1. Disbursement Procedure Japan International Cooperation Agency
for
Japan International Cooperation Agency
(JICA)
Assistance

2. Outline of the presentation
Part A – Reimbursement Procedure – I
Statement of Expenditure Procedure – II
Part B – Commitment Procedure – I
Transfer Procedure
Part C – Debt Relief

3. Project Financing (Budgeting)
Step-I
Annual Requirement of Rupee resources for meeting the expenditure of the Project Cost including External funding is required to be approved by the Planning Commission.
Step-II
Inclusion of the funds requirement approved under step-I, in the Annual Budget of the Government

4. Pre-requisite for Disbursement
Loan Agreement (L/A)
Signed and becomes effective
Contract between the Executing Agency and the Supplier / Consultant
Signed
Concurred by JICA

5. JICA Disbursement Procedures
Reimbursement Procedure
Reimbursement
Statement of Expenditure
Direct Payment
Commitment Procedure
Transfer Procedure

6. Part – A Reimbursement Procedure I

7. Reimbursement Procedure
Used For: Payment already made to the suppliers
In Short :
PIU makes payment to the Supplier / consultant / contractor
PIU requests JICA through AAAD to reimburse the amount paid
JICA makes disbursement
Cont.

8. Reimbursement Procedure
Documents Required
Request for reimbursement
Summary Sheet
Evidence ( Document showing delivery of goods / services performed (e.g. Invoice, certificates ))
Contactor/consultant/Supplier’s receipt

9. Documents for Reimbursement
Request for disbursement
JICA
Summary sheet of Payment
Invoices
Supporting Documents
Reports

10. Fund flow Chart for Reimbursement
Project Implementing Agency
Claims
AA&A Division
Claims
JICA
New Delhi
Advice
JICA Tokyo
Payment
Nominated Bank in Tokyo
Payment
AAAD Account
at RBI, New Delhi
through RBI, Mumbai
Advice to AAAD

11. Part – A Statement of Expenditure Procedure (SOE) II

12. Statement of Expenditure Procedure (SOE)
This procedure is a variant of JICA Reimbursement Procedure.
It is Used when large number of small payments and/or complicated paperwork is there in preparation of claim.
It is useful in making timely disbursement with less administrative work involved.

13. Documents for SOE Claim
Request for disbursement
JICA
Summary sheet of Payment
Invoices,
Supporting Documents,
& Reports
Not Required

14. Statement of Expenditure Procedure (SOE)
JICA checks SOE Instead of Invoices and Receipts
The PIA Employs the Auditor
The Auditor checks invoices and receipts once a year
JICA checks the Audit Report
Auditor points out the non-eligible expenditure in SOE, Then borrower/PIA must adjust/ refund the amount to JICA.
Disbursement will be suspended if the Audit Report is not submitted by due date or the adjustments required to be made are not adjusted/refunded.

15. When SOE is to be adopted
When the Borrower / Executing Agency wishes and JICA agrees to it, or
When SOE Procedure is appropriate due to the nature of the project, and JICA considering its suitability makes it applicable for the project at the time of Appraisal.

16. Main points considered by JICA for SOE
An independent audit
Adequate fund management structure

17. Appointment of Auditor
The PIA should
Select an auditor.
Submit an engagement letter to JICA.

18. Requirement for appointment for Auditor
Independent
Expert
Auditing Standards (GAAS)
Responsibilities
(e.g. Timing of report submission, providing detail information on unjustifiable SOE)
Note:-However for Government Departments Comptroller & Auditor General of India shall be Auditor.

19. Maintenance of Accounts Records
The Executing Agency should maintain records and accounts that are adequate to reflect, in accordance with consistently maintained sound accounting practices, the expenditure financed from the proceeds of the loan.
JICA may inspect the Executing Agency’s status of such custody from time to time.

20. What should be audited Statement of Expenditure (SOE)
Supporting documents

21. Submission of Audit Report
The Borrower/Executing Agency should
Furnish a certified copy of the Audit Report to JICA
As soon as it is available but not later than 9 months from the end of each fiscal year i.e. December
Note: The copies of SOE that are audited to be attached with the Audit Report.

22. Requirement of Auditor’s opinion
4 Types of Auditor’s Opinion
Unqualified Opinion
Qualified Opinion
Adverse Opinion
Disclaimer of the Opinion

23. Adjustment
In case when the use of a specified amount of the Loan is not justified
JICA will deduct this amount from the next disbursement
If the Borrower/ PIA fails to perform its obligation (e.g. submission of an audit report in time)
The Borrower is required to refund the amount to the JICA or,
Part or whole of its rights may be suspended.

24. Important points for Auditor
Late submission of Audit Report / Settlement Certificate. The Auditor should explain
Role and the responsibility of the Auditor.
Critical points of the projects and time schedule to be adhered to by the auditor.
Suspension of the disbursement in case of delay in submission of audit report.
Availability for tracing of the disbursement claims in case of ineligible items
Clear indication of the claim No. in the Audit Report is to be given.

25. Project should avoid Tendency of delay in submitting SOE
Payment for not eligible goods and service
Inaccurate deduction, taxes calculation
Discrepancy of contents in SOE with the supporting documents
Double-Disbursement of Claims
Wrong / omitted words
Loss of all or part of supporting documents
Long periods required in setting objection with the Auditors
Time consuming process to trace the details necessary for refund / adjustment of the objected amount.

26. Part – B Commitment Procedure I

27. Commitment Procedure Used for :
Foreign currency payment for import of goods and services under Letter of Credit (L/C)
In Short :
JICA issues a Letter of Commitment (L/Com) that guarantees reimbursement made to the relevant L/C
Documents Required
Evidence ( Document showing delivery of goods / services performed (e.g. invoice/ certificate )

28. Commitment procedure issuing stage
JICA
Issue a L/Com
Apply for L/COM
Nominated bank in Tokyo (Japanese Bank & Issuing bank)
Apply for L/C
L/C
3) Evidence
AAAD
Supplier’s Bank
L/C
Apply for L/C
Apply for L/C
Supplier
Project Implementing
Authority
Sign a contract

29. Commitment Procedure (Disbursement)
Documents
Money
Documents
Money
JICA
(5). Disbursement
(4) Disbursement Request
Nominated bank in TOKYO (Japanese Bank)
(6) Disbursement
(3) Evidence
(7) Intimation
Supplier’s Bank`
AAAD
(9) Intimation
(8)Disbursement
(2) Evidence
Supplier
Project Implementing
Authority
(1)Delivery

30. Commitment Procedure (Important Points)
L/Com Amount is issued in Japanese Yen.
JICA will not issue the L/Com until all the discrepancies between the L/C and the contract are resolved.
At the time of issuing the L/Com, JICA will charge 0.1 % of its amount. This amount is treated as disbursed to the borrower.
JICA does not make disbursement until all the discrepancies between the documents submitted and the documents required by the L/C are resolved.

31. Part – B Transfer Procedure II

32. Transfer Procedure Used For:
Payment to be made directly to the suppliers/contractors in India
In Short
The Borrower issues Transfer Instruction to the Bank of India, Tokyo (JAPAN)
JICA makes disbursement to Bank of India, Tokyo
The bank makes payment to the Supplier/contractor in India in his bank account

33. Transfer Procedure Documents Required Request for Disbursement
Summary Sheet
Claims for Payment
Transfer Instruction
Evidence (Document showing delivery of goods / services performed (e.g. Invoice, certificate)
Pre-receipt

34. Transfer Procedure Supplier Project Implementing Authority
Documents
Money
JICA
(3). Disbursement
Bank in TOKYO
(Paying Bank)
Non-resident Yen
Account of the
Borrower
2. Request for disbursement and other required documents
(2) Transfer Instruction
Borrower
(4) Transfer
Project Implementing
Authority
Supplier
(1) Claims for Payment Evidence

35. Check List Covering Letter Official Address of PIA, Tel. No. & fax No.
Reference No. & Date.
Subject along with IDP No.
Claim Amount in figures and words.
Beneficiary Name etc. if Transfer Procedure.
Contd….

36. Check List I. Check list for Reimbursement Claims (Document-wise)
Summary Sheet of Payment
Whether correct Loan No. and amount indicated?
Whether Contract No., Contract Concurrence No. Supplier’s Name indicated?
Whether correct Category name and number indicated?
Whether the amount of payment, amount applied for financing correct?
Whether the document signed by the authorized signatory?
Contd….

37. Check List
Invoice
Whether the Contract No. and the Supplier’s name indicated?
Whether the total amount, amount of deduction, net amount for payment/Reimbursable amount) indicated?
Whether the document signed by the authorized person?
Contd….

38. Check List
Receipt
Whether the Contract No. and Supplier’s Name indicated?
Whether the total amount (in the requested currency), deduction, paid amount indicated clearly?
‘Received’ Signature of Supplier with the company name and seal, date of receipt and “Received the amount’ on the Invoice is clearly indicated.
Contd….

39. Check List Check list for Transfer procedure Documents required
Request for Disbursement
Summary Sheet of Payment
Transfer Instruction
Claim for Payment
Invoice
Delivery Certificate/Statement of Performance
Pre-receipt
Contd….

40. Check List Request for Disbursement
Date, loan no and application S.No are given on the top of request form.
Same has been correctly mentioned in the request.
Amount has been given in figure and word and the same tallies with the amount mentioned in other documents attached with the application.
Contd….

41. Check List Summary Sheet of Payment
Contract Concurrence No., Contract No. should be correctly indicated.
Amount to be paid and amount applied for JICA financing should be correctly indicated.
Nature of Payment (e.g. Payment No., Period of Payment, Period, Invoice No.) should be correctly indicated.
Reference No. of ‘Claim for Payment’ should be indicated in Summary Sheet of Payment.
Contd….

42. Check List Transfer Instructions
Date, loan agreement no and application sl. no are given on the top of Transfer Instructions.
Same has been correctly mentioned in the Transfer Instructions.
Amount has been given in figure and word and the same tallies with the amount mentioned in other documents attached with the application.
Contd….

43. Check List Claim for Payment Whether the Reference No. indicated ?
Whether the Contract Concurrence No. and Contract No. indicated?
Whether the claimed amount correctly indicated?
Whether the details such as Name & Address of the Supplier, his Bank’s name and Account etc. indicated correctly?
Whether the Nature of Payment (e.g. Payment No., Payment Period, Invoice No. etc.) indicated ?
Contd….

44. Check List
Invoice
Are the Contract No., Supplier’s Name and Amount indicated?
Are the total amount, amount of deduction, net amount for payment, amount applied for JICA financing indicated?
In case there are more than one Invoice, whether an abstract sheet for all the Invoices has been prepared?
Contd….

45. Check List Delivery Certificate/Statement of performance
Whether the Contract No., Supplier’s Name and Amount indicated?
Whether it is signed by the authorized official?
The certificate/statement is in English. In case it is in some other language an English translation of the same should be attached.
In case there are more than one certificate/statement, whether an abstract sheet for all the Invoices has been prepared?
Contd….

46. Check List Pre-receipt
Whether the Contract No., Supplier’s Name and Amount indicated?
Whether it is signed by authorized official?
The Pre-receipt should be in English. In case it is in some other language an English translation of the same should be attached.
In case there are more than one certificate/ statement, whether an abstract sheet for all the Invoices has been prepared?
Contd….

47. Check List III. COMMITMENT PROCEDURE
Items of L/C should follow the Contract concurred by JICA.
Loan Agreement No. and Contract No. should be correctly indicated in the request.
Contract No. of L/C should be the number of original Contract (not amendment No.) which was concurred by JICA.
Contd….

48. Check List III. COMMITMENT PROCEDURE
Expiry date of L/C should be prior to Loan closing date i.e. expiry date of L/C should be at least one month before Loan Closing date.
L/C amount cannot be more than the Contract concurred amount by JICA.
Payment terms of L/C should be same as that of Contract.
Contd….

49. JICA Disbursement Policy
Proper Use of Loan Funds
Clear Flow of Loan Proceeds
Speedy Transfer of Loan Proceeds
Accountability ( Internal / External Audit System )

50. Category of Expenditure
In every loan agreement category wise allocation of loan amount is given
Illustration shown in the next slide

51. Illustration Category Amount of the Loan Allocated
( In Millions Japanese Yen)
% of eligible expenditure to be financed
(A)
(B)
(C) -
Total

52. Ineligible Expenditure
In every loan agreement a list of Items not eligible for financing is given. For example:
General Administration expenses
Taxes and duties
Purchase of land and other real property
Compensation
Other Indirect Charges – fine, penalty, interest etc.

53. Revolving Fund This is also known as Special account.
This is established to help the borrower reduce cash flow difficulties.
This is kept with RBI Mumbai in JPY.
This is maintained separately for each loan.
This account is being operated by AAAD.
AAAD is responsible for Annual audit of this account by C&AG and sending audit certificate to the JICA.
This is only a Proforma Account.

54. Part – C Debt Relief Grant

55. Flow Chart - Debt Relief Grant
INDIA
JAPAN
Agreement
Payment
Bank of India, Tokyo

56. Debt Relief Grant
Grants are given by Government of Japan through JICA (Japan International Cooperation Agency)
Amount of grant is deposited in yen account in the Nominated bank in, Tokyo
The amount can be used for making imports
Imports can be from any country
Imports can be in any currency
Amount of grant cannot be used for procurement in India

57. Debt Relief Grant – Control
It is at the disposal of Japan Section, Ministry of Finance (DEA), New Delhi
Implementing Agency who want to use this grant is required to approach Japan Section
After its approval, importer will send request for issue of A.P. (Authorization to Pay) to Japan Section in prescribed format
Japan Section will forward the same to AAAD

58. Authorization to Pay (A.P)
AAAD will scrutinize The request and issue A.P.
A.P. means Authorization to Pay (A.P)
It is used for authorizing Bank of India, Tokyo for making payment out of grant funds provided by Government of Japan for making Imports.
Any change in A.P. can only be carried out with the approval of Japan Section in Ministry of Finance (DEA)
For this purpose request, for any change like validity, enhancement of amount, change in description of import, change in quantity of items to be imported or any other change, is to be made the Japan Section and Japan Section will forward the same to AAAD.

59. FLOW CHART FOR A.P PIA Supplier (6) Documents Min. of Fin. (DEA)
(1) Supply Order
Supplier
PIA
(6) Supply
(2) Request for issue of A.P.
(6) Documents
Min. of Fin.
(DEA)
(Japan Sec.)
Supplier’s
Bank
(3) Request for issue of A.P
AAAD
(4) issue of A.P
(7) Documents
(5) A P
BOI, Tokyo
(8) Payment
(8) Advice

60. Thank You