Presentation on Review of Financial Management and Post Review of Procurement in Manipur By: N.P. Chauhan Consultant- Financial Management T.S.G. - S.S.A. Annexure ‘E’

I visited Manipur from 11th October, 2009 to 16th October, 2009 for Review of Financial Management and Post Review of Procurement. Visit to SPO, 2 DPOs (ZEOs), 4 BRCs/CRCs, 4 Primary Schools

Review of Financial Management State Project Office Cash Book The Cash book is being maintained in Double Entry System. The SPO maintains following bank accounts: The Cash book is being maintained in Double Entry System. The SPO maintains following bank accounts: Cash book is closed daily and cash balance is struck and attested by SPD Cash book is closed daily and cash balance is struck and attested by SPD It is seen from above that the credit balances of cash book and bank statements do not tally as on and Therefore, there is a need for monthly reconciliation of cash book and bank statement on regular basis Bank Name Current A/c. NO. Date Credit Bal. as per Cash Book Credit Bal. as per bank statement United Bank of India United bank of India

Maintenance of Current Bank Account instead of Savings Bank Account It is a matter of serious concern that the State Project Office, Manipur has been maintaining a Current Bank A/c. instead of Saving Bank A/c. which is a violation of basic guidelines issued by MHRD. SPD, Manipur is being advised to close this current account and transfer the balance of Rs to savings bank account as there is a loss of interest on the amount lying idle in current account. It is a matter of serious concern that the State Project Office, Manipur has been maintaining a Current Bank A/c. instead of Saving Bank A/c. which is a violation of basic guidelines issued by MHRD. SPD, Manipur is being advised to close this current account and transfer the balance of Rs to savings bank account as there is a loss of interest on the amount lying idle in current account. There are over writings and corrections in the Cash Book which should be attested by the Head of Office/DDO under his/her dated initials as per para of FM&P Manual. These guidelines are not being followed. There are over writings and corrections in the Cash Book which should be attested by the Head of Office/DDO under his/her dated initials as per para of FM&P Manual. These guidelines are not being followed.

Ledger- The Ledger is not being maintained which is essential for classification of different heads of accounts. Ledger- The Ledger is not being maintained which is essential for classification of different heads of accounts. Journal - The Journal is not being maintained which is necessary for recording adjustment entries. Journal - The Journal is not being maintained which is necessary for recording adjustment entries. Register for Temporary Advances – This is being maintained. Register for Temporary Advances – This is being maintained. Register of Money Orders/Bank Draft Received – This is not being maintained as this may not be required. Register of Money Orders/Bank Draft Received – This is not being maintained as this may not be required. Register of Remittances made into bank – This is not being maintained. Register of Remittances made into bank – This is not being maintained. Register of MO, PO and Bank drafts despatched- This is not being maintained. Register of MO, PO and Bank drafts despatched- This is not being maintained. Bank Passbook/Bank Statement – Bank Statements are being received from UBI periodically. Bank Passbook/Bank Statement – Bank Statements are being received from UBI periodically. Bill Register – This is being maintained. Bill Register – This is being maintained.

Establishment Register – This is not being maintained. Establishment Register – This is not being maintained. Stock Register – This is being maintained. Stock Register – This is being maintained. Capital Goods of consumable articles, non consumable articles and Register of works – This is being maintained. Capital Goods of consumable articles, non consumable articles and Register of works – This is being maintained. Fixed Assets Register – This is being maintained. Fixed Assets Register – This is being maintained. Register of Investments – This is not being maintained as this is not required. Register of Investments – This is not being maintained as this is not required. Register for settlement of Audit Objections (Annexure XXII) – This is not being maintained. Register for settlement of Audit Objections (Annexure XXII) – This is not being maintained. Consolidated Register indicating progressive expenditure (Para 55 of FM&P Manual) – This is not being maintained. Consolidated Register indicating progressive expenditure (Para 55 of FM&P Manual) – This is not being maintained.

Classification Accounts of the Project – Register is not maintained. However, Costing Code heads are followed for booking of expenditure under various heads like free text books, teacher training, BRC, CRC etc. Classification Accounts of the Project – Register is not maintained. However, Costing Code heads are followed for booking of expenditure under various heads like free text books, teacher training, BRC, CRC etc. Dispatch Register – This is being maintained. Dispatch Register – This is being maintained. Monthly accounts of Receipts/Payments – This is not being maintained. Monthly accounts of Receipts/Payments – This is not being maintained. File Register – This is not being maintained. File Register – This is not being maintained. Temporary Advances Register for Staff, Customers/supplier/VEC and TA/DA Advance – This is being maintained. Temporary Advances Register for Staff, Customers/supplier/VEC and TA/DA Advance – This is being maintained. The SPO to take an urgent action for opening of all the above mentioned registers. The SPO to take an urgent action for opening of all the above mentioned registers.

Status of Bank Reconciliation As per para 82 of FM&P Manual bank reconciliation is to be done on monthly basis. However, bank reconciliation is not being done at all The SPO is required to tally entries shown in the passbook/bank statement with the entries in the cash book on monthly basis as per para 82.4 of FM&P Manual. The discrepancies are to be rectified and differences are to be explained in the Bank Reconciliation Statement as explained in para 82.5 of FM&P Manual

Financial Irregularities BEO, Wangoi under District Imphal (West), withdrew an amount of Rs Lakhs for civil works and retained the amount with him for two years which was detected by Statutory Auditors As per guidelines, the funds should be transferred to the VECs through crossed cheques only. It is not understood as to how the BEO had withdrawn a heavy amount of Rs Lakhs on account of Civil Works and the funds were retained by him without transferring the same to the VECs. The SPD has been requested to investigate the case and submit a report on the subject at the earliest possible.

Position of Flow of Funds The Status of flow of funds is given below: Status of Receipt of funds from GOI and State Govt. of Manipur F.Y. Date of Receipt Particulars Amount (Rs.) State Share Central Share Total

Status of Release of funds from SIS to Districts It is noticed that there is a delay in release of funds from SPO to Districts/Sub Districts. As per para 89.3 of FM&P Manual SIS is required to release funds to the districts within fifteen days of its receipts from the GOI. There is a need for prompt release of funds from SPO to Districts/Sub Districts and VECs for smooth implementation of SSA. The feasibility of electronic transfer of funds is to be explored by discussing this issue with your banker i.e. United Bank of India, Paona Bazar branch, Imphal (West) and MHRD may be kept informed about further developments on the subject. F.Y. Date of Release Amount (Rs.) Total

Status of Statutory Audit by CA firm Statutory Auditors have been appointed for conducting audit of the year who were supposed to commence Audit from and the same is to be completed by It was intimated by Finance Controller that Annual Report alongwith Audited accounts will be submitted to MHRD by Status of C&AG Audit The Finance Controller has informed that Accountant General, Manipur had conducted Audit for However, the file was not traceable.

Status of Internal Audit Internal Audit is being conducted through Chartered Accountant firm as there is no in house arrangement for Internal Audit for SSA in the State. It was intimated by Finance Controller that Internal Audit for the financial year has been completed. The Finance Controller has been advised to take up Internal Audit for the financial year on top priority. There is no need for a Internal Audit for the year

Status of Staffing Staffing Structure of Finance & Accounts Staff The Status of staffing structure at SPO level is as under: Name of the Post Sanctioned posts at State level (SPO) No. of posts filled No. of vacant posts Finance Controller 11NIL Internal Audit Officer 11NIL Senior Accountant 11NIL Junior Accountant Cum Cashier 11NIL Accountant11NIL

The Status of staffing structure at DPO level is as under: Name of the post Sanctioned posts at Dist. level (DPO) No. of posts filled No. of vacant posts District Project Officer 99Nil Addl. District Project Officer 1313Nil District Coordinators 3636Nil Accountant1313Nil Data Entry Operator 1313Nil Special Teachers 2525Nil Accounts Manager 9Nil9

Status of Orientation, Training for Accounts and Internal Audit-Personnel As per para 84 of FM&P Manual orientation training on planning, budgeting, accounting, procurement, internal audit etc. of SSA should be imparted to all account and audit staff at periodical interval so as to equip them with sufficient knowledge of the area of their work for smooth and efficient functioning of the tasks assigned to them. However, such training is not being arranged in Manipur. Delay of 1-2 ytears in Receipt of Utilization Certificates from DPOs Imphal (East), Chandel and Bishnupur.

Register showing Position of Outstanding Advances paid to suppliers/contractors – This is not being maintained. Register showing Position of Outstanding Advances paid to suppliers/contractors – This is not being maintained. Register showing Position of Outstanding Advances paid to employees – This is being maintained. Register showing Position of Outstanding Advances paid to employees – This is being maintained. Visit to District Project Offices – Visit to District Project Offices – Action Taken Report on concurrent financial review report of IPAI Action Taken Report on concurrent financial review report of IPAI Initial comments have been received from the SPD. However, further comments on some observations of IPAI’s review report are pending. Status of Annual Reports and Audited Accounts Status of Annual Reports and Audited Accounts The Annual Report and audited account of year have been submitted and Annual Report and audited accounts of year are under preparation. It was intimated by FC that efforts will be made for submission of Annual Reports for by Statutory Audit was to be commenced on and it will be completed by in 9 Districts.

Status of Training of Finance and Accounts Personnel It is noticed that training has not being conducted for finance and accounts personnel. As per para 99.6 of FM&P Manual, initial and orientation training on financial management covering planning, budgeting, accounting,procurement and internal audit etc. should be imparted to all finance & accounts personnel. It is noticed that training has not being conducted for finance and accounts personnel. As per para 99.6 of FM&P Manual, initial and orientation training on financial management covering planning, budgeting, accounting,procurement and internal audit etc. should be imparted to all finance & accounts personnel. DPO, District Imphal (West) The DPO is headed by Zonal Education officer Maintenance of Current Bank Account instead of SB A/c. The ZEO maintains a current bank account number 8402 in United Bank of India, Paona Bazaar, Imphal. There is an urgent need to close the current bank account and to open a savings bank account by transferring balance from the existing current bank account to the savings bank account.

Cash Book Cash book is written up to and there is an urgent need to complete the cash book from onwards the cash book shows a credit balance of Rs as on where as the bank statement shows a credit balance of Rs as on which does not tally with the balance as shown in the Cash Book. Bank Statement for the period from to is only available.. The bank statement shows a credit balance of Rs as on Necessary action to be taken by the DPO for completion of Cash Book and its reconciliation with the bank statement on top priority.

Advance Register – This is not being maintained. Advance Register – This is not being maintained. Cheque Issue Register – This is being maintained Cheque Issue Register – This is being maintained Ledger – This is not complete and it is not maintained from onwards. Ledger – This is not complete and it is not maintained from onwards. Visit to Lamgjing Primary School – Primary Section was a part of upper primary school Langjing Primary School which has been separated as an independent primary school from February 2009 (Academic Session). It was intimated by the Headmistress that a new saving bank account has been opened with United Bank of India on She was unable to show any other registers during the visit. It was also intimated that all schools in 4 valley districts out of 9 are closed for the last 1 month due to threat of some organizations. Visit to Lamgjing Primary School – Primary Section was a part of upper primary school Langjing Primary School which has been separated as an independent primary school from February 2009 (Academic Session). It was intimated by the Headmistress that a new saving bank account has been opened with United Bank of India on She was unable to show any other registers during the visit. It was also intimated that all schools in 4 valley districts out of 9 are closed for the last 1 month due to threat of some organizations.

Visit to Ngashi Rastralipi Primary School - The School is maintaining a saving bank account no in Manipur Rural Bank from There is a balance of Rs in the same bank account. Visit to Ngashi Rastralipi Primary School - The School is maintaining a saving bank account no in Manipur Rural Bank from There is a balance of Rs in the same bank account. Bank Passbook/Bank Statement – The Headmistress could neither show passbook nor bank statement. Bank Passbook/Bank Statement – The Headmistress could neither show passbook nor bank statement. Stock Register – This register is not being maintained. Stock Register – This register is not being maintained. Cash Book – This was not presented during my visit. Cash Book – This was not presented during my visit.

Visit to BRC (URC) – Khoyathong Saving Bank Account is being maintained in United Bank of India, Paona bazaar, Imphal. Visit to BRC (URC) – Khoyathong Saving Bank Account is being maintained in United Bank of India, Paona bazaar, Imphal. Cash Book – Cash Book has been maintained upto The Cash Book shows a closing balance of Rs whereas the bank statement shows a balance of Rs as on which does not tally with the balance shown in the Cash Book. The Cash book not up to date and this is also not signed by the Head of Office. The Cash book is also not written on daily basis as required under para 77.8 of FM&P Manual. It was intimated by BRC that Cash Book has not been written for the year and as funds were not received.

Visit to BRC – Haorang Sabol 16 CRCs work under rural and one CRP is posted for each CRC. No records are maintained by CRCs. A current bank account no is maintained for rural main and the holder of the account is Block Education Officer Imphal (West) -1 under Zonal Education officer-1. The current bank account is to be closed and a savings bank account is to be opened with immediate effect. The Cash Book entries have not been signed by Head of Office on daily basis. Stock Register- This is not being maintained. Stock Register- This is not being maintained. Assets Register - This is not being maintained. Assets Register - This is not being maintained. Cheque Issue Register – This was not presented during my visit. Cheque Issue Register – This was not presented during my visit.

District Project Office (ZEO) Churachandpur Cash Book – Cash Book is written upto The Cash Book shows a Credit Balance of Rs as on The Bank Statement dated shows a balance of Rs as on which does not tally with the balance shown in the cash book. The Bank Statement for the period from to shows a credit balance of Rs as on Cash Book – Cash Book is written upto The Cash Book shows a Credit Balance of Rs as on The Bank Statement dated shows a balance of Rs as on which does not tally with the balance shown in the cash book. The Bank Statement for the period from to shows a credit balance of Rs as on Stock Register - The stock register is maintained upto which needs updation. Stock Register - The stock register is maintained upto which needs updation. Cheque Issue Register – This register is maintained upto Cheque Issue Register – This register is maintained upto It was intimated by Zonal Education Officer that new cheque book register is maintained by Deputy Commissioner’s Office in continuation of the cheque issue register maintained by ZEO.

BMC Churachandpur Cash Book – Cash Book is written upto and it shows a balance of Rs as on The Bank Statement dated also shows a balance of Rs which tallies with the closing balance of cash book. The BMC maintains a SB A/c No in United Bank of India, Churachandpur. It was intimated by BMC that funds have not been received after Cash Book – Cash Book is written upto and it shows a balance of Rs as on The Bank Statement dated also shows a balance of Rs which tallies with the closing balance of cash book. The BMC maintains a SB A/c No in United Bank of India, Churachandpur. It was intimated by BMC that funds have not been received after so, no transaction have been recorded in the cash book. Cheque issue register – The Register is maintained upto Cheque issue register – The Register is maintained upto Stock Register - Stock Register is maintained upto There is an urgent need for updation for the stock register. Stock Register - Stock Register is maintained upto There is an urgent need for updation for the stock register.

Release of funds for SSA to Deputy Commissioner of District. It was intimated by ZEO, Churachandpur now funds are being released to Deputy Commissioner of the district and DPO’s proposals for expenditure are processed by Deputy Commissioner as per Chief Secretary, Manipur wireless message No. DC(CCP)/DDC/2001`1: Dt According to new arrangement Zonal Education Officer is to be involved in implementation of SSA but not in actual operation of account and sanction of funds including signing of cheques. It was intimated by ZEO, Churachandpur now funds are being released to Deputy Commissioner of the district and DPO’s proposals for expenditure are processed by Deputy Commissioner as per Chief Secretary, Manipur wireless message No. DC(CCP)/DDC/2001`1: Dt According to new arrangement Zonal Education Officer is to be involved in implementation of SSA but not in actual operation of account and sanction of funds including signing of cheques. The ZEO Churachandpur has informed that the accounts are being maintained by the office of Deputy Commissioner’s after issue of above mentioned directive of the Chief Secretary, Manipur from July 2007 onwards. The ZEO Churachandpur has informed that the accounts are being maintained by the office of Deputy Commissioner’s after issue of above mentioned directive of the Chief Secretary, Manipur from July 2007 onwards. The Zonal Education officer, Churachandpur could not show the books of accounts and other related documents which are maintained by the office of the Deputy Commisioner, Churachandpur. The Zonal Education officer, Churachandpur could not show the books of accounts and other related documents which are maintained by the office of the Deputy Commisioner, Churachandpur.

Visit to BRC, Samulamlau Block, Churachandpur Cash Book - This is written upto which shows a balance of Rs as on The correspondence bank statement for this was not presented/Shown. It was intimated by BRC that the cash book prepared upto was under submission to Internal Auditor. The Cash Book is to be updated from onwards. Cash Book - This is written upto which shows a balance of Rs as on The correspondence bank statement for this was not presented/Shown. It was intimated by BRC that the cash book prepared upto was under submission to Internal Auditor. The Cash Book is to be updated from onwards. The cash book is also not maintained as per double entry system. The cash book is also not maintained as per double entry system. Stock Register – It was intimated by BRC that the register is under submission to internal auditor Stock Register – It was intimated by BRC that the register is under submission to internal auditor Asset Register – It was intimated by BRC that the register is under submission to internal auditor Asset Register – It was intimated by BRC that the register is under submission to internal auditor

Visit to Primary School Vungzugen Cash Book – The Cash Book is written upto and it shows a balance of Rs The Head Mistress of the School has informed that funds were not received after So, no entries have been made in the cash book. Cash Book – The Cash Book is written upto and it shows a balance of Rs The Head Mistress of the School has informed that funds were not received after So, no entries have been made in the cash book. Cheque Issue Register – This is not being maintained. Cheque Issue Register – This is not being maintained. Register for School Maintenance grant – This is maintained upto Register for School Maintenance grant – This is maintained upto

Visit to Primary School, Rengkai The Cash book is written upto and it shows a closing balance of Rs. 453 as on The bank passbook (Savings bank account No ) is incomplete as there are no entres after It shows a balance of Rs. 537 as n It was informed by headmaster that funds were not received Therefore cash book was not maintained. Stock Register – This is being maintained. CRC Churachandpur Savings Bank Account – It was intimated by ZEO that no separate bank account is maintained by cluster resource person and there are five primary school under this CRC. CRC Vimgzagin There are no records maintained in this CRC.

Post Review of Procurement Post Review of Procurement The contracts for Rs on account of School Mapping & Micro Planning and Household Survey were selected for post review The objective of School Mapping & Micro Planning and Household Survey was to bring to all children to school or alternate schools, bridging gender gap and to focus on quality. Notification for Invitation of offers published in local dailies only Notification for Invitation of offers published in local dailies only A Notification No. 3/12/08-SSA(SMA) dated was published by the State SSA Mission Authority, Manipur in two Newspapers viz., the Sangai Express (English) and Poknapham ( Local daily). Notification not published in one National Daily.

High level committee for selection of NGOs High level committee for selection of NGOs A Committee consisting of Chief Secretary, Manipur, Principal Secretary (Planning), Principal Secretary (Finance) and Commissioner (Education-S) was constituted by Chairman, Executive Committee of SSA for selection of NGOs for conducting Survey for School Mapping & Micro Planning and Household vide State Project Director No.3/12/08-SSA(SMA) dated

Terms of Reference Terms of Reference A suggested TOR for selection of NGOs was prepared internally Sl No.Area to be consideredSuggested marks 1Financial Soundness15 2Area of Operation20 3Availability of Manpower20 4Experience of similar projects15 5Interview with the selection committee30 Total100

Responses received from 54 NGOs With reference to the advertisement, 54 responses were received from the NGOs out of which 10 NGOs were shortlisted on the basis of above mentioned criteria. Selection of 3 NGOs by Selection Committee after Interview 1.Green Foundation, Kwakeithel for household survey in the four valley districts. 2.Oriental Rural Development Organisation, Tamei, Tamenglong for household survey in five hill districts. 3.Nirvana Foundation, Imphal for School Mapping.

The Ten Shortlisted NGOs were intereviewed by the High Level Selection Committee A meeting of the high level selection committee for NGOs was held on vide Commissioner (Education-S), notice number 3/12/08-SSA(SMA) dated Direction issued to SPD for negotiation of prices instead of inviting financial and technical bids in two envelopes. The Selection Committee directed the SPD,SSA, SMA to negotiate and fix the rate with the NGOs involved in the implementation of the work keeping the overall amount within the estimated figure of Rs. 50 Lakhs. Accordingly the SPD, SSA negotiated the rate with the NGOs keeping the overall amount within the estimated figure of Rs. 50 Lakhs. Time Frame – The School Mapping exercise was to be completed within March Total Budget – The rate of survey will be Rs. 800 per Village/Town/City ( for both hill or plain area ) subject to a maximum ceiling of Rs. 21,50,000 Deduction of 1% for delay of every week or part thereof

Observations on the post review of procurement contract – 1. Lack of procurement plan - which is an essential requirement as per para 108 of FM&P Manual. The procurement plan covering civil works, equipment, goods, vehicles and consultancy services is to be prepared on firm basis for the first year of the programme and on a tentative basis for the subsequent years as per para 108 (b) of FM&P Manual. The procurement plan is to be prepared every year for proper monitoring. As per para 108 (d) of FM&P Manual, procurement schedule is to be sent to the EE Bureau, GOI. 2. Lack of Cost Estimates - for the above mentioned contracts were not prepared as required in para of FM&P Manual. 3. Non-publication of advertisement in National Daily - The advertisement for invitation of expression of interest was published only in two local newspapers published from Imphal..As per para of FM&P Manual, advertisement (seeking Expression of Interest)shall be published in regional and national newspapers having wide circulation.

4. Financial Bid and Technical Bid not Invited - Proposals were not sought in two envelope system i.e. Technical proposal in one envelope and Financial proposal in another envelope which is a violation of guideline contained in para of FM&P Manual 5. Evaluation procedure not followed - Technical and Financial evaluation is required to be done by two separate evaluation committees. However, in this case the High Level Selection Committee directed only SPD, SSA to negotiate contract price without inviting financial bids which is a violation of para of FM&P Manual. 6. Appraisal procedure for proposals not followed - As per para 120.5, the proposals for engagement of NGOs should initially be desk appraised by an evaluation committee formed for this purpose and if found suitable, be field appraised before selection. However, in this case the process has not been followed. 7. Negotiation of Rates without Inviting Financial Bid is not proper - The selection committee consisting of Chief Secretary, Principal Secretary (Planning), Principal Secretary (Finance) and Commissioner (Education-S) directed the SPD to negotiate and fix the rate with the NGOs keeping the overall budgetary allocation of Rs. 50 Lakhs without assessing the reasonableness of rates which is not proper.

8. Guidelines for Negotiation with L-1 Bidder not followed - As per direction of the Selection Committee, SPD was asked to make negotiation of contract price with the NGOs without inviting financial and technical bids which is in contravention of guidelines contained in para of FM&P Manual according to which negotiation should ordinarily be discouraged and negotiation may be undertaken only with lowest evaluated responsive bidder (L-1). 9. Records for Negotiation of Price not maintained - As per para of FM&P Manual detailed reasons and results of negotiations of price shall be recorded in the proceedings. However, in this case the reasonableness of the contract price and details of negotiation of price with the NGOs are not available in the file.

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