1. Recommendations of the 19 th JRM on Financial Management & Procurement 40 th Review Meeting of State FCs- New Delhi (30 th January 2014)

2. 2 Held from January 13-27, 2014. Undertook field review in 5 States of Karnataka, Kerala, Madhya Pradesh, Nagaland and Punjab. Aide Memoire relating to FM&P is enclosed at Annexure I. Annexure I Key recommendations on FM&P (a) The Mission is of the view that while maximum possible utilization of outlays is important, expenditure should not be allowed to become an end in itself. Proper utilization and ‘value for money’ considerations are as important, and should suitably temper the concern for full utilization of outlays. 19 th JRM recommendations on FM&P

3. 3 Where appropriate, release of financial assistance may be modulated so as to nudge implementation of neglected but important steps. (b) The Mission also recommends associating financial experts as members in each mission team sent to states for detailed appraisal of financial management and procurement practices in the states. 19 th JRM recommendations on FM&P

4. 4 General Recommendations on FM&P Accounting The Mission recommends that the deficiencies in the accounting system should be corrected early. Accounting Software The Mission recommends that the software needs to be installed in the remaining 4 States (Andaman & Nicobar Islands, J&K, Lakshadweep and Meghalaya) and the coverage should be extended up to Block Level gradually and the manual system dispensed once the software is stabilized. 19 th JRM recommendations on FM&P

5. 5 Adjustment of Outstanding Advances The Mission recommends that clear strategies need to be adopted to adjust all outstanding advances of 2011-12 by 31.03.2014. Statutory Audit Since the statutory audit report is a very important financial monitoring tool, the Mission recommends that sustained efforts needs to be made to submit the audit report by due date. 19th JRM recommendations on FM&P

6. 6 Compliance of Audit Observations The Mission recommends that MHRD and States should closely monitor the progress of settlement of outstanding audit objections and take sustained efforts to settle the outstanding audit observations. Internal Audit The Mission recommends that the 12 States not started the internal audit be asked to complete the internal audit by 31.03.2014. 19th JRM recommendations on FM&P

7. 7 Staffing The Mission recommends that the vacancies of Finance and Accounts need to be filled urgently in order to strengthen financial management system. Capacity Building of Finance & Accounts Staff The Mission recommends that the States need to provide adequate capacity building to finance and accounts staff. 19th JRM recommendations on FM&P

8. 8 Procurement Software The Mission recommends that all states need to use the software extensively to monitor the procurement of open tender contract of Rs. 10 lakh and above and this effort need to continue in future to maintain the transparency of Procurement. 19th JRM recommendations on FM&P

9. 9 Karnataka Financial Management In some districts, expenditure is below 50% as on November 30, 2013 figures provided and requires some attention. Response from the state to comments on the audited statement of accounts of 2011-12 are awaited and needs to be resolved on priority. The State is following the cash basis of accounts instead of accrual system of accounts. This requires attention and action. State specific recommendations on FM&P

10. 10 Karnataka Financial Management The Statutory auditors have commented that Advances given under SSA and KGBV are pending. The Register of Advances has not been physically verified. Steps need to be taken to take corrective actions based on internal and statutory auditor observations. State specific recommendations on FM&P

11. 11 Madhya Pradesh Financial Management State government is facing shortage of funds for teacher training, payment of salary etc; Releases made to SMCs and the main obstacle to release of Central Share relates to procedure of adjustments of UCs; A concurrent audit is carried out at district & block level there is need to strengthen the maintenance of books and the preparation of Books such as the Register of Assets and preparation of statements like the Bank Reconciliation statement at the village level. State specific recommendations on FM&P

12. 12 Outstanding audit paras and major key pending issues – There are paras involving procedural lapses such as non maintenance of books of accounts or improper maintenance. Deficiencies have been found in accounting. Bank reconciliation not being done every month in all units. Outstanding Advances: The total outstanding advances against which Utilization have become due stood at Rs.711.30 crores as on 30 th September 2013 out of this Rs.691.00 crores belong to the period up to 2011-12. State specific recommendations on FM&P

13. 13 Punjab Financial Management System of budgetary projections to be made more accurate Steps to introduce the mercantile system of accounts may be taken. System of adjustment of advances may be streamlined. Action on audit observations of IA,SA and AG(audit) may be taken in a time-bound manner. Action may be taken to implement the Central Plan Monitoring System. Assets created out of Project Funds may be verified and accounted for. State specific recommendations on FM&P

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