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37th Quarterly Review Meeting of Finance Controllers, New Delhi

Review of Audit Reports FY-2011-2012

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1. Audit Reports for the year 2011-2012 received from SIS were reviewed and deficiency letter indicating the deficiencies/discrepancies in the audited documents and pointing out certain key audit observations were sent to the SIS

Review of Audit Reports FY-2011-2012

2. Review of Audit Reports has revealed that the following common key issues continue to recur in a large number of states, year after year.

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• Non production of records for Audit• Weaknesses in accounting and record keeping• Transfer of funds from one level to another is

treated as expenditure• Internal controls-

Bank reconciliation statement not prepared monthly for every account.

Details of Advances, recovery, refund not maintained and monitored.

• Non maintenance of required books of accounts, weak recording/ monitoring of Civil Works.

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• Refund of unspent advances returned back by units is treated as Receipts.

• Inadequate follow up on Audit objections made in previous year.

3. The above common finding may have the following impact on the programme

No monitoring of end utilization of funds-expenditure reported is much higher than actual

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Lower assurance on accuracy of financial information / Statements, higher risk of mis-appropriation of funds

In adequate financial information, weak monitoring resulting in sub-optimal outputs

Financial statements are critically examined by external aid agencies, invite adverse comments or even disallow

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4. Major deficiencies Statewise listed below :

1. Andaman & Nicobar Islands :

i. Refund of Rs.8.02 lakhs by sub-district has been shown as Receipts (income) in Income & Expenditure A/c. Instead of crediting to Advances accounts, since fund releases are to be classified as advances in book of accounts (Para – 74.1 of FM&P Manual).

ii. Other receipts as per consolidated AFS are shown as Rs.87.84 lakhs whereas same as per UC is RS.34.23 lakhs & Rs. 8 lakhs in I&E accounts.

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iii. Irregularities in purchase of office furniture- Excess payment for fright port dues etc. which is not

iv. None deduction of Income Tax.

2. Assam

i. Total Receipts as per UC shown as Rs.147863.90 lakhs and as per AFS RS.147587.88 lakhs. The difference of Rs.276.01 lakhs

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ii. As per Para-74.1 Manual funds released to District & Sub-district level are to be clarified as advances in the books of accounts. The Bank & Cash balance with Districts are therefore, also to be treated as advances outstanding with DPOs, but no such advance has been shown outstanding in the audited accounts of SPO. This needs to be rectified.

iii. Huge amount of advances given in earlier years since 2002-203 are yet to be adjusted. Some of advances have become time barred.

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iv. Funds in Transit of Rs.40.47 lakhs to Dina Hasso (HC Hills) District for earlier years along with Rs.22.28 lakhs curing current year.

v. There was no completion certificate from the Civil Works units of District in majority of cases

vi. Advances of FY-2002-2003 i.e., more than 10 years are also being carried forward.

vii.An amount of Rs.152.86 lakhs has been debited to Civil Works for expenditure incurred for SMO-Building (Adm. Building). This is not covered under SSA norms. (Para-26.2)

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3. Chandigarh (UT)(a) The following items of receipts do not constitute Actual Receipt and, therefore, the same should not have been classified under other Receipts.

i. Refund of Balance Amount by NCERT

ii. Cheque returned by DEO UT-Chandigarh

iii. (Payment of counseling charges)iv. Refund received from Engineering

Department Cheques cancelled

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All the above receipts are minus expenditures and are to be credited to the relevant expenditure heads to reduce the expenditure amount already debited. By crediting the same to Receipt head, the Receipts have been inflated and expenditures allowed to stand overstated in the books of accounts.

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4. Dadra & Nagar Haveli

i. The following documents are missing

a) Consolidated Annual Financial Statement in the format at Annexure-XX of the Manual on Financial Management & Procurement.

b) FMRs – I, II & IIIc) Procurement Audit Certificated) Management letter issued by the Auditors

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ii. Expenditures for which no documentary evidence.

iii. Advances of Rs.20737083/- outstanding on 31.3.2011 have been treated as expenses of current year as explained by the department which is not correct. Advances are to be treated as expenditure only based on the documents viz. expenditure statement / utilization certificate.

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5. Delhi

i. Variation in unspent balance as per Balance Sheet and UC

ii. Variation in Advances outstanding as per BS and UC

iii. No monthly Receipts and payment accounts is being maintained in the DPOs

iv. Fixed Assets Registers is not being maintained properly.

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6. Jammu & Kashmiri. Variation in Unspent Balanceii. Bank Reconciliation statements has not been

regularly prepared at District/Sub-District level

iii. At some districts/sub-districts offices remittances in transit were not reconciled.

iv. Maintenance of accounts at DPOs/Sub-district level need improvement

v. Internal Audit also needs to be strengthened.vi. Reconciliation in between DPOs/Sub-offices

in respect to transfer of funds/surrender of funds with SPD not done properly.

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7. Goa

i. Statutory Auditor qualified report, certain issues to be verified by Statutory Auditor for FY-2012-2013

ii. Advance payment of Rs.2.21 crores for Civil Works during FY-2008-2009 still not adjusted

iii. DPO-North-Advance amount of Rs.1.41 crore for FY-2010-2011 still remain unadjusted

iv. DPO-South-Advance amount of Rs.2.21 crores as on 21.3.2011 only Rs.88 lakhs adjusted during FY-2011-2012.

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v. Lack of reconciliation of balances between BRCs and DPO and between DPOs and SPO.

vi. DPO-South received grant from SPO of RS.7.25 crores, out of 1 crore was remitted by it to North-DPO. But same was wrongly accounted as refunded back to SPO.

vii.Defaulted in deduction of TDS and PF contribution from Staff Salary / Contractors bill

viii.Monthly payment & receipts accounts are not being prepared by DPO/Sub-DPO.

ix. BRC/ Salcete-not maintained cash book. All withdrawal from bank account found accounted in the name of accountant

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8. Gujarat

i. Rs.477.89 lakhs has been shown under ‘Other Receipts’ which is not in conformity with the provisions in the FM&P manual. Since fund releases are booked as Advances in the books of accounts Grant refunded savings need to be credited to advances and is not to be treated as Receipt. The error needs to be rectified as receipts have been inflated.

ii. Mis-procurement cannot be funded under SSA FM&P manual (Para-127.1)

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iii. Funds of Rs.85 crore received under 13th FC award have not been shown in Consolidated Utilization Certificate.

iv. Excess expenditure incurred by DPOs under different activities as compared to approved AWP&B for the same

v. Advances outstanding at DPO need to be closely monitored

vi. Previous years statutory audit observations not complied with.

vii.Proper procurement procedure not followed by SMC/CRC.

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9. Maharashtra

i. Rs. 20.80 crores shown as ‘Other Receipts” no details

ii. Advances of earlier years amounting to Rs.166.78 crore expended during the year have been shown as fresh Receipts instead of showing the same under opening balance. Advances of earlier year can’t be expended and adjusted during the current year without approval of PAB for spillover. As per Para-74.3 of FM&P Manual.

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iii. Advances of Rs.16150 lakhs adjusted during 2010-2011 has been shown as Receipts under Receipts & Payment account.

iv. Expenditure under various activities head exceed budget allocation for the year 2011-2012.

By Auditor :v. Records maintained by some DPOs

incompletevi. Authorised / supporting documents or details

of payment / vouchers were not made available.

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iii. Advance given to BRC/BEO for advertisement in 2007-2008 supporting voucher received in 2010-2011.

iv. Advances were not adjusted within stipulated time

v. Improper BRSvi. Some BRCs have opened current account

instead of saving Bank A/C.vii.Grants to Sub-DPO booked as expenditure

instead of advancesviii.Utilization Certificate not record in timeix. Books of accounts not maintained properly

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x. Grant record for count of New Primary School was not spent for 3 years due to non availability of land.

10. Manipur

1. The following documents not enclosed with Audit Report• Utilization Certificate (Annexure-XIX)• Consolidated Annual Financial Statement

(Annexure-XX)• Procurement Audit Certificate• FMRs-I, II & III duly filed in

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• Para on settlement of outstanding /previous year Audit objections

• Para on coverage of Audit of Sub DPOs/VECs receiving grants of more than 1 lakh per year.

• Gist of significant observations made by the Auditors who have conducted Audit of accounts of DPOs/Sub DPOs

• Details of unadjusted advances as on 31.3.2012

2. The following discrepancies are observed.

i. Refund received by SPO from VECs have been shown as Receipts

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ii. In Imphal West District accounts, Rs.22.15 lakhs shown as Receipts but amount pertains to Mid Day Meal scheme and not SSA.

iii. Stale cheques have been shown as ‘Receipts’ in Senapati and Thoubal Districts.

iv. Rs.4.71 lakhs shown as ‘Receipts’ in Imphal West District accounts which was refund received from blocks.

v. Funds received from SPO has been shown as ‘Receipts’ in DPOs and not as advances.

vi. Amount of Rs.11.21 crores have been shown as Fund in Transit (not received by districts) which needs to be reconciled early.

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vii. Rs.1 lakh cash in Hand Churachandpur District accounts as on 31.3.2012.

3. The Auditor has pointed out:

a) The accounting records not maintained as per FM&P Manual. In most of districts neither book of accounts are maintained on day to day basis nor proper heads of expenditure recorded in cash books. In many districts no ledger is either maintained or maintained incomplete.

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b) In SPO and DPOs, accrual basis of accounting as prescribed in FM&P Manual is not followed but cash system of accounting followed.• Book of Accounts particularly Register of

Advances, VEC wise Civil Advance Register Stock Register, Fixed Assets Register, Ledger, Bill Register, UC Register are either not maintained or improperly maintained in the Districts.

• Bank Reconciliation Statement is either not prepared at all or prepared at the end of the year deviating from the guidelines in FM&P Manual.

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• Most of the Districts are treating the fund released to the Blocks and VECs under different interventions as expenditures instead of showing it as Advance. These funds are actually utilized by the concerned authority at later date and some time in the next accounting year. No record for non receipt of UC or expenditure statement is maintained to monitor actual utilization of such fund for the specific purpose.

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• While drawing the accounts some of such funds sent to the Blocks/VECs have been considered as Advance and Expenditure Statements received were considered as utilization. As the Advance Register is not maintained / improperly maintained , yearwise break up of outstanding/unadjusted Advance-block/VEC wise is not available.

• In most of the Districts inspite of providing computer system as well as Tally software the Accounts are maintained manually.

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• System of compilation of monthly Receipt & Payment and Income Expenditure A/C is totally absent.

• In most of the Districts including SPD office, TDS, VAT etc. deductible from the payment to parties has been treated through Cash Book instead of Journal and also payment of such deductions are not made within the statutory time limit.

c) There is no effective internal control mechanism in commensurate with the volume & nature of the transaction.

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d) Most of the funds are being utilized at the Block/CLRC/VEC level but no effective control and monitoring from the District level is observed for the same. In some districts the price of certain items purchased appears to be abnormally high.

e) In some cases fixed assets including Computer, Laptop, furniture and other materials were purchased by the District authority from the shop without asking for any quotation.

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f) Advances paid to the staff and others are not being properly recorded in the Advance Register, where maintained, Majority of districts are not maintaining such Registers. Details and period of outstanding is not available. Follow up for recovery/ adjustment of outstanding advances not there in Districts/SPO.

11. Odishai. Internal Audit Report needs to be followed

up / suggestion implementedii. BRS not prepared regularly, stale cheque

lying

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iii. Maintenance of Records at SMC level need improvement

iv. Maintenance of Records in respect of UCs and settlement of advances not satisfactory

v. In DPO system of monitoring/collection of UCs need to be improved

vi. Advances to individualsvii. Delay in payment of GPF/EPF/TDS/

Professional Taxviii.Auditor has made 13 recommendations may

be considered for implementation.

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12. Madhya Pradesh

i. Rs. 9.05 crore appear in Income & Expenditure Account amount includes various refunds received from PTA/Blocks amount has been shown as Misc. receipts.

ii. Fund balances, opening balances of current year is not tallied with closing balance of previous year.

iii. Procurement audit many irregularitiesFY-2009-2010:Out of 8 observations-5 are

still pending

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FY-2010-2011: Out of 7 observations-4 are still pending

FY-2011-2012: Out of 21 observations madeiv. Income tax / professional tax/PF deductionsv. BRS not prepared by PTA/SMCsvi. Non compliance of Audit observations made

in previous year vii. Cash payments be minimized. Most

payments by chequesviii. Excess of expenditure over provision in

AWP&Bix. Management letter-21 nos. suggestions

made.

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13. Rajasthan

i. Funds amounting to Rs.320 crore released by 13th FC for FY-2011-2012 have not been depicted in Financial Statement including UCs.

ii.Funds releases to SDMCs are treated as expenditure, before execution of works. This is non conformity with Para-74.1 of FM&P manual

iii.Actual expenditure on training programme is in excess of AWP&B

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14. Punjab

i. Allahabad Bank A/C in name of Deputy State Project Director, SSA being not shown in books of accounts and having transferred funds of Rs.102.97 lakhs

ii. Interest Free loan of Rs.970 lakhs given to RMSA

iii.Expenditure booked on basis of performa invoice, without receipt of materials.

iv.Payment of Rs.40.61 lacs made to M/S Everon Project Consultant Ltd.

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v. Allocation of Expenditure to districts without any supportive details.

vi. Register of advances for the funds released to District level

vii. Entries in Stock Register / Fixed Assets are not updated

15. Uttar Pradeshi. Auditor has made many materials

observations/objection regarding• Fraudulent withdrawal• Irregularities in preparation of BRS• Procurement

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ii. Procurement guidelines procedure not being followed

iii. In some districts relevant records required for audit not produced

iv. Management letter- many suggestions

(1) District – Bulandshar: DPO

a) Rs.40,86,463.00 was transferred for construction of primary school building between 01-04-2011 to 31.3.2012 but records could not be shown to auditors

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for verification. Similarly Rs.34,76,752.00 was transferred to 4 schools for construction of building but records were not shown.

b) District purchased laptop for Rs.19,700/- which is neither appearing in the fixed assets register and also not physically available at DPO. Also pen drives worth Rs.11750/- was procured but not entered in the fixed assets register and also not physically available.

c) Purhcase of computer worth Rs.42,82,600.16 Quotations were not called from the parties and also sanction of competant authority.

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DIET

(a) On 05-01-2012, Rs.23,35,900.00 and Rs.29,85,700.00 were withdrawn fraudulently vide cheque no 92046 and 92073 respectively from A/C No.0069000102387978 of DIET, Bulandshar with Punjab National Bank, Moti Bagh, Thana: Kotwali, Bulandshar for which FIR has also been lodged on 05-01-2012 itself with Thanha-Kotwali.

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(2) District-Muzaffarnagar:

a) Tender form selling register has not been maintained. Unit was not able to reconcile the number of forms sold and the amount of cash deposited against the same in bank. As such the amount collected on selling of forms could not be accounted for in to.

b) Earnest money draft/cheques are still in the file. The same have neither been returned to the parties nor encashed.

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c) Purchase of computers:• No entry in stock register against 40

computers• 40 UPS 1KVA’LUMINOUS’ were purchased

at the rate of Rs.7,500/- each against MRP of 5,499/-

• MRP of the computer set is Rs.34,024/- against quoted price of Rs.36,900/-

(3) District –Unnao:•Tax has not been deducted at source against payment of Rs.17,53,489.00 to Viivgyore Infotec Pvt. Limited for supply of computer operators and accountants.

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• Computers for Rs.28,99,024/- purchased from Impulse Micro Electronics Private Limited and furniture of Rs.5,87,640.00 from Shri Balaji Enterprise, Hariom market. In this respect it has been observed:-

1. Computers have not been purchased from SPO Authorized agencies.

2. Purchase/Tender file was not provided to auditor for examination.

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(4) District-Jaunpur:

A. Purhcase of Computers (Computer Education)

40 sets fof computer systems were purhcased from UPDESCO & UPEC Ltd. in a quantity of 20 sets from each @80,550.00 AND 80,900.00 as against Rs.78,450.00 quoted by Uptron Powertronics Limited thus an Excess payment of Rs.(49,000+42,000=91000) was made in comparison to lowest price quoting party. Thus this action resulted an excess payment of Rs.91,000.00 which needs necessary action.

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B. Total Amount of Rs.49,485/- has been over paid. This is in connection with purchasing of hearing aid and earmold, brailer by Rs.30,888.00. Excess salary said to M/S Purvanchal Computer institute towards services provided of computer operator by Rs.7,355.00. Excess payment towards hotel bills by Rs.4,270.00, Taxibill by Rs.6,980.00. This is in addition to Rs.91,000.00 as discussed above.

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(5) District-Pratapgarha) Bank Reconciliation•Ch.No. 972320 dated 31/03/2010 passed from bank on 27/04/2011. Amount as per previous year reconciliation is Rs.10,94,000.00 whereas as per bank statement Ch. amount is Rs.1,09,04000.00. Hence there is dirrence of Rs.98,10,000.00 in previous year reconciliation also. Previous year reconciliation is also not proper.

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(6) District-Allahabad:• Rs.78000/- paid to U.P. System Development

Corporation Ltd. for purchasing of computers & Rs.13164/- to Surya Khadi Avam Gram Udyog Sewa Sansthan for purchase of support equipment in KGBV. However no quotation/ procurement procedures were followed for purchase of such equipments. Further the computers so purchased were at DPO till the date of our audit and no arrangements have been made for its installation. However these were received in March 2012 and all the payments have been made and booked in same year. Since then almost half a year have passed but the systems were dumped in a sotre at DPO.

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(7) District –Fatehpur

•In connection with construction of ACR and New Building for the total amount of Rs.12,32,110.00 in PS Astha, PS Sachauli, PS Narainpur for which no financial records were produced to auditors despite repeated reminders. Auditors have expressed chances of manipulation and embezzlement.

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(8) District-Gonda(a) Cash and Bank Balance

• Extra debit of Rs.12,84,363.00 has been made by the bank between 06-04-2005 to 16-09-2010 which needs to be identified, reviewed and reconciled.

(b) It was observed that school teachers/Nirman prabhari of BRC Mankapur, BRC Tarabganj,BRC Itiathok, BRC Cornailganj, BRC Bhabhanjot, BRC Jhanjhari, BRC, Mujahana and BRC Rupaidiha did not produce records for audit.

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16. West Bengal

i. Large number of discrepancies in Bank Reconciliation Statements• Not prepared on Monthly basis for all A/C• Stale cheques not reversed• Un-reconciled deficiencies as per cash

book and bank statement• In DPO

ii. Large amount of Advances for civil grants outstanding since 1.4.2010.

iii. Books of accounts not produced for Audit-KGBV

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iv. DPO/Jalpaiguri has treated all disbursement to various sub-units as expenditure

v. UCs not being monitored properly by DPOsvi. During FY-2011-2012, Rs.58.64 crores was

received by DPOs as refund of un-utilized balances from CRCs, but interventionwise details were available for few districts.

vii. In Kolkatta district- Difference of Rs.7.10 crores in Advances against Civil Works as per records of accounts Department of Civil Department.

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viii.DPO/Jalpaiguri has incurred expenditure not related to SSA activities.

ix. In some department personal advances made to employees remained outstanding for more than 1 year. Recovery of Advances not being monitored adequately.

x. TDS not being deducted from contractors bills and deposited with I.T. Authorities.

xi. Large amount of advances are being brought forward for long period of time, for which UCs/Expense Statements not submitted by the concerned units.

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Audit observations (Activitywise)1. Accounting system : Double Entry accrual

basis2. Accounting Irregularities – Release of funds

being treated as expenditure instead of advances.

3. Utilization Certificate- School Grant/ Teacher Grant/ School Maintenance Grant not being sent

4. Bank Reconciliation statement not prepared monthly for each bank account.

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5. Un-reconciled / unexplained ledger balances6. Records not / Improperly maintained.7. Records not produced for Audit8. Internal Control/Internal Audit inadequate9. Outstanding advances-pending adjustment for

many year.10. Outstanding advances to employees11. Refund of Unspent Balances at blocks treated

as Income 12. Audit of SMCs not conducted

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13. Settlement of Audit paras/objections14. Procurement procedures not followed,

irregularities, quotations not invited. Excess payment made.

15. Improper control over budget. Excess / Irregular expenditure over PAB approval

16. Prior period expenses booked in subsequent years

17. Asset Registers not maintained, Physical verification of assets not conducted annually.