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WEL COME

WEL COME. Seminar on “Reduction/Elimination of cash in Government Transactions – The WAY FORWARD TOWARDS INTEGRATED FINANCIAL MANAGEMENT. Indian Audit and Accounts Department. INTRODUCTION.

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WEL COME

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  1. WEL COME

  2. Seminar on “Reduction/Elimination of cash in Government Transactions – The WAY FORWARD TOWARDS INTEGRATED FINANCIAL MANAGEMENT Indian Audit and Accounts Department

  3. INTRODUCTION • An important issue in the North East is using cash in large number of cases in government transactions.

  4. The Audit Reports reveal a number of cases of misappropriation and diversion of funds which have been facilitated by predominance of cash transactions in Government Finances. This could be controlled through transacting by using Electronic Clearance System (ECS).

  5. RISKS IN SYSTEM • MISAPPROPRIATION • RETENTION IN BANK ACCOUNTS/CASH • SECURITY RISKS • DEPRIVING THE INTENDED BENEFICIARY • DELAYS IN PAYMENTS/RECEIPTS • COMPLEX PROCEDURES AND SYSTEMS • INCOMPLETE FINANCIAL INFORMATION • OTHER ISSUES Next

  6. MISAPPROPRIATION • SALARY & PERSONAL ENTITLEMENT • PENSION • PROCUREMENT • OTHERS

  7. MISAPPROPRIATION • Amount was paid in cash for construction of roads without any roads or trail as to where money has gone. • Government money being drawn in cash and invested in insurance companies in names of individuals.

  8. MISAPPROPRIATION • Cashier investing government cash. • Land acquisition money being paid to unknown persons in cash by first putting money in bank by officials incompetent to handle land acquisition. The transaction taking place despite objection by the Deputy Commissioner.

  9. MISAPPROPRIATION • During the period from 2005-06 to 2008-09 16 instances involving 51.80 crore reported in C&AG Report in one State • Drawal of inflated salary bills and personal entitlement and payment in cash with excess being retained by Cashier and DDOs (Rs.25.88 crore in 9 cases) • Drawl of pension / gratuity from two treasuries and two sub-treasury to ineligible persons – Rs.10.47 crore

  10. MISAPPROPRIATION • Funds under Technology Mission for integrated Development of Horticulture was misappropriated / un accounted for – Rs.21.43 crore

  11. MISAPPROPRIATION • Handling cash and drawal of money led to suspected fraud of Rs.3.49 crore. • Funds released suspected to have been misappropriated – Rs.2.66 crore • NABARD loan meant for implementation of minor irrigation projects is suspected to have been misappropriated – Rs.0.44 crore.

  12. MISAPPROPRIATION • Suspected misappropriation of Rs.4.38 lakh and unaccounted deposit of Rs.2.18 lakh involving cash transaction. Back

  13. SECURITY RISKS • Amount meant for implementation of 64 projects under LADP Scheme was paid in cash to the Personal Assistant of Parliamentary Secretary for disbursement. • The money was looted on the way • Had the amount been disbursed through bank to the individual beneficiaries this could have been avoided. Back

  14. RETENTION IN BANK ACCOUNTS / CASH • In a study in a State 172 DDOs retained Rs.317.87 crore in various bank accounts. Information collected from banks • This reduces the cash balance of the State Government held with Reserve Bank of India (RBI) causing loss of interest without any benefit to the State. • Loss of any credible control of either the Treasury, Head of the Department or the Finance Department on these funds.

  15. RETENTION IN BANK ACCOUNTS / CASH • Loan of Rs.267.97 crore taken from Rural Electrification Corporation (REC) without the knowledge of the Government and Rs.234.60 crore received placed in Savings Bank Account in personal names. Rs.20.00 crore shifted to two other banks as term deposits in personal names.

  16. RETENTION IN BANK ACCOUNTS / CASH • The BDOs drew Rs.17.19 crore which remained undisbursed / unadjusted between four months to even more than five years in some cases risking misuse including misappropriation of Government money. • Random disbursement of advances from the undisbursed money to implementing officers has also resulted in Rs.10.36 crore remaining outstanding for long period.

  17. RETENTION IN BANK ACCOUNTS / CASH • An officer was detained with large amount of money. The officer was carrying government money for payment to supplier. • Retention of Rs.94.07 lakh for over one year • Rs.85.76 lakh was drawn by two BDOs through fully vouched contingent bills in cash for meeting future liabilities.

  18. RETENTION IN BANK ACCOUNTS / CASH • Several cases of retention noticed • Since money retained in bank is reflected as final expenditure in the Government accounts, non-depiction in an alternative financial reporting process carries the risk of money being retained in bank / cash with no trail which is forgotten over time. Back

  19. DEPRIVING THE INTENDED BENEFICIARY • The payments due to a company was drawn in cash and paid to someone ineligible. • The system of payment by cash carries the risk of non-payment, reduced payment to intended beneficiary • It also carries the risk of payment to absentee beneficiary. Back

  20. DELAYS IN PAYMENT/RECEIPT • Time taken in the process of payment / receipt is larger • Administrative involvement in the process carries an inbuilt lead time in payment / receipt. Back

  21. COMPLEX PROCEDURES AND SYSTEMS • The DDO has to go to Treasury and Bank to collect payments and deposits receipt. • DDO has to reconcile physically receipts and payments with the Treasury • Reconciliation of cash balances between RBI and State Government • Reconciliation with the Banks in case of DDOs having Bank Accounts. • Multiple cheques / documents for a single payment Back

  22. INCOMPLETE FINANCIAL INFORMATION TO THE FINANCE DEPARTMENT • Incomplete information of cash balances with DDO • Incomplete information of bank accounts with DDO • Incomplete information of the cash position of the State instrumentalities • Lack of trail of funds flow in a number of cases. Back

  23. OTHER ISSUES • Funds originating outside the State budget meant to be transacted through Public Accounts like Deposits, Deposits for acquisition of land required by entities other than State Governments entities, loans from Rural Electrification Corporation (REC) end up in Bank accounts without being routed through State Finances. Back

  24. ALTERNATE SYSTEMS • With the development of new banking services which reduces the handling of cash, government machinery is also expected to use these development. • ECS has already been introduced for payment of pension in Meghalaya on pilot basis. • Manipur has also introduced ECS for salary payments. • Mizoram is on course to implement Mizoram On-line System of Tax Receipts.

  25. ALTERNATE SYSTEMS • ECS facility is utilised by the Government of India to transfer funds/ Grants-in-aid to the State Governments. • The release of funds by the REC to the State Electricity Corporations/Departments through the ECS facility and further payments to the Contractors are also through ECS. • Eliminates / Reduces cash in Government Transactions thereby reducing the risks of misappropriations and security threats like robbery, theft etc..,

  26. ALTERNATE SYSTEMS • It makes the entire process of receipts and payments simpler. Work of Accounts staff and Cashier become simpler. • A trail of flow of funds will be maintained / established for easy monitoring of the transactions. Information on cash flows will easily be available at any level. • The Finance Department of a State will have ready and immediate information of all cash flows including funds available in any Departments, Directorate, Autonomous Bodies and PSUs.

  27. ALTERNATE SYSTEMS • It allows for immediate depositing of Government Revenues, thereby eliminating delays. • Financial information of the location and amount of funds would be available. • Ensures direct transfer to the beneficiary. • It reduces the risk of transfer of funds to unauthorised persons.

  28. ALTERNATE SYSTEMS • Reconciliation of accounts between DDO and Treasury Officer and between the Finance Department and RBI through Accountant General is simplified. • There would be no extra cost to any Government if ECS is introduced. • Administrative costs of Government transactions is likely to come down significantly.

  29. ALTERNATE SYSTEMS • Collection centres for revenue increases manifold times without any cost. • User/Customer satisfaction increases due to faster transfer and simpler procedures • Improvement of banking sector in the region leading to better credit creation and faster economic development. • It improves governance and leads to efficient management of public finances. • Provides better service delivery, greater return to the Governments on their cash.

  30. ALTERNATE SYSTEMS • Cash position of the State Governments would be better managed as fund flow takes place when required and not prior to it. • ECS and its variants are single credit with multiple debits and single debit with multiple credits across the banking system. • Financial reporting activity largely taken over by sophisticated software applications now available in the banking sector in India at the State Capitals with sponsoring banks including that of utilities and semi-government entities.

  31. ALTERNATE SYSTEMS • Absentee beneficiary and related issues can be identified and addressed • Financial benefit to Government and semi-Government entities in terms of better financial management due to better financial reporting.

  32. POTENTIAL • The existing applications in banking industry could be leveraged to create a cascade of banking accounts under Government category with a parent child relationship of State Government and the various functional entities under the State Government

  33. IMPACT ON COMPILIATION OF ACCOUNTS • ECS transaction number to be noted on the voucher and captured in compilation of accounts • This links it with the payment details in ECS • DDO-wise cash transaction reporting can be obtained

  34. THANK YOU

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