1. Recommendations of the 15 th JRM on Financial Management & Procurement 33 rd Review Meeting of State FCs- Delhi (24 th - 25 th May 2012)

2. 2 Held from January 16-30, 2012. Undertook field review in 10 States of Assam, Chhattisgarh, Gujarat, Haryana, J&K, Kerala, Rajasthan, Tamil Nadu, Tripura and West Bengal. Aide Memoire relating to FM&P is enclosed. Key recommendations on FM&P (a) Fill up the existing vacancies in the Finance Wing and (b) Capacity building through intensive training given by professionals at all levels should be arranged through a need based gap analysis. The JRM feels that the strengthening of the Financial Wing at state, district and sub- district levels is essential to face the challenges of sustaining a robust financial management system in a complex and multi- tiered delivery system. 15 th JRM recommendations on FM&P

3. 3 (c) Implementation of the online procurement monitoring software should be fast tracked, as this is a very useful monitoring tool for MHRD and the States. General Recommendations on FM&P To face the challenges of sustaining a robust financial management system in a complex and multi-tiered delivery system, the Finance Wing at State, district and sub-district levels need to be considerably strengthened in the interest of the stakeholders. 15 th JRM recommendations on FM&P

4. 4 The approach should be twofold: (a)urgent steps need be taken to fill up the existing vacancies in the Finance Wing and (b)capacity building through intensive training given by professionals at all levels should be arranged through a need based gap analysis District level FM staff shortages have been highlighted by last 3 – 4 JRMs, but the progress is not satisfactory. States must fill vacancies of FM staffing, including at district and sub-district level, at the earliest. The mission recommends that Controllers Meeting should particularly focus on FM staffing in states at district and sub-district level. 15 th JRM recommendations on FM&P

5. 5 FM Training The training module needs to be drawn up by experts in the area. In the states where structured Finance and Accounts services exist, officers from those services may be suitably utilised on deputation basis for efficient running of the SSA programme. It must be remembered that the materiality and significance of fiscal parameters in a flagship programme like SSA cannot be over-emphasised. The officers in the Finance Wing should be well versed in budgeting, accounting (both cash and mercantile systems), financial reporting, government rules and procedures and the provisions of Manual on Financial Management and Procurement (FM & P Manual) of SSA. 15 th JRM recommendations on FM&P

6. 6 In case suitable personnel are not available from within the government system, qualified Chartered Accountants or persons with proven experience in the field of financial administration at different levels may be inducted. Apart from completing mandatory training of 5 days in a year for accounts staff at state/district/block level, states should pay equal attention to training of VEC/SMC and heads of schools. As computerized accounting is a relatively recent development in many states, particularly at district and block level, training on computerized accounting should be organized on a regular basis for state/district staff. 15 th JRM recommendations on FM&P

7. 7 FM training of staff may also include dissemination of findings of internal audit and statutory audit to district/sub-district staff, so that staff are made aware of specific areas of concerns and can take necessary corrective action. States may consider developing a cadre of Master trainers on finance and accounts. Also, states must implement measures for assessing effectiveness and relevance of FM training at all levels 15 th JRM recommendations on FM&P

8. 8 Accounting and Disclosure Issues It is recommended that critical issues like non- inclusion of disaggregated figures of grants under each component, GOI and State Share including interest and district level balances in the consolidated balance sheet, booking of advances as expenditure, non- availability/maintenance of display boards in schools and non-opening of bank accounts in some schools and drawing funds from the Bank Accounts of other schools, are addressed expeditiously by the states. 15 th JRM recommendations on FM&P

9. 9 It will be useful to agree a format for social audit display boards at the SPO level itself, which can be shared with all the districts to ensure that financial information is consistent, visible and adequate. VEC/SMC level Issues VEC/SMC training to include modules on maintenance of minutes of VEC/SMC meeting. The minutes of meeting to include information on grants received; expenditure and balance of each grant; cash and bank balance; and major decisions regarding procurement, payments etc. 15 th JRM recommendations on FM&P

10. 10 Controllers meeting to monitor development of FM training material for community level and training of VEC/SMC members. Accounting Software States have made considerable progress in implementation of financial accounting software. The process needed to be expedited in the state of Madhya Pradesh, as it is the only state among ten largest states in which the software has not been implemented in all districts. MHRD should also focus on monitoring whether: (a) manual record-keeping is continuing along with the software at state and district level; and 15 th JRM recommendations on FM&P

11. 11 (b) basis of audit i.e., manual records or accounting records as per accounts produced from computerized system. A report on this should be presented during the July 2012 JRM. Internal Audit Concerns An annual plan for internal audit with red flags for identified and measured risk areas will strengthen administration and enhance the confidence of stakeholders. Risk identification and measurement can be done through statistical and scientific audit sampling, since manpower is a limited resource. 15 th JRM recommendations on FM&P

12. 12 This control of all controls can identify the gaps in financial management system and reduce noises in the population by addressing such issues like adjustment of high value outstanding advances with age-wise analysis of the same, bottlenecks in fund flow system and many performance snags. MHRD should act in tandem with the state governments for inducting professionalism in internal audit system. Reports of Institute of Public Auditors of India (IPAI) MHRD may like to monitor the IPAI reports closely, particularly when the internal audit system is at the take-off stage in many states. 15 th JRM - Recommendations on FM&P

13. 13 Procurement MHRD may investigate the specific contracts highlighted in the PPR and also identify states where more focused oversight and attention is to be provided. MHRD may suggest specific checklists for review of procurement as part of the ToR for internal and external audit and the ToR shall prescribe the percentage of purchase transactions/contracts that need to be reviewed by the auditors and reported on. MHRD should re-emphasise that all states should adhere to the SSA FMP manual and that repeated non adherence to the manual shall be dealt with appropriate actions including declaring mis procurement as provided for in the FMP Manual. Recommendations on FM&P

14. 14 It may also provide clarification on the applicability of the FMP provisions to all entities that procure on behalf of the SSA program. The procurement monitoring software which was agreed as an important action point at the 12 th JRM is yet to be implemented. This remains a serious concern for the mission as many states still report non adherence to the FMP Manual. It is suggested that Implementation of the online procurement software be fast tracked, as this is a very useful monitoring tool for MHRD and the states. Recommendations on FM&P

15. 15 Since majority of the procurement under SSA is being done at the community level, it is recommended that all states print and distribute SMC (School Management Committees) manuals with sections on Financial Management and Procurement in the vernacular to all SMCs. Regular Training and frequent briefings on procurement procedures may be provided to SMC members in order to increase effectiveness, efficiency and economy in procurement. It is recommended that Comprehensive Annual Maintenance contracts (Parts / Labor / Onsite) be entered into for all equipment procured under the SSA program Recommendations on FM&P

16. 16 The 13th JRM had suggested measures for improvement in text book printing. The Action taken on the recommendations have been reported in the 14th JRM, but there is still scope for improvement. The Missions suggests the following for further improvements in text book printing: (i)Specifications (e.g. quality, size and thickness of the paper etc) of each book should be printed somewhere in the opening pages of the books; (ii)Use of Bar code on Text books would help in preventing duplication in the market. (iii)Consider and share the good practice models found in states e.g., qualification criteria in line with Maharashtra tender documents and specifications as per Karnataka tender documents; Recommendations on FM&P

17. 17 (iv) While printing, specify FOR FREE SUPPLY on the cover to save time on manual stamping of books by the authorities, as is being practiced by most states; (v) Consider withdrawing the practice of providing positives and charging for the same in view of the current industrial printing practice viz. Computer To Plate (CTP) Recommendations on FM&P

18. 18 ASSAM A follow-up discussion on the internal audit mechanism should be done with MHRD for a common understanding on the same and an update be provided on cost items that have significant under utilization of funds. CHHATTISGARH Delays continue to be there in the initiation and completion of civil works projects. This was attributed in part to the conflict in LWE areas and partly to a delay in the receipt of funds from GoI. The second instalment from the Central Government has not yet been received. No civil work sanctioned for 2011-12 has been completed till date. Recommendations on FM&P of STATES

19. 19 Though there are 4778 works which are under progress throughout the state. Fund flow mechanisms from the GoI to state and from state to districts and below need to be streamlined on an urgent basis. It is important to urgently address staffing and capacity building at all levels. Although the state has initiated training on the FM&P Manual at district and block level, awareness and utilisation could be further strengthened. The state is finding it difficult to fill the vacant posts because of the lack of qualified accountants within the state. The state needs to find a solution to this issue as the implementation is suffering on this count. Recommendations on FM&P of STATES

20. 20 The Mission came across certain issues that are barriers to RTE but do not necessarily find their places in the present SSA guidelines. It would be important for MHRD to consider having a component of flexible fund which can be given to states on the basis of the proposal prepared separately to address such specific needs. GUJARAT Staffing (i) The state must review the new arrangement of Block level accountants continuously to ensure that it is working effectively e.g., sample visit and checking of reports by next higher level (BRC accountant for SMC and CRC accountant). Recommendations on FM&P of STATES

21. 21 FM Guidelines/Manuals and Training (i) Existing FMP manual in Gujarati needs to be updated as per the version of FMP issued in 2010 and BRC guidelines in Gujarati should be updated. (ii) The state may also consider scheduling FM training after each cycle of internal audit and statutory audit, to disseminate key findings of the audit. Flow of Funds (i)The state may consider the use of mobile phones for sending information about releases of funds to SMCs through CRCs, to speed up the flow of information. Recommendations on FM&P of STATES

22. 22 (ii) Also, as soon as schools have computer labs and internet facility, all correspondence to SMCs/CRCs/BRCs can be done through electronic mail. (iii)This would also lead to effective use of infrastructure provided to schools. (iv)Computers have already been delivered in some schools in December 2011. Accounting and Internal Controls (i) Fixed Asset Register to be as per the format in FMP at all levels. (ii) BRCs to print and sign monthly accounts and BRS from Tally. (iii)The state may also consider having joint signatories for bank accounts at BRCs. Recommendations on FM&P of STATES

23. 23 Monthly Financial Reporting from district and sub-district level (i)To include additional aspects e.g., large cash withdrawals and cash payments at SMC level. Audit (i) State to clear backlog of internal audit at the earliest. Block Accountants and CRC accountants to monitor compliance of audit observations for their respective offices and compliance of audit observations by SMCs. SMC (i)SMC Minutes to include information on grants received; expenditure and balance of each grant; cash and bank balance; and major decisions regarding procurement, payments etc. Recommendations on FM&P of STATES

24. 24 (ii)Also, the woman community member, who is a co-signatory of SMC account, should also sign vouchers and not just cheques. Haryana The major issue in terms of staffing in FM department is at the BRC level. 180 Accountants posts are currently lying vacant. Most schools visited the Mission did not have an Expenditure information display board. Where ever it was seen (4/20 schools visited by the Mission), the board has not been updated for more than 2 years, or not filled/ updated; in some places, it mostly had information on maintenance/ beautification grants received. Recommendations on FM&P of STATES

25. 25 SMC members seem to be not aware of TLM/ TLE grants. School staff/ SMC members are not trained for accounting and record keeping. There are no printed materials distributed to school levels functionaries guiding them on how to maintain accounting and record keeping. JAMMU & KASHMIR State needs to expedite the process of auditors and audit firm appointment. The posts of internal auditors created at District level are also being filled up for furtherance of effectiveness of internal audit. Recommendations on FM&P of STATES

26. 26 KERALA The State needs to ensure that a mechanism for transferring funds electronically is put in place immediately. The pace of fund utilization has been rather slow in the current financial year, which has mainly been due to non-recruitment of teachers sanctioned in the year's plan. RAJASTHAN It will be useful to agree a format for social audit display boards at the SPO level itself which can then be shared with all the Districts to ensure financial information is consistent, visible and adequate. The large number of vacancies in Accounts needs to be addressed urgently. The State has been employing retired accounts personnel to fill up vacancies on contract basis and increased use of such consultants should be considered. Recommendations on FM&P of STATES

27. 27 The mission recommends that Training for Headmasters and teachers on basic accounts and record keeping be provided. The mission suggests that SMCs be regularly briefed on procurement methods and procedures as a large proportion of procurement activities are conducted through them. TAMIL NADU Internal Audit is a control function which examines and evaluates the adequacy and effectiveness of other controls in the system. In fact, it has been defined as control of all controls. The vacancies in Internal Audit be filled up expeditiously in consultation with director of LF Audit, failing which Chartered Accountants may be engaged for the work under the provisions of FM and Procurement Manual. Recommendations on FM&P of STATES

28. 28 Urgent steps need to be taken to strengthen the Finance Wing, particularly at the field level. The consolidated balance sheet should have adequate disclosure under the capital fund. Audit objections need to be settled quickly. Similarly, the third phase report IPAI needs attended to expeditiously. Steps need to be taken to adjust the outstanding advances. Particular attention needs to be given for obtaining the pending UCs. More loss of time may prove to be risky in getting the required documents necessary for adjustment of the high value advances. Recommendations on FM&P of STATES

29. 29 TRIPURA Third party evaluation of civil works needs to be carried out urgently. Many of the recommendation of the IPAI report need to be implemented and action taken report need to be sent to MHRD urgently. Finance Officer/Coordinators and Accounts officers post need to be filled up urgently before disbursement of next tranche or by beginning of the next financial year. Along with filling up posts, regular training and hand holding support to all relevant officials, Head masters, CRCs and BRCs on finance and accounting guideline and practices need to be conducted. Recommendations on FM&P of STATES

30. 30 More number of Master trainers on finance and accounts need to be developed and deployed. Strengthening of internal audit system with required manpower is necessary to ensure more frequent audits and action taken on recommendation. Financial accounting software needs to be rolled out urgently. WEST BENGAL It is desirable that provision of Para 74.1 of the Manual on Financial Management and Procurement are strictly followed, and the incorrect practice of booking Advances as expenditure discontinued forthwith. Recommendations on FM&P of STATES

31. 31 Furthermore, detailed analysis of the un- reconciled amount of Rs 15.33 cr needs to be undertaken on priority basis to resolve the discrepancy. There is also need to examine, whether all primary schools at VEC level can be authorized to have separate Bank Accounts, so that handling of cash is minimized. In the absence of Headmaster, it needs to be considered whether Headmaster of a neighboring school along with Teacher-in-charge of the school can be authorized to operate a separate Bank account. Recommendations on FM&P of STATES

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