Advantages of Direct Credit System (DCS) over the old Manual

Billing for Employee related payments:

Introduction: The Initiative of Direct Credit System was floated in the Project of Improving Financial
Reporting and Auditing II (PIFRA-II). The PIFRA-I was launched in 1997 with the help of world bank.
Whereas PIFRA-II was launched in 2005 and completed in 2010 with the cumulative amount of $127
million. Although, the Direct Credit System changed the overall Public Financial Management under
PIFRA, but due to preciseness a few advantages of DCS are discussed over Old Manual Billing for employee
related payments discussed below:

Atomization: The very first and the foremost advantage of DCS is its atomization. It does mean that
when payroll executes, all the payments are directed to respected accounts of the employees through a
comprehensive procedures mentioned in the chapter 4, section 6,7 and 8 of Accounting Policies and
procedures Manual.

Centralization of data: SAP provides an opportunity to maintain the data of all the employee in to one
place, where anyone having the authority can see what are the development and non-development
budget including the salaries and pension holders. Therefore, the DCS provides a fair bit of advantage over
manual Billing system in this respect by centralizing all the data into one place.

Rectification of procedural issues: The delays in the payments due to the procedural issues like in
payments due to manual billing system using the cheque payments are reduced completely by
implementing DCS. Hence, rectification of procedural issues ensured the timely payment to the
employees.

Adequate monitoring and supervisory checks: Things were not moving in the right direction since
there was little ownership at the top level, as a result of which progress of payments i.e. pension section
was not reviewed on a regular basis by the Senior Management. Since structured supervision was not in
place, various issues did not get resolved under the manual payments system. On the other hand, DCS
made it possible to supervise and monitor all the payments on just a click.

Improved service delivery: The history is stand evident that there were flaws in the service delivery
of previous manual payment system. People have to wait in front of banks to get their pensions every
month, employee were getting salaries through DDO and if he was not available they have to wait for days
and days. DCS made it easy by improving the payments service to credit the salaries and pensions directly
in the bank account.

Secure and reduction of Risk: No doubt, DCS have not only made improved the service delivery to
the Government employees but also reduced the risk of theft and fraud during the transactions. With
DCS, no one can forge the check like an incident happened in the Muzaffar Garh district of Punjab
regarding pension payments. Since, through direct crediting the amount directly credited to the bank
account of the employee. Hence, there is improved security.
Economical: DCS proved to be a very economical system of payments. It is because of the fact that no
cheque or visit to accounts office are involved in the issuance of payments. Therefore, DCS can be
regarded as the most economical system of payments.

Access to payments: Once the payment is credited into the account of the employee, he would have a
full control over all the amount and can manage in any manner through his/her bank account and draw
whenever needed.

Easy to audit: Direct Credit system made the accounts easy to audit. It is because of the fact the least
no of people are involved in the process of crediting the payments and atomization leads to an easy to
audit process. Any discrepancy can be traceable vary easily. In fact, it was for the first time in the history
of Pakistan that the audit reports along with financial statements were presented to president and
governors in eight (8) months. Reducing the submission time from 22 to 8 months.

Easy to report: As the data is centralized and the payrolls are executed from one place for all the
payments therefore, it is very easy to report the transactions for management and analysis purposes.
Furthermore, Reporting is the hallmark of Project of Improving Financial Management and Reporting
System (PIFRA).

Easy to maintain/ manage record:

Compliance: Direct Credit System made the compliance with the rules possible. For example; there is a
Govt. policy to pay the salary and pension to every employee at the last working day of the month. DCS
made it possible to comply with the rule by crediting the amount at the last working day of the month.

Improved efficiency, transparency and accountability: There is no doubt about that DCS improved
the efficiency by reducing the time constraints and providing the accessibility to the payments to the
employee with easy reporting and auditing that made accountability of the payments easy and the culprit
can be traceable with no time. Above this, Public expenditure and accountability (PEFA) has awarded A
after analyzing the DCS in Pakistan which can be considered as a big achievement.

Increased flexibility: One of the great advantage of Direct Credit System is its flexibility i.e. it can
incorporate changes for all by giving only one command to the system. Whereas, manual system of
payments needed a system of manual procedure to make a change in the payments in every cost center
for every employee. Moreover, the system is flexible enough to make deduction and refund/deduct of
excess/ less Income Tax, which is again a major advantage of DCS over MPS.

Easy to reconcile: Direction 1, Sub-section 19, Section 7, chapter 4 of APPM elaborates that the Bank
will send the Bank Return to the Account Section, where a delegated officer shall check the Bank Return
with the copy of the Pension Advice Note/ Payroll Advice Note and Pension Credit Advice/Payroll Credit
Advice. In respect of these, the total will be reconciled with the total appearing on the Bank Return. The
officer shall investigate any item which is on the Bank Return but not on these Advice Note and the Credit
Advices, and vice versa. It was not possible before the Direct Credit System.