Karnataka Watershed Development Project Financial Management Arrangements

Legal Arrangements Financing Agreement Disbursement Letter Project Agreement

Financial Management Cycle Audit Reporting ((IUFRs) Internal Controls Accounting & Record Keeping Flow of Funds Budgeting and Planning FM

Financial Management Financial Management System: to ensure that financial resources made available by the Bank to the project are used for intended purposes so that the end results/objectives of the project are achieved. Key Documents Project Appraisal Document (PAD) and PIP Legal Agreement FM Manual Financial Management System: to ensure that financial resources made available by the Bank to the project are used for intended purposes so that the end results/objectives of the project are achieved. Key Documents Project Appraisal Document (PAD) and PIP Legal Agreement FM Manual

Expenditure under project pre-financed through budget. Eligible expenditures financed through budget are reimbursed by Bank based on quarterly IUFRs The one time advance, generally adjusted towards the end of the project. Sources of Funds

Project submits quarterly IUFRs reporting actual expenditure incurred in agreed format to Bank Bank approves IUFR Project submits Bank approved IUFR to CAAA CAAA forwards claim to Bank (Chennai Office) for disbursement Bank remits funds to special account for the Project maintained in RBI Claims Process for Reimbursement from the Bank

Accounting will cover both bank funded and counterpart funded expenditure- treasury system Manual Accounting initially, move to computeri zed accounting Separate cash-bank book and ledger accounts to record utilization of grant funds. Audit certification every year. Accounting

Project (Bank funds) follows the existing rules, procedures and framework of IA Technical sanction and processing by IA All payments approved/ vetted in accordance with schedule of power in place for IA Process payments and reconcile with AG (A&E) account. Internal controls

A) WDD (post consolidation of expenditure reported by DoH) will submit quarterly IUFRs to the Bank disclosing – Sources and application of funds (bank and counterpart funded) For the quarter and cumulative (year and project-to-date) compared with budgets and variances By contract/ package/ activity. B) Claims and IDA disbursements reconciliation – Contracting status and – Physical and financial progress of the project C) IUFRs to be submitted within 45 days from the end of the quarter D) IUFR is the basis for reimbursement claims from the Bank A) WDD (post consolidation of expenditure reported by DoH) will submit quarterly IUFRs to the Bank disclosing – Sources and application of funds (bank and counterpart funded) For the quarter and cumulative (year and project-to-date) compared with budgets and variances By contract/ package/ activity. B) Claims and IDA disbursements reconciliation – Contracting status and – Physical and financial progress of the project C) IUFRs to be submitted within 45 days from the end of the quarter D) IUFR is the basis for reimbursement claims from the Bank Reporting

WDD as well as DoH will be subject to separate annual project audit: – Auditor: State AG for conducting the audit – As per ToR agreed with the Bank. Separate project audit report for WDD and DoH along with annual IUFRs will be submitted to the Bank within 6 months from financial year end i.e. September 30 – Non compliance of this requirement would be non compliance of legal agreement leading to application of Bank remedies. Project will also be subject to internal audit. WDD as well as DoH will be subject to separate annual project audit: – Auditor: State AG for conducting the audit – As per ToR agreed with the Bank. Separate project audit report for WDD and DoH along with annual IUFRs will be submitted to the Bank within 6 months from financial year end i.e. September 30 – Non compliance of this requirement would be non compliance of legal agreement leading to application of Bank remedies. Project will also be subject to internal audit. Audit

FM Capacity: staffing, training, FMTSC Accounting and Record Keeping Eligible Expenditure: – clarity on project/components/activities – FM Manual and procurement procedures IUFRs and Setting up Reporting System: timely and accurate Internal Controls and Internal Audit Annual Budget Provision Submission of Annual Audit Report to the Bank Co-ordination between WDD and DoH FM Capacity: staffing, training, FMTSC Accounting and Record Keeping Eligible Expenditure: – clarity on project/components/activities – FM Manual and procurement procedures IUFRs and Setting up Reporting System: timely and accurate Internal Controls and Internal Audit Annual Budget Provision Submission of Annual Audit Report to the Bank Co-ordination between WDD and DoH KEY POINTS

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