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Training Manual on
Financial Management

&

Procurement


29
th

FCs review meeting

2

Financial Management

Training Manual & Modules on Financial
Management & Procurement



GOI

developed

a

draft

comprehensive

Manual

and

Modules

through

a

retired

C

&

AG

officer,

engaged

on

short

term

basis
.


Modules

cover

5

days

training

of

finance

and

accounts

staff



It

contains

9

Chapters,

covering

introduction,

planning,

budgeting,

accounting,

fund

flow

arrangements,

financial

reporting,

internal

control

&

internal

audit,

auditing

and

procurement
.

3

Cont’d


Shared

the

Manual

and

Modules

with

all

States

through

e
-
mail

on

27
th

April

2011

through

e
-
mail
.


Sought

comments/suggestions

of

States

by

5
th

May

2011
.


In

case

any

amendment

is

considered

necessary,

a

revised

formulation

of

that

part

was

sought
.


Except

West

Bengal,

nobody

responded

till

10
th

May

2011
.


West

Bengal

also

did

not

suggest

any

revised

formulation
.

4

Cont’d


Team


In

order

to

facilitate

a

fruitful

discussion

within

a

short

period,

3

teams

are

formed
.


Team

I

(Leader

Shri

Birkhe

Ram)



12

States


Planning,

fund

flow

and

financial

reporting
.


Team

II

(Leader

Shri

U
.
K
.

Verma)

11

States


Accounting,

Internal

control

&

monitoring

and

auditing
.


Team

III

(Leader

Shri

K
.

Gopalan)



12

States


Introduction,

Budgeting

and

Procurement
.


The

leader

may

form

3

sub

teams,

so

that

one

Chapter

is

examined

by

each

sub

team
.

5

Cont’d


Expectations

from

the

Teams


The

Training

Manual

and

Modules

need

to

be

in

conformity

with

the

provisions

of

FM

&

P

Manual
.



The

Teams

should

examine

the

draft

Manual

and

Modules

carefully

and

ensure

that

the

basic

provisions

of

the

FM

&

P

Manual

are

invariably

incorporated

therein
.


GOI

recently

developed

a

revised

SSA

Framework

for

the

smooth

implementation

of

RTE

Act
.


Relevant

provisions

of

the

revised

SSA

Framework

also

need

to

be

incorporated

in

the

Manual,

as

some

of

the

provisions

incorporated

are

from

the

pre
-
revised

SSA

Framewark
.


The

draft

Manual

also

elaborates

certain

basic

provisions

on

procedural

matters

in

order

to

enrich

the

working

knowledge

of

the

participants,

which

if

considered

necessary,

may

be

retained
.

6

Cont’d


Expectations

from

the

Teams


It

should

be

kept

in

mind

that

the

Manual

and

Modules

are

for

the

benefit

of

the

finance

and

accounts

staff

of

SSA

at

all

levels

and

therefore

it

should

meet

their

requirement
.


While

the

training

needs

up

to

Block

level

are

identical,

the

same

at

Cluster

and

school

level

will

differ

due

to

maintenance

of

double

entry

system

of

accounting

up

to

Block

level

and

single

system

of

accounting

at

Cluster

and

school

level
.


All

the

books

of

accounts

and

Registers

prescribed

in

the

Manual

may

not

be

required

to

be

maintained

at

Cluster

and

school

level

and

as

such

the

Team

should

look

into

this

and

suggest

the

books

of

accounts

and

Registers

required

at

CRC

and

School

level

and

a

separate

training

modules
.

7

Cont’d


Expectations

from

the

Teams


Observations

from

IPAI

review

reports

and

JRM

recommendations

are

extensively

included

in

many

Chapters

with

names

of

the

States

which

is

not

considered

appropriate
.


In

order

to

understand

the

common

mistakes

generally

committed

by

the

implementing

agencies

in

accounting,

fund

flow,

opening

of

bank

accounts,

diversion

of

funds,

misappropriation

of

funds,

procurement

etc,

key

observations

brought

out

by

the

statutory

auditors,

IPAI,

JRM,

Team

on

post

review

of

procurement

may

be

included

under

the

relevant

subject

with

out

naming

the

States

and

source
.



8

Some examples

Key Observations


Accounting


-


Weak accounting system prevailing.


-


Non
-
maintenance of prescribed books of
accounts like cash book, ledger, journal, cheque
issue register, stock register, asset register etc.


-


Non carrying out of annual physical verification
of stock and asset.


-


Non preparation of bank reconciliation
statement.


-


Delay in obtaining utilization certificates.

9

Some examples

Key Observations


Advances


-


advances included in the expenditure.


-



expenditure not supported by utilization
certificate/expenditure statement.


-


advances allowed as expenditure for reporting
purpose remain as advances in the books of
accounts.


-


not carried out adjustment of outstanding
advances.

10

Some examples

Key Observations


Opening of Bank Accounts


-

Accounts not opened in the name of Head of
Office.


-

Not opened joint signatory savings bank
account with nationalized/scheduled bank.


-

Not opened separate accounts for SSA,
NPEGEL and KGBV.


-


Opened multiple bank accounts instead of one
bank account.


-


Not adopted e
-
transfer of funds even where
such facilities exist.

11

Some examples

Key observation on procurement

:


need for tightening of procurement system especially on
procedural lapses


incomplete documentations


Irregularities


diversion of funds


lack of monitoring the progress

Procedural lapses


Not issued solicitation letters to the vendors for
obtaining quotations.


obtained Quotations by hand by visiting the premises of
the vendors.


In some cases, notice inviting quotations being put on the
notice boards of SSA offices.


No formal agreement had been signed for procurement at
State level.


12

Some examples

Procedural lapses


Engagement of contractors for construction of additional
class rooms without obtaining the prior approval of
PAB.


Non observance of the time limit of 30 days for
submission of bids.


Letter of award issued within 20 days, even though 30
days time limit was allowed for submission of bids.



Not indicated Bid validity period in the bid documents.


Not taken Earnest money deposit from prospective
bidder.


Absence of social audit at VEC level.


Followed Single tender method of procurement
particularly at VEC/school level in majority of cases
without inviting any quotations.


13

Some examples

Procedural

lapses


Not

indicated

validity

period

of

the

earnest

money

deposit

in

the

tender

documents
.


Not

obtained

Security

deposit/performance

guarantee

from

selected

bidders
.


Not

contain

clauses

for

liquidated

damages,

security

deposits,

retention

money,

delivery

schedule

and

payment

schedule

in

Work

Orders

.


Not

published

advertisement

in

national

news

paper

for

open

tender

valuing

more

than

Rs
.

20

lakh
.


Not

clearly

specified

Technical

specifications,

delivery

period,

payment

terms

etc

in

the

tender

documents
.


14

Expectations from the Team


Check list and exercise are given at the end of each
Chapter to facilitate proper evaluation of the training
imparted to the participants.


In case any changes are made in the text, the check list
and exercise also need suitable modifications.


After completing the examination the Team should
share the input during the concluding session.

15

Accounting


As

per

State

Government

procedure

with

the

exception

of

cash

book

in

double

entry

method
.


Single

entry

system

in

Cluster

&

VEC/School
.


List

of

Books

of

Accounts

and

Registers

provided

in

Para

52
.


Ensure

maintenance

of

essential

books

of

accounts

like

cash

book,

journal,

ledger,

cheque

issue

register,

advance

register,

stock

register,

asset

register,

bill

register,

establishment

register

etc
.


Carry

out

annual

physical

verification

of

Assets

and

Stocks
.

16

Accounting

Advances


Following

advances

treated

as

expenditure

for

reporting

purpose

only
:


School

Grant


Teacher’s

Grant


TLE


Repair

and

Maintenance

of

School

building


Civil

Works

by

community


Salary

of

locally

appointed

teachers


EGS/AIE

(Salary

and

Materials)


Teacher’s

Training


Annual

Grants

to

BRC/CRC


Obtain

Utilization

certificates

from

sub
-
districts

and

districts

as

per

the

time

frame

prescribed

17

Accounting


Advance

Register


Monitoring

of

Advances


Account

head


Cash

Book


Journal


Ledger


Monthly

Bank

Reconciliation


Indicative

staffing

structure

of

Finance

and

Accounts

staff

at

SPO,

DPO

and

enabling

provision

for

Accountant

at

block

level
.


Capacity

Building

of

Accounts

and

Audit

Staff
-

Minimum

5

days

training

mandatory

to

accounts

staff

in

a

year


Control

of

Expenditure


Re
-
appropriation

of

funds

18

Fund Flow Arrangements


GOI

and

State

Share



Procedure

for

release

of

funds


Ad
-
hoc

release

of

Ist

installment

of

GOI

share

in

April



50
%

of

the

expenditure

incurred

in

the

previous

year

less

opening

balance

subject

to

subsequent

adjustments
.


Fund

flow

from

GOI

to

SIS,

State

to

SIS,

SIS

to

District

and

District

to

sub
-
district

level
.


Opening

of

bank

accounts



Nationalized/scheduled

bank



Joint

signatory

SB

account,

Accounts

in

one

bank




Open

only

one

savings

bank

account

for

each

scheme
.


Opening

of

multiple

bank

accounts

needs

approval

of

EC
.



e
-
transfer

of

funds

at

all

levels

subject

to

availability

of

banking

facility


Accounting

of

Interest

earned
.


19

Internal Control and


Internal Audit


Internal

Audit



Strengthen

with

adequate

staff/CA

firm,

Concurrent,

pursue

observations

to

finality,

submit

reports

to

EC
.


In

many

States

not

being

carried

out

on

concurrent

basis
.



Not

yet

started

in

J&K
.


Not

started

for

2009
-
10

in

Delhi,

Haryana,

Manipur,

Rajasthan

and

Sikkim
.


Needs

to

strengthen

the

system

on

priority
.


20

Auditing


Selection

of

Chartered

Accountant

Firm



C&AG/AG’s

empanelled

list

of

CA

firms



Use

prescribed

Terms

of

Reference



Initially

one

year

and

may

be

extended

upto

3

years

subject

to

satisfactory

service
.



Ensure

engagement

of

CA

Firm

by

April

every

year
.


Close

the

annual

accounts

by

30
th

June

every

year
.


Annual

Audit

Report

by

CA

Firm

by

September

every

year


Submit

Annual

Audit

Report

to

GOI

by

1
st

November

every

year


Pursuance

of

Audit

Objections


Annual

audit

report

for

2008
-
09

is

still

awaited

from

J&K
.


Ensure

submission

of

audit

report

for

2009
-
10

by

October

2010


Procurement Procedure
under

SSA / NPEGEL/KGBV

22

PROCUREMENT


Mandatory to follow Chapter IX of the Manual.


Financial

ceiling

for

each

method

as

per

State

Government

ceiling

unless

prescribed

by

MHRD
.



Presently

ceiling

prescribed

by

MHRD

vide

letter

dated

17
th

September

2008

which

applies

upto

30
th

September

2012
.


Ensure

the

levels

of

procurement

provided

in

Para

112

is

strictly

followed



School

/

Community

level



CRC

/

BRC

level



District

level



State

level



Upload

the

Procurement

Plan

every

year

in

SSA’s

website
.


Financial

ceiling

prescribed

for

each

method

to

be

strictly

followed
.

23






1.
Open Tender (Para 115 of the Manual)

2.
Limited Tender (Para 118 of the Manual)

3.
Single Tender (Para 119 of the Manual)

4.
Procurement without tender / quotation
(Para 120 of the Manual)

5.
Procurement through communities
(Para 121 of the Manual)

Method of Procurement

24

Procurement Under External
Funding


Detailed

Instructions

issued

to

States/UTs

on

17
th

September,

2008
.



No

change

in

method

of

procurement
.



Mandatory

to

follow

Procurement

procedures

prescribed

in

Chapter
-
IX

of

the

Manual
.



However,

follow

the

financial

ceilings

indicated

below

against

each

for

all

procurement

of

works,

goods

and

services
.

25

Procurement


Open Tender (Para 115
-
117 of the Manual)


Goods,

excluding

Information

Technology

Equipment,

estimated

to

cost

the

equivalent

of

more

than

US

$

50
,
000

but

not

more

than

US

$

300
,
000

per

contract

and

works

estimated

to

cost

the

equivalent

of

more

than

US

$

40
,
000

but

not

more

than

US

$

300
,
000

per

contract
.


Textbooks

estimated

to

cost

the

equivalent

of

upto

US

$

1

million

per

contract
.


Works

for

SIEMAT

estimated

to

cost

the

equivalent

of

upto

US
$

800
,
000

per

contract
.


Information

Technology

Equipment

estimated

to

cost

the

equivalent

of

more

than

US

$

50
,
000

but

not

more

than

US

$

4
.
00

million

per

contract
.

26

2. Limited Tender (Para 118 of the Manual)


Goods

including

Information

Technology

Equipment,

estimated

to

cost

the

equivalent

upto

US

$

50
,
000

or

less

per

contract
.


Works

estimated

to

cost

the

equivalent

of

US

$

50
,
000

or

less

per

contract
.

27

3. Single Tender (Para 119 of the Manual)


Goods

estimated

to

cost

the

equivalent

of

less

than

US

$

30
,
000

per

contract

and

which

are

specifically

certified

as

of

proprietary

nature

or

of

which

only

a

particular

firm

is

the

manufacturer
;


Textbooks

estimated

to

cost

the

equivalent

of

US

$

500
,
000

or

less

per

contract
.


Books,

teaching

materials,

school

facility

improvement,

hiring

of

vehicles

and

operation

and

maintenance

of

equipment

estimated

to

cost

the

equivalent

of

less

than

US

$

30
,
000

per

contract
.


Works

estimated

to

cost

the

equivalent

of

US

$

40
,
000

or

less

per

contract

(single

tender

method

i
.
e
.

direct

contract

without

competition)
.

28

5.
Procurement through communities (Para 121 of
the Manual)


Works

estimated

to

cost

the

equivalent

of

US

$

40
,
000

or

less

per

contract
.


Works

estimated

to

cost

the

equivalent

of

US

$

20
,
000

or

less

per

contract

may

be

procured

under

the

unit/piece

rate

through

qualified

contractors

or

registered

non
-
governmental

organisation,

other

beneficiary

association

or

Village

Panchayats
.



29

6.
Procurement of goods more than the above
financial ceiling not procured using the
proceeds of credit


Goods,

other

than

Information

Technology

Equipment,

estimated

to

cost

the

equivalent

of

more

than

US

$

300
,
000

per

contract



Works

other

than

SIEMAT

estimated

to

cost

the

equivalent

of

more

than

US

$

300
,
000

per

contract


Works

for

SIEMAT

estimated

to

cost

the

equivalent

of

more

than

US

$

800
,
000

per

contract


Information

Technology

Equipment

estimated

to

cost

the

equivalent

of

more

than

US

$

4
.
0

million

per

contract

shall

be

procured

in

accordance

with

such

methods

as

may

be

established

by

the

Association
.

30

7.
Employment of Consultants


All

consulting

services

to

be

financed

out

of

the

proceeds

of

the

Credit

and

estimated

to

cost

equivalent

of

US
$

200
,
000

or

less

per

contract

shall

be

procured

in

accordance

with

Para

123

-

124

of

Chapter

IX

of

the

Manual

on

Financial

Management

and

Procurement
.


Consultancy

services

estimates

to

cost

equivalent

of

more

than

US
$

200
,
000

per

contract

shall

not

be

procured

using

the

proceeds

of

this

credit
.

31

Key Observations of Post review of Procurement

Irregularities

in

Procurement


Selected same contractor on single source basis in two schools.


Purchased Computers from agencies not on authorized DGS&D
or State Government Rate contract entities.


Assets procured were not available for physical verification.


Absence of concerned staff during the course of review despite
prior notification of the visit.


Diversion of funds


Used ACR fund for the construction of library


Monitoring the progress of the Procurement


No MIS for monitoring progress of procurement at State and
district level.


32

Financial Management

Key Issues



Refund of unspent balance of DPEP.



Gujarat


Rs. 3.64 crore


Kerala


Rs. 4.95 crore


Tamil Nadu


Rs. 1.09 crore


Uttar Pradesh


DPEP
-
II
-

Rs. 4.44 crore


DPEP
-
III


Rs. 1.36 crore


West Bengal


Rs. 15.70 crore

33

Financial Management

Key Issues


Refund of unspent balance of SSA Pre
-
Project funds.



Jammu & Kashmir



Manipur



West Bengal


Non
-
refund of these balances is likely to
affect future release of SSA funds.

34

Financial Management

Key Issues


Backlog of State share as on 31
-
3
-
2010



Delhi



Rs
.

4
.
37

crore



J&K



Rs
.

79
.
51

crore



Kerala



Rs
.

12
.
85

crore



Rajasthan



Rs
.

245
.
93

crore



Tamil

Nadu



Rs
.

0
.
11

crore



Uttarakhand



Rs
.

16
.
13

crore



West

Bengal



Rs
.

43
.
52

crore



Release

of

2
nd

Installment

from

GOI

is

subject

to

release

of

the

backlog

of

State

share
.

35

Financial Management

Key Issues


Status of finance and accounts staff and
training.


-

Vacant posts exist in SPOs of Gujarat (1),
Haryana (11), J&K (2), UP (6), Uttrakhand (1) and
WB (3).


-

Vacant posts exist in DPOs of Delhi (27), Gujarat
(13), Haryana (4), J&K, Orissa (13), Rajasthan
(34), UP (47), Uttrakhand (13) and WB (22).


-

Fill up these posts on priority.


-

Also provide an Accountant at block level.


-

Provide minimum 5 days training in a year to all
accounts staff.

36

Financial Management

Key Issues


Status of finance and accounts staff and training.


-

Vacant posts exist in SPOs of Chhattisgarh (2), HP (1),
J&K (3), Rajasthan (1), UP (9), Uttrakhand (1) and WB
(3).


-

Vacant posts exist in DPOs of Chhattisgarh (6),
Gujarat (12), Kerala (5), Manipur (9), Rajasthan (102),
Sikkim (3), Tamil Nadu, UP (62), Uttrakhand (11) and
WB (16).


-

Fill up these posts on priority.


-

Also provide Accountant at block level or for a group
of blocks.


-

Provide minimum 5 days training in a year to all
accounts staff.

37

Financial Management

Key Issues



Audit of VECs/Schools


-

Ensure

that

audit

of

VECs/schools

receiving

more

than

Rs
.

1

lakh

per

year

is

covered

in

a

three

year

cycle

of

audits
.


38

Financial Management

Key Issues

Pursuance of Audit Objections


-

Audit

observation

compliance

awaited

from

the

following

States
:



2005
-
06
-

Haryana

and

Manipur
.



2006
-
07
-

Jharkhand,

Haryana,

Karnataka,

Kerala,

Manipur,

Sikkim

and

Tamil

Nadu
.




2007
-
08
-

Chandigarh,

J&K,

Jharkhand,

Haryana,

Karnataka,

Kerala,

Manipur,

Rajasthan

and

Tamil

Nadu
.


Monitor

the

settlement

of

outstanding

audit

objections

through

the

register

prescribed

in

Para

110
.
1

of

the

Manual
.

39

Remedial Measures

FM Action Plan



MHRD on 19
-
4
-
2010 sought State Action Plan along with monthly
expenditure plans by 30
th

April, 2010.


The

revised

action

plan

includes
:



expected

outcomes

for

books

of

accounts



closing

of

accounts

¾

internal

audit



financial

monitoring

including

social

audit



capacity

building

¾

procurement

¾

staffing



statutory

audit



compliance

of

audit

observations

and

¾

concurrent

financial

review

by

IPAI

40

Remedial Measures

Monthly Expenditure Plan


Expenditure trends in the past indicate back loading of
major portion in 4
th

Quarter

¾
To provide sufficient time for completion of activities,
appropriately front load the fund flow at district and
sub
-
district level.


This will result in not only even flow of funds in all
the Quarters but also completion of activities within
the stipulated time frame.


Release all the annual grants to the beneficiaries
immediately on receipt of the ad
-
hoc/first instalment.




41