2Objective Understanding different disbursement procedures Issues connected with claim preparation.To understand funds flow mechanismMaintenance of accounting records and audit procedures.
3Project Financing Budgeting Step-I Annual Requirement of Rupee resources for meeting the expenditure of the Project Cost including World Bank funding is required to be approved by the Planning Commission.Step-IIInclusion of the funds requirement approved under step-I, in the Annual Budget of the Government.
4World Bank AssitanceWorld Bank extends financial assistance through its three Constitutions namely:International Development Agency (IDA)International Bank for Reconstruction and Development (IBRD)Trust Fund (IDF)World Bank also co-finances with Bilateral/ Multilateral agencies
5Terms and Conditions of lending-IDA Lending from internal resources in the form of contribution from member countries.Carries no interest charges. But levies service charges of 0.75% p.a. on the amount drawn and outstanding.Carries commitment charges of 0.50% p.a. on the undrawn balances of the credit subject to waiver.Repayment maturities upto 35 years including 10 years grace period.
6Terms and Conditions of lending-IBRD Lending from market borrowingsCarries interest charges based on LIBOR base rate (plus variable spread)Charges 0.25% of the total amount of the loan as front end fee.Carries commitment charges of 0.75% p.a. on the undrawn balances of the loan subject to waiver. The commitment charges have however been abolished for new loans signed/approved after May 2007.Repayment maturities upto 20 years including 5 years grace period
7Disbursement Procedures ReimbursementThrough Special AccountOutside Special AccountDirect PaymentDirect Payment with claimDirect Payment by Special CommitmentReport Based DisbursementF.M.R. -Based DisbursementCont.
8Disbursement Procedures a. Special AccountWorld Bank makes an advance disbursement from the loan account for deposit to an Special Account to be used exclusively for its share of eligible expendituresb. Outside Special AccountWorld Bank pays from the loan account to the Borrower’s account for eligible expenditures which have been incurred and paid for by the project out of its budget allocation or its own resources.Cont.
9Disbursement Procedures a. Direct PaymentThe Borrower may request World Bank to pay the supplier/contractor directly from the loan funds.b. Special CommitmentWorld bank at the request of the Borrower, provides an irrevocable undertaking to reimburse a commercial bank for payments made or to be made to a supplier against a Letter of Credit (LC) financed from the loan account.Cont.
10Disbursement Procedures Financial Management Report (FMR) -Based DisbursementUnder this procedure FMR as prepared by Project Implementing Authority and submitted to Financial Management Specialist & AAAD, are used to withdraw funds from the loan account by AAAD. For this purpose AAAD will prepare a withdrawal application as the case may be, and forward to World Bank Chennai office. Project is required to submit the actual for the past quarter and estimate of expenditure for next two quarters.
11Claims Reimbursement Direct Payment Withdrawal Application (By AAAD) AbstractSummary SheetsDocuments : Invoice / Bills Evidence of Payment (for documented Claims)Direct PaymentWithdrawalApplication (By AAAD)Summary SheetInvoice / BillBill of Lading / Airway BillCopy of LC in case of Special commitment
12Conditions Precedent to Disbursement Loan Agreement to be declared effective.Procurement Procedures as laid down in the agreement to be followed.Authorised signatory of AAAD to withdraw funds to reach the Bank.Authorised Signatory of Project to sign claims to reach Aid Account and Audit Division.Participatory Agreements to be entered into between Government of India / State Government and the Project Executing Agency, if applicable.
13Special Account This is also known as desginated account. This is maintained with RBI Mumbai in US Dollar currency.This is maintained separately for each loan/credit/ grant.This account is being operated by AAAD.AAAD is responsible for Annual audit of this account by C&AG and sending audit certificate to the World Bank.This is only a proforma account.
14Additional Central Assistance (ACA) ACA under replenishment procedure (through Special Account) to the projects is released on the basis of exchange rate of RBI for USD on the date when Special Account is debited by RBI for normal loans.The ACA for Back to Back loans/grants is released after disbursement from World Bank based on the exchange rate on the disbursement date.For reimbursement outside Special Account ACA is released to the projects after getting disbursement from World Bank.
15Rupee deposit by Ministries/ PSUs/ Autonomous Bodies All Central Ministry/ Departments/ PSUs/ Autonomous Bodies are required to make provisions in their budget for Direct payments made from External Assistance.Counterpart rupee for such payments is to be deposited in AAAD account maintained at RBI, New Delhi or SBI, Tis Hazari, Delhi.In addition to it, interest at prescribed rate will also be payable by PSUs/ Autonomous Bodies.
16---------------------------Project (Illustration) Significant datesDate of Agreement:Date of Effectiveness:Project Completion dateTerminal date of Disbursement:Retroactive period To(Retroactive financing amount )
17Schedule – I (----------------------Project ) Credit/Loan/Grant No Sl. NoCategory DescriptionAmount of the Loan allocated (in SDR/USD)% of Expenditure to be financed123Total
18Contract Review Prior review World Bank Civil Works More than USDGoodsMore than USDConsultancyMore than USD (For Firm)More than USD (For Individual)
19Contract ReviewPOST REVIEWWORLD BANKCivil WorksLess Than USDGoodsConsultancyLess Than USD (For Firm)Less Than USD (For Individual)Note-Training and Operating cost will be claimed in SOE forms.
20INELIGIBLE ITEMS Goods/Equipments: Local Expenditure For Claiming 100 % ReimbursementSales TaxCentral Sales TaxExciseFor Claiming 80 % ReimbursementAbove Taxes are admissible but the charges such as Latter of Credit opening charges and Bank charges are not admissible
21Ineligible Items Civil Works Recovery of Security Deposit. Recovery of mobilisation advanceLand acquisition costPenalty paid to Govt. or any Govt. OrganisationLevy of penalty on contractor for delayed/defective executionRecovery towards fundInterest paid to the contractor on account of delayed payment
22Ineligible Items Consultancy Bill For claiming 100% reimbursement Income TaxService ChargeFor Claiming 90 % or 80% Reimbursement, above items are admissible
23Form 1-B Item No. Category No. Schedule of Withdrawal of Proceeds Date _________________ IDA/IBRD Loan No _______ Application No. _________ Summary Sheet No. _____ Payments made during the Period ____ to ______123456789101112Item No.Category No.Brief Description of Works, Goods or ServicesName of Contractor/ Supplier/ Consultant Address, Contract No. & Date (if USA, please also indicate the city and state)Contract AmountCurrency and Cumulative Amount Paid to DateCurrency and Cumulative Amount Paid during this PeriodIDA/IBRD Financing %Amount Eligible for Financing (% from Col. 8 Applied to Amount in Col.7)Exchange rateUS$ equivalent withdrawn from the Special AccountRemarks or Invoice reference (including no-objection telex date)1 In the case of U.S. Suppliers, please provide us with complete names and addresses ( including city and State)If this application is not for replenishment of the Special Account, leave columns 10 and 11 blank.
24Statement of Expenditures (SOE). Form 1-C Statement of Expenditures (SOE) Form 1-C Date _________________________ IDA/IBRD Loan No ____________ Application No.________________ Summary Sheet No. _____________ Payments made during the Period _______________to____________________12345678910Item No.Category No.Name of Contractor/ Supplier/ Consultant Address, Contract No. & Date (if USA, please also indicate the city and state) 2/3Total Amount of Invoices covered by Application (net of retentionIDA/IBRD Financing %Amount eligible for financing % from Col. 6 applied to the amount in Col. 5US $ equivalent withdrawn from Special AccountExchange rateRemarksTotalSupporting documents for this SOE retained at _____________________*1/ Items should be grouped by category, or alternatively, a separate SOE form may be used for each category2/ Consolidate payments by country of Supplier, except for US suppliers3/ For all suppliers or contractors from the US, the address should include the city and State.I certify that detailed information on expenditures incurred is available at a central location in the State Govt.
25Abstract of Summary Sheet Name of the Project: ___________ IDA/IBRD CR./Loan No.___________Reference Period: ___________ Application No._________Date :__________Summary Sheet No.CategoryNo.Total Expenditure% of ReimbursementClaimed for reimbursementRemarks123456Total___________________________________________________Category-wise Break upCategory AmountDOC SOE Total123TotalProject Authority
26Summary Sheet Form 1-B. Cont. To be used for expenditure under contracts prior reviewed by the bank. Such claim should have W.B.R. No. In the remarks column against each contract. Post review contracts should not be claimed under form 1-B.The period of the claim should be specific as from ………………… to ………………..…Separate summary sheet to be used for each category of expenditure.Separate claim to be prepared for each currency of expenditure.Cont.
27Summary Sheet Form 1-B.The claim should be in the currency in which the contract is concluded and not in the currency of expenditure.Each Summary Sheet is independent by itself.The bank financing percentage should be correctly indicated as per schedule I to the loan agreement.The claim in INR should be entered in millions with three decimals whereas the claim in foreign currency should be in full with decimals. (E.G. .Rs.1,23,05,146 is to be shown as million)
28Summary Sheet Form 1-C.To be used for expenditure under contracts post reviewed by the bankTo be used for all training expenses, incremental operating costs, study visits etc.The period of claim should be specific as from ……………. To ……………..The claim should relate to total expenditure during the period category wise separately. No need to list separately each expenditure under a contract.Separate summary sheet to be used for each currency of expenditure.The claim should be in the currency in which the contract is concluded and not in the currency of expenditure.Cont.
29Summary Sheet Form 1-CThe claim in INR should be entered in Millions with three decimals whereas the claim in Foreign Currency should be in full with decimals ( e.g. Rs. 1,78,56,423 is to be written as Rs million).The bank financing percentage should be correctly indicated as per schedule 1 of the loan agreement.The Summary Sheet in form 1-C should have additional certificate as to the location at which the documents are retained.The Summary Sheet in form 1-C under goods if claimed 100% furnish additional certificate that the claim is ex-factory and does not include taxes and duties and other charges.
30Deficiency in Summary Sheet WBR No. is not given in case of prior review contractsSummary Sheets are not signed by the authorized signatory.Retroactive Expenditure claim and Proactive Expenditure claims are prepared in the same summery sheet.Incorrect percentage claimed.Approval of World Bank wanting for the revised contract cost when expenditure exceeds more than 15% of the original contract value.Cont.
31Deficiency in Summary Sheet Foreign Currency payments are claimed in INR.Name of location where the documents have been kept not mentioned in case of SOE Claims.Passed/pay order not given on the invoice/voucher.More than one No. of application in case of same category.
32General / Miscellaneous Claims are sent before the loan is declared effective.Incomplete documents attached with the claim.Illegible documentsAmount claimed not conforming with the detail given in the voucher.Alterations in Pay order or Memorandum of payments leads to confusion.Cont.
33General / Misc. Deficiencies Inadequate payment instructions in respect of Direct Payment Claims.Insufficient Funds in loan or category.Incomplete evidence of payment.Taxes to be claimed when payment is actually done and not independently.Extra rounding off.Non submission of audit report to the World Bank in case of SOE claim.Not giving reason for lodging the claim after six months of the period of Expenditure.Unacceptable evidence of payment especially in case of third party payment, e.g. Commercial Bank’s advice simply confirming debit to project account does not form evidence of payment. It should be either receipt of payment by supplier/contractor or Commercial Bank’s advice indicating name of beneficiary and amount paid.
34Audit Covenants World Bank Furnish to the Bank within 6 months from the end of each financial year (i) Certified copies of the Balance Sheets, Statement of Income and Expenses and related statements duly audited andFurnish to the Bank within 6 months after the end of financial year the Report of Audit on the records and accounts of the project in such details as the Bank shall have reasonably requested.
35Scope of AuditAudits of financial Statements for Bank funded Projects include-An assessment of the adequacy of accounting and internal control systems to monitor expenditures and other financial transactions and ensure safe custody of project-financed assets.Determination as to whether the project implementing agencies have maintained adequate documentation of all relevant transactions.Verification that the expenditures submitted to the Bank are eligible for Bank financing, and identification of any ineligible expenditures, andVerification that the annual financial statements can be reconciled with the total Claims made during the year
36Financial Reporting – Audit As per financing agreement the borrower has to submit acceptable financial statements /Audit certificate to the Bank with in six (6) months of the close of the financial year.If Audit reports/certificate are not received on the above date, a notice giving three(3) months time is served by the World Bank and if Audit Report / Certificate are still not received the use of SOE may be suspended.After this date the World Bank gives a four (4) months final notice and if the Audit Reports / Certificate are not received after expiry of this period, disbursement for the Project may be suspended.In case suspension continues for 30 days the Bank may cancel the part of Loan that was subject to suspension.
37General deficiencies in the Audit Reports Non-consistency and uniformity in the format of the financial statements.Non-disclosure and consistency in the accounting standard adopted.Non-mentioning of management letter from the auditors highlighting internal control weaknesses observed.Non submission of reconciliation of the SOE claims with the audited expenditure as per the financial statements.Non submission of records to audit.Including of expenditure in SOE claims which is not actually incurred.Claiming the advanced amount in the SOE and treating the same as final expenditure without obtaining utilisation certificates from the institutions / agencies to whom the advances were given.
38General deficiencies observed by the Audit Timely and periodic bank reconciliation not done.Non maintenance of fixed assets registers.Non monitoring of advances.
39Project Financial Management - I Project Activities-ImplementationEnsure proper procurement procedures are followed before incurring Expenditure.Ensure availability of funds in the Budget for the year.Ensure Expenditure is within the approved contract.Take advance action for revision of contract and its approval if the expenditure is likely to exceed the contract value.Ensure that no advance is given to the contractor beyond the ceiling provided in the contract.
40Project Financial Management - I All advances to contractors should be supported by a Bank Guarantee.Advances are not to be treated as final expenditure in the accounts, till the expenditure is incurred.No Payment is to be made without a valid invoice/bill duly supported by receipt by the payee.Ensure production of all vouchers, etc. to the Accounting authority for compilation of Accounts and reconciliation of expenditure periodically.
41Project Financial Management - II EXTERNAL FUNDINGStrictly observe Financial covenants as per Loan Agreement and Project Agreement in so far as they relate to Project Funding, Maintenance of Accounts and Audit.Ensure Periodical submission of Reimbursement claims to CAA&A and monitor its reimbursement.Maintain Records/Registers to monitor that eligible expenditures as per the Agreement are claimed for reimbursement.Maintain Records/Registers to monitor the category-wise disbursement status both in Rupees and USD.
42Project Financial Management - III AUDITEnsure Audit Report for each year is sent to World Bank within due date.Take timely action to resolve the Audit disallowances to get revised Audit certificate sent to World Bank.Wherever World Bank recovers the disbursement made based on unresolved Audit disallowances, prompt action be taken with the audit to get the revised audit certificate and obtain approval of the World Bank for reclaiming the Recovery made.Submit reimbursement claim through CAA&A for all such recovery as soon as the Bank conveys their approval for the same.