33 rd Review Meeting of State Finance Controllers Key Observations of IPAI Review IIIrd Phase

1. 33rd Review Meeting of State Finance Controllers Key Observations of IPAI Review IIIrd Phase 24th – 25th May 2012 New Delhi

2. GENERAL IPAI have completed the 3rd Phase of concurrent financial review of all the 35 States. Review Reports have been shared with the States seeking Action Taken Reports. Response from the States is still awaited. In addition Action Taken Reports on 1st and 2nd Phase are also awaited from some States. States need to take immediate action to furnish the ATR in view of the recommendations of the 15th JRM. Key Observations of Financial Review by IPAI 2

3. The reports also brought out a number of observations on : Meeting of GC/EC Irregular holding of GC/EC meetings, Not taken EC’s approval on the audited annual accounts before sending to MHRD. Key Observations of Financial Review by IPAI 3

4. Release of funds Delay in release of State Share, Delay in release of funds to districts and sub-district level units, Non-release of school grant, teacher grant, maintenance grant, TLE etc. Delay in release of annual grants – released at the fag end of the year. Non-availing of e-transfer facilities resulting in delay of receipt of funds. Key Observations of Financial Review by IPAI 4

5. Advances Treating advances as expenditure, Non-adjustment of outstanding advances for a considerable period of time, Heavy advances lying with textbook Corporation / Society, other departments, institutions etc. Non-refund of advances paid to other departments / institutions. Key Observations of Financial Review by IPAI 5

6. Financial Irregularities Excess expenditure, Diversion of funds, Mis-appropriation of funds Embezzlement of funds Incurring inadmissible expenditure Handing over of assets created under SSA to other departments. Re-appropriation of funds without obtaining sanction of the competent authority; Key Observations of Financial Review by IPAI 6

7. Accounting Weak accounting system; Non-maintenance of prescribed books of accounts like cash book, ledger, stock & asset register, advance register; Not carried out annual physical verification of stocks/assets; Non-maintenance of cash book at school level; Improper maintenance of books of accounts; Non-submission/delay in submission of UCs; Non-preparation of bank reconciliation statement ; Non-cancellation of Stale Cheques for a considerable period; Double entry system not followed; Key Observations of Financial Review by IPAI 7

8. Civil Works Delay in carrying out of civil works; Heavy advances remain unadjusted; Not handed over buildings after completion; Wasteful expenditure; Lack of transparency in civil works at VEC level; Key Observations of Financial Review by IPAI 8

9. Finance and Accounts Staff Non-filling up of vacant posts at SPO, DPO and Block; Adequate staff not sanctioned taking into account the heavy increase in outlay; Training Lack of training to accounts staff; Not provided training though 5 days training is mandatory in a year; Key Observations of Financial Review by IPAI 9

10. Internal Audit Non-carrying out of internal audit Weak or inadequate internal audit; Statutory audit Delay in submission of statutory audit reports Continuation of Chartered Accountant beyond three years; Social audit Display board in schools is the source of social audit which is not available in many schools or if available not updated Key Observations of Financial Review by IPAI 10

11. Textbooks Not assessed requirement of textbooks properly resulting in loss to SSA; Not supplied textbooks to eligible children; Delay in supply of textbooks; Procured textbooks for children of higher classes; Cost of Textbooks paid to State Government in cases where textbooks are issued free of cost by the State; Printing of inappropriate books resulted in wasteful expenditure; Key Observations of Financial Review by IPAI 11

12. Uniforms Not supplied uniforms to eligible children; Delay in supply of uniforms; Delayed payment resulted in loss of cash discount Inclusive Education Aids and appliances not supplied to needy CWSN Delay in issue of Aids and Appliances to CWSN. Key Observations of Financial Review by IPAI 12

13. Procurement Non-adherence of the prescribed procurement procedure; Purchases without obtaining quotations; Fraudulent purchases; Non-purchase of bulk quantities resulted in loss to SSA; Finance wing bypassed in processing the payment of bills to suppliers; Same firm selected for supplies repeatedly in disregard to its poor performance and SSA authorities failed to initiate any penal action against the supplier in terms of the agreement. Key Observations of Financial Review by IPAI 13

14. Non-charging of liquidated damages; Technical member not associated with procurement of costly technical items; Excess payment to suppliers/printers; Payment to suppliers made without proper scrutiny and recording pass order on the bills; Not maintained transparency in major procurement; Arbitrary award of contract to sole source vendor based on their unsolicited offers, uneconomic rates, unsubstantiated reimbursement of payment of VAT; Centralized procurement at State level instead of decentralized procurement; Key Observations of Financial Review by IPAI 14

15. Teacher’s Salary Data of SSA teachers not maintained, but reimbursement of salary made on the basis of demands made by Education Department; Diversion of SSA funds for payment of teachers of State cadre; SSA funds used for payment of salary of State cadre head teachers and teachers on regularization; Salary of State cadre teachers on promotion to head teachers paid from SSA without filling resultant vacancies; Key Observations of Financial Review by IPAI 15

16. Irregular payment of salary made to PRI Teachers; Excess reimbursement of salary of SSA vacant teachers to State Government; Key Observations of Financial Review by IPAI 16

17. These observations raise serious doubts on the efficiency and effectiveness of the existing financial management system even after 10 years of its implementation; Cost effectiveness and accountability should be strictly followed. States need to take immediate remedial action to avoid recurrence of such irregularities in future. Issue suitable instructions to all functionaries for strict compliance of the SSA financial norms and the provisions of the FM&P Manual. Key Observations of Financial Review by IPAI 17

18. Thank You