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STUDY OF GASB STATEMENT 34 FOR MANAGEMENT’S DISCUSSION AND ANALYSIS 1 WORK STUDY GROUP - 3 & V ALIDATING INFORMATION RECEIVED FROM THE GOVERNMENT IN RESPECT.

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Presentation on theme: "STUDY OF GASB STATEMENT 34 FOR MANAGEMENT’S DISCUSSION AND ANALYSIS 1 WORK STUDY GROUP - 3 & V ALIDATING INFORMATION RECEIVED FROM THE GOVERNMENT IN RESPECT."— Presentation transcript:

1 STUDY OF GASB STATEMENT 34 FOR MANAGEMENT’S DISCUSSION AND ANALYSIS 1 WORK STUDY GROUP - 3 & V ALIDATING INFORMATION RECEIVED FROM THE GOVERNMENT IN RESPECT OF STATEMENT ON GUARANTEES, NON FINANCIAL ASSETS, FINANCIAL ASSETS (LOANS,ADVANCES AND INVESTMENTS)

2 2 Presentation - Part-1 GASB STATEMENT 34 FOR DEVELOPMENT OF TEMPLATE OF MANAGEMENT’S DISCUSSION AND ANALYSIS FOR APPLICATION TO FINANCIAL STATEMENT

3 GASB 34 MDA 3

4 Management’s Discussion and Analysis 1.Easily readable analysis of the Govt. Financial Activities. 2.Comparison of the current to the prior year 3.An analysis of the Govt. Financial position and results of operations. 4.Significant budget variances. 5.Capital Assets and long term activity 6.Description of current facts, decisions, or conditions. 4

5 1.Trend analysis and Comparisons with previous years’ accounts. 2.Budget Variations. 3.Major saving/excesses and Ratio analysis 4.Items of peculiar nature and Prior period items 5.Performance Indicators 6.Net increase in Assets/Liabilities 7.Liability on account of incomplete projects 8.Comparison of condition Tools for Management’s Discussion and Analysis 5

6 6 TEMPLATES FOR MANAGEMENT’S DISCUSSION AND ANALYSIS Trends in aggregate receipts

7 7 Trends in various components of total expenditure

8 8 Total Expenditure : Trends by Activities

9 9 ParticularsCurrent yearPrevious year Revenue Receipts Revenue Expenditure Revenue Deficit Borrowing Interest Grant in Aid Education Expenses Others Comparison with previous year’s Accounts

10 10 Budget Estimates

11 11 Ratio Revenue Receipt Revenue Expenditure Revenue deficit Revenue Receipt Borrowing Others Ratio Analysis

12  Peculiar Items to be reported for Management Discussion & Analysis:  Prior Period item  Events occurring after the date of finalizing the Accounts  Performance Indicator 12

13 13 Sl.NoItemOpening Balance Addition/ Investme nt Dispositio n/Disinve stment Closing Balance Net increase/ Decrease Percentage of Net Increase/Decrease Assets Net Increase in Asset/Liability & detail thereof Sl.NoItemOpening Balance Addition/ Investme nt Dispositi on/Disinv estment Closing Balance Net increase/ Decrease Percentage of Net Increase/Decrease Liabilities

14 14 Liability on account of incomplete projects Sl.NoNo. of incomplete projects Cost/Revised CostExpenses incurred More funds required Likely sources of Funds Department-wise profile of incomplete projects DepartmentNo.of incomplete projects Initial budgeted costRevised total cost of project Total expenditure upto March 09 End of Template on MDA

15 15 GASAB 34 V/S EXISTING ACCOUNTING SETUP Full accrual accounting principleCash Accounting Revenue and cost will be accounted for as they occur Revenue and expenses will be accounted as and when Reporting of all long- lived capital assetsReported in Finance Account Statement 13 Requirement for a Management’s Discussion and Analysis section Notes to Accounts, mobilization of resources, reasons of variations etc. in State Finance Account Governments will need to determine the cost associated with their transportation infrastructure assets. Improvements are treated as works/additions Depreciation expense or applying alternative modified/preservation approach. Not yet been introduced.

16 Actionable Points  To define our networks/sub-systems  Depreciate.  Management systems in place  Our inventory.  The current condition of our inventory.  Reporting practices being consistent  Historical cost of our infrastructure 16

17  Define “maintenance” versus “preservation” and “ addition” versus “improvement” for reporting purposes..  Ability to explain, to external groups  Informed resource allocation General Comments  Assets are maintained by Administrative Departments  Full implementation has the potential that accounts will be maintained by Administrative Authorities 17 The End of Presentation - I

18 Part II WORK STUDY GROUP 3 3(ii) VALIDATING INFORMATION RECEIVED FROM THE GOVERNMENT 18

19 TERMS VALIDATIONASSERTION VALIDATIONMANAGEMENT ASSERTION 19

20 20 MANAGEMENT ASSERTION TransactionAccounts BalancesPresentation and Disclosure OccurrenceExistenceOccurrence CompletenessRights and ObjectionCompleteness AccuracyCompletenessClassification ValuationAccuracy

21 Guarantees Non Financial Assets Financial Assets Loans Investments 21

22 Guarantees  State Government gives guarantees to the Financial Institutions/Banks against loans to various bodies.  Liability of the beneficiary institution to pay guarantee commission  Sanction and Annual information (Statement No.9 of Finance Accounts) 22

23 FAULTS  Guarantees outstanding exceed the maximum amount  Guarantee commission received differs with accounts figure  Information furnished incomplete  Expired Guarantee also included 23

24 Causes for Faults  Data not readily available with Govt.  Accuracy of Guarantee commission paid - deficient  No system of verification 24

25 Actionable Points  Aims to improve the quality of information Suggested Action by A&E Office  Consolidate details from beneficiary institutions  Check misclassification of guarantee commission  Database/register for capturing orders issued  Finance Dept. to include the words "invoking Guarantees” in the nomenclature of sub head while issuing sanctions 25

26 Suggested Action by Audit Office  Proper maintenance of DCB Statement of Guarantee Commission, and other records during local audits  Role of Commercial Audit wing & LBA. Suggested Action by State Government  A web based software for information on guarantees  The website to be updated by the State Govt or even by the beneficiary institution. 26

27 STATEMENT OF GUARANTEES GIVEN BY THE GOVERNMENT 1234 Sector Maximum amount guaranteed Outstanding at the beginning of 20_ _ Net Additions(+) Deletions(-) (Other than invoked) during the year PrincipalInterest PrincipalInterestPrincipalInterest (Rupees in Crore) Template for Information from Management on Guarantees 27 567 Invoked during the yearOutstanding at the end of 20__-__ Guarantee Commission or fee DischargedNot Discharged PrincipalInterestReceived Receivable (Rupees in Crore) B. The particulars of the guarantees are given below Public or other body for which guarantee has been given and brief nature of guarantee(@) Maximum amount guaranteedSums guaranteed outstanding on 31 st March 2010 (Principal only)PrincipalInterest

28 Template for Management Assertion on Guarantees ASSERTIONFOCUSREMARKSVALIDATION ExistenceCertificate & Test Check DisclosureCertificate & Test Check Occurrence Guarantees invokedCertificate & Test Check Classification Guarantee commission0075 CompletenessCertificate & Test Check AccuracySanctionsCertificate & Test Check CutoffCertificate & Test Check AuthorisationSanctionsCertificate & Test Check 28

29 Certified that : (i) the information furnished in this statement are based on the records maintained by the Administrative departments and subordinate offices of the Government for recording guarantees given, guarantee commission received, guarantees invoked etc (ii) the basic records maintained by Government and institutions controlled by Government are in accordance with the relevant accounting and other policies of the Government (iii) reasonable efforts have been made to ensure correctness of the information collected from sources other than Government/Government controlled institutions before adopting for inclusion in this statement and (iv) the information included in this statement depicts complete, true and fair position relating to guarantees given by the Government PrincipalSecretary (Finance) Government of Kerala 29 Template for Management Certification for Guarantees End of Validation of Guarantees

30 Non- Financial Assets ( a) Capital Expenditure  Progressive and current year’s expenditure under Capital heads is depicted in statement No. 13  Prepared from the information available in accounts  No information is received from the Government  The position is same in other A&E Offices 30 b) Other Information on Capital Expenditure Financial Results of Irrigation Works  Depicted in Appendix IX of Finance Accounts  Shows Financial Results of Irrigation Schemes declared commercial (Project-wise, Major and Minor Irrigation Schemes-Commercial)  Prepared from Information available in accounts and DCB statements from PW Divisions  The figures of expenditure verifiable in accounts

31 Other Information on Capital Expenditure ( ii) Statement of Commitments on Incomplete Public Works Contracts  Depicted in Appendix X of Finance Accounts from the PW Divisions  Only the figures of expenditure verifiable in accounts  The position is same in other A&E Offices from where responses where received 31

32 Sl.NoName of projectCapital outlay during 20_ _Capital outlay to the end of DirectIndirectTotalDirectIndirectTotal 12345678 Scheme wise Template for Information from Management on Financial Results of Irrigation Works Revenue ReceiptsRevenue forgone/remission of revenue during 20_ _ Total Revenue during 20_ _ (col 11 and 12) Direct receipts Indirect receipts Total 910111213 32 Working expenses & Maintenance during 20_ _ Net revenue excluding interestNet profit or loss after meeting interest DirectIndirectTotalSurplus of revenue(col 13) over Rate percent on capital outlay to the end of 20_ _ Interest on direct capital outlay Surplus of revenue over expenditure Rate percent on capital outlay to the end of 20_ _ 1415161718192021

33 STATEMENT OF COMMITMENTS ON INCOMPLETE PUBLIC WORKS CONTRACTS AS ON 31st MARCH (In Lakh of Rupees) S.No. Name of the project/works Estimated cost of work/date of sanction Year of commencement Target year of completion Physical progress of work (in per cent) 123456 Expenditure during the year Progressive expenditure to the end of the year Pending paymentsRevised cost, if any/date of revision Cost of balance work adjusted to inflation 7891011 33 Template for Information from Management on Commitments on Incomplete Public Works

34 Template for Management Assertion on Capital Expenditure ASSERTIONFOCUSREMARKSVALIDATION Existence Physical verificationCertificate & Test Check DisclosureCertificate & Test Check Valuation DepreciationCertificate & Test Check CompletenessCertificate & Test Check AccuracyCertificate & Test Check OwnershipCertificate & Test Check 34

35 Certified that i.the information furnished in this statement are based on the records maintained by the Administrative departments and subordinate offices of the Government for recording Capital expenditure, DCB statements, etc. ii.the basic records maintained by Government and institutions controlled by Government are in accordance with the relevant accounting and other policies of the Government iii.reasonable efforts have been made to ensure correctness of the information collected from sources other than Government/Government controlled institutions before adopting for inclusion in this statement and iv.the information included in this statement depicts complete, true and fair position relating to the financial results of irrigation works and capital expenditure incurred by the Government Principal Secretary (Finance) Government of Kerala 35 Template for Management Certification for Commitments on Incomplete Public Works

36 36 Loans  Details of Loans and Advances made by the Government to Various Bodies - Statement No. 7 of Finance Accounts  Detailed accounts maintained by AG (A&E)  Accounts of functional loans maintained by the departmental Controlling Officers  Annual reporting by Controlling Officers

37 Faults  Inaccuracies in Detailed accounts of Departments  Misclassification of disbursements and repayments  Incomplete information in some cases  Amount of interest received and credited not furnished  Acceptance of balances not communicated 37 Causes  Non- maintenance of proper Loan Registers and Broadsheets by Departments  Estimation of interest receipts  Classification errors  Reconciliation not being done

38 Action to be Taken by A&E Office  Review of budget document in respect of loans  Check misclassifications  Obtain acceptances of balances before finalisation of accounts  Upload loan transactions on the website  Account adjustment of loans written off/converted into equity 38 Actionable Areas for Audit Offices  Verification of Loan accounts, DCB Statements, Broadsheets etc during local audit  Strengthen audit scrutiny of budget documents in respect of loans and advances  Strengthen Sanction Audit of loans

39 Action to be taken by the State Govt  Capacity building of departmental staff  Standardise nomenclature to the extent feasible  Estimation of interest receipts in the Revenue Receipts separately for Loan schemes to the extent feasible  Review of the maintenance of loan account by Finance Inspection wing  Standardized format for all loan accounts in various departments  Acceptance of balances by departments before finalization of accounts  Specific mention of the terms and conditions of repayment  Review recovery in arrears 39

40 STATEMENT OF LOANS AND ADVANCES MADE BY GOVERNMENT AND DETAILS OF RECOVERIES IN ARREARS CONVERSION OF LOAN ETC 1. Loans and advances for which terms and conditions not fixed 123456 Name of loanee institution Head of AccountSanction order of loan Purpose of loanDate of drawal of loan Reasons for delay in fixing terms and conditions 2 Recoveries in Arrears of Loans (Functional Loans) 1234 Name of DepartmentHead of AccountLoan Amount outstanding Recoveries in arrears PrincipalInterest 40 Template for Information from Management on Loans

41 3. Conversion of Loan & interest on loan 1234567 Name of Dept Head of Account Loan amount outstanding as on 31 st March Outstanding Loan amount converted into Equity Outstanding interest converted Sanction order of loan conversion Loans in respect of which details of arrears of recoveries not intimated DeptHead of Acct Period from which due 41 Template for Information from Management on Loans 4. Details of loans written off 123456 Name of departmentHead of Account Of loan Amount written offHead of account to which written off Sanction code number Whether budget provision obtained 5.Interest 12 Loan Head of Account upto detailed headInterest received and credited to Government

42 Template for Management Assertion on Loans ASSERTIONFOCUSREMARKSVALIDATION ExistenceCertificate & Test Check OccurrenceCertificate & Test Check AuthorisationCertificate & Test Check Cut offCertificate & Test Check OwnershipCertificate & Test Check AccuracyCertificate & Test Check ClassificationCertificate & Test Check Disclosure Recoveries in arrearsTest check with departments Valuation Provision of bad debtCertificate & Test Check CompletenessCertificate & Test Check 42

43 Certified that i.the information furnished in this statement are based on the accounts maintained, DCB Statements and other records maintained by the Administrative departments and subordinate offices of the Government ii. the basic records maintained by Government and institutions controlled by Government are in accordance with the relevant accounting and other policies of the Government iii.reasonable efforts have been made to ensure correctness of the information collected from sources other than Government/Government controlled institutions before adopting for inclusion in this statement and iv.the information included in this statement depicts complete, true and fair position relating to recoveries in arrears, interest received, loans written off, etc. Principal Secretary (Finance) Government of Kerala 43 Template for Management Certification for Loans

44 Investments Introduction  Information on investments to AG(A&E) for statement of investments  Consolidated information in respect of investment furnished by Government annually. 44

45 Faults  Years of investment not correctly indicated  Incomplete/incorrect details of working results of the undertakings  Number of shares received differs from number of shares issued to Govt. by the Undertaking  Percentage of Govt. investment differs from that shown in the statement furnished by the Undertaking  Details of dividend received and credited to Govt. differs from that reflected in accounts  Details of disinvestments not shown  Conversion of loan, interest on loans, preliminary expenses, etc into equity are not indicated in the statement from Govt. 45

46 Causes for Faults  No Database of investments with the Govt.  Quarterly statement of dividend not received  Information on number of shares not correct  On making new investment, percentage of investment on paid-up capital not revised  Proper records regarding the working details not available 46

47 Action to be taken by A&E Office  Collect details from the institutions for cross checking  Check misclassification of investments  Scrutiny of Supplementary Demands for Grants  Check dividends  Cross check the working results furnished by Govt. with Commercial Audit Wing data 47 Action to be taken by Audit Office  Statement received from Govt. may be scrutinised by Commercial Audit Wing.  Details of non-working institutions to A&E Office Action to be taken by State Govt.  Maintain database of investments/disinvestments and dividend  Ensure legislature approval

48 Template for Information from Management on Investments 48 STATEMENT OF INVESTMENTS OF THE GOVERNMENT Details of Investments upto 20_ _ 12345 Sl. No Name of the concern (Institution-wise details) Year(s) of investment Details of investmentCurrent year investment alone Type ‘P” Preference Shares. ‘O’ Ordinary Shares No. of SharesFace value of each share 678910 Amount invested Total % of Govt Investment to the total paid up capital Dividend received and credited to Govt during the year Dividend declared but not credited to Government account Remarks (Rupees in lakhs)

49 Additional Information 1.Details of conversion of loans into share capital etc 2.Details of investments held by companies and corporations which have been referred to BIFR or declared sick 3.Details of disinvestment of shares 1.Name of Statutory Corporation/Govt.Company/Other joint Stock Comp,Cooperative Banks and Societies 2.Number of shares disinvested 3.Amount of consideration received [face value and premium separately] 4.Date of remittance, Head of Account, Name of Treasury etc 49

50 Template for Management Assertion on Investments ASSERTIONFOCUSREMARKSVALIDATION OwnershipCertificate & Test Check AccuracyCertificate & Test Check AuthorisationCertificate & Test Check ExistenceCertificate & Test Check Disclosure Conversion of loans into equity Certificate & Test Check Classification Dividend4000 CompletenessCertificate & Test Check 50

51 Certified that: i.the information furnished in this statement are based on the records maintained by the Administrative departments and subordinate offices of the Government for recording investments made, dividend received, disinvestment made, etc. and information on working results obtained for the institutions ii.the basic records maintained by Government and institutions controlled by Government are in accordance with the relevant accounting and other policies of the Government iii.reasonable efforts have been made to ensure correctness of the information collected from sources other than Government/Government controlled institutions before adopting for inclusion in this statement and iv.the information included in this statement depicts complete, true and fair position relating to investments of the Government Principal Secretary (Finance) Government of Kerala 51 Template for Management Certification for Investments

52 52 POSITION IN 14 OTHER A&E OFFICES GUARANTEES Sl.NoGUARANTEESResponses 1 Consolidated information received at the end of the year 10 2 Individual sanction issued by Government 6 3 Maintaining Database for capturing information 2 4 Maximum limit for issuing guarantee 7 5 Information available in Audit Office for verification 3 Non-Financial Assets 1 Consolidated information for preparation of Statement of capital expenditure (Stt. No. 13) NIL 2 Consolidated information for preparation of Appendix on ‘Commitment on Incomplete Public Works Contracts 14

53 53 POSITION IN 14 OTHER A&E OFFICES LOANS Sl.NoLOANSResponses 1States which are not receiving the required acceptance of balances from the departmental officers 12 INVESTMENTS 1States which are not receiving the Consolidated information on investments 8 3States which are making use of the information available in Audit Office to verify the information received 3

54 Thank You 54


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