Andhra Pradesh Rural Water Supply & Sanitation Project

Transcription

Financial Management Manual for Department of RWSS
May 2008
ANDHRA PRADESH RURAL WATER
SUPPLY AND SANITATION PROJECT
(APRWSSP)
FINANCIAL MANAGEMENT MANUAL FOR
DEPARTMENT OF RWSS, SWSM AND
DWSM
FINAL REPORT
AUGUST, 2009
1
Financial Management Manual for Department of RWSS, SWSM and DWSM
August, 2009
Disclaimer
This report has been prepared by PricewaterhouseCoopers (P) Limited for the Project Director (PD), World
Bank funded Andhra Pradesh Rural Water Supply and Sanitation Project (APRWSSP), Government of
Andhra Pradesh (GoAP). Contents of this report should not be copied or reproduced by any third party or
otherwise quoted or referred to, in whole or in part, without the prior permission of PricewaterhouseCoopers,
PD, ARWSSP or World Bank in writing. PricewaterhouseCoopers disclaims any responsibility for any loss
or damage suffered by any third party by taking reliance of this report. Furthermore PricewaterhouseCoopers
will not be bound to discuss, explain or reply to queries raised by any agency other than the intended
recipients of this report.
The report has been prepared on the basis of limited study done at some of the offices of Rural Water Supply
& Sanitation (RWSS) department and Panchayati Raj Institutions (PRIs) i.e. Zilla Parishad, Mandal Parishad
and Gram Panchayat. Our assessment and recommendations are based on the facts and details provided
during our visit and may not be similar across the organization/ state. If any of these facts or details provided
is not complete or accurate, the conclusions given could cause us to change our opinion. The conclusions
drawn and recommendations made are based on the information available at the time of writing this report
and PricewaterhouseCoopers will not be responsible to rework any such conclusion or recommendation if
new or updated information is made available.
PricewaterhouseCoopers does not accept any liability or responsibility for the accuracy, reasonableness or
completeness of, or for any errors, omissions or misstatements, negligent or makes any representation or
warranty, express or implied, with respect to the information contained in this document. The information
contained in this document is selective and is subject to updation, expansion, revision and amendment. It
does not, and does not purport to, contain all the information that a recipient may require. Further this is not
an audit report and no reliance should be based on this report for the purposes of audit.
Each recipient must conduct its own analysis of the information contained in this document and is advised to
carry out its own investigation into the proposed project, the legislative and regulatory regime which applies
thereto and by all matters pertinent to the proposed project and to seek its own professional advise on the
legal, financial, regulatory and taxation consequences of entering into any agreement or arrangement relating
to the proposed project.
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Table of Contents
LIST OF ACRONYMS ________________________________________________________________ 4
CHAPTER 1 - INTRODUCTION _______________________________________________________ 5
CHAPTER 2 – INSTITUTIONAL ARRANGEMENTS _____________________________________ 7
CHAPTER 3 – FLOW OF FUNDS _____________________________________________________ 10
CHAPTER 4– FINANCIAL AND ACCOUNTING POLICIES ______________________________ 12
CHAPTER 5 – FINANCIAL AND ACCOUNTING PROCEDURES _________________________ 15
CHAPTER 6 – FORMAT OF BOOKS OF ACCOUNTS ___________________________________ 16
CHAPTER 7 – FINANCIAL REPORTING ______________________________________________ 17
CHAPTER 8 – AUDITING ___________________________________________________________ 18
ANNEXURE _______________________________________________________________________ 19
ANNEXURE 1: FORMATS FOR BOOKS OF ACCOUNTS ________________________________ 20
ANNEXURE 2: FORMATS FOR FINANCIAL REPORTS_________________________________ 23
ANNEXURE 3: TERMS OF REFERENCE FOR INTERNAL AUDIT _______________________ 24
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List of Acronyms
Abbreviation
AEE
APRWSSP
CAG
CBO
CE
CSS
DD
DEE
DPSU
DWSC
DWSM
E in C
EE
FMM
GoAP
GoI
GP
GPWSC
IEC
IUFR
LoC
M&E
MoF
MoU
MP
MTP
MVS
MVS-WSC
NGO
O&M
PAO
PD
PRI
PSU
RWSS
SE
SVS
SWSM
ToR
WB
ZP
Full Form
Assistant Executive Engineer
Comptroller and Auditor General
Community Based Organisations
Chief Engineer
Community Sanitation Scheme
Demand Draft
Deputy Executive Engineer
District Project Support Unit
District Water & Sanitation Committee
District Water & Sanitation Mission
Engineer in Chief
Executive Engineer
Financial Management Manual
Government of Andhra Pradesh
Government of India
Gram Panchayat
Gram Panchayat Water & Sanitation Committee
Information, Education and Communication
Interim Unaudited Financial Report
Letter of Credit
Monitoring & Evaluation
Ministry of Finance
Memorandum of Understanding
Mandal Parishad
Medium Term Sector Program
Multi Village Scheme
Multi Village Water Supply Committee
Non Governmental Organisations
Operation and Maintenance
Pay and Accounts Office/ Officer
Project Director
Panchayati Raj Institution
Project Support Unit
Rural Water Supply & Sanitation
Superintending Engineer
Single Village Scheme
State Water & Sanitation Mission
Terms of Reference
World Bank
Zila Parishad
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Chapter 1 – Introduction
INTRODUCTION
1.1
The Andhra Pradesh Rural Water Supply and Sanitation Project (APRWSSP) is a
World Bank funded Project which is being implemented by the Government of
Andhra Pradesh (GoAP).
1.2
Government of Andhra Pradesh has prioritized Rural Water Supply and Sanitation
(RWSS) as a key area of its development agenda. The vision for the RWSS sector and
related policy notes were issued by GoAP in October 2006. Key elements of GoAP's
Vision are:
(i)
Significant improvement in service levels and coverage;
(ii)
Devolution to PRIs;
(iii) Enforcement of full recovery of O&M cost and sharing of capital cost (taking
into consideration affordability, particularly of disadvantaged groups); and
(iv)
1.3
Improvement of the "accountability framework" by clarifying roles and
responsibilities of various actors of the RWSS sector at the state, district and
village levels.
GoAP has envisioned an APRWSSP which forms a part of the overall RWSS sector
investment program and implementation action plan for realising the goals for
medium term as per the Vision of GoAP for the RWSS sector by 2014. The Project
will support RWSS programs in about six Districts in AP, selected through
transparent self-selection criteria, with priority for taking up ‘not covered’ and ‘no
safe source’ habitations. It serves as an action plan for channelling resources for
integrated rural water supply and sanitation development in six Districts of the state.
PROGRAM COMPONENTS
1.4
The Project comprises of three main components:
Component A – Sector development: This component will provide institutional
capacity support to implement, manage and sustain the project activities, along with
sector development studies. The main sub-components include: (a) Capacity Building
and Training activities for state level institutions, PRIs and sector stakeholders; (b)
Communications Strategy and Information, Education and Communications (IEC)
Program; (c) Sector Development Studies to inform policy decisions.
Component B – Infrastructure Development: This component will support
investments for improving water supply and sanitation services in the project
habitations, including construction of new infrastructure or rehabilitation and
augmentation of existing schemes with safe disposal of waste-water. These
investments would be made in an integrated manner with source strengthening and
catchment area protection activities; soak-pits; construction of latrines for BPL
households; community awareness programs for improving sanitation and hygiene
practices; and incentives for achieving “open defecation free status”. Solid waste
management and surface drainage activities will be taken up in major GPs.
Underground piped drainage will be supported in select Mandal Headquarters. About
80% habitations are expected to be served by SVS using local groundwater sources.
The MVSs, mainly relying on surface water sources, will be taken up for habitations
where the local source is either not sustainable or of not acceptable quality.
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Component C – Project Implementation Support: A Program Support Unit (PSU)
under the SWSM, assisted by staff in the districts (D-PSUs), will implement and
manage the WB Project. Main functions of the PSU will be to coordinate with various
stakeholders including the SWSM, DWSM, DWSC; procure external services (as
required) to support the implementation of the WB Project; and review and report the
progress of the WB Project. This component includes establishing and
operationalizing the following systems: (i) Sector Information System (SIS) and
Monitoring and Evaluation System (M&E) for the Sector Program and WB Project;
and (ii) financial management system for administering funds and expenses for the
WB Project.
APPLICABILITY
1.5
This Manual lays down the Financial Management System to be followed by the
RWSS Department. All committed and on-going schemes under any program which
are outside the sector approach are outside the preview of this manual. The new
schemes and related expenditure will be governed by the proposed fund flow
arrangements and enhanced/ strengthened accounting, reporting and auditing rules
and regulations.
1.6
The implementing agencies where this manual will be followed are Division Offices
of RWSS Department.
OBJECTIVES OF FINANCIAL MANAGEMENT MANUAL
1.7
The Financial Management Manual (FMM) has been designed with a view to build
on and update the current accounting system to meet the requirements/ expectations
of the World Bank financed project as also to meet the new challenges of handling
the sector program. The main objectives of FMM shall primarily be:
 To ensure a single reporting and auditing system for all the activities in the sector
 To achieve better Project management by providing timely information on
financial aspects and on key performance indicators to Project management
 To meet the financial reporting requirements of various stakeholders
 To keep track of funds utilization
 To provide reasonable assurance that the resources/ funds are being used
effectively and efficiently for their intended purpose
 To ensure that all Project related activities are reflected in the IUFRs and the
same be closely aligned with the Project components as per the Medium Term
Sector Program
 To improve creditability and control over data integrity through effective internal
control arrangement.
ADMINISTRATION OF THE MANUAL
1.8
This Manual shall be administered in the manner given below:
 Finance Department, GoAP shall authorize use of the manual
 The manual is a living document and may be amended by the Principal Secretary,
Department of Rural Water Supply and Sanitation as and when required and as
learning accumulates within the project. All participants in the Project are
encouraged to share their learning and experiences of the Project implementation
so as to improve the proposed arrangements made to attain the Project objectives.
 Concurrence of Finance Department shall be taken for any amendments in the
Manual
 All amendments made to this Manual shall –
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


Be circulated to SWSM/ E-in-C and to all the CE/ DWSM/ DWSC/ EE/
GPWSCs. The circular/ notification shall clearly state the paragraph(s) and
line(s) to be replaced. All such circulars/notifications shall be serially
numbered
Mention the date from which the change shall be effective
Be annexed to the manual with a cross reference at the appropriate places in
the manual.
Chapter 2 – Institutional Arrangements
2.1
The proposed institutional arrangement has been summarized here for the state,
district & village levels. The project will support progressive decentralization and
devolution to the PRIs, with increased community participation, financial
sustainability and enhanced accountability at all the levels.
2.2
The Andhra Pradesh Panchayat Raj Act, 1994, focuses on devolution of important
responsibilities pertaining to the RWSS sector, among other sectors, to the Panchayat
level. In the RWSS sector, responsibilities pertaining to O&M of SVS and intravillage facilities of MVS are given to the GPs and the responsibilities pertaining to
O&M of common facilities of MVS are given to the ZPs.
INSTITUTIONAL ARRANGEMENTS
2.3
2.4
The implementation arrangements for the Project at the state level, district level,
mandal level and the GP/users level is as follows:
State level:
State Water and Sanitation Mission (SWSM): The SWSM will be responsible for
the entire RWSS Sector Program. The Executive Committee of SWSM, headed by
Secretary RWSSD will be responsible for planning and policy formulation; capacity
building; fund flow; approval of annual plan and budget allocation; review,
monitoring and evaluation of the Sector and District Programs. It will also be
responsible for coordination with various departments of GoAP, GoI and other sector
partners wherever necessary.
2.5
Rural Water Supply & Sanitation department (RWSSD): The RWSSD will work
as the ‘facilitator’ for all aspects of District Programs, including technical support for
RWSS activities (as required), capacity building, training programs, etc. RWSSD
Engineering Wing will continue to plan and implement the MVSs in participation
with ZP, while O&M will be devolved to the ZP.
2.6
State Project Support Unit (PSU): The State PSU will implement the World Bank
Project in the selected districts. It will assist SWSM in monitoring and
implementation of policy decisions by the Project partners such as various
departments of GoAP, GoI etc. The Project Director (PD), PSU will be of the rank of
a CE. The PD-PSU will oversee the implementation of the World Bank supported
District Program. In addition, the Project Director, PSU will also be responsible for:
(a) Overseeing the implementation of policy decisions by SWSM relating to all
aspects including Community participation, Communications and Capacity
Building
(b) Dissemination of policy decisions of SWSM and assisting SWSM in monitoring
the implementation of the policy decisions by various Project partners
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(c) Overseeing the implementation of World Bank funded Projects in 6 selected
Districts
(d) Monitoring participation of PRIs along with village communities for
implementation of IEC programs.
(e) Coordination with various departments of GoAP, GoI and other sector partners
as appropriate on Project implementation issues.
(f) Reporting of Project implementation progress to all authorities concerned,
including the World Bank.
(g) Appointing state level Independent construction quality surveillance consultants
for the project.
2.7
District level:
District Water and Sanitation Mission (DWSM): The DWSM will be the
governing body at the district level and has already been established under the
Swajaldhara program. DWSM will be responsible for providing policy guidelines
received from the SWSM for the implementation of the district program. DWSM will
also be responsible for overseeing implementation of the Sector Program, ensuring
that the decentralization and community participation agenda is implemented. The
overall functions of DWSMs include overall planning of RWSS in the district,
approval of the annual budget related to RWSS, prioritization/selection of GPs to be
included in the proposed SVS/MVS and review implementation progress. The
DWSM will be assisted by the District Water and Sanitation Committee (DWSC),
which will function as its executive arm.
2.8
District Water and Sanitation Committee (DWSC): The DWSC established under
Swajaldhara will be headed by the District Collector and will be responsible for
implementation of entire District Program in the state. The SE will function as its
Member Secretary. The DWSC will facilitate in decision making of all district RWSS
activities, including design and implementation of all schemes and sanitation program
through concerned GPs, administrative sanctions, capacity building, IEC programs,
and management and monitoring of all district projects. The DWSC will also take a
decision on the works to be carried out at the district level (if necessary, packaging of
GP programs for cost effectiveness) and the requirement of engineers and Self Help
Group (SHG) or Support Organizations (SOs). In case the RWSSD Engineers are not
available or do not have the capacity, the DWSC could hire the services of private
Technical Service Providers.
2.9
District Project Support Units (D-PSU): The District Collector will be the Program
Director who will head the D-PSU. D-PSU will report to the DWSC and will have
staff for supporting the implementation of program and policies of DWSM, including
technical, financial, communications, capacity building, monitoring and evaluation of
programs and social audits. The D-PSUs will coordinate with various departments at
the district level.
2.10
RWSSD Engineering Wing: The RWSSD Engineering Wing at the district level
(Superintendent Engineer / Executive Engineer) will be responsible for designing and
implementing the MVS in partnership with the MVS-WSC. All design, supervision or
operational activities will be undertaken through an agreement between the RWSSD,
DWSC and MVS-WSC. The MVS-WSC will sign off on all activities related to the
MVS. The DWSC can also select the RWSSD Engineering Wing to provide
engineering support, through a service contract agreement, for SVS.
2.11
Zilla Parishad: The ZP through its sub-committee MVS-WSC (one for each MVS)
will be responsible for management of common facilities of MVS.
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2.12
Multi Village Scheme - Water Supply Committee (MVS-WSC): The MVS-WSC
at the district level will be a representative committee of the group of GPs for a MVS.
This will be a sub-committee of the ZP and will work closely with the RWSSD
Engineering Wing in planning, designing and implementing the MVS. The
responsibilities of MVS-WSC is to ensure community participation and to put forth
the requirements of the user (group of GPs) in terms of preferences for technology,
site selection, infrastructure requirements such as household connections etc. to the
RWSSD for consideration.
2.13
Technical Service Providers (Engineering Support): RWSSD will provide
technical support to DWSC to carry out planning, designing, procurement and
implementation of SVS and MVS. In case of capacity constraints at RWSSD to
provide technical support, DWSC will have the option to recruit private TSP.
Monitoring of RWSSD or private TSP will be the responsibility of DWSC. In either
case, the RWSSD or private TSP will be accountable to the DWSC and the concerned
GP through a service contract agreement.
2.14
Village level:
Gram Panchayat: The GP will be responsible for endorsing (signing off) the
planning, designing and implementation of scheme, tariff fixation, accounts
management, financial audits, M&E and conflict resolution under village level
programs. It will provide capacity support to the GP-WSC and will ensure regular
O&M and cost recovery through user charges.
2.15
Gram Panchayat Water & Sanitation Committee (GP-WSC): The GP-WSC,
constituted under the Gram Panchayat will be in-charge of O&M of SVS and intravillage facilities of MVS and will work with the DWSC for scheme planning,
designing and implementation of SVS. The GP-WSC will endorse the planning,
designing and implementation of the scheme and sign off payments at all stages. The
Committee will perform a similar role for intra-village facilities of MVS. The tariff
fixation and O&M of the SVS and intra-village facilities of MVS will also be the
responsibility of GP-WSC.
2.16
Self Help Group (SHG) / Support Organizations (SOs): The SHGs or SOs / NGOs
shall be identified and selected by DWSC based on pre-agreed criteria. They would
be responsible for carrying out IEC and capacity building activities based on reform
principles and policies issued by SWSM and DWSMs. The SHGs or SOs would
closely interact with the GPs/ GP-WSCs for executing their responsibilities. They
would also obtain guidance from the Social and Community specialists working at the
D-PSUs at the district levels.
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Chapter 3 – FLOW OF FUNDS
INTRODUCTION
3.1
This chapter contains the process of flow of funds from the World Bank to the Project
implementing agencies. All the new schemes under the Program will be guided by the
funding mechanism as detailed in this chapter. The schemes which are on-going will
be guided by the existing funding mechanisms.
FUND FLOW AND DISBURSEMENT ARRANGEMENTS
3.2
The proposed fund flow arrangements for new schemes are given in the figure below:
World Bank
Govt. of India
Flow of Funds
Requirements of Funds
Authorisation for
payment
Govt.of AP,
Finance Dept.
BRO
Secretary, RWSSD
E-in-C
RWSSD
LoC
SWSM
Authorisation of
payment
Division-wise
requirement of funds
EE, RWSSD
& PSU
DWSC
PAO
MVS-WSC
GP
(GP-WSC)
3.3
Bills endorsed and
sign-off
Bills endorsed and
sign-off
Works
Contractors/
Executing
Agency
The procedure for disbursement of funds to the implementing agencies under the
Project is as under:
3.3.1
World Bank to GoI: The World Bank shall make available project funds
into the Special Account opened by GoI with Reserve Bank of India. The
World Bank releases funds into the special account as reimbursement based
on quarterly Interim Unaudited Financial Reports (IUFRs) prepared by the
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PSU on the basis of consolidated “actual expenditure” in the specified agreed
formats.
3.3.2
GoI to GoAP: MoF, GoI will transfer the Rupee equivalent of the funds
credited into the Special Account to the Consolidated Fund of GoAP within
specific number of days on a back to back arrangement.
3.3.3
GoAP, Finance Department to RWSSD: GoAP, Finance Department will
provide the BRO to E-in-C, RWSSD as per project requirements
3.3.4
RWSSD to respective Divisions: The Engineer-in-Chief will release LoCs
based on the annual allocations by DWSC.
3.3.5
Community contributions: Community contributions shall be received by
the GPWSC as per the rates laid down in the user cost sharing principles. The
community contribution shall be received in cash/ cheque/ DD/ kind towards
the capital costs of the scheme and money will be deposited into a separate
GPWSC bank account.
FUND FLOW ARRANGEMENTS UNDER THE ON GOING SCHEMES
3.4
The fund flow arrangements for on-going schemes shall remain as at present i.e.
through the LoC route.
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Chapter 4– Financial and Accounting policies
INTRODUCTION
4.1
This chapter describes the annual scheme wise budgeting process both at the
department level and district level. The applicable financial and accounting policies
under the project are also given in this chapter.
4.2
The financial and accounting policies contained in this manual shall supplement the
policies and procedures given in GoAP State Financial Rules.
BUDGET OBJECTIVES
4.3
The main objectives of the budgeting system can be summarized as under:
a. To ensure participation at all levels in the budgeting process
b. To provide a basis for periodical monitoring of the performance of Project
implementing and that of all the executing agencies under the implementing
agency
c. To meet World Bank’s monitoring requirements of the Project funds
d. To facilitate fixation of accountability for budget variances.
BUDGET CENTRE
4.4
A budget centre is an office which shall be responsible for budget preparation and
shall be accountable and responsible for budgetary control. The proposed planning
and budgeting under the Project shall be done at the following offices —

At State level:
The SWSM will be responsible for overall planning and budgeting at the state
level under the Project. The SWSM will receive requirement of funds from the
DWSCs on a scheme-wise basis. The SWSM shall then prepare Division-wise
budgets and send to Secretary, RWSS for approval.

At District level:
DWSC will be responsible for overall planning and budgeting at the district level.
It will receive scheme wise requirements from the respective GPWSCs/ MVSWSCs/ RWSS Department. The district budget will be sent to SWSM for
approval.

At Village level:
GPWSC (SVS & Intra Village Facilities of MVS) will be responsible for overall
planning and budgeting at the scheme level. The Department or Engineering
Support will provide technical assistance to GPWSC in preparing the Budget and
the same will be sent to DWSC for approval.
BUDGET PREPARATION EXERCISE
4.5
The APRWSSP shall form the overall framework within which the budget centres
shall prepare their respective budgets for the budget period.
4.6
The budget preparation will be guided by the scheme cycle, i.e. Pre-planning,
Planning, Implementation and O & M. All the implementing agencies while
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preparing its budget shall have to factor in the cost/ expenditure associated with the
scheme cycle.
4.7
While preparing the budget the budget centres shall also analyze the actual vs
budgeted performance for the previous period except for the first period when it is not
possible.
BUDGET PERIOD AND REVISION OF BUDGETS
4.8
Budget period shall be the same as the financial year followed by Project
implementing agencies i.e. from April 1 to March 31.
4.9
Normally, budgets should be applicable for a full year. As the budgeting process
involves forecasting on the basis of certain assumptions, the possible variations
should be planned at the time of preparation of the budgets. Any significant variations
from the original assumptions would necessitate revision of budgets within the budget
year itself. The revised budgets if any shall be approved by SWSM.
CORE SYSTEM OF ACCOUNTING
4.10
The accounts at various offices of the Project shall be maintained manually as per the
Government system of accounting. Since project activities will be undertaken by
different accounting entities including Divisions/ GPWSCs, this will involve
recording and consolidation of accounting information from a large number of
accounting locations.
4.11
The principles of accounting in the proposed Project will follow the State
Government accounting systems such that the overall accounting system in the
project is based on GoAP State Financial Rules.
ACCOUNTING CENTRES
4.12
The accounting for the Project will be done at:
 Divisional Office, Department of RWSS
 GPWSC
ACCOUNTING POLICIES AT DIVISION OFFICES
4.13
The Accounting policies to be followed at the Divisional Office for the purpose of
recording Project expenditure is as follows:
Method of Accounting
(a) Accounts shall be maintained on single entry book keeping system and
accounting shall be done on cash basis i.e., all payments in respect of the
Project shall be accounted for on the basis of actual payments made.
(b) All payments should be charged of to the relevant expenditure head of
account at the time of making payment.

Valuation of Stocks
(a) Materials and supplies purchased for the Project should be charged as
expenditure at the time of its payment.
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
Expenditure incurred by Technical Service Agencies and Support
Organizations
(a) MOU’s shall be entered with the Technical Service Agencies and Support
Organizations to provide support. Any payments made to these shall be
treated as expenditure since these payments are to be made on completion of
certain milestones.

Accounting to Contractor/ Executing Agency for Project Expenditure
(a) The expenditure incurred on project activities shall be booked to the relevant
account head provided for the sub-component under the component.
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Chapter 5 – Financial and Accounting procedures
5.1
This chapter contains the financial and accounting procedures for the project to be
followed by the Division Offices of RWSS Department, SWSM and DWSM for
important transactions have been explained alongwith updation of books and records
and internal control mechanism.
Overview of Financial and Accounting Procedures
5.2
The financial and accounting procedures are covered in this chapter under the
following broad heads:
(a) General Guidelines/ Standard Internal Controls
(b) Payment to Contractors/ Executing Agency
(c) Consolidation of Accounts for Project Reporting
General Guidelines/ Standard Internal Controls
5.3
General guidelines/ standard internal controls are as follows:
(a) The existing GoAP and CAG rules and regulations for accounting and other
financial management activities shall continue to apply for the project.
(b) Instruction to PAO for payment of bill to Contractor/ Executing Agency is only
after it has been approved by the GPWSC/ MVS-WSC, verified by DWSC and
further checking by the EE.
(c) The project shall be subject to Internal Audit by an independent firm of Chartered
Accountants on a half-yearly basis. As the project funding increases, the
periodicity can be reviewed and made on a quarterly basis or as and when
required.
Payment to Contractors/ Executing Agency
5.4
No advance payment shall be made to any contractors/ executing agency. The DEE
on completion of specific milestones shall raise running bills and payment shall be
made on the basis of these bills. The bills shall be first approved by the AEE and then
by GPWSC (SVS and Intra Village MVS) or MVS-WSC (MVS) and verified by
DWSC. To enable monitoring of payments, a Contractor’s Payment Register
(Annexure 1, Form 1) shall be maintained. A LoC Register (Annexure 1, Form 2)
shall also be maintained to keep control over LoCs received and utilised.
Consolidation of Accounts for Project Reporting
5.5
To facilitate reporting to World Bank from books of accounts in a consolidated
manner, consolidation of accounts shall be done. This will be done as IUFRs to be
prepared and submitted on a quarterly basis.
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Chapter 6 – Format of books of accounts
Overview of various formats
6.1
The formats to be used by the accounting units are mentioned in this chapter. In case
computerized accounting software is used, the formats as designed therein can be
adopted, as long as it suffices the basic data requirements of the formats prescribed in
this chapter. The format number, title, purpose and the periodicity for updation/
preparation shall be as follows:
Form
No.
Title
Purpose
Form 1
Contractor’s
Payment Register
Form 2
LoC Register
To record all the bills raised by
contractors and actual payment made
To record funds sanctioned in favour
of the division for various activities
under the scheme
6.2
Periodicity for
updation/
Preparation
As and when raised
As and When
The formats are contained in Annexure 1 to this Manual.
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Chapter 7 – FINANCIAL REPORTING
7.1
This chapter describes the reporting requirements by the project implementing
agencies i.e. Division Offices of the Department.
7.2
The financial report shall be prepared by the Divisions for the project financial status
as per the books of accounts maintained by them.
7.3
The reports shall be sent by the Division Offices to the E-in-C on a quarterly basis. A
copy of the same shall also be sent to the DWSC. The DWSCs shall compile the
report and send it to the SWSM.
Interim Unaudited Financial Report (IUFR) (Quarterly)
7.4
The IUFR (Annexure 2, Form IUFR/1) shall be the sole report to be prepared on a
quarterly basis and submitted to the World Bank. IUFR shall report expenditure on
the project activities made in the previous quarter alongwith % of reimbursement by
World Bank.
7.5
The IUFR shall be compiled by E-in-C/ SWSM based on the information received
from the Divisions at least 7 (seven) days before the due date of reporting by E in C
to GoAP.
The format is annexed in Annexure 2 to this Manual.
17
August, 2009
Chapter 8 – AUDITING
8.1
Audit of accounts, statements and reports provides means to ensure accuracy and
check in financial system of an organization. To ensure proper functioning of the
financial system on prescribed norms in the Manual, the Project requires an
exhaustive auditing arrangement. In this chapter, essential elements involved in the
mechanism of conducting financial audit have been highlighted. Two types of audits
would be carried out as follows:
a. Internal Audit by an independent firm of Chartered Accountants on half yearly
basis.
b. Statutory Audit by CAG on annual basis.
8.2
The detailed Terms of Reference for Internal Audit by an independent firm of
Chartered Accountants is given in Annexure-3.
STATUTORY AUDIT (ANNUAL)
8.3
8.4
The Comptroller and Auditor General of India (CAG) through its offices in Andhra
Pradesh will be the statutory auditor for the project. Audit by CAG shall include the
Divisions of RWSS implementing the project.
The audit report will be submitted to the Bank within six months of the close of each
financial year.
INTERNAL AUDIT
8.5
Objective
The objective of the Internal Audit is to provide comfort to the Project management
and to various stakeholders (Government of India, State Government and World
Bank) on the accuracy of the IUFR, compliance with loan covenants and satisfactory
working of the financial management systems.
8.6
System of Audit
a. An audit for review of the IUFR and internal control measures will be conducted
on half yearly basis by an independent firm of Chartered Accountants, appointed
for the purpose by the Project with well defined terms of reference (ToR).
b. In accordance with the World Bank operational policies, the ToR and the
qualification of the independent firm of Chartered Accountants have to be
reviewed by the World Bank.
8.7
Coverage
a. The audit will cover all offices of the Project i.e. SWSM/ DWSC/ Divisions/
GPWSC.
b. The audit includes the verification of expenditure incurred directly by these
offices, for the purpose of the Project.
c. The audit will include checking of prescribed financial and management reports
generated at various levels periodically.
d. The audit would also include payments for consultancy / training / research or
other contracts/ agreements where it is made to the contractor / consultant /
institute.
18
August, 2009
ANNEXURE
19
August, 2009
ANNEXURE 1: FORMATS FOR BOOKS OF ACCOUNTS
Form No.
Form 1
Form 2
Title
Contractor’s Payment Register
LoC Register
20
May 2008
Form 1 – Contractor’s Payment Register
CONTRACTOR’S PAYMENT REGISTER
FOR THE YEAR __________________
Name of Party: ____________________
Particulars of Bill
Payment details
Sr.
No.
Bill No.
Bill Date.
Amount of
Bill (Rs.)
1
2
3
4
Remark
No. of
s
Amount
days (reason
Sanctioned
Amount
between
for
Date of
Reason for
(Rs.) and Cheque no.
Disallow
approva delay
Payment
disallowance
date of
ed (Rs.)
l dt. and beyond
approval
paymen 3 days)
t dt.
5
6
7
8
9
10
11
Note: Open separate folio for individual parties
21
August, 2009
Form 2 - LoC Register
___________________Name of the Division
LoC REGISTER
Order/Designation of the Authority sanctioning the LoC:
Date of Order:
Period of the LoC:
Sanctioned Amount (Rs.):
Sr. No.
LoC No.
LoC Date
Amount
1
2
3
4
Expenditure on specific LoCs
Date
Amount (Rs.)
5
6
22
Balance LoC (Rs.)
Amount (Rs.)
7
May 2008
ANNEXURE 2: FORMATS FOR FINANCIAL REPORTS
Form
No.
IUFR/1
Title
Interim Unaudited Financial Report (IUFR)
Form IUFR/1 - Interim Unaudited Financial Report (IUFR)
For the Quarter Ended:
IUFR No.:
Particulars
1
(Amount in Rs.)
Expenditure for
the Quarter
(Actual)
Reimbursement %
2
3
Reimbursement
amount
4 (2 X 3)
Expenditure cumulative
(Actual)
For the Year
5
Till date
6
Component 1:
Details sub-component wise
Component 2:
Component 3:
Total
23
May 2008
ANNEXURE 3: TERMS OF REFERENCE FOR INTERNAL
AUDIT
APRWSSP
Draft Terms of Reference (ToR) for
Internal Audit
Background:
1.1
The Andhra Pradesh Rural Water Supply and Sanitation Project (APRWSSP) is a
World Bank funded Project which is being implemented by the Government of
Andhra Pradesh (GoAP).
1.2
Government of Andhra Pradesh has prioritized Rural Water Supply and Sanitation
(RWSS) as a key area of its development agenda. The vision for the RWSS sector and
related policy notes were issued by GoAP in October 2006. Key elements of GoAP's
Vision are:
(i)
Significant improvement in service levels and coverage;
(ii)
Devolution to PRIs;
(iii) Enforcement of full recovery of O&M cost and sharing of capital cost (taking
into consideration affordability, particularly of disadvantaged groups); and
(iv)
Improvement of the "accountability framework" by clarifying roles and
responsibilities of various actors of the RWSS sector at the state, district and
village levels.
1.3
GoAP has envisioned an APRWSSP which forms a part of the overall RWSS sector
investment program and implementation action plan for realising the goals for
medium term as per the Vision of GoAP for the RWSS sector by 2014. The Project
will support RWSS programs in about six Districts in AP, selected through
transparent self-selection criteria, with priority for taking up ‘not covered’ and ‘no
safe source’ habitations. It serves as an action plan for channelling resources for
integrated rural water supply and sanitation development in six Districts of the state.
1.4
The project comprises of three main components:
 Component 1 - Sector development

Component 2 - Infrastructure development

Component 3 - Project implementation support
Financial Management Arrangements:
1.5
World Bank to GoI: The World Bank shall make available project funds into the
Special Account opened by GoI with Reserve Bank of India. The World Bank
releases funds into the special account as reimbursement based on quarterly Interim
Unaudited Financial Reports (IUFRs) prepared by the PSU on the basis of
consolidated “actual expenditure” in the specified agreed formats.
1.6
GoI to GoAP: MoF, GoI will transfer the Rupee equivalent of the funds credited into
the Special Account to the Consolidated Fund of GoAP within specific number of
days on a back to back arrangement.
24
August, 2009
1.7
GoAP, Finance Department to RWSSD: GoAP, Finance Department will provide the
BRO to E-in-C, RWSSD as per project requirements
1.8
RWSSD to respective Divisions: The Engineer-in-Chief will release LoCs based on
the annual allocations by DWSC.
1.9
Community contributions: Community contributions shall be received by the
GPWSC as per the rates laid down in the user cost sharing principles. The community
contribution shall be received in cash/ cheque/ DD/ kind towards the capital costs of
the scheme and money will be deposited into a separate GPWSC bank account.
Scope of Work:
1.10
Internal audit of the project at all concerned offices i.e. SWSM/ DWSM/ all Divisions
of RWSS where the project is being implemented/ GPWSC. Internal audit shall stress
on all areas of financial management and fiduciary arrangements.
Outline of Tasks to be carried out:
1.11
Audit of expenditure – Auditing on a test basis all expenditure and giving opinion
whether all expenditure has been made for the purposes intended for, have been used
with due attention to economy and efficiency and after following all relevant rules
and procedures of the project and World Bank. The Financial Management Manual to
be followed shall be taken as the base document and complied with.
1.12
Procurement – Checking that all procurement of goods and services has been done
as per the Procurement Manual and reporting any deviations from the Manual or
cases of undue favour, mis-procurement, etc.
1.13
Checking of all IUFR – Checking of the IUFR prepared by Divisions and
confirming that the same have been made on a true basis and based on books of
accounts.
1.14
Compliance - Ensuring compliance with laid down procedures in the Financial
Management Manual.
Internal Audit Report
1.15
The auditor shall express his opinion in the internal audit report and submit the same
not later than one month after completion of audit. The report shall cover the current
processes, deviations from Manual and general accounting principles, monetary
impact of deviation, person responsible and suggestions for improvement.
1.16
The auditor should submit three copies of the Report.
Methodology (expected):
1.17
The methodology to be adopted by the consultant in carrying out the his work may be
summarized as under:
 Audit plans;
 Review of documents (e.g., Reports, Financial Statements, etc);
 Compliance to Financial Management Manual
 Discussions as required to validate findings and discuss suggestions.
Periodicity:
25
August, 2009
1.18
Internal audit shall be conducted on a half-yearly basis and as-and-when required. As
the project funding increases, the periodicity can be reviewed and made on a quarterly
basis.
Outputs:
1.19
The consultant will be responsible for the following reports:
Output
Contents
Draft
Internal  The report shall cover the current processes,
Audit Report
deviations from Manual and general
accounting principles, monetary impact of
deviation,
person
responsible
and
suggestions for improvement
 Opinion that funds have been used for the
purposes intended
 Compliance to Financial Management
Manual
 Compliance to Procurement Manual
Final
Internal  Incorporation of comments on Draft Final
Audit Report
Report
Due
Within 3 weeks
completion of audit
of
Within 1 week of
receiving
comments
from concerned office
Data, services and facilities to be provided:
1.20
All concerned offices shall provide access to all vouchers, supporting, books of
accounts, previous audit statements and all relevant documents.
DWSM/ SWSM to monitor consultant's work:
1.21
DWSC will be responsible for monitoring the progress of the Internal Audit work at
District Level and SWSM will monitor at State. DWSC/ SWSM will be free to seek
comments and input on the consultant's work from World Bank Staff and other
experts as appropriate.
List of Key Professionals required for each audit:
1.22
The consultant must engage the following personnel for internal audit work:
Key Person
Audit Manager
Audit Assistant
Qualification
Chartered
Accountant
Specialization
Experience of conducting internal
audit of government institutions,
government departments, rural or
urban local bodies
Articled Assistant Experience of conducting internal
(PE II passed)
audit
Experience
Minimum 10
years in audit
Minimum
year
Key staff’s inputs of 1 (one) person month is estimated for internal audit at each occasion. In
addition the Auditor shall provide the requisite support staff as required.
Terms of payment:
1.23
The terms of payment are as under:
a. On submission of Draft Audit Report
b. On submission of Final Audit Report
70%
30%
26
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