Financial Management Manual - Bihar Gram Swaraj … BGSYS / FMM / Version 01 / March – 2011Final Copy for approval by General Body Financial Management Manual (Version - 01 March

-i- BGSYS / FMM / Version 01 / March – 2011Final Copy for approval by General Body

Financial Management Manual (Version - 01 March 2011)

Bihar Panchayat Strengthening Project

Bihar Gram Swaraj Yojana Society Department of Panchayati Raj Government of Bihar

-i- BGSYS / FMM / Version 01 / March – 2011 Final Copy approved by General Body

DEFINITIONS

“Accounting Year”, “Year” or “Financial Year”‟ means the year Commencing from 1st April

and ending with 31st of March succeeding year .

“Bank” means the Schedule bank in which a separate account is opened to operate the project

funds.

“SPMU” means State Project Monitoring Unit.

“DPMU” means District Project Coordinating Unit

“BPMU” means Block Project Implementation Unit

“GP” means Gram Panchayat.

“Project” means Bihar Panchayat Strengthening Project

“PRI” means Panchayati Raj Institution

“BGSYS” means Bihar Gram Swaraj Yojana Society

-ii- BGSYS / FMM / Version 01 / March – 2011 Final Copy approved by General Body

Table of Contents

Definitions (i)

Section I-Introduction 1-4

1.1 Objectives & Structure of Financial Management manual 1

1.2 Administration of the manual 2

1.3 Financial Propriety 2

1.4 Back ground of Project 3

1.5 Project Development Objective 3

1.6 Project Components 4

Section II –Project Institutional Arrangement 5-8

2.1 Constitution of BGSYS 5

2.2 Executing Agency for civil works 5

2.3 Primary functions of the SPMU 6

2.4 Role of the Executing agency 6

2.5 Role of District Units of BGSYS 7

2.6 Role of BPMU 7

Section III –Budget & Planning 9-12 3.1 Objectives of budgeting system 9

3.2 Budget Period 9

3.3 Budget &AAP calendar 10

3.4 Basis for Budgeting 10

3.5 Annual Action Plan 11

3.6 Approval of AAP/Budget 11

3.7 Re – appropriation of Budget 11

3.8 Supplementary Budget 11

3.9 Budget formats 11

3.10 Budgetry Controls 12

3.11 Budget Variance 12

Section IV Flow of Funds 13-14 4.1 Fund Flow Process 13

4.2 Banking Arrangements 14

Section V Accounting System & Frame Work 15-24

5.1 Accounting Centres 15

5.2 Accounting Year 15

5.3 Accounting Policies 15

5.4 Accounting records 17

5.5Accounting procedure 19

-iii- BGSYS / FMM / Version 01 / March – 2011 Final Copy approved by General Body

Section VI Internal Controls 25-29

6.1 Internal control Frame work 25

6.2 General Principles 25

6.3Mode of Payment 27

6.4 Controls for Payments for works executed by contractor 27

6.5 Preparation of Statement 27

Section VII Financial Reporting 30-32 7.1 Objectives 30

7.2 Interim Unaudited Financial Reports 30

7.3 Annual Project Financial Statements 31 7.4 Preparation of reports 32

Section VIII Staffing & Training 33-37

8.1 Staffing 33

8.2 Training & Capacity Building 37

Section IX Auditing Arrangements 38-41

9.1 Statutory Audit 38

9.2 Internal Audit 39

Annexure I -Terms of Reference for Internal Auditors 42

Annexure II- Terms of Reference for External/Statutory Auditors 48

Annexure III- Model Audit Report by External Auditor 52

Annexure IV- Model Management Representation Letter to External Auditor 53

Annexure V- Budget Format Part-1 54

Annexure VI- Budget Format Part-2 56

Annexure VII- IUFR 1: Statement of Sources and Uses of Funds 58

Annexure VIII- IUFR 2: Details of Expenditure by Component/Sub Component 59

Annexure IX- IUFR 3: Payments made under Prior Review Contracts 61

Annexure X- Balance Sheet 62

Annexure XI-Statement of Sources and Applications of Funds 66

Annexure XII- Reconciliation of audited expenditure with IUFR expenditure 67

-iv- BGSYS / FMM / Version 01 / March – 2011 Final Copy approved by General Body

Annexure XIII- Tool for Post Reviews of Contracts 68

Annexure XIV- Bank Reconciliation Statement 69

Annexure XV- Fixed Assets Register 70

Annexure XVI- Double Column Cash Book 71

Annexure XVII- Journal Voucher 72

Annexure XVIII- General Ledger 73

Annexure XIX- Stock Register 74

)

Annexure XX- Register of Contracts for Consultancy 75

Annexure XXI- Trial Balance 76

Annexure XXII- Chart of Accounts 77

-1- BGSYS / FMM / Version 01 / March – 2011 Final Copy approved by General Body

1.1 OBJECTIVES AND STRUCTURE OF FINANCIAL MANAGEMENT MANUAL

The financial management system for Bihar Gram Swaraj Yojana Society (BGSYS) which is the

implementing agency for Bihar Panchayti Raj Strengthening Project has been designed to ensure

transparency and accountability and also inclusiveness in decision-making and allocation of

financial resources to the District,blocks & Panchayats.

The Financial Management Manual (FMM) has been designed with a view to (a) standardize the

FM Arrangements for the BGSYS and (b) provide guidance to project finance staff on project

financial management aspects. 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 component/ sub component/activity 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 enhance transparency and promote accountability at the State, District, Block and

Panchayat level to promote social audit.

To have proper accounting & reporting requirement at the State, District, Block and of

Panchyat Incentive Fund in Gram Panchayats.

To have proper Internal Control issues at the State, District, Block and for Panchayat

Performance Awards.

To monitor financial aspects and key performance indicators to monitor financial

progress against action plan and to facilitate management decision making

.

To Promote accountability at different levels,

SECTION –I - INTRODUCTION


To Establish satisfactory internal controls to ensure that policies and procedures outlined

by project management on various operational aspects are adhered to; and

To Assist in meeting the financial reporting requirements of various stakeholders

including the Government of India, Government of Bihar and the World Bank.

1.2 ADMINISTRATION OF THE MANUAL

This Manual shall be administered in the manner given below:

General Body of the Society will authorize the manual .

The manual is a live document and may be amended as and when required(after seeking

approval of competent authorities, as the case may be) as experience and learning

accumulate with the evolution of the project. All participants in the BGSYS are

encouraged to share their learning from their experiences of the project implementation

so as to improve the arrangements defined in this manual(similarly in other manuals)

envisaged for implementation of BPSP to attain its project mission and objectives.

All amendments made to the Manual shall be circulated to all the implementing units by

SPMU. 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 .This manual along-with the PIP, the financial

and administrative rules and procurement Manual provides the overall control

framework for the project.

The Manual will be administered by the Project Director, BGSYS under the overall control,

superintendence and guidance of the CEO, BGSYS, who will ensure that the provisions of this

Manual are followed by all those involved in the Project.

1.3 FINANCIAL PROPRIETY

Every Officer incurring or authorizing expenditure from the Society funds or on behalf of the

Society should be guided by the established principles of financial propriety viz.,

To enforce financial order and economy at every step

To see that financial regulations and directions are observed by his own office and by

subordinate offices.

To exercise the same vigilance as a person of ordinary prudence would exercise in

respect of expenditure of his own money.

Not to exercise its power of sanctioning expenditure to pass an order which will be

directly or indirectly to his/her advantage.

The expenditure should not be prima-facie more than the occasion demands.

The allowances should not be on the whole a source of profit to the recipient


1.4 BACKGROUND OF PROJECT

In 2006, the Government of Bihar (GoB) requested for IDA assistance to strengthen the

Panchayati Raj Institutions as units of self governance with a physical presence capable of

planning and implementing development schemes, promoting community life, generating

employment opportunities and providing justice at doorsteps. The Government requested

financing for GP office infrastructure and capacity building for PRIs. A Project Concept Note

approved by the Bank in Feb 2008 proposed a response to the request based on the dialogue with

Government of Bihar and the Bank‟s assistance strategy for Bihar.

1.5 PROJECT DEVELOPMENT OBJECTIVE

The Project Development Objective of this project is “to strengthen state government capacity in

promoting inclusive, responsive and accountable Panchayati Raj Institutions in six districts.”

1. Project beneficiaries include: 1) elected officials and functionaries at the Gram Panchayat

level, who can become stronger leaders, who listen to their constituents and solve their

problems, protect the vulnerable, fairly resolve local conflicts, and capable of mobilizing

resources and support and take initiatives; 2) rural residents in the target PRIs of the six

districts, who are better able to effectively monitor fulfillment of government obligations and

can enjoy better and fairer government services and undertake effective collective actions to

solve local problems.

2. Key performance indicators include:

Improvement in key health (esp. water-borne diseases, infant mortality) and livelihood

indicators in the Project‟s intervention Gram Panchayats;

Increased percentage of active Gram Sabha participants who belong to socially

disadvantaged groups (e.g., SC, ST and women);

Increased percentage of PRI project beneficiaries who belong to socially disadvantaged

groups (e.g., SC, ST and women);

Decreased response time and more timely resolution of complaints associated with receipt

by citizens of entitlements and public services that PRIs provide, e.g., pension payment,

housing benefits, birth & death certificates, and caste certificates;

Increased number of PRIs that submit annual financial statement within four months from

the end of fiscal year for external audit;

Increased percentage of people from all social groups who perceive panchayats as being a

responsive, reliable and trustworthy resource to help address individual and community

issues.


1.6 PROJECT COMPONENTS

1) Panchayat Sarkar Bhavans

2) Gram Panchayat Capacity Building

2.1 Institutional Strengthening

a) Core institutional capacity [v and m, standing committees, regular meetings, holding

gram sabhas, scheme literacy, results based planning]

b) Community Engagement (social audits, mobilization, citizen trainings on RTI,

accountability, scheme literacy, grievance redress etc.)

c) Communications and Mass Media

d) Financial Management

2.2 Strengthening Development Capacity of Panchayats.

a) Sanitation

b) Water Quality

c) Nutrition

d) Natural Resource Management

3) State-level Policy Environment for Decentralization

4) Panchayat Performance Award

5) Project Management [includes M and E]


2.1 CONSTITUTION OF BGSYS

The Bihar Gram Swaraj Yojana Society (BGSYS) – an autonomous institution registered as

Society under the Society Registration Act, 1860 and facilitated by the Department of

Panchayati Raj, GoB will host the project. To ensure awareness and support for the

panchayat empowerment process, the Governing Body of the Society consists of multi-

departmental participation and is headed by the Development Commissioner.The Executive

Committee is headed by the Principal Secretary, DoPR with members from key line

departments. The General Body will provide overall policy guidance, while the Executive

Committee will be responsible for monitoring overall performance of the project. The day to

day affairs of the project will be managed by the Project Director, who is a senior All India

Service member of the government.

This project nurtures and depends upon strong partnership with line departments such as

Public Health and Engineering (PHED, for the water and sanitation component), Rural

Development (for the natural resource management component), and Woman and Child

Development (for the nutrition component), and development partners such as UNICEF and

DfID, which both invest heavily in improvement in water, sanitation and public health. The

Project will supplement the investment made under various schemes managed by these

departments, esp. ICDS, NREGS, Rural water, and TSC by facilitating intensive social

mobilization and strengthening the roles of elected panchayat members as champions for

these issues. The Project has benefited from learning from the experience generated from

UNICEF‟s field programs, especially their community mobilization and local planning

approach.

The Bihar Gram Swaraj Yojana Society (BGSYS) is under the administrative control of the

Panchayti Raj Department of GoB. All the members of the Society form its General Body.

The Society also has an Executive Committee. The powers and functions of the General

Body and Executive Committee are detailed in the Bye Laws of the Society. Executive

committee is headed by CEO.The overall day to day administration of the Society vests with

the Project Director who is assisted by State managers of respective field.

2.2 EXECUTING AGENCY FOR CIVIL WORKS OF BHAWAN COMPONENT.

The Bihar Gram Swaraj Yojana Society (BGSYS) is the Sate Project Management Unit

(SPMU) for the World Bank assisted Project and, as a special purpose vehicle, is the primary

entity responsible for planning, co-ordination, implementation and monitoring of the project.

As per the decision at the highest level of the Government of Bihar, BGSYS shall assign civil

works relating to Bhawan component to Building Construction Department (BCD), GoB.

SECTION –II - PROJECT INSTITUTIONAL ARRANGEMENTS


2.3 PRIMARY FUNCTIONS OF THE SPMU

The primary functions of the SPMU related to financial management are:

• Coordinate with the GoB, World Bank and line agencies both in the preparation and

implementation phases and be overall responsible for reporting to the Government and Bank

on project progress, procurement, financial management and disbursement, results

monitoring and evaluation of the Project and management of consultancies and contract

administration

• Ensure that the Project is implemented in accordance with agreed procedures and guidelines

of the Bank (Procurement, Financial, Environment, Social etc.) as described in the legal

agreements, Operations Manual, Financial Management Manual, Procurement Manual etc.

• Liaise with the hired implementing agencies for successful implementation of the Project

• Review the designs of all works under the Project

• Exercise control over the Procurement process applicable to the Project including approval of

Bidding Documents, Tendering, Award, executing Contracts for works/goods/ services, and

ensuring the execution of the same

• Conduct Quality Assurance through third party audits and social audit and put in place an

effective redressal mechanisms and e-initiatives like portal etc..

• Approve and make payments to contractors, consultants and vendors

• Release funds for Panchayat Performance Grants and support DPMUs in its monitoring of

utilization by GP

• Process funds transfers to the District office using EFT mechanism.

• To ensure adequate internal controls, maintenance of books of account (preferably on a

computerized accounting software) and other records in the format and manner prescribed in

the Financial Management Manual

• Ensure Financial Audit(s) of the Project, as prescribed

• Maintain project MIS and prepare and submit periodic financial reports, in the format and

manner prescribed in the legal agreements/Manuals, to the World Bank

• Maintain adequate finance and accounts staffing and ensure their training

• Ensure statutory compliances including proper & timely deduction and deposit of TDS.

2.4 ROLE OF THE BCD, GOB (EXECUTING AGENCY) FOR CIVIL WORKS

(PANCHAYAT SARKAR BHAVANS)-

Building Construction Department will be primarily responsible for the construction of

Panchayat Sarkar Bhawans. To meet the desired results the BCD will be required to shoulder

following roles and responsibilities –

a. Preparation of DPRs, Cost estimation and preparation of bidding documents following

the standard bidding document of the World Bank


b. Receipt of Tenders, opening and preparation of preliminary bid evaluation reports,

finalize tenders and engaging the contractor(s) for the construction of Panchayat Sarkar

Bhawans

c. Implementation of Works and Contract Management (acting as Employer/Engineer under

the contract); Supervision of works, quality assurance and progress monitoring,

d. Ensuring provisions of environmental safeguards and mitigation measures as per the

EMP approved by the BGSYS, community vigilance, social audit and also supervision

consultancy and, if need be, additionally third party quality audit as worked out in detail

with mutual consultations between BCD and the BGSYS

e. Payments to contractors as per contract conditions,

f. Have an effective grievance redressal mechanism and incorporating suggestions by the

BGSYS

2.5 ROLE OF DPMU

BGSYS has District Project Management Units (DPMU) managed by a District Project Manager under

the supervision, guidance and control of SPMU.

Coordinate with SPMU and BPMU to Institute mechanisms for proper accounting of

project funds at state and district level;

Compile annual budget for the district and submit the same to the SPMU.

Receive funds into its bank account from the SPMU and also transfer fund to Block in

form of Imprest as per allocated budget.

Coordinate and forward regular monthly/quarterly financial monitoring reports to SPMU

Coordinate with BPMU to ensure regular and timely Maintenance of Primary Books of

account (columnar cash book) at Block level and receiving monthly Operational

Expenses report from Block for accounting and compilation at district level.-

Appoint Finance and Procurement Sub-committees and entrust them with specific

financial management and procurement functions

Ensure that all financial management and procurement decisions are documented

Other function as may be assigned by SPMU.

2.6 ROLE OF BPMU

Block Project Management Units (BPMU) is managed by a Block Program Manager under the

supervision, guidance and control of the DPMU.

Receiving funds from DPMU for Operational Expense on an imprest basis

Submit Bills, Vouchers, with adequate and appropriate supporting documentation and

Primary Books (e.g cash book/bank book) for accounting at DPMU on monthly basis

Implement and supervise activities of Project


May engage an accountant and ensure that all project expenditures are recorded in cash

book/bank book with proper supporting.

Request of funds from DPMU along with proof of expenditure

Provide records and support for project audit

Other function as may be assigned by SPMU/D


3.1 OBJECTIVES OF BUDGETING SYSTEM

The objective of an efficient budgeting system is to facilitate timely approval of the Annual

Action Plan, drawdown of resources from Govt. of Bihar and the budgetary control i. e.

monitoring of performance at regular intervals and fixing accountability for variances.

3.2 BUDGET PERIOD

Budget period to be followed by the Project Units shall be the financial year i. e. from

April to March of each year.

Budgets shall be prepared for the budget year and broken up into quarterly budgets. This

would enable periodical performance review through quarterly variance analysis and

preparation of quarterly financial reports.

Normally, budgets would be applicable for a full year. However, if the original

assumption made while formulating budgets change of significant variations arise in

actual performance or in the environment, it may be necessary to review the budgets

during the year also.

Mid Year Review: At the time of budget preparation for the next year the budget for the

current year should also be reviewed. The review should take into account the actual

performance for the nine months and the estimates for the next three months of the

current year.

3.3 BUDGET AND ANNUAL ACTION PLAN CALENDAR

The process of preparation, review and approval of budget shall normally take around three

months. However, since the budget is passed by the State government at the end of February, the

budget preparation process should finish by November end in order to ensure adequate budget

provision in the GoB Budget for next financial year . However Annual Action Plan/budget for

the budget year may be started from September month of current financial year, thereby leaving

about three months for preparation, review, consolidation, revision and approval of budgets. The

milestones in the budgeting/Annual Action Plan process along with the target dates are laid down

in the following budget/AAP calendar.

SECTION –III - BUDGETING & PLANNING


Budget and Annual Action Plan Calendar

S.no Activity Responsible

Agency

Completion date

1 Dissemination of Target Annual

Budget Amount to each

BPMU/DPMU

SPMU 31st August of Previous year

2 Preparation of Annual Action

Plan by BPMU within Budget

Amount.

BPMU 30st September of Previous

year

3 Preparation/consolidation of

Annual Action Plan by DPMU for

the expenditure to be incurred by

it

DPMU 15th

Oct of Previous year

4 Preparation of Annual Action

Plan by SPMU for the expenditure

to be incurred by it

SPMU 15th

Oct of Previous year

5 Consolidation of the Annual

Action Plan within budget amount

at State level

SPMU 31st Oct of Previous year

6 Approval of Budget/AAP by

Executive Committee / General

Body

EC/GB 30th

Nov of Previous year

7

8

Submission of Budget/AAP to

DoPR for onward submission to

Planning and Finance Department

Information of Approved Budget and

Annual action plan to various project

units for their advance preperations

SPMU

SPMU

15th

Dec of Previous year

20th

Mar of Previous Year

3.4 BASIS FOR BUDGETING

The SPMU/DPMUs shall prepare the annual financial budget based on the Project progress and

the project targets as reflected in the following plans:


3.5 ANNUAL ACTION PLAN (AAP)/BUDGET

As part of the budget preparation the SPMU shall (based on the achievements and Actual figures

of the previous year, progress made up to the project period and the annual targets in the overall

work plan) prepare an annual action plan for the budget year broadly identifying the focus areas/

activities for the project in the budget year. The Final responsibility of preparing AAP/Budget

lies with the SPMU. AAP/Budget shall highlight the focus areas/activities for the project in the

budget year. The AAP shall be prepared in consultation with the project Units at district & Block

level. The action plan for the first year shall be based on the Overall Work Plan. Revisions can

be made to the Annual Action Plans based on the changed requirements after quarterly or half

yearly review. The Annual Budget/AAP is prepared in format given in Annex V & VI

3.6 APPROVAL OF AAP/BUDGET

The AAP/Budget is first considered by the Executive Committee of BGSYS and then placed

before its General Body for their consideration and approval. Thereafter, it is submitted to DoPR

for further submission to the Planning and Development Department for inclusion in the

Department‟s budget and onward submission to the Finance Department for approval by the

State Legislature.

After the annual budget has been approved by the GoB and the same communicated to BGSYS,

the Executive Committee, shall inform about the budget allocations to SPMU

to DPMUs and BPMUs . The basis of allocation of physical and financial budgets shall be the

budget proposals submitted by SPMU ,various DPMUs.and BPMUs Essentially, the process of

Communuication of approved budget allocation to the Project Units should be completed before

the start of the accounting year, so that they can start advance preparations for their activities.

3.7 RE – APPROPRIATION OF BUDGET

Re–appropriation of the approved Budget within the overall ceiling is sanctioned by the

Executive Committee of BGSYS on recommendation of the Project Director through CEO. All

re-appropriations are placed before the General Body for ratification at the meeting held

immediately after such event.

3.8 SUPPLEMENTARY BUDGET

For additional funds requirement over and above that already approved by the State Legislature,

BGSYS follows the extant guidelines for the preparation and submission of supplementary

budget to the Government

3.9 BUDGET FORMATS

The formats of the various budgets to be prepared along with the supporting worksheets are

provided in Annexure.V & VI


3.10 BUDGETARY CONTROLS

The state and district level units shall facilitate an effective budgetary control system for

monitoring of performance and accounting for variances.

3.11 BUDGET VARIANCE

Budget Variance Report shall be prepared every quarter and the reasons for variation analyzed

and documented. All the stake holders from the Districts and the State shall participate in the

Budget Analysis and provide explanations wherever necessary. Any variations due to errors in

estimation/assumptions shall be taken into consideration during the preparation of next Budget.

All functional directors & SPMs (with the help of DPMU and BPIU) shall be responsible for

preparation of Budget Variance Analysis in their respective units. All functional directors and

SPMs at SPMU shall be responsible for documentation of explanations and formulation of action

plan for corrective measures.


4.1 FUND FLOW PROCESS

Funds from the World Bank to GoI

World Bank (IDA) would provide advance and reimbursements to Government of India

(GOI) which in turn will transfer funds to GoB in accordance with the prevailing

procedures for transfer of external borrowings.

Funds from GoI to GoB

GOI would transfer the initial advance to Government of Bihar and the subsequent

reimbursements on a quarterly basis based on the Interim Financial Reporting.

Funds from GoB to SPMU

GOB shall provide funds for the project to SPMU through an annual budgetary

allocation. This should include both IDA funds and Government counterpart funds.

Government of Bihar will transfer funds to the project on a quarterly basis based on the

requirement of funds as projected in the Annual Budget and Actual expenditure in every

quarter.

This amount shall be transferred to the Savings Bank Account called “Project Fund

Account” of the SPMU.

SPMU shall submit reimbursement application (IUFR) to the World Bank on a quarterly

basis for amounts spent for the project.

The Budget provision will be made in GOB budget account head (2515001010110) (-

Main Head(2515)-Other Rural Development Program ;Sub main head-00; short head-

101-(Panchayati Raj);Sub Head-0110 (Panchayati Raj system & Human Resourse

Development))

The provision made for the project in FY 2011-12 budget is RS. 83.89 Crores

FUNDS FROM SPMU TO DPMU/BPMU

SPMU provides funds to its DPMUs for meeting the project management costs. The DPMUs

will meet its project management costs and also disburse salaries of the BPMU staffs (including

facilitators and CRPs) and transfer imprest funds to BPMUs to meet their operating costs.

BPMUs will incur the expenditure and submit detailed monthly statement of expenditure along

with original supporting documents to the DPMUs.for accounting and replenishment of the

Imprest.

SECTION –IV - FLOW OF FUNDS


All funds transferred to the DPMU/BPMUs are kept in a dedicated Project bank account. While

DPMUs will be accounting centers (and use TALLY accounting system), the BPMUs will only

maintain a Project Cash/Bank Book and Journal to record the transactions.

Funds from SPMU to BCD (Executing agency for Panchayat Sarkar Bhawan)

• Funds as per action plan will be devolved to BCD from the Department of Panchayati Raj

or the BGSYS to its Bihar Building Construction Corporation constituted within the BCD

department, or through its deposit work head 8782 maintained with the Treasury, to

ensure that funds are adequately available for ensuring timeliness of construction of

Bhawans, and that those do not get locked in the departmental budgetary process through

Letter of Credit System.

• BCD will make disbursements to regional units as its implementation plan

4.2 BANKING ARRANGEMENTS

SPMU and the DPMU/BPMUs will open a dedicated project bank account with a scheduled

commercial bank. Only one account per office will be opened . The opening of bank accounts

and the signatories will be approved by the Executive Committee. The bank account at the

SPMU level will be operated under the joint signatures of the Project Director and a functional

head as decided by the Executive Committee. The signatories at the District level will be the

DPM and District Finance officer(Jointly) on behalf of the BGSYS.

SPMU will make arrangements to open an account with a scheduled commercial bank(s) which

has (a) core banking network and (b) branches in all the project districts. This would facilitate

electronic transfer of funds and allow viewing rights of transactions to SPMU/ DPMU


5.1 ACCOUNTING CENTRES

The Accounting Centers are the offices where the basic accounting in respect of expenditure on

the project Activities shall be carried out. These centers will be responsible for maintaining the

relevant books of Accounts and shall Account all the financial transactions entered into by each

of them.

The Accounting Centers for the project can be divided in following manner-

Unit Accounting Reporting Consolidation

SPMU (1) √ √ √

DPMU (6) √ √ √

BPMU * √ √ ×

BCD √ √ √

*will operate on imprest basis and send all bills and supporting documents to DPMU for

accounting

Accounting at SPMU and DPMUs (Project Accounting Centers) will be done using software

package (Tally). In addition, all the books of Accounts of Initial Entries (Cash

Book/Journal,Vouchers, Cheque issue Register, Fixed asset Register) shall also be maintained

manually.

5.2 ACCOUNTING YEAR

The Accounting Year for the Project is the Financial Year (FY) which commences on 1st April

each year and end on 31st March of the next year. This implies that all books of account are

closed on 31st March every year, annual financial statements prepared and audited, and balances

carried forward to the first day of the next financial year i. e. 1st April.

5.3 ACCOUNTING POLICIES

Accounting policies are benchmark norms that determine how and when Assets & Liabilities and

Receipts & Payments (Expenditure) are recognized and treated to maintain consistency in

application across transactions and over time.

All significant accounting policies are disclosed in the annual financial statements in a

separate schedule.

Accounting policies are applied consistently over time and not changed intra or inter year

frequently. Wherever a change in accounting policy is deemed appropriate, prior approval of

SECTION –V - ACCOUNTING SYSTEM & FRAME WORK


the Executive Committee is obtained. Every change in an accounting policy is disclosed in

the annual financial statements describing the nature of the change and its impact.

ACCOUNTING POLICIES FOR THE PROJECT

a. Basis of Accounting

Project Accounts are maintained on Cash basis of accounting, double entry book keeping system

on historical cost convention following Accounting Standards generally accepted in India.

b. Fixed Assets

Fixed Assets are stated at their cost of acquisition including taxes, duties, freight and other

incidental expenses relating to their acquisition, and substantial expenditure on subsequent

improvements thereto. Fixed Assets received in kind are stated at a nominal value of Re. 1 only.

In case of Fixed Assets acquired through Project grants and owned by BGSYS, an amount

equivalent to the cost of acquisition is credited to a Capital Fund and shown in the Balance

Sheet. On disposal of such Fixed Asset, equivalent amount is reduced from the Capital Fund.

Depreciation is not provided on Fixed Assets.

c. Treatment of Interest Earned and Other Income

Interest earned on balance/s in Project bank accounts and Other Income (such as tender fees etc)

arising from the Project are recognized as project fund and will be utilized for project purpose.

d. Valuation of Stocks

Materials and office supplies purchased for the Program is charged as expenditure at the time of

its payment, through memorandum stock registers.

e. Treatment of advance payment

Advances are provided for various program activities.These are recorded as advance and will be

adjusted and recognized as expenditure only on rendering of services or delivery of goods and

submission of supporting documents . All advance payment should continue to be treated as an

advance until its final adjustment.

f. Revenue Recognition

Grant Received from the State Govt. will recognized as income to the extent of the

expenditure made during the year with the balance being shown as a liability. For

expenditure incurred on fixed assets, a corresponding amount will be transferred to

capital grant utilized.

g. Panchayat Awards.


Grants to GP as Panchayat Performance Awards will be initially recorded as advance

under the head „ Award Provided‟ and recognized as expenditure on submission of

quarterly financial reports i.e „Awards Utilized‟ (Expenditure). Refund of unspent

Panchayat Performance Awards will be reversed from „ Awards Provided‟. A year wise

ledger account Award provided and Award Utilized will be maintained with sub ledger

(advance) for individual Awards.

h. Consultancy Payments:

Payments against consultancy contracts which are output based i.e payments based on

achievement of milestones will be recognized as expenditure at the time of payment, while

payments (advances) against input or time based contracts will be recorded as advances and

recognized as expenditure based on submission of the necessary supporting documents.

5.4 ACCOUNTING RECORDS

Bihar Gram Swaraj yojana society is a Society registered under Society Registration Act 1860

and following Cash basis, double entry system of Accounting.. The expenditure and Income is

recognized only on actual receipt and payment.

Books of account are the basic records which have to be maintained as part of the accounting

system. The Books of Account shall be updated and tallied regularly and the balances in the

books of accounts shall be taken to the Trial Balance. The books of Accounts shall be

maintained through the Accounting package Tally and in addition to the computerized

Accounting , manual Accounting will also be done in the books of initial Entry like Cashbook ,

Bank Book.

There shall be the following principal books of account:

a. Cash and Bank Book – SPMU, DPMUs, BPMUs & BCD have to maintain

Cash and Bank Books for all receipts and transfers from the Project fund

Account. Cash/Bank collections, Cash/Bank payments and withdrawal/ deposit

of cash to bank must be accounted in the Cash and Bank Book. All receipts,

remittances/deposits must be debited in the Cash Book and all payments shall

be credited. The Cash Payment Voucher, Bank Payment Voucher, Cash Receipt

Voucher, Bank Receipt Voucher, Transfer Voucher must be the basis of

recording transactions in these Books of Accounts. In addition, the SPMU,

DPMU & BPMU may, with permission of PD of the Society, also maintain

petty cash Book to meet the expenses of small amounts and of high frequency

such as payments for stationery, postage, telegrams, carriage, conveyance and

other petty expenses for which payments may not be made by Cheque.

b. Journal register: The Journal Register is used to record all the journal entries

passed. Journal entries are those accounting entries which do not involve outflow


and inflow of the funds at the time of transaction and hence do not appear in the

Cash and Bank Book.

c. General Ledger - The General Ledger shows the details of transactions effected

during the period in each account head other than cash and bank accounts.

Entries from the Journal Register and Cash and Bank Book shall be posted in to

this General Ledger.

d. Trial Balance - Trial balance shall be the list of balances of all account heads

appearing in general ledger having debit balances on one side and credit balances

on the other side.

(1) The total of the debit side must be equal to that of its credit side.

(2) The Trial Balance shall always be prepared as on a particular date for a

specified period.

(3) The Trial Balance shall be used to check the arithmetical accuracy of the

entries for the period.

e. Financial Statements - The Project shall prepare annually the financial

statements supported by schedules for every grouping. The schedules shall

strictly reflect the groupings as prescribed in the Chart of Accounts:

A Balance Sheet shall be prepared to show the financial position as on the last

date of the financial year. This shall contain a list of all assets and liabilities (with

appropriate schedule for fixed assets, advances and liabilities) together with

appropriate notes to accounts and accounting policies as on the 31st of March

each year. The Assets and Liabilities shall be represented major fund component

wise in order to provide a clear picture of the finance

position.

i. Statement of source and application of Fund: It shall summarize all the sources of

Fund and utilization thereof that have taken place during a period according to

the account heads and represented in a logical grouping of the receipts and

payments. This shall detail the actual inflows and outflows of cash during the

period. The statement shall begin with the opening cash & Bank balances and

end with the closing Cash & bank balances by effecting the transactions that

have occurred during the period.

ii. Reconciliation of audited expenditure with IUFR expenditure-Format will be as

per annexure.

f. Bank Reconciliation Statement (BRS) - BRS shall be prepared on a monthly

basis to identify and provide details/information for the differences between the

closing balance of the bank account as on last working day of each month and the

closing balance as shown by the pass book (or bank statement).


5.5 ACCOUNTING PROCEDURE

The accounting procedures at the SPMU, DPMU and BPMU are outlined under the following

heads:

Receipt accounting

Payment accounting

Accounting of bank transfers

Bank reconciliation

Accounting of fixed assets

Correction of Entries

Consolidation of Account

Closure of books of accounts at DPMUs/BPMUs

Closure of books of accounts at SPMU

5.5.1 Receipt Accounting

a) The funds shall be made available to the SPMU by the Government of Bihar in

the form of grant/loan

b) The DPMU/BPMU shall receive funds from SPMU for project activities. The

funds shall be received at periodic intervals in the form of cheque/ DD/ Bank

transfers.

c) BPMU will receive funds from DPMU as advance for Project Activities after

establishment of DPMU office.

d) There could be other receipts on account of interest on bank account, receipt of

security deposits, receipts of earnest money deposits, etc.

e) The receipts would generally be in the form of bank receipts. There could be cash

receipts also, e.g. settlement of advance by an employee in cash, etc. Based on the

mode of receipts, the receipt transactions shall be classified as bank and cash

receipts.

f) On receipt of funds a bank/ cash receipt voucher shall be prepared. The voucher

shall be prepared preferably through the computerized system. At the time of

receipt, all details of the receipt transaction shall be fed into the computerized

system.

g) On authorization of the voucher by the competent authority, the voucher shall be

updated in the computerized system. The system shall then generate a voucher

number and voucher date.

h) The posting of the voucher shall update the bank / cash receipt day book,

bank/cash book/ cheque register and general ledger.


i) In case of receipt of security deposits/earnest money deposits, the entry shall be

made into the Register of security deposits/earnest money. The register of security

deposits/ earnest money shall contain voucher wise details of the following:

Opening balance of deposit

Amount received during the period

Amount refunded during the period

Closing balance of deposit

Expected date of refund of deposit.

j) The Project Units shall periodically review the register for security

deposits/earnest money deposits to keep track of deposits nearing date of maturity

and deposits overdue for payment.

k) In case the security is in the form of bank guarantee then no accounting shall be

done for the same. However record of such security shall be kept in the „Register

of Bank Guarantee‟

5.5.2 Payment Accounting:

The payments shall mainly be in respect of the following:

Inter unit fund transfer by SPMU to DPMUs & BPMU

Release of Performance Awards funds by SPMU/ DPMUfor GP.

Other payments at SPMU ,DPMUs BPMUs (such as payment for goods and

services, preparation/procurement of training material/ publications, payment

to consultants, exposure visits, payment for operational expenses, refund of

security deposit/ EMD, etc.).

a) The payments would mainly be made through cheques/DD/bank transfers.

However there could be cash payments for petty expenditures e.g. petty repairs

and maintenance, conveyance, etc. The accounting for payments shall be done as

per the mode of payment i.e. bank payment or cash payment.

b) All bank payments shall be accounted for through Bank payment voucher and

details of the payment shall be recorded in a Cheque register. All payments made

through cash shall be accounted for through Cash payment voucher.

c) The voucher shall be prepared through the manual as well as computerized

system. At the time of making the payment, all the details of the payment

transaction shall be fed into the cash book and computerized system.

d) In order to avoid preparation of cash payment voucher for petty expenses, an

advance shall be given to an administrative official of the office for the purposes

of meeting the office expenses of a routine nature and small amounts (nature and

amount to be specified by the competent authority of the project). At regular

intervals the official shall submit a statement of expenditure incurred, classifying

the expenses according to the general ledger code classifications. With permission

of PD Petty cash system may also be adopted.


e) After authorization of expenses by the competent authority, a cash payment

voucher shall be prepared to account for the expenses as per the statement of

expenditure and the amount shall be reimbursed to the concerned official. On

posting of the voucher, system shall update bank/ cash payment day book, bank/

cash book and general ledger.

f) The disbursement of Panchayat Performance Awards (preferably through direct

transfer to Panchayat Bank Accounts by EFT) will be done from the

SPMU/DPMU and will based on (i) determination of performance awards and (ii)

signing of and as per the terms of MOU entered into between BGSYS and

panchayat unit for the Panchayat Performance Awards.

g) Panchayat Performance Awards will be initially recorded under the head „Award

Provided‟ and recorded as advance and based on submission of quarterly financial reports

will be transferred to „Award Utilized‟ (Expenditure). Refund of unspent Panchayat

Performance Awards will be reversed from „Awards Provided‟. A year wise ledger

account Award provided and Award Utilized will be maintined with sub ledger (advance)

for individual Award.

5.5.3 Accounting of Bank Transfers (i.e. accounting for contra entries)

The accounting of bank transfers i.e. cash deposited in bank and cash withdrawal from

bank shall be accounted for as contra entries. The accounting in respect of bank transfers shall be

done through Bank transfer/Contra Voucher. On posting of the bank transfer/Contra voucher the

system shall update the cash book and bank book. The cash deposited into bank shall update

payment side of cash book and receipt side of bank book. Similarly, cash withdrawn from bank

shall update receipt side of cash book and payment side of bank book.

5.5.4 Bank reconciliation

The SPMU, DPMUs & BPMU shall reconcile bank balance as per the bank statement

and the bank book on a monthly basis and prepare a monthly Bank Reconciliation Statement by

7th of the succeeding month. For this purpose, the bank statement shall be entered into the

system. The system shall match and compare the bank statement and bankbook and will generate

a list of unmatched transactions. The unmatched transactions would be grouped under the

following heads:

Cheque deposited but not credited

Cheque issued but not presented

Excess/ less amount debited / credited by bank

Bank interest

Bank charges

Debits against standing instructions like payment of telephone bills, electricity bills etc.,

if any. The project office shall pass appropriate correction entries wherever necessary for the

differences in the bank statement and bank book.


The bank reconciliation statement shall be regularly reviewed for Cheques issued but not

presented for payment for more than 6 months. These Cheques shall be treated as stale Cheques.

The Project Units shall prepare a bank receipt voucher, crediting stale Cheques account, to

account for stale Cheques. No activity shall be credited at the time of passing such entry.

The Project Units shall maintain a Stale Cheques Register for the purpose of control over

the stale Cheques in the books of account.

A fresh Cheque shall be issued on demand from the party and necessary entry shall be

made in the books of account and in the stale Cheques register. On issue of the fresh cheque the

project authorities shall debit the stale cheque account. The activity shall not be debited / credited

on issue of fresh cheque.

If a Cheque is reversed by the project authorities and no fresh cheque is issued against it

for a period of three years from the date of issue of the original cheque, then the project

authorities shall debit the stale cheques account and credit the other income account in the books

of account.

5.5.5 Accounting for fixed assets:

The accounting for fixed assets shall be done only at the offices of SPMU, DPMUs & BPMUs .

Accounting of fixed assets shall be done in respect of assets acquired for the project. The various

cost components that shall form part of cost of fixed assets shall be as per the accounting policy

on fixed assets. In respect of purchase of fixed assets, a Fixed Asset Transaction Form shall be

filled along with the voucher. This form shall contain the details of the assets acquired, such as

specification of the asset, asset number, location of the asset, etc. Separate form shall be filled for

each individual item of fixed asset. On posting of the voucher shall be update in the Fixed Asset

Register.

Fixed assets register: The fixed assets register shall be maintained only by SPMU, DPMUs &

BPMUs for assets acquired by the SPMU, DPMUs & BPMUs .

Whenever a fixed asset is purchased a payment voucher shall be prepared whereby the

respective account head is debited and bank/ cash account is credited. The relevant asset code

and description is specified in the voucher itself

The fixed asset register shall give details as regards:

The nature of asset

Date of purchase

Location

Cost

Asset code

Voucher reference of purchase

The fixed asset register shall be updated as soon as the Cash / bank payment voucher

is passed for purchase of the fixed asset.


Physical verification of fixed assets; The State Administrative Officer and his/her team shall

conduct physical verification of the fixed assets (at least yearly). The procedure for physical

verification shall be as under:

The SPMU DPMU,BPMU shall generate a list of the assets acquired in the

project from the fixed asset register

The project office shall physically verify the fixed assets at its location with

respect to the physical presence, condition of the asset and its workability (i.e.,

whether the asset is in running condition or not)

Any discrepancies or otherwise noticed during the physical verification shall be

noted. The Project Units shall explain in detail, the reasons for the discrepancies

noticed during physical verification and the competent authority will take

appropriate action.

A certified copy of the fixed asset register shall be sent by each of the

BPMU/DPMU to SPMU

A comparative statement indicating fixed assets as per records and assets as per

the physical verification conducted, variation, if any, and reasons thereof shall be

appended with the annual audited statements of accounts.

5.5.6 Correction of entries

Once an entry is entered in the Books of Accounts /computer, the editing of such

entry shall not be permitted. The correction of such entries shall be done only

through the journal vouchers.

Journal voucher shall be passed with the appropriate narrations explaining in

detail the reason for the correction made, giving reference to the earlier

accounting entry.

The voucher shall be prepared using the manual as well as computerised system.

At the time of preparation of voucher all the details of the transaction shall be fed

into the computerised system.

On authorization of the voucher by a competent authority the voucher shall be

updated in the system. The posting of the voucher shall update the journal book

and general ledger.

5.5.7 Consolidation of Account

The consolidation of accounts for the project shall be done at all levels on a quarterly and

annual basis. The DPMU shall consolidate the accounts of the BPMUs with the

accounts of the DPMU after establishment of DPMU/BPMU offices , and


The consolidated accounts prepared at all the DPMUs shall again be consolidated at the

SPMU. All the accounts of BPMUs will be consolidated at SPMU level till the

establishment of full fledge DPMU/BPMU offices. For consolidation, the trial balance

for each DPMU/BPMU shall be transferred to the SPMU.

The system shall provide the following options for consolidation at SPMU:

1. Through Floppy/E-mail and hard copies: The BPMUs/DPMUs shall generate the

computer file for transfer to the SPMU. In case E-mail is available at both the

locations, the file may be mailed to the SPMU using E-mail.

2. The SPMU shall load the information received from DPMUs/BPMUs into the

system. The Account will be consolidated at the SPMU. At the time of

consolidation it shall be ensured by SPMU that inter – unit control accounts are

reconciled.

On consolidation, the Component / Headwise trial balances shall be generated for the project as a

whole:

5.5.8 Closure of books of accounts at DPMUs/BPMUs

All BPMUs /DPMUs under this project shall close their books of account by April 7th of

the succeeding financial year on a provisional basis. Adjustments subsequent to

provisional closure of books shall be made by journal vouchers, which shall update the

trial balance. On finalisation of accounts the provisional balances will be adjusted

accordingly.

For the purposes of closure of accounts on a provisional basis, a provisional trial balance

shall be generated and all the ledger accounts shall be taken to the final accounts. A

provisional balance sheet, income and expenditure account, receipts and payments

account and relevant schedules, which shall form part of the annual accounts, shall be

prepared.

A copy of the provisional accounts so prepared shall be sent to the SPMU for

consolidation latest by April 15 of the succeeding financial year.

5.5.9 Closure of books of accounts at SPMU

The same procedure that is being followed at the DPMU/BPMU shall be followed at the

SPMU for account closing purposes.

The SPMU shall receive the provisional accounts from DPMUs/BPMUs by April 15 of

the succeeding financial year and it shall generate its own provisional accounts and the

provisional accounts for the project as a whole by April 30.

After getting copies of final accounts from the DPMUs, SPMU shall prepare the final

accounts for the project as a whole in the manner provided in the consolidation of

accounts section of this report


6.1 The internal control framework of the project is provided in the financial Management

Manual, Project Implementation Plan and the Financial & Administrative Rules for the BGSYS.

In addition to the transaction, controls for receipts and payments has been described in

Accoumting Section of the manual

A handbook for Financial and administrative delegation is being prepared with delegation of

financial powers, authorities and payment responsibilities.

The Director (Finance &Admin) through PD will issue office orders and guidelines relating to

internal control from time to time. The A handbook for Financial and administrative Rules will

elaboratethe approval processes for specific project activities. The project will review these

arrangements periodically and make suitable amendments as needed for smooth project

implementation.

The other key internal control mechanisms are:

Performance standards for certification of milestones and release of payments

Each accounting unit will close the books of accounts within a specified number of

days of the close of each month, reconcile its balances with bank statements and

books of accounts and forward the same to the next level of authority in the

institutional hierarchy, and State Society will provide oversight on the qualitative and

timeliness aspects of the reporting.

Inter unit reconciliation.

6.2 GENERAL PRINCIPLES

The following general principles apply to all payments made under the Project.

The expenditure or advance pertains to an activity under the Project.

A competent sanction to incur the expenditure or making an advance along with budget

provision is available.

A proper and formal statement of claim/bill/invoice from the concerned person/party/firm in

the name of the Project/BGSYS/executing agency, based on which payment has been

demanded or adjustment of advance is sought, is available. All bills/invoices/claims and

SECTION VI-INTERNAL CONTROL


receipts should be of a recent current date. The name, address and tax registration numbers of

the payee and serial number should be pre-printed on these documents.

The purchases made or services rendered are in accordance with the approved work

order/contract/purchase order.

The particulars of the claim i.e. specifications, rates, calculations, net payable amount,

deductions etc. and compliance with the terms and conditions of the contract/agreement have

been examined/checked by the authorized technical and finance persons of

BGSYS/executing agency.

Expenditure is duly supported with original invoices and approved by delegated authority

and actually paid.

The payment or adjustment has been approved in writing by the competent authority and the

claim/bill/invoice has been marked “Passed for Payment/Adjustment”.

Maintaining supporting documentation for all transactions/expenses is of vital importance. In

the absence of appropriate supporting, the expense may not be reimbursable from the World

Bank and there may be audit objection. All paid claims/bills/invoices and supporting

documents should be stamped with the seal “Paid & Cancelled” and reference to the paying

instrument has been recorded on the claim/bill/invoice.

All consultancy payments will be against achievement of milestones or deliverables (output

based contracts) or submission of the required supporting documents (input or time based

contracts).

Monitor the payments and utilization (by way of financial reports and grant audit) of funds

by GP receiving Panchayat Performance Awards.

Taxes have been deducted at applicable rates at the time of making the payments. BGSYS

should ensure that it has a valid TIN number and taxes are remitted to the Government

Account timely.

All payments by BGSYS are made by crossed cheque/bank draft or through electronic fund

transfer system (the preferred mode). Petty expenses can be met through maintenance on

imprest with an authorized staff.

All payments should have a duly approved Voucher and charged to the correct head of

account as per Chart of Accounts


6.3 MODE OF PAYMENTS

All payments are made through crossed cheque or demand draft. For petty day to day

expenditure, an imprest is given to a staff member who submits monthly expenditure statement

for accounting of expenditure and replenishment of the imprest. Besides, maintenance of Petty

cash system may also be adopted with permission of PD.

6.4 CONTROLS FOR PAYMENTS FOR WORKS EXECUTED BY CONTRACTOR

(NOT APPLICABLE to Panchayat Sarkar Bhawan which would be constructed by

the Building Construction Department, Government of Bihar as per the decision of

the Government of Bihar).

Usually all construction works, be they of small nature, involving tendering, technical

measurement etc. will be outsourced from competent technical organization of the

Government. However, in any situation of exigency if it is considered necessary and thus

approved by the CEO that the society itself will ensure the required construction work,

then proper payment control mechanism will be incorporated in MOU entered into with

support agency/contractor. Following points may be considered while framing MOU.

Works are procured in accordance with the Procurement procedures agreed with the

World Bank and documented in the Procurement Manual. The final approval vests with

the competent authority as per power of delegation.

Contractor get the works executed in terms of the Contract Bond.

Work done is recorded in Measurement Books and verified and approved as per extant

procedure. BGSYS maintains the Contractor‟s Account and the Guarantee Register in

respect of the works under the Project.

The Technical and Finance sections of BGSYS will verify the bill for compliance with the

terms of the Contract Bond. The verified bill is put up by Director (Finance & Admin) before

the competent authority as per the financial and administrative rules for final approval and

payment order.

Taxes are deducted at source by BGSYS as per applicable statutes and deposited with the

government as per rules. BGSYS is also responsible for issuing the necessary certificate of

tax deducted at source.

6.5 PREPARATION OF STATEMENTS

As a part of internal control system, the Accounts personnel at State/District Society shall

prepare the following statements to ensure financial discipline.

6.5.1 Financial statements

Bank Reconciliation statement on a monthly basis to Review the details of the variations

between the Bank Book and Bank Statement and analyze reasons for long outstanding

bank credits (cheque deposited not yet credited).Check Long delay in encashment of

cheque issued by the project/its implementing offices. It may reveal that cheque were not

physically handed over in-time/ posted as indicated in the books. Analyze unusual credits

and debits in the bank transactions or in the Bank Book. Check any delay or non

accounting of bank charges or interest credited by bank etc.


Monthly Receipts and Payments statements to analyze the utilization of funds provided

and raised by the organization.

Monthly Trial Balance to ensure accuracy and correctness of the books of accounts.

Monthly Reconciliation of Payments with Expenditures to ensure proper accounting, as

all payments are not expenditures.

Quarterly Reconciliation of Expenditures with claims (Eligible for IDA financing) to

ensure that only eligible expenditures are included in the reimbursement claims.

Monthly Review of financial progress against Annual Budget (quarterly target)

identifying the variance to ensure that project is progressing as planned and to plug

any deviation or to take necessary steps to set right to achieve the target.

Monthly monitoring of major works/contracts with respect to time and cost over-runs to

ensure that all major contracts are progressing as per the contract terms/mile

stones/benchmarks and to alarm slow progress or stagnation in execution, if any, are

addressed immediately instead of waiting till the end of the contract period.

Monthly analysis of advances – schedule with age wise analysis to ensure financial

discipline and to avoid any Blockage of project funds for a long duration.

Monthly analysis of statutory payments – deductions and remittances such as sales tax

and income tax etc. to ensure that legal and statutory deductions and remittances are

made in time and avoid any legal action or penalty for the delay.

Monthly Review of financial progress against Annual Budget (quarterly target)

identifying the variance to ensure that project is progressing as planned and to plug any

deviation or to take necessary steps to set right to achieve the target

6.5.2 Fixed Assets

Fixed Assets shall be codified and yearly physical verification undertaken to ensure

accountability for the assets provided and to ensure its proper utilization.

The payments/purchase of asset, its procurement procedure, sanction order etc. shall

be subject to monthly review to ensure that assets have been purchased adhering to

the procurement guidelines and properly accounted.

Insurance policies such as assets insurance, etc. shall be reviewed periodically for

timely renewal and to ensure all assets of the projects and its implementing offices are

fully and adequately protected against all risks.

6.5.3 Cash and Bank Balances

Monthly Bank Reconciliation Statement of bank balances with statement of accounts

from all the implementing offices shall be obtained to keep a check on whether the

accounts personnel properly update books. This helps to detect errors and mistakes as

well.

Quarterly bank confirmation of balances shall be obtained.


SPMU/DPMU shall minimize cash transactions to maximum extent possible.

SPMU/DPMU shall insure movement of cash and cash holdings.

6.5.4 Procurements and Contracts

The procurement limits monthly shall be monitored to ensure that project has adhered

to the procurement limits and there is no mis-procurement.

Monitoring of all contracts by reviewing quarterly its financial progress and timeline

adherence

An annual confirmation of balances form outside parties shall be obtained.

6.5.5 Fund Flow

“Request Letter” shall be submitted for seeking releases after ensuring the balance

available, amount spent and the projected expenditure

Annual review and reconciliation of the status of disbursement in terms of Rupees

with the Government of India and Government of Bihar shall be undertaken to

confirm the disbursements with the GOI have been received.

Obtain accurate status of disbursement.

No transfers will be made from one DPMU/BPMU to another and all transfers will be

routed through the SPMU. This is to avoid problems with inter unit reconciliation

Inter Unit reconciliation to be carried out on a monthly basis.

6.5.6 EDP Controls

SPMU/DPMU/BPMU shall have proper backup procedures, disaster recovery

procedures, etc. SPMU/DPMU/BPMU shall establish appropriate control over

applications and environment of computer information systems by establishing

controls over Changes to computer programs and access to data files

6.5.7 Controls over Advances against Expenses

Advance to any project personnel in relation to project objective will be provided only

after written application of person who seeks advance and with approval of competent

authority.

The receiver of Advance will have to submit bill against advance within 30 days of date of

expenditure incurred. However incase of advance for outstation tour bill will have to be

submitted within 30 days of returning from tour.

If bill is not submitted within prescribed period advance may be adjusted against salary of

staff with permission of competent authority.

No new advance will be given unless bill against previous advance has been submitted.

This chapter discusses the proposed financial reporting system under the following broad heads:


(1) Objectives of the Financial MIS

(2) Interim Unaudited Financial Reports

(3) Annual Project Financial Statements

(4) Preparation of MIS reports.

7.1 OBJECTIVES

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.

7.2 INTERIM UNAUDITED FINANCIAL REPORTS

BGSYS prepares Interim Unaudited Financial Reports (IUFR) for all Project components at least

every calendar quarter. The IUFR is signed by the Project Director and Director(Finance &

Admin) and submitted to the World Bank within 45 days of the close of the each quarter after

approval of CEO.

The IUFR is prepared by BGSYS in the format given in Annex and comprises of the following

parts –

IUFR 1: Statement of Sources and Applications of Funds

IUFR 2: Details of Expenditure by Component

IUFR 3: Payments made against Prior Review Contract

IUFR 4: Expenditure against GP Performance Awards

All financial information in the IUFR should be in agreement with the books of account.

7.2.1 Expenditure Eligible for Reimbursement from the World Bank

The World Bank will reimburse eligible expenditures (works, goods, services and operating

costs) incurred on activities approved under the project.

SSEECCTTIIOONN VVIIII--FFIINNAANNCCIIAALL RREEPPOORRTTIINNGG


7.2.2 Expenditure Ineligible for Reimbursement from the World Bank

The following expenses are not eligible for reimbursement from the World Bank.

Any costs incurred on acquisition of Land;

Any expenditure not having any relation with project objective.

Institutional fee/Centage Charges payable to any executing agency/support agency.

7.3 ANNUAL PROJECT FINANCIAL STATEMENTS

7.3.1 Contents of the Project Financial Statements and other matters

As at the close of each financial year on 31st March, BGSYS prepares annual Project Financial

Statements (PFS), comprising of the following, for all project transactions under its purview.

a. Balance Sheet with supporting schedules

b. Statement of Sources & Applications of Funds

c. Reconciliation of audited expenditure with IUFR expenditure

e. Statement of Significant Accounting Policies and Notes on Accounts

The format of the PFS is given in Annex X XI & XII

The PFS is prepared by BGSYS in accordance with the accounting policies prescribed for the

Project in this manual, and presented to the auditors for their report thereon. The audited PFS is

signed by the Project Director, CEO , Director ( Finance & Admin) on behalf of the Society, and

by a partner on behalf of the audit firm.

7.3.2 Management Representation Letter

BGSYS Management provides a written acknowledgement of its responsibility for the

preparation and fair presentation of the PFS and an assertion that project funds have been

expended in accordance with the intended purposes as reflected in the financial statements. The

Management Representation Letter is issued to the Auditors in format given in Annex IV and is

part of the PFS.

7.3.3 Approval and submission of PFS

The audited annual PFS with comments of the Executive Committee are considered and

approved by the General Body.

Audited PFS along with the Audit Report is submitted to GoB and the World Bank within six

months of the close of the financial year i. e. on or before 30th

Sept following the financial year

along with a copy of the resolution passed by the General Body approving the audited financial

statements.


7.4 PREPARATION OF REPORTS

The proposed Financial MIS would be generated from the computerized TALLY

accounting system and the database maintained to track utilization of the funds

transferred. These would be based on the reports generated at each level . In addition,

SPMU shall consolidate the MIS reports generated by each BPMU & DPMU and shall

consolidate the MIS reports.


8.1 STAFFING

The BGSYS SPMU would have a Director (Finance & Administration) who would be on

deputation from the Govt having Minimum 12 years of experience in finance and administration

of government departments/ Society/program and would be supported by a qualified Chartered

Accountant for accounting and finance function. The Director (F&A) in BGSYS SPMU will

have overall responsibility for all financial and accounting aspects of the project besides

administration, including necessary interaction with the DPMUs & BPMU . Each of the 6

BGSYS DPMUs would have a District finance Coordinator having minimum 3 years experience

in financial management/accounting.

The SPMU, DPMUs and BPMUs would also have appropriate number of accountants to

support in carrying out the various routine activities under the direction of the key staff indicated

above. The number of these staff would be determined based on the quantum of activity.

Finance staff needs to quickly become familiar with and trained on the project and the

financial management system. This is an important priority in the early stages of the project; and

will be one of the main responsibilities of the Director( Finance & Admin).All project managers

and staff also needs to be sensitized on the importance of financial management aspects for

effective project management and success. Following are details of qualification, experience,

reporting authority, role and responsibility of various staff of finance unit of BPSP.

PERSONNEL

The personnel at various institutional levels of the project directly performing the financial

management functions are summarized in as below:

Post- Director -Finance & Administration

Qualification- Finance/Administration officer on deputation from GOB

Experience- Minimum 12 years of experience in finance and administration of

government departments/ Society/program.

Reporting to- Project director

Role & Responsibilities

The Director Finance & administration will have the overall responsibility for financial

management and administrative function of BGSYS

S/he has to prepare strategies, assist the Project Director for overall project & office

administration/ HR/financial management,

SECTION VIII – STAFFING & TRAINING


S/he has to supervise project administration ensuring smooth flow of funds and financial

management under various components and HR related functions,

S/he has to review performance of staff under administration, finance, and HR

management and recommend annual contract renewal; s/he will be also responsible for

coordination with auditors and financial consultant of the project.

S/he has to maintain communication with all concerns, gather support, organize and

perform internal HR functions,

S/he has to apprise PD of any bottlenecks and review performance of project

administration and suggest measures for prudent financial norms and ensuring fiduciary

disciplines in the society

S/he will be responsible for ensuring timely submission of IFR

Overall responsible for procurement of goods and services with the close co-ordination

with SPM- Procurement

Post- SPM-Finance

Qualification- CA/ ICWAI /MBA – Finance

Experience- 7 years experience in managing finance and account

Skill in providing technical guidance on financial management and

accounting

Proficiency in MS Office & tally.

Reporting to- Director -Finance & Administration


Ensure that all financial management issues are dealt with as per Society Finance manual

Support the Director ( Finance & Admin) on financial matters relating to the project;

make periodic visits to field offices for advising, solving problems and monitoring;

Establish effective budget preparation and monitoring mechanisms in the Project related

to financial transaction;

Maintaining the accounts of the Project in a computerized accounting package;

Generating periodic financial reports including Interim Un-audited Financial for

submission to the management/Government

Preparation of annual Project Financial Statements in line with consistently applied

accounting policies in the manner provided in the Project Financial Management Manual;

Ensuring compliance with all statutory and tax laws, i.e. filing of returns, obtaining tax

exemption certificates, deduction and deposit of TDS and service tax etc;

Ensuring proper internal controls in the processing of payments; carrying out monthly

bank reconciliations;

Ensuring timely audit of the Project including audit of the Project Financial Statements;

attend to audit reports and ensure timely and effective resolution of audit observations;

Support training to staff on financial management of society


Post- Account officer (3 no.)-SPMU

Qualification- MBA-Finance/CA-Inter/ICWA-Inter/M.Com/B.com, Preference to CA-

Inter/ICWA-Inter

Experience- For Semi qualified ( CA-Inter/ICWA-Inter)/M.Com/ Minimum 2 years of

experience in accounts /financial management; For B.com, Minimum 3

years Experience, Proficiency in Tally.


Role & Responsibilities (No.1)

S/he has to maintain all files, vouchers and registers on accounts of the BPSP at state

level

S/he has to responsible for maintenance of TALLY accounting system; consolidation of

accounts of SPMU & DPMU accounts

S/he has to support District/Block accountants on tally

S/he has to monitor advances of funds

Other works as may be assigned


S/he has to support in preparation of budgets and annual work plans,

S/he has to Prepare IUFR and other financial report to Management/ the World Bank

(IUFR),

S/he has to do pay-roll processing

S/he has to help in internal & external audit.

Checking of Tally accounting entry on regular basis


Role & Responsibilities(No.3)

S/he has to regularly check contract payments,

S/he has to regularly check consultants contracts,

S/he has to check all bills before making payments,

S/he has to process all payments (other than pay roll).


Post- Cashier -SPMU

Qualification- Minimum B.com

Experience- Minimum 2 years of experience in accounts /financial management.

Proficiency in Tally.




S/he has to manage cash transactions,

S/he has to process the cheques,

S/he has to help in making payments and

S/he has to do the activities related to cash management.


Post- District Finance Manager-DPMU

Qualification- MBA (Finance)/( CA-Inter/ICWA-Inter)/M.Com

Experience- Minimum 3 years of experience in accounts /financial management; Skill

in preparation of financial reports and managing day to day financial

matters of PMU.

Should have proficiency in MS Office and Accounts Software e.g. Tally

Reporting to- DPM


S/he has to ensure maintenance of regular books of accounts of DPMU and BPMUs on

Tally. Compilation of Accounting data of BPMU, financial reporting and submission of

accounts/reports to SPMU

S/he has to work for financial management activities related to credit/grant of the grant of

WB and GOB

S/he will support District Project Manager in managing day to day financial

management of the DPMU

S/he has to help in preparing procurement plan & procurement of goods and services for

the project/Society.

Her/his role includes preparation of budgets and monitoring the financial management

functions and application of tools.

S/he has to liaise with the project implementations teams, Government administration

NGO‟s, guide project teams to manage financial issues and ensure monitoring.

S/he will maintain inventory of materials and books of accounts, co-ordinate and support

meetings, workshops related to financial procedure budget expenditure analysis.

Ensuring compliance of TDS under Income Tax Act, WCT of VAT.

Post- Accountant (2 no.) -DPMU

Qualification- Minimum B.com,



Reporting to- DPM


S/he has to maintain all files, vouchers and registers on accounts of the DPMU at

District level

S/he has to responsible for data entry on TALLY accounting system; consolidation of

accounts of BPMU.


S/he has to support Block accountants for accounting

S/he has to monitor advances of funds

Role & Responsibilities (No.2) (During initial period both roles can be performed by a single

accountant)

S/he has to support in preparation of budgets and annual work plans,

S/he has to do pay-roll processing

S/he has to help in internal & external audit.

Checking of Tally accounting entry on regular basis

S/he has to regularly check contract payments,

S/he has to regularly check consultants contracts,

S/he has to check all bills before making payments,

S/he has to process all payments

Post- Cashier -DPMU

Qualification- Minimum B.com



Reporting to- DPM




S/he has to help in making payments and

Post- Accountant- BPMU (Decision for this post will be taken later during

implementation phase of the project)

Reporting to- BPM



S/he has to maintain cash book/bank book/Journal book for operational expences


S/he has to help in making payments

8.2 TRAINING

SPMU, DPMU & BPMU Staff: The financial and accounting staff at the State, District

& Block level will be trained in the requirements of accounting and reporting under the

project by the separate Agency. Modules will be prepared by the Agency and training

will be included in their annual calendar. As the project is implementing computerized

financial management & Accounting system, the staff will be trained to operate the

computerized systems


SECTION-IX AUDIT ARRANGEMENTS

9.1 STATUTORY AUDIT

The SPMU will appoint an independent firm of chartered accountants to conduct annual

audit of the project. Annual audit shall be completed by 30th

June every year. Duly audited

annual accounts of the society shall be placed for approval before EC immediately after

completion of audit. Annual audited accounts of the society shall be placed before the annual

General Body meeting before the 31st July of the year. The audit would cover all project

operations.

The audit report will consist of:

(i) financial statements and

(ii) audit opinion confirming whether the project financial statements have been

prepared in accordance with consistently applied Accounting Standards and give a

true and fair view of the operations of the project during the year and that the

withdrawals from the World Bank made on the basis of IFRs, procedures and

internal controls involved in their preparation, can be relied on to support the

related withdrawals.

Additionally, the auditor will be required to provide a management letter to project management

highlighting findings during the audit. The audit will be conducted as per the accepted standards

and financial reporting will follow the Accounting Standards.

TORs for the audit has been prepared in agreement with World Bank and will be agreed upon

with the audit firm/s .The TOR for Statutory audit is given attached as Annexure-

9.1.1 Objectives of the Statutory Audit

The key objectives of the Project external audit are to obtain a professional opinion from

independent auditors whether –

1. the PFS give a true and fair view of the financial position of the Project at the end of the

period under audit examination, and of the sources and applications of Project funds for that

period;

2. the Project funds were utilized for the purposes for which they were provided;


3. Expenditures are eligible for financing under the Project legal agreements and these were

exclusively financed through the Project funds and no other sources of funds have been

received by BGSYS for incurring these expenditures;

4. Expenditure reported in the Interim Unaudited Financial Reports (IUFR) are in agreement

with the books of account and the IUFRs can be relied upon to support applications for

withdrawal of the Credit, and adequate supporting documentation has been maintained to

support these claims;

5. Procurement has been carried by BGSYS in line with the agreed procedures as detailed in the

Project legal agreements and the Procurement Manual;

6. The Project has an adequate internal control system (including its continuing implementation

and effectiveness) and adheres to the provisions of the project legal agreements, the Financial

Management, Procurement and Operations Manual in all material aspects.

9.1.2 Appointment and Tenure of Statutory Auditors- The Project External Auditors are

selected in accordance with the guidelines for procurement of consultants as contained in the

Procurement Manual of the Project,

The process of appointment should be completed before the commencement of the financial year

under audit. The appointment is approved by the General Body on the recommendations of

the Executive Committee of the Society

Tenure of the selected audit will be for a period of one year.

9.2 INTERNAL AUDIT

The project accounts will also be subjected to quarterly internal audit. Internal audit of the year

will be conducted by Firms of chartered accountants and will be engaged by the SPMU to

conduct a quarterly audit of the State & District Units and to submit management letters to the

Management. The TORs of the internal audit task have been drafted and attached at Annexure

A firm of chartered accountants will be engaged to cover all the districts and in line with the

expansion of the project more firms may be inducted to carry out the audit.

The audit will be carried out on a quarterly basis and the sample coverage is projected to be as

under: (This will be subject to changes based on the actual pace of implementation)

Unit Expected Total No. of

Units

Frequency No of Units to be Covered in

Audit as per stated frequency

2011-12 to

2015-16

2011-12 to

2015-16

SPMU 1 Quarterly 1

DPMU 6 Quarterly 6

The auditors will be appointed on a competitive basis as per the procurement guidelines of the

Bank from the firms which meet certain minimum quality criteria .


. The key internal audit functions are:

Ascertain whether the systems of internal checks and controls operating are effective

Ascertain reliability of accounting financial reports

Ascertain the extent to which the systems in place prevent misuse of project assets

Ascertain whether the financial rules and procedures as laid down in the Manuals are

followed.

Verification of GP for performance grant

9.2.1 Appointment and tenure of Internal Auditors

The Project Internal Auditors are selected in accordance with the guidelines for procurement of

consultants as contained in the Procurement Manual of the Project,

The process of appointment should be completed before the end of first quarter of the financial

year under audit. The appointment is approved by the Executive Committee on

recommendation of committee of CEO, PD and Director (A&F).

The tenure of the selected audit firm will be for a period of one year.

9.2.2 Internal Audit Report

The Internal Auditors shall prepare quarterly reports and an annual audit report.

The report shall contain results of a 100% check of the accounts.

The internal audit shall review project financial management systems and adherence

to Government Orders, office orders, instructions issued by the State Society,

adequacy of internal controls, etc.

The audit shall check the effectiveness of the overall financial management

arrangements of the project at all levels.

It shall provide the necessary support to the Project Management with timely

information on the following:

o Accounting and financial management aspects of the project

o Adequacy of the internal controls

o Compliance with the various financial arrangements

o It shall provide data for corrective and follow up measures


9.2.3 Addressing of Audit Observations/Recommendations

(1) Any adverse comments of the internal auditors need to be looked into and

rectified immediately both by the State, District & Block Units.

(2) Any serious comment shall be thoroughly investigated to see if internal controls

exist in the areas reported and if internal controls are missing or lacking,

sufficient remedial measures have to be taken immediately to rectify the

problem.

(3) In such a case, a critical report shall be submitted by the Auditors to the

Executive Committee of State Society immediately.

9.2.4 Performance Review of Internal auditor

The annual evaluation of the performance of the Auditor‟s includes the following parameters:

Timeliness in completion of the audit (deviation between stipulated and actual date of

completion);

Timeliness of submission of audit reports (deviation between stipulated and actual date of

submission);

Overall quality of the Audit Reports in terms compliance with key criteria contained in the

ToR including coverage of areas and auditable units, quality of staff deployed etc., relevance

of audit observations, application of modern audit techniques etc.

9.2.5 Removal of internal auditor Auditors

An auditor may be removed on the following grounds:

Continuous delay in conducting the audit or issuing the report without justified reasons;

Significant inadequacy in the quality of audit or the audit reports;

Conflict of Interest, misconduct etc.;

Any other ground that is considered serious by the Executive committee

However, before any action is initiated, adequate opportunity is provided to the auditor to

remedy the default/defect or to make representation .The final authority for approving the

removal of the internal auditor is the Executive committee on the recommendation of committee

of CEO, PD and Director (A&F).


ANNEXURE I BIHAR GRAM SWARAJ YOJANA SOCIETY BIHAR PANCHAYAT STRENGTHENING PROJECT (CREDIT NO. ____)

(TERMS OF REFERENCE FOR INTERNAL AUDITOR)

1 BACKGROUND Government of Bihar is implementing a Bihar Panchayat Strengthening Project funded by the

World Bank through its Bihar Gram swaraj Yojana Society ( BGSYS). BGSYS has been set

up by the Government of Bihar as part of its strategy to Strength Panchayati Raj Institution.

BGSYS is an independent and autonomous institution registered under the Society Registration

Act 1860 in the year 2010. The proposed project is the first-phase of World Bank support to a long-

term reform agenda. A long-term vision of inclusive, responsive and accountable local governance

encompasses the following aspects:

A critical mass of grassroots political leaders who promote development, social justice

and cohesion

PRIs have mature processes, practices and capacity to address own development

priorities

GoI and GoB allow PRIs more autonomy

Informed and engaged citizenry and activists who participate in governance, monitor service

delivery and demand government accountability

2 OBJECTIVES OF THE PROJECT-

The Project Development Objective of this project is “to strengthen state government capacity

in promoting inclusive, responsive and accountable Panchayati Raj Institutions in six districts.”

Project beneficiaries include: 1) elected officials and functionaries at the Gram Panchayat




districts, who are better able to effectively monitor fulfillment of government obligations

and can enjoy better and fairer government services and undertake effective collective

actions to solve local problems.

Key performance indicators include:







Decreased response time and more timely resolution of complaints associated with

receipt by citizens of entitlements and public services that PRIs provide, e.g., pension

payment, housing benefits, birth & death certificates, and caste certificates;



the end of fiscal year for external audit;

Increased percentage of people from all social groups who perceive panchayats as being a

responsive, reliable and trustworthy resource to help address individual and community

issues.

3. Project Scope & Components

It is envisaged that the project, to be implemented over a period of 5 years, will cover 1312

Gram Panchayats in 93 blocks spread over 6 districts and the project cost is estimated at USD

120 million. The five broad components of the project are:




4) Panchayat Performance Grant


4. Implementation Arrangements

The Bihar Gram swaraj Yojana Society under the administrative Control of Dept. of

Panchayati Raj, Govt. of Bihar is led by its General Body, from which a more functional

Executive Committee has been formed for taking all policy level decisions and advising the

functionaries of the society on the management of Bihar Panchayat Strengthening Projec.

Representatives from the Government of Bihar, civil society, private sector, banks, academia,

and developmental institutions form the executive committee of the Society.

State Level: At the state level, the State Project Management Unit (SPMU) has been formed

and staffed with a team of dedicated development professionals from the market/GOB

deputation officer. The BPS project and the society is headed by a Chief Executive Officer

District level: District Project Management Units (DPMU) are established in each of the six

districts. The District Project Manager heads the DPMU with primary responsibility of

Coordinating with their blocks for effective implementation and convergence with ongoing

projects in the district.

Block Level: At the Block level, Block Project Implementing Units (BPMUs) will be

implemented in each of the 93 units will be established The Block Project Manager heads the

BPMU.


5. Objectives of the Audit:

The overall objectives of the internal audit are to: (i) enable the auditor to express a

professional opinion on the effectiveness of the overall financial management and procurement

arrangements; (ii) whether the overall financial management and arrangements including the

system of internal controls as documented in the Project Financial Management Manual

(FMM), the Project Implementation Plan (PIP) are in practice, effective and adequate,

commensurate to the nature of the operations and (ii) provide project management with timely

information on financial management aspects of the project, including internal controls and

compliance with financing agreements, to enable follow-up action.

5.1 Coverage and Standards for the Audit: The audit would cover the entire project i.e.,

covering the implementing units at the Project level (SPMU, DPMU) and Gram Panchayat(GP)

for performance award. The audit would also cover all consultancies or other contracts that

may be entered into by the implementing agencies. The internal audit should be carried out in

accordance with the Auditing & Assurance Standards prescribed by the Institute of Chartered

Accountants of India and will include such tests and controls, as the auditor considers

necessary under the circumstances.

Specific areas of coverage of the audit will include the following:

5.1.1 Project level (SPMU, DPMU):

a) An assessment of the adequacy of the project financial management systems, including

internal controls. This would include aspects such as adequacy and effectiveness of

accounting, financial and operational controls, and any needs for revision; level of

compliance with established policies, plans and procedures; reliability of accounting

systems, data and financial reports; methods of remedying weak controls or creating

controls in areas where they are lacking; verification of assets and liabilities.

b) Efficiency and timeliness of the funds flow mechanism at the SPMU, DPMU and BPMU

and to GP for performance grant.

c) Whether the fund release for GP for performance grant are properly approved by the

officer at SPMU having the necessary authority and the conditions (tiggers/ graduation

criteria) for tranche release (as provided in the POM/FMM for various funds) have been

complied and are in line with the financing agreement.

d) Whether the SPMU is accounting for the tranche release properly in the subsidiary

records and is monitoring the receipt of periodic reports and utilization certificates from

the GP for performance grant and follow up on overdue reports are adequate. Quantify

(number and amount) of the funds transferred to the GP for performance grant for which

the reports and/or UCs are overdue.

e) Whether the accounts of the project are complied in a timely manner and the expenditures

consolidated on a Quaterly basis at the SPMU level.


f) An assessment of compliance with provisions of financing agreements (IDA

Development Credit Agreement and Project Agreement), especially those relating to

procurement, accounting and financial matters.

g) Goods, works and services financed have been procured in accordance with the World

Bank procurement guidelines, procurement manual of the project and financing

agreements;

h) All necessary supporting documents, records, and accounts have been kept in respect of

all project activities and that clear linkages exist between accounting records, accounts

books and the periodic financial reports (e. Interim Financial Reports)

i) Adequate records are maintained regarding the assets created and assets acquired by the

project, including details of cost, identification and location of assets and ensuring that

there is a system of physical verifications of assets

j) The auditor is expected to obtain and satisfactorily document sufficient audit evidence to

support audit conclusions.

o) Inter unit fund transfers and Bank reconciliations have been carried out on a monthly

basis.

6. Period, Timing and sample coverage of Internal Audit

The Internal Audit will be for the period from 1st April to March 31, of the year will be carried

out on a quarterly basis. The selected firm(s) will submit in advance and agree with the SPMU

a „schedule of audit‟.

The audit will be carried out on a quarterly basis and the coverage is projected to be as

under:

Unit Expected Total No. of

Units

%

Sample

Frequency No of Units to

be Covered in

Audit as per

stated

frequency

2011-12 2012-13

SPMU 1 1 100% Half Yearly 1

DPMU 6 6 100% Quarterly 6

7. Reporting


7.1 Quarterly Reporting: The Auditors will provide a quarterly report for the units audited

(a summary of the key findings, implications and recommendations for each District –

including the BPMU and GPs covered, must be prepared and discussed with the

DPM/SPM/Director(A&F) to enable the Project Management to take timely action. The report

should be discussed and agreed with the auditable units and should be structured in a manner

giving the observations, the implications of the observations, the suggested recommendation

and the management comments/ agreed actions. The audit observations should be supported by

instances and quantified, as far as practicable.

The individual audit reports should be submitted within 30 days of the completion of the audit

of a particular unit (District – together with the sample of Block and GP within District) and

SPMU. The reports will be directed as under –

The Project Management Letter to PD/CEO.

The individual audit reports of each of the auditable unit to the PD/Director(F&A)

In addition the internal auditor should provide an Executive Summary highlighting the critical

issues which require the attention of the CEO and the Executive Committee of the BGSYS and

the status of actions on the previous recommendations

7.2 Format of the Management Letter: The Management Letter will inter alia have the

following sections -

Objectives of the audit;

Methodology of the audit;

The status of implementation of the financial management system;

The status of compliance of the previous audit reports, including major audit

observations pending compliance;

The key areas of weaknesses that need improvement; and

Recommendations for improvements.

8. Qualification of the Auditing Firm(s)

8.1 The Audit firm applying for the assignment should possess the following qualifications.

The firm should have a standing of at least fifteen years.

The firm must have at least four partners exclusively engaged in the affairs of the firm,

of whom at least two partners should be Fellow Chartered Accountants.

The Firm should have at least one partner with continuous association with the firm of

not less than ten years and one partner with continuous association of not less than 5

years and adequate qualified staff to be able to carry out the assignment.


The firm should be empanelled with the Comptroller and Auditor General of India.

Each audit team would be led by an Audit Partner with a minimum of 10 years of post-

qualification experience as a practicing Chartered Accountant. The anticipated input of

the team leader is about 30 working days each year. Day-to-day management of the

audit should be the responsibility of an Audit Manager/Partner with at least 5 years of

post-qualification experience The audit firm should be able to deploy adequate number

of audit staff comprising of qualified, semi – qualified and unqualified assistants.

9. General

The auditor would be given access to all documents, correspondence, and any other

information relating to the Project and deemed necessary by the auditor. The auditor

should become familiar with the Project, and with the relevant policies and guidelines

of the World Bank (including those relating to disbursements, procurement and

financial management and reporting). The auditor would be provided copies of the

Project Implementation Plan, Project Appraisal Document (PAD) of the World Bank,

Development Credit Agreement and Project Agreement with IDA (including agreed

Minutes of negotiations), Financial Management Manuals, guidelines, policies and

procedures issued by Project Management and the relevant World Bank policies and

guidelines.


ANNEXURE II

BIHAR GRAM SWARAJ YOJANA SOCIETY BIHAR PANCHAYAT STRENGTHENING PROJECT (CREDIT NO. ____)

TERMS OF REFERENCE FOR EXTERNAL/ STATUTORY AUDITORS

1. Background Government of Bihar is implementing a Bihar Panchayat Strengthening Project funded by the

World Bank through its Bihar Gram swaraj Yojana Society ( BGSYS). BGSYS has been set

up by the Government of Bihar as part of its strategy to Strength Panchayati Raj Institution.

BGSYS is an independent and autonomous institution registered under the Society Registration

Act 1860 in the year 2010. The proposed project is the first-phase of World Bank support to a

long-term reform agenda. A long-term vision of inclusive, responsive and accountable local

governance encompasses the following aspects:

A critical mass of grassroots political leaders who promote development, social justice

and cohesion

PRIs have mature processes, practices and capacity to address own development

priorities

GoI and GoB allow PRIs more autonomy

Informed and engaged citizenry and activists who participate in governance, monitor service

delivery and demand government accountability

2. Objectives of the Project-

The Project Development Objective of this project is “to strengthen state government capacity

in promoting inclusive, responsive and accountable Panchayati Raj Institutions in six districts.”

Project beneficiaries include: 1) elected officials and functionaries at the Gram Panchayat




districts, who are better able to effectively monitor fulfillment of government obligations

and can enjoy better and fairer government services and undertake effective collective

actions to solve local problems.

Key performance indicators include:








Decreased response time and more timely resolution of complaints associated with

receipt by citizens of entitlements and public services that PRIs provide, e.g., pension

payment, housing benefits, birth & death certificates, and caste certificates;


the end of fiscal year for external audit; Increased percentage of people from all social groups who perceive panchayats as being a

responsive, reliable and trustworthy resource to help address individual and community issues.

3. Project Scope & Components

It is envisaged that the project, to be implemented over a period of 5 years, will cover 1312

Gram Panchayats in 93 blocks spread over 6 districts and the project cost is estimated at USD

120 million. The five broad components of the project are:




4) Panchayat Performance Grant


4. Implementation Arrangements

The Bihar Gram swaraj Yojana Society under the administrative Control of Dept. of

Panchayati Raj, Govt. of Bihar is led by its General Body, from which a more functional

Executive Committee has been formed for taking all policy level decisions and advising the

functionaries of the society on the management of Bihar Panchayat Strengthening Projec.

Representatives from the Government of Bihar, civil society, private sector, banks, academia,

and developmental institutions form the executive committee of the Society.

State Level: At the state level, the State Project Management Unit (SPMU) has been formed

and staffed with a team of dedicated development professionals from the market. The BPS

project and the society is headed by a Chief Executive Officer

District level: District Project Coordination Units (DPMU) are established in each of the six

districts. The District Project Manager heads the DPMU with primary responsibility of

Coordinating with their blocks for effective implementation and convergence with ongoing

projects in the district.

Block Level: At the Block level, Block Project Implementing Units (BPMUs) will be

implemented in each of the 93 units will be established The Block Project Manager heads the

BPMU.


5. Objectives of the Statutory Audit

The key objectives of the Project external audit are to obtain a professional opinion from

independent auditors whether –

1 the PFS give a true and fair view of the financial position of the Project at the end

of the period under audit examination, and of the sources and applications of Project funds

for that period;

2 the Project funds were utilized for the purposes for which they were provided;

3 Expenditures are eligible for financing under the Project legal agreements and these

were exclusively financed through the Project funds and no other sources of funds have

been received by BGSYS for incurring these expenditures;

4 Expenditure reported in the Interim Unaudited Financial Reports (IUFR) are in

agreement with the books of account and the IUFRs can be relied upon to support

applications for withdrawal of the Credit, and adequate supporting documentation has been

maintained to support these claims;

5 Procurement has been carried by BGSYS in line with the agreed procedures as

detailed in the Project legal agreements and the Procurement Manual;

6 The Project has an adequate internal control system (including its continuing

implementation and effectiveness) and adheres to the provisions of the project legal

agreements, the Financial Management, Procurement and Operations Manual in all

material aspects.

Timing: The audit would be carried out annually and the report should be provided to the

SPMU latest by 30th

June each year to facilitate approval and placement before the

Executive Committee and General body before 31st July and submission to the World Bank

by September 30 each year.

Period of Appointment: The auditor would be appointed for a period of one year for the

financial year ending March 31.

6. Qualification of the Auditing Firm(s)

The Audit firm applying for the assignment should possess the following qualifications.

The firm should have a standing of at least fifteen years.

The firm must have at least four partners exclusively engaged in the affairs of the

firm, of whom at least two partners should be Fellow Chartered Accountants.

The Firm should have at least one partner with continuous association with the firm

of not less than ten years and one partner with continuous association of not less

than 5 years and adequate qualified staff to be able to carry out the assignment.


The firm should be empanelled with the Comptroller and Auditor General of India.

Each audit team would be led by an Audit Partner with a minimum of 10 years of

post- qualification experience as a practicing Chartered Accountant. The anticipated

input of the team leader is about 30 working days each year. Day-to-day

management of the audit should be the responsibility of an Audit Manager/Partner

with at least 5 years of post-qualification experience The audit firm should be able

to deploy adequate number of audit staff comprising of qualified, semi – qualified

and unqualified assistants.

7 GENERAL

The auditor should be given access to all legal documents, correspondence, books of

accounts, Financial management manual, Community Operations Manual, Project

Implementation Plan, Project Appraisal Document (PAD), financial and administrative

rules, FM Manual, Government orders and office orders and any other information

associated with the project and as deemed necessary by the auditor. Confirmation should

also be obtained wherever required and appended to the Report


ANNEXURE-III

MODEL AUDIT REPORT

UNQUALIFIED OPINION

(FOR PROJECT FINANCIAL STATEMENT INCLUDING IFR)

Addressee *

Introductory Paragraph

We have audited the accompanying financial statements of the [_____________] Project

[financed under World Bank Loan No. ___________/IDA as of March 31, 20XX [indicate

any other additional years necessary] for the year(s) then ended. Our responsibility is to

express an opinion on these financial statements based on our audit.

Scope Paragraph

We conducted our audit in accordance with National Standards on Auditing issued by the

Institute of Chartered of India. Those Standards require that we plan and perform the audit

to obtain reasonable assurance about whether the financial statements are free of material

misstatement. An audit includes examining, on a test basis, evidence supporting the

amounts and disclosures in the financial statements. An audit also includes assessing the

accounting principles used and significant estimates made by management, as well as

evaluating the overall financial statement presentation. We believe that our audit provides a

reasonable basis for our opinion.

A Opinion Paragraph

In our opinion, the financial statements give a true and fair view of the Sources and

Application of Funds and the financial position of _______________________ Project for

the year ended March 31, 20XX, in accordance with relevant national standards.

In addition, (a) with respect to IFRs adequate supporting documentation has been

maintained to support claims to the World Bank for reimbursements of expenditures

incurred; and (b) which expenditures are eligible for financing under the Loan/Credit

Agreement [Ln/Cr. _______________]. (c) The IFR submitted and procedure and internal

controls involved in their preparation can be relied upon to support the withdrawals.

[Name and Address of Audit Firm]

[Date – Completion Date of Audit]

The auditor‟s report should be appropriately addressed as required by the circumstances

of the engagement and local regulations.

** A “Source and Application of Funds” statement is always required for each project. A

balance sheet is also required where the project has assets and liabilities.


ANNEXURE-IV BIHAR GRAM SWARAJ YOJANA SOCIETY

BIHAR PANCHAYAT STRENGTHENING PROJECT (CREDIT NO. ____)

FORMAT OF MANAGEMENT REPRESENTATION LETTER1

(ON THE LETTERHEAD OF BGSYS)

(To Statutory/External Auditor) (Date)

This Representation Letter is provided to you in connection with your audit of the Project

Financial Statements of the Bihar Panchayat Strengthening Project under Credit No.

______ for the year ended on ______ implemented by Bihar Gram swaraj Yojana Society

(BGSYS) for the purpose of expressing an opinion as to whether the financial statements

give a true and fair view of the financial position of the Project as of ____ and of the

sources and uses of funds for the year then ended. We acknowledge our responsibility for

the fair presentation of the financial statements in accordance with the basis of accounting

policies followed by BGSYS, and we confirm, to the best of our knowledge and belief, the

following representations made to you during your audit:

The Project Financial Statements are free of material misstatements, including

omissions.

Assets shown on the project balance sheet exist, are owned by BGSYS, and are used

solely for project purposes.

Project funds have been used for the purposes for which they were provided.

Project expenditures are eligible for financing under the Credit and Project Agreements.

There have been no irregularities involving management or employees which have a

significant impact on the internal controls or that could have a material effect on the

project financial statements.

Procurement has been done as per the agreed procedures as per the Credit and Project

Agreements and the Procurement Manual. We have made available to you all

procurement documents relating to the Project.

We have made available to you all books of account and supporting documentation

relating to the Project.

All complaints received and subsequent correspondences thereof have been made

available to you.

The Project has complied with the conditions of the Credit Agreement, Project

Agreement, Emergency Project Paper, Minutes of Negotiations, Operations Manual,

Financial Management Manual and the Procurement Manual.

_______________________ _______________________

Project Director Chief Finance officer

1 This sample management representation letter is based on SA 580 - “Written Representations,” issued by

the Institute of Chartered Accountants of India (revised 2008)


ANNEXURE V

BUDGET FORMAT PART-1

Compon

ent No.

Particulars Qtr I Qtr II Qtr III Qtr IV Total

Units Amt. Units Amt Units Amt Units Amt Units Amt

1 3) Panchayat Sarkar

Bhavans

Total component1

2

4) Gram Panchayat

Capacity Building

2.1 Institutional

Strengthening

2.1a Core institutional

capacity building

2.1b Community

Engagement

2.1c Communications and

Mass Media

2.1d Financial Management

Total 2.1

2.2 Strengthening

Development Capacity

of Panchayats.

2.2a Sanitation

2.2b Safe drinking Water

2.2c Nutrition

2.2d Natural Resource

Management

Total 2.2

Total component2

3 State-level Policy

Environment for

Decentralization


Total component 3

4 Panchayat

Performance Award

Total component 4

5 Project Management &

coordination [includes

M and E]

Total component5

GRAND TOTAL OF

COMPONENTS

1+2+3+4+5

The above main Activity has to broken in Further Sub Activity and Account Heads.


ANNEXURE VI

BUDGET FORMAT-2

PART-2

BIHAR PANCHAYAT STRENGTHENING PROJECT

(CREDIT NO. ____)

ANNUAL ACTION PLAN/BUDGET FOR THE YEAR 20 _ _/_ _

Component/Sub – Component

Cost over

Project Period

Actual Expenditure

till the beginning of

the current year

Budget for the

current year

Balance Cost over

remaining Project

Period

1 5) Panchayat Sarkar Bhavans

Total component1

2



2.1a Core institutional capacity building

2.1

b

Community Engagement

2.1c Communications and Mass Media

2.1

d

Financial Management

Total 2.1

2.2 Strengthening Development Capacity

of Panchayats.

2.2a Sanitation

2.2

b

Safe drinking Water

2.2c Nutrition

2.2

d

Natural Resource Management

Total 2.2


Total component2

3 State-level Policy Environment for

Decentralization

Total component 3

4 Panchayat Performance Award

Total component 4

5 Project Management & coordination

[includes M and E]

Total component5

GRAND TOTAL OF

COMPONENTS 1+2+3+4+5


ANNEXURE VII

INTERIM UNAUDITED FINANCIAL REPORT FOR THE

QUARTER _________TO _________

IUFR 1: STATEMENT OF SOURCES AND USES OF FUNDS )

(TO BE PREPARED /MODIFIED BY WB)

Particulars Allocation as per

PAD

Actuals CTD

expenditure

as a % of

Allocation

as per PAD

For the quarter YTD CTD

1 2 3 4 5 6 = 5/2*100

1. Opening Balances

Cash in Hand

Balance with Bank

Advances less Liabilities

Total Opening Balances

2. Add: Receipts

Grant from IDA/World bank/GOB

Interest Received

Other Income

Total Receipts

3. Less: Project Expenditure

Panchayat Sarkar Bhavans

Gram Panchayat Capacity Building

State-level Policy Environment for

Decentralization

Panchayat Performance Award

Project Management and cordination

[includes M and E]

Total Project Expenditure

4. Closing Balances

Cash in Hand

Balance with Bank

Advances less Liabilities

Total Closing Balances (1+2-3)

The documents supporting the above are maintained at the SPMU/DPMU/BPMU of the Society.

The expenditures reported are in agreement with the books of account maintained by BGSYS.

Director ( Finance & Admin) Project

Director

Dated: _ _ /_ _/_ _ _ _


ANNEXURE VIII


(CREDIT NO. ____)

IUFR 2: DETAILS OF EXPENDITURE BY COMPONENT/SUB COMPONENT

INTERIM UNAUDITED FINANCIAL REPORT FOR THE QUARTER _________TO

_________

Particulars Allocation

as per

PAD

Actuals CTD

expenditure as

a % of

Allocation as

per PAD

For the

quarter

YTD CTD

1 2 3 4 5 6 = 5/2*100


Total component1

2

8) Gram Panchayat Capacity

Building


2.1a Core institutional capacity

building

2.1b Community Engagement



Total 2.1

2.2 Strengthening Development

Capacity of Panchayats.

2.2a Sanitation


2.2c Nutrition

2.2d Natural Resource Management


Dated: _ _ /_ _/_ _ _ _ __________________________ _________________________

Director ( Finance & Admin) Project Director

Total 2.2

Total component2

3 State-level Policy Environment for

Decentralization

Total component 3


Total component 4


coordination [includes M and E]

Total component5

GRAND TOTAL OF

COMPONENTS 1+2+3+4+5


ANNEXURE IX


(CREDIT NO. ____)

INTERIM UNAUDITED FINANCIAL REPORT FOR THE QUARTER _________TO _________

IUFR 3: PAYMENTS MADE UNDER PRIOR REVIEW CONTRACTS

S.

N

.

Contractor/S

upplier/Cons

ultant

Contrac

t No. &

Date

Descri

ption

Contract

Amount

(revised)

Stipulated

/

actual

Date of

Completio

n

WBR

No.

Date of

NOC

from

Bank

Amount Paid World Bank Share

During the

quarter

YTD CTD Rei

m.

%

During

the

quarter

CT

D


ANNEXURE X

BIHAR GRAM SWARAJ YOJANA SOCIETY


BALANCE SHEET AS AT 31ST

MARCH _ _ _ _

(Amount in Rs.) Previous

Year

Liabilities Current

Year

Previous

Year

Assets Current

Year

Grant from Government of Bihar Fixed Assets (Schedule 3)

Unutilized Grant at the beginning of the Year Current Assets, Loans & Advances

Add: Grant received during the year Cash in Hand

Less: Project Revenue Expenditure during the year

(Schedule 1)

Balance with Bank/s in Current/Savings Account

(Schedule 4)

Less: Project Capital Expenditure during the year Balance with Bank/s in Fixed Deposits

Unutilized Grant at the close of the Year Cheques in Hand/ Funds in Transit

Advances & Other Current Assets (Schedule 5)

Capital Fund

Current Liabilities (Schedule 2)

Total

Total

Significant Account Policies – Schedule 6

Notes to Accounts – Schedule 7

The schedules referred to above form an integral part of the Balance Sheet.

Dated: _ _ /_ _/_ _ _ _ __________________________ _________________________



Annexure X (contd)

Bihar Gram swaraj Yojana Society

Bihar Panchayat Strengthening Project (Credit No. ____)

Balance Sheet as at 31st March _ _ _ _

Schedules forming part of the Balance Sheet as at 31st March _ _ _ _

Schedule 1 – Project Revenue Expenditure during the year

Sl.

no.

Particulars Current

Year

Previous

Year


Total component1

2

Gram Panchayat Capacity Building


2.1a Core institutional capacity building

2.1b Community Engagement



Total 2.1

2.2 Strengthening Development Capacity of Panchayats.

2.2a Sanitation


2.2c Nutrition

2.2d Natural Resource Management

Total 2.2


(Amount in Rs.)

Schedule 2 – Current Liabilities

(Amount in Rs.)

Particulars Current Year Previous Year

Tax deducted at Source payable

Works Contract Tax payable

Other Taxes payable

Bank Interest

Other Receipts

Earnest Money received

Security Deposit received

Total

Total component2

3 State-level Policy Environment for Decentralization

Total component 3


Total component 4

5 Project Management & coordination [includes M and

E]

Total component5

GRAND TOTAL OF COMPONENTS 1+2+3+4+5


Annexure X (contd)

Schedule 3 – Fixed Assets

(Amount in Rs.) Particulars As at the end of

Previous Year

Purchased

during the year

Adjustments/

disposal during

the year

As at the end of

Current Year

a. Project Management

Furniture & Fixtures

Computers

Office Equipment

Vehicles

Total

Schedule 4 – Balance with Bank/s in Current/Savings Account

(Amount in Rs.) Particulars Current Year Previous Year

SPMU

DPMUs

BPMUs

Total

Schedule 5 – Advances & Other Current Assets


Advances to Contractors

Advances to Consultants

Advances to DPMU/BPMUs

Advances to Staff

Other Advances

Security Deposits (paid)

Total


ANNEXURE XI



STATEMENT OF SOURCES AND APPLICATIONS OF FUNDS FOR THE YEAR

ENDED 31ST

MARCH _ _ _ _


1. Opening Balances

Cash in Hand

Balance with Bank

Funds in Transit/Cheques in Hand

Total Opening Balances

2. Add: Sources/Receipts

Grant/Loan from Government of Bihar/WB/GOI

Interest

Other Receipts

Decrease in Advances & Other Current Assets

Increase in Current Liabilities

Total Sources/Receipts

3. Less: Application/Uses PANCHAYAT CAPACITY BUILDING

STATE LEVEL GOVERNANCE REFORM AND CAPACITY

BUILDING

Panchayat Performance Awards

PROJECT MANAGEMENT AND COORDINATION (Except Society

Fixed Assets)

Fixed Assets purchased (net)

Increase in Advances & Other Current Assets

Decrease in Current Liabilities

Total Application/Uses

4. Closing Balances

Cash in Hand

Balance with Bank

Funds in Transit/Cheques in Hand

Total Closing Balances

Dated: _ _ /_ _/_ _ _ _

_________________________

Project Director

Director ( Finance & Admin)

__________________________

Note: Total Closing Balances (4) should be equal to 1 + 2 – 3


ANNEXURE XII



RECONCILIATION OF AUDITED EXPENDITURE WITH IUFR EXPENDITURE FOR THE YEAR ENDED 31ST

MARCH _ _ _ _

(AMOUNT IN RS.) Particulars Component 1

PANCHAYAT

CAPACITY

BUILDING

Component 2

STATE LEVEL

GOVERNANCE

REFORM AND

CAPACITY

BUILDING

Component 3

Panchayat

Performance

Awards

Component 4

PROJECT

MANAGEMENT

AND

COORDINATION

Total

Total Expenditure as per Audited Project

Financial Statements

Revenue Expenditure (Schedule 1)

Capital Expenditure (Schedule 3)

Add: Other eligible amounts (mobilization

advance, secured advance etc)

Less: Ineligible Expenditure

1. Eligible Expenditure as per audited

PFS

2. Eligible Expenditure as per IUFR

3. Excess/Short Expenditure reported (1-2)

4. Reimbursable %age

5. World Bank share (1*4)

6. Reimbursement made for the year (as

per list attached)

7. Excess/Short Claim (5-6)

Dated: _ _ /_ _/_ _ _ _ __________________________ _________________________



ANNEXURE XIII

TOOL FOR POST REVIEWS OF CONTRACTS


Credit No. _____ IN

Date of Audit: Name of Agency :

Contract For:

Contract No. and Date: Contract Amount:

Contractor/Supplier’s Name and Address:

Description of Items procured and Quantity

PROCUREMENT METHOD: Goods-Shopping/NCB/Direct

Contracting Services- QCBS/LCS/FBS/CQS/SSS

Aspects Comments and Findings

Quality and completeness of Procurement Documentation (Filing)

Details of Advertising

EoI/ Pre/post qualification carried out as required

Time allowed for submission of bids/proposals.

Availability and quality of Bid opening & minutes of bid opening

Bid security records (for goods procurement)

No. of bids sold (for goods procurement)

No. of bids/proposals submitted

No. of bids/proposals found responsive

Bid/Proposal Evaluation process- verify bids/proposals– Names of

bidders; evaluation committee, quality of evaluation minutes.

Bid/Proposal/Quotation validity period

Contract document

Reference to Bank and “no objection,” if any (not required under

Agreement)

Advance payment guarantee details and records

Performance security details and records.

Complaints & other matters

Contractual completion date

Actual completion date

Delivery receipt or similar instrument.

Liquidated damages, details and enforcement for delays.

Timeliness of payments

Other matters

Compliance with agreed provisions- Yes or No (Explain)

Observations:

Deviations and Comments

_______________________

Signature of the CA Firm Note: Fill the checklist separately for each of the Contracts

audited.


ANNEXURE XIV

BANK RECONCILLATION STATEMENT

MONTH:

Bank‟s Name:

Sl. No. Particulars Amount Rs. Amount Rs.

A Balance as per Bank Statement

B ADD: (i) Amount Deposited but not

Credited by Bank (ii) Amount debited

but not taken to Cash Book

C SUB TOTAL (A+B)

D LESS: (i) Cheques issued but not

presented in the bank (ii) Amount

credited by bank but not taken to Cash

Book

E Balance as per Cash book (C-D)

List of Cheque not presented in the Bank as per D (i) Amount Date of

Encashment

Cheque No.

TOTAL

Prepared by Checked by Approved By

(Cashier) (Accounts Incharge) (Appropriate Authority)


ANNEXURE XV

FIXED ASSET REGISTER

Asset Group:

Sl.

No

.

Date of

Purchas

e

Bil

l

No

.

Supplier’

s Name

Detail

s of

Asset

Type

and

Mak

e

Quantit

y

Amoun

t Rs.

Locatio

n

Identificatio

n

Date of

Physical

Verificatio

n

Signatur

e

Remark

s


ANNEXURE XVI

DOUBLE COLUMM CASH BOOK

Receipts Payments

Date Heads of

Account with

Particulars

LF Amount(Rs.) Date Heads of

Account

with

Particulars

LF Amount(Rs.)

Cash Bank

Cash Bank


ANNEXURE XVII

JOURNAL VOUCHER

Journal Voucher No: Date:

J.B. Folio

No:

PARTICULARS WITH HEAD

OF ACCOUNT

DEBIT Rs. CREDIT Rs.


ANNEXURE XVIII

GENERAL LEDEGER

Date and

Month

Head of

Account:

Vr. No./

Receipt

No. /

Journal

Vr. No.

CB

Folio/

JL Folio

No.

DEBIT

Rs.

CREDIT

Rs.

Balance

Rs.


ANNEXURE XIX

STOCK REGISTER

Name of the article

Date Particulars Bill No./

Indent

No.

Quantity Receipts Issues Balance


ANNEXURE XX

REGISTER OF CONTRACTS FOR CONSULTANCY SERVICES

Sl.No. Contract

No.

Consultant‟s

Name and

Address

Brief

description

of the

consultancy

service

Date of

contract

Date of

scheduled

Completion

Amount

of

contract

with

stages

if any

Date of

actual

completion

Remarks


ANNEXURE XXI

TRIAL BALANCE AS ON __________________

Sl.No. L.F.No. HEAD OF ACCOUNT DEBIT Rs. CREDIT

Rs.

TOTAL


ANNEXURE XXII

CHART OF ACCOUNTS FOR THE PROJECT

Assets and Liabilities Accounts Primary

Group

Sub Group/

Component

Sub Sub Group/

Sub Component

Ledger Account/s

(debit/credit)

LIABILITIES

Grant Grant for PRI Grant under PHRD

Fund under PPF

Fund under Main project

Reserves &

Surplus

Capital Fund

Current

Liabilities

Duties & Taxes Income Tax deducted at source

Works Contract Tax

Other Taxes

Other Current

Liabilities

Bank Interest

Other Receipts (tender fees etc)

Earnest Money (received)

Security Deposit (received)

Guarantee

Memorandum

Account

Guarantee Suspense

(Credit)

[Open individual account for each Contract]

Guarantee Suspense

(Debit)

Retention Money

Memorandum

Account

Retention Money

(Credit)

Retention Money

(Debit)

ASSETS

Fixed

Assets

PROJECT

MANAGEMENT

AND

COORDINATION

Furniture & Fixtures

Computers & Printers

Office Equipment

[Open other heads as required]

Current

Assets

Cash in Hand Cash in Hand


Primary

Group

Sub Group/

Component

Sub Sub Group/

Sub Component

Ledger Account/s

(debit/credit)

Bank Accounts

Current/ Saving

Accounts

[Open individual accounts for each Bank

account at SPMU, DPMU and BPMU]

Fixed Deposit

Accounts

[Open individual accounts for each Bank]

Cheques in Hand/

Funds in Transit

Cheques in Hand

Fund in Transit

Loans &

Advances (Assets)

Advances to DPMU

and BPMU

[Open individual account for each DPMU and

BPMU]

Advances to

Contractors

[Open individual account for each Contract]

Advances to

Consultants

[Open individual account for each Consultant]

Advance to Staff [Open individual account for each Staff]

Other Advances [Open individual account for each party]

Deposit (Assets) Security Deposit (paid)

Expenditure Accounts

Sl.no

.

Component

Account

Heads


HP BHAWAN -1-

GP NAME

Total component1

2

Gram Panchayat Capacity

Building

Open account head

as per nature of

Expenses


Open account head

as per nature of Expenses

2.1a Core institutional capacity

building

Open account head


2.1b Community Engagement Open account head


2.1c Communications and Mass

Media

Open account head


2.1d Financial Management Open account head



Total 2.1

2.2 Strengthening

Development Capacity of

Panchayats.

Open account head


2.2a Sanitation Open account head



Open account head


2.2c

Nutrition

2.2d Natural Resource

Management

Open account head


Total 2.2

Total component2

3 State-level Policy

Environment for

Decentralization

Open account head


Total component 3

4 Panchayat Performance

Award

Total component 4


coordination [includes M

and E]

Open account head as

per nature of Expenses

Total component5

GRAND TOTAL OF

COMPONENTS

1+2+3+4+5

******