school sector reform program · pefa: public expenditure and financial accountability assessment...

School Sector Reform Program

Public Expenditure Tracking Survey/Fund Flow Tracking Survey for 2011/12

Submitted to the Ministry of Education and the Asian Development Bank

Study conducted by NK Sharma and Company, Tripureswor, Kathmandu

29 May 2013

Contents

Contents

1

Executive Summary

Context Survey Objectives and Scope Objectives Scope Key Observations Central Level Field Level Review of School Auditing Financial Audit Social Audit Key Issues and Recommendations Conclusion

2

Introduction

Background SSRP Sector-wide Approach The Assignment Objectives and Scope Objectives Scope Report and Deliverables Limitation Acknowledgment

3

Approach and Methodology

Contents

General Approach

Methodology District Selection Survey Tools/Questionnaire Data Collection Data Tabulation, Analysis and Reporting

4

Work Plan and Staffing Schedule

Work Plan Staffing Schedule

5

Budget and Fund Flow Mechanism

SSRP Budget and Budget Heads Education Budget v/s SSRP Budget DPs Share in SSRP Budget Budget v/s Expenses

Budget Heads

Budget Process Budget Ceilings, Guidelines and Approval Authorization and Release Letters Budget Revision Fund Flow Process Donors’ Contribution to FCA Funds Flow to Schools

Contents

Appendices

Appendix 1: Terms of Reference Appendix 2: List of Districts and Schools Visited Appendix 3: School (Financial) Auditing Review Appendix 4: School (Social) Auditing Review Appendix 5: List of Documents Reviewed Appendix 6: Survey Tools Appendix 7: Survey Tools Filling Guidelines in Nepali Appendix 8: Districts Selection Process Appendix 9: List of Attendees – Central Level Workshop Appendix 10: List of Attendees – Regional Level Workshop at Surkhet Appendix 11: List of Attendees – Regional Level Workshop at Hetauda Appendix 12: Survey Reporting Template Appendix 13: Total Budget and Expenditures of Districts at 2 REDs Appendix 14: Budget Released by DEO and Income Recorded by Schools Appendix 15: Status of Multiple Authorizations Appendix 16: Fund Flow Mechanism (Overall, Timeframe and Only Fund Flow) Appendix 17: Fund Flow Process DEO to School Appendix 18: Executive Summary of Pilot Fund Flow Tracking Survey

Abbreviations and Acronyms

Abbreviations and Acronyms

ADB: Asian Development Bank ASIP: Annual Strategic Implementation Plan AusAID: Australian Agency for International Development AWPB: Annual Work-plan and Budget DEO: District Education Office DFID: Department for International Development of the United Kingdom DOE: Department of Education DP: Development Partner EC: European Commission EFA: Education for All EMIS: Education Management Information System ESP: Education Sector Program FCA: Foreign Currency Account FCGO: Financial Comptroller General Office FMR: Financial Monitoring Report GAAP: Governance and Accountability Action Plan GON: Government of Nepal IDA: International Development Association JFA: Joint Financing Arrangement MDG: Millennium Development Goal MEC: Minimum Enabling Condition MOE: Ministry of Education MOF: Ministry of Finance NGO: Non-governmental Organization OAG: Office of the Auditor General OCE: Office of Controller of Examinations PBA: Program Based Approach PEFA: Public Expenditure and Financial Accountability Assessment PFM: Public Financial Management SESP: Secondary Education Support Program SIP: School Improvement Plan SMC: School Management Committee SSRP: School Sector Reform Program SWAp: Sector Wide Approach TEVT: Technical Education and Vocational Training UNESCO: United Nations Educational, Scientific and Cultural Organization UNFPA: United Nations Population Fund UNICEF: United Nations Children’s Fund VDC: Village Development Committee WB: The World Bank

List of Tables and Exhibit

LIST OF TABLES AND EXHIBIT

Tables:

TABLE 1: ACTIONS TO IMPLEMENT RECOMMENDATIONS TABLE 2: DISTRICTS SELECTED TABLE 3: MILESTONES AND ACTUAL DATES COMPARISON TABLE 4: CONSULTANTS AND PERIOD OF INVOLVEMENT TABLE 5: DP’s PRORATA SHARE FOR 2011/12 TABLE 6: SPENDING OF SSRP BUDGET FOR 2011/12 TABLE 7: SPENDING PATTERN PER SOURCE FOR 2011/12 TABLE 8: BUDGET AND EXPENDITURE PATTERN FOR 2011/12 TABLE 9: BUDGET, RELEASE AND EXPENDITURE PATTERN OF SELECTED REDS/DISTRICTS FOR 2011/12 TABLE 10: DEO RELEASE, INCOME RECORDED AND EXPENDITURE BY SCHOOL FOR 2011/12 TABLE 11: COMPARISON OF STUDENT NUMBERS TABLE 12: SSRP BUDGET HEADS TABLE 13: AUTHORIZATIONS LETTERS FROM MoE to DoE TABLE 14: RELEASE LETTERS FROM FCGO to DTCO TABLE 15: BUDGET REVISIONS FOR 2011/12 TABLE 16: FUND DEPOSIT BY DPs – DATES AND DELAYS TABLE 17: FMR SUBMISSION – DATES AND DELAYS TABLE 18: DISTRIBUTION PATTERN OF FUND DISBURSEMENT IN SELECTED DISTRICTS Exhibits:

EXHIBIT 1: CENTRAL LEVEL WORKSHOP PHOTO EXHIBIT 2: REGIONAL LEVELS WORKSHOP PHOTO EXHIBIT 3: SHARE OF DPs IN EDUCATION SECTOR FOR 2011/12

Executive Summary

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1

Executive Summary

Context

1 Various studies and audit reports of School Sector Reform Program (SSRP) have indentified relatively high fiduciary risks in its implementation and need of technical assistance to the Ministry/Department of Education (DoE) to enable them to develop and apply means in order to mitigate such risks.

2 The Asian Development Bank (ADB) approved a policy-based grant of $65 million to support the Government of Nepal's SSRP during 2012–2014. A policy condition under this grant requires the Ministry of Education (MoE) to undertake a tracking survey to check flow of funds to schools for textbooks, per capita funds, construction, scholarships, and disseminate the results of the survey to the general public.

3 In this regard, MoE has entrusted 5 Regional Education Directorates (REDs) to check funds flow to schools for textbooks, per capita funds and scholarships. MoE proposed to build upon this exercise and conduct tracking surveys through external technical assistance that helps to develop tools and/guidelines for the REDs of their expanded role in tracking public funds, and strengthen capacity for internal control in the system.

4 The ADB contracted 3 consultants to assist MoE/DoE/RED and enable them undertake fund flow tracking survey at 2 REDs and 2 District Education Offices (DEO) and 3 Schools under each DEO in each RED.

5 This document reports the technical assistance provided by the team of consultants and findings of a Fund Flow Tracking Survey conducted at 2 of the selected REDs as a part of Public Expenditure Tracking Survey (PETS) that was motivated by the intent of MoE/DoE to meet the 2 policy actions for second tranche conditions under output 5 of the Policy Matrix.

Survey Objectives and Scope

Objectives

6 The main objectives of the fund flow tracking survey are: ensuring

i) appropriate resource allocation from central to school and their Use ii) transparency, accountability and timeliness iii) proper use of rules, regulations and guidelines iv) corrective measures

Executive Summary

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7 With an aim to realize the above stated objectives, the main objectives of technical assistance to DoE/RED are to:

a) Develop survey tools and/guidelines to carry out fund flow tracking survey,

b) Strengthen capacity of DoE/RED staff in undertaking similar kind of survey in the future,

c) Identify vulnerable areas/system in the fund flow process, and d) Provide a set of recommendations to take corrective actions

Scope

8 The original Terms of Reference (TOR)1

9 Review of funds flow was done at two levels: First, fund flows from the center to the selected districts, and second, fund flows from the selected districts to the schools.

for the consultants required assisting 2 REDs in carrying out funds flow tracking at selected districts and schools and capacity development trainings at central level. However, the first revision in TOR (dated 21 Jan 2013) also required to review the school audit functions at the selected schools and provide findings and recommendations.

10 Technical assistance was provided in conducting the survey at two (Eastern and Mid Western) REDs.

11 Two districts in each RED and three schools under each district were visited2

12 Besides assisting REDs in carrying out survey at selected districts and schools, capacity development trainings were organized for RED staffs at Central and Regional Levels in using the developed tools and writing survey reports.

. Thus, a total of 2 REDs, 4 DEOs and 12 Schools were visited for the purpose.

Key Observations 13 Following are some of our key observations of the Survey from review of documents and discussions carried out at field levels. It is important to note that the sample size of the Survey and availability of verifiable data/information limit the extrapolation possibilities, so caution should be used in applying percentages, particularly of usage/leakage estimations and certain aspects of the data provided in this report.

14 The need for a tracking survey is quite symptomatic of the challenges present in internal controls and ensuring use of funds for the intended purposes. The availability of information at the school-level from expenditure, performance and results perspectives is seriously wanting.

Central Level 1 Refer Appendix 1: Terms of Reference 2 Refer Appendix 2: Districts and schools visited for survey.

Executive Summary

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15 There has been some improvement over the quality of reporting and implementing Financial Management Action Plan in recent years. However, there remains concerns over

A) - The overall spending of the allocated SSRP budget during 2011/12 was

more than 96%, except for scholarship and administrative costs, which were below 90%.

In terms of budget and use:

- The spending pattern per sources of funding was, however, varying (96.13% in terms of government sources and 97.91% in terms of donors funding).

- Budget and expenditure pattern for SSRP Programme Budget at Central and District Levels for 2011/12 showed that there was underutilization of budget at central level mainly due to below 60% expenses in recurrent head.

- Budget of SSRP also contains sizable amount determined based on lump-sum amount due to want of required information and hence multiple authorizations sent to meet the desired level of expenses.

- The existing FCGO budget reporting system (which is used by DoE for preparing FMRs) provides financial data as per budget sub-heads and line items (e.g. Budget Sub-Head 3508033 - SSRP – District – Current has number of line items, one of them being 26412/Earmarked Grant that is used for text-book, PCF, etc.) that do not necessarily provide information about the four main heads (construction, textbooks, per capita funds and scholarships) for which the fund flow tracking from central to school level could be done.

B) With regard to timeliness:

- There was a delay of more than a month in finalizing the ASIP for 2068/69 (2011/12).

- Authority letters for 2011/12 (2068/69) from MoE to DoE were received during 2nd week of Srawan and DoE started sending authority letters to RED/DoE from 2nd week of Bhadra 2068

- Authorizations were sent to DEOs till last month of the fiscal year (i.e. less than a week before the end of the fiscal year).

- There was delay of about one month and two months in releasing letters to DTCO respectively for second and third installments.

- There was a gap of 12 days to more than a year between dates committed to actual dates of fund deposited by the individual donors.

- There were still considerable delays (more than 100 days) in submitting quality FMRs to donors by MoE/DoE.

C) With regard to compliances

- There were general compliances of programme implementation guidelines.

Field Level

Executive Summary

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16 There are common as well as peculiar issues in various districts visited. However, the general concerns were:

A) - The data collected and compiled at DoE for the 2 REDs and 4 districts

selected for survey showed a mix pattern of budget, release and expenditures under four major heads (highest (99.94%) expenses in Construction and lowest (84.29%) in Scholarship heads.

In terms of budget and use:

- There was mismatch between disbursement recorded by DEO, income recorded by schools and expenditure incurred in 6 major heads in 12 schools covered in the survey.

- Financial record keeping and management at schools were grossly inadequate to render effective review and ensuring utilization of fund for intended purposes.

- Instances of expenses incurred by the head master without prior approval from SMC, blank cheques signed and use of funds for one purpose to other purposes were noted.

B) With regard to timeliness:

- The transfer of the SSRP programme budget (except for Primary Teacher’s Salary) to Schools started only during Falgun 2068 (first week of March 2011), that means after 8 months of start of the fiscal year.

- More than 64% of SSRP funds were disbursed in the third trimester only in the reviewed schools.

- There was also considerable time lag between dates of release letters by the DEO and dates the fund recognized in school books. In the mid western region, 2 districts and 6 schools visited by us, it was seen that the dates vary from 2 days to 27 days during 2068/69 (2011/12).

C)

- Records of audit reports (financial and social) received not maintained by

With regard to compliances, monitoring and assurance - DEOs did not provide clear descriptions of line items against which how

much budget has been provided to the Schools (only total budget transferred made known to them) rendering difficulty in recognizing the amount in the books of account by Schools and ensuring use of fund for the intended purposes.

- Efforts have been made to check the correctness of the education data provided by schools. However, still there remains concern over the number of students reported by schools. Comparison of student numbers as reported in Flash I of 2069, Flash II of 2068 and present during the visits to 12 schools selected showed a wide variation.

- There was no consistency in distribution of scholarship funds in the visited schools.

- There was delay in completion of construction works as well as delay in distribution of text books.

- There was no plan prepared by RED/DEO for monitoring visits and no monitoring reports prepared. Financial monitoring was inadequate.

Executive Summary

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DEO to track submission of reports and their review. - Auditors for 3 schools were appointed by DEOs without receiving

recommendations from SMC of concerned schools. - The audit irregularities at DEOs have been in increasing trends (there

were 128 audit queries for 2 years at 4 districts visited with NPR75 million financial irregularities of which only NPR25 million were resolved, which was very low (only about 33% of audit irregularities were resolved).

- Meetings of SMC were not regular and effective from financial management perspective.

Review of School Auditing 17 There were 4 levels of assurance (checking and verifying compliances, purposefulness and accuracy of the reports) mechanism adopted in school sector, namely i) School Management Committee at operation level, ii) Social Audit at beneficiary level, iii) Financial Audit at an independent level and iv) Periodic Monitoring by DEOs at supervisory level.

18 Various audits and studies conducted in the past, including the mid-term review and fiduciary review conducted in 2011 by the World Bank suggested that the ineffectiveness of all the assurance mechanisms stated above had contributed into reporting of increased cases of non-compliances with laws, program implementation guidelines and ineligible expenses charged to SSRP budget.

19 To address the implementation of the effective mechanism in assurance activities, policy actions for second tranche conditions under output 5 of the Policy Matrix of the ADB requires implementation of the recommendations of the SSRP mid-term review on social accountability mechanisms (including social and school audits).

20 The review conducted showed that the performance of the school audits (financial as well as social) were found less than satisfactory due to inadequate financial records maintained, non-observance of guidelines by the reviewer as well as external auditors3

In respect of Financial Audit

and lack of proper review of reports by DEOs/REDs. The key findings are:

19 Out of the 12 schools surveyed, audit report was issued as prescribed in the

school audit guidelines in only one case and in 5 cases it was partially complied with. There was no audit opinion expressed in 4 cases, whereas qualified audit

opinion was issued in 2 cases although 7 reports have financial issues out of the 11 schools that have audit queries. Interestingly, none of the schools have prepared audit follow up action plan besides having number of audit observations for improvement.

Audit Report Format and Audit Opinion:

3 Refer Appendix 3 Review of School Auditing (Financial) and Appendix 4 Review of Social Auditing for details

Executive Summary

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20.

Audit reports were available in all schools surveyed. However, audit reports for current year 2068/69 were available in only 3 cases, whereas audit reports for previous year (2067/68) were available in 8 cases. Audit report of one school was available for 2066/67 (2 years’ backlog) only. In one case audit for 2067/68 and 2068/69 was conducted together.

It was also noted that audit reports were issued within 3 months of the end of fiscal year in 2 cases, whereas in 8 cases it was within 12 months and in 2 cases it was beyond 12 months.

With regard to timeliness:

21. Income statements (Income and Expenditure Account) were attached with

the audit reports in all 12 cases, whereas balance sheets were available in only 9 cases, receipt and payments in 7 cases, cash flow in 1 case, assets list in 10 cases, and advances outstanding details in 2 cases only. All 12 audit reports were signed and dated by the auditors. The head master has signed in only 10 cases, the SMC chair has signed in 8 cases and there was no signature of any member of SMC in any financial statements in all 12 cases. The accountant has signed in 2 cases out of 9 schools where separate accountant was available.

With regard to types of financial statements audited and its authentication

22. Auditors were appointed by the concerned DEO as per the recommendations

received from school in 9 cases whereas in 3 cases the auditors were appointed directly by DEO without receiving recommendations from the concerned schools.

It was further noted that in none of the schools visited, a single auditor was

appointed for more than 3 times (years).

With regard to appointment of auditors

23. Out of the 12 schools (4 primary, 4 Lower Secondary and 4 Higher

Secondary), the status of book keeping was poor in primary and lower secondary schools whereas it was slightly better in higher secondary schools. Only 5 of them have maintained cash/bank ledger, 11 have bank statements, 5 have income ledger, 4 have expense ledger, 5 have assets ledger, 2 have advance ledger and only 9 of them could show the review team vouchers raised for booking income and expenses.

With regard to types of books/records maintained

24. The survey team noted that there was hardly matching among the various

records (DEO, School Record, Audit Report) about the income and expenses reported. The books of account maintained were not kept updated and in a manner that segregate recording and reporting of major budget heads. Also, there was no mechanism to match figures from different sources and prepare reconciliation or investigate the un-reconciled differences. The books of accounts were not maintained segregating different sources of funding.

With regard to status of the income/expenses recording and reporting

Executive Summary

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In respect of Social Audit

25. Out of the 12 schools surveyed, social audits were conducted in 10 schools

only. The report was issued as prescribed in the social audit guidelines in only 5 cases. There were no issues mentioned in the social audit report of all the schools.

Social audit reports for 2068/69 (current year) were available in 9 cases, in 1

case it was available for 2067/68 and no report in 2 cases. Social audit was conducted within Bhadra in 3 cases only.

Report Format and Timeliness

26. There was no similarity in the composition of the members conducting social

audit. It was noted that the representative of PTA was available in 10 cases, of SMC in 9 cases, Headmaster in 4 cases, of parents in 2 cases, of students in 3 cases, of teachers in 10 cases and outsiders in 3 cases.

Also, there was different ways followed by schools in making the social audit

report public. It was noted that in only 4 cases social audit report was presented in stakeholders’ gathering orally and in 4 cases through exhibition in the school board. In 2 cases, the report was presented in SMC meeting only that too orally.

Key Issues and Recommendations

With composition of team and process of presentation of report

27. SSRP programme funding is based on number of students, teachers and status of the school. However, there is no reliable database available with up-to-date information or the profiles of all these parameters so as to track the funding and ensuring proper use of funds. Lack of adequate information available at the MoE/DoE level and poorly maintained underlying financial and other data at the school levels (majority of the fund spending units) coupled with weak monitoring and assurance activities have aggravated risks associated with SSRP implementation. Thus, it is recommended to: Priority #1: Develop system (database) to update profiles of schools, teachers and students, Priority #2: Prepare realistic budget based on updated information, Priority #3: Ensure timely availability of fund to DEO and Schools, Priority #4: Implement simplified financial book-keeping system at schools and provide financial management training to SMC, HM and accounting staff, and Priority #5: Enhance monitoring (with the involvement of REDs and DEOs) and assurance activities (with the involvement of ICAN). 28. Followings actions could be considered to implement the priorities listed above to improve in education sector financing in line with recommendations and actions stipulated in Financial Management Action Plan:

Executive Summary

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TABLE 1: ACTIONS TO IMPLEMENT RECOMMENDATIONS SN Actions Timeline Immediate Short Med/Long

A. In relation to Budget and Use 1.1 MOE/DEO to carry out effective budgeting and

variance analysis to ensure proper use of funds

1.2 MOE/DOE to make student number verification process regular and effective.

1.3 MOE/DOE to liaison with FCGO to include major heads (like salary, scholarship, text book, construction, PCF) trackable through their existing system.

1.4 DEO to provide/improve financial management training to SMC and Head Masters.

1.5 School to be provided with simple book keeping system (formats) and guidelines that can be used to prepare financial reports in line with the requirement of Education Laws.

1.6 DEO to require proof of deposit and record in school books of the previous budget released before providing subsequent budget.

1.7 DEO to compulsorily obtain social audit report for release of second instalment.

B. In relation to Timeliness 1.1 MoE/DoE to strictly follow the deadlines for budget

formulation as prescribed by Budget Guidelines of the Government.

1.2 DEO to provide authorizations for SSRP to DEOs within 2nd

trimester

1.3 DOE to form a policy of not releasing budget during last month of the fiscal year and concentrate to monitor and obtain financial reports from implementing units during that month.

1.4 DOE to prepare quality FMR on timely basis. 1.5 Donors to deposit their shares on time. 1.6 DEOs to release funds to school on fixed periodic

basis and reduce number of releases to schools for better control over fund disbursement.

C. In relation to compliances, monitoring and assurance 1.1 DEO to compulsorily provide details of budget

released to Schools at the time of release in prescribed format

1.2 DEO to maintain records of submission of audit reports and review such reports for taking appropriate actions

1.3 DEO to provide TOR to the external auditors incorporating the requirements inter-alia of ensuring compliances with Education Laws, Programme Implementation Guidelines, School Audit Guidelines and reconciling the budget released by DEO with the records maintained by School.

Executive Summary

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1.4 DEO to prepare its own audit follow-up action plan and RED to review status of implementation of audit recommendations on a regular basis (through off-site as well as on-site visits)

1.5 RED/DEO to develop and implement Monitoring Plan that requires visit to risky ones a number of times and at-least once in other schools in one year.

1.6 SMC to submit Audit Follow-up action plan and its implementation status to DEO before release of third trimester budget.

Conclusion 29. Despite various measures taken and commitment shown by the MoE/DoE, it was observed that there were significant prevalence of weak control, compliance and monitoring issues contributing high fiduciary risks in SSRP implementation. It is necessary to increase the level of commitment at the top and monitoring at the RED and DEO level with a focus on improving quality and actual data submission by school, use of simple book keeping at school, enhancing auditing and check and balance function with the involvement of all stakeholders (DEO, SMC, PTA, Auditors, Parents, etc.). It is also necessary to consider preparing a database that provides profiles of teachers, students and schools so that control can be started from fund allocation (budgeting) to monitoring of the implementation of reform measures in improving controls.

***

Introduction

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2

Introduction

Background

SSRP

30 The Government of Nepal (GoN) has prioritized investment in the education sector by focusing on the education sector since the early 1990’s through a series of national programs such as the Basic Primary Education Projects (BPEP I, 1992-1998 and BPEP II, 1999-2004), and Secondary Education Support Program (SESP, 2003-2009), and Education For All Program (EFA, 2004-2009). The School Sector Reform Program (SSRP) that runs between FY 2009/2010 and FY 2014/2015 is the final program in the 15 year Education for All – National Program of Action (EFA-NPA).

31 The SSRP is seen as a program that consolidates the gains achieved under previous programs, while simultaneously expanding the program coverage in a phased manner to include all levels of Schooling.

Sector-wide Approach

32 The overall thrust of the sector-wide approach (SWAp) in the education sector that started in Nepal from FY2004/05 with the implementation of EFA and continued with SSRP is to align development partner support with the government system especially by using the Government’s financial management and reporting procedures, and national procurement systems to the extent possible.

33 This mechanism aims to reduce transaction costs for all parties concerned, and also to ensure that the sectoral ministry complies with the government’s own regulations and systems.

The Assignment

34 Various studies and audit reports of SSRP have indentified relatively high fiduciary risks in its implementation and need of technical assistance to the Ministry/Department of Education to enable them to develop and apply means in order to mitigate such risks.

35 The Asian Development Bank (ADB) approved a policy-based grant of $65 million to support the Government of Nepal's SSRP during 2012–2014. A policy condition under this grant requires the Ministry of Education (MoE) to undertake a tracking survey to check flow of funds to schools for textbooks, per capita funds, construction, scholarships, and salary and disseminate the results of the survey to the general public.

Introduction

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36 In this regard, MoE has entrusted 5 Regional Education Directorates (REDs) to check funds flow to schools for textbooks, per capita funds, scholarships, construction and salary. MoE proposed to build upon this exercise and conduct tracking surveys through external technical assistance that helps to develop tools and/guidelines for the REDs of their expanded role in tracking public funds, and strengthen capacity for internal control in the system.

37 The ADB contracted Mr. Nanda Kishor Sharma, FCA as team leader and two consultants, Mr. Dipendra Subedi, CA and Mr. Sabin Prasad Sanjel, ACCA to assist MoE/DoE/RED and undertake fund flow tracking survey at 2 REDs and 4 District Education Offices (DEO) and 3 Schools under each DEO in each RED.

38 This document reports the technical assistance provided by the team of consultants and findings of a Fund Flow Tracking Survey and Review of Schools Auditing conducted at 2 of the selected REDs as a part of Public Expenditure Tracking Survey that was motivated by the intent of MoE/DoE to meet the 2 policy actions for second tranche conditions1

39 The support to the tracking survey is expected to complement the comprehensive public expenditure tracking survey (PETS) being coordinated by the World Bank.

under output 5 of the Policy Matrix.

Objectives and Scope Objectives 40 The objectives of fund flow tracking survey are: ensuring

i) That appropriate resources are allocated from central to school levels to achieve the overall objectives of the funding and their use for the intended purpose.

ii) That the process followed for resource allocation and uses are transparent, on a timely basis and with a sense of accountability.

iii) That resource allocations are done in full compliance of the set rules, regulations and guidelines, and

iv) That suitable corrective measures are taken to eliminate the impact of the shortcoming identified.

41 The objectives of review of school audit function are to provide the present status of the quality auditing function, its compliance with the standards/guidelines prescribed and suggest recommendations for improvement.

1 1) Policy Reform Area: Improving Financial Management and Procurement – Policy Action: Undertake a tracking survey to check flow of funds to schools for textbook, per capita funds, scholarships and disseminate the results of the survey to general public 2) Policy Reform Area: Strengthened Performance Monitoring and Evaluation – Policy Action: Implement the recommendations of the SSRP mid-term review on social accountability mechanisms (including social and school audits)

Introduction

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42 With an aim to realize the above stated objectives, the main objectives of technical assistance to DoE/RED are to:

a) Develop survey tools and/guidelines to carry out fund flow tracking survey,

b) Strengthen capacity of DoE/RED staff in undertaking similar kind of survey in the future,

c) Identify vulnerable areas/system in the fund flow process and school auditing practices, and

d) Provide a set of recommendations to take corrective actions Scope 43 The technical assistance to DoE/RED covers (based on revised TOR dated 21 January 2013):

• Support for Fund Flow Tracking Survey, and • Review of School Audits

44 With respect to Fund Flow Tracking Survey:

- Review of funds flow to be done at two levels: First, fund flows from the center to the selected districts, and second, from the selected districts to the schools.

- Consultants to assist in the survey at two (Eastern and Mid Western) REDs among the five REDs.

- Two districts in each RED and three schools under each district to be visited so that a total of 2 REDs, 4 DEOs and 12 Schools are covered for survey purpose.

- Capacity development trainings at Central and Regional Levels are to be conducted in developing tools, its use and writing survey reports.

45 The specific tasks to be carried out for the fund flow tracking survey are:

(i) Review of the fund flow tracking mechanism already adopted by REDs and assess the capacity need for the REDs to design and conduct tracking surveys;

(ii) Review and liaise with other relevant agencies (e.g. sector agencies that have already carried out PETS, the World Bank and FCGO, AGO, etc.) to ensure a proper background study of the tracking survey work;

(iii) Undertaking a mapping of fund flows from the central treasury to the schools so as to identify vulnerable points which can then be taken up by the tracking survey;

(iv) Developing a methodology/tools for the survey and finalize the same based on the feedback of the stakeholders;

Introduction

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(v) Conducting an initial test of the survey tools by visiting one of the DEOs and 2 schools under the selected REDs

(vi) Based on the testing, revising the survey tools as required; (vii) Conducting training workshop at the center encompassing all five

REDs on tracking survey techniques and tools; (viii) Compiling a report which presents the main findings of the tracking

survey, and specific including tools and/guidelines for the REDs to undertake limited PETS in the future;

(ix) facilitating DOE/RED in public dissemination workshop of the survey in Kathmandu to be attended by all the relevant stakeholders, and

(x) Submit the final report to the RED.

46 With respect to review of school audit, it is envisaged that:

i) Review shall be based on review of audit reports at the 12 schools visited, in line with the ICAN School Audit Guidelines and requirements of DOE, and

ii) It shall be supplementary to the fiduciary report of the World Bank.

Report and Deliverables

47 The Consultants are required to submit:

• an Inception Report, describing the plan and methodology for carrying out the activities;

• reports stating the overall work progress during the period under review;

• a Draft final report within 15 March 2013 (revised from 31 Dec 2012 due to late start of the assignment and additional activities added in the original TOR) including the main findings of the tracking survey and specific section on school audit review, including tools and/guidelines for the REDs to undertake limited PETS in the future;

• a Final Report after incorporating comments from ADB/MoE/DOE.

• Conduct one workshop at the central level and two at the regional levels. Limitation

47. The terms of reference required to carry out tracking survey at selected offices through review, observation and discussion. It was not envisaged and not feasible within the timeframe available to do thorough verification of all supporting documents to substantiate/validate the transactions and ensure proper use of funds.

48. Important limitations of this report include the small sample size and recognition that a Fund Flow Tracking Survey is not an audit from either a financial

Introduction

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or compliance perspective or concluding on the utilization of funds. As such, caution should be used in the extrapolation of the Survey findings.

49. This report is intended solely for the information and use of the Asian Development Bank and MoE/DoE and is not intended to be and should not be used by anyone without consent of the ADB. The consultant will not assume any responsibility to any user of the report other than the ADB.

Acknowledgement

50. We would like to thank officials of MoE, DoE and REDs and staff at DEO and Schools and ADB staff for their cooperation and time to complete the tasks and for their valuable suggestions in finalizing the survey tools and shaping the survey reporting formats.


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General 51. The following approach and methodology was followed based on consultants’ understanding of the objectives of the assignment and discussion held with the ADB and DoE staff.

52. ADB’s support to the DoE was to undertake a much focused tracking survey with the involvement of REDs supported by external team of consultants.

53. The consultants' team was responsible for the conceptualization, planning, and assisting the selected REDs in undertaking the survey works together with processing the data and completing the report writings.

54. The REDs was responsible for providing one IT staff and two other enumerators in each of the REDs, and in close collaboration with the consultants’ team to plan and manage the tracking survey, and organize workshops. However, RED was able to provide only one staff during the survey and hence 2 field enumerators were hired by the consultants for 2 REDs for 2 months to assist the survey teams. In addition, one IT expert was hired by the consultant to develop software for consolidating and analysis of data collected for reporting purposes for 2 months.

Approach

55. A “three phase” approach was adopted to achieve the intended objectives of the assignment:

• First phase: Planning The consultants carried out:

a. Review of relevant documents b. Contacts and liaison with other stakeholders c. Development of draft methodology/tools in consultation with MoE/DoE

(including capacity assessment of the REDs) d. Selection of districts to be covered for survey e. Submission of the Inception Report f. Pilot testing of methodology/tools working along with RED g. Workshop at central level for all the REDs in Kathmandu sharing the

concept, methodology and process. h. Orientation to the enumerators (from REDs and consultants).

• Second Phase: Data Collection and Compilation


20

The consultants assisted REDs in carrying out: a. Survey and data collection from the selected field offices (4 DEOs and

12 schools) b. Processing of the data collected on survey (through regional level

workshops and use of software developed) • Third and Final Phase: Analysis and Reporting

The consultants reviewed the draft reports prepared by the REDs and submitted draft reports to ADB/MoE/DoE. Final report shall be prepared based on the feedback received from ADB/MoE/DoE

Methodology

56. The consultants adopted the following methodology:

A) In the planning phase, the consultants: • Held meeting with the ADB staff, OAG/N officials involved in education sector

audit and senior DoE staff to gain and understanding of their expectation and agree on approach and methodology;

• Reviewed the reports and documents1

• Developed survey tools/methodology to carry out the survey in consultation with the MoE/DoE senior staff,

related to audit, other reviews and guidelines to understand, design and conduct survey, use common approach and avoid possible duplication;

• Selected one good and another poor performing districts for field visits; • Conducted pilot testing of survey tools at Sunsari DEO and 3 schools to test

the practicability of the survey tools/methodology so developed; • Based on the experiences gained at pilot district and school, revised the

survey methodology/tools by way of organizing a central level workshop inviting participants from MoE, DoE, all 5 REDs to share with them the survey techniques, concept, methodology and process.

• After finalization of survey templates2, prepared template filling guidelines3

Districts selection

and provided orientation trainings to the enumerators involved in pilot survey at two REDs.

57. The TOR requires choosing of 2 districts for survey from each of the REDs – 1 better performing and 1 less performing – in consultation with the OAG and based on its annual audit report for 2068 (49th Annual Report of the OAG, 2068 B.S). The DoE provided information on fund release during 2010/11, financial and program progresses and audit irregularities of all districts with Eastern and Mid-western RED and ranking of performance4

1 Refer Appendix 5: List of Persons met and documents reviewed 2 Refer Appendix 6: Survey Tools 3 Refer Appendix 7: Guidelines for filling the Survey Tools 4 Refer Appendix 8: Ranking of performance of districts under 2 selected REDs

was done based on average combined rankings.


21

58. Accordingly, following districts were selected for field survey:

TABLE 2: DISTRICTS SELECTED

SN Name of Districts

Release Amount,

NRs.

Financial Progress

(%)

Physical Progress

(%)

Audit ineligible amount (IA) for 2010/11 NRs.

AI % Perfor-mance

Ranking Eastern Region

1 Ilam 662,281,198 95.37 99.08 72,982,882 11.02 Good 2 Sunsari 842,475,723 85.08 93.84 103,479,483 12.28 Poor

Mid-Western Region 1 Dailekh 576,043,681 94.8 95.42 4,496,642 0.78 Good

2 Banke 540,101,575 87 89.65 41,072,945 7.60 Poor

Survey Tools/Questionnaire 59. The team of consultants developed survey tools/questionnaire to track of fund flow from central to school levels. Accordingly, 4 different survey tools/ questionnaire5

Form 1: Survey Tools/Questionnaire for Central Level Form 2: Survey Tools/Questionnaire for District Education Office Form 3: Survey Tools/Questionnaire for School, and Form 4: Survey Tools/Questionnaire for DTCO.

were developed, as follows:

60. These tools/questionnaires were discussed with DoE staff, tested at pilot district/school and finalized at the central level workshop organized at Kathmandu during 30 and 31 Dec 2012 and attended by 32 participants6

EXHIBIT 1: CENTRAL LEVEL WORKSHOP PHOTO

from MoE, DoE and all 5 REDs.

Mr. Nanda Sharma, team leader deliberating at the central level workshop while the Director

General/DoE (left) and the other participants listening to him.

B) In the data collection and analysis phase, the consultants assisted REDs in carrying out actual survey at the selected districts and schools and in conducting skill development trainings at 2 Regions to process the data obtained and writing survey reports.

5 Refer Appendix 6: Survey Tools/Questionnaire 6 Refer Appendix 9: List of attendees in central level workshop


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Data Collection

61. The consultant supported DoE/RED staff in collecting information required by the survey tools/questionnaire. The following teams conducted the actual survey at the fields:

Location DoE/RED staff Consultants Enumerator Central Mr. Chitra Bahadur KC Dipendra Subedi and Sabin Sanjel ERED Kewal Prasad Regmi

Deepak Shrestha Dipendra Subedi Rameshwore Tripathi

MWRED Dambar Bahadur Thapa Lok Prasad Poudel

Sabin Sanjel Ujjwal Lamichhane

Data Tabulation, Analysis and Reporting

62. The consultant helped RED staff to tabulate the information and data gathered from the survey using excel spreadsheet, consolidating and presenting the results through bar and pie charts.

63. The team of consultants prepared a template for presenting the Survey Report7 and conducted skill development trainings at 2 Regions (one during 7-8 Feb 2013 at MWRED, Surkhet attended by 9 staff8 involved in the survey at FWRED, MWRED and DEOs covered and second during 12-13 Feb 2013 at CRED, Hetauda attended by 16 staff9

involved in the survey at ERED, CRED, WRED and DEOs covered) to process the data obtained and writing survey reports.

EXHIBIT 2: REGIONAL LEVELS WORKSHOP PHOTO

Regional level capacity development workshops at Surkhet (left) and at Hetauda 64. The concerned RED drafted the survey reports based on skill gained during the regional level workshops and the team of consultants reviewed the reports from the point of view of quality, coverage and flow of the reports before submitting the same to DoE and ADB. The draft reports of the pilot REDs and summary fund flow tracking survey report10

65. The IT expert hired by the Consultant prepared software based on the request from RED staff to consolidate and analyse data collected from the field. An orientation on use of the software developed will be held at an appropriate time fixed by DOE.

were submitted to DoE.

7 Refer Appendix 12: Survey Form 5 - Template for Presenting the Survey Report 8 Refer Appendix 10: List of attendees at Regional Level Workshop at Surkhet 9 Refer Appendix 11: List of attendees at Regional Level Workshop at Hetauda 10 Refer Appendix 18: Summary Fund Flow Tracking Survey Report of 2 REDs


23

66. The lead consultant was involved in finalizing the survey reports based on the feedback received from DoE and ADB and to ensure disseminating the survey report through official website of the Ministry/Department of Education.


24

4


Work Plan 67. The work plan and staffing schedule have been followed in accordance with the timing requirements for outputs and deliverables specified in the Terms of Reference.

68. The assignment started from 9 October 2012 after selection of all three consultants by ADB and kick off meeting at ADB.

69. Component tasks were defined in the Terms of Reference (see Appendix 1), grouped into 3 phases and sequenced on a timeline, as given below: • Phase I – Planning - approximately 3 weeks • Phase II – Data Collection and Compilation – approximately 6 weeks, Sept to Nov

2012 • Phase III – Analysis and Reporting – approximately 5 weeks, Nov to Dec 2012

70. The phased timeline needed to be extremely aggressive in order to meet the ToR requirements but due to delay in contracting consultants, time required for due involvement of DoE in the process, extension of the work and longer time taken by RED in drafting the survey reports shifted the deadlines of completion of assignment and phases outlined.

71. The phases with component tasks were then rescheduled in consultation with ADB. Targeted dates versus the actual dates achieved are noted in Table below:

TABLE 3: MILESTONES AND ACTUAL DATES COMPARISON Milestone Original Date Revised Date Actual Date Kick Off 9 Oct 2012 Planning 31 Dec 2012 Data Collection and Compilation Sept to Nov 2012 31 Jan 2013 31 Jan 2013 Analysis and Reporting Nov to Dec 2012 15 Feb 2013 28 Feb 2013 Draft Report Dec 2012 28 Feb 2013 15 March 2013 Final Report 31 Dec 2012 31 May 2013 31 May 2013* *Expected

Staffing Schedule

72. The consultants involved in the assignment are shown below. Consultants’ inputs were availed in accordance with the demands of the work throughout the project period.


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TABLE 4: CONSULTANTS AND PERIOD OF INVOLVEMENT

Name of consultants Days contracted Period of involvement Nanda Kishor Sharma, Team Leader 66 Oct 2012 to Mar 2013 Dipendra Subedi, Consultant 81 Oct 2012 to Feb 2013 Sabin Prasad Sanjel, Consultant 81 Oct 2012 to Feb 2013 Rameshwore Tripathi, Enumerator 44 15 Dec 2012 to 15 Feb 2013 Ujjwal Lamichhane, Enumerator 44 15 Dec 2012 to 15 Feb 2013 Debesh Lohani, IT Expert 44 15 Mar 2013 to 15 May 2013 73. Field teams were lead by concerned RED staff and supported by one consultant and one enumerator hired to assist the consultant at each RED. The consultant’s teams supported the RED teams to fill up the survey questionnaire, obtaining and verification of data, filling up the templates and analyzing the results. The draft reports prepared by the RED team were then reviewed by the consultants for its quality, accuracy and compatibility with the format prescribed.


26

5


SSRP Budget and Budget Heads

Education Budget v/s SSRP Budget

74. The total education sector budget for 2011/12 was NPR 63.92 billion and the share of SSRP was NPR51.93 billion (81.24% of total budget) which was revised to 52.64 billion (82.35%). The share of Development Partners (DPs) on SSRP for FY 2011/12 was NPR13.446 billion (25.94%) (equivalent to US$186.75 million).

DPs Share in SSRP Budget

75. As per the letter dated 20th

TABLE 5: DP’s PRORATA SHARE FOR 2011/12

Dec 2011 received from the World Bank Nepal Country Office, the agreed pro-rata share of pooled donors for 2011/12 was as follows.

SN Development Partner

Amount in Thousand (NPR)

Amount in Million (US$)

Pro Rata Share %

1 ADB 2,877,444 40 21.4 2 AusAid 537,840 7.4 4 3 DENMARK 1,801,764 25 13.4 4 EU/DFID 941,220 13 7 5 FINLAND 322,704 4.5 2.4 6 NORWAY 645,408 9 4.8 7 UNICEF 26,892 0.35 0.2 8 World Bank 2,689,200 37.5 20 9 FTI – Catalytic 3,603,528 50 26.8 Total 13,446,000 186.75 100

EXHIBIT 3: SHARE OF DPs IN EDUCATION SECTOR FOR 2011/12

21.44

13.4

726.8

2.44.8

0.220

Share of DPs In Education Sector

ADB

AusAid

DENMARK

EU/DFID

FTI – Catalytic

FINLAND


27

Budget v/s Expenses 76. The overall spending of the allocated SSRP budget during 2011/12 was more than 96%, except for scholarship and administrative costs, which were below 90%.

TABLE 6: SPENDING OF SSRP BUDGET FOR 2011/12

Budget Heads Annual Budget, NPR

Adjusted Budget, NPR

Expenses for 2011/12, NPR

Progress %

1. Teacher Salary 29,831,068,000.00 31,111,068,000.00 31,033,058,968.65 99.75

2. Construction 40,875,000.00 42,167,370.00 41,603,954.16 98.66

3. School Grant 15,971,419,000.00 16,324,701,297.00 14,982,980,842.44 91.78

a. Block - - -

b. Earmark 13,822,438,000.00 14,197,426,297.00 13,245,224,304.96 93.29

c. Scholarships 2,148,981,000.00 2,127,275,000.00 1,737,756,537.48

81.69

4. Other Program Cost 2,661,520,000.00 2,691,910,000.00 2,689,871,086.03

99.92

5. Sub-Total (1+2+3+4) 48,504,882,000.00 50,169,846,667.00 48,747,514,851.28

97.16

6. Administrative Cost 3,421,328,000.00 2,471,848,947.50 2,091,818,807.82

84.63

Grand-Total (5+6) 51,926,210,000.00 52,641,695,614.50 50,839,333,659.10 96.58

77. The spending pattern per sources of funding was, however, varying, as shown below:

TABLE 7: SPENDING PATTERN PER SOURCE FOR 2011/12 Sources Adjusted Budget for

2011/12, NPR Expenses for 2011/12,

NPR %age of expenses

over budget GoN 39,195,695,614.50 37,674,774,174.01 96.12% Pooled Donors 13,446,000,000.00 13,164,559,485.09 97.91% Total 52,641,695,614.50 50,839,333,659.10 96.58%

78. Budget and expenditure pattern for SSRP Programme Budget at Central and District Levels for 2011/12 showed that there was underutilization of budget at central level mainly due to below 60% expenses in current head, as shown below:

TABLE 8: BUDGET AND EXPENDITURE PATTERN FOR 2011/12 SN Budget Head Adjusted Budget for

2011/12, NPR Expenses for

2011/12, NPR %age of expenses

A Central 1 3501213 345,259,000.00 211,850,584.34 61.36% 2 3501214 33,400,000.00 32,389,357.75 96.97%

Sub total 378,659,000.00 244,239,942.09 64.50% B District 1 3508033 17,510,028,630.00 16,099,211,902.00 91.94% 2 3508034 48,537,370.00 47,879,472.10 98.64%


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Sub-total 17,558,566,000.00 16,147,091,374.10 91.96%

79. The data collected and compiled at DoE for the 2 REDs and 4 districts selected for survey showed a mix pattern of budget, release and expenditures under four major heads (Refer Appendix 13 for district wise details).

TABLE 9: BUDGET, RELEASE AND EXPENDITURE PATTERN OF SELECTED REDS/DISTRICTS FOR 2011/12

SN Activities Construction Scholarship

Budget Released Expenses %

Utilization Budget Released Expenses %

Utilization A ERED

1 Illam 71,550 71,550 71,550 100.00 20,354 16,736 16,736 82.23

2 Sunsari

95,450

95,450

95,450 100.00

51,252

30,334 30,334

59.19

ERED Total

1,098,550

1,098,150

1,098,150 99.96

436,316

346,703 346,703

79.46 B MWRED

1 Banke 65,600 65,600 65,600 100.00 32,424 23,483 23,483 72.42

2 Dailekh

74,550

74,550

74,550 100.00

29,084

25,623 25,623

88.10

MWRED Total

802,040

801,220

801,220 99.90

366,112

329,667 329,667

90.05

2 REDs Total

1,900,590

1,899,370

1,899,370 99.94

802,427

676,370 676,370

84.29

S.N Activities Salary Text-Book and Others

Budget Released Expenditure %

Utilization Budget Released Expenditure %

Utilization A E RED

1 Illam 499,517 495,367 495,367 99.17 104,903 99,854 99,854 95.19

2 Sunsari

574,388

569,140 569,140

99.09

193,641

163,407 163,407

84.39

ERED Total

7,353,457

7,333,394 7,336,512

99.77

1,889,596

1,720,897 1,720,897

91.07 B MWRED

1 Banke 378,526 375,018 375,018 99.07 134,273 111,518 111,518 83.05

2 Dailekh

377,065

377,035 377,035

99.99

123,754

115,454 115,454

93.29

MWRED Total

4,574,132

4,561,743 4,561,743

99.73

1,837,252

1,713,113 1,713,113

93.24

2REDs Total

11,927,588

11,895,137 11,898,255

99.75

3,726,847

3,434,011 3,434,011

92.14

80. There was mismatch between disbursement recorded by DEO, income recorded by schools and expenditure incurred in 6 major heads in 12 schools covered in the survey (Refer Appendix 14 for school-wise information). TABLE 10: DEO RELEASE, INCOME RECORDED AND EXPENDITURE BY SCHOOL FOR

2011/12 NPR in ‘000

Expense Heads DEO Disbursement to 12 School

Total income recorded by 12

Schools

Expenses shown by 12

Schools

Balance, (DEO disbursement - Expenses) NPR

Construction 5,323 5,403 9,935 (4,612)


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Scholarship 1,373 1,580 1,464 (91) Textbook 901 785 876 25 PCF - Salary 281 272 387 (106) PCF - Non Salary 660 472 78 582 Teachers Salary 29,714 27,876 28,531 1,183

Grand Total 38,252 36,388 41,271 (3,019)

81. There was no mechanism developed by DEOs to reconcile the balances. It was informed that the mismatch was on account of poor and incomplete record keeping by Schools and possibilities of recording transactions in two different fiscal years by DEO and Schools.

82. There was no consistency in distribution of scholarship funds in the visited schools. Out of 12 schools visited, 8 schools have remaining balance of scholarship amount, 3 schools have shown expenses more than budget received and 1 school has fully provided the scholarship amount to the students. Out of 12 school visited, 3 schools have distributed scholarship in the month of Jestha, 3 schools in the month of Ashad, 4 schools in the month of Bhadra and 2 schools in the month of Ashoj. Similarly, out of 12 schools, 1 school has distributed the scholarship pertaining to F.Y. 2067/68 in the year 2068/69, 1 school has distributed scholarship on the basis of poor and deserving students of Class 6 to 10 and for other grades on equal basis not segregating Girls, Dalit and handicapped students, and 1 school has distributed uniform to few students instead of scholarship money.

83. There was delay in completion of construction works as well as delay in distribution of text books. Out of 12 schools visited, 4 schools have remaining balance of text-book amount, 7 schools have shown expenses more than budget received and 1 school has fully provided the text-book amount to the students. Out of 12 school visited, 6 schools have distributed text-books in the month of Baisakh and 2 schools have not recorded the date of distribution of text-books, and 1 school has not recorded the distribution of text-books to students. In regards to construction works, out of 12 schools visited, measurement book was not found in 3 schools.

84. Comparison of student numbers as reported in Flash I of 2069, Flash II of 2068 and present during the visits at 12 schools selected showed a wide variation in number of students. Although DEO disburses budget to Schools based on latest Flash report, the wide variation noted recommends a proper mechanism to ensure quality data submitted to DEOs by schools and checking of their accuracy by DEO to ensure that funds are provided to schools based on actual number of students.

TABLE 11: COMPARISON OF STUDENT NUMBERS

School

No. of Students

on the Date of Visit (a)

No. of Students

as per Flash I

2069 (b)

No. of Students

as per Flash II 2068 (c)

No. of Students

appearing in final

exam (d) Difference

e=(b-a) %

Absent

% Not appeared in Exam

1 507 864 945 784 357 41.32 17.04


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2 172 237 273 218 65 27.43 20.15 3 60 141 150 146 81 57.45 2.67 4 337 415 448 394 78 18.80 12.05 5 137 170 182 170 33 19.41 6.59 6 44 58 43 43 14 24.14 - 7 609 796 796 682 187 23.49 14.32 8 77 335 436 205 258 77.01 52.98 9 240 289 274 248 49 16.96 9.49

10 346 379 379 120 33 8.71 68.34 11 80 163 264 111 83 50.92 57.95 12 45 61 63 64 16 26.23 (1.59)

Total 2,654 3,908 4,253 3,185 1,254 32.09 25.11 Budget Heads

85. In a joint meeting held on Sept 02, 2009, MOE and DPs agreed to include the following 13 budget headings (original and new after changes in GoN budgetary system from 2010/11) for SSRP pooled fund and suggested to incorporate in the JFA accordingly.

TABLE 12: SSRP BUDGET HEADS SN Original Budget

Heads New Budget Heads Descriptions

1 65-3-140 3500163 Primary Education 2 65-3-150 3500173 Lower secondary/secondary education 3 65-3-167 3500213 Non formal education 4 65-4-167 3500214 Non formal education 5 65-3-169 3500223 Teacher record office 6 65-3-170 3500233 Special Education 7 65-3-176 3500263 Teacher Pension facilities 8 65-3-426 3501053 School Capacity Building (Soft skills) 9 65-4-426 3501054 Community school Capacity Building 10 65-3-428 3501213 (current) SSRP- Center 11 65-4-428 3501214 (capital) SSRP- Center 12 65-3-815 3508033 (current) SSRP- Districts 13 65-4-815 3508034 (capital) SSRP- Districts

86. The existing FCGO budget reporting system (which is used by DOE for preparing FMRs) provides financial data as per budget codes and line items that do not necessarily provide information about the four main heads (construction, textbooks, per capita funds and scholarships) for which the fund flow tracking from central to school level could be done. Budget Process Budget Ceilings, Guidelines and Approval 87. Based on the resource estimation by National Planning Commission (NPC), Budget Committee of the GoN fixes the size of national budget, shares of different


31

ministries and sends preliminary guidelines to respective ministries for preparing budgets through the Ministry of Finance (MoF).

88. As per the guidelines and ceiling received from MoF and in accordance with the Mid Term Expenditure Framework (MTEF), MoE sends budget ceilings and guidelines to departments, districts and projects by 1st week of Poush (end of 2nd week of Dec). However, DoE had sent such information for 2011/12 (2068/69) during 2nd week of Magh 2067 i.e. 3rd

89. Annual Strategic Implementation Plan (ASIP) prepared by each district and other agencies based on the guidelines received from DoE is discussed at Regional Level and a draft annual work plan and budget is prepared by DoE after consolidation for submission to the MoE. This was done during 1

week of Jan 2011 to the district level units.

st week of Chaitra 2067 against deadline of 4th

90. Discussion about the program, budget, resources, current capital, etc. continues simultaneously with the NPC and MoF and within the DoE during 4

week of Magh 2067 fixed by Budget Guidelines.

th Week of Falgun to 1st Week of Jestha. The MoF then finalizes the budget and submit to the Parliament for approval by 1st week of Jestha. Expected date for approval of the budget is 29th

Authorization and Release Letters

of Asar. However, the budget for 2068/69 was approved by the Parliament on 31 of Asar 2068 (16 July 2011).

91. After approval of the budget, MoF send authorization to use budget as per the Red Book on 1st Day of Srawan to MoE. The MoE secretary then sends authorization to respective spending units including the DoE within 15th of Srawan. Authority letters for 2011/12 (2068/69) from MoE to DoE were received during 2nd week of Srawan and DoE started sending authority letters to RED/DoE from 2nd week of Bhadra 2068. Authorization letters were sent to DoE and DEOs till last week of last month of the fiscal year (4th

92. Authorizations letters (including for virement) for 2011/12 were sent by MoE to DoE as follows:

week of Ashad 2069)

TABLE 13: AUTHORIZATIONS LETTERS FROM MoE to DoE

NPR’000 Program Code Approved

Budget NPR Date of

Authorization Amount

Authorized, NPR 3508033 School Sector Reform (Districts)-Current

18,330,401 2068/04/13 18,333,041 2069/03/21 66,200

3508034 School Sector Reform (Districts)- Capital

47,245 2068/04/13 47,245

3501213- School Sector Reform (Center) 348,034 2068/06/02 321,928 2068/10/12 500

3502124 - School Sector Reform (Center) 33,400 2068/06/02 33,400 3500163- Education for All (Primary Education) 20,066,630 2068/04/04 20,066,630 3500173- Various Secondary & Lower Secondary Schools

9764438 2068/04/04 9764438 2069/03/21 600,000


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93. Review of dates of authorizations letters for 2011/12 sent to DEOs by DoE on two main budget sub-heads (3500163 – Primary Teachers’ Salaries and 3508033 – SSRP District (Current)) revealed that authority letters were sent till 2069/03/27 i.e. 4 days ahead of end of fiscal year1

94. As per the information available at DoE, For 2011/12 (2068/69) FCGO has sent release letters to DTCO as follows:

. As per details of authorizations sent to DEOs, it can be inferred that DEOs always keeps certain percentage of budget as “Unallocated Budget” against those heads where there were no programs approved (additional activities based on government’s priority) or where there is no identification of unit eligible to receive grants (e.g. which schools to get the construction budget) or changes in the numbers or eligible amount (like grade increment, transfer or retirement of teachers) or utilization status of operational budgets (travel, repairs, etc.) or reduction of certain budgets by MoF/Planning Commission after submission of ASIP by MoE (e.g. grants reduced based on main budget heads but may include Teacher’s salary within the budget heads). That means that budget of SSRP also contains sizable amount determined based on lump-sum amount because of want of required information.

TABLE 14: RELEASE LETTERS FROM FCGO to DTCO

In ‘000 Instalment Date of Release Date to be

Released Amount

Released, NPR Delay

First N/A - N/A - Second 2068/9/18 2068/8 15.58 billion About 1 Month Third 2069/02/04 2068/12 21.49 billion About 2 Months

95. Information for the first instalment release letter submission was not available. There was delay of about one month and two months in releasing letters to DTCO respectively for second and third instalments. Budget Revision 96. There was a revision in the approved budget during the year, based on the preliminary data received and analysed at DoE. Major revision as made in teachers’ salary.

TABLE 15: BUDGET REVISIONS FOR 2011/12 NRs.000

Program Code Annual Budget (NPR) Virement +/- Total Adjusted Budget (NPR)

Budget Head 3508033 (School Sector Reform Grant) District 26423 –Capital Grant (Construction)

4,943,350 49,450 4,992,800

27211- Scholarship 2,148,981 (21,706) 2,127,275 26412- Social Grant (Earmark)*

9,252,088 (233,024) 9,019,064

Other 1,985,982 (615,092) 1,370,890 Sub Total 18,330,401 (820,372) 17,510,028

Budget Head 3508034 (School Sector Reform Grant)District

1 Refer Appendix 15: Status of multiple authorizations sent to DEOs by DEO


33

Capital Expenditure 47,245 1,292 48,537 Sub Total 47,245 1,292 48,537

Budget Head 3501214 (School Sector Reform Grant)Centre No revision in the budget

Budget Head (3501213) (School Sector Reform Grant)Centre 26412- Social Grant (Ear Mark)*

10,000 3,782 13,783

Other 338,034 (6,558) 331,476 Sub Total 348,034 (2,775) 345,259

Budget Head 3500163 (Primary School Teachers’ Salary) 26411-Social Grant (Block)

16,032,086 1,080,000 17,112,086

Other 4,034,544 400,000 3,634,544 Sub Total 20,066,630 680,000 20,746,630

Budget Head 3500173 (Lower Secondary and Secondary Teachers’ Salary 26411- Social Grant (Block)

6,641,214 500,000 7,141,214

26412- Social Grant (Earmark)

2,973,224 250,000 3,223,224

Other 150,000 (150,000) - Sub Total 9,764,438 600,000 10,364,438

Fund Flow Process

Donors’ Contribution to FCA

97. Budget distribution is channelized through the GoN system and hence, it is a usual practice of disbursing GoN funds first and gets the reimbursement of the Donors’ share after certification of the FMRs2

98. Although the donors’ fund is withdrawn from FCA pooled Account maintained by NRB after disbursing funds at the districts, it is first ensured that the committed funds by the donors are actually available in the FCA account. The release letters to DTCO were sent by FCGO based on the availability of donors’ fund in FCA account.

.

99. The actual deposit of funds by different donors for 2011/12 was done as shown in the table below:

TABLE 16: FUND DEPOSIT BY DPs – DATES AND DELAYS SN Development

Partner Date of

Agreement Date

Committed First Deposit

Date Time taken to

deposit, in days 1 ADB 27/11/2009 20/12/2011 14/10/2012 1 Year,65 Days 2 Aus Aid 10/05/2011 20/12/2011 17/04/2012 3 Months 27 Days 3 DENMARK 27/11/2009 20/12/2011 30/10/2012 1 Year 50 Days 4 EU/DFID 22/06/2010 20/12/2011 16/01/2012 36 Days 5 FTI – Catalytic 07/12/2010 20/12/2011 - - 6 FINLAND 27/04/2010 20/12/2011 02/01/2012 12 Days 7 NORWAY 27/11/2009 20/12/2011 04/12/2012 1 Year, 16 Days 8 UNICEF - 20/12/2011 24/08/2012 8 Months, 4 Days 9 World Bank 27/11/2009 20/12/2011 15/08/2012 7 Months,25 Days

2 Refer Appendix 16: Fund Flow Process – (Overall, timeframe and only fund flow)


34

100. The above table shows that there was a delay in committing funds by DGs and also gap of 12 days to more than a year between dates committed to actual dates of fund deposited by the individual donors. There were issues related to MoE/DoE as well as Donors in delay deposit of funds. It was due to delay in submitting quality FMRs by MoE/DoE to Donors, depositing funds based on conditions of grant or DPs funding cycle, etc. 101. Actual dates of submission of FMRs and project account by MoE/DoE for 2 years are given below:

TABLE 17: FMR SUBMISSION – DATES AND DELAYS FMR/Project Account Due Date Forwarded date Delay in Days Consent from WB

F.Y. 2067/68 (2010/11) FMR I 30 Dec 2009 27 June 2010 179 days 1 Nov 2010 FMR II 29 Apr 2010 2 July 2010 64 days 1 Nov 2010 FMR III 31 Aug 2010 30 Nov 2010 91 days 4 May 2011 Unaudited Project account 15 Oct 2010 29 April 2011 187 days 17 Jun 2011 Audited Project Account 15 Jan 2011 27 June 2011 163 days 27 Jun 2011

F.Y. 2068/69 (2011/12) FMR I 30 Dec 2010 29 April 2011 166 days Dec-11 FMR II 29 Apr 2011 11 July 2011 101 days Dec-11 FMR III 31 Aug 2011 NA NA NA Unaudited Project account 15 Oct 2011 25 Jan 2012 NA 6 Mar 2013 Audited Project Account 15 Jan 2012 16 Apr 2012 NA NA

Funds Flow to Schools

102. Funds to schools were released by DEOs based on the request, compliances and verification of data submitted by Schools. There was no significant delay in providing funds to schools after their request if authorizations and release letters are available with DEOs. However, there were no fix pattern of releases to Schools and hence multiple transfers were made for different heads. The fund flow processes from DEO to Schools are explained in Appendix 17.

103. The transfer of the SSRP fund to Schools started only during Falgun 2068 (first week of March 2011) (except for teachers’ salary), that means after 8 months of start of the fiscal year (Refer Appendix 16.2 for details of date and amount of fund transfers). Such a delay occurs due to delay in sending release letters to DTCO by FCGO, which is done only after ensuring availability funds (including share of donors) and red book disclosure.

104. The distribution pattern of fund disbursement in selected four districts was as follows:

TABLE 18: DISTRIBUTION PATTERN OF FUND DISBURSEMENT IN SELECTED DISTRICTS


35

Trimester SSRP budget

% Salary – Secondary and lower secondary

% Salary - Primary

% Total, NPR %

First Trimester 57,754 5 232,997 39 438,623 38 729,374 26

Second Trimester 341,278 31 186,816 31 352,272 30 880,366 34

Third Trimester 710,515 64 180,354 31 362,652 32 1,253,521 41

Total 1,109,547 100 600,167 100 1,153,547 100 2,863,261 100

105. The above table shows that more than 64% of SSRP funds were disbursed in the third trimester only.

106. There was also considerable time lag between dates of release letters by the DEO and dates the fund recognized in school books. In the mid western region 2 districts and 6 schools visited by us, it was seen that the dates vary from 2 days to 27 days during 2011/12.