Circular No 15 of 2003-2004

HEAD OFFICE, KARACHI

No.			June 30, 2004
		CIRCULAR NO. 15/2003-04
Subject:	Implementation of Accrual Accounting System

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Please refer to Circular No.34/2002-03 dated 22.03.2003. It has been decided to switch over from current cash receipt basis to accrual accounting system from 1st July 2004. M/s AZM Computer Services (Pvt) Limited have submitted Operational and Training Manuals on “Accrual Accounting System”, copies of which are enclosed herewith to fully explain the system and its operation. It is evident that a comprehensive, reliable and up-to-date database of employers and insured persons is one of the pre-requisites of the System. For this purpose the financial year 2003-04 was declared as “The Year of Record Building” and it is hoped that the field officers must have made considerable progress in collection of data and its entry into the system.

II. Instructions were issued from time to time through various circulars and letters to clean and update the database of employers and insured persons. As the target date set for the Accrual Accounting has approached, the Zonal and Regional Heads are advised to recheck the progress of compliance on the basis of points listed below to ensure successful implementation of Accrual Accounting System:-

1. Pre-requisites of the System:

1.1 New employers shall be registered after obtaining particulars of insured persons prescribed in form PR02, PR-02A along with the PR-01 at the time of registration. The date of registration shall be determined on the basis of declaration/admission of the employer corroborated with evidence and the arrear of contribution, if any determined accordingly.

2 The Monitoring, Evaluation & Training (MET) Department and Monitoring & Inspection (M&I) Teams shall conduct inspection on the basis of information and beat officers failing to register such cases within six months of commencement of operation, after obtaining prescribed particulars of IPs on form PR-02, PR-02A, shall be held liable for disciplinary action for inefficiency and/or connivance, by the competent authority.

1.3 All employers shall be requested to provide/confirm details of IPs for whom they were making payment on or before 15^th July 2004. The draft letter dispatched to all Zones and Regions vide B&C Department’s IOM # HO/B&C/72/01/2002/906 dated 17-06-2004 must have been sent to all employers. The Regional Heads shall personally ensure to obtain the PR-02/02A forms upto 1^st August 2004 from the defaulting employers.

1.4 Data entry of the PR-02/02A forms shall be completed in all respects upto 30^th September 2004 by the beat officers under supervision of Regional/Zonal Heads.

1.5 After necessary checking, cross verification, preparation of software, employers accounts shall be debited at the Regional Office on the basis of actual number of IPs and contribution paid per IP in Self-Assessment cases and the cases of drawing salary of Rs.3000 @ Rs.150 and in other case @ Rs.125 on the basis of minimum wage and Rs.20 as employee’s contribution deductible from wages.

1.6 The cleaned and verified arrears on 01.07.2004 shall be debited year-wise in the employers ledger account on the basis of authentic list duly signed/stamped by the Regional Head. The payment of arrears shall be credited year-wise and balance arrears reflected in the ledger under the caption “Arrears Account”. The current account shall be debited and credited as specified in para 5.2. The ledger at any time shall reflect the balance of arrear, current account and total amount receivable from an employer.

1.7 Separate ledger accounts of each registered employer and a subsidiary ledger account for each Insured Person shall be maintained. The subsidiary ledger account shall reflect the monthly credit of employers and employees share of contribution. The annual account shall be closed by adding up monthly contribution and shall be carried over to next year. The Annual Contribution Summary shall be reflected with the back up of monthly details.

1.8 The beat officers shall also prepare manually the proforma ledger accounts of their employers and employees and make debit & credit entries affecting the employer’s account as per Annex-I till such time that the computerized accounting attains perfection. The parallel memoranda record may be maintained on customized software.

2. Posting in Ledger Accounts

2.1 On the first day of every month each employer’s account shall be debited by a sum based on the number of IPs given in the PR-02 or PR-02A form. In case the number of IPs is not available the account of the employer shall be debited on the basis of average monthly contribution paid during the preceding financial year by the employer and employees’ contribution @ Rs.20/- separately. The employer’s and employee’s accounts shall be credited on the basis of PR03/PR03A on which payments are made in the Banks.

2.2 The Regional Heads shall issue intimation letters along with 2% statutory increase on delayed/short payments on 20^th of every month after satisfying that no payment has been made in the bank. Statutory Increase shall be debited on the basis of “Debit Advice” placed as Annex-II.

2.3 The Regional Head with the assistance of field officers shall exercise a regular check on the monthly payments by the employers. In case of variation between payment made in PR03 and the amount debited in the account of the employer, he shall ascertain the reasons for variation from the employer. He shall obtain PR-02B for the changes and make adjustment through Annex-V or take further action in accordance with law.

3. Reconciliation

3.1 Regional Heads shall reconcile the amount paid by the employers on form PR-03 and the amount sent by the bank through IBCO to ensure that all payments have been remitted to Nursary Branch, Karachi. They shall sort out the exceptions/missing payments and send their report to the Reconciliation Department on weekly basis.

3.2 Reconciliation Department shall match the amount received through IBCO with the Regional Report. Exceptions shall be reported to the concerned Region and the Chairman. The Regional Head shall be responsible to settle the difference within three days.

4. Software

4.1 EDP Department is at final stage in preparation of necessary software for debiting the employers’ and employees’ accounts and adjusting the balances on the basis of the PR-03 or Debit/Credit Advices. They are also preparing software for generation of “Debit Advice” for Statutory Increase. The software shall be made available by EDP upto 15^th July 2004.

5. Accounting entries in Regional Office:

I. Debit Entries Arrears outstanding on Ist July 2004 Employers Contribution Account	On the basis of Arrears List reflecting year-wise arrears duly signed/stamped and authenticated by the Regional Head. Ist of Every Month On the basis of PR-02, PR-02A submitted by the employer containing details of employees @Rs.150 for self assessment and cases drawing salary of Rs.3000 or more and Rs.20 as employee’s contribution and in other cases @Rs.145 including Rs.20/- as at para 1.5 per IP per month. Alternatively, as per 12 monthly average contribution for the previous financial year as per para 2.1.
Statutory Increase	Imposed automatically by the system on the basis of list of defaulters generated by the system on non-receipt of PR-03 from the bank on 20^th of every month.
Demand created under Section 12(3) for Evasion	The Assessment Order and D&SC vide SL-004 duly stamped.
II. Credit Entries Receipt of Payment in EOBI Collection Account	On the basis of receipted PR-03 by the bank containing unique Serial Number and collected by the Regional Office.
On Appeal Affect under Section 33, 34, 35 and other reasons	On the basis of input document known as serially numbered Credit Advice duly signed by EO, AD(R&C) and Regional head (Annex-III)
Appeal Affect to the order of High Court and Supreme Court	On the basis of input document (Annex-IV) bearing serially numbered Credit Advice duly certified by EO, AD(R&C), Regional Head and Law & Audit Officer of the Region.

Ø One the first and 20^th of every month, the following accounts shall be debited or credited for contribution or Statutory Increase by the EDP Department at Head office:-

Accounts Receivable Control A/c _________ Dr

Contribution Income _________ Cr

Accounts receivable – statutory Increase _________ Dr

tatutory Increase Income _________ Cr

Ø The invoice-wise details will be entered and linked with IBCO when the entered data is transferred to the central database at Head Office and posted in the account of the employer by the following entry:-

Receivables Clearing A/c (IBCO-wise) Dr.

Accounts Receivable Control A/c. Cr.

Ø The grand total of all the balances outstanding in the Employers’ Accounts will always be equal to the balance in the Accounts Receivable Control A/c in the General Ledger.

6. Training

6.1 A training programme for officials shall be arranged by the Zonal Heads immediately for the implementation of the Accrual Accounting System. The experience shall be shared and problems addressed through workshops regularly.

6.2 Training material has been developed and supplied to Zones/Regions. Further clarification shall be issued in consultation with F&A Department, the Statutory Auditor and the Consultant

7. Responsibilities

7.1 Beat Officer

7.1.1 Beat Officers shall be responsible for collection of PR-02/PR-02A forms in July every year and PR-02B forms thereafter for incorporation of change in the system.

7.1.2 Beat Officers shall assist the employer in proper filling of all columns of the PR-03 in coordination with the bankers.

7.1.3 Beat Officers shall be responsible for providing sufficient forms PR02/PR02A, PR03 to employers for filling up to update the database.

7.1.4 It shall be the responsibility of the Beat Officer to monitor the payments, levy of Statutory Increase and recover arrears. The beat officer shall point out the cases which are in default for payment for more than three months and check whether they are closed or otherwise. A report on closed units alongwith necessary evidence shall be submitted to the Regional De-Registration Committee. The existing closed units should positively be deregistered by 30^th September 2004.

7.2 AD (R&C) and Regional Head

7.2.1 The Regional Head being in charge of the operations shall be responsible for implementation of the Scheme and overall operation of the Region.

7.2.2 He shall ensure debiting the accounts of all the active employers and employees on the first day of every month for contribution and on 20^th of every month for Statutory Increase.

7.2.3 He shall ensure weekly reconciliation of payments (PR-03) with IBCOs, Bank Scrolls and the Reconciliation Department. He shall be personally responsible for verification of the reports of closed units submitted to him by the Beat Officer and their deregistration through the respective Committees. They shall ensure de-registration of existing closed units by 30^th September 2004.

7.2.4 Regional Head shall be responsible for proper debit, credit and levy of statutory increase.

7.2.5 All the input documents mentioned in Annex-II to V shall be signed by Regional Head and he shall be personally held responsible for the same.

7.2.6 The Regional Head shall be responsible for the accurate preparation of MPR and authentication of its figures through computer.

7.2.7 The Regional Head shall generate a monthly list of outstanding contribution and ensure its updation and recovery of outstanding amounts within minimum possible time.

7.2.8 PI-21/pension record shall be updated upto 31^st July 2004.

7.2.9 A copy of PI-22 shall be obtained by the Region from Bank branches and matched with PI-21 from July 2004 onward.

7.2.10 MPR shall be generated by the system itself on the basis of complete data input verified by the Regional Head.

7.3 Responsibilities of Zonal Head:

7.3.1 The Zonal Head being head of the Zone shall be personally responsible for implementation and smooth working of Accrual System within the Zone in accordance with the guidelines provided in this circular and the manuals mentioned above.

7.3.2 He shall arrange the training programme and shall personally explain the system to Regional Heads, Field Officers and staff.

7.3.3 He shall organize training/education of the employers or their representatives dealing with EOBI Registration, collection and disbursement.

7.3.4 He shall ensure that the field officers/Regional Heads under his control perform the functions specified under the law, in general, and under the accrual system, in particular.

7.3.5 He shall guide, assist and respond to the queries made by all stakeholders and refer questions needing elaboration or answer at Head Office level.

7.3.6 He shall ensure proper supply of all forms especially forms PR-01, PR-02A, PR-02B to the employers and field officers in liaison with Head Office.

7.3.7 He shall supervise the entry of data, monitor the progress and render guidance and assistance as and when, wherever needed and consult the Operations Division, Head Office in cases of difficulty.

7.3.8 He shall Supervise and Control entering data on the basis of genuine input documents and preparation of MPR and other financial and management statements generated by the system.

8. Pension Account.

8.1 Accrual Accounting shall also be used to exercise control on disbursements. Institution’s Liability on account of pensions shall be worked out on the basis of the PI-21 (pension payment control register).

8.2 It shall be the responsibility of the EO/AD (Benefits) to get all the particulars of pensioners entered in computer by 15^th July, 2004 with the help of DEO so that validations list do not show any missing field/information.

8.3 The pension liability of the all PI-21 shall be recorded at the 1^st of every month through the following accounting entry:-

Pension Expenses __________________ Dr

Pension Payable __________________ Cr

8.4 A copy of the PI-22 shall be obtained form Bank branches and entered in computer at Regional level. The accounting entry for all PI-22 (Lump sum) will be made as under: -

Pension Payable __________________ Dr

Bank __________________ Cr.

8.5 Any difference between the PI-21 and PI-22 shall be examined and sorted at Regional level. This shall also be reported to Reconciliation Department Head Office, Karachi.

8.6 The Regional Heads shall ensure that the pension files along with PI-24 are sent to the Region where the disbursing bank branch is located. To facilitate immediate matching of PI-21 and PI-22 in the same Region. The copies of PI-21 and PI-22 shall continue to be received at Head Office alongwith the matching programme to operate as inbuilt check to ensure control and accurate accounting.

8.7 Till the finalization and implementation of IT Solution the existing system of control and processing of PI-22 at Head Office shall continue.

9. Monthly Cycle of Collection:

9.1 The monthly cycle of collection will be as under:

Ø Debiting the account of the employer on Ist of every Month.

Ø Receipt of monthly change statement (PR-02B) upto 5^th of every month.

Ø Data entry of change at the Region upto 10^th of every month.

Ø Updating database upto 15^th of every month

Ø Collection of PR-03 from banks and their entry from 16^th to 19^th of every month.

Ø Imposition of Statutory Increase through debit advice on 20^th of every month.

Ø Updating of database on daily basis..

9.2 The MPRs shall be generated from the system and all debits and credits i.e. receipts and deletions/expenses shall be reconciled with the memoranda account maintained in the Region. The reconciliation shall be carried out on monthly basis and discrepancies sorted out at the Regional/Zonal level. Unresolved discrepancies shall be reported to the Head Office alongwith reasons for such discrepancies.

10. Seminars & Workshops:

10.1 Seminars and workshops for explaining the purpose and procedure of Accounting System shall be held by the Zonal and Regional Heads in close association with Zonal Advisory Committees, chambers, industrial, traders and professional associations to solicit their cooperation in the account building and success of automation of the registration, collection and disbursement procedure. Chairman and senior officers shall also participate in meetings with chambers and associations of national importance.

Chairman EOBI

All Zonal/Regional Heads:

Copy to:

The Secretary LMOP/President and all members of Board of Trustees for their kind information with reference to the discussion held in the 69^th Board Meeting held on 30.06.2004.

Annex-I

EMPLOYEES’ OLD-AGE BENEFITS INSTITUTION

Regional Office ___________ LEDGER ACCOUNT

M/s. /Mr.____________________ Reg. NO. ____________________

Date

Particular

Reference

Debit

Rs.

Credit

Rs.

Balance

Rs.

Date

Particular

Reference

Debit

Rs.

Credit

Rs.

Balance

Rs.

Text Box:
Total Receivable Rs.__________________

Explanation:

At Regional Level:

Ø Amount entered on debit side on the basis of database of employers (PR-02, PR-02A) for the contribution receivable from each employer of the region.

Ø Amount entered on debit side on the basis of defaulter list for Statutory Increase in the case of non-receipt of contribution from employers.

Ø Amount entered on debit side on the basis of demand issued for under-reporting of IPs or wages.

Ø Amount entered on credit side on the basis of receipt (PR-03) of amount into the bank from respective employer.

Ø Amount entered on credit side on the basis of “Credit Advice” prepared for giving appeal affects.

Ø The reference column shall be carefully filled up by recording cross reference of the input document such as unique number of PR-03 in case of payment.

Annex II

EMPLOYEES OLD AGE BENEFITS INSTITUTION

Regional Office__________________ Phone:___________Fax:___________

EMail:_________________________ Date:

Ref: EOBI/

M/s. __________________

__________________

SUBJECT: Debit Advice of Statuary Increase levied on Non/Delayed payment of Contribution for the Month of &_____.

Dear Sir,

Your contribution under section-9 & 9-B of the Employees’ Old Age Benefits Act, 1976 for the month of_____________ & ______________2004 amounting to Rs: _______ as Employer’s share & Rs: ________ as Employee’s share on behalf of ________ employees was payable by 15^th of ____________ under Rule 3(2) of the EOB (Contribution) Rules, 1976. This contribution has not been paid or/has been paid on ________ vide PR-03 NO.___________ i.e. ____________days delayed, therefore, Statutory Increase @ 2% per month amounting to Rs. __________has been levied under Rule 4 of the above mentioned Rules on the contribution paid/payable.

You are therefore, advised to pay the outstanding dues within seven days from the date of receipt of this notice, failing which it shall be recovered as arrears of land revenue under the Land Revenue Act, 1967 as prescribed under Section -13(2) of the EOB Act, 1976.

Asstt. Director (R&C)

Annex - III

Employees’ Old – Age Benefits Institution

Regional Office: _______________

Credit Advice No. _______________ Dated: __________

Name Of Employers ___________________

Registration __________________________

Amount Rs. __________________________

Reason:

q Reduction in IPs

q Reduction in Wages

q Decision under Section 33-34-35

q Closure of Unit

q Any other Reason (Specify)

Proposed by Checked by Approved by

EO/AD (Field) AD/DD (R&C) Regional Head

Annex - IV

Employees’ Old – Age Benefits Institution

Regional Office: _______________

Credit Advice No. _____________________ Dated: __________

Name Of Employers ___________________

Registration __________________________

Amount Rs. __________________________

Reason:

q Decision by Court in Appeal # ____________ dated ___________

q High Court __________________

q Supreme Court of Pakistan ______________

Proposed by Checked by Approved by

EO/AD (Field) AD/DD (R&C) Regional Head

Countersigned by.

EO/AD (L&A)

Annex - V

Employees’ Old – Age Benefits Institution

Regional Office: _______________

Dedit Advice No. _____________________ Dated: __________

Name Of Employers ___________________

Registration __________________________

Amount Rs. __________________________

Reason:

q Increase in IPs

q Increase in Wages

q Any other Reason (Specify)

Proposed by Checked by Approved by

EO/AD (Field) AD/DD (R&C) Regional Head

AnnexVI

Abbreviations Used:

1. IP = Insured Person

2. EDP = Electronic Data Processing

3. IBCO = Inter Bank Credit Order

4. EO = Executive Officer

5. AD = Assistant Director

6. R&C = Registration & Contribution

7. Dr. = Debit

8. Cr. = Credit

9. F&A = Finance and Account

10. D&SC = Demand & Show Cause

11. ME&T = Monitoring Evaluation & Training Department

12. MPR = Monthly Progress Report

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1. Pre-requisites of the System:

1.4 Data entry of the PR-02/02A forms shall be completed in all respects upto 30th September 2004 by the beat officers under supervision of Regional/Zonal Heads.

2. Posting in Ledger Accounts

2.2 The Regional Heads shall issue intimation letters along with 2% statutory increase on delayed/short payments on 20th of every month after satisfying that no payment has been made in the bank. Statutory Increase shall be debited on the basis of “Debit Advice” placed as Annex-II.

3. Reconciliation

3.2 Reconciliation Department shall match the amount received through IBCO with the Regional Report. Exceptions shall be reported to the concerned Region and the Chairman. The Regional Head shall be responsible to settle the difference within three days.

4. Software

5. Accounting entries in Regional Office:

1.4 Data entry of the PR-02/02A forms shall be completed in all respects upto 30^th September 2004 by the beat officers under supervision of Regional/Zonal Heads.

2.2 The Regional Heads shall issue intimation letters along with 2% statutory increase on delayed/short payments on 20^th of every month after satisfying that no payment has been made in the bank. Statutory Increase shall be debited on the basis of “Debit Advice” placed as Annex-II.