paid against the individual
entries in the current DAO 15 registers. If the details for a particular cheque are correct,
the accounts officer should enter a tick mark against the corresponding entry in DAO 15
to indicate that the cheque is no longer outstanding.

30
Baseline report on bank reconciliation

Where a cheque has been paid which was issued during a pervious month, the same
process of entering a tick mark should be carried out on register DAO 17 – Register of
Outstanding Cheques.

Layout of DAO 17 – Register of Outstanding Cheques

Serial Date of Amount


Cheque No. Tick mark
No. Delivery ( Taka )

Total

Whereas the DAO 15 register is used to record all cheques issued during the current
month, the DAO 17 register is used to record all cheques outstanding from previous
months. It is therefore the responsibility of the accounts office, at month end to transfer
any unticked, and therefore uncashed entries on the DAO 17 register to a fresh DAO 17
register. Then, any unticked and therefore uncashed entries from the current months
DAO 15 registers are to be transferred to the fresh DAO 17 register.

The number of cheques outstanding and their total value is then to be reconciled against
the completed DAO 16 register. Any difference identified is to be adjusted.

At the end of the month, the local bank will send a handwritten monthly statement,
which is to be signed by both the bank manager and the corresponding DAO or UAO.
This statement summarises all of the transactions under the Governments 13-digit code.
It is therefore the responsibility of the respective DAO/UAO to ensure that the monthly
statement corresponds with the sum of the daily statements reflected in the accounts
office monthly accounting records. This statement is to be included with the
consolidated monthly accounts forwarded to the Divisional Controller of Accounts
(DCA) office. Any discrepancy between the monthly statement and the consolidated
monthly accounts should prevent the data from being entered onto the CGA’s
consolidated accounts system. These differences are to be amended immediately.

31
Baseline report on bank reconciliation

3.2 Observations

As the nature of District and Upazilla accounting is by its very nature cash based and
the source data is tied directly to the daily bank statement, it is generally understood to
be of limited risk in terms of bank reconciliation. However, several issues have been
identified which should be of concern to the CGA office in its attempts to reconcile the
bank.

1. Larger accounts offices are often unable to comprehensively reconcile the


supporting documentation to the daily statement. This is due to staffing
constraints, the large number of daily transactions and supporting documentation
which is often not provided in an ordered manner corresponding directly with
the information on the daily statement. It is therefore felt that this results, in
some cases, in daily accounts being prepared directly from the information
reported by the local bank and not the individual transactions. This lack of
control and reconciliation is a major concern.

2. The daily total cash movement recorded in the accounts is compared to the DAO
1 register. However, the movement in individual bank accounts is not
reconciled.

3. The local banks often compile daily statements and send many days worth of
scrolls and supporting documentation at the same time to the accounting offices,
or send daily information after significant dealy. When interviewed, DAO
Narsandi stated that they had not received a daily statement for 14 days. The
manual nature of the local banking system is the principal reason given for this
delay. This delay inevitably causes backlogs and therefore places too large a
workload on local accounting offices if they are required to reconcile all
individual transactions back to the daily statements at the same time as preparing
monthly accounts within the 10 day period after month end stipulated by CGA.

4. Although a record is maintained of banks that are late in reporting daily and
monthly transactions, the local accounting offices are limited in their ability to
influence the banks. Influence should be applied from a higher, more central
position to encourage the reporting to be carried out in a timely manner.

5. The procedures outlined earlier in this chapter are not appropriately designed to
facilitate an easy reconciliation between bank accounts and the respective
Ministry. Public Account transactions are currently coded under generic
function codes, for example under C&AG, rather than being associated to the
actual Ministry to whom the transaction relates. This inevitably records the
gross expenditure under Ministry and Net Cash Movement is lost. The
movement and balances of individual bank accounts are therefore not being
utilised to provide any reconciliation function at Ministry level.

6. Many local banks appear to be aware of the limitations in, or even lack of,
reconciliation taking place in District and to a lesser degree Upazilla accounting
offices. The lack of local and central reconciliation discussed later in the report
indicates that this opens the possibility of bank officials intentionally
manipulating daily and monthly returns. No evidence has been found in the

32
Baseline report on bank reconciliation

preparation of this report of this taking place, a risk exists for such actions to
take place.

7. Local banks are regularly making classification errors when reporting daily
receipts transactions. The current responsibility to allocate transactions
according to the Government coding structure is generally felt to be unrealistic.
Both Bangladesh Bank and Sonali Bank are primarily concerned with accurately
recording banking transactions. Therefore their principal concern is not, and
should not be expected to be, providing accurate information to Government
using the Governments internal coding structure.

8. Many accounts officials feel that many receipt transactions relating to the same
4-digit economic codes are being grouped together under single functional codes
on the daily bank statement. This means that the statement does not allocate the
receipts to the concerned Ministry or Department. Unless this is identified and
corrected by all accounts offices every month, the individual bank account
balance of each concerned Ministry or Department can never be used to
reconcile the receipts recorded in the accounts.

9. Members of the public are often required to write both the 13-digit Government
accounting code and bank account number manually on challans when making
lodgements to the Government accounts. Neither bank officials nor members of
the public are sufficiently trained to correctly identify and enter this information
and often are not given clear advice as to the correct codes to enter. The impact
that this miscoding has on the accounts could be easily avoided if the required
information were to be provided by the issuing authority at source.

33
Baseline report on bank reconciliation

4 Chief Accounts Officers

4.1 Background

Chief Accounts Officers (CAOs) are operating under the control of the CGA. Each
CAO has been placed facing a specific Line Ministry and in that respect is to act as
Financial Advisor to the concerned Ministry. CAOs are also charged with the function
of issuing pre-audit cheques within the Presidency region of Dhaka for the concerned
Ministry and preparing accounts for this region in relation to the transactions processed.

Each CAO is to prepare their monthly accounts based on Presidency transactions


carried out within the CAO office, Foreign Aid projects operated under the jurisdiction
of that Ministry and provide an overall reconciliation and control facility for the
Ministry as a whole. CAOs that operate within departmental Ministries are given the
additional responsibilities of incorporating initial accounts submitted by divisions and
of reconciling remittance codes for the Ministry.

The monthly reconciliation is to take place by means of a comparison of Ministry wide


data obtained from the CDPU and that received from the Ministry’s internal reporting
structure. Any differences identified are to be reconciled and agreement obtained from
both parties.

4.2 Presidency Accounting Region – Central Reconciliation Unit

As stated, CAOs issue pre-audit cheques for their respective Ministry for expenditure
transactions within the Presidency region of Dhaka. In the financial year 2002-2003,
pre-audit cheques issued by the 51 CAO offices accounted for approximately 28% of
cash outflow from the main 78 bank accounts during the year. A cash control measure
has been introduced to monitor these payments through the establishment of the Central
Reconciliation Unit (CRU) within the CGA building in Dhaka. This unit was originally
designed to reconcile both payments and receipts, yet to date has only been operated for
pre-audit cheques issued by CAO offices within Dhaka. The operation on the CRU is
described briefly below.

 On a daily basis, when CAOs prepare pre-audit cheques, these cheques are not
to be signed and issued until the relevant details (name of payee, date of cheque,
amount of cheque and cheque number) have been entered onto the CRU system.

 If the information printed off from the CRU system is in agreement with the
passed bill data and cheques prepared, only then may the cheques be signed and
issued.

 A daily advice is issued sent to Bangladesh Bank for all cheques of value greater
than Tk25000/-

 At month end, the cheques issued data is transferred to the central CRU
database.

34
Baseline report on bank reconciliation

 Bangladesh Bank electronically send the relevant details of all cheques actually
cashed in the Presidency region on a monthly basis and the CRU system
matches the two data sources and identifies cases of data mismatch.

 Cashed cheques and the corresponding debit scroll are issued by Bangladesh
Bank to the issuing CAO to be matched against the information sent to the CRU.

 The following reports are produced centrally by the CRU and issued to the
concerned CAO offices, where mismatches are to be clearly corrected by the
CAO and the reports returned to the CRU where any required amendments may
be made. The current Government Order states that these reports eare to be
produced within one week of the month end.

Reports produced by CRU and issued to CAO offices:

Amount Mismatch Report


Date mismatch Report
Date and Amount Mismatch Report
Unmatched Cheques from Bangladesh Bank Report
Comparison of Cheques and Bills Amount Report
Time-Barred Outstanding Cheques Report
List of Outstanding Cheques Report

The treasury office responsible for recording transactions within the Presidency region
is DCA Dhaka, which incorporates what was DAO Dhaka. All CAO pre-audit cheques,
when cashed, are recorded by DCA Dhaka, not through the individual CAO office. The
system is so designed that when a CAO issues a cheque, the code for ‘Cheque and Bills’
is credited, which will be offset by the debit entry recorded by DCA Dhaka when the
cheque is cashed.

4.3 Observations

1. It appears that the CRU is not seen as a high profile unit that operates with the
required monitoring, support or authority of the CGA. This is indicated by the
following findings relating to the four-month period July 2003 to October 2003,
as reported by the CRU on 19th January

CAO Office Observation

Civil Aviation and Tourism No data entered for any of the four months.
Finance No data entered for three months.
Internal Resources Division No data entered for one month.
Rural Development & Cooperative No data entered for two months.

Of the 204 individual months data that should have been recorded by all CAOs for the
four month period, 10 months, or approximately 5% showed no data entry at all.

35
Baseline report on bank reconciliation

The following tables clearly demonstrate the limited success that CRU is experiencing
in receiving amended reports from the concerned CAOs.

Unmatched Report analysis

Month No. of CAOs Number of CAOs that % of CAOs that


required to amend have not amended have as yet not
unmatched reports reports by 24th amended CRU
January 2004 reports
July 2003 20 8 40%
August 2003 9 6 67%
September 2003 7 5 71%
October 2003 9 9 100%

Mis-Matched report analysis

Month No. of CAOs Number of CAOs that % of CAOs that


required to amend have not amended have as yet not
mis-match reports reports by 24th amended CRU
January 2004 reports
July 2003 50 14 28%
August 2003 44 12 27%
September 2003 45 20 44%
October 2003 42 27 64%

The following table indicates the overall position between Cheques and Bills recorded
on the CDPU system for each individual CAO office and the corresponding amounts
entered onto the CRU system by the same CAOs.
(Crore Taka)
CAO-Cheque Difference Difference
Month CAO-Cheque Cashed
Issued from CDPU from CDPU
Accounts- CRU Cheque Accounts- CRU Cheque
CDPU- Issued CDPU- Cashed
8611 9611
March 727.25 727.91 0.66 733.77 751.58 17.81
03
June 03- 3064.21 2959.72 104.49 2271.86 2307.55 35.69
Pre
July 03 408.77 407.99 0.78 975.91 981.66 5.75

2. The improved and standardised CAO Accounting Procedures Manual, prepared


in December 2003 has directed that monthly accounts data should not be entered
onto the CDPU system until it is noted that the Cheques and Bills figure
reported equals the total cheques issued for the concerned CAO on the CRU
system. This measure should dramatically improve the accuracy of the CRU

36
Baseline report on bank reconciliation

and CDPU data, as errors must now be corrected at source before the data is
compiled.

3. It is found that many CAO offices are unable to enter the CRU data before
issuing cheques. This is due to a combination of lack of staff with sufficient IT
skills, pressure to issue cheques to payees and lack of respect for the CRU
function. It is therefore common for a list to be maintained of cheques issued
and for the CRU system to be updated on a weekly basis. This may lead to data
entry errors or data being omitted from the CRU system.

4. The Government Order that CRU reports are to be issued within one week of the
end of the month is not considered to be realistic. There are major delays in
Bangladesh Bank sending the electronic data for cashed cheques to the CRU.
As at the 24th January 2004, data had only been received for the month of
November 2003. Similar delays are noted in the process of CAO offices
receiving the actual cashed cheques from Bangladesh Bank. In this regard,
CAOs report that a delay of approximately two months is considered standard.

5. The CGA office is unable to reconcile the Cheques and Bills figures for
individual CAO offices. The unique accounting procedures currently in place at
DCA Dhaka are causing confusion and lack of clarity in a crucial area of
reconciliation. When DCA Dhaka receives debit scrolls from Bangladesh Bank
relating to cashed CAO pre-audit cheques, the officers entering the data into the
monthly accounts are unable to differentiate in the accounts between different
CAO offices. The Cheques and Bills figure reported, for cashed cheques is
restricted under one generic Public Account code - 9611. As the data for all
CAOs cashed cheques is entered in DCA Dhaka and therefore under one
location source code, only the total movement in Cheques and Bills may
currently be monitored. There is therefore no role for the CRU to play in
monitoring and inspecting the monthly Cheques and Bills data forwarded from
individual CAO offices with their monthly returns.

6. Departmental CAOs are currently not taking responsibility for reconciling


Remittance data for their respective Ministry. CAOs interview stated that they
lacked the resources and skills needed to carry out this reconciliation. It is
viewed that the large number of cheques issued for each Department is too large
for a manual reconciliation procedure to be carried out in a CAO office.

7. The composition of balances stated as Remittance for each Departmental


Ministry are not clearly understood. While the balance contains the value of
outstanding departmental cheques, this is complicated by the inclusion in the
same code of departmental receipts.

8. Inability to reconcile and general confusion surrounding the correct operation of


Remittance, has resulted in a Public Account code where many transactions may
be effectively ‘lost’. This is a major concern in terms of the safekeeping of
Public monies. The following table shows the balances under Remittance as
reported by the Finance Accounts, incorporating 2002/03 movements from
CDPU for the period ending June 2003.

37
Baseline report on bank reconciliation

Reported Remittance Balances and Movement, period ending June 2003

(figures in thousands of taka)


Closing Balance
Opening Balance Movement
Head Balance June Reconciled
July 2002 2002/03
2003 Yes/No
Post Office 12141232 -263408 11877824 No
T&T 15749699 -3686276 12063423 No
Public Works -3034370 483715 -2550655 No
Housing & Settlement 824805 -110111 714694 No
Roads & Highways 1902348 -395121 1507227 No
Public Health Engineering 1522389 -163529 1358860 No
Forest 398888 190740 589628 No
Customs 18778 -226864 -208086 No
GPF Transfer 328345 323383 651728 No
Others -1215215 -725171 -1940386 No
Total 28636899 -4572642 24064257

It is clear from the above table that there are significant balances reported in the
government’s books of accounts that are not being controlled or reconciled. This will
inevitably have wider implications on the correctness of the Appropriation Accounts
and Finance Accounts.

The requirement for a code ‘Others’ is unclear and may cause confusion at a local level.
It is noteworthy that the opening balance, movement during the year and closing
balance are debit balances. This is unusual for outstanding cheques, which should be
the major element of a remittance code. This issue is addressed in more detail on page
62.

38
Baseline report on bank reconciliation

5 Foreign Aid

5.1 Overview

There appears to be widespread confusion surrounding Foreign Aid. The RIBEC


project produced a comprehensive instruction manual, entitled the Project Accounting
Manual, yet none of the CAOs or Projects interviewed were following this manual, with
some being unaware of its existence. Extensive training in the Project Accounting
Manual is currently underway to improve this situation, yet it remains the case that
Foreign Aid is misunderstood by a large proportion of accounting officers within
Government.

To this end, a comprehensive overview of Foreign Aid and detailed accounting


instructions have been included in the Improved and Standardised Accounting
Procedures Manual for CAO offices, produced under the FMRP project. For
information purposes, the relevant chapter is included as annex C.

Foreign Aid may be summarised for the purposes of this report into Food Aid,
Commodity Aid and Project Aid. Despite the creation of four separate bank accounts
for Food Aid and one for Commodity Aid, there was no evidence found of
reconciliation of these accounts.

Project Aid may be summarised into three main categories:

1. Reimbursable Project Aid


2. Pre-financed Project Aid
3. Direct Project Aid

1. Reimbursable Project Aid (RPA)

The Project Director submits bills to the local accounting office as per the standard pre-
audit system. On a periodical basis, an expenditure statement is issued to the
Development Partner and whole or partial reimbursement is made directly into the main
GoB bank account.

2. Pre-financed Project Aid (PPA)

The donor credits special project bank accounts with an imprest amount. When the
imprest balance has been expended by the project, the PD will submit a reimbursement
application to the donor. Upon approval of the expenditure statement provided, the
account will be replenished.

There are four types of account operated under Pre-financed Project Aid:

A. Special Account in Foreign Exchange (SAFE)

As per Government Order MF/DD/Dev Wing16/93/234 dated 5th August 1993,


Bangladesh Bank is to send a monthly report concerning the SAFE account to the
concerned CAO and Project Director. The Project Director is to send the Account
Statement of Project’s Special Account to the concerned CAO office to incorporate the
39
Baseline report on bank reconciliation

expenditure into the government accounts. The CAO office should reconcile the two
statements and ensure that the expenditure entering the accounts matches the banks
figures.

B. Convertible Taka Special Account (CONTASA)

As per Government Order MF/FD/DRS/3/91/444(20) dated 4th May 1992, the


commercial bank concerned is to send a monthly report concerning the CONTASA
account to the concerned CAO and Project Director. The Project Director is to send the
Account Statement of Project’s Special Account to the concerned CAO office to
incorporate the expenditure into the government accounts. The CAO office should
reconcile the two statements and ensure that the expenditure entering the accounts
matches the banks figures.

C. Dollar Special Account (DOSA)

As per Order of the CGA, CGA/Accounts Compilation Section/18(2nd Part/1/51) dated


2nd July 2003 the Project Director is to send the Account Statement of Project’s Special
Account to the concerned CAO office to incorporate the expenditure into the
government accounts. The CAO should request a monthly bank statement to be sent by
Bangladesh Bank, detailing any activity on the DOSA account. This statement should
then be reconciled with the Account Statement of Project’s Special Account.

D. Imprest Account

As per Order of the CGA, CGA/Accounts Compilation Section/18(2nd Part/1/51) dated


2nd July 2003 the Project Director is then to send the Account Statement of Project’s
Special Account to the concerned CAO office to incorporate the expenditure into the
government accounts. The CAO should request a monthly bank statement to be sent by
the Commercial Banks, detailing any activity on the relevant Imprest accounts. These
statements should then be reconciled with the Account Statement of Project’s Special
Account.

3. Direct Project Aid (DPA)

Expenditure is incurred directly by the Development Partner and rarely communicated


to the Project Director, even though there is a budget allocation in the annual
development budget for DPA. Direct Project Aid has no direct impact on the current
report into bank reconciliation and is included for completeness of information.

As per Order of the CGA, CGA/Accounts Compilation Section/18(2nd Part/1/51) dated


2nd July 2003 the Project Director is to send the Statement of Direct Project Aid to the
concerned Chief Accounts Office to incorporate the expenditure into the government
accounts. This places the responsibility for gathering the relevant information onto the
Project Director. The CAO offices should therefore request the Project Director to
supply this information on a monthly basis, in line with the RPA and PPA accounting
procedures.
40
Baseline report on bank reconciliation

5.2 Observations

1. It is clear from the above, summarised instructions that monitoring,


reconciliation and control of expenditure on Foreign Aided projects is
unmistakably a responsibility of the concerned Chief Accounts Officer.
However, despite this, only one of the CAOs interviewed for this report
considered this to be a key responsibility of a Chief Accounts Officer.

2. Due to the use of commercial bank accounts and the lack of pre-audit
procedures, the main concern in relation to foreign aid for bank reconciliation is
PPA projects. It is required that expenditure statements for these projects be
accompanied with the corresponding bank statement to allow the concerned
CAO to reconcile with the cash movement.

A sample of CAO offices were assessed to measure the degree of compliance with this
requirement and the findings were as follows:

Total
Number
Total Foreign
CAO Office assessed of PPA Findings
Projects Aid
Projects
Projects
CAO receives expenditure statements
CAO Primary and
25 14 10 but no bank statements for any PPA
Mass Education
projects.
CAO receives expenditure statements
CAO Water
87 18 11 but no bank statements for any PPA
Resources
projects.
CAO receives expenditure statement
CAO Land 8 2 1
and bank statement for PPA project.
CAO receives expenditure statements
CAO Electricity 69 31 2 but no bank statements for any PPA
projects.

As shown in the table above, of four CAO offices sampled, only 1 out of 24 PPA
projects provided a bank statement in support of the expenditure statements. This
degree of non-compliance with prescribed procedures, and consequent lack of
reconciliation, presents a risk to the integrity of government accounts and is seen as a
significant control weakness.

41
Baseline report on bank reconciliation

6 District Accounts Office Dhaka

6.1 Background

Operating under the guidance of DCA Dhaka, the office that was previously DAO
Dhaka records all receipts for Dhaka from information received from Bangladesh Bank
on daily debit and credit scrolls. (This office is still often referred to in government as
DAO Dhaka and this distinction shall be made for the purposes of this report.) DAO
Dhaka is also responsible for processing approximately 10,000 pension bills per month
as well as P.L. Account transactions.

6.2 Observations

1. In the financial year ending June 2003, DAO Dhaka was responsible for
accounting for approximately 34% of total Government receipts. However,
there are currently only 23 officers and staff posted to DAO Dhaka. This is in
sharp contract to approximately 200 employees at the Government Accounts
branch in Bangladesh Bank, which prepares the daily debit and credit scrolls
which are sent to DAO Dhaka.

2. The number of challans attached to the daily debit scrolls sent to DAO Dhaka
varies between 2,000 and 8,000 per day. Due to these high volumes, it is not
possible for the staff at DAO Dhaka to assess the accuracy of the Bangladesh
Bank debit scrolls in respect of either value or coding as compared to the
supporting documentation.

3. For various reasons, the focus of attention at DAO Dhaka is currently placed on
passing pension bills as opposed to preparing quality accounting information.

4. Working conditions at DAO Dhaka are very difficult and are not conducive to
the governments focus on producing quality accounting data. For example,
daily bank scrolls are to be maintained at the office for three years, as per
Government Order. However, it was found that they are currently being stored
for fifteen years, as there is a general fear of destroying any documentation.
These bank scrolls are found in almost every office, with no possibility of
identifying specific documentation that may be required.

Senior officers from the CGA office produced an internal report within the last
year clearly identifying the staffing and accommodation problems at DAO
Dhaka. This report has not been acted upon to date.

5. The District Accounts Officer in DAO Dhaka acknowledges that the office is
unable to produce quality accounting information, given the limitations
identified above. Information is being taken directly from the bank scrolls and
entered into the Government Accounts, without any reconciliation or controls
being exercised.

6. Morale at DAO Dhaka is understandably low and again, this has a major impact
on the quality of accounts that are produced. DAO Dhaka concerns have not
been addressed, despite the importance it holds in terms of transaction value.
42
Baseline report on bank reconciliation

7 National Board of Revenue

7.1 Background

The National Board of Revenue (NBR) is the Government body entrusted with the
assessment, collection and reconciliation of Income Tax, Customs and VAT.
Approximately 85% of Government revenue is credited through the NBR, of which
approximately 70% comes from Customs. The ability to reconcile between NBR, CGA
and Bangladesh Bank data is therefore crucially important when the Government is
aiming to produce quality accounting information.

Customs

Approximately 95% of Customs trade passes through the four main Customs Houses at
Dhaka Airport, the Inland Container Depot (ICD), Chittagong Port and Benapole
Border. These Customs Houses are all on-line with the Asycuda system, for which a
simple process is followed:

 The Customs Agent, acting on behalf of the concerned Importer lodges a ‘Bill of
Entry’, describing the goods imported and this is entered onto the Asycuda
system.

 The system automatically calculates the various duties and charges due and
these are printed onto the ‘Assessment Notice’.

 If there is uplift in the reported value following a Customs assessment, the


Asycuda system will recalculate the amounts due and hold the amended figures
in its database.

 When the Customs Agent presents the Assessment Notice to the Sonali Bank
branch associated with the Customs House and pays the total amount due, the
Assessment Notice is stamped and the payment challan given to the Agent.

 Once payment is made in full to Sonali Bank, the goods in question may be
released.

 A daily printout of the Customs ‘Cash Day Book’ is sent to Treasury, the
Customs Supervisor and Sonali Bank.

 Sonali Bank compares the printout to their receipts figure and then signs and it,
indicating agreement of the figures.

The remaining 5% of Customs revenue, obtained at many small border-crossing points,


is entered onto the NBR books at Regional Income Tax offices.

Income Tax

Due to the high degree of tax evasion encountered, it has been necessary for the
Government to deduct Income Tax at source for several types of transactions. These
include deducting between 1% and 10% from various claims from contractors and
43
Baseline report on bank reconciliation

suppliers to Government or public sector agencies, deducting Income Tax on imports


and interest earned on savings. Overall, more than 70% of Income Tax is collected at
source by commercial banks and Government agencies other than NBR, with no
involvement of the Income Tax Department.

The Research and Statistics Directorate of NBR is responsible for collecting income tax
data for 18 income tax zones, each of which is headed by an Income Tax
Commissioner. Each Commissioner is responsible for collecting data from the Deputy
Commissioner of Taxes offices that report to them. There are 393 Deputy
Commissioner of Taxes offices, each of which is responsible for an individual income
tax circle. VAT is accounted for by NBR by means of 7 VAT Commissioners, using a
similar process.

Income Tax receipts, which impact most strongly on CGA bank reconciliation, are
treated in the following manner by NBR:

 For all income tax collections for Dhaka, NBR officers from Tax Zone 1
initially collect the challans from DAO Dhaka approximately twice a week.

 The challans are compared on an individual basis to the computer generated


credit scrolls supplied by both Sonali Bank and Bangladesh Bank to the NBR.

 The challans are then segregated according to zone and all zones except Zone 2
and Survey Zone are recorded on three computers, using a foxpro database,
designed in 1995. The two zones excluded from data entry are done so on the
basis of the large number of challans received.

 After data entry has taken place, the number of challans for each zone and the
date are recorded in individual registers for each zone. The same information is
then recorded on the bundles of challans before the concerned officers of each
zone collect them.

 Each tax zone then distributes the challans to the concerned tax circle under their
jurisdiction, where the details of each individual challan are recorded in Register
Five.

 At the end of each month, the tax circles report the monthly and cumulative
totals for Register Five to the concerned Tax Commissioner who in turn reports
the combined total to the NBR.

 The same computer unit in Zone 1, which records challans, also receive
statements from Bangladesh Bank for Interest on Securities. A separate
Microsoft Access Database is maintained for this data.

 Other income tax receipts, not recorded directly from challans are incorporated
at the Tax Commissioners Office

The NBR is required to reconcile its monthly revenue figures with those recorded by the
CGA in the Government accounts, the source documents of which are the challans
received by DAO Daka.
44
Baseline report on bank reconciliation

7.2 Observations

1. Eight months after the 2002–03 year-end, NBR is only able to provide a
provisional figure for annual tax revenue. This figure of Taka 4372 Crore is
Taka 510 Crore higher than the figures reported by CGA for the same period.

2. No action has been instigated by either the CGA office or NBR to address the
discrepancies in reported figures. NBR officials state that they do reconcile their
monthly figures with the CGA. This consists of both parties presenting their
figures for the month in question, calculating the difference and stating that the
figures are now reconciled. This does not form the basis of a reconciliation and
should not be perceived as such.

3. Detailed information for the four main Customs Houses is readily available on
the NBR Asycuda system. This includes the Monthly Cash Report, which
details the 13-digit codes that Sonail Bank has coded the relevant receipts to for
each location. This information could be invaluable to the CGA office in
reconciling a significant proportion of the total revenue of Government in
relation to the bank receipts, government accounts and NBR reported
information.

The central Asycuda system is located in the building adjacent to the CGA
office. It is assumed therefore that CGA officers, with appropriate management
support if required, could easily obtain this detailed 13-digit code wise
information and thereby develop the reconciliation at the concerned District
offices and Sonali Bank branches.

4. Customs and Sonali Bank are not aware of the correct 13-digit codes required
for each type of revenue received. This matter could have been easily resolved
through improved communications between Customs, Sonali Bank and the CGA
office. However, this lack of communication may have resulted in serious
miscoding by Sonali Bank over recent years.

5. The CGA office does not appear to have been proactive in attempting a
reconciliation between the Customs, Treasury and CGA data.

6. There appears to be no communication between DAO Dhaka officers and the


NBR officer that collects challans from DAO Dhaka. This means that no
agreement is reached as to the number or value of challans taken.

7. Reconciliation at the field level between NBR offices and local accounting
offices is made difficult due to the different geographical areas covered by each.
There is no correlation between tax zones and circles and the District and
Upazilla regions as the income offices are located according to the
demographics of the taxpayers. This is noticeable in the fact that DAO Dhaka
accounts for taxes relating to 10 income tax zones and approximately 200
income tax circles. At the same time however, four circles reporting to Zone 3
alone lodge their receipts at district offices other than DAO Dhaka. This means
that Zone 3 figures cannot be directly compared to DAO Dhaka.
45
Baseline report on bank reconciliation

8. There is an urgent need to update and expand the computerisation at Zone 1.


The current level of computerisation is not capable of recording all challans
received from DAO Dhaka. The opportunity is therefore lost to carryout the
fundamental reconciliation between the total figures on the accompanying daily
bank scrolls and the challans recorded in the NBR system.

9. It is claimed that software limitations currently mean that the daily monetary
total of challans being recorded on the NBR system for each zone cannot be
calculated. This results in only the number of challans sent to each zone being
recorded, which is of limited use to either party.

10. The tax zones do not appear to record the value of challans distributed to each
circle. When the monthly information is transmitted back from the Register
Five for each circle, this therefore is not compared to the sum of the batches
distributed. There is a very high degree of reliance placed on the accuracy of
information recorded in the tax circles. This reliance has led to a feeling that
reconciliation of data is not required.

46
Baseline report on bank reconciliation

The following table compares the data recorded on the NBR computer system (at tax
zone 1) for tax zone 3 for the month of February 2004, against the information reported
by each circle from Register Five for the same month.

(Circles where the collection is lodged outside of Dhaka and therefore are not entered
onto the computer have been removed to allow a more realistic comparison.)

Zone 3 Circle Name Computer Data Zone 3 Reported Difference %


Recorded via circle Difference
(by Zone 1) Register 5
Circle 23 38,123 490,339 -452,216 -1,186
Circle 24 290,885 400,487 -109,602 -38
Circle 25 446,483 446,472 11 0
Circle 26 2,848,964 5,020,000 -2,171,036 -76
Circle 27 29,310 31,530 -2,220 -8
Circle 28 233,365 635,211 -401,846 -172
Circle 30 109,608 506,476 -396,868 -362
Circle 31 138,123 93,080 45,043 33
Circle 32 394,133 38,670 355,463 90
Circle 33 182,212 182,972 -760 0
Circle 34 66,386 67,586 -1,200 -2
Companies 07 2,226,213 10,453,426 -8,227,213 -370
Companies 08 2,111,257 2,099,057 12,200 1
Companies 09 7,404,730 8,306,300 -901,570 -12
Contractor 05 2,595,203 2,504,071 91,132 4
Contractor 06 3,145,350 3,146,335 -985 0
Salaries 05 8,489,110 9,352,811 -863,701 -10
Salaries 06 3,322,701 4,217,115 -894,414 -27

Total 34,072,156 47,991,938 -13,919,782 -41

Total monthly figures for Circles within Dhaka for Zone 3 may be compared for the
period July 2003 – February 2004, from data supplied by Zones 1 & 3 as follows:

Month Computer Zone 3 Difference %


Data Recorded Reported for Difference
(by Zone 1) Dhaka Circles
July 26,655,483 25,367,454 1,288,029 5
August 42,699,504 50,920,905 -8,221,401 -19
September 108,957,077 116,151,415 -7,194,338 -7
October 238,433,561 99,870,370 138,563,191 58
November 57,648,043 85,088,659 -27,440,616 -48
December 69,219,712 104,812,167 -35,592,455 -51
January 53,995,172 50,195,077 3,800,095 7
February 34,072,156 48,339,973 -14,267,817 -42

Total 631,680,708 580,746,020 50,934,688 8


47
Baseline report on bank reconciliation

It may be seen that there are some very large variations between the figures
reported by the Zone 3 Commissioner for each circle and those recorded on the
Zone 1 computer system during the month of February 2004.

Similarly, the monthly total variations are very large, especially when
considering that both sets of data are primarily from the same source documents,
namely income tax challans received during the month.

It is clear therefore that the computer data maintained at Zone 1 is not being
utilised for reconciliation processes and other basic reconciliation procedures are
similarly not being carried out within the income sections.

One interesting point to note however is that for the cumulative figure from July
2003 to February 2004, the amount reported by the Commissioner of Taxes as
per all Dhaka circles register 5s, is only 92% of the total amount recorded in the
Zone 1 computer system for same period.

Contrary to the opinions of some officers in the CGA, that income tax data is
often opaque, exaggerated and unreliable, the Commissioner of Taxes
interviewed during the course of this work, was very open and transparent when
information was requested. The source of all information requested was clearly
explained and documentary evidence provided.

11. The current practice of setting strict monthly and annual tax collection targets
for the NBR and individual zones and circles may be adding to the lack of trust
in reported income tax figures. It is seen that where targets are not met, the
target is often adjusted downwards, resulting in the reporting that targets are
consistently attained or very nearly attained. There is clearly manipulation of
figures between months to smooth the reported collections and to avoid targets
being increased inappropriately, however no evidence was found while
preparing this report that total figures are not sincerely reported. Manipulation
of figures would however have a detrimental effect on any bank reconciliation
efforts that incorporate the reported figures.

We were assured by the Tax Commissioner that monthly discrepancies do not


affect the annual figures reported at the year end in June. It is not clear at this
time what actions are taken to enable this assurance to be given.

12. There is a duplication of challan recording at both the Sonali and Bangladesh
Banks and the NBR. It should be investigated whether the information recorded
at the banks could be expanded to include the additional fields of tax zone and
TIN number. If this were possible, a simple data transfer system would remove
the current problems of data limitations at NBR and dramatically improve the
possibility of reconciling receipts recorded through the bank and the
corresponding data held at NBR.

13. There still remains a certain degree of discretion and potential manipulation of
tax assessments received from NBR. Frequent adjustment of assessments may
seriously undermine any future attempts to reconcile receipts through the bank
to a database of assessments received from NBR.
48
Baseline report on bank reconciliation

14. Challans used for payment of income tax assessments are, in many cases,
completed by the members of the public themselves. It is therefore highly likely
that incorrect bank account and 13-digit codes will be entered, limiting the
CGA’s ability to reconcile data with the NBR.

15. There are many instances where the incorrect bank account has been credited by
the local bank for tax receipts, as shown in Chapter 9 Ministry Wise Bank
Accounts, on page 59. Until there is an effective bridge table produced between
Ministry codes and individual bank accounts, these mistakes will persist,
limiting the CGA’s ability to reconcile its data to the specific bank account
movements.

16. There is an individual bank account established for IRD, which is often confused
with NBR revenue by local banks and members of the public. Bank account
number 189 – NBR, is made up of specific bank accounts for each revenue type,
yet the cumulative account is not blocked in all bank branches. The additional
accounts, created for Income Tax, VAT and Import Duty etc, have not to date,
been officially numbered. The resulting misclassification is found in most
monthly accounts bundles examined.

17. There is clearly a dual system of classification currently operating between NBR
and CGA that needs to be addressed before detailed reconciliation of revenues
may be considered. An example of this may be seen when considering
Supplementary Duty, which may be collected from either imports or domestic
products. NBR classifies SD from import as a sub item under import duty and
SD from local products under VAT. The CGA offices however have
subdivisions of SD for import and local.

18. Tax deducted at source as a book adjustment through the CGA accounting
network is currently not distinguishable in the accounts from tax collected
through the bank. All tax is currently recorded under the function code of IRD
and this has a serious impact on the CGA office’s ability to reconcile its reported
tax revenue figures with those reported by Bangladesh Bank. This in turn
reduces the confidence with which the MoF views the CGA data when
comparing it to that of the NBR.

There is no standard approach for dealing with tax deducted at source by


Government bodies. It is seen that some that lodge a cheque directly to the
concerned revenue bank account, some send a cheque to the Income Tax
authority causing a delay before lodgement while others simple deduct the
amount at source and make no transfer to the NBR.

49
Baseline report on bank reconciliation

8 CGA Reconciliation Procedures

8.1 Background

The Account Code provides no guidance on the correct procedures to be followed by


the CGA when reconciling the Government accounts with the actual cash movement in
Bangladesh Bank. The CGA Officer responsible for the Central Data Processing Unit
(CDPU) has attempted to reconcile the movement in cash for each of the 469
accounting offices with the individual bank branch movement as reported by
Bangladesh Bank up to the month of March 2003. The reconciliation has not been
attempted since March 2003.

This reconciliation provides a basic control measure that should be achievable every
month by CGA Officers. The local accounting offices record movement in the
economic codes 8901 and 9901 for cash only upon receipts of debit or credit scrolls
from the local bank. As shown in the diagram below, the source of financial
information that feeds into the CGA accounts is the same that forms the foundation of
the Bangladesh Bank monthly statement.

Monthly movement reconciliation

CGA

Bangladesh Bank
DAO DAO DAO Head Office
Daily and
Monthly
Statements
Flow
1 Local Local Local
Sonali Sonali Bangladesh
Bank Bank Bank
Flow 2
Sonali Bank Head Office
Daily and Monthly
Statements

50
Baseline report on bank reconciliation

8.2 Current reconciliation process

The basic layout of the monthly summary reconciliation certificate (as printed on 21/01/04 for this
report) is shown below.
Certificate

This is to certify that the attached abstract of Accounts of the Government of Bangladesh for the
month of March and year 2002-03 has been compiled in my office and signed by me on 21/01/04

General statement of accounts is given below:

Opening Balance: 7,37,06


Bangladesh Bank deposit 7293,09,79
Bangladesh Bank Deposit (Railway) -7285,72,72
7,37,07
Receipts of the current month:
1. Consolidated Fund 3823,63,90
2. Public Accounts 4086,76,18
TOTAL 7917,77,14

Expenditure of the current month:


1. Consolidated Fund 4113,32,13
2. Public Accounts 3833,63,20

Closing Balance: -29,18,20


Bangladesh Bank Deposit 7261,84,80
Bangladesh Bank Deposit (Railway) -7291,02,99
-29,18,20

TOTAL 7917,77,14

It is certified that the closing balance of deposit in Bangladesh Bank as shown in the list of balances
furnished by the Manager, Bangladesh Bank, Central Branch, Dhaka of Tk. 328188 has been
reconciled.

The explanation of the difference of the amount, Tk. 620008 has been shown in the enclosure.

Balance as per Bangladesh Bank Cash Report

A/c No. 100 and other than 201 Tk. 7284,04,83


A/c No. 201 Tk. -7251,22,95
Total - Tk. 32,81,88

Controller General of Accounts

51
Baseline report on bank reconciliation

The March 2003 reconciliation spreadsheet prepared within CGA was analysed in detail
and the following observations were made.

The layout of the spreadsheet is shown below.

Office of the Controller General of Accounts

Explanation of difference between cash balance of Bangladesh Bank and CGA


Year: 2002-03 Month: March

As per accounts Office As per Bangladesh Bank Status of


difference of
cash balance
Sl Source Name of Receipt Payment Differenc Receipt Payment Differenc Excess Short
No Code District/Upazilla e e debit / debit /
. of Short Excess
Acc. credit credit
Off.
1 2 3 4(2-30 5 6 7(5-6) 8(4-7) 9(4-7)

The column totals as per Accounts Office and Bangladesh Bank that appear on the final
page, page 21 are as follows:

As per: Receipt Payment Movement

Accounts Office 35,92,44,13,07 36,26,93,38,696 -34,49,25,617


9
Bangladesh Bank 14,53,93,32,21 22,42,68,72,699 -7,88,75,40,486
3

The column totals for the Status of difference of cash balances are as follows:

Excess debit / Short debit /


Short credit Excess credit

Total 9,04,53,72,723 1,50,27,57,854


Difference of cash balance in current month 7,54,26,14,869
9,04,53,72,723 9,04,53,72,723

Other Balance 14,80,01,89,738

52
Baseline report on bank reconciliation

Beneath these column total figures, appears the following ‘reconciliation’.

Opening Balance of difference of Cash balance (Debit): -6,92,93,86,869


Difference of cash balance in current month (Debit): 7,25,75,74,869
Closing Balance of difference of Cash balance (Debit): 32,81,88,000

8.3 Observations

1. The CGA office has not attempted bank reconciliation since March 2003. No
action has been taken to date to address this critical lack of control.

2. The Government bank account has not, since Independence in 1971, been
effectively reconciled. This has resulted in a generally accepted feeling that
bank reconciliation will only be achievable by the introduction of wide scale
computerisation. As a result, no serious and concerted effort has been made to
do this.

Rather, the overall reconciliation attempt has been prepared as more of a


procedural exercise, where the aim appears to be to show that any figures quoted
can be balanced against each other, rather that an attempt to reconcile actual
cash movement. The initial indication from interviewing key stakeholders
involved in this process is that there is little belief that the bank can actually be
reconciled under the current processes and therefore the required importance is
not attached to the reconciliation attempt.

3. There is a serious misunderstanding of the figures reported on the spreadsheet.


This is especially true for the ‘reconciliation’ figures at the end of the
spreadsheet, which are incorrectly named and inconsistently calculated.

4. No satisfactory explanation could be provided for the introduction of a balancing


item ‘Other Balance’ or to describe what it represents.

5. Within several lines of the column totals, two different figures are both stated as
‘Difference of cash balance in current month’, Tk 7,54,26,14,869 (000) and Tk
7,25,75,74,869 (000). No explanation is provided on the report for this change.

6. ‘Opening balance of difference of Cash balance’ is not correctly named. The


actual opening balance of difference of cash balance is calculated by identifying
the difference between the cash balances of the previous month as reported by
CGA and Bangladesh Bank respectively. The correct figure for the month in
question is actually Tk 61,32,29 (000). However, the figure stated on the report
is the cumulative residual errors made in preparing previous months
reconciliation spreadsheets and is of no benefit to the current months
reconciliation.

7. ‘Closing balance of difference of cash balances’ is actually closing cash balance


as reported by Bangladesh Bank.

53
Baseline report on bank reconciliation

8. Movement as per Bangladesh Bank is not directly compared to the actual


movement shown on the monthly bank statement. This has a major impact in
light of observations 10 and 14.

9. All figures are in thousands of Taka, yet this is not stated anywhere on the
report.

10. The cash inflows and outflows as per the accounts are generated directly from
the CDPU system. The inflows and outflows for Sonali Bank branches are
entered using the summary information on the monthly bank statement.

The 9 Bangladesh Bank branches are more difficult to calculate. The monthly
statement received by the CGA Office does not summarise the overall cash
inflow and outflow for each branch. Instead, a data input operator at the CDPU
is required to calculate these figures by adding 156 figures for each branch,
being receipts and payments for each of the 78 individual bank accounts. This
amounts to 1404 individual entries that are clearly prone to error. Bangladesh
Bank should be instructed with immediate effect to provide the receipt and
payment figures for the nine branches as part of the standard statement.

Further difficulties arose in preparing the Bangladesh Bank branch figures for
March 2003, as there was some confusion over whether the amounts appearing
on the statement were net or gross figures.

11. Of the 469 offices assessed, there were significant differences in the figures for
26 offices and the Railway account as shown in the tables below.
Movement of
Sonali Bank Movement as Sonali Bank as
Difference % Difference
branch per CDPU per CGA
spreadsheet
Taka Taka Taka
Lohajang -3,902,792 -5,002,792 1,100,000 -28.18
Singair -3,880,362 -3,920,367 40,005 -1.03
Daulatpur -5,017,051 -5,037,771 20,720 -0.41
Shariatpur Dist -24,763,570 -24,663,570 100,000 -0.40
Noria -4,674,387 -4,695,584 21,197 -0.45
Basail -4,546,568 -4,561,778 15,210 -0.33
Netrokona Dist -45,017,153 -44,839,741 177,412 -0.39
Nikli -1,548,058 -1,538,058 10,000 -0.65
Naniarchar -3,595,900 -3,580,140 15,760 -0.44
Panchhari -6,363,798 -6,343,975 19,823 -0.31
Manikchhari -4,668,467 -4,539,353 129,114 -2.77
Gurudaspur -4,123,391 -4,149,012 25,621 -0.62
Dinajpur Dist -83,281,936 -82,781,936 500,000 -0.60
Goinghat -3,305,758 -3,099,152 206,606 -6.25
Boralekha -2,897,513 -2,837,137 60,376 -2.08
Lohagora -9,531,997 -9,463,950 68,047 -0.71
Chhattak 2,768,688 2,738,689 29,999 1.08
Doarabazar -3,153,812 -3,138,309 15,503 -0.49
54
Baseline report on bank reconciliation

Movement of
Bangladesh
Bangladesh Bank Movement as
Bank as per Difference % Difference
branch per CDPU
CGA
spreadsheet
Taka Taka Taka
Dhaka District 650,256,646 1,380,808,208 730,551,562 112.35
Chittagong District 8,975,420,742 161,569,984 8,813,850,758 98.20
Rajshahi District -245,191,804 71,672,004 316,863,808 -129.23
Bogra District -251,278,474 -38,877,229 212,401,245 -84.53
Rangpur District -34,070,890 95,108,147 129,179,037 -379.15
Khulna District 137,380,197 162,504,459 25,124,262 18.29
Barisal District -21,763,266 63,908,604 85,671,870 -393.65
Sylhet District 254,793,857 93,226,781 161,567,076 63.41

Railway – FA & CAO -53,026,617 -120,072,425 67,045,808 -126.44

12. After the reconciliation report was produced identifying the above differences
between the CGA accounts and Bangladesh Bank, CGA Officers took no further
action.

13. Before the CGA became computerised, a similar report was produced manually
at the CGA Office. Due to the limitations of operating a manual system, it was
the accepted procedure to identify the differences between movement shown in
the CGA accounts and Bangladesh Bank statement for the first ten or twelve
accounts offices. After this small number of differences had been calculated, the
remaining difference between total cash movement was simply identified as
Other Balances. It was assumed at the time that if the same procedure had been
carried out on all of the accounting offices, the total of the differences would
equal the total difference between the two sources.

The introduction of computerisation now allows a complete analysis to be


carried out on all 469 offices, and therefore the difference for each office to be
calculated. It can be seen however on the extract of the March 2003
reconciliation spreadsheet, that the same policy of identifying Other Balances is
still in operation. The entry of Other Balances indicates that the data entered
onto the reconciliation spreadsheet has been entered incorrectly. The principal
reason offered by the CGA Officers for the inclusion of Other Balances was that
it is a residue from the difference in stated balances at Independence in 1971.
This demonstrates a need for training at the CGA Office into the rudimentary
principles of bank reconciliation.

14. Total movement in the Bangladesh Bank statement for the month of March 2003
was a reduction in cash of Taka 35,87,47 (thousand)

Total movement in the bank as per the reconciliation statement for March 2003
was a reduction in cash of Taka 7,88,75,40 (thousand)

55
Baseline report on bank reconciliation

If these two figures had been compared directly on the final page of the
reconciliation spreadsheet, errors relating to data input would have been more
easily identifiable. The current template however does not compare these
figures and therefore the errors in the spreadsheet itself were assumed to relate
to the actual difference between the CGA accounts data and the Bangladesh
Bank monthly statement.

15. The differences identified in the movement for accounts offices serviced by
Bangladesh Bank branches has been explained above with the complexity of the
receipts and payments figures supplied by Bangladesh Bank. The differences
relating to Sonali Bank branches however required further investigation. An
examination was made of the movement shown on the monthly bank statements
sent from the local bank branches to the respective accounting offices, compared
to the movement reported by each accounts office. For all offices examined, it
was observed that the local accounts office correctly entered the cash movement
according to the original monthly statement. This is in line with the CGA order
that monthly accounts data should not be entered onto the CDPU system if it is
inconsistent with the attached monthly bank statement.

For those branches sampled, Sonali bank was reporting a different figure for
cash movement during the month on two separate bank statements.

Government Accounts branch of Sonali Bank was visited to obtain an


explanation for the difference between the actual cash movement and the
amount of cash that Sonali Bank received from Bangladesh Bank for UAO
Panchari. After some investigation, it was found that Sonali Bank received an
amended bank statement report, signed by both bank manager and UAO in May
2003. The subsequent adjustment of balance notification was received from
Bangladesh Bank in December 2003.

16. While it is reassuring that Sonali Bank did adjust their figures under their own
initiative, it is of concern that the local UAO office recorded the correct
information within 15 days of month end, yet it took one and a half months for
Sonali Bank to identify the required correction and eight months for Bangladesh
bank to amend the balances.

17. The UAO was aware of the misreporting by Sonali Bank, yet CGA was not
informed of it. Therefore, given the inability of CGA to reconcile the movement
reported in each local office, no action was taken and Bangladesh Bank was also
not informed.

18. A weakness exists due to the lack of reconciliation carried out between the cash
disbursed by Sonali Bank (as reported by local accounting offices) and the
amount reimbursed by Bangladesh Bank. While no evidence has been found in
preparing this report that Sonali Bank have received any amounts for which
disbursement was not made, it is possible that this may have happened.

CGA is the office that is ideally placed to carryout this reconciliation and
immediate action should be taken to ensure that Public Funds are appropriately
safeguarded.
56
Baseline report on bank reconciliation

19. No evidence was found during this study to show that any reconciliation is
carried out with Bangladesh Bank data during the preparation or data entry of
Railway monthly accounts. The CGA office must carry out a full investigation
into this issue.

20. The Central Reconciliation Unit has been compiling figures for cheques and
bills for every District Office since December 2002. This information is
compiled by the respective Divisional Controller of Accounts office and
summary information sent to the CRU. To date, nothing has been done with this
information and no comparison of the reported figures has been made with the
data held by the CDPU.

When analysed, the information held for DCA Chittagong as at December 2003
presented the following findings.

Closing net balances of cheques and bills as at December 2003 were given by
the DCA Chittagong office and CDPU (calculated as total movement from
September 1999 – December 2003) as follows:

Balances as per %
Balances as
District DCA Difference Difference
per CDPU
Chittagong
Chittagong District -551,939,866 35,681,444 587,621,310 1,646.85
Coxs Bazar District -28,843,556 2,021,041 30,864,597 1,527.16
Rangamati District 89,373,544 3,440,070 -85,933,474 -2,498.02
Bandarban District 14,839,688 1,521,042 -13,318,646 -875.63
Khagrachori District -6,503,773 684,245 7,188,018 1,050.50
Comilla District -104,589,148 11,962,395 116,551,543 974.32
Chandpur District -37,104,645 4,563,985 41,668,630 912.99
Brahmanbaria District 48,274,393 7,655,516 -40,618,877 -530.58
Noakhali District -879,183 6,636,493 7,515,676 113.25
Feni District -152,975,693 2,126,272 155,101,965 7,294.55
Lakshmipur District 32,358,593 1,356,428 -31,002,165 -2,285.57

This table indicates a major discrepancy between the CDPU data, which is used
in the preparation of the government’s accounts, and the actual value of
outstanding cheques at any given time.

It is noteworthy that 7 out of 11 offices showed negative balances on the CDPU


system. All outstanding cheques at year-end should have been cleared by
September 1999, the date from which cumulative data was collected for the
above analysis. Furthermore, as budget distribution delays payments for the
initial months of any year, this highlights the potential for significant error in
CDPU data.

57
Baseline report on bank reconciliation

Monthly movements in Cheques and Bills for each District office in the month
of December 2003 as given by DCA Chittagong and CDPU is as follows:

(Amounts in Taka)
Cheques
Cheques Cheques Cheques paid
issued as per
District issued as per paid as per as per DCA Difference
DCA
CDPU CDPU Chittagong
Chittagong
160,745,39
Chittagong District 147,641,275 4 147,641,274 160,745,394 1
Cox's Bazar District 44,784,820 47,940,558 44,784,820 47,940,558 0
Rangamati District 37,496,506 36,030,591 37,496,507 36,030,591 -1
Bandarban District 15,293,616 0 15,293,616 15,346,649 15,346,649
Khagrachori District 25,100,867 26,969,461 25,100,867 26,969,461 0
165,885,20
Comilla District 157,819,716 0 157,819,716 165,885,200 0
Chandpur District 38,868,875 40,759,217 38,868,875 40,759,217 0
Brahmanbaria District 45,685,358 40,678,786 45,685,358 40,678,786 0
Noakhali District 43,510,632 42,539,906 43,510,631 42,539,906 1
Feni District 34,559,816 35,827,360 34,559,815 35,827,360 1
Lakshmipur District 23,311,559 24,873,241 23,311,559 24,873,241 0

21. It is not clear whether the DCA office obtained confirmation of the movements
and balances from the District offices or simply based their return to the CRU on
the monthly accounts data sent. No check has been carried out by the CRU into
the reliability of the DCA office returns.

22. The simple comparison carried out in the preparation of this report, where only
eleven offices were sampled for one month has identified an obvious example of
miscoding. Again this is highlights the potential for miscoding within the CGA
accounts data.

58
Baseline report on bank reconciliation

9 Ministry Wise Bank Accounts

9.1 Observations

It is the intention of MoF to increase the financial management responsibility of line


ministries over time. It is beneficial therefore that Bangladesh Bank and Sonali Bank
currently maintains separate accounts for each Ministry. While it is the intention of
MoF that eventually, each Ministry should be responsible for the control and
reconciliation of their respective bank account, no CAOs interviewed were aware of this
intention. CAOs currently do not take responsibility for the control, reconciliation or
maintenance of their respective bank account and do not consider that they have the
resources, skills or information required to do so.

It was found that Bangladesh bank is currently sending monthly statements to only a
limited number of CAO offices. This may explain why many CAOs are not willing to
be held responsible for the activities taking place in their individual bank accounts,
particularly as they are actually controlled and operated by others. The monthly
statement produced by Bangladesh Bank contains the names of all offices that are to
receive a copy of the statement. Only the original 21 CAO offices are listed and
therefore it is clear that the source information is simply not available for the newly
created 30 CAOs. No member of staff at CGA or any CAO has addressed this issue and
the resulting lack of responsibility has, to date, not been seen as a key issue at CGA.

The CGA Office in Dhaka is also currently unable to reconcile these individual
accounts to the transactions reported through the accounting offices for each Ministry.
No such reconciliation has been attempted to date by any Government unit.

The original premise upon which these additional bank accounts were introduced was
that the cash movement reported by Bangladesh Bank for each Ministry would give a
more accurate reflection of the actual receipts and expenditure for each Ministry than
the CGA accounts data. The evidence collected in the preparation of this report
suggests that this is not currently the case.

59
Baseline report on bank reconciliation

An examination of a small sample of consolidated monthly accounts bundles from


District and Upazilla accounts offices for the month of March 2003 identified the
following errors.

Accounting Office Findings


DAO Kishoreganj Income Tax and VAT had been wrongly allocated by the local Sonali
Bank to Bank Account No. 137 – Local Government Division

UAO Naria All receipts and revenues have been allocated by the local Sonali Bank
to Bank Account No. 215 – Public Account Others.
UAO Panchari The local Sonali Bank included internal sub-divisions of Bank
Accounts that are not recognised by Bangladesh Bank, namely Bank
Account Nos. 186, 187, 188. This is an internal coding system used
within Sonali Bank. The district officials have never questioned the
inclusion of these additional accounts.
DAO Dinapur The local bank allocated Income Tax and VAT together to Bank
Account No. 189 – NBR, despite the separate columns identifying
each type of revenue on the statement. The confusion surrounding
revenue coding is exacerbated by some revenue receipts being coded
to Bank Account No. 111 – IRD.
DAO Dhaka The spreadsheet included as annex D clearly shows that the District
Accounts Office in Dhaka does not consider the Bank Account
allocation when receiving, reconciling or recording daily or monthly
receipts information from Bangladesh Bank. Payments cannot be
reconciled as CAO offices record the expenditure in their accounts and
DAO Dhaka can only record these cheque payments under the generic
Public Account code ‘Cheques and Bills’. The District Accounts
Officer has written to the CGA stating that the DAO Dhaka office is
currently unable to provide an effective accounting function. The
severe limitations under which DAO Dhaka is operating are resulting
in highly significant lack of controls or reconciliation at one of the key
government accounts offices. Given that DAO Dhaka is the office
responsible for coding and reconciling the receipts for the Presidency
region of Dhaka, which accounts for approximately 34% of all
receipts, this will inevitably significantly undermine the ability of the
CGA office to reconcile monthly or annual accounts back to the
individual bank accounts, or even individual function codes.

It was found to be the case that every bundle examined showed misallocation between
individual bank accounts.

This indicates that training is urgently required for bank officials operating in
connection with Government accounts.

60
Baseline report on bank reconciliation

An in-depth examination of the 78 bank accounts maintained at DAO Dhaka was also
carried out to assess the practicality of reconciling these balances in an individual
accounts office against the unreconciled balances taken from the monthly accounts.
With the introduction of many new bank accounts in September 2002, combined with
procedural weaknesses, the reconciliation between CGA Ministry accounts data and
individual bank accounts for the financial year 2002-03 has not been achieved.

The same study was carried out for the single month of March 2003. As can be seen in
annex D, the reconciliation was not achieved, but did provide a general approximation
between the movement in CGA accounts and individual bank accounts.

There are several key reasons that give rise to the difficulty in reconciliation, even at a
local accounts office level:

A. Misallocation by bank officials

The degree of misallocation on bank statements is highlighted above where


every monthly accounts bundle examined showed cases of misallocation. In
many cases, the misallocation involved inevitable codes that should have been
used, or unusual codes where the inclusion of data would be considered
noteworthy. Accounts officials should have identified these instances during the
preparation of monthly accounts.

B. Accounting for Ministry Expenditure Gross

The accounting function at CGA accounts offices is more focused on fund


management against budget allocation than cash management. As detailed in
the local accounting office section (page 26), District and Upazilla accounts
offices record vouchers on registers DAO 4 or UAO 4 respectively.

When a specific Ministry voucher is passed, the gross amount is charged against
the expense codes under that Ministry’s functional code. Any deductions or
recoveries are then charged against non-Ministry specific functional codes such
as GPF, Loans and Advances etc. The net value, being gross expenses adjusted
for deductions or recoveries is then charged to economic code 8616 – Cheques
and Bills. This is the amount that the resulting cheque will be prepared for,
which is different than the amount charged to the respective Ministry functional
code. This severely complicates any attempt to reconcile between the charge
against a specific function code and the movement in the respective Ministry
bank account.

C. Cheques and Bills

Register DAO 4 is used in District accounts offices to prepare accounts on an


accruals basis for vouchers passed by individual Ministries. In Upazilla
accounts offices the accounting entry is only made when passed bills have been
actually been paid by the local bank.

61
Baseline report on bank reconciliation

The accounting entry at a District Office is as follows:

Debit: Relevant expenditure codes


Credit: Cheques and Bills

The entry against the expenditure codes can be linked directly to the respective
Ministry by means of the functional code used. The movement in cheques and
bills is indicative of outstanding cheques not yet cashed, but is a non-Ministry
specific functional code.

When the payment is reported to District Accounts Offices by means of the bank
debit scroll, the office records the transaction by the following entry:

Debit: Cheques and Bills


Credit: Cash

These entries cannot be tagged to specific Ministries as they are entered under
common functional codes in the Public Account.

When an analysis is carried out to reconcile functional code expenditure to


movement in a specific Ministry bank account, cheques issued during the
previous two months will pass through the bank, yet be coded to Cheques and
Bills.

As neither the opening balance nor movement during the month of outstanding
cheques can be disaggregated into specific Ministries, it is not possible to
reconcile cheques cashed for individual Ministries. It should however be
possible to carry out this reconciliation if we consider total movement in all
bank accounts.

D. Departmental Ministries

As examined on page 37, Departmental Ministries have the authority to issue


their own cheques outside of the CGA pre-audit structure. These payments are
only accounted for at District offices when the daily debit scroll is received from
the local bank. The Drawing and Disbursement Officers concerned report their
expenditure to the concerned CAO who will account for the expenditure in the
following manner:

Debit: Expenditure code


Credit: Remittance

When the cheque is paid and the District Accounts Office receives the debit
scroll, the DAO Officers make the following entry in the accounts:

Debit: Remittance
Credit: Cash

Receipts lodged by the Drawing and Disbursement Officers are similarly


accounted for through the above remittance procedure.
62
Baseline report on bank reconciliation

The CAO will record receipts by:

Debit: Remittance
Credit: Income

Upon receipt of the credit scroll, the DAO Officers will record:

Debit: Cash
Credit: Remittance

Unlike Cheques and Bills, Remittance codes are specific to the respective
Ministries. The opportunity therefore should exist to reconcile the Departmental
Ministry remittance codes. However, the following was found to be the case
when two Departmental CAOs were interviewed.

i. CAO Ministry of Communications

The CAO Office is carrying out no reconciliation. It was found that supporting
documentation (paid cheques and challans) supplied by the local accounting
offices through the CGA was returned as it was not considered to possible for
the CAO office to carry out the reconciliation.

ii. CAO Public Works

Primary steps have been taken by the CAO office to reconcile the monthly
movement in Remittance. This reconciliation was undertaken on the initiative
of CAO Officers, not under Government Order.

There are prescribed orders from the CGA for CAO Offices in relation to the
reconciliation of Remittance. However, there are no instructions on procedures
to be followed or on feedback required. This lack of reconciliation of
Remittance codes is widely known and is therefore seen as a significant
weakness. Given the access to bank funds that Drawing and Disbursement
Officers currently have, it is essential that a thorough reconciliation be carried
out between the accounts submitted to the respective CAO and the actual cash
movement in the bank.

The Remittance codes are clearly vulnerable to abuse, which may facilitate
inappropriate actions or defalcation of Government money.

When the above four reasons are considered together, it is clear that reconciling
individual Ministry bank accounts is currently not achievable.

It is generally viewed as unrealistic to expect the CGA or CAOs based in Dhaka to


monitor and take responsibility for an account that is perforated by Upazilla Accounts
Offices, District Accounts Offices, Divisional Controller of Accounts Offices, the CGA
Office, Drawing and Disbursement Officers (DDO) and members of the General Public.
63
Baseline report on bank reconciliation

Before this would be considered appropriate, there are wider reconciliation procedures
that need to be implemented and proven to be sustainable.

Monthly reconciliation between DDOs and the local treasury accounting office is a
fundamental reconciliation that is currently not undertaken. The amounts for
expenditure made or revenue received for each Ministry are not currently reconciled, in
most cases, to the accounting records generated at DAO and UAO offices. Until this
takes place in a complete and timely manner, it is not appropriate to consider attempting
to reconcile the Ministry bank account receipts and payments for each accounting office
to the details recorded by the local banks.

The FMRP project is currently attempting to implement such a reconciliation procedure


between DDOs and DAO and UAO offices. This is to be achieved by designing and
monitoring a communication channel between DAO/UAO, CGA, CAO and the
Ministry itself. Once the CGA office is confident that the accounting records being
compiled throughout its DAO and UAO offices conform with the individual Ministries
data, it will then be in a position to examine the relationship between the accounts data
and individual bank account balances as reported by Bangladesh Bank.

The proposed reconciliation system is outlined in the following diagram:

Monthly reconciliation DDO 1

District / Upazilla Office DDO 1

Record maintained of DDO 3


defaulting DDOs
Forwarded with
accounts on a
quarterly basis

Divisional Controller of Accounts


Instruction to
Consolidated on system reconcile to be issued
and information sent to
respective CAO via CGA
Concerned Ministry

Chief Accounts Office Defaulting DDO names


communicated to DG

64
Baseline report on bank reconciliation

Step 1. Drawing and Disbursement Officers are to reconcile their accounts with the
gross and net figures appearing in the DAO 4 register and register DAO
15A. The DDO net figures can be obtained from the accumulated Bill
Extracts for the month in question.

Step 2. District and Upazilla Officers maintain a record of DDOs that have not
reconciled during the quarter. This is forwarded to the Divisional
Controller of Accounts Office.

Step 3. The DCA office will record the data on a database and forward it to the CGA
where it will be compiled and distributed to the concerned CAOs.

Step 4. Each CAO will communicate this information to the Ministry, which will have
responsibility for ensuring that any defaulting DDOs reconcile their
accounts with the local accounting offices.

The success and sustainability of this reconciliation procedure will largely determine the
feasibility for reconciling the individual bank accounts maintained for each Ministry. If
this is not found to be achievable, the current system of maintaining individual bank
accounts for each Ministry may need to be re-examined.

9.2 Proposals for moving forward with Ministry accounts

Assuming MoF maintain the current Ministry wise focus and determine that the
reconciliation of each individual Ministry is required, incorporating Ministry, CGA and
Bangladesh Bank data, some changes will be required. These are briefly outlined
below:

 The bank accounts recording Ministry and Divisions transactions, maintained by


Bangladesh Bank must be rationalised into Ministry and Division facing
accounts only, removing any accounts where multi-ministry cash flow is
allocated. This will result in all cash movements being directly attributable
to a specific Ministry or Division, in line with the current functional
coding structure in the chart of accounts. The required 52 accounts are
listed as annex E. Therefore, single figures for net cash inflow and
outflow will be easily identifiable for each Ministry or Division without
the confusion introduced by function related accounts such as pensions or
GPF.

• The problem of misallocation by bank officials must be overcome. This may


be achieved by introducing a comprehensive bridge table to clearly instruct
bank officials as to the correct bank account to be used for every 13-digit
Government code. This should not be a complex or time-consuming
exercise, but should dramatically reduce the instances of misallocation.
Unless bank officials receive sufficient training to improve the current high
levels of misallocation, the complications introduced by rectifying
identified cases of misallocation could have a seriously detrimental effect

65
Baseline report on bank reconciliation

on even the basic reconciliation of total cash inflow and outflow currently
achieved at accounting offices.

• The responsibility on local accounting offices to reconcile the detailed


information for each daily transaction accurately to the supporting
documentation must be increased. All receipts and payments must be
checked to ensure that the correct function code, bank account and amount
are reported. Furthermore, remedial action must be instigated
immediately to rectify any instances of misallocation.

Only after these have been successful introduced is it possible to move towards a more
detailed reconciliation to accounting records. Two proposals for doing so are detailed
below:

9.2.1 Manual reconciliation with minor amendment to CGA coding

 The current system of accounting for the expenditure of each Ministry through
the use of the DAO 4 register should be amended only slightly. When preparing
the monthly payment schedules each month, a manual record should be taken of
the total monthly non-cash deductions, recoveries and book adjustments
recorded under each function code. The total gross expenditure is then to be
amended to incorporate this figure and the resulting net expenditure agreed with
the respective DDO. This agreed figure would then be recorded manually as the
value of cheques issued for each Ministry.

 Cheques and Bills must be able to be tagged to specific Ministries or Divisions.


This proposal may cause additional difficulties for local accounting offices, as it
will introduce a manual system of recording outstanding cheques for each
Ministry or Division using the DAO 15, DAO 16 and DAO 17 model. Register
DAO 15A should be amended slightly to incorporate the recording of paid
cheques for each Ministry or Division in line with the current ticking procedure
on DAO 15 and DAO 17. In this way, a record will be available of opening
balance of outstanding cheques, cheques issued, cheques cashed and closing
balance of outstanding cheques for each Ministry or Division. This will increase
the amount of paperwork that accounting offices are required to carryout but
should provide the required information in an easily reconcilable manner. This
could also incorporate the utilisation of currently available function codes for the
Cheques and Bills of each Ministry or Division.

 Remittance codes for every Departmental Ministry must be comprehensively


reconciled every month and signed agreement of the figures obtained from the
respective DDOs. The current balances in Remittance accounts should therefore
be reconciled, under or over stated balances transferred to suspense pending
further investigation and very strict monitoring of monthly movement
maintained centrally at the CGA office.

 The current economic code for remittance should be separated into two
distinguishable codes, one solely for Departmental Cheques and the other for

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Baseline report on bank reconciliation

Departmental Receipts. This measure will remove a great deal of confusion that
currently surrounds the remittance balances and will enable these codes to be
more easily reconciled.

 When all of these issues have been successfully addressed, only then can the
proposed reconciliation between DDOs and local accounting offices be
expanded. When the gross, net and outstanding cheques information, gained
manually, is fed through to the concerned CAO office, the CAO will be in a
position to reconcile these figures with the Ministry or Division internal data
flow from DDOs. Thereafter, this information should be directly compared and
reconciled to the individual bank accounts operated at each bank branch.
Differences identified should be investigated and amended.

 The figures that could be agreed for each Ministry or Division at either a local or
national level would be:

Gross Expenditure AAA (From CDPU data)


Less Deductions BBB (Manually recorded)
Book adjustments CCC (Manually recorded)
Net Cash Payments XXX

As per Bangladesh Bank XXX (From bank statements)

Gross Revenue DDD (From CDPU data)


Less Recoveries EEE (Manually recorded)
Book Adjustments FFF (Manually recorded)
Net Cash Receipts YYY

As per Bangladesh Bank YYY (From bank statements)

 This proposal would be the least disruptive way to achieve this reconciliation
within the CGA office. However, it is based on the manual recording and
communication of information for deductions, outstanding cheques etc and is
therefore prone to errors. It would be confusing for accounting staff to operate
and the information provided may not carry the confidence of the users of the
accounts. Furthermore, it depends on a concerted and co-ordinated effort from
all personnel involved and may therefore not be the ideal approach to be taken at
this time.

9.2.2 Comprehensive reconciliation through more significant CGA coding


changes

If the MoF and CGA are prepared to develop the manual idea in 9.2.1 above further,
this may lead to a more realistic and sustainable way forward. Where the current chart
of accounts is unable to provide the information required and the bank accounts
maintained do not lend themselves to reconciling all transactions on a Ministry or
Division basis, it is appropriate to consider amendments that enable the CDPU data held
to be directly reconciled against the bank statements.

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It is found that further benefits would be available if all transactions, including all
Public Account transactions were to be functionalised to the relevant Ministry or
Division. This would mean that all deductions and recoveries and Bangladesh Bank
deposit transactions and balances could be directly allocated to the concerned Ministry
or Division by means of the data held in the CDPU. These transactions are effectively
‘lost’ under the current system of generic functional coding. The responsibility for each
function will remain unchanged, however, the accounting information available will be
more detailed and valuable.

In line with this measure, the bank accounts held with Bangladesh Bank could be
restructured to ensure that all transactions could be allocated to specific Ministries or
Divisions, rather than separating the cash movements between Ministry or Division
specific and generic accounts. If this were to take place, the reconciliation of individual
bank account movements with the CGA data for each office would be attainable.

The use of register DAO 4 means that the current accounting procedures allocate the
gross expenditure for a transaction to the Ministry or Division concerned. This function
code is entered at the top of the register. The fields used to record gross on the register
DAO 4 are filled below.

Legal & Functional Code

Total
Net Total
Token Name Gross deductions
Date of payment/
No & of Admissible claims with economic codes payments Deductions/recoveries with economic codes and
payment cheque Cr.
date Payee Dr. Recoverie
s
4501Pay of Officer

4601Pay of Estt

4705.House rent

8101GPF

8241B.F

3901HB advance

Interest on loan

VAT
8246G.I.
4717Medical

6821Furniture

A B
D
C
(B+C)
(A—B)

8616

Monthly total
Previous month
Progressive

However, when non-cash deductions are made, these are recorded under separate
columns, the totals of which are coded to a single function code that is different than
that of the gross expenditure, as filled below.
Total
Net Total
Token Name Gross deductions
Date of payment/
No & of Admissible claims with economic codes payments Deductions/recoveries with economic codes and
payment cheque Cr.
date Payee Dr. Recoverie
s
4501Pay of Officer

4601Pay of Estt

4705.House rent

8101GPF

8241B.F

3901HB advance

Interest on loan

VAT
8246G.I.
4717Medical

6821Furniture

A B
D
C
(B+C)
(A—B)

8616

Monthly total
Previous month
Progressive

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Baseline report on bank reconciliation

If all non-cash deductions or recoveries were simply coded to the same function code as
the original transaction, this would provide a traceable Ministry or Division wise
connection between the gross expenditure, deductions or recoveries and net cheques
issued. This will simplify the work carried out at month end as the office will no longer
be required to separate the deductions into distinct function codes, but can instead
simply complete the month-end schedules directly from the DAO 4 register.

In turn, it should be possible for the local treasury accounting office to agree with the
concerned DDO, by means of DAO 4, the gross and net expenditure for the month. The
resulting figure will represent the amount of cheques issued during the month for the
concerned Ministry or Division, as indicated by the newly functionalised cheques and
bills code.

Confusion may arise when it is considered that currently, the same economic codes are
used for cash and non-cash transactions such as GPF or Income Tax, where there are
deductions at source and cash lodgements. To resolve this issue, offices could be
instructed that any non-cash deductions are to be coded in line with the functional code
of the original transaction, i.e. the function code at the top of the DAO 4 register.
However, cash lodgements should be coded to the Ministry or Division that is
responsible for the operation of that particular role and lodged into that office’s bank
account, i.e. to IRD for income tax lodgements.

The different treatment to be used for these transactions is explained below:

a. Where a Ministry of Health employee submits a pay bill where there is a non-
cash deduction made for GPF.

In this case, the local treasury accounting office should complete the DAO 4 register
and code both the gross pay and deduction to the function code of the Ministry of
Health. When the cheque is cashed through the local bank, this should be allocated to
the bank account of the Ministry of Health.

b. Where a Ministry of Health employee lodges cash into the bank to supplement
their GPF balance.

In this case, the bank should initially allocate the lodgement to the bank account of the
C&AG. When the local treasury accounting office receives bank debit scroll, they
should code the lodgement under the function code of the C&AG, as this office is
responsible for the overall operation of the GPF.

Accounting at local treasury accounting offices should be carried out on a Ministry or


Division wise basis. Separate registers should be maintained for each Ministry and
Division and monthly accounts should be prepared on this basis. There should only be
a minor increase in work for the officers at the accounting office as the functionalised
Public Account codes are easily recorded directly from the DAO 4 register.

Accounting on a daily basis must be enforced, with the individual bank account
movements recorded on a re-designed DAO 1 register and reconciled with the
supporting documentation provided by the bank. It is at this stage that the accounting
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Baseline report on bank reconciliation

officers must ensure that the supporting documentation allocated by the bank against a
specific Ministry or Division account does relate to the Ministry or Division stated and
that any errors identified be amended by the bank immediately.

At month end, the office should reconcile the monthly bank statement against the totals
recorded on the DAO 1 registers maintained for each Ministry or Division. This should
ensure that the individual movements reported for each bank account are accurately
reported on the monthly statement.

A separate monthly account should be prepared for each Ministry and Division,
accompanied by a legal code summary sheet which should be supported by the
appropriate schedules for Consolidated Fund and Public Account receipts and payments
and may be reconciled with the appropriate bank account movement stated on the
monthly bank statement

The end result of these measures should be that the following reconciliation is
achievable, directly from the accounts data, for all Ministries and Divisions at both a
local and national level.

Gross Expenditure Gross Receipts


Less Deductions at source Less Deductions at source
Less Movement in Departmental cheques Less Movement in Departmental Receipts
Less Movement in DAO cheques . .
Equals Net cash outflow Equals Net cash inflow
Cash outflow as per bank Cash inflow as per bank

If Departmental Ministries are provided with a computerised reconciliation system to


enable outstanding departmental cheques to be reconciled, the data held at the CDPU
will be valuable for another reconciliation. The value of departmental cheques issued,
as recorded by the CAO may be compared to the value of departmental cheques cashed,
as reported by the local treasury accounting offices. The movement in the balance of
departmental cheques outstanding may then be reconciled with the list of outstanding
cheques maintained by the CAO office.

The calculation of non-cash transactions may be achieved through either the


identification of individual economic codes or alternatively through the introduction of
separate legal codes. The optimal procedure should be clearly identified during piloting
exercises to be carried out within the FMRP project.

The measures highlighted above show that it is a realistic aim of the CGA to tie together
the Ministry and Division accounts, CGA accounts and Bangladesh Bank statements.
This will not be achieved instantly, but should in time clearly demonstrate that the
accounts produced by the CGA may be relied on with more confidence than has
previously been the case.

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Baseline report on bank reconciliation

10 Future Developments

The systems and procedures found throughout Government and private enterprise in
Bangladesh have been developing and changing at a dramatic pace over recent years.
This trend will inevitably continue with a resulting impact on the bank reconciliation
processes within the CGA office. The following issues may be seen at this time to be
the most influential in this regard and to this end a brief description and impact
assessment of each follows:

10.1 Bangladesh Bank

The World Bank has approved a significant project entitled the Central Bank
Strengthening Project. A World Bank press release on June 19th 2003 stated that,

“ US$ 37 million was approved for a Central Bank Strengthening Project which will
help the Bangladesh Bank more effectively perform its essential role of regulator and
supervisor for the country’s banks, as well as the conduct of Bangladesh’s monetary
policy.
Recognizing the need to help stem the continuing and significant problem of poor
governance, which is perpetuating a “default culture” within Bangladesh’s banking
system, the Government requested the World Bank to assist in the reform and
restructuring of Bangladesh Bank.
Bangladesh Bank worked closely with the World Bank on design and will also
implement the project which will focus on its functional reorganization, automation and
modernization. It will undertake human resource development, strengthening of the
legal framework, and building capacity for more effective regulation, supervision and
research. It is envisaged that, at the end of the project period, a strong and modern
Bangladesh Bank would not only be able to monitor and supervise all financial
institutions more effectively, but would also lead the design and implementation of a
medium to long-term reform program for achieving a sound and efficient financial
system in Bangladesh. The total project cost is US$ 46.13 million of which IDA will
provide US$37 million and the Government will provide US$9.13 million.”

The impact of this project for CGA bank reconciliation is not seen as significant. The
recording of accurate and timely financing information may improve, however as stated
previously, the information required by Government is currently available, although not
actively sought after by Government.

The computerisation of the main Bangladesh Bank branches will also have a limited
impact on the current processes. Bangladesh Bank, like Sonali Bank currently prepares
a separate credit scroll for all NBR receipt challans and prepares an electronic listing of
cashed cheques information for the CRU. Although the speed of information provision
may improve as a result of this project, it is unlikely to lead to any dramatic change of
proposed reconciliation processes.

The most significant improvement expected at the end of this project from the
Governments reconciliation perspective is the move away from manual record keeping
at Bangladesh Bank to a fully computerised one. This should improve the quality of
information provided to the CGA office, but any controls introduced by CGA under the
current manual system will still be required in future.

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Baseline report on bank reconciliation

10.2 Sonali Bank

Sonali Bank is currently in the process of computerising 62 Principal and Regional


branches, including all of their Dhaka branches, with the target date of April 2004. In
addition, over the coming three years this roll out should be continued to result in
approximately 300 branches in total. While Sonali Bank has over 1,100 branches
throughout the country, there are currently no plans to extend this programme in the
near future to incorporate all branches.

Where there are computerised and non-computerised Sonali Bank branches serving a
District Accounts Office, the incomplete information provided will be of little use in
any reconciliation processes. Furthermore, it is unclear whether the realistic aim of
Sonali Bank in the short term is that detailed or only consolidated Government Account
wise receipt and payment data from each District will be sent to the Head Office. The
desired detailed information offering the opportunity to reconcile actual cheques cashed,
as is the case in Dhaka, or challans received is therefore not seen as a possibility in the
near future.

As with Bangladesh Bank, there may be useful developments resulting from this
initiative in coming years and as such, the CGA office should regularly discuss the
developments and opportunities with each bank.

10.3 National Board of Revenue

There is currently a project in the Large Taxpayer Unit (LTU) of NBR funded by the
Department for International Development (DfID). The aim of this project is to pilot an
improved and computerised income tax collection, monitoring and reconciliation unit.
There have been several attempts previously to computerise the assessment and receipts
of income tax and these have, to date, proved difficult to implement successfully. It is
the considered opinion of this report that the CGA office should not consider amending
any reconciliation procedures in anticipation of developments arising out of this project.
This does not in any way assume that the pilot will not be successful, but is a realistic
assessment of the time and resources required to ensure confidence in the figures
produced over coming years and that the LTU accounts for approximately 1/3 of
income tax not collected at source.

There appear to be no other plans to further computerise any other areas of NBR
operations in the short term. This means that while CGA may be able to exert some
influence in implementing some improvements and expansion of the current Zone 1
data collection systems, there is likely to be little significant impact on bank
reconciliation arising from new developments in NBR in the coming years. As stated
previously, there are currently significant opportunities for reconciliation through the
customs projects within NBR that should be utilised by the CGA office immediately.

The CGA office should closely monitor and discuss any future developments in NBR to
identify possibilities presented for improved reconciliation.

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Baseline report on bank reconciliation

10.4 Controller General of Accounts

Following the success of the RIBEC project in introducing a computerised


consolidation system at CGA and improved and standardised accounting procedures
throughout many accounting offices, the FMRP project is aiming to take this progress to
the next logical level. The most significant impact on bank reconciliation will
inevitably come from the planned systems developments in both the medium and longer
terms.

The piloting, implementation and roll out of Transaction Accounting through local
accounting offices should dramatically improve the quality and detail of information
relating to bank movement for each individual office where the system is introduced.
This will in turn lead to major improvements in the quality of bank reconciliation that
may be carried out, including the possibility of system operated bank reconciliation at a
local level.

The longer-term aim of introducing an Integrated Financial Management Information


System throughout Government will totally revolutionise the bank reconciliation
procedures at CGA. This will prove to be immensely beneficial in the long term, but
until basic manual reconciliation is achieved, it will be difficult to position the financial
operations of Government in such a way to accommodate the improved systems. It is
essential therefore that Government address the current reconciliation problems
immediately, so that any future systems adopted are given the opportunity to succeed.

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Baseline report on bank reconciliation

11 Recommendations

The following recommendations have been considered with both a short and medium-term
perspective. These should be considered by key stakeholders and agreement reached as to the
most appropriate recommendations to be adopted. Recommendations will be followed up in
future years of FMRP to assess progress and review outcomes.

11.1 Short Term Recommendations

1. The MoF and CGA offices should ensure that all documents received from Bangladesh
Bank clearly explain the information actually contained within them. The title of ‘Bank
Statement’ or ‘Bank Balance’ must be prudently restricted to those documents that
represent actual cash balances on a stated date.

2. The CGA office should establish a high level working group incorporating MoF and
CGA Officers on the Government side and Bangladesh Bank and Sonali Bank
representatives. This working group must establish the information requirements of
Government and detail the status and suitability of all information currently provided.

3. Training should be provided to Ministry of Finance and Controller General of Accounts


Officers and Staff into the contents and implications of the various documents currently
received from Bangladesh Bank.

4. An independent Banking Unit should be established within the CGA and should be
totally outside of the control of the CDPU. This unit should establish a communication
channel with the Government Accounts Department at Bangladesh Bank. All daily
information received from GAD relating to financial data not reported through UAO,
DAO or DCA offices, except that relating to Treasury Bills and Ways & Means should
be recorded in a register and distributed to the concerned CAOs. Information relating to
the movement in Treasury Bills and Ways & Means Advances should be recorded
directly by the Banking Unit.

5. The Banking Unit should reconcile its monthly figures with Bangladesh Bank and ensure
that these are accurately entered onto the CDPU system within a few days of month end.

6. The CRU should be upgraded to become a fully independent Central Reconciliation Unit,
not limited to the current CRU operations. This unit must be given sufficient resources,
authority and support from the CGA to enable it to carry out all central reconciliation
procedures required. The Central Reconciliation Unit Officers should be trained in the
specific reconciliation procedures required and given general accountancy training to
enable them to fully understand the importance, consequence and general principles of
bank reconciliation.

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Baseline report on bank reconciliation

7. A sustainable and comprehensive reconciliation should be carried out by the CRU for
total monthly cash movement at each of the 469 treasury accounting offices and direct
transactions from GAD. The same reconciliation spreadsheet, which was used for
previous attempts, should be slightly amended to clearly show the cash movement as per
the actual bank statement as a separate figure that may be compared on the spreadsheet to
the calculated movement. The following table provides a simple format for the required
calculation. The reconciliation of differences relating to individual accounting offices
should only proceed once:

a) The total net cash movement as per Bangladesh Bank calculated on the
spreadsheet equals that taken from the bank statement.
b) The total net cash movement as per CGA calculated on the spreadsheet
equals that taken from the table below.
c) The total difference in net movement between CGA data and Bangladesh
Bank data calculated on the reconciliation spreadsheet (currently titled as
‘Difference of cash balance in current month’) equals the difference
calculated in the table.

Opening Receipts Payments Net Closing


Balance Movement Balance

As per Bangladesh Bank Statement (a)


As per CGA data (b)
Difference (c)

The current confusion surrounding the reconciliation terminology on the spreadsheet,


which is resulting in inappropriate figures being incorporated in to the reconciliation,
should be removed and more easily understood wording used instead.

FMRP should assist in this reconciliation by providing guidance and training to the
officers responsible.

The reconciliation of cash movement in individual bank accounts is addressed in


recommendation 11.1.

8. The CGA should sign all monthly accounts prepared only upon the accurate completion
of a genuine bank reconciliation. This would ensure that all CGA employees saw the
bank reconciliation as a fundamental control mechanism and this would greatly improve
the prospects for future reconciliations.

9. The CGA office should carry out a full investigation into the Railways accounts
preparation and bank reconciliation procedures. Action must be taken on the findings of
this investigation.

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Baseline report on bank reconciliation

10. The CRU should be adequately supported by the CGA in carrying out the current
operation of CAO outstanding cheques reconciliation. CAOs must be compelled by the
CGA to co-operate with amending mismatches identified in the monthly reports and with
complying with the procedural requirements of balancing outstanding cheques and
Cheques and Bills as per the monthly accounts.

11. The duties and responsibilities of the Central Data Processing Unit should be strictly
confined to the consolidation of monthly data. Other than to correct data input errors,
this unit should not make any amendments to data or journal entries into the accounts
without the authorisation of a senior officer responsible for the affected source data. Any
journals entered centrally must be recorded on the prescribed journal forms and
maintained for inspection at a later date.

12. The CGA office should contact both Bangladesh Bank and Sonali Bank to ensure that all
bank branches reporting to local accounting offices do so within the required time and to
the required standard. This means that daily scrolls are received on a daily basis, with
sufficient time to prepare quality monthly accounts and that supporting documentation is
accurately recorded and provided in the optimal order to assist the local accounting office
to fulfil its reconciliation obligations. This should be monitored by accounting offices
and persistently late submissions escalated through the CGA hierarchy.

13. When there is confidence in the total cash and financing information entering the
Governments accounts by accurate reconciliation of monthly movements, the actual
balances for cash held and Treasury Bills and Ways & Means outstanding claims should
be calculated. The differences between stated balances in the accounts and actual
balances should be written off, either directly to the Consolidated Fund, or in the short-
term to suspense in the Governments Accounts, awaiting a possible retrospective
reconciliation. The CGA office should be given a definite time period of one year after
the creation of this suspense account balance to carry out the retrospective reconciliation
and agree changes with Bangladesh Bank. Any remaining balance at the end of this
period must then be authorised appropriately and written of to the Consolidated Fund.
While this measure may not be seen as optimal, it is the necessary course of action to
ensure that accounts presented by government are seen to provide quality information in
the coming months and years. Once this recommendation is acted upon, it is essential
that CGA ensure 100% monthly reconciliation for cash and financing movements.

14. As a short-term measure, pending a final decision from the Ministry of Finance on its
future, DAO Dhaka should be instructed and trained to carry out sample inspections on
the daily bank scrolls and supporting documentation received from Bangladesh Bank.
This limited control measure should examine the cash movement against challans
received and sample checks of the accuracy of Bangladesh Bank coding should be carried
out. Bangladesh Bank should be officially informed of all errors identified and
amendments made to the bank statements.

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Baseline report on bank reconciliation

15. A study should be carried out to ascertain whether DAO Dhaka and the NBR could, on a
sustainable basis, compare the cash receipt figures reported on the computer generated
credit scrolls that accompany the NBR challans taken to Zone 1 with the relevant figures
reported in the accounts by DAO Dhaka. Any differences identified may then be
reconciled and agreed by both parties. If successful, the total cash generated figures
reported by NBR through the Register 5s of each circle may be able to be reconciled with
the CGA accounts data.

16. All Government agencies interacting with members of the public or banks for receipts or
payments should provide the accurate 13-digit code and relevant bank account number
for any receipts or payments to be made.

17. The CGA office should instruct Bangladesh Bank to provide the monthly cash flow
statement in a layout that is more tailored to the needs of the CGA office.

As may be seen below, the figures appearing in each of these proposed statements may
be directly compared to the information in the other statements. In this way, any errors in
reporting by Bangladesh Bank will be immediately identified by the CGA office and
amendments ordered.

If these statements are provided to the CGA office, it should dramatically improve the
ability of the CGA office to carry out bank accurate and reliable reconciliation
procedures.

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Baseline report on bank reconciliation

This new information provided to the CGA should include the following four statements:

i. Total Opening Balance, Receipts, Payments, Net Movement and Closing Balance of the
Government. This summary cover page should provide succinct and easily
understandable information for all users of the actual movements and resultant balances
during the month in question.

The summary page should take the following format:

Bangladesh Bank Government Account (A/c 100-219) Month _______


Year________

Opening Balance A

Net movement per Bangladesh Bank branches B

Net movement per Sonali Bank branches C

Net movement as per GAD D

Net Movement E

Closing Balance F

ii. Total Opening Balance, Receipts, Payments, Net Movement and Closing Balance for
each of the 78 accounts.

This report should take the following format:

Bangladesh Sonali
Opening GAD Net Closing
Account Bank Net Bank Net
Balance Movement Balance
Movement Movement
100 – General
xxxx
xxxx
xxxx

Total A B C D F

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Baseline report on bank reconciliation

iii. Receipts, Payments and Net Movement for each bank branch reporting to local
accounting offices

This report should take the following format:

Net Total Net


Total Total
Bank Branch Movement Movement
Receipt Payment
for Month per Bank
Bangladesh Bank
xxxx G1 G2 G3
xxxx
xxxx
xxxx
Total Net Movement per Bangladesh Bank B
Sonali Bank
xxxx
xxxx
xxxx
Total Net Movement per Sonali Bank C
GAD Movement D
Total E E

iv. Receipts, Payments and Net Movement for each bank branch, detailed by individual bank
account.

This report should take the following format:

Net Movement
Bank Account Total Receipt Total Payment
for Month

100 – General
xxxx
xxxx
xxxx

Total G1 G2 G3

The detailed account wise information for each local accounting office should be made
available in an electronic format to assist the CGA in its reconciliation process.

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Baseline report on bank reconciliation

18. A comprehensive bridge table should be prepared and distributed detailing the correct
bank account in which to post each type of revenue or expenditure. This should be
distributed to all bank branches, Government agencies and local accounting offices. If all
banks are instructed to consult the bridge table to confirm the appropriateness of coding
and bank account for all receipts and payments processed, this should greatly improve the
accuracy of bank coding and reporting. This recommendation will not only improve
reporting in the short-term, but should be considered in the light of the long-term
recommendations made and the inevitable consequence that this improvement will have
on the success of future bank reconciliation developments.

19. All bank personnel should be thoroughly trained, not only in the correct use of the bridge
table, but in any other issues identified in the operation of the Government account.

20. Each local accounting office should be instructed to compare the individual account wise
movements reported on the daily bank statement to the accounts information produced.
Where differences are observed, any errors made by either the local bank or the
accounting office are to be identified and reconciled between the Bank Manager and
Accounts Officers and relevant amendments made. The cumulative total of daily figures
should be reconciled against the individual movements identified on the monthly bank
statement. Recommendations made in this report for the longer-term will greatly
simplify this reconciliation and prove the long-term benefits of this detailed daily
reconciliation.

21. A database should be designed and implemented at all Divisional Controller of Accounts
offices. The receipts and payments for each individual bank account of each reporting
office, as stated on the monthly bank statement, should be entered and this data may later
be utilised by the CRU. If Bangladesh Bank provide the above statement showing
detailed account wise information for each local accounting office in an electronic
format, the computer may then identify discrepancies in reporting of individual bank
accounts by Bangladesh Bank. This database will also provide a valuable data source for
the DCA, CGA or concerned CAO to monitor and investigate unusual movements in
individual bank accounts.

22. The MoF should ensure that all Drawing and Disbursement Officers comply with the
currently prescribed requirement to reconcile data with the concerned District or Upazilla
office. The degree of compliance should be monitored by the CGA office (and DCA
office) and corrective action taken where required.

23. All departmental CAOs should be given responsibility for, and assistance in reconciling
the movement in Public Account codes for their respective Ministry. This should reduce
the detrimental impact of codes that are viewed by many as ‘black holes’ in the accounts.
In the absence of any detailed bank reconciliation procedures, these uncontrolled
balances are a serious concern for the Government. The degree of compliance with this
recommendation should be monitored by the CGA office.

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Baseline report on bank reconciliation

24. Remittance codes should be replaced with individual codes for Departmental Cheques,
Departmental Receipts and if required, other specific codes. This will provide clarity as
to the items that should be coded and provide the opportunity to more easily reconcile the
balances each month.

25. A computerised reconciliation program based on the current CRU cheque reconciliation
system should be implemented at all Departmental CAO offices to reconcile outstanding
departmental cheques.

26. Training needs at Accounting Offices and centrally within the CGA office need to be
continually assessed and subsequent training in bank reconciliation at both a local and
national level provided.

27. Responsibility for accounting, monitoring and reconciling Foreign Aid projects should be
clearly placed on Chief Accounts Officers.

28. The detailed instructions to be contained in the final CAO Accounts Procedures Manual
should be discussed, agreed by key stakeholders and implemented as soon as possible.
This should ensure that all CAO personnel are fully aware of and trained in the correct
and required accounting procedures for Foreign Aid projects. Reconciliation of Foreign
Aid cash balances are an integral part of this process.

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Baseline report on bank reconciliation

11.2 Medium Term Recommendations

1. The individual bank accounts maintained at Bangladesh Bank and Sonali Bank should be
brought in line with the Governments long-term aim of decentralisation along a Line
Ministries axis. It is therefore recommended that:

 Each Ministry and Division should maintain one bank account, with sub-accounts if
required, feeding into the total balance of the main account. The individual
Ministry and Division bank accounts should be numbered in line with the current
Government coding structure to assist in the accurate allocation of cash. The first
two digits of the account number should be the 2-digit ministry or division code,
with any sub-accounts required taking the final digit i.e. Ministry of Commerce is
Ministry code 17. The main bank account should therefore be 170, with sub-
accounts, if required, being accounts 171, 172 etc.

 In addition to these 52 main Ministry and Division accounts, there should be one
account maintained solely for Governments Floating Debt. This account should
record the daily movements in outstanding claims against the Government as a
result of Treasury Bills and Ways & Means adjustments.

 The final account recommended should enable the annual transfer of all Ministry
balances at year-end into one single balance brought forward representing
cumulative cash surplus or cash deficit resulting from all non-floating debt
Government transactions. This will act in the same way as the current account
number ‘100 – General’ was initially designed. The only other balance that should
roll forward into the following year should be the Government Floating Debt
account. The balance reported in this account should be regularly reconciled to
ensure that it accurately reflects the outstanding claims against the Government that
generated the balance. Ideally, both of these accounts rolled forward should offset
each other, with only a minimal credit balance remaining on the account. Any
excess financing should then be easily identifiable from the year-end bank
statement.

 Historically, legal requirements from certain donor organisations have made it


necessary to maintain certain balances on the bank statement. The benefits of the
revised bank statement and reconciliation procedures should be discussed with
these donor organisations and where possible, these balances should be removed
from the bank statement. It is important that the bank statement reflects actual
movement in cash balances held, rather than attempt to act as both banker and
accountant for the Government.

2. It is recommended that all transactions, for both Consolidated Fund and Public Account
should be directly attributable to a specific Ministry or Division. Ministry and Division
wise function codes should therefore be implemented for all deductions at source,
cheques and bills balances and any other balances currently coded under generic codes.
(A detailed examination of the issues addressed is available in chapter 9, Ministry Wise
Bank Accounts.)

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Baseline report on bank reconciliation

All DDOs should prepare accounts using the DAO 4 register format to allow an effective
reconciliation between Ministry or Division data at a local level, with the respective
District or Upazilla office.

Where non-cash deductions at source or recoveries are recorded for a particular Ministry
or Division on register DAO 4, these should simply be coded using the same Ministry or
Division function code as the gross expenditure or receipt. However, where a cash
lodgement or payment is made for an economic code relating to deductions or recoveries,
these should be coded to the function code relating to the Ministry responsible for the
overall operation of that code.

Accounting at local accounting offices should be carried out on a Ministry and Division
wise basis. Separate registers should be maintained for each Ministry and Division and
monthly accounts should be prepared on this basis. A separate legal code summary sheet
for each Ministry or Division should be supported by the appropriate schedules for
Consolidated Fund and Public Account receipts and payments and may be reconciled
with the appropriate bank account movement stated on the monthly bank statement. One
total legal code summary sheet should also be prepared which may reconciled with the
total movement on the monthly bank statement.

Cash outflow under economic code 8901 and inflow under economic code 9901 may now
be reconciled for each Ministry and Division with the movement recorded on the bank
statement at both a local and national level. Discrepancies could be immediately
identified and traced to the concerned accounting office by means of the detailed
information held under short-term recommendations 16 & 19.

Accounting on a daily basis must be enforced, with the individual bank account
movements recorded on a re-designed DAO 1 register and reconciled with the supporting
documentation provided by the bank. It is at this stage that the accounting officers must
ensure that the supporting documentation allocated by the bank against a specific
Ministry or Division does relate to the Ministry or Division stated and that any errors
identified be amended by the bank immediately. If these entries are assessed and
recorded on a daily basis, the individual bank account movements reported on the
monthly bank statement may be directly compared to the totals recorded on the DAO 1
Register.

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Baseline report on bank reconciliation

The end result of these measures should be that the following reconciliation is
achievable, directly from the accounts data, for all Ministries and Divisions at both a
local and national level and for government as a whole.

Gross Expenditure Gross Receipts


Less Deductions at source Less Deductions at source
Less Movement in Departmental cheques Less Movement in Departmental Receipts
Less Movement in DAO cheques . .
Equals Net cash outflow Equals Net cash inflow
Cash outflow as per bank Cash inflow as per bank

If these changes are agreed, piloted and successfully introduced, this should allow a much
more robust comparison of CGA data with that of each individual Ministry and Division,
where the CGA data will be considered significantly more reliable than previously
thought. Although this will necessarily require some changes to the working practices at
local accounting offices, it will produce benefits that far outweigh the extra efforts
required.

This development would greatly enhance the credibility of the Government of


Bangladesh financial reporting and should have an inevitable impact on the
considerations of International Development Agencies.

3. Improving the quality of Government accounts is a fundamental aim of the Ministry of


Finance and to this end a decision must be made as to the future of what was previously
DAO Dhaka. This report is not appropriately placed to provide the definitive answer to
this issue, as a detailed study of DCA Dhaka is required, given the major consequences of
such a decision. This detailed assessment will be carried out by the FMRP project at a
later date and appropriate recommendations made at that time to assist in the decision
making process.

4. A comprehensive monitoring system should be implemented to ensure that all cash


balances, including Foreign Aid held outside of the Governments Accounts and Imprest
balances held by Departments or other agencies are fully controlled and reconciled. This
should be undertaken by the strengthened CRU under the jurisdiction of the CGA.

5. A unit within CGA should establish procedures to monitor that all Foreign Aid projects
are accurately accounted for, that all required reconciliations are carried out and that all
supporting documentation required by CAOs is provided. Figures generated by this unit
should be reconciled with the relevant data held by the Economic Relations Department
(ERD).

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Baseline report on bank reconciliation

Annex A

List of Stakeholders interviewed.

Mr. Abu Naser Deputy CAO Foreign Affairs


Mr. Shamiran Kumar Dutta Accounts Officer, CAO Foreign Affairs
Mr. Anwar Hussain Superintendent, CAO Foreign Affairs
Mr. Uttam Kumar CAO Ministry of Communication
Mr. Monwar Hossain AAO CAO Ministry of Communications
Mr. Salahuddin CAO Ministry of Public Works and Housing
MS Shaheda Khanam CAO Women and Children Affairs
Mr. Anisur Rahman CAO Prime Minister’s Office
Mr. Matiur Rahman CAO Primary & Mass Education
Mr.Shafiqur Rahman CAO Land
Mr. Chayan Kumar Das CAO Postal & T&T
Mrs Shireen Sultana CAO Forest and Environment
Mr. Abdus Samad CAO IRD
Mrs Monwara Habib. CAO Food
Mr. Rezai Rabbani AAO (Former DAO Dhaka), DCA Dhaka
Mr. Zahidul Haque Joint CGDF
Mr. Moqsood Ali Chowdhury AAO CGDF
Mr. Mafuzur Rashid General Manager, GAD, Bangladesh Bank
Mr. K.A. Majed General Manager, PAD, Bangladesh Bank
Mr. Osman Ghani Assistant Director, Bangladesh Bank
Mr. Mokhtar Hossain General Manager, Accounts, Sonali Bank
Mr. Abdus Salam General Manager, Government Accounts, Sonali Bank
Mr.Md. Zahiurul Haq Munshi Deputy General Manager, Sonali Bank
Mr. Zaher Mohammed Member Taxes, NBR
Mr. Kazi Aslam Hussain Income Tax Commissioner, Zone 1 & Zone 3, NBR
Mr. Mahbubur Rahman Additional Commissioner of Income Tax, Zone 1, NBR
Mr. Shafiqur Rahman Senior System Analyst, NBR
Mr. MA Rashid Deputy CGA
Mr. Shabbir Ahmed Khan AAO, CGA Office
Mr. Neaz Mohammed Khan AAO, CGA Office
Mr Nurul Islam Talukdar Project Director, Development of food in secured poor women,
Ministry of Women Affairs
Mr Mahmud Hossain Alamgir Project Director, Adarsha Gram (Ideal Village), Ministry of
Land

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Baseline report on bank reconciliation

Annex B

Government Accounts with Bangladesh Bank

Account Number Account Name

100 Bangladesh Bank- General


101 Office of the President
102 Parliament
103 Prime Minister's Office
104 Cabinet Division
106 Election Commission
107 Ministry of Establishment
108 Public Service Commission
109 Finance Division - Except C&AG
Banking Division (merged with Finance Division)
193 Pension
196 Interest on domestic debt
217 T.B, W&M, Dom Debt
110 Comptroller & Auditor General
111 Internal Resources Division
219 National Savings Scheme
189 National Board of Revenue (Blocked)
VAT (merged with NBR)
Income Tax (merged with NBR)
Import Duty (merged with NBR)
NBR- Other (merged with NBR)
113 ERD
194 DSL- Foreign-Principal
195 DSL- Foreign-Interest
197 Foreign Aid Grants
198 Foreign Aid -Grants
199 Project Aid
203 Pl 480- Title 3
205 EEC- Food Aid
207 Japan- KR
208 Japan KR-2
209 Japan Debt Relief Grant
210 SAFE
114 Planning Division
Statistics Division (merged with Planning Division)
115 IMED
117 Ministry of Commerce
118 Ministry of Foreign Affairs
119 Ministry of Defence
Armed Forces Division (merged with Ministry of Defence)

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Baseline report on bank reconciliation

121 Ministry of Law and Justice


122 Ministry of Home Affairs
124 PMED
125 Ministry of Education
126 Ministry of Science & Technology
127 Ministry of Health and FW
129 Ministry of Social Welfare
130 Ministry of Women and Children
131 Ministry of Labour and Manpower
132 Ministry of Housing and Public Works
133 Ministry of Information
134 Ministry of Cultural Affairs
135 Ministry of Religious Affairs
136 Ministry of Youth and Sports
137 Local Government Division
138 Rural Development and Co-operation
139 Ministry of Industries
140 Ministry of Jute
141 Ministry of Textiles
142 Ministry of Energy and Mineral R
143 Ministry of Agriculture
144 Ministry of Fisheries & Livestock
145 Ministry of Environment& Forest
146 Ministry of Land
147 Ministry of Water Resources
148 Ministry of Food
201 Food Operation
149 Ministry of Disaster Management & Relief
150 Ministry of Communication
192 Railway (5031)
152 Ministry of Shipping
153 Ministry of Civil Aviation and Tour
154 Ministry of Post and Telecom
190 T&T Board (5441)
191 Postal Department
155 Ministry of Chittagong Hill Tracts
156 Energy Division
161 Supreme court
163 Ministry of Liberation War Affair
165 Expatriates Welfare & Overseas employment
213 Public Account - GPF
215 Public Account - Other

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Baseline report on bank reconciliation

Annex C

FOREIGN AID

The following chapter is intended to provide both an in depth understanding of Foreign


Aid and detailed instructions for CAO offices concerned.

Background

The development budget in Bangladesh is based on the Annual Development Program


(ADP). The aims of the ADP are poverty alleviation, employment generation and
developing health, education and physical infrastructure.

There are currently a considerable number of development projects being undertaken.


The two main sources of funding for these projects are:

 Domestic resources – Revenue Surplus and Domestic Debt


 External Resources - Foreign Aid Grants and Loans

These foreign aid grants and loans are provided by development partner organisations
that share the common objective of global prosperity.

Development projects that are funded by domestic resources all pass through the normal
pre-audit system. The project costs are therefore recorded in the accounting records of
the local accounting office concerned and thereby enter the information stream of the
Government accounts.

However, only a limited number of foreign aid projects are recorded in this way. For
other projects, the expenditure will remain outside of the Governments accounts, unless
the Project Director specifically informs the CAO about project expenditure.

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Baseline report on bank reconciliation

Foreign Aid Categories

There are three main categories of Foreign Aid that fall under the general terms of either
Grants or Loans:

A. Food Aid
B. Commodity Aid
C. Project Aid

Food Aid

Food aid is principally provided in the form of grants, however it may also be a loan. It
provides food under programmes such as “Food for Works”, “Food for Education”,
“Test Relief” and “Vulnerable Group Development”, “Vulnerable Group Feeding” etc.
The office of the Director General of Food initially receives the food donated. With the
exception of “Test Relief”, donated food is sold in either:

 Sold on the Open Market


 Sold on the Statutory Rationing System
 Sold on the Modified Rationing System; or
 Proceeds from Government Departments such as Defence or Police who receive
the food at a subsidised rate.

The funds generated from the sale are then utilised to meet the costs of projects as
agreed with the development partners.

Various Chief Accounts Offices are directly involved in accounting for Food Aid.

 CAO Food
 CAO Relief
 Other offices such as CAO Local Government & Rural Development

CAO Food

A. Receipt of Food

Upon receipt of the donated food, the Ministry of Food issues an adjustment order in
favour of CAO Food. The order is for the value of the food donated. The Ministry of
Food orders that the adjustment is carried out as follows:

Debit: Ministry of Food – Procurement 3-4821-0001-6400


Credit: Development Partner Grant 1-1321/1322-xxxx-3700

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Baseline report on bank reconciliation

B. Sale of Food

When donated food is sold, the cash is deposited into the bank. Upon receipt of the
credit memo from the bank, the District and Upazilla accounts offices make the
following accounting adjustment:

Debit: Cash
Credit: 1-4823-0020-(3001-3007)

C. Relief Ministry

When the Relief Officer takes delivery of the food from the food stores of the Food
Department, The Food department should inform the District and Upazilla accounts
offices which will then make the following accounting adjustment:

Debit: Expense Code of Relief Ministry 3-4903-xxxx-xxxx


Credit: Ministry of Food – Distribution 1-4823-0030-(3051 – 3073)

D. Subsidy

The subsidiary is calculated as the difference between the imported value, inclusive of
the distribution costs and the issue price. Based on actual distribution of food grain at
subsidised rates, the subsidy is calculated by the Ministry of Food. CAO Food should
ensure that the Government Order in this respect is issued by the Finance Division
before the June closing.

When the Ministry of Finance issues a Government Order in favour of CAO Food for
the subsidy to the Ministry of Food, the CAO Food will request the CGA office to send
an advice to Bangladesh Bank. Bangladesh Bank then sends a debit and credit memo to
the CGA office, where the following accounting adjustment is made:

Debit: Expense Code of concerned Ministry – Subsidy 3-xxxx-xxxx-5801


Credit: Ministry of Food – Subsidy 1-4823-0030-3080

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Baseline report on bank reconciliation

E. American Express Bank

As per agreement of the development partner, an amount of cash is to be transferred to


American Express Bank as a short-term investment. Upon receipt of the debit memo
from Bangladesh Bank, the CGA office will make the following accounting adjustment:

Debit: 7-1051-0000-9460 Short-term investment Amex *


Credit: Cash

When the invested amount is returned from American Express Bank, Bangladesh Bank
will send a credit memo to the CGA office, where the following accounting adjustment
will be made:

Debit: Cash
Credit: 6-1051-0000-8460 Short-term investment Amex

* Note: A new Economic Code is to be opened for Short-term investment Amex under
the Public Account of the Republic to accommodate this entry.

CAO Relief

As stated above, when Relief Officers take delivery of food from the stores of the Food
Department, this is accounted for by the local District or Upazilla accounts offices. It
will therefore be seen that the CAO Relief has no accounting function in relation to Test
Relief, but should monitor the progress of expenditure in relation to release orders
issued to unit offices.

Other Ministries

Other Ministries, such as Local Government & Rural Development execute many
projects that are funded through the proceeds of the sale of donated food. The sale
proceeds form part of the general cash balance of Government. Therefore, funds
utilised by these Ministries will be accounted or by the CAO, DAO or UAO offices in
the following manner:

Debit: Expense Code of the Ministry


Credit: Cash

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Baseline report on bank reconciliation

Overview of Food Aid distribution

Food Aid
American Express
Bank – Short-term
Investment

Non-moneterised Moneterised

Test Relief Vulnerable Vulnerable Food for Food for Other Projects
Group Group Education Works as per budget
Development Feeding provisions from
food aid

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Baseline report on bank reconciliation

Commodity Aid

Commodity Aid (which also includes program credit) may also take the form of a grant
or loan. Under Commodity Aid, the development partners provide a certain commodity
to be imported by public or private bodies. The importer then deposits the value of the
commodity in taka into Bangladesh Bank. A portion of this is then referred to as a
counterpart fund. This fund is generally utilised for executing specific development
projects.

Bangladesh Bank sends a credit memo in relation to Commodity Aid to the concerned
District Accounts Office where the accounting entries are to be made. For this reason,
Commodity Aid does not form part of the duties of the CAO office.

Project Aid

Project Aid is provided for development programmes that cover a wide range of areas.
As above, Project Aid may be in the form of a loan or grant.

There are three main categories of Project Aid:

 Reimbursable Project Aid (RPA)


 Pre-financed Project Aid (PPA)
 Direct Project Aid (DPA)

Reimbursable Project Aid (RPA)

Reimbursable Project Aid is explained simply as a commitment from the development


partner organisation to reimburse the Government of Bangladesh for expenditure that
has been incurred by the Government in the act of carrying out certain development
projects. This is dependant on certain conditions being met and certain requirements
being fulfilled.

These RPA projects are directly channelled through local accounting offices by means
of the normal pre-audit procedures. This means that the Project Director submits bills
to the local CAO, DAO or UAO office. The accounts officers will then examine that
there is a budget provision for the expenditure and authority from the concerned CAO
before the bills will be passed for payment. The local accounting office will therefore
record the expenditure and so incorporate the project in the overall Government
Accounts.

The Project Director will present a Statement of Expenditure to the concerned


development partner and thereby claim for reimbursement. After the development
partner has examined the Statement of Expenditure, with reference to the Development
Credit Agreement, they will deposit into Bangladesh Bank either the full claim or in
case of some inadmissible items the reimbursement could be partial.

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Baseline report on bank reconciliation

Pre-financed Project Aid (PPA)

There are four types of account operated under Pre-financed Project Aid:

A. Special Account in Foreign Exchange (SAFE)


B. Convertible Taka Special Account (CONTASA)
C. Dollar Special Account (DOSA)
D. Imprest Account

A. Special Account in Foreign Exchange (SAFE)

This account has been operated through Bangladesh Bank since 1985. To operate the
account the development partner deposits an initial advance. Subsequent deposits are
made on the basis of claims for replenishment by the Project Directors. The amounts
deposited by the development partner are credited to the SAFE account and the Project
Director opens an account for the project in a commercial bank. The Ministry of
Finance issues an authorisation letter to Bangladesh Bank based on the budget provision
for the relevant project. This letter instructs Bangladesh Bank to transfer the
appropriate amount into the project’s bank account. Bangladesh Bank sends debit and
credit memos to the office of the CGA to allow these transactions to be incorporated
into the government accounts.

As per Government Order MF/DD/Dev Wing16/93/234 dated 5th August 1993, the
Bangladesh Bank is to send a monthly report concerning the SAFE account to the
concerned CAO and Project Director. The Project Director is then to send the Account
Statement of Project’s Special Account, as attached, to the concerned Chief Accounts
Office to incorporate the expenditure into the government accounts. The CAO office
should reconcile the two statements and ensure that the expenditure entering the
accounts matches the banks figures.

The specific accounting adjustment entry to be made by the CAO upon receipt of the
Statement of Expenditure is as follows:

Dr 5-xxxx-xxxx-xxxx Cr 6-1051-0000-8746

(xxxx-xxxx-xxx) is dependant on the specific expenditure details

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Baseline report on bank reconciliation

Overview of accounting for SAFE receipts and expenditure

Developmen
t Partner
Organisation
CGA CGA
Cash Development Partner

Debit Credit Debit Credit


Money received
by Bangladesh STEP 1
Bank XXX XXX

Statement of
Expenditure CGA CGA
issued to allow Cash Foreign Aid Suspense
replenishment Debit Credit Debit Credit
Money transferred
to commercial STEP 2
STEP 3a bank account XXX XXX

CAO CAO
Foreign Aid Suspense Expenditure
Account Statement
Debit Credit Debit Credit
of Project’s Special
STEP 3b
Account received by
CAO XXX XXX

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Baseline report on bank reconciliation

B. Convertible Taka Special Account (CONTASA)

These accounts were opened to implement International Development Association


(IDA) aided projects. Upon receipt of approval from Finance Division, the project-
executing agency opens a CONTASA account with a commercial bank. When the IDA
deposits foreign currency with Bangladesh Bank, the taka equivalent is immediately
transferred into the commercial bank account.

Finance Division issues a letter of authorisation to the bank showing the budget
allocation against the project and the Project Director can then incur expenditure. A
Statement of Expenditure is sent to the IDA for subsequent replenishment of the
account.

As per Government Order MF/FD/DRS/3/91/444(20) dated 4th May 1992, the


commercial bank is to send a monthly report concerning the CONTASA account to the
concerned CAO and Project Director. The Project Director is then to send the Account
Statement of Project’s Special Account to the concerned Chief Accounts Office to
incorporate the expenditure into the government accounts. The CAO office should
reconcile the two statements and ensure that the expenditure entering the accounts
matches the banks figures.

The specific accounting adjustment entry to be made by the CAO upon receipt of the
Account Statement of Project’s Special Account is as follows:

Dr 5-xxxx-xxxx-xxxx Cr 1-1321-xxxx-xxxx

(xxxx-xxxx-xxx) is dependant on the specific expenditure details


(xxxx-xxxx) is dependent on the specific development partner details

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Baseline report on bank reconciliation

Overview of accounting for CONTASA receipts and expenditure

International
Development
Association
(IDA)

Foreign currency deposited


into Bangladesh Bank
Statement of
Expenditure
issued to allow
replenishment
Taka equivalent
transferred to commercial
bank account

CAO CAO
Development Partner Expenditure
Account Statement of Debit Credit Debit Credit
Project’s Special STEP 1
Account received by
CAO
XXX XXX

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Baseline report on bank reconciliation

C. Dollar Special Account (DOSA)

The Dollar Special Account (DOSA) is an account opened in Bangladesh Bank in US


Dollars under a loan from the International Development Associaion (IDA). The
purpose of the account is principally to support the provision of technical assistance
projects. The initial deposit is made as an advance with subsequent deposits being
made following claims for replenishment from the Executing Agencies.

After the Economic Relataions Division (ERD) issues an allocation of expenditure to


the Executive Ministry, the Ministry of Finance issues a letter of authorisation to allow
expenditure to be incurred. The Executing Agency will then submit bills to the Project
Director, who will examine the bill and present them to Bangladesh Bank for payment.

As per Order of the CGA, CGA/Accounts Compilation Section/18(2nd Part/1/51) dated


2nd July 2003 the Project Director is then to send the Account Statement of Project’s
Special Account to the concerned Chief Accounts Office to incorporate the expenditure
into the government accounts. The CAO should request a monthly bank statement to be
sent by Bangladesh Bank, detailing any activity on the DOSA account. This statement
should then be reconciled with the Account Statement of Project’s Special Account.

The specific accounting adjustment entry to be made by the CAO upon receipt of the
Account Statement of Project’s Special Account is as follows:

Dr 5-xxxx-xxxx-xxxx Cr 1-1321-xxxx-xxxx

(xxxx-xxxx-xxx) is dependant on the specific expenditure details


(xxxx-xxxx) is dependent on the specific development partner details

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Baseline report on bank reconciliation

Overview of accounting for DOSA receipts and expenditure

International
Development
Association
(IDA)

US Dollars deposited into


Bangladesh Bank
Statement of
Expenditure
issued to allow
replenishment
Project Director presents
bills to Bangladesh Bank

CAO CAO
Development Partner Expenditure
Account Statement of Debit Credit Debit Credit
Project’s Special STEP 1
Account received by
CAO
XXX XXX

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Baseline report on bank reconciliation

D. Imprest Account

To facilitate the receipt of Asian Development Bank (ADB) aided projects, the
Government of Bangladesh opens imprest accounts with commercial banks. The
Executing Agencies submit a Withdrawal Application and Estimate of Expenditure
Sheet for the initial advance to the ADB. At the beginning of each financial year, the
Ministry of Finance issues an advice to the commercial bank to inform them of the
Annual Development Program allocation for the project with the imprest account. This
will authorise the release of funds from the imprest account to the Executing Agency. It
is the responsibility of the Executing Agency to ensure that they do not apply to the
ADB for withdrawals that exceed the current years ADP allocation.

The Executing Agency can make all local payments and foreign exchange payments
directly up to a limit of US$ 50,000 equivalent per payment without going through
commitment letter procedures. The Executing Agency will submit a withdrawal
application along with a bank statement for the imprest account on a monthly basis to
the ADB to facilitate replenishment of the account.

As per Order of the CGA, CGA/Accounts Compilation Section/18(2nd Part/1/51) dated


2nd July 2003 the Project Director is then to send the Account Statement of Project’s
Special Account to the concerned Chief Accounts Office to incorporate the expenditure
into the government accounts. The CAO should request a monthly bank statement to be
sent by the Commercial Banks, detailing any activity on the relevant Imprest accounts.
These statements should then be reconciled with the Account Statement of Project’s
Special Account.

The specific accounting adjustment entry to be made by the CAO upon receipt of the
Account Statement of Project’s Special Account is as follows:

Dr 5-xxxx-xxxx-xxxx Cr 1-1321-xxxx-xxxx

(xxxx-xxxx-xxx) is dependant on the specific expenditure details


(xxxx-xxxx) is dependent on the specific development partner details

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Baseline report on bank reconciliation

Overview of accounting for Imprest receipts and expenditure

Asian
Development
Bank (ADB)

Funds deposited into


Commercial Bank
Statement of
Expenditure
issued to allow
replenishment
Project Director presents
bills to Bangladesh Bank

CAO CAO
Development Partner Expenditure
Account Statement of Debit Credit Debit Credit
Project’s Special STEP 1
Account received by
CAO
XXX XXX

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Baseline report on bank reconciliation

Direct Project Aid (DPA)

Direct Project Aid is supplied is such a manner that the development partner has direct
control over expenditure. This may be incurred either outside or outside Bangladesh.
Previously therefore, the transactions were very rarely incorporated into the
Government Accounts, as the source data was not directly available to the concerned
Chief Accounts Offices. However, as per Order of the CGA, CGA/Accounts
Compilation Section/18(2nd Part/1/51) dated 2nd July 2003 the Project Director to send
the Statement of Direct Project Aid to the concerned Chief Accounts Office to
incorporate the expenditure into the government accounts. This places the
responsibility for gathering the relevant information onto the Project Director. The
CAO offices should therefore request the Project Director to supply this information on
a monthly basis, in line with RPA accounting procedures.

The specific accounting adjustment entry to be made by the CAO upon receipt of the
Statement of Direct Aid Project is as follows:

Dr 5-xxxx-xxxx-xxxx Cr 1-1321-xxxx-xxxx

(xxxx-xxxx-xxx) is dependant on the specific expenditure details


(xxxx-xxxx) is dependent on the specific development partner details

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Baseline report on bank reconciliation

Overview of Foreign Aid


FOREIGN AID

GRANT LOAN

FOOD AID COMMODITY AID PROJECT PROJECT


AID AID COMMODITY AID FOOD AID

REIMBURSABLE DIRECT PROJECT DIRECT PROJECT REIMBURSABLE


PROJECT AID - RPA AID - DPA AID - DPA PROJECT AID - RPA

THROUGH
THROUGH GOVERNMENT
PRE-FINANCED PROJECT
GOVERNMENT OF OF
AID - PPA
BANGLADESH BANGLADESH

S.A.F.E. C.O.N.T.A.S.A. D.O.S.A. IMPREST

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Baseline report on bank reconciliation

CAO Office Initial Responsibilities

The first duty of the CAO office is to consult the Budget to identify the number of
projects that relate to the particular Ministry or Division. This information is then to be
recorded and prepared in the following manner:

Ste Procedure
p
Identify all projects relating to the concerned Ministry or Division under
1.
Development Projects in the Budget
Enter all of the project codes into the “Log Sheet of Adjustments of PPA and
2. DPA in the Monthly Accounts”. These project codes are to be found in the
Budget.
Identify the Project Directors for every project listed above. A close working
3.
relationship is to be established with the Project Directors.
For every project listed on the above Log Sheet, prepare an individual
4.
“Register of Adjustment of PPA and DPA in the Monthly Accounts”.
The following information is to be obtained from every Project Director and
5. entered onto the individual Registers as per the attached Register: Source of
Fund, Type of Aid, Loan Agreement No., Address and Telephone No.
The following information is to be obtained from the Budget and entered onto
6. every individual Register as per the attached Register: Project Code, Name of
Project, Financial Year, Budget/Revised Budget, GoB, Foreign Aid and Total.
The Accounts officer should ensure that all relevant projects in the Budget
appear on the Log Sheet of Adjustments of PPA and DPA in the Monthly
7.
Accounts. The officer should then ensure that a completed Register of
Adjustment supports every project on the Log Sheet.

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Example of layout of Development Projects as per Budget

Supplementary Project Description Budget Revised Budget Budget Revised Budget


Agency Code 2003-04 Budget 2002-03 2003-04 2002-03
2002-03
Project Aid Project Aid
Taka (Disbursable) Taka (Disbursable)
A B C D E F G H I J K
1701 7351 Export diversificationRevenue 13000 133600 133600 13000 0 36100 97500
project & market (95500)
development, project
co-operation & 401200 493300 384500 1200 400000 2000 491300
development support Capital (260000) (284500)
component
414200 (a) 629800 518100 14200 (b) 400000 (c) 38100 588800
Total (260000) (d) (380000)

The total budget for the year 2003-04 of the above project amounts to Tk 414200 (thousand) (a). Out of this, the Government of Bangladesh amount is
Tk 14200 (thousand) (b) and the Foreign Aid amount is 400000 (thousand) (c). The Foreign Aid may be broken down into Reimbursable Project Aid
(RPA) or Pre-financed Project Aid (PPA) of Tk 260000 (thousand) (d), being the figure shown in brackets, with the remaining Tk 140000 (thousand)
(c-d) being Direct Project Aid (DPA).

105
9.
8.
7.
6.
5.
4.
3.
2.
1.

10.
Sl No.
Code
Project
Date of Receipt

July
Date of Data Entry

Date of Receipt Aug


Date of Data Entry

Date of Receipt
Sept

Date of Data Entry

Date of Receipt
Oct

Date of Data Entry

Accounts Officer_____________________________________
Date of Receipt
Nov

Date of Data Entry


Log sheet of Adjustments of PPA and DPA in the Monthly Accounts

Date of Receipt

106
Dec

Date of Data Entry


Months

Date of Receipt
Jan

Date of Data Entry

Date of Receipt
Feb

Date of Data Entry


Baseline report on bank reconciliation

Date of Receipt
Mar

Date of Data Entry

Date of Receipt
Apr

Date of Data Entry

Date of Receipt
Log sheet of Adjustments of PPA and DPA in the Monthly Accounts

May

Date of Data Entry

Date of Receipt
June

Date of Data Entry


Remarks
Baseline report on bank reconciliation

Register of Adjustment of PPA and DPA in the Monthly Accounts

Register of Adjustment of PPA and DPA in the Monthly Accounts Serial No. Of Log Sheet

Project Code……………(Budget column B).. Name of Project……………(Budget column C)……………………….


Source of Fund…………(Project Director )... Type of Aid…(Project Director)…………. Loan Agreement No…(Project Director)…..
Address…………………( Project Director ).. Budget / Revised Budget…………(Budget column E)……….…….…
……………………………………………… GoB…………………………………(Budget column H)…………………
Telephone No…………..(Project Director).… Foreign Aid…………………………(Budget column I)…………….……
Financial Year………….(Budget column E)… Total:………………………………..(Budget column E)…………………

Amount Adjusted
Period Budget of PPA PPA DPA Total PPA & DPA % of Adjustment Initial of Data Remarks
& DPA Entry Operator
1 2 3 4 5 6 7(3+5) 8(4+6) 9 10 11

Current Year to Current Year to Current Year to


Month Date Month Date Month Date
July
August
September
October
November
December
January
February
March
April
May
June (Pre)
June (Final)

(Information Source shown in brackets) Accounts Officer_____________________________________

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Baseline report on bank reconciliation

CAO office Monthly Procedures

The CAO office should record all the relevant Foreign Aid information on a monthly basis and
incorporate the information into the monthly accounts in the following way:

Ste Procedure
p
The CAO should request all Project Directors to send the Account Statement of Project’s
Special Account (as per 11.2) or the Statement of Direct Project Aid (as per 11.2) to the CAO
office every month. The Accounts Officer is to enter the date that the above statements are
1.
received, on the Log sheet of Adjustments of PPA and DPA in the Monthly Accounts (as per
11.2). A nil statement is to be sent where no expenditure has been incurred in relation to PPA
or DPA during the month,
Where the CAO office has not received the Account Statement of Project’s Special Account, the
Statement of Direct Project Aid or the Nil Statement within 10 days of the end of the
2. month/quarter in question, the CAO should contact the Project Director and request the
information to be issued. The CAO should inform the Secretary of all Project Directors that
have failed to supply the required information within the above timeframe.
Where any Project Director fails to supply the information by the end of the following month,
3.
the CAO should again inform the Secretary.
The Accounts Officer is to enter the economic code level information obtained from the above
4.
statements onto the CAO 6 Register, Register of Book Adjustment for each individual project.
When the Accounts Officer has entered the information into CAO 6, the relevant Register of
Adjustment of PPA and DPA in the Monthly Accounts (as per 11.2) should be updated to
5.
incorporate the information obtained on the Account Statement of Project’s Special Account or
the Statement of Direct Project Aid.
The Accounts Officer is to record the date that CAO 6 has been updated for each project on the
6.
Log Sheet of Adjustments of PPA and DPA in the Monthly Accounts.
Where the Log Sheet of Adjustments of PPA and DPA in the Monthly Accounts shows any
project where the CAO office has received the required information but not yet entered it onto
CAO 6, the Accounts Officer should investigate whether CAO 6 has actually been updated. If
7.
CAO 6 has not been updated, this should be done. If CAO 6 had been updated, the date that the
entry was made should be entered onto the Log Sheet of Adjustments of PPA and DPA in the
Monthly Accounts

 On a quarterly basis, the CAO office should send a copy of the Register of Adjustment of PPA
and DPA in the Monthly Accounts to the concerned Project Director.

 The CAO should request the Project Director to agree or reconcile the information contained
on the Register of Adjustment of PPA and DPA in the Monthly Accounts with the Project
Director’s own data.

 Any differences should be reconciled and amended at the CAO office by means of journals.

It is the responsibility of every Chief Accounts Officer to ensure that all Foreign Aid projects operated
under the jurisdiction of their concerned Ministry are incorporated completely and accurately in the

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Baseline report on bank reconciliation

Government Accounts. The CAO should also work closely with the concerned Project Directors to
ensure that there is no double accounting for any foreign aid receipts and expenditure.

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Baseline report on bank reconciliation

Account Statement of Project’s Special Account


(As prescribed in Project Accounting Manual)
Account Statement of Project’s Special Account
(SAFE/CONTASA/DOSA/Imprest/Others)
Month……………………………..……………… Year………………..
Ministry and Implementing Agency Code No. and Name………………………………………… Code No. & Name of the Project…………………………….…………….…….
Source and type of Project aid…………………………………………………………………………………………………………………………………………………….……..
Total estimated expenditure…………………………………………..Local currency……………………………………Foreign exchange……………………………..……….….
Current year Budget………………………………………..Project Aid………………………………………………….Taka Portion………………………………………….……
Period of Project Implementation…………………………………………………………………………………………..Extended Time (if any)…………………………………...
Name & telephone No. of Project Director………………………………………………………………………………..Accounts (in Taka)…………………………………………

Receipt Expenditure
Bank Economic Amount Economic Description Current Financial Year
Code Code Budget Monthly Cumulative
Project Aid (Taka Portion) Expenditure
(A) Revenue Expenditure
5900 Subsidies and current transfers
6600 Block allocations
(A) Total Revenue Expenditure
(B) Capital Expenditure
6800 Acquisition of Assets
6900 Acquisition of Land
7000 Construction and Works
7100 Investment in Shares and Equity
7200 Capital Grants
7300 Lending and Advances
7900-7979 CD/VAT
7980-7998 Miscellaneous
(B) Total Capital Expenditure
Grant Total
• 4500 – 7998 Detail economic code Closing Balance Cash in hand ………………………….
to be shown Cash at Bank ………………………….
Total …………………………. Name & Seal of the officer

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Baseline report on bank reconciliation

Statement of Direct Aid Project (Cash/non-cash)


(As prescribed in Project Accounting Manual)

Statement of Direct Project Aid (Cash/non-cash)

Month……………………………..……………… Year………………..

Ministry and Implementing Agency Code No. and Name………………………………………… Code No. & Name of the Project…………………………….…………….…….

Source and type of Project aid…………………………………………………………………………………………………………………………………………………….……..

Total estimated expenditure…………………………………………..Local currency……………………………………Foreign exchange……………………………..……….….

Current year Budget………………………………………..Project Aid………………………………………………….Taka Portion………………………………………….……

Period of Project Implementation…………………………………………………………………………………………..Extended Time (if any)…………………………………...

Name & telephone No. of Project Director………………………………………………………………………………..Accounts (in Taka)…………………………………………

Receipt Repayment/Expenditure
Economic Description Month Cumulative Economic Description Month Cumulative
Code No. Taka Taka Code No. Taka Taka
*3700 (1) Foreign Aid-Grants (1)
*4200 (2) Foreign Aid-Loans (2)
(3)
(4)
Total:-
Total:-

• Relevant Detailed economic code to be given

Signature & Seal of the officer

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Baseline report on bank reconciliation

Economic Relations Division

 CAO offices are required to complete the following Foreign Aid Loan
Reconciliation Sheet on a quarterly basis for every project that is funded by
means of a loan.

 This sheet is to be sent electronically to the office of the CGA within one month
of the end of the quarter.

 The CGA office will then be in a position to consolidate this information and
provide a complete analysis to the Economic Relations Division (ERD) to allow
a comprehensive reconciliation to take place between the expenditure that is
being incorporated in the Government Accounts and the amount of capital
provided for each loan

Foreign Aid Loan Reconciliation Sheet procedures

Ste Procedure
p
Identify all projects that relate to the concerned CAO office that are funded by
1.
means of loan.
2. Enter the name of the CAO Office
3. Enter the quarter number, e.g. Quarter 1, Quarter 2 etc
4. Enter the financial year
Obtain the Loan Agreement Number for each and enter these numbers in the
5.
Loan Agreement column.
Total the expenditure under each project on the Foreign Aid Loan
6. Reconciliation Sheet for the three months of the quarter and enter these
amounts against the appropriate Loan Agreement Number.
Calculate the progressive total to date for the current financial year for each
7.
project and enter against the appropriate Loan Agreement Number.
Where any Project Director has not provided the complete three months data
for a relevant loan funded project, the Accounts Officer is to contact the Project
Director and request the information to be sent urgently. The Accounts Officer
8.
is also to contact the Secretary and detail the information required and the
Project Directors defaulting. An “N” should be entered in the Complete Data
Y/N column. If the three months data is provided, enter a “Y”.
Once all of the loan-funded projects have been entered on the Foreign Aid
Loan Reconciliation Sheet, the sheet is to be sent electronically to the office of
9.
the CGA. The CAO is to undertake to provide this information in a complete
manner to the CGA office within one month of the end of the quarter.

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Baseline report on bank reconciliation

Foreign Aid Loan Reconciliation Sheet

CAO Office:
Quarter:
Financial Year:

Complete Amount (Taka)


Loan Agreement Number Data
This Quarter Progressive to date
Y/N

Accounts Officer____________________________ Date________________

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Baseline report on bank reconciliation

Annex D

DAO Dhaka bank account analysis

DAO DHAKA - MARCH 2003 (All amounts in thousand Taka)

Bank Function Total


Receipts Payments
Acct Code Difference
CDPU Bank Difference CDPU Bank Difference

CONSOLIDATED FUND
100 Bangladesh Bank General
101 Office of the President 01 0 0 0 0 1491 -1,491 1491
102 Parliament 02 19 0 19 0 18752 -18,752 18771
103 Prime Minister's Office 03 3 674 -671 0 39628 -39,628 38957
104 Cabinet Division 04 1 11 -10 0 20928 -20,928 20918
106 Election Commission 06 11 28 -17 0 3467 -3,467 3450
107 Ministry of Establishment 07 3021 4020 -999 0 134205 -134,205 133206
108 Public Service Commission 08 1052 462 590 0 2315 -2,315 2905
109 Finance Div - Except C&AG 09 1518771 1186648 332123 963,940 69909 894,031 -561908
193 Pension 0 0 326510 -326,510 326510
196 Interest on domestic debt 2841 -2841 932250 -932,250 929409
217 T.B, W&M, Dom Debt 516236 -516236 282868 -282,868 -233368
110 Comptroller & Auditor General 10 0 168 -168 0 23752 -23,752 23584
111 Internal Resources Division 11 6797942 119755 6678187 2,812 746300 -743,488 7421675
189 National Board of Revenue 0 0 0 0 0
VAT 1960059 -1960059 0 0 -1960059
Income Tax 2130541 -2130541 0 0 -2130541
Import Duty 597545 -597545 0 0 -597545
NBR- Other 2218093 -2218093 282706 -282,706 -1935387
Banking Division 0 0 0 0 0
113 ERD 13 640061 0 640061 0 3412 -3,412 643473
194 DSL- Foreign-Principal 0 0 0 0 0
195 DSL- Foreign-Interest 0 0 0 0 0
197 Foreign Aid Grants 450788 -450788 0 0 -450788
198 Foreign Aid -Grants 0 0 320280 -320,280 320280

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Baseline report on bank reconciliation

199 Project Aid 106 -106 0 0 -106


203 Pl 480- Title 3 0 0 0 0 0
205 EEC- Food Aid 0 0 0 0 0
207 Japan- KR 0 0 0 0 0
208 Japan KR-2 0 0 0 0 0
209 Japan Debt Relief Grant 150263 -150263 0 0 -150263
210 SAFE 0 0 0 0 0
114 Planning Division 14 63 81 -18 0 36071 -36,071 36053
115 IMED 15 0 0 0 0 2004 -2,004 2004
Statistics Division 16 8 0 8 0 0 0 8
117 Ministry of Commerce 17 41038 39467 1571 176 8962 -8,786 10357
118 Ministry of Foreign Affairs 18 132 139 -7 0 100552 -100,552 100545
119 Ministry of Defence 19 1 61210 -61209 0 1047685 -1,047,685 986476
Armed Forces Division 0 0 0 0 0
121 Ministry of Law and Justice 21 42214 30829 11385 0 8081 -8,081 19466
122 Ministry of Home Affairs 22 285066 262183 22883 33,768 269025 -235,257 258140
124 PMED 24 17064 12045 5019 0 494838 -494,838 499857
125 Ministry of Education 25 3878 3985 -107 437 1729099 -1,728,662 1728555
126 Ministry of Science & Tech 26 12100 12510 -410 0 87570 -87,570 87160
127 Ministry of Health and FW 27 7090 21859 -14769 6,169 309239 -303,070 288301
129 Ministry of Social Welfare 29 23 2286 -2263 0 4577 -4,577 2314
130 Ministry of Women and Children 30 244 283 -39 0 16841 -16,841 16802
131 Ministry of Labour and Manpower 31 60 121 -61 0 5956 -5,956 5895
132 Ministry of Housing and Public Works 32 22327 8984 13343 0 285844 -285,844 299187
133 Ministry of Information 33 70556 77488 -6932 2,517 54042 -51,525 44593
134 Ministry of Cultural Affairs 34 463 177 286 0 39068 -39,068 39354
135 Ministry of Religious Affairs 35 0 451 -451 0 45161 -45,161 44710
136 Ministry of Youth and Sports 36 19 80 -61 0 8804 -8,804 8743
137 Local Government Division 37 89 1932 -1843 0 493635 -493,635 491792
138 Rural Development and Co-operation 38 452 18 434 1901 5085 -3,184 3618
139 Ministry of Industries 39 1901 79209 -77308 946 3227 -2,281 -75027
140 Ministry of Jute 40 153 605 -452 0 1309 -1,309 857
141 Ministry of Textiles 41 62 15811 -15749 0 1586 -1,586 -14163
142 Ministry of Energy and Mineral R 42 103226 103507 -281 0 3434 -3,434 3153
143 Ministry of Agriculture 43 8 659 -651 0 150131 -150,131 149480
144 Ministry of Fisheries & Livestock 44 3226 3714 -488 0 58413 -58,413 57925
145 Ministry of Environment& Forest 45 715 1481 -766 0 9145 -9,145 8379
146 Ministry of Land 46 7131 7266 -135 0 9272 -9,272 9137
147 Ministry of Water Resources 47 1641 1647 -6 0 124861 -124,861 124855
148 Ministry of Food 6370 1768 4602 1246 2378 -1,132 5734
201 Food Operation 2874 -2874 60158 -60,158 57284
149 Ministry of Disaster Management & Relief 0 12 -12 0 7474 -7,474 7462

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Baseline report on bank reconciliation

150 Ministry of Communication 4483 16084 -11601 0 568579 -568,579 556978


192 Railway (5031) 0 0 0 150846 -150,846 150846
152 Ministry of Shipping 6971 11036 -4065 0 57988 -57,988 53923
153 Ministry of Civil Aviation and Tour 848 1193 -345 0 641 -641 296
154 Ministry of Post and Telecom 385 -385 0 515 -515 130
190 T&T Board (5441) 589323 -589323 0 603296 -603,296 13973
191 Postal Department 5017 -5017 0 150325 -150,325 145308
155 Ministry of Chittagong Hill Tracts 351 -351 0 394 -394 43
156 Energy Division 250,000 -250000 0 1231041 -1,231,041 981041
161 Supreme court 5 0 5 0 10996 -10,996 11001
163 Ministry of Liberation War Affair 9 0 9 0 1171 -1,171 1180
165 Expatriates Welfare & Overseas employment 1 -1 6581 -6,581 6580
9600517 10966309 -1365792 1013912 11474673 -10,460,761 9094969

PUBLIC ACCOUNT
C&AG 14231271 14231271 23662878 23,662,878 -9431607
Less : Adjustment Bangladesh Bank deposit -12963671 -12963671 -13613928 -13,613,928 650257
213 GPF 2814 -2814 89183 -89,183 86369
215 Other 625321 -625321 219919 -219,919 -405402
219 Savings Scheme 2464264 2019479 444785 1619265 1337038 282,227 162558
3731864 2647614 1084250 11668215 1646140 10,022,075 -8937825
13332381 13613923 -281542 12682127 13120813 -438,686 157144

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Baseline report on bank reconciliation

Annex E

Ministries and Divisions under separate function codes within current Chart of
Accounts structure

Ministry /
Division Description
Code

1 Office of the President


2 Parliament
3 Prime Minister's Office
4 Cabinet Division
6 Election Commission
7 Ministry of Establishment
8 Public Service Commission
9 Finance Division
10 Finance Division - Comptroller & Auditor General
11 Internal Resources Division (IRD)
13 Economic Relations Division (ERD)
14 Planning Division
15 Implementation, Monitoring and Evaluation Division (IMED)
17 Ministry of Commerce
18 Ministry of Foreign Affairs
19 Ministry of Defence
21 Ministry of Law, Justice and Parliamentary Affairs
22 Ministry of Home Affairs
24 Ministry of Primary and Mass Education
25 Ministry of Education
26 Ministry of Science and Information & Communication Technology
27 Ministry of Health and Family Welfare
29 Ministry of Social Welfare
30 Ministry of Women and Children's Affairs
31 Ministry of Labour and Employment
32 Ministry of Housing and Public Works
33 Ministry of Information
34 Ministry of Cultural Affairs
35 Ministry of Religious Affairs
36 Ministry of Youth and Sports
37 Local Government Division
38 Rural Development and Co-operatives Division
39 Ministry of Industries
40 Ministry of Jute
41 Ministry of Textiles

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Baseline report on bank reconciliation

42 Petroleum and Mineral Resources Division


43 Ministry of Agriculture
44 Ministry of Fisheries and Livestock
45 Ministry of Environment and Forest
46 Ministry of Land
47 Ministry of Water Resources
48 Ministry of Food
49 Ministry of Disaster Management and Relief
50 Ministry of Communication
52 Ministry of Shipping
53 Ministry of Civil Aviation and Tourism
54 Ministry of Post and Telecommunications
55 Ministry of Chittagong Hill Tracts Affairs
56 Energy Division
61 Supreme Court
63 Ministry of Liberation Affairs
65 Ministry of Expatriates' Welfare and Overseas Employment

118