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-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
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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
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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
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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
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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
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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
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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.
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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]
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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
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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
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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
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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
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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
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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:
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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
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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.
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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
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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
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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
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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.
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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
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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).
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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.
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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.
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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.
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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.
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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
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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
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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
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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
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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.
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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.
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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:
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(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
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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.
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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.
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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
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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
Role & Responsibilities
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
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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.
Reporting to- Director -Finance & Administration
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
Role & Responsibilities (No.2)
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
Other works as may be assigned
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).
Other works as may be assigned
Post- Cashier -SPMU
Qualification- Minimum B.com
Experience- Minimum 2 years of experience in accounts /financial management.
Proficiency in Tally.
Reporting to- Director -Finance & Administration
Role & Responsibilities
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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.
Other works as may be assigned
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
Role & Responsibilities
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,
Experience- Minimum 2 years of experience in accounts /financial management.
Proficiency in Tally.
Reporting to- DPM
Role & Responsibilities (No.1)
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.
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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
Experience- Minimum 2 years of experience in accounts /financial management.
Proficiency in Tally.
Reporting to- DPM
Role & Responsibilities
S/he has to manage cash transactions,
S/he has to process the cheques,
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
Role & Responsibilities
S/he has to manage cash transactions,
S/he has to maintain cash book/bank book/Journal book for operational expences
S/he has to process the cheques,
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
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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;
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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 .
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. 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
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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).
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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
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.
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;
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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.
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:
1) Panchayat Sarkar Bhavans
2) Gram Panchayat Capacity Building
3) State-level Policy Environment for Decentralization
4) Panchayat Performance Grant
5) Project Management [includes M and E]
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.
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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.
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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
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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.
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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.
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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
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.
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);
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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.
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:
1) Panchayat Sarkar Bhavans
2) Gram Panchayat Capacity Building
3) State-level Policy Environment for Decentralization
4) Panchayat Performance Grant
5) Project Management [includes M and E]
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.
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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.
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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
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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.
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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)
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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
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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.
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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
6) Gram Panchayat Capacity Building
2.1 Institutional Strengthening
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
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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
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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: _ _ /_ _/_ _ _ _
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ANNEXURE VIII
BIHAR PANCHAYAT STRENGTHENING PROJECT
(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
1 7) Panchayat Sarkar Bhavans
Total component1
2
8) 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
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Dated: _ _ /_ _/_ _ _ _ __________________________ _________________________
Director ( Finance & Admin) Project Director
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
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ANNEXURE IX
BIHAR PANCHAYAT STRENGTHENING PROJECT
(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
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ANNEXURE X
BIHAR GRAM SWARAJ YOJANA SOCIETY
BIHAR PANCHAYAT STRENGTHENING PROJECT (CREDIT NO. ____)
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: _ _ /_ _/_ _ _ _ __________________________ _________________________
Director ( Finance & Admin) Project Director
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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
1 9) Panchayat Sarkar Bhavans
Total component1
2
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
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(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
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
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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
(Amount in Rs.) Particulars Current Year Previous Year
Advances to Contractors
Advances to Consultants
Advances to DPMU/BPMUs
Advances to Staff
Other Advances
Security Deposits (paid)
Total
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ANNEXURE XI
BIHAR GRAM SWARAJ YOJANA SOCIETY
BIHAR PANCHAYAT STRENGTHENING PROJECT (CREDIT NO. ____)
STATEMENT OF SOURCES AND APPLICATIONS OF FUNDS FOR THE YEAR
ENDED 31ST
MARCH _ _ _ _
(Amount in Rs.) Particulars Current Year Previous Year
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
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ANNEXURE XII
BIHAR GRAM SWARAJ YOJANA SOCIETY
BIHAR PANCHAYAT STRENGTHENING PROJECT (CREDIT NO. ____)
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: _ _ /_ _/_ _ _ _ __________________________ _________________________
Director ( Finance & Admin) Project Director
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ANNEXURE XIII
TOOL FOR POST REVIEWS OF CONTRACTS
BIHAR PANCHAYAT STRENGTHENING PROJECT
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.
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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)
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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
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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
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ANNEXURE XVII
JOURNAL VOUCHER
Journal Voucher No: Date:
J.B. Folio
No:
PARTICULARS WITH HEAD
OF ACCOUNT
DEBIT Rs. CREDIT Rs.
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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.
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ANNEXURE XIX
STOCK REGISTER
Name of the article
Date Particulars Bill No./
Indent
No.
Quantity Receipts Issues Balance
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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
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ANNEXURE XXI
TRIAL BALANCE AS ON __________________
Sl.No. L.F.No. HEAD OF ACCOUNT DEBIT Rs. CREDIT
Rs.
TOTAL
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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
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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
1 10) Panchayat Sarkar Bhavans
HP BHAWAN -1-
GP NAME
Total component1
2
Gram Panchayat Capacity
Building
Open account head
as per nature of
Expenses
2.1 Institutional Strengthening
Open account head
as per nature of Expenses
2.1a Core institutional capacity
building
Open account head
as per nature of Expenses
2.1b Community Engagement Open account head
as per nature of Expenses
2.1c Communications and Mass
Media
Open account head
as per nature of Expenses
2.1d Financial Management Open account head
as per nature of Expenses
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Total 2.1
2.2 Strengthening
Development Capacity of
Panchayats.
Open account head
as per nature of Expenses
2.2a Sanitation Open account head
as per nature of Expenses
2.2b Safe drinking Water
Open account head
as per nature of Expenses
2.2c
Nutrition
2.2d Natural Resource
Management
Open account head
as per nature of Expenses
Total 2.2
Total component2
3 State-level Policy
Environment for
Decentralization
Open account head
as per nature of Expenses
Total component 3
4 Panchayat Performance
Award
Total component 4
5 Project Management &
coordination [includes M
and E]
Open account head as
per nature of Expenses
Total component5
GRAND TOTAL OF
COMPONENTS
1+2+3+4+5
******