CHAPTER 1 - INTRODUCTIONpbdwss.gov.in/prwssp/Downloads/docs/Manual/Fin_M_M… · Web viewAll the above payment , are a % to the total cost net of community contribution 4.14 Besides

Punjab Rural Water Supply and Sanitation Program Financial Management Manual

CHAPTER 1 - INTRODUCTIONCHAPTER 1 - INTRODUCTION

INTRODUCTION

1.1 The Punjab Rural Water Supply and Sanitation Program (PRWSSP) being implemented by the GoP with support from the World bank and GOI (through schemes such as ARWSP etc).

1.2 Government of Punjab (GoP) has prioritized Rural Water Supply and Sanitation (RWSS) as a key area of its development agenda. Over the past few years, significant capital allocations to the RWSS sector have been made which indicates the high priority accorded to the sector. Government of India too supports the RWSS sector reforms and provides significant financial assistance to Punjab through its centrally sponsored programs such as ARWSP, Swajaldhara and Total Sanitation Campaign (TSC). Despite these efforts, several issues are on hand.

In the above context, GOP is keen to reform the sector to improve sustainability and standard of rural water service delivery, in Punjab.

Now, GoP intends to scale up statewide the demand responsive and decentralized service delivery approach. In this context, the World Bank is assisting the GoP in implementing its 5 year medium term Rural Water Supply and Sanitation (RWSS) program . The Program would be a sector wide approach (SWAp) to RWSS improvements in the State.

PROGRAM COMPONENTS

1.3 The program comprises of three main components (Components included in SWAp basket) Component A - Program management

Objective of the Component is to build the capacity of DWSS and other Support organizations in facilitating demand responsive and decentralised water supply and sanitation service delivery to village communities in Punjab. The main activities of the component are

i. Institutional support and development to DWSSii. Monitoring and Evaluation iii. Capacity buildingiv. Program IECii. Sector development initiatives

This component will finance investment and operating cost of the DWSS, consultancy’s goods and equipment for Information Education and Communication campaigns, developing and operating a Monitoring and Evaluation and MIS system and water quality monitoring. This component will also include program for capacity building of


DWSS staff and Support Organisations. Various sector development activities including piloting of innovative approaches will also be implemented under the component.

Component B - Community Development Support Objective of the component is to build the capacity of GPWSC and GP in implementing rural water supply and sanitation service delivery adopting program principles in an efficient and sustainable manner. The main activities of the component are

i. Capacity building of GPWSC and GP through Support Organisation for new schemes.

ii. Capacity building of GPWSC and GP through Support Organisation for existing schemes for taking up service improvement.

iii. Technical assistance for engineering design support for new schemes iv. Technical assistance for engineering design support for existing schemes v. Technical assistance for engineering design support for sanitation schemes.

This component will mainly finance consultancy fees of the NGOs, NGIs and other service providers to the GPWSC and GP in social mobilisation, community development, technical, financial as well as management aspects.

Component C - Infrastructure Development Building Objective of the component is to build new water supply schemes according to approved design standards, estimated cost and time schedule as well as to improve the functioning of existing schemes. The main activities of the component are i. Bharat Nirman Program for constructing and updating rural water supply to all NC

and PC villages. ii. Service improvement measures for effecting transfer of existing Single Village and

intra-village component of Multi Village schemes to GPWSCs.iii. Environmental sanitation Program for sullage water disposal including pond

rehabilitation. This component will mainly finance civil works contracts for construction of new water supply and sanitation schemes including up-gradation of existing schemes. The component will be implemented through participatory process of community consultation involving GPWSCs in deciding on technology options, cost of investment, O&M arrangements etc. The implementation of Single Village schemes and intra-village distribution system of Multi Village schemes will be the responsibility of GPWSC while the implementation of common infrastructure for Multi Village schemes will be the responsibility of DWSS. The environmental sanitation schemes will not include any investment in private lands including household toilets but will include systems for safe disposal of sullage water like small bore drainage system, pond rehabilitation etc. The GPWSC will have the option to decide and prioritise the investments in water supply and sanitation.


The cost of the program and the financing sources are as under:

Table 1: Component-wise Total CostsComponent Total

SWAp progra

m

Financing shareRs Crores

Bank Fin. of total

GOP contributi

onRs Crores

Bank share as a % of GoP contributi

on

Rs Crores

GOI * GOP Comm.

A Program Management 142 - 142 - 142 100%B Community

Development Support111 - 111 - 111 100%

C Infrastructure Building 935 194 665 77 440 66%TOTAL – SWAp Program

1188 194 918 77 693

* currently through ARWSP scheme.

1.4 The components discussed above are included in the MTSP SWAp basket. In addition to these components the following additional investments/ expenditures are expected in the water supply and sanitation sector which are outside program.

Committed schemes – In about 2900 habitations DWSS is currently implementing water supply schemes through funding from Govt. of India under ARWSP and Swajaldhara and from NABARD. It is estimated that an amount of Rs. 476 Crores will be required to complete the committed schemes.

Operation and Maintenance expenses of existing schemes – The expenses towards operation and maintenance of existing schemes are undertaken by the DWSS either fully or partially. The recoveries through user charges are not able to fully cover the expenses of staff salaries, electricity bills etc. The O&M cost of existing schemes will be borne by the DWSS on a declining basis so as to move towards full recovery of O&M cost in all water supply schemes.

DWSS staff and establishment cost – Currently the cost towards staff and other establishment expenses are currently financed through non-plan budget allocation of about 72 Crores. Out of this for managing the RWS alone is assumed to 70% with an annual increase of 5%.

1.5 The Program will be implemented in the rural areas of all the 20 districts of Punjab. Villages will be included in the Program by adopting a self-selection process, a prerequisite of


demand-responsive development. The Program is expected to directly benefit about 5 million rural people (33% of the State’s rural population).

APPLICABILITY

1.6 This Manual lays down the Financial Management System to be followed by all the implementing Agencies for all the Programs covered under SWAp .All the committed schemes under any program along with the O&M and Establishment expenditure of DWSS are outside SWAp and hence outside the preview of the manual. These schemes and expenditure’s will continue to be governed by the existing arrangements for fund flow, accounting, reporting and auditing rules and regulation.

1.7 The implementing agencies where this manual will be followed are State Program Management Cell (SPMC), District Program Management Cell (DPMC), Divisional offices of the DWSS for MVS and the Gram Panchayat Water and Sanitation Committee (GPWSC) for SVS and intra village distribution and pipeline .

OBJECTIVES AND STRUCTURE OF FINANCIAL MANAGEMENT MANUAL

1.8 The Financial Management Manual (FMM) has been designed with a view to build on and modernize the current accounting system to meet the requirements/expectations of the Program as also to meet the new challenges of handling the sector program. The main objectives of FMM shall primarily be:

To achieve better Program management by providing timely information on financial aspects and on key performance indicators to the Program management

To meet the financial reporting requirements of various stakeholders To keep track of funds utilization for each program separately. To provide reasonable assurance that the resources/funds are being used effectively and

efficiently for their intended purpose. To ensure that all program related activities are reflected in the Program Financial

Statements and the same be closely aligned with the Program components as per the Medium Term program .

To improve creditability and control over data integrity through effective internal control arrangement.

To enhance transparency and promote accountability at the GP level and to promote social audit.

To have proper accounting & reporting requirement at the GP Level. To have proper Internal Control issues at the GP level. To ensure that DPMC should have complete knowledge of the funds utilization of the

GP level & that there are no misappropriation.

To achieve this objective the Financial Management Manual has a detailed section on GPWSC. This section provides for the accounting Policies and the formats of accounting books to be


followed at that level. It also details the responsibility of accounting staff, the Payment mechanisms, method of Book keeping, banking, Auditing and reporting requirement.The manual also provides for the accounting policies to be followed by the department .Since the departmental implementing agencies will follow the government system of accounting, additional books of accounts have been prescribed to meet the more stringent requirement of the program .It also provides for a detailed chart of accounts for both the GPWSC & the Department which would assist in monitoring of Expenses with those given in the Medium Term Plan. The manual is intended to meet the requirements of efficient accounting and financial management system of the program within the overall framework of the government accounting system.

ADMINISTRATION OF THE MANUAL

1.9 This Manual shall be administered in the manner given below:

Principle Secretary, Department of Rural Water Supply and Sanitation will authorize the manual .

The manual is a living document and may be amended by the Principle Secretary, Department of Rural Water Supply and Sanitation as and when required and as learning accumulates with in the project. All participants in the Program are encouraged to share their learning and experiences of the program implementation so as to improve the proposed arrangements made to attain the program objectives.

All amendments made to the Manual shall –

Be circulated to all the DPMC/DO by SPMC. The circular/notification shall clearly state the paragraph(s) and line(s) to be replaced. All such circulars/notifications shall be serially numbered.

Mention the date from which the change shall be effective Be annexed to the manual with a cross reference at the appropriate places in the

manual This manual shall apply to all the implementing agencies of the SWAp Program i.e.

SPMC, DPMC, Divisional offices for MV schemes & GPWSC.


CHAPTER 2 – INSTITUTIONAL ARRANGEMENTSCHAPTER 2 – INSTITUTIONAL ARRANGEMENTS

INTRODUCTION 2.1 Considering the fact that the proposed Program will adopt a sector wide approach where

irrespective of funding sources the GoP will adopt uniform principles and guidelines for implementing all activities in the rural water supply and sanitation sector statewide. The Government of Punjab proposes to strengthen the existing structure at DWSS to manage and monitor all the Programs in the rural water supply and sanitation sector under the new approach.

2.2 The DWSS will redefine its role from the current builder of rural water supply infrastructure and provider of services to that of a partner, facilitator and guide for improving the overall rural water supply and sanitation service delivery.

2.3 The existing DWSS structure will be remodeled to create two independent channels within and under the overall supervision, guidance and monitoring of Minister and Principal Secretary, DWSS, namely “Program Facilitation and Monitoring Wing” and “Operations Wing”.

2.4 Program Facilitation and Monitoring Wing will consists of a vertical chain of new structures one each at State, District and Village level. This wing will be responsible for policy formulation, approving annual plans and funding, triggering Program implementation, arranging state level IEC and M&E. The new set-up consists of State water and sanitation Program Management Cell (SPMC) at the state level, District water and sanitation Program Management Cell (DPMC) at district level and GPs in partnership with an inclusive and accountable community based organisation of users - the Gram Panchayat Water Sanitation Committee (GPWSC).

2.5 The Operations Wing will be largely the current DWSS set-up with Regional Chief Engineers and existing offices of Circles, Divisions and Sub-Divisions. The Operations Wing will be

responsible for Program implementation at the field level.

2.6 The overall institutional arrangement showing the inter linkages of State, District and Village level is given in Exhibit-2.1.

STATE LEVEL ARRANGEMENT

2.7 GoP will set up a State Water Supply and Sanitation Mission (SWSM), a high level body headed by the Chief Secretary and responsible for providing overall leadership and guidance to the RWSS sector, in general, and in particular, institutionalizing the decentralized RWSS service delivery to Gram Panchayats and communities.


Exhibit-2.1 – Overall Institutional Model

Key Functions of

SO/VST- Technical - Financial - Community Mobilisation support- IEC

Superintending Engineer

Key Roles of DWSC- Prioritising Schemes and Villages- Recommending District Annual Plan- Approving Implementation Phase Proposals- Coordination & Monitoring

District Program Management Cell

Dist. Program Director

Facilitating Wing

Gram Panchayat

District Water Sanitation Committee

Executive Engineers

SO/VSTJ E

Sub Divisional Engineer

GP Level

District Level

GPWSCSub Committee of GP (Sec.25)

Gram Sabha/UsersRole of GS/ UsersSelect GPWSC membersCommunity ContributionUser Charges

State Water and Sanitation Mission State Level

Key Roles SWSM- Provide policy guidelines-Overall monitoring - Approving State Annual plans- Convergence & Coordination- Budget Approval

Chief Engineers (3)

State Program Management Cell Program Director

Principal Secretary, DWSS

Role of GPWSC- Planning,

Construction and O & M of SV schemes (all intra village works of MV schemes)

- Tender approval and awarding contracts up to Rs.30lakhs for SV schemes

Operations Wing


DWSS- Department of Water Supply and Sanitation, GPWSC- Gram Panchayat Water and Sanitation Committee JE- Junior Engineer, MV- Multi Village O&M- Operation and Maintenance, SO- Support Organisation, SV- Single Village , , , VST- Village Support Team

Key Roles Facilitation Wing Key Roles Operations WingEntity Roles Entity Roles

SPMC

- Over all Program Planning & Mgt.

- Fund Flow Management

- Capacity Building, IEC

- Achieving Development Objectives

- Quality Control, M & E, Reporting

Chief Engineer - Head Regional Operations

Superintending Engineer

- Lead District level Programme anagement,- Head District Operations

DPMC

- District level Program Planning & Mgt

- Achieving Dev. Objective.

- Fund Flow Management

- Capacity Building, IEC

- Quality Control, M & E

Executive Engineer

- Divisional level Operations- Planning, Construction and O&M of

MV schemes common facilities- Integrated Engineering & software

support to GPWSC for SV schemes, intra village facilities

SDEs/JE

- Same as that of EE but in their own area

The Mision will also be responsible for finalizing village selection, approving state annual

plans, fund allocation, overall monitoring as well as convergence and coordination.

The Principal Secretary, DWSS will be the member Secretary of the Mission. The Principal Secretary will be assisted by a Program Director and three Chief Engineers. The Program Director will be assisted by a Multi disciplinary team of experts organised into State Program Management Cell (SPMC). The Program Director will be appointed by Government of Punjab for a minimum tenure of three years, who will lead the Program implementation in the state for both facilitation and operations wings.The SPMC will be part of Program Facilitation and Monitoring Wing and the Chief Engineers will be part of the Operations Wing at the state level. The SPMC will be responsible for the achievement of the Program development objectives and the key financial responsibilities are:

Program planning and management Consolidating annual work plans Financial management and audit Fund flow management and fund releases

2.8 The SPMC will have six units namely Monitoring and Evaluation Unit, Procurement Unit, Quality Surveillance Unit, Community Development Unit, Finance Unit and Technical Unit. The Finance Unit will be headed by a senior finance officer, at least of the rank of a Joint

Key Functions of SO/VST- Technical and

Financial support

- Community Mobilisation support


Controller, would be deputed from the Finance Dept. In addition a Financial Management Specialist, an experienced chartered accountant as per terms of reference and job descriptions acceptable to IDA, will be hired from the market on contractual basis. This team will be supported by one section officer/ superintendent level person. Two assistants would be hired from the market, who are at least commerce graduates and have a sound computer knowledge of application programmes like Excel, Word, Internet, etc. The key responsibilities of the Finance Unit are:

i. Consolidate periodic reimbursement claims from all DPMCs and submit to GOP/GOI/World Bank.

ii. Liaise with GOP for timely release of funds.iii. Assist the senior Program specialist in preparing annual plans by

consolidating the district plans.iv. Release funds to DPMCs in accordance with approved district plans.v. Prepare and submit periodic financial management reports, annual financial

statements etc.vi. Disbursement of salaries and other allowances to staff, payment to Service

Agencies etc.vii. Be responsible for auditing of DPMCs and monitor auditing of GPWSC.

2.9 The operations wing will be responsible for providing comprehensive software and engineering, support to the GP/GPWSC for all Single Village and intra village schemes and works. In addition the operations wing will be responsible for implementing and managing common infrastructure of Multi Village schemes.

2.10 The Program Director will act as a coordinator for the Chief Engineers and will undertake all liaison functions with Government, World Bank and other external agencies. The three Regional Chief Engineer will continue to perform their operations, responsibilities in their respective areas of operations.

DISTRICT LEVEL ARRANGEMENT

2.11 The district level arrangement consists of establishing a District Program Management Cell (DPMC) and an advisory body District Water Sanitation Committee (DWSC).

2.12 The District Water Sanitation Committee will have the following responsibilities Selection of villages Approval of annual plan

2.13 The DPMC – will be responsible for carrying out the facilitation functions at the district level including building capacity of the Operations Wing. Organisationally the DPMC will be the counterpart unit of the SPMC at District level. The Superintending Engineers will be heading the DPMCs. Since there are 11 circles in the state and 20 districts, some of the Superintending Engineers will head DPMCs in more than one district. The Superintending


Engineers will be assisted in their activities by a District Program Specialist, who will be an Executive Engineer. District Program Director DPMC – The Superintending Engineer will be the District Program Director, who will have dual responsibility of leading the facilitation functions as well as operational functions. The engineering skills of the DPMC will be supplemented by District Program Management Consultants. They shall be hired to provide the support services.

2.14 The DPMC will have three units namely Community development unit, Technical unit and financial unit. At each DPMC, a Divisional Accountant, having Additional Charge will be deputed to the Divisions. He will be supported by a Assistant Finance Manager as per terms of reference and job descriptions acceptable to IDA, will be hired from the market on contractual basis. They will be supported by two Finance Assistants, a commerce graduate with experience of computer applications like Excel, Word, internet, etc.The Finance Unit will assist the Technical unit in finalising the district plans. The Finance unit will facilitate signing of the MoU with the GP/GPWSC and will be responsible for processing for release of program funds to the GPWSC. The Financial unit will prepare and submit periodic financial management reports, annual financial statements etc. to the SPMC. The finance Unit will also be responsible for facilitating, auditing of the GPWSC and follow up audit reports.

2.15 The roles of the DPMC are: The DPMC will have the following financial responsibilities: District level Program planning and management Consolidating District annual work plans Fund Management and Release to GPWSCs Financial management and audit Scheme approvals up to Rs. 30 Lakhs for Multi Village schemes (Common

infrastructure)

2.16 The Circles, Divisions and Sub-Divisions of the DWSS will form the Operations Wing. The Operations Wing will undertake the entire engineering operations including planning, construction and O&M of common facilities of Multi Village schemes as well as providing integrated software and engineering support to the GP/GPWSCs for both water supply and sanitation schemes including intra village schemes/works of Multi Village schemes. The Operation Wing will undertake the Socio-Technical process of planning for the Water Supply and Drainage schemes side by side with the activities of the DPMC and Support organisations. The Executive Engineers of the Divisions will be making available the required technical support to the GPWSC in planning, executing and operating and maintaining Water Supply and Drainage schemes through Sub-Divisional Engineers and Junior Engineers. Wherever required the Executive Engineer will also outsource technical assistance to GPWSCs.

VILLAGE LEVEL ARRANGEMENTS


2.17 The most important institutional entity for Program implementation will be an inclusive and accountable Gram Panchayat Water Sanitation Committee (GPWSC) selected by the Gram Sabha working in partnership with the Gram Panchayat.

2.18 The composition of GPWSC and its linkages are shown in Exhibit-2.2

Exhibit 2.2 – Village level Institutional Arrangement

2.19 The GPWSC will be constituted as a recognised body under section 25 of the Punjab Panchayat Raj Act, 1994.

2.20 The Sarpanch will be the ex-officio chairperson of the GPWSC, which will consist of minimum of 11 members and maximum of 21 members depending upon the village population. Three Panches of the GP are also ex-officio members in the GPWSC. The Gram Sabha will directly select the remaining members of the GPWSC. One third of the GPWSC

Gram Panchayat

GPWSCComposition (11-21 as per population of the village) Sarpanch - Chairman Women Panch- Member Schedule caste Panch Member General Panch Member Representative from Women (1/3rd members) Representative from SCs (1/5th members) Representative from BPL/ (1/3rd Member)

Landless families JE – Technical Member cum Convener

Contractor for SV Scheme/Intra village Distribution System of MV Schemes/ Small MV Schemes

Contract Arrangement

Community Contribution User Charges

SO/VST

Technical Support Community Mobilisation Support

Gram Sabha

SDE and JETech. Guidance and Support

DPMC

Facilitation/ Software Support


members shall be women, one fifth of the members from Scheduled Caste and Backward Class persons and one third from BPL or landless families. The GPWSC members will select a Secretary and Treasurer. The Junior Engineer of the DWSS in-charge of the village will be the technical member cum convener of the GPWSC.

2.21 Key Financial responsibilities of GPWSC are:a. Planning for the water supply and sanitation related investments in the villageb. Selecting cost effective and feasible technology and schemes c. Approval of schemes and tenders up to Rs. 30 Lakhs in respect of Single Village

schemes.d. Mobilising community contribution e. Construction and operation and maintenance of Single Village schemes, small Multi

Village schemes and intra-village components of Multi Village schemes including inviting bids, awarding contracts, contract management etc.

f. Management of Program funds for Program executiong. Maintaining books of accounts h. Deciding on the O&M arrangements either through engaging own staff or contracting

out to private contractors.i. Levying user charges and full financing of O&M expenditurej. Adherence to principles of maintaining transparency, public disclosure and cost

effectiveness in all transactions k. Ensuring inclusion of all sections of the village community in Program activities and

equitable distribution of benefits.

2.22 Memorandum of Understanding - In order to achieve orchestrated functioning of the GP, GPWSC and the DWSS (as represented by DPMC) in close coordination and partnership the roles and responsibilities and obligations of each of the party need to be formalised and agreed upon. A MoU will be signed among these three parties.

2.23 Support Organisations / VST – In order to supplement the engineering skills of the SDE / JE at the village level with social mobilisation and participatory skills, the services of Support Organisations will be provided to the GPWSC. Wherever services of experiences NGOs are not available as Support Organisation, the DPMC will constitute a VillageSupport Team comprising of GPWSC members, village youth and the Junior Engineer in-charge of the village.


CHAPTER 3– PLANNING,BUDGETING & ANNUAL WORK PLAN CHAPTER 3– PLANNING,BUDGETING & ANNUAL WORK PLAN

INTRODUCTION3.1 This chapter contains the framework for the proposed planning & budgeting system

including the various aspects of the budgeting process. The need for annual planning is a step in the process of continuous assessment of the situation and the identification of appropriate strategies and activities for achieving the program objectives. There is, therefore, a need every year to take stock of achievement as well as constraints and then plan ahead.

OBJECTIVES3.2 The main objective of an efficient Planning and budgeting system is to facilitate monitoring

of performance at regular intervals and the accountability for variance. Proper planning is possible only if proper budgeting system exists . The proposed budgeting system has been developed with this end objective. The main objectives of the proposed budgeting system are as follows:a. To ensure participation at all levels in the budgeting process b. To provide a basis for periodical monitoring of the performance of Program

implementing and that of all the executing agencies under the implementing agency.c. To meet external reporting and monitoring requirements of the Program funds.d. To facilitate fixation of accountability for budget variances.

BUDGET CENTRE3.3 An budget centre is an office which shall be responsible for budget preparation and shall be

accountable and responsible for budgetary control system The proposed planning and budgeting under the program shall be done at the following offices — At State level:

The SPMC will be responsible for overall Planning and budgeting .SPMC will be responsible for preparing the overall annual budget under SWAp and also monitor the financial progress. SPMC will consolidate the budgets received from DPMC’s along with its own budget to arrive at overall annual budget.

At District level: DPMC and DO will be the budget centre at the district level.The DO office shall be responsible for preparing the budgets for the schemes assigned to them.The DPMC will be responsible to prepare the budgets in two parts .One for the schemes assigned to the GPWSC/ DO and under implementations using demand driven principles and other for the new schemes not yet assigned to the DO or GPWSC but planned during the year. Besides the schemes, DPMC like SPMC, will also incur expenditure on other developmental activities like establishment expenses, payment to support staff, consultancies etc. Budgeting and planning for these will also be done while preparing the budgets. DPMC will consolidate the budgets received from DO’s along with its own budget to arrive at overall District Annual Budget.MEDIUM TERM PLAN (MTP)


3.4 A medium term plan (MTP) has been agreed to between the GoP and the World Bank giving the expected timing of disbursements and the expenditure.The MTP contains the District wise year-wise break-up of physical targets, budgeted cost for each activity, financial targets for each of the activity under each of the components and the details of the components relevant for the program.

PREPARATION OF THE ANNUAL WORK PLAN

3.5 The MTP shall form the overall framework within which each SPMC/DPMC/DO shall prepare its respective annual budgets for the budget period. The MTP contains the District wise year-wise break-up of physical targets and budgeted cost for each activity. These annual targets shall be communicated to each DPMC.

3.6 On the basis of these physical and financial targets given by the SPMC each DPMC shall prepare its own physical and financial targets.

3.7 The DO office shall be responsible for preparing the annual Work Plan for the schemes assigned to them by DPMC .These would be broken down into quarterly time frames and submitted to respective DPMC’s. The format in which the DO will prepare the Work Plan is enclosed vide Appendix 1 form B-2.

3.8 The DPMC will be responsible to prepare the budgets for the schemes assigned to the GPWSC and for the schemes not yet assigned to the DO and GPWSC but are planned during the year. These again would be broken down into quarterly basis. Besides the schemes, DPMC like SPMC, will also incur expenditure on other developmental activities like establishment expenses, payment to support staff, consultancies etc. Budgeting and planning for these will also be done while preparing the budgets. The format in which the DPMC will prepare the Work Plan is enclosed vide Appendix 1 form B-3.

3.9 The Work Plan at the DO would basically be the scheme wise fund requirement broken down into quarterly basis. Where as at SPMC & DPMC there would also be a budget for other activities viz Institutional Cost Investment & Recurring, capacity building, monitoring & evaluation etc.

3.10 The annual Work Plan prepared by each will be consolidated at respective DPMC and forwarded to SPMC for further consolidation and summerised in format enclosed vide Appendix 1 form B-1.

3.11 While preparing the annual Work Plan the DPMC shall also analyze the actual vs budgeted performance for the previous year except in the first year when it is not possible. For the first year, the annual budget of the MTP will serve as the annual budget but will have to be broken down into quarterly basis.

3.12 The DPMC/DO shall analyze the deviations, if any, with the physical and financial targets as communicated by the SPMC and specify reasons thereof in writing for approval.

3.13 If the reasons for deviations are not satisfactory, clarifications shall be sought from the concerned DPMC. Once the District Annual Budget is prepared it shall be approved by DWSC.


3.14 Thereafter the SPMC/PMU shall compile the budgets submitted by the DPMCs along with its own physical and financial targets as also the financial budgets for those activities to be undertaken by the SPMC.

APPROVAL OF ANNUAL WORK PLAN

3.15 The annual Work Plan consolidated by DPMC shall be first approved by DWSC before submitting to SPMC .The annual Work Plan consolidated at SPMC shall be approved by the SWSM.

3.16 The AWP shall be sent to the World Bank and GOI by January 31 of each year for the following financial year.

3.17 The overview of the budget process is provided in Exhibit-FM-3.1

BUDGET PERIOD AND REVISION OF BUDGETS

3.18 Budget period shall be the same as the financial year followed by Project implementing agencies i.e. from 1st April to 31st March.

3.19 Normally, budgets should be applicable for a full year. As the budgeting process involves forecasting on the basis of certain assumptions, the possible variations should be planned at the time of preparation of the budgets. Any significant variations from the original assumptions would necessitate revision of budgets within the overall ceiling of the approved budget and within the budget year itself. The revised budgets if any shall be approved by DWSC at the district level and SPMC at the state level.

BUDGET FORMATS

3.20 The budgets would be prepared in the formats as detailed in the Appendix 1. Consolidated budget for each program shall be dully supported by activity wise physical and financial details at each budgeting location i.e. SPMC/DPMC/DO

BUDGET VARIANCE ANALYSIS

3.21 Budget variances & their analysis form a significant part of Project monitoring System. It is imperative to compare actual & physical costs with those budgeted & arrive at favorable or adverse variances, at each level of the Project. The comparison between Actual & Budget has been done in the reporting formats of the project. [See Chapter 7]

BUDGET CALENDAR

3.22 In order that the exhaustive budgeting exercise gets completed within the specified time frame a budgeting calendar has been prepared which give the time schedule for the preparation of the budget in each of the agencies. The budget calendar is enclosed in Table 3.1 below:-

BUDGET & ACCOUNTING IN GOP (STATE BUDGET)3.23 Presently water programs are being budgeted under Budget line 4215-01-102.

4215 being Major Head : Water Supply & Sanitation01 being Sub-major Head : Water Supply102 being Minor Head : Rural Water Supply


For further classification, normally a sub-head code representing a scheme, detailed head representing a sub-scheme and Object head – representing type & object of expenditure are given.

Based on agreement with the Finance Dept (GoP0 the detailed Annual Work Plan will be summarized by Project Components and submitted to the Finance Dept for facilitation component wise budgeting in the State Budget together with expected inflows from the World Bank and GOI. This will facilitate the accounting system maintained by AG (A&E) to capture the Govt. expenditure as above. Advantage of capturing the information from the government system is that almost all expenditure in the sector under various schemes can be captured with existing arrangements. Considering this program is following a Sector Wide Approach, it is important that the expenditure details of the entire sector can be culled out with minimum delay and there are no variances between information as available to the Govt. and to the Bank.

Based on this the program would be budgeted under the three program components with the funds to be transferred to the GPWSC being budgeted as grant in aid. The program would be budgeted under the Major Head 4215 for all the components and the SPMC will have the flexibility to re-allocate budgets within the components within the overall ceiling of the approved budget.


TABLE 3.1

Budget Calendar

S.no Activity Responsible Agency

Completion date

1 Dissemination of Annual Targets to each DPMC as per the MTP

SPMC 30th October of Previous year

2 Preparation of Annual budget by DO DO 31st Oct. of Previous year

3 Preparation of Annual budget by DPMC for the expenditure to be incurred by it

DPMC 31st Oct of Previous year

4 Preparation of Annual budget by SPMC for the expenditure to be incurred by it

SPMC 31st Oct of Previous year

5 Consolidation of the budget at district level

DPMC 15th Nov of Previous year

6 Submission of the Annual budget to DWSC for approval

DPMC 20th Nov of Previous year

7 Approval of the district annual budget by DWSC

DWSC 30th Nov of Previous year

8 Submission of Approved annual district Budget to SPMC

DPMC 5th Dec. of Previous year

9 Consolidation of the Annual budget SPMC 10th Dec of Previous year

10 Submission of the Annual budget to SWSM for approval

SPMC 15th Dec of Previous year

11 Approval of the annual budget by SWSM

SWSM 25th Dec of Previous year

12 Submission of the approved budget (summarized by project components) to the Finance Dept GoP for inclusion in the State Budget

SPMC 31st Dec of previous year

13 Submission of the Annual Work Plan to the World Bank and GOI

SPMC 31st Jan of Previous year


Exhibit- FM -3.1

BUDGETING PROCESS UNDER THE PROGRAM

SPMCMTP for the project

Consolidated annual budget

DPMC

Annual/ Quarterly activity budget

Based on the MTP the SPMC shall intimate the annual budget to the DPMC

SPMC Consolidates DPMC wise budgets with its own.

DO

DPMC shall consolidate annual budget received from DO to arrive at the annual consolidated budget for the district .This would be sent to DWSC for approval

DWSC

For approval

After approval

SWSM

DWSS

After approval

DO prepares there budget and submit to DPMC

SPMC submits the Annual budget to the SWSM for approval


CHAPTER 4 – CHAPTER 4 – FLOW OF FUNDS

4.1 This chapter contains the process of flow of funds from the funding agencies to the program offices.

INSTITUTIONS PROVIDING FUNDS

4.2 The Program is proposed to be funded by the following agencies— State Government Central Government. World Bank Community Contribution

PRESENT FUND FLOW ARRANGEMENTS

4.3 The major programs which are being currently funded by the GOI are ARWSP, PMGY & Swajaldhara .The funds for all these programs except for Swajaldhara are being routed to DWSS through State Treasury (Finance Department) , GoP via Letter of Credit (LOC) system .These funds are further allocated to DO via LOC system , who are the implementation agencies for these programs .The Swajaldhara funds are transferred in the bank account of District Water Supply Mission directly by the GOI

4.4 All programs funded by GoP are routed through DWSS via LOC system

FUND FLOW ARRANGEMENTS UNDER SWAp

4.5 All the committed schemes under any program along with the O&M and Establishment expenditure of DWSS are outside SWAp. All new investments will be covered under SWAp.

4.6 The flow of funds of the sector programs (SWAp/Non SWAp) is depicted in Exhibit – FM

4.1. Pooling of funds between Bank and GOI is not envisaged and each will have differences in the timing, frequency and conditions for fund release to GOP.


Exhibit – FM 4.1

Punjab RWSS Project, Funds Flow Arrangements [SWAp]

FUNDING BY THE CENTRAL GOVERNMENT

4.7 All funds under the program (ARWSP) from Dept of Drinking Water Govt. of India will flow to the Finance department GoP. These funds will be released by GOI based as the existing conditions for fund release under the ARWSP scheme.

FUNDING BY WORLD BANK

4.8 Funds from the World bank will be made available to GOP (through the GOI) under the Back to Back arrangements between GOI and the States. The Bank will provide an initial advance will be transferred by GOI to the GOP. The advance will be enhanced subsequently

Government of India

Finance Department, GoP

Principle Secretary DWSS

As per budget for the entire program

State Program management cell

(SPMC)

GPWSCs(Separate bank a/c)

District Program management cell

(DPMC)Divisional office of DWSS

i) SVS (ii) ‘In Village’ component of MVS

i) Proj. Mgt. (ii) Community mobilization (Sos)

(i) MVS (common infra.) (ii) Community

Sanitation

Transfer via LOC on recommendation of the program director , SPMC

Transfer via LOC for all Common structure of MVS & community sanitation

By cheque for SV

S &

Intra village com

ponent of MV

S

Community contribution

Transfer via LOC

World Bank


proportionate to the increased level of expenditure. Subsequent releases will be on re-imbursement basis, based on Bank’s share of eligible project expenditure that is contributed by the GoP (i.e other than GOI and Community Contribution).. This would be determined on the basis of the Interim Financial Statements (Component wise) from the AG’s accounting system adjusted for movement in security deposit relating to the project (as it is accounted division wise and not project wise by the AG) and confirmed by annual audited financial statements.

4.9 A special account would be opened by GoI with the Reserve Bank of India, to receive funds under the project. Unutilised balance if any, at completion of the project would be repaid to the Bank.

FUNDING BY THE STATE GOVERNMENT TO THE PROGRAM

4.10 The State Government shall provide initial funds to the Principal Secretary , DWSS for the execution of the Program. as under.

Based on the approved budget and annual work plan (broken down quarterly), LOC for the first quarter’s fund requirement will be issued by the FD. This will be on a lump sum basis and not broken down by components thereby giving the flexibility to the Line Dept to allocate the LOC as required. Such a request will be processed by FD within 14 days (two weeks) of the request by the DWSS..

LOC for subsequent quarters would be based on the projected requirement adjusted for actual expenditure in the previous quarter.

Informal controls exercised by Treasury (such as requesting for approved pending bills) will not be exercised.

The Dept (SPMC/ DPMC and Divisions) will not open any Bank accounts to park funds especially at year end.

.

FUND FLOW WITHIN DEPARTMENT

4.11 Funds for the programs under SWAp will flow to Principal Secretary , DWSS from Finance Department, Punjab.

4.12 All funds under SWAp program meant for SV schemes, intra village works of MV schemes and for simple sanitation schemes (to be defined) will be transferred by Principle Secretary , DWSS to DPMC on the recommendation of the program director , SPMC . Funds will flow to DPMC through SPMC also through LoC system.

4.13 Payments to GPWSC will be made by DPMC through cheques as per tripartite MOU. The condition for the release for the to GPWSC is given vide table 4.1:-


Table 4.1 - Conditions for Release of Program Funds

Installment No Amount of Installment Condition for Release of Installment

Installment – I 60% of the approved DSR* Mobilization of 100% of the community capital contribution

Signing of MoU Signing of the contract with

the contractor(In case where procurement of works is done in 2 packages , on signing of the first contract)

Installment – II 1.Disbursement of Balance to make a total disbursement of 90% of the total contract allotted (In case no procurement is done by the GPWSC ) or

2. Balance so as to make a disbursement equal to 90% of the contract allotted and 90% of approved DSR * for the distribution works ( in case the procurement of pipes is being undertaken by the GPWSC)

Submission of utilization certificate utilizing 60% of the first installment and verified by third party (Chartered Accountant)

Installment –Final

Balance payment so as to reimburse the actual expenditure of GPWSC , after taking into the account interest income and other income viz. sale of tender’s etc

Submission of utilization certificate utilizing 60% of the first and second installment and verified by third party (Chartered Accountant)

Scheme Completion Report prepared and accepted dully certified by Concurrent Auditor’s .

In case of Multi Village Schemes, ‘approved DSR’ will be equal to the amount towards Intra-village assets.

All the above payment , are a % to the total cost net of community contribution

4.14 Besides these payments for works , payment for account assistant will also be made @ 1500 per month for a period of twelve months .50% of this payment would be made in 2 installments , 50% at the time of release of the first installment and remaining 50% at the time of release of the 2nd installment .

4.15 The GPWSC shall open a bank account (for capital works) where all the payments received for the program will be deposited.

4.16 All expenditure under SWAp for MVS shall be done directly by Divisional office of DWSS and the funds for the same will be routed through SPMC—DPMC—DO via LOC system.


Procedure for accounting, fund flow and reporting in respect of community contribution for MV Water Supply Schemes/Sewerage Schemes will be handled in the following manners.(a) For Multi-Village Water Supply Scheme (MVS) - Any MVS will have two

components; the common facility works and the 'intra-village' component, with the Division and GPWSC respectively. However the community contribution will be collected for both the components; therefore the division needs to have access to these funds to be able to make full payment for the common facility works. Since Divisions do not operate regular/commercial bank accounts, the element of community contribution for the common facility component of the MVS may be reduced in calculations for the release from the Project to the GPWSC for the in-village component of the work.

(b) For sewerage - Once the entire community contribution has been received, the same will need to be actually transferred to the Divisions since the above principles cannot be followed as GPWSCs are not responsible for implementation. GPWSC should pay its contribution to the Division in the form of a single consolidated cheque. For this the SPMC will authorize the Divisions to open a bank account to be able to deposit this cheque and then utilize the funds for the Project (Sewerage scheme) purposes. This account will not be used for any purpose other than the one specified above.

4.17 Further, the SPMC can reallocate the LOC among the DPMC/DO during the year, on the basis of the actual utilization and estimated fund requirements of the DPMC/DO.

4.18 Funds which are outside SWAp will flow directly to Divisional offices from DWSS as per the existing arrangements i.e. Funds for the committed schemes will flow through LOC system whereas funds for the staff and establishment costs will flow through the treasury system.

COMMUNITY CONTRIBUTION

4.19 The community contribution under the program would be received directly by the GPWSC before undertaking the implementation of the program activities. The beneficiary contribution shall be collected in cash in the following stages of the scheme cycle

50% at the planning stage after agree to do meeting

50% during the start of the implementing phase just before signing the agreement with the contractor.

As per modified cost sharing rules which have come in vogue w.e.f. 1st November, 2008: Upper ceiling of house hold share of capital cost has been reduced from Rs.1500/- to

Rs.800/- for general category and from Rs.750/- to Rs.400/- for house hold in the difficult area villages i.e. notified villages along International Border, Kandi area, Bet area and water logged area.

SC population will contribute only 50% of the prescribed amount for General category and difficult area villages.


Community contribution shall be at least 10% of capital cost irrespective of the technology choice or single or MV schemes. However the quantum of Gap in beneficiary contribution to make it equal to 10% or 5% of the scheme cost will be made up in a stepped approach as per following procedure: First by raising voluntary contribution from the community. Second through non-budgetary resources of the Gram Panchayat. Third by accessing untied funds available with the District Administration. And lastly, through State Government grant.


CHAPTER 5 – ACCOUNTING POLICIES/FRAMEWORKCHAPTER 5 – ACCOUNTING POLICIES/FRAMEWORK

CORE SYSTEM OF ACCOUNTING

5.1 This chapter describes the accounting and financial procedures that should be followed by various accounting centre for accounting of Program transactions. These procedures shall supplement the State Financial and Accounting rules.

5.2 The accounts at various offices of the Program shall be maintained manually as per the Government system of accounting. Since Program activities will be undertaken by different accounting entities including SPMC, DPMC, Divisions of DWSS and the GPWSCs, this will involve recording and consolidation of accounting information from a large number of accounting locations.

5.3 The principles of accounting in the proposed program will follow the State Government accounting systems. As such the overall accounting system in the project is based on the state financial Rules on Accounting.

5.4 At GP level manual accounting would be followed which is detailed in GPWSC section of this manual.

ACCOUNTING CENTRES

5.5 The accounting for the program will be done at: GPWSC Divisional Office of DWSS(DO) DPMC SPMC

ACCOUNTING POLICIES AT SPMC/DPMC/DO

5.6 The Accounting policies followed at SPMC/DPMC/DO for the purpose of recording program Expenditure would be as follows:-

Method of Accounting(a) Accounts shall be maintained on single entry book keeping system and

accounting shall be done on cash basis i.e., all receipts and payments in respect of the Program shall be accounted for on the basis of work executed and payments made or received.

(b) All payments should be charged of to the relevant expenditure head of account at the time of making payment.

(c) All payments will be made after statutory deductions like TDS, Sales Tax etc.


Fixed Assets and Depreciation(a) Assets acquired under the Program shall be valued at cost including all direct costs

i.e., purchase price, transportation expenses, installation charges and other expenditure incurred for bringing the fixed assets in working condition, incurred prior to its first use.

(b) Assets created/constructed as a part of Program activity should be valued at the direct cost incurred in creating/constructing the assets.

(c) Assets both acquired and constructed should be valued at its full cost inclusive of beneficiary contribution.

(d) No depreciation shall be charged on the fixed assets in the financial statements

Valuation of Stocks

Materials and supplies purchased for the Program should be charged as expenditure at the time of its payment.

Expenditure incurred by Technical Service Agencies and Support Organizations

MOU’s shall also be entered with the Technical Service Agencies and Support Organizations. Any payments made to these shall be treated as expenditure since these payments are to be made on completion of predetermined miles stone.

Payments to GPWSCsPayment to the GPWSC to be treated as grant in aid (in line with the mainstream accounting) and considered eligible for reimbursement . The project will however maintain systems and processes to track the utilization of the grant (by way of periodic financial and physical progress reports, audit reports and UCs

CONSOLIDATION PROCESS FOR REPORTING PURPOSE5.7 For the purpose of reporting to the bank following process is going to be adopted :-

The expenditure incurred under SWAp at DO of DWSS would be consolidated at DPMC level for each Program separately based of the reports received from DO on quarterly basis.

The consolidation may be done using computers.

The DPMC will report to SPMC for each Program separately.

The SPMC shall consolidate the expenditure as reported by DPMC with its own Expenditure for each Program separately.

The SPMC shall thereafter consolidate the Expenditure of all the programs & report to the Bank.

Expenditure incurred by GPWSCs during the various phases of the Program shall be adjusted and taken to expenditure on the basis of


the report submitted at the time of filing the request for release of payments with the DPMC as per the stipulations in the underlying agreement and will be recorded in the memorandum register for control purposes.

However the element of Community Contribution will be included only while reporting to the World Bank, based on reports received from GPWSC. This would be done at the time of making first tranch payment .An equivalent expenditure will also be shown at that time.

The accounting note of each of the Implementing agency is briefly described in Table 5.1

TABLE – 5.1-Accounting note on each accounting centre Institution Accounting and reporting responsibilities GPWSC An accounting centre of the program.

Receive funds as advance from DPMC for implementation of the Program. Maintains Manual book of accounts on single entry system and follows

cash system of accounting. Reports to DPMC at the time of release of next tranche .

Divisional office

An accounting centre of the Program. Incurs expenditure for both inside and outside SWAp Activities. Funds for the SWAp expenditure is received from DPMC. For Non SWAp

the funds are received from DWSS directly . Prepares its own books of accounts as per the Government accounting

rules. Also maintain additional books of accounts as detailed in this manual Reports to DPMC on Quarterly basis for expenditure incurred inside SWAp

as per the formats prescribed in this manual. Non SWAP Expenditure is reported separately as per the existing

requirement . DPMC An accounting centre of the Program.

Incurs expenditure only under SWAp. Prepares its own books of accounts as per the Government accounting

rules. Also maintain additional books of accounts as detailed in this manual. Consolidates the expenditure reports received from Divisional offices with

it’s own expenditure. The consolidation for each Program is done separately.

Book payment made to GPWSC as Expenditure at the time of disbursement. Reports to SPMC on Quarterly basis as per the formats prescribed in this

manual.

SPMC An accounting centre of the Program. Incurs expenditure only under SWAp. Consolidates the expenditure reports received from DPMC with it’s own

expenditure. The consolidation for each Program is done separately. Reports to World Bank on Quarterly and annual basis as per the formats

prescribed in this manual.

The roles of each can be briefly summarised in the Table-5.2


ABLE-5.2

Institution Accounting TasksAccounting centre

Consolidation Reporting

GPWSC

Divisional office

DPMC

SPMC


CHAPTER 6 – BOOK KEEPING AND ACCOUNTINGCHAPTER 6 – BOOK KEEPING AND ACCOUNTING

INTRODUCTION

6.1 DWSS being a Government department, the accounting system followed is of Single entry, Cash basis, i.e. receipts and payments are recognized in the cash book only on actual receipt or payment of cash.

6.2 Detailed accounting rules have been prescribed by Government of Punjab. The same are prescribed in the follwing:

Department Financial Rules – Financial Handbook No.3 The Punjab Financial Rules – Volume I – Financial Handbook No. 2 Punjab Financial Rules – Volume II – Appendices and Forms – Financial Handbook

No.2 Account Code Manual – Volume III

6.3 Books of accounts – The accounting for the project will be done using the existing accounting system of the GoP and the AG (A & E). As the project is being budgeted by components, the accounting will also capture expenditure by components using the AG accounting system. The expenditures reported by the DO/ DPMC and SPMC will be reconciled with the AG’s records on a quarterly basis. As per the above mentioned Financial & Accounting rules following important books of accounts and records will be maintained at the Divisional Office/SPMC/DPMC and be applicable to the project also.

Cash Book (Form PWA 1) – This has details of all receipts and payments of the Division. No Separate Cash book is prepared for Plan and Non Plan Expenditure.

Sub Cash Book (for employees pay only) – This cash book needs to have a NIL balance at the end of the year. In case of any undistributed cash balance, the same is reported with the pay-bill of March. The treasury deducted the balance available and pays the balance

Form 27 provides details of schemes such as Name of the scheme, Name of the village, estimated cost of scheme, monthly expenditure and expenditure incurred till date. The register is updated through the Stock register, Cash Book and Transfer entries.

Form 34/35 Provides details of deposit/security, miscellaneous advances. Minor Works Register including repairs and maintenance of village water works is

maintained scheme wise. Major Works Register is also maintained scheme wise the register is updated month

wise. Income Tax deducted Schedule. Sales Tax deducted Schedule. PWA 23 – Details of receipts and payments (head wise/office wise). Register/ Statement of security deposit deducted/ paid to the contractors


The following books of accounts are maintained at the office of Sub Division. Cash Book (Form PWA 1) – This has details of all receipts and payments of the

Division. Bank Pass book. Work abstract Register: - Has scheme wise and sub component wise (Distribution of

pipeline, OHSR, Tube well etc.) detail of expenses. MB register. Material at site register: - Has scheme wise details of material at site.

ADDITIONAL BOOKS OF ACCOUNTS

6.4 In addition to the books of accounts of accounts currently being maintained under the State Financial Rules, following additional books/ records shall be maintained at SPMC/DPMC/DO essentially to improve monitoring and control.

‘GP Advance Control Register’ will be maintained by DPMC for recording the amount disbursed to GPWSC and the balance lying unutilized with the GPWSC. The Format of the Control Register is given vide Appendix -1I (Format 2.1) enclosed. Separate folio will be opened for each GPWSC to whom the advances are made. The advances disbursed to a GPWSC will be adjusted in the Control register only on receipt of certified statement from the Chartered accountants (Concurrent financial auditor) before the release for the next tranche to the GPWSC.This register shall be maintained at the DPMC since all payments to GPWSC will be made by them.Community contribution collected at GPWSC will also be refelected in this register .

Sub Component/Activity Register will be maintained in addition to the cash book to facilitate tracking of expenditure by project sub- components and activities. The format of the same is given vide Appendix II (Format – 2.02). All payments for expenditure, under SWAp will be recorded in Activity Register. Activity register is like a ledger have a separately folio for each activity as per the Chart of accounts. All entries in cash book pertaining to the SWAp expenditure will be recorded in this register. Since the expenditure is to be reported Program wise the expenditure will be recorded under the Program for which it pertains to. This register shall be maintained at all accounting centre i.e SPMC/DPMC/DO.

Claim Register – Format of claim register is enclosed vide Appendix II (Format – 2.03). The purpose of the claim register is to keep track of all claims lodged with the bank. This register shall be maintained at SPMC , since all claims to the bank will be lodged by them .

CHART OF ACCOUNTS

6.6 For the purpose of maintaining the activity register and to facilitate the reporting requirements of the project a detailed Chart of Accounts has been developed and is enclosed vide Appendix III. The chart of accounts shows relationship between component , sub component and the activities.


6.7 All expenses recorded in Cash Book must detail the activity for which it has been incurred, so as to facilitate the recording in the Activity register.

ACCOUNTING FOR COMMUNITY CONTRIBUTION6.8 Community contribution received by GPWSC will not be recorded in books of Accounts of the

Project.6.9 No Community Contribution shall be received by the Project.6.10 All payments made by DPMC to GPWSC will be net of Community contribution. 6.11 However the element of Community Contribution will be included only for the purposes of

financial reporting (to the GOI and the Bank), based on reports received from GPWSC. This would be done at the time of making first tranch payment .An equivalent expenditure will also be shown at this time. This will not be included in the annual financial statements by way of a note and will also not be considered for reimbursement.

ACCOUNTING STAFF REQUIREMENT AT SPMC/DPMC

6.12 The staff required for the SPMC/DPMC will be drawn from DWSS as well as outsourced through State Management Development and Support Agency. The Financial and accounting staffing requirement is given vide Table 6.1

Table 6.1 – Accounting and financial Staffing requirement SPMC/DPMC/DO

Designation Number of Positions Remarks

SPMC Joint controller of finance and accounts

1 To be on deputation from Finance Department.

Financial Management Specialist

1 To be engaged by the project . Would be a chartered accountant with at least 3 year experience .

Accounts Officer 2 To be engaged by the project Section officer /superintendent

1 To be on deputation from Finance Department.

DPMC Divisional Accountant

1 On deputation from Finance Department

Assistant finance manager

1 Contractual

Finance Assistants 2 ContractualDIVISIONAL OFFICE

Divisional Accountant

1 The Divisional Accountant appointed by AG Punjab.


Superintendent/Sub divisional clerk

1 Departmental Staff

Senior assistant Works

1 Departmental Staff

Auditor 1 Departmental StaffINTERNAL CONTROL:

Internal control will be exercised in accordance with the Department and GoP Financial Rules. Special attention needs to be given to the following aspects:

6.13 Control Over Advances given to GPWSC

This segment deals with the working of internal control system in GPWSC required to be observed by the Project staff while monitoring the execution of the Project. As the Project is being executed through GPWSC, the Project will require complete details of expenditure incurred by GPWSC. Following are the key areas where the attention of the Project Staff is required in order to monitor the GPWSC effectively.a. Amount disbursed to GPWSC is being utilized for the execution of the Project

activities. The amount is not blocked in the Bank Accounts of the GPWSC.b. The activities once initiated have been completed well as per time schedule and

there is no time over run. c. Community Contribution is collected as per norms.d. Actual amount expended against the activity is not more than the amount

sanctioned, in DPR and as such there is no cost over run.

6.14 Physical verification of stock

The stocks in hand, if any, at SPMC/DPMC shall be physically verified at least at the close of every year. Verification shall be carried out by a responsible officer deputed for the purpose. A report shall be sent to Program Director-SPMC/DPMC for discrepancies observed

6.15 Physical verification of fixed assets

Physical verification of fixed assets shall be conducted by authorized staff at regular intervals (at least yearly). The Physical Verification shall be done on the basis of Fixed Assets register. Discrepancies observed shall be recorded in the Fixed Asset Register itself and a separate report along with comments of the concerned officer shall be submitted to the Program Director.

6.16 Authorization Of Payments & Expenditure:

For effective control over disbursements, it is essential to determine the number and status of persons authorized to approve expenditures and sign cheque, the limitation of


their authority, and the minimum number of signatories required for operation of bank accounts. This would be governed by the financial rules of the state.

All payment must be supported by documents such as bills, receipts and cash memos.

All Payments must always be made by cheque.

When disbursing the payments, the Accountant should obtain the signature of the payee or his authorized representative acknowledging receipt of the cheque or cash as the case may be. Accountant should also ensure before passing the payment of any supply of materials/assets that those items have been entered in store ledger/stock register and folio no. of such register should be mentioned in the goods receipt note. The measurement and quality of those items should approved on goods receipt note.

Prior to payment for services, a copy of the order authorizing the engagement of the person concerned for a particular job or assignment, details of the person like address, work background, etc., and a statement of the completion of the job or assignment should be obtained. When a cheque payment is made to any firm an official receipt should be obtained.

Counterfoils of cheques issued should bear the payee’s name, amount, the date of issue, voucher no. and initials of the signatories.

Cheque book/money should always be kept under lock and key under the safe custody of the Accountant.

Cancelled cheques should be retained with the cheque books. The corners of the cheque should be torn off as a measure of safeguarding against any misuse in the future, the word VOID should be written over the cancelled cheques.

Payment must be posted to cash book daily.

6.17 Ensure that no Bank accounts are opened into which projects funds are deposited either at SPMC/ DPMC and the Divisions of DWSS

6.18 The accounts of the SPMC/ DPMC and the Divisions of DWSS are rendered on a timely basis (i.e by the 10th of every month) to the AG (A & E) and reconciled with the AG on a quarterly basis.

6.19 Financial & Administrative delegations for scheme approval, approval of tender, approval of running bills and cheques are adhered to.


CHAPTER 7 – FINANCIAL REPORTING CHAPTER 7 – FINANCIAL REPORTING

7.1 This chapter discusses the proposed financial reporting system (MIS system) under the following broad heads:

(1) Objectives of the financial MIS(2) Type of reports – Their periodicity & objective.(3) Preparation of MIS reports. (4) Reporting Chart.

OBJECTIVES

7.2 The proposed Financial MIS has been designed with the following main objectives:

(1) To provide project implementing agencies with relevant information that would enable them to plan, monitor and control the various project activities.

(2) To identify and report critical areas of information which are relevant at different levels of project implementing agencies and would facilitate in decision making at those levels.

(3) To provide a basis for evaluation of various project activities by regular comparison of actual with the budgets

(4) To provide a basis for taking remedial actions to correct any adverse trend(5) To facilitate ‘management by exception’ by presenting critical and select

information to the top management of the program, World Bank and State Governments.

(6) To assist consolidation at various levels.

7.3 TYPES OF REPORTS

a. Internal Reports:

Reports that are generated by the Project, which will assist in preparation of the External Reports, are Internal Reports.


Following are the Internal Reports that shall be generated by the Project. The formats of these reports are enclosed vide Appendix IV

S.NO TITLE OF REPORT

REPORT NO.

PERIODICITY

BY WHEN PREPARED BY

SUBMITTED TO

1 Statement of Receipt & Payment Account

GR-1 -do- Before release of 2, 3 & 4th tranche

GPWSC DPMC

2 Source and application of funds

DR-1 Quarterly 7th of the following month

DO DPMC

3 Scheme wise statement of Expenditure

DR-2 Quarterly 7th of the following month

DO DPMC

4 Source & application of funds

DP-1 Quarterly 15th of following month

DPMC SPMC

5 Activity wise statement of Expenditure

DP-2 Quarterly 15th of following month

DPMC SPMC

Note ;- The formats of the reports generated by the GPWSC are detailed in the GPWSC section of the manual

b. External Reports:

Reports that are generated for the purpose of submission to the GOI and World Bank are the External Reports. They are further classified into quarterly and annual financial reports .The formats of Financial Managements Reports (FMRs) are detailed in Appendix IV

S.NO TITLE OF REPORT REPORT NO. PERIODICITY BY WHENQuarterly reports 1. Report On Expenditure Incurred

For The PeriodSOE-1 Quarterly 30th Of Following

Month

2 Payments Against Prior Review Contracts

SOE-2 Quarterly 30th Of Following Month

3Summary Quarterly Table 1

Quarterly 30th Of Following Month

4 Physical And Financial Progress

Quarterly/Annual 30th Of Following Month

5 Program Physical Progress And Process Indicators Report

Table 2 Quarterly/Annual 30th Of Following Month

6 Program Financial Progress Report Table 3


7Program Cash-Flow Status Table 4


Results And Outcomes


8Summary Annual Table 5

Annual 30th August of following Year

9 Program Outcomes And Results Achievement Report

Table 6 Annual 30th August of following Year

Annual Reports 1 Consolidated –Audited Annual

financial Statement A-1 Annual 30th August of

following Year2 Statement of Reconciliation

with SOE .A-2 Annual 30th August of

following Year

7.4 PREPARATION OF MIS REPORTS

The proposed Financial MIS would be generated manually. These would be based on the reports generated at each level .MIS reports shall be prepared by the respective implementing agencies in respect of activities directly carried out by them. In addition, SPMC shall consolidate the MIS reports generated by each DPMC and DPMC shall consolidate the MIS reports generated by each DO. In order to ensure accuracy of the financial information (MIS) the aggregate expenditure by the project components must be reconciled with the expenditure accounted and reported by the AG (A & E)

7.5 Additional Financial Reporting of GOI: In addition to the financial and physical progress report given in this manual there will be some additional reporting requirements to the GOI which will need to be complied with by the project.

The reporting procedure can be batter understood with the help of the Chart given vide Exhibit-7.1

7.6 Transparency and Disclosures

The intent of the disclosure policy is in total agreement with the RTI Act both for on demand disclosure and suo moto disclosure. This will enhance disclosure of information to the citizens. Following Financial Management Information can be seen at website www.wbprwss.org at Project level:-

Sr.No. Documents to be disclosed Frequencyi) Project Financing Plan Before start of the projectii) Budgetary allocation for the project Yearlyiii) Progress report (Financial and physical) Quarterly/Annuallyiv) Financial Management Guidelines Before the start of the project



EXHIBIT – 7.1

REPORTING CHART

Note: - Expenditure reported by the GPWSC will not be consolidated at DPMC since the payments made to GPWSC are reflected as expenditure at the time of making the payment and are included in the expenditure report of DPMC.

DPMC

Each DPMC consolidates the expenditure with its own expenditure for each Program separately.

Reports to SPMC for each Program as well as on consolidated basis at the end of each quarter.

Submits the following reports --DP-1, DP-2 to SPMC by 15th of following month

Consolidates the expenditure as reported by DPMC & reports to WB on quarterly /Annual basis for each Program under SWAp as well as consolidated expenditure

WB/GOI/GOP

SPMC

DivisionalOffice

Quarterly reporting in form DR-1 & DR-2 for each Program separately by 7th of the following months


CHAPTER 8 – AUDITING CHAPTER 8 – AUDITING

8.1 Audit of accounts, statements and reports provides means to ensure accuracy and check in financial system of an organization. To ensure proper functioning of the financial system on prescribed norms in the Manual, the Project requires an exhaustive auditing arrangement. In this chapter, essential elements involved in the mechanism of conducting financial audit have been highlighted. Two types of audits would be carried out as follows:

a) Internal Audit by Financial Review Consultants (FRC) on quarterly basis.

b) Statutory Audit by CAG on annual basis.

c) Concurrent audit of GPWSC (detailed in the GP handbook for Procurement &

Financial Management)

The TOR FRC and external audit by the CAG has been annexed by Appendix-V (a) and

V(b).

STATUTORY AUDIT (ANNUAL)

8.2 The Comptroller and Auditor General of India (CAG) through its offices in Punjab will be the statutory auditor for the project. The CAG’s office will conduct an annual audit of the operations of the Project covering the entire project including all sources of funding. The audit report will be submitted to the Bank within six months of the close of each financial year. ToR for audit has been sent to the CAG for their approval. An audit opinion on the annual financial statements and the reimbursement claims will be provided by CAG.

FINANCIAL REVIEW CONSULTANTS

8.3 Objective

The objective of the ‘Financial and Systems Review’ audit would be to provide comfort to the Project management and to various stakeholders (Government of India, State governments and World Bank) on the accuracy of the Project financial statements, compliance with loan covenants and satisfactory working of the financial management systems.

8.4 System of Auditi) An audit for review of the adequacy and adherence to the internal control

measures will be conducted on quarterly basis by an independent firm of Chartered Accountants, appointed for the purpose by the Project with well defined terms of reference (TOR).


8.5 Coverage

The audit will cover all offices of the Program i.e SPMC, DPMC & DO.

The audit includes the verification of expenditure incurred directly by these offices,

for the purpose of the Program.

The audit will include checking of prescribed financial and management Reports

generated at various levels periodically.

The audit would also include cost based consultancy / training / research or other

contracts / agreements where payment is made to the contractor / consultant / institute

on the basis of actual expenditure incurred and no documentation in support of

the expenses is provided to the Project agencies.

The audit would be carried out at each of the implementation agencies of the Project

except GPWSC .The audit of GPWSC will be conducted by concurrent auditors and

has been separately elaborated in the section on GPWSC in this Financial Manual .The

Financial Review consultants will take into account the reports received from the

Concurrent auditors while reporting to the bank.


GPWSC HANDBOOK ON PROCUREMENT

& FINANCIAL MANAGEMENT


CHAPTER 1 – INTRODUCTION CHAPTER 1 – INTRODUCTION

INTRODUCTION 1.1 The Punjab Rural Water Supply and Sanitation Program (PRWSSP) being implemented by

the GoP with support from the World bank and GOI (through schemes such as ARWSP etc).

1.2 Government of Punjab (GoP) has prioritized Rural Water Supply and Sanitation (RWSS) as a key area of its development agenda. Over the past few years, significant capital allocations to the RWSS sector have been made which indicates the high priority accorded to the sector. Despite these efforts, several issues are on hand. In the above context, GOP is keen to reform the sector to improve sustainability and standard of rural water service delivery, in Punjab.

1.3 GoP is committed to the principles of decentralization and strengthening the Panchayat Raj Institutions (PRIs). The GP appears to be better equipped legally and organizationally institution to own and manage water supply and sanitation schemes on behalf of the user communities. Thus, the GPs will be the focal points for water supply and sanitation program implementation, and will be responsible for facilitation, planning, implementation and O&M of the schemes Besides Single village water supply schemes the Program will also fund the Multi Village schemes. The Department of Water Supply and Sanitation (DWSS),GoP will be the nodal agency

1.4 Adoption of a demand responsive, adaptable approach along with community participation based on empowerment of villagers to ensure their full participation in the project through a decision making role in the choice of the drinking water scheme, planning, design, implementation, control of finances and management arrangements.

1.5 The main developmental objectives of this program is to improve the quality of rural water supply and environmental sanitation service delivery, sanitation and hygiene, to achieve sustainability of investments and generate health and income benefits in the State of Punjab by involving Panchayati Raj Institutions and local communities.

1.61.6 The institutional entity at the village level for Program implementation will be Gram Panchayat Water Sanitation Committee (GPWSC) selected by the Gram Sabha working in partnership with the Gram Panchayat.

1.71.7 The GPWSC will be constituted as a recognised body under section 25 of the Punjab Panchayati Raj Act, 1994.The Sarpanch will be the ex-officio chairperson of the

GPWSC the Gram Sabha will directly select the remaining members of the GPWSC. The GPWSC members will select a Secretary and Treasurer. The Junior Engineer of the DWSS in-charge of the village will be the technical member cum convenor of the GPWSC

1.7 GPs / GPWSCs will be responsible for planning, technology selection (type of scheme), procurement (bid invitation, award), construction and O&M management of all new SV water schemes and for all intra-village water supply works of MV water supply schemes


with support from DWSS / NGOs/ Private sector in social, technical and management aspects.

KEY FINANCIAL RESPONSIBILITIES OF GPWSC

1.8 The Key financial responsibilities of the GPWSC would be :- Planning for the water supply and sanitation related investments in the village Selecting cost effective and feasible technology and schemes Approval of tenders up to Rs. 30 Lakhs in respect of Single Village schemes. Mobilising community contribution Construction and operation and maintenance of Single Village schemes, small

Multi Village schemes and intra-village components of Multi Village schemes including inviting bids, awarding contracts, contract management etc.

Management of Program funds for Program execution Maintaining books of accounts Deciding on the O&M arrangements either through engaging own staff or

contracting out to private contractors. Levying user charges and full financing of O&M expenditure Maintaining transparency and cost effectiveness in all transactions Ensuring inclusion of all sections of the village community in Program activities

and equitable distribution of benefits.

PLANNING AND BUDGETING

1.9 Program Cycle : The program would follow a scheme cycle consisting of four distinct phases namely pre-planning (institutionalization, sensitization and identification phase); planning phase and implementation (including commissioning) phase in addition to a post project completion phase there after. The program cycle will comprise the following phases: -

1. Pre Planning Phase2. Planning Phase3. Implementation Phase 4. Operation and Maintenance Phase

Pre Planning Phase

In the preplanning phase, applications would be invited from the GPs. These applications would be prioritized, approved and selected .The selected GPs would be subsequently intimated. The major out puts of the Pre Planning Phase shall be the prioritization of the GPs and the selection of the Support Organizations and Technical service provider.

Planning Phase:

In the planning phase the selection of the technology option shall be done by the GPWSC. After the selection of the technology option DSR would be prepared with the help of the technical service provider .and discussed with the GPWSC .The DSR would


be approved by the GPWSC passing a resolution to this effect in the meeting. Administration and the technical sanction would then be obtained before initiating the works .The major outcomes of the Planning Phase shall be the formation of the GPWSC, the preparation of Detailed Survey Report (DSR) and Community Action Plans (CAP) for each of the GPWSCs.

Implementation Phase

The implementation of the planned water and sanitation activities shall be carried out in this phase. The Implementation Phase Completion Reports (IPCRs) shall be prepared. The implementation phase would involve:-

a. Procurement of the works

b. Execution of the works

c. Commissioning of the schemes

Operation and maintenance phase

The O & M phase would involve operation and the maintenance of the schemes commissioned .Users charges would be fixed for the housed hold, collected and used for the maintenance of the schemes.

MEMORANDUM OF UNDERSTANDING

1.10 In order to achieve orchestrated functioning of the GP, GPWSC and the DWSS (as represented by DPMC) in close coordination and partnership, the roles and responsibilities and obligations of each of the party need to be formalised and agreed upon. A draft copy of the MoU is enclosed vide Appendix A enclosed with the manual

1.11 DELEGATED POWERS FOR APPROVAL AND SANCTION OF SCHEMES

The technical sanction of the DSR is given vide table 1.1 as under:- Table 1.1

Description Approving authority

Technical sanction of Detailed Scheme Report and DNIT( bid ) approval

Executive Engineer up to Rs. 10 Lakhs Superintending Engineer above Rs. 10 Lakhs and up

to Rs. 30 Lakhs Chief Engineers above Rs. 30 Lakhs up to Rs. 50

Lakhs Program Director above Rs. 50 Lakhs full powers


1.12 The acceptance of the tenders will be done on a committee basis as elaborated in table 1.2

Table 1.2 – Powers of Tender AcceptanceSl. No.

Description Approving authority

1. Single Village schemes costing up to Rs. 30 Lakhs and without premium

The Committee consisting of GPWSC president – Chairman Executive Engineer DPMC – Member Executive Engineer operations wing – Convenor

2. Single Village schemes costing above Rs. 30 Lakhs without premium

The committee consisting of: Superintending Engineer – Chairman Executive Engineer, DPMC – Member Executive Engineer operations wing – Convenor GPWSC representatives – Member

Wherever tender need to be accepted with a premium ,the tender will be send to the next higher level committee with justification.

1.13 Invitation of bids: Bids for all single village scheme and intra village component of multi

village scheme will be invited by GPWSC in the office of GPWSC or at any other place as

decided by the GPWSC. In case of multi village schemes Executive Engineer operations wing

of DWSS will invite bids for common facility.

1.14 Opening of Bids: For all SVS and MVS the bids will be opened by ‘Bid opening committee’

comprising of three persons.

1. Executive Engineer (Operations Wing) of DWSS2. Divisional Accounts Officers of DWSS3. GPWSC Member/s

For all SVS the bids will be opened at the place defined by GPWSC .In case of the MVS

the bids shall be opened at the Divisional office of DWSS.

1.15 Evaluation of Bids: Bids will be evaluated by Executive Engineer operation wings and

evaluation sheet shall be signed by Chairmen GPWSC/s..

Note:- The procurement procedures for community procurementare documented in the approved Procurement Manual and the same will beincorporated in the GP handbook on Procurement and FM after negotiation for thepurposes of translation into local language.


CHAPTER 2 -CHAPTER 2 - FUND FLOW

COMMUNITY CONTRIBUTION

2.1 The community contribution under the program would be received directly by the GPWSC before undertaking the implementation of the program activities. The beneficiary contribution shall be collected in cash in the following stages of the scheme cycle

50% at the planning stage after agree to do meeting

50% during the start of the implementing phase just before signing the agreement with the contractor.

As per modified cost sharing rules which have come in vogue w.e.f. 1st November, 2008:

Upper ceiling of house hold share of capital cost has been reduced from Rs.1500/- to Rs.800/- for general category and from Rs.750/- to Rs.400/- for house hold in the difficult area villages i.e. notified villages along International Border, Kandi area, Bet area and water logged area.

SC population will contribute only 50% of the prescribed amount for General category and difficult area villages.

Community contribution shall be at least 10% of capital cost irrespective of the technology choice or single or MV schemes. However the quantum of Gap in beneficiary contribution to make it equal to 10% or 5% of the scheme cost will be made up in a stepped approach as per following procedure: First by raising voluntary contribution from the community. Second through non-budgetary resources of the Gram Panchayat. Third by accessing untied funds available with the District Administration. And lastly, through State Government grant.

2.2 Since the execution of SV schemes & intra village works of MV is to undertaken by the GPWSC, the funds to GPWSC will be made available by DPMC through cheques as per tripartite MOU. The condition for the release of funds for execution of the works to GPWSC is detail in the Table-3.1 below:-

Table 2.1 - Conditions for Release of Program Funds

Installment No

Amount of Installment Condition for Release of Installment

Installment – I 60% of the approved DSR* Mobilization of 100% of the community capital contribution

Signing of MoU Signing of the contract with the contractor(In

case where procurement of works is done in 2 packages , on signing of the first contract)

Installment – II 1. Disbursement of Balance to make a total disbursement of 90% of the

Submission of utilization certificate utilizing 60% of the first installment and verified by third party (Chartered Accountant)


total contract allotted (In case no procurement is done by the GPWSC ) or

2. Balance so as to make a disbursement equal to 90% of the contract allotted and 90% of approved DSR * for the distribution works ( in case the procurement of pipes is being undertaken by the GPWSC)

Installment –Final

Balance payment so as to reimburse the actual expenditure of GPWSC , after taking into the account interest income and other income viz. sale of tender’s etc

Submission of utilization certificate utilizing 60% of the first and second installment and verified by third party (Chartered Accountant)

Scheme Completion Report prepared and accepted dully certified by Concurrent Auditor’s .

In case of Multi Village Schemes, ‘approved DSR’ will be equal to the amount towards Intra-village assets.

All the above payment , are a % to the total cost net of community contribution

Besides these payments for works , payment for account assistant will also be made @ 1500 per month for a period of twelve months .This payment would be made in 2 installments , 50% at the time of release of the first installment and remaining 50% at the time of release of the 2nd installment .

BANK ACCOUNT, ITS OPERATION AND RECONCILLATION

2.3 Opening and Operation of Bank Account at GPWSC:-

The GPWSC shall open two separate Bank Accounts titled 1. ‘Capital Cost – Name of the GPWSC’2. ‘O & M – Name of the GPWSC’

2.4 Capital Bank Account All funds received from DPMC during the Implementation Phase will be deposited in this bank account. Also all beneficiary contribution received in cash by the GPWSC for implementation of the capital works shall also be deposited in this bank Account.

2.5 O & M Bank Account Full responsibility for the operation and maintenance of the schemes shall be devolved on the GPWSCs. All funds received for the purposes of O&M during the Implementation Phase or thereafter shall be deposited in this Bank Account.


2.6 Operation of the Bank Account :- The operation of these bank accounts shall be as per under mentioned rules / Guidelines.

The Bank accounts shall preferably be a saving account in any Nationalized Bank or its associate. The account shall be opened after passing resolution to this affect in the meeting of GPWSC.

The Account shall be jointly operated by the Chairman, Secretary and Technical Member of GPWSC.

All payments shall be made through ‘Crossed A/c payee’ cheques only .Uncrossed cheque shall be made only in case where the labour component is engaged by the GPWSC.Such payments shall be approved in the monthly meeting of GPWSC. All payments to the contractor shall be made through crossed cheque. Payments to Account Assistant shall also be made by a crossed checque Even payments for the purchases made by the GPWSC shall be made through an crossed cheque .Withdrawal of cheque via self cheque is not permitted under any circumstances

Counterfoils of Cheques issued should bear the payee’s name, amount, date of issue, voucher number and initials of the signatories.

The cheque books shall always be kept under lock & key in the safe custody of the Treasurer.

Cancelled cheques should be retained with the Cheque books. The corners of the cheque should be torn off as a measure of safeguarding against future misuse. The word VOID should be written over the cancelled cheques.

All cash collected shall be deposited in the bank accounts within 2 working days .

No funds will be transferred from one bank to another .

2.7 Monthly Bank Reconciliation:- The monthly Bank Reconciliation Statement shall be prepared in form GP-5 (format enclosed in, next chapter). The general rules / guidelines for the preparation of the Reconciliation are enumerated below:

Within ten days following the end of every month the Bank statement of the accounts should be obtained from the Bank.

The balance in hand as at the end of the month as per the Bank statement should be reconciled with the balance as per the Bank column of the Cash book.

All debits charged by the Bank in the form of Bank charges / Commissions etc. and all credits by way of Bank interest earned as appearing in the Bank statement should be scrutinized carefully before accepting them as correct and before recording these Debits / Credits in the Cash Book.


The Cheques which are older than six months from the date of issue should be written back in the cash book noting the reference number and date of Payment Voucher after obtaining the due approval of the Chairman and the Treasurer.

CHAPTER 3 –CHAPTER 3 – ACCOUNTING POLICIES AND FRAMEWORK

3.1 ACCOUNTING POLICIES

Following are the Significant Financial and Accounting Policies proposed under the Program for accounting at the GPWSC.

1 Accounting Convention:-

The Accounts shall be prepared on the historical cost convention in accordance with generally accepted accounting principles.

2 Method of Accounting:-

a. Accounts shall be maintained on single entry book keeping system and accounting shall be done on cash basis i.e., all receipts and payments in respect of the Program shall be accounted for on the basis of work executed and payments made or received.

b. All payments should be charged of to the relevant expenditure head of account at the time of making payment.

c. All payments will be made after statutory deductions like TDS, Sales Tax etc. GPWSC will be required to make payments to contractors for the works and therefore are responsible for deduction and deposit of Tax (Tax Deducted at Source or TDS) on the payment made to contractors. The following aspects of this transaction need careful consideration:

(i) at the time of passing the bill it will be the responsibility of the Division to advise the "GPWSC on the amount of the bill be approved and the various retentions/deductions. Divisions have the required skills and will provide the GPWSCs with the required accounting entry;

(ii) GPWSCs will apply for the necessary registration with the Income Tax Authorities (application for provision of TAN Number). Further, they will be immediately responsible for deduction and deposit of the TDS on any contractor payments;

(iii) if similar formalities are required, under any other local laws, the Division will ensure that GPWSCs are provided adequate support to enable compliance with all the required laws.

3 Stocks:-

Materials and supplies purchased by GPWSC during the various phases of the Program should be charged to relevant Expense/Activity Account to which it pertains on payment and will be considered as utilized but memorandum records and physical controls will


be maintained. Any stocks lying unutilized at the end of the program may be utilized for O&M purposes on approval of executive engineer .

4 Community Contribution

(a) Community contribution in cash should be accounted for as and when the cash is received from the beneficiaries.

(b) No Community Contribution will be received in kind.

5 Interest received from bank on program funds, community contribution and other incomes

Receipts on account of other incomes, interest earned on bank funds shall be utilized for capital works and the payment to be received from DWSS will accordingly adjusted .

6 Advance payment

No advances will be given including to the functionaries of GP / GPWSC for the purpose of travel, conveyance related to the Program etc.Also no personal advance/loan (such as salary advance, house loan etc.) should be given out of the program funds to any of the GP / GPWSC functionaries.

7 Basis of Payment to Contractor

All payments to the contractor will be made on the basis of running bills. No advance payments will be made. These shall be charged of as expenses at the time of making the payment as these payments are made on certain predefined milestones.

8 Fixed Assets and Depreciation

i. All assets created shall be the property of the Gram Panchayat.ii. Assets created/constructed as part of the Project activity should be valued at the

direct cost incurred in creating/constructing the asset.iii. Assets acquired under the Project would be valued at cost including all direct

costs (i.e. purchase price, transportation expenses, installation charges and other expenses incurred for bringing the fixed asset in working condition), incurred prior to its first use.

iv. Assets, both acquired and constructed, should be valued at its full cost inclusive of the Community’s contribution.

v. No depreciation should be charged on fixed assets in the Project financial statements.

SAVING AND EXCESS


3.2 The total payment to be reimbursed to GPWSC by DPMC shall be on the basis of the actual amount spent by it. Hence there will not be any saving and excess .The final adjustment will be made at the time of the release of the last installment

3.3 STAFFING

GPWSC Accounts Assistants will be appointed by the GPWSC to take care of all the accounting requirements at the GPWSC. To optimize resources, one person can serve 2 – 3 GPWSCs in the area. Primarily they shall be responsible for maintenance of GPWSC books of account and get them audited .The account assistant would at least be 10+2 . Job Description of the GPWSC Accounts Assistant is given vide Appendix B

3.4 Capacity Building – Adequate capacity building initiatives will be put in place, to ensure familiarization of participants on the project FM requirements. These initiatives will focus on Accounts Assistants, Secretaries, Treasure and Chairperson but will also cover GPWSC members to some extent. Capacity building will include training on book-keeping, procurement procedures, reporting, banking, reconciliations, records retention, audit certification and social audit.

3.5 Financial Roles and Responsibilities of GPWSC and its office bearers The roles and responsibilities of GPWSC during each of the stage of the program cycle is as under

Planning Phase Responsibilities

Prepare and approve the detailed plans for water supply and sanitation schemes for the village.

Prepare and implement the operation and maintenance plan for the water supply and sanitation schemes including the tariffs to be collected from users.

Mobilize the agreed contribution towards capital cost-sharing of the planned water and sanitation services.

Implementation (Construction) Phase Responsibilities

Directly receive funds from DWSS and expend the same for approved water supply and sanitation schemes for the village.

Invite bids for awarding tenders and finalise contract for works with approval from DWSS.

Enter into contracts with contractors and other technical service providers and to release their payments with the approval from DWSS

Meet regularly and take stock of the progress in work, community involvement, support required and quality assurance.


Maintain books of accounts and other records relating to implementation and other activities of the GPWSC.

Make available all books of accounts and other records, provide information and co-operate for audit by DWSS.

Submit monthly progress reports on physical and financial progress on implementation aspects to the DWSS and GP.

Maintain transparency and cost-effectiveness in all transactions.

Facilitate and co-operate for visit and inspection of works, stores, books records etc. By DWSS.

Operation and Maintenance Responsibilities

Develop a detailed Operation and Maintenance plan including fixing tariffs, roles and responsibilities of DWSS, GP and GPWSC in operation and maintenance activities. This may include contracting out the O&M services

Collect water charges from users and meet the operation and maintenance expenses of water supply and sanitation facilities in the village.

Develop checks and measures for defaulters in payment of water tariff.

Maintain regularly accounts and records of operation and maintenance expenditure. Prepare the Income and Expenditure statement of Operation and Maintenance to be

publicized in the community through hand bills/display in public places to ensure transparency and accountability


CHAPTER 4 – ACCOUNTING AT GPWSC DURING IMPLEMENTATION PHASECHAPTER 4 – ACCOUNTING AT GPWSC DURING IMPLEMENTATION PHASE

INTRODUCTION

4.1 This chapter deals with the records to be maintained and reports to be prepared by each GPWSC. Keeping in view the design of Fund flows the extent of activities proposed to be implemented and the level of experience and expertise of the GPWSCs, minimal books have been prescribed at this level.

4.2 Expenditure during the Implementation Phase shall primarily be incurred by the GPWSCs while the role of the DPMC shall be restricted to that of a monitoring and consolidation of Project Expenditure incurred by all the GPWSCs within its jurisdiction and for financial reporting to the Project authorities. The GPWSCs has therefore been considered as an Accounting Centre under the Project thereby entailing maintenance of books of accounts essential for effective Project accounting and Financial Reporting.

4.3 Accounting at GPWSC has been discussed under the following broad heads;

1) Book keeping and formats of Books of accounts2) Financial Payment Mechanisms 3) Reporting and Disclosure4) Auditing

BOOK KEEPING AND FORMATS OF BOOKS OF ACCOUNTS

4.4 Books of accountsGPWSC will maintain the under mentioned books of accounts for the Program to record all transactions of Receipts and Payments in the formats GP-1 to GP-8. These formats are enclosed vide Appendix C.a. Payment Voucher GP - 1b. Receipt Voucher GP - 2c. Correction Voucher GP - 3d. GPWSC Cash Book GP - 4e. Monthly Bank Reconciliation GP - 5f. Stock & Asset Register GP - 6g. Cash Contribution Receipt GP – 7h. Community Contribution register GP – 8i. Contractor Register GP – 9


4.5 Accounting books to be provided by SPMC

The books of accounts to be maintained by the GPWSC shall be provided by SPMC. These books of accounts and forms shall be got printed by the Department and distributed to the GPWSC at the time of formation of GPWSC.

4.6 Preparation of Books of Accounts

All books of accounts shall be prepared by the Account Assistant to be provided by the Program authorities at each GPWSC. The books shall remain in the custody of the treasurer of GPWSC. The treasures shall be overall responsible for maintaining Books of accounts. He shall be assisted by Account Assistant.

4.7 Book Keeping

4.7.1 Payment / Receipt/Correction Voucher

At the time of making payment, a payment voucher will be prepared in Form GP-1 while a receipt voucher in Form GP-2 shall be prepared for all receipts – Funds, Bank interest earned, other incomes etc.

When disbursing the Payments the Account Assistant should obtain the signature of the Payee or his authorized representative acknowledging receipt of the Cheque or Cash as the case may be. This signature must be affixed in the appropriate space in the voucher.

Bills / Supporting documents for expenditure incurred shall be attached with the Payment voucher.

Payment voucher shall provide details regarding:- Name of recipient.- The purpose of the Payment.- The mode of payment i.e. cash or cheque.- Details of the documentary evidences

The Formats of the Correction voucher is enclosed vide Form G-3. The correction voucher shall be used in case where there are some correction are to be made in the books of accounts for the mistakes made earlier in writing the books .

4.7.2 GPWSC Cash Book

The GPWSC Cash Book in Form GP-4 shall be columnar Cash Book having column for Cash, Bank and Adjustments if any

Community Contributions received during the various phases shall also be recorded in this Book.


All payments for purchase of material shall be booked in respective Activities for which it is purchased. This holds true even in case the purchase is for multiple activities.

The Cash Book should be printed on both pages and bound in a book for durability and for serving the purpose of a permanent record. This book is intended to record all Receipts/Payments made through cash (in the columns designated for recording of Cash transaction) or through the Capital Bank account (in the columns designated for recording of Bank transaction) or through the correction vouchers (in the columns designated for recording of journal entry).

Recording in the Cash Book shall only be made on the basis of the vouchers – Payment, Receipt or Journal.

Community Contributions, received in cash during the Planning/Implementing Phase shall also be recorded in this Book.

The general principles to be observed in recording of transactions in the Cash Book are given here under:- The Books must be kept in the prescribed form and the same must be serially

machine numbered.

- The entries in the books should be made neatly and legible on a day-to-day basis. No erasures and overwriting should appear in the books.

- Wherever applicable, corrections of entries in the books should be got initialed by the Account Assistant.

- All columns in the books should be filled up properly without leaving any blank column.

- Balancing in the Cash Book should be done daily and the balance extracted should be tallied with the Physical Cash in Hand.

- The officer of the DWSS duly authorized can make surprise checks of the Cash Balance and review the Project Cash Book.

The Cash Book should be closed at the end of each accounting month and should contain the following certificate to be recorded at an appropriate place in the book duly signed by the Account Assistant, Treasurer and the Chairman of GPWSC


4.7.3 Stock Ledger The Format of the stock Ledger is enclosed vide Annexure Form GP – 5. All stocks purchased are entered in stock register in respective folio of the material

purchased. All issues of shall be recorded under ‘Issue’ column in Stock Register. The Stock Register maintains only the quantities of the stock purchased and

issued. It is recommended that Physical verification of the stores should take place at least

once during the life cycle of the project . The verification should be undertaken by a team comprising of Chairman of GPWSC and 2 members of GPWSC duly authorized.

4.7.4 Community Cash Contribution Receipt

When a member puts in Cash as his community contribution, cash receipt will be prepared in duplicate. The Original Copy will be of the member while the duplicate copy shall be kept as a record.

The community Cash contribution Receipt book must be serially pre-numbered and the original and duplicate receipts must differ in colour.

The format for the community Cash contribution Receipt is enclosed vide Form GP – 6.

All community Cash contribution Receipt will be issued & entered in the GPWSC Cashbook and also in the Community Contribution Register.

4.7.5 Community Contribution Register

Community contribution register shall be prepared in the format enclosed vide Form G P-7.

The register will detail house hold wise contribution required and contribution paid .

Certified thata. The Cash in hand on ………. (date) is Rs …………….. (in

figures)Rupees …………………………………….. (in words)

b. The Balance with Bank on …………. (date) is Rs …………….. (in figures)Rupees …………………………………….. (in words)

c. All receipts and payments during the month have been duly entered in the GPWSC Cash Book.

Signature ofAccount Assistant Chairman Treasurer


All entries regarding the community contribution shall be entered in this register.

Contractor register Each contractor will have a separate folio in this register . All bill received by the contractor will first be entered here before they are send for

verification in the EE office . This register will against each bill record the deductions made and against which

head and the amount payable .

4.8 Payment Mechanisms :-The GPWSC are the employer of the contractors for the SVS & the intravillage component of MVS .All bills will be first submitted to the GPWSC .On receipt of the bills , the same shall be recorded in the Contractor register before submitting to the JE for verification .After verification and comparing it with the MB maintained by him , he will submit the bill to the SDE/EE for final approval who in turn will give approval to the net amount to be paid to the contractor after deducting all statutory dues .The same shall also be recorded in the approval .After the approval the bill be send back to the GPWSC for the payment .The GPWSC will record the details in the contract register before the payment .All payments will be released by GPWSC after the pre- audit of bill by SDE/EE and the banks may be accordingly instructed not to honor any checque without the technical sanction(Clearance Certificate) of SDE/EE. The flow chart of the payment process is detailed in Exhibit 4.1

The monthly expenditure statement and the monthly physical progress reports shall be placed, considered, reviewed and approved in the monthly meeting of the GPWSC.

The expenditure incurred during the Implementation Phase shall also be placed, considered, reviewed and approved in the meeting of the GPWSC every month. The GPWSC should also review the Physical Progress reports submitted by the NGO / SO and establish linkages with the financial statements before approval of such expenditure.

All financial Reports approved by GPWSC shall be placed in the meetings of the Gram Sabha held during the tenure of the contract and also on completion of the Implementation Phase activities as stipulated in the contract.


EXHIBIT 4.1

4.9 Inter activity Adjustment Mechanism

During the course of Accounting, situations/circumstances viz. Compliance to audit observations etc. may arise which demand transfer of Expenditure from one activity to another in cash book .

The recording of such inter activity adjustments shall be done through a correction voucher

Such Adjustments shall only be made after the approval of the Chairman, GPWSC who shall initial such voucher as also verify, confirm and also ensure maintenance of appropriate documentary evidence in support of the reasons for passing such adjustments, with the Account Assistant.

Bills received by GPWSC

Entered in contract register

Submitted to JE for pre audit

Approval of SDE/EE Giving the detail of deduction if any

Makes the payment

After approval of SDE/EE

Returns the bill to GPWSC


4.10 Financial Reporting

4.10.1 The financial reports to be prepared by the GPWSC in the Implementation Phase is detailed hereunder and are enclosed vide Appendix D

Statement of Receipt & Payment GR - 1

4.10.2 This report shall be prepared before the release of next installment. It shall be signed by the Treasurer & Chairman of the GPWSC. These reports should be certified by the concurrent auditor.

4.10.3 These Financial reports shall be prepared in triplicate – one copy whereof shall be kept by GPWSC and the rest of the copies shall be submitted to the DPMC & DO

4.11 Concurrent Audit Arrangements:

Before the release of instalment of funds an audit by Chartered Accountant is to be conducted. The report GR1 shall be got audited by the GPWSC .This reports shall be accompanied by the audit report given by the Chartered Accountant.

These Firms of Chartered Accountants, who will be appointed by the SPMC , for ‘Concurrent Financial Audit’ of the GPWSC expenditure. Second (and subsequent) tranche of funds will be released to the GPWSC by the DPMC only on receipt of ‘Statement of Receipt and Payment duly certified by the concurrent auditor’s .

4.12 The detailed terms of reference of the concurrent auditor’s is enclosed vide Appendix E enclosed with the manual


CHAPTER 5 – ACCOUNTING FRAME WORK AT GPWSC AT O&M PHASECHAPTER 5 – ACCOUNTING FRAME WORK AT GPWSC AT O&M PHASE

5.1 After the Capital Works are completed, the responsibility of maintaining the water supply and the sanitation schemes is with GPWSC’s. For maintenance of the water supply and the sanitation schemes the GPWSC will be collecting the user charges and pending it for maintenance of the Schemes.

5.2 The GPWSC shall develop a detailed Operation and Maintenance plan including fixing tariffs, roles and responsibilities of DWSS, GP and GPWSC in operation and maintenance activities. This may include contracting out the O&M services.

5.3 It shall collect water charges from users and meet the operation and maintenance expenses of water supply facilities in the village.

5.4 Books of accounts

GPWSC will maintain following additional books of accounts during the O&M Phase.These formats are enclosed vide Appendix-F.

a. GPWSC Cash BookGP - 9

b. Register of Demand from members GP – 10

5.5 Beside these mentioned books of accounts the GPWSC shall also maintain books of accounts as detailed in para 5.4 form GP1 to 8 .The form GP1 to GP 8 have already been explained in the earlier chapter .In addition to these books, Form GP-10, Register of demand from members has to be maintained which will be in the form of ledger and will have a dedicated folio for month . Each row of the register for each month shall record the tariff to be deposited and actually collected for each house hold on monthly basis. This will assist the GPWSC in determining the pending dues from each house hold. The rules and procedure for writing the cash book will remain the same as explained in para 5.7.2 .The revised form of the cash book and register of demand from the members are enclosed in Appendix-F

5.6 The GPWSC shall maintain regularly accounts and records of operation and maintenance expenditure as done in the implementation phase.

5.7 The GPWSC shall prepare the Income and Expenditure statement of Operation and Maintenance to be publicized in the community through hand bills/display in public places to ensure transparency and accountability. A copy of same shall also be forwarded to DPMC.The format of the same is enclosed vide appendix F –Form R1


CHAPTER 6 – CHAPTER 6 – TRANSPARENCY AND DISCLOSURE AT GP LEVEL

Community oversight of the works done by GPWSC will bring about transparency and social audit and is hence a very important for successful implementation of the project and to the entire satisfaction of the Villagers .Community oversight can be brought about by involving them in all the major decisions and also by pasting important financial and physical progress on the Notice Board or at any such place, which is easily accessible, by the members of the community.

DISCLOSURE ON THE NOTICE BOARD

Scheme Approval :- Once the Scheme approval is granted , it shall be prominently displayed in the village at all time .It shall clearly mention the estimated costs of each of the following component of the scheme

i Boring and installation of tubewell.

ii Providing and installation of Pumping Machinery.

iii Construction of OHSR of specified capacity and defined FSL.

iv Providing and laying of Water Supply distribution network.

Procurement of the components : -The entire process of the procurement should be displayed in the village right from weather the GPWSC wants to appoint a single contracting agencies for all the components , or it wants to split the components and appoint separate contractor for each of the component on turnkey basis or it wands to procure the material second and 3rd component and engage the labour contractor .

Following thing on procurement must be disclosed on the notice board

o Date of advertisement in the news paper and last date of submission of the Bids.o The members of the evaluation committee o No of bids received and the name of the parties /contractors o Date of the opening of the bid o Financial bid of the contractors o Contractor selected and contract value o Schedule of implementation

In case the procurement of goods is to be done, it must be displayed the parties from which the quotation has been received and the rate given.


Financial disclosure :-Following disclosure should be done by the treasurer of the GPWSC every month in order to bring about community oversight .

1. The Expenditure incurred during a month along with physical progress achieved, activity wise, should be pasted on the notice board.

2. Funds received, payments made and balances, shall also be prominently displayed in the village at all time and updated regularly every month.

3. Details of all payments vide uncrossed cheque also to be displayed .4. The details of the labour if they are to be engaged from the village along with

the daily rates given .

Financial disclosure of O&MThe GPWSC shall prepare the Income and Expenditure statement of Operation and Maintenance to be publicized in the community through hand bills/display in public places to ensure transparency and accountability.

DISCLOSURE AT GRAM SABHABesides displaying on the notice board , community oversight will also be brought by initiation the following steps

Books of account as well as expenditure statements shall be available to all members for viewing

Financial and Physical progress achieved in terms of the underlying agreements of various phases under the Program should be put up for consideration before the Gram Sabha every month.

The observations and audit report of the Auditor’s shall be presented to the Gram Sabha and dealt with properly and the same to be minuted in the minutes of the meeting

All the above aspects will also be monitored during the Concurrent Financial Audit and reported by them . The responsibility of all the disclosure requirement will rest with the Treasurer and the chairman .