TECHNICAL EDUCATION QUALITY IMPROVEMENT PROGRAMME OF GOVERNMENT OF INDIA

FINANCIAL MANAGEMENT MANUAL

AUGUST 2003

TH

NATIONAL PROJECT IMPLEMENTATION UNIT FLOOR, EDCIL HOUSE, PLOT 18-A, SECTOR 16-A, NOIDA 201301 UTTAR PRADESH

CONTENT Page

DEFINITIONS Section I Section II Section III Section IV Section V Section VI REIMBURSEMENT & DISBURSEMENT MANAGEMENT SYSTEM FINANCIAL ACCOUNTING SYSTEM AUDIT REQUIREMENTS REIMBURSEMENT PROCEDURES CONTRACT AND PROCUREMENT MANAGEMENT SYSTEM FINANCIAL REPORTING AND FINANCIAL MANAGEMENT REPORTS

1 2 9 15 16 24 32

ANNEXURE Annex I Annex II MODEL AUDIT REPORT SAMPLE TERMS OF REFERENCE FOR THE AUDIT OF PROJECT FINANCIAL STATEMENTS (and Accompanying SOE and SA Where Applicable) FINANCIAL MANAGEMENT REPORT (FMR) CASH BOOK PETTY CASH VOUCHER PETTY CASH BOOK JOURNAL VOUCHER JOURNAL BOOK GENERAL LEDGER BANK RECONCILLATION STATEMENT STOCK REGISTER 33 34

Annex III Annex IV Annex V Annex VI Annex VII Annex VIII Annex IX Annex X Annex XI

37 42 43 44 45 46 47 48 49

Annex XII Annex XIII Annex XIV Annex XV Annex XVI Annex XVII Annex XVIII Annex XIX

FIXED ASSET REGISTER REGISTER OF CONTRACTS FOR CONSULTANCY SERVICES RECEIPTS AND PAYMENT ACCOUNT TRIAL BALANCE INCOME AND EXPENDITURE ACCOUNT BALANCE SHEET FORM 1B/1C/ABSTRACT OF SUMMARY SHEET CHART OF ACCOUNTS

50 51 52 53 54 55 56 59

DEFINITIONS

Accounting Year, Year, or Financial Year means the year commencing from 1st of April and ending with 31st of March succeeding year. Auditor means a firm of qualified Chartered Accountants appointed by National Project Implementation Unit & State Project Facilitation Unit for auditing the project accounts. Bank means a Scheduled Bank in which a separate account is opened to operate the project funds. BTE means the Bureau of Technical Education within the Department of Secondary and Higher Education, Ministry of Human Resource Development, Government of India. NPIU means National Project Implementation Unit created by Ministry of Human Resource Development for facilitating, implementing, coordinating and monitoring Project activities at National level. Project means Technical Education Quality Improvement Programme of Government of India (TEQIP). PIP means Project Implementation Plan for the Project dated August 2002, including action plans, procedures and criteria for implementation of the Project. Project Institutions means technical/engineering education institution, as defined in PIP, duly selected for support under the Project. SPFU means State Project Facilitation Unit to provide support to the Secretary in charge of technical education in facilitating, implementing, coordinating and monitoring the Project at the State level.

SECTION I REIMBURSEMENT & DISBURSEMENT MANAGEMENT SYSTEM 1. 1.1. Project Implementation Units Each State has a State Project Facilitation Unit (SPFU). Each SPFU, in turn will have a number of institutions and these are referred to as Lead/Network Institution Project Management Unit (LIPMU/NIPMU). At national level for facilitating, implementing, coordinating and monitoring of the project, National Project Implementation Unit (NPIU) has been constituted. Project Years and Project Periods The Technical Education Quality Improvement Programme of Government of India (TEQIP) will span a period of 5 years and has been categorized into 5 Project Years. Retroactive Period Year 1 Year 2 Year 3 Year 4 Year 5 2.2. 01.12.2001 to 01.01.2003 to 01.04.2003 to 01.04.2004 to 01.04.2005 to 01.04.2006 to 31.12.2002 31.03.2003 31.03.2004 31.03.2005 31.03.2006 31.03.2007

2. 2.1.

Each Project Year can be further divided into Project Periods on a Quarterly basis for monitoring purposes. These Project Years and Project Periods will have defined start dates and end dates and each Project Year and Project Period will be mutually exclusive of each other. Expenditure Categories The World Bank has defined certain expenditure categories. Expenditure incurred by each unit for TEQIP will be booked against appropriate Expenditure Category. The Expenditure Categories defined by the World Bank are as follows: I II Institutional Development sub-projects Goods - Equipment - Vehicles - Furniture Books & Learning Resources

3. 3.1.

III

IV

Consultant Services - Local Consultants - Foreign Consultants Training & Workshops - Local Training/Fellowships - Foreign Training/Fellowships Recurrent Cost - Incremental Salaries - Incremental Operating Cost

VI

4. 4.1.

Project Components and Sub-Components For monitoring of expenditure against physical activities, the World Bank has defined certain Project Components and Sub-Components. Expenditure incurred by each unit for Technical Education Quality Improvement Programme of Government of India will also be booked against appropriate Project Components and Sub-Components. The Project Components and Sub-Components defined by the World Bank are as follows: Component 1: Institutional development - Promotion of Academic Excellence - Networking of Institutions - Providing Services to Community and Economy Component 2: System Management Capacity Improvement - Establishment/Strengthening of Project Management Structures - Research and Training in Education Planning & Management

5. 5.1.

Funding and Financing Plan The estimated funding for various institutions and structures during the First Phase of the Programme is as below: (Rs. In Million) (a) (b) (c) (d) (e) Lead Engineering Institutions Network Engineering Institutions Polytechnics (Lead and Network Institutions) SPFUs NPIU, Research Studies, Services of Resource Institutions Total
3

9000 5450 750 150 150

15500

5.2.

Detailed Financing Plan The detailed financing plan for the First Phase is reflected in the tables below :
Cost Table (Project Yearwise) Rs. in Million

Component/ Category Promotion of 1 Academic Excellence 2 Networking of Institutions

Year 1

Year 2

Year 3

Year 4

Year 5

Total

Programme Component - 1 : Institutional Development (Competitive Funding) 920.488 2,964.187 3,557.025 3,229.375 1,185.675 11,856.750 137.925 121.587 444.125 391.688 532.950 470.025 483.850 426.775 177.650 156.675 1,776.500 1,566.750

Services to 3 Community & Economy TOTAL (A)

1,180.000 3,800.000 4,560.000 4,140.000 1,520.000 15,200.000

Programme Component - 2 : System Management Capacity Improvement ( Non-Competitive Funding) I Goods II Books & LRs III Consultancies Trainings, IV fellowships & workshops V Salary VI Operation & Maintenance TOTAL (B) GRAND TOTAL (A+B) 3.250 0.550 3.200 5.000 7.700 10.300 30.000 8.125 1.375 8.000 12.500 15.400 20.600 66.000 8.125 1.375 8.000 12.500 15.400 20.600 66.000 6.500 1.100 6.400 10.000 19.250 25.750 69.000 6.500 1.100 6.400 10.000 19.250 25.750 69.000 32.500 5.500 32.000 50.000 77.000 103.000 300.000

1,210.000 3,866.000 4,626.000 4,209.000 1,589.000 15,500.000

Cost Tables - Central Institutions & NPIU, Research Studies & Resource Institutions Rs. in Million Component/ Category Year 1 Year 2 Year 3 Year 4 Year 5 Total

Programme Component - 1 : Institutional Development (Competitive Funding) Central Institutions Promotion of 1 Academic Excellence 2 Networking of Institutions 191.138 30.100 21.262 242.500 659.437 103.250 74.813 791.325 123.900 89.775 732.075 114.450 83.475 930.000 263.775 2,637.750 41.300 29.925 413.000 299.250

Services to 3 Community & Economy TOTAL (A)

837.500 1,005.000

335.000 3,350.000

Programme Component - 2 : System Management Capacity Improvement ( Non-Competitive Funding) - NPIU, Research Studies & Resource Institutions I Goods 0.800 0.200 2.500 1.500 3.500 6.500 15.000 2.000 0.500 6.250 3.750 7.000 13.000 32.500 2.000 0.500 6.250 3.750 7.000 13.000 32.500 1.600 0.400 5.000 3.000 8.750 16.250 35.000 1.600 0.400 5.000 3.000 8.750 16.250 35.000 8.000 2.000 25.000 15.000 35.000 65.000 150.000

II Books & LRs III Consultancies Trainings, IV fellowships and workshops V Salary VI Operation & Maintenance TOTAL (B)

Cost Tables - State Level Institutions & SPFUs Rs. in Million Component/ Category Year 1 Year 2 Year 3 Year 4 Year 5 Total

Programme Component - 1 : Institutional Development (Competitive Funding) - State Level Institutions Promotion of 1 Academic 729.350 2,304.750 2,765.700 2,497.300 921.900 9,219.000 Excellence 2 3 Networking of Institutions Services to Community & Economy TOTAL (A) 107.825 100.325 340.875 316.875 409.050 380.250 369.400 343.300 136.350 126.750 1,363.500 1,267.500

937.500 2,962.500 3,555.000 3,210.000

1,185.000 11,850.000

Programme Component - 2 : System Management Capacity Improvement ( Non-Competitive Funding) SPFUs I II Goods Books & LRs 2.450 0.350 0.700 3.500 4.200 3.800 15.000 6.125 0.875 1.750 8.750 8.400 7.600 33.500 6.125 0.875 1.750 8.750 8.400 7.600 33.500 4.900 0.700 1.400 7.000 10.500 9.500 34.000 4.900 0.700 1.400 7.000 10.500 9.500 34.000 24.500 3.500 7.000 35.000 42.000 38.000 150.000

III Consultancies Training, IV fellowships and workshops V VI Salary of Key Staff Operation & Maintenance TOTAL (B)

6. 6.1.

Disbursement Disbursement of Credit Disbursement of Credit is as per the following table.

Programme Component/Expenditure Category Institutional Development System Management Capacity Improvement

Programme Cost (Rs. in Million) 15200

Bank Financing Percentage 80%

Goods

32.5

100% of foreign expenditure, 100% of local expenditure (ex-factory cost) and 80% of local expenditures for other items procured locally 100% 80% 100% 80% until December 31, 2004, 65% until December 31, 2006 and 25% thereafter

Books & LRs Consultancies Trainings, fellowships and workshops Incremental Operating Costs

5.5 32 50 180

Total Programme Cost

15500

6.2.

Disbursement Process The disbursement will be made in the traditional system (reimbursement with full documentation and against statement of expenditures). Under the traditional system of claiming disbursement, the Programme implementing agencies initially incurs the expenditure and then reimbursement is claimed by way of reimbursement claims. The reimbursement claims constitutes three parts: 1. Withdrawal Application 2. Summary Sheets 3. Documents such as invoices, bills, payment receipts, etc.
7

6.3.

Disbursement Categories Expenditure incurred by each unit for Technical Education Quality Improvement Programme of Government of India will be booked as per World Bank designated Expenditure Categories. However for the purpose of claiming reimbursement for these expenditures, the claims have to be consolidated under certain heads designated by the World Bank as Disbursement Categories as given below: I II Institutional Development sub-projects

Goods (including equipment, furniture & vehicles) III Books & Learning Resources IV Consultant Services V Training & Workshops VI Incremental Operating Cost including salaries The entire expenditure at the institutional level will be claimed under Category I Institutional Development sub projects. The expenditure of SPFUs and NPIU will be claimed under Category II to Category VI as per the nature of expenditure.

SECTION II FINANCIAL ACCOUNTING SYSTEM 1. 1.1. Funds And Funds Flow For the centrally supported institutions and the NPIU, funds will be budgeted under identifiable budget line item in the Ministry of Human Resource Development (MHRD). On approval of the budget by the Parliament, MHRD will release annual fund requirements in three to four instalments to the institutions as grant. The transfer of funds will be through cheque/draft. The institutions will maintain a separate bank account (PLA account) for the Programme funds. For NPIU, MHRD will release funds in three to four instalments. For State supported institutions and SPFUs, funds will be allocated in the budgets of the concerned Departments of the respective State Governments. On approval of the budget by the legislature, the State Governments will allocate and release funds in three to four instalments as grant to the institutions and SPFU. The funds to private institutions will be on lend by the respective State Governments as loan. The transfer of funds will be through cheque/draft. The SPFU and institutions will maintain a separate bank account for the Programme funds. Flow of Funds The Programme funds to the institutions will be released in three to four installments each year on the basis of a Memorandum of Understanding (MOU) between the States and the institutions, which will contain the terms and conditions of the grants/loan. The first installment will not be more than 20% of the grant/loan amount and will be based on the committed expenditure as per the annual plan. Further installments will be released on the receipt of utilization status. Each subsequent installment will be released on utilization of 70% of the amount of the previous installments. This would ensure smooth flow of funds to the institutions and will avoid accumulation of funds at the institution level. Chart of Accounts Each accounting unit i.e. NPIU, SPFU, and LIPMU/NIPMU would maintain a detailed chart of accounts for booking of the expenditure under the project. The chart of accounts would confirm to the accounting requirements of the respective governments under which it falls. A sample chart of accounts is attached at Annex XIX.

1.2.

2. 2.1.

3. 3.1

4. 4.1.

Method of Accounting/Accounting Policies Each accounting unit i.e. NPIU, SPFU, and LIPMU/NIPMU would adopt Double Entry System of book keeping on Cash basis retaining basic principles of Government Accounting. All payments will be charged off to relevant expense account head at the time of making the payments except advance payment. Advance payments will be charged off to the relevant heads of accounts on adjustment. The assets created out of project will be accounted at cost. No depreciation will be provided on Fixed Assets acquired under the project. Materials purchased for the project activities will be charged off to the relevant project expenditure at the time of purchase itself. Eligible expenditure incurred on project activities will only be claimed. Expenditure not in accordance with the project agreements will not be claimed. Project Accounting To ensure a transparent and accurate accounting system, the following actions are required: Separate books of accounts and record of fund flow for the Programme funds will be maintained by each management structure at institutional, State and National levels i.e. by LIPMU, NIPMU, SPFU, and NPIU. Each of these management structures will maintain standard Books of Account (Cash Book, Bank Book, Journal, Ledgers, etc.). Cash Book Each management structure at institutional, State, and National Levels i.e. LIPMU, NIPMU, SPFU and NPIU will maintain Cash Book with Cash and Bank columns. The format of the Cash Book is attached at Annex IV. The transactions of Cash and Bank will be recorded in the Cash Book along with classification as and when transactions take place. The Cash Book will be closed monthly and attested by the Incharge (Finance). There will be a surprise verification of Cash at least once in a month by an appropriate authority and result of such verification will be recorded in the Cash Book under his date and signature.
10

4.2. 4.3. 4.4. 4.5. 4.6. 4.7.

5. 5.1. 5.1.1.

A.

B.

Petty Cash Book A reasonable amount of Cash will be fixed as Imprest to meet routine office expenses and it will be in the custody of the Cashier. Adequate security will be obtained from the Cashier. The Cashier will obtain the approval of Incharge (Finance) on the Petty Cash Voucher before making payment out of the imprest cash. The format is attached as Annex V. He will maintain proper accounts for the amounts spent. The format of the Petty Cash Book is attached as Annex VI. Expenditure from the imprest will be reimbursed as per the requirements but in any case on the last working day of the month. Petty Cash Book will be closed at the close each working day and got verified and attested by Incharge (Finance).

C.

Journal Book and Journal Voucher Journal Voucher will be prepared for any adjustment entry ( the format is attached at Annex VII ) and the same will be posted to Journal Book ( the format is attached as Annex VIII ) The entries from Journal Book will be posted to General Ledger as and when recorded in the Journal Book giving full details of transactions, Journal Voucher number and amount.

D.

General Ledger The entries from Cash Book will be posted to General Ledger (the format is attached at Annex IX) as the transactions occur. It will be balanced quarterly.

E.

Bank Reconciliation Statement Bank statement will be obtained from the bank within 5 days after the close of the month. Closing balance appearing in Bank statement would be got reconciled with that shown in the Cash Book by preparing the Bank Reconciliation Statement. The format is attached at Annex X.

F.

Stock Register The person in charge of Stores will maintain a Stock Register (the format attached at Annex XI) to account for stores items purchased and issued. The details regarding date of purchase, quantity and value of items purchased will be recorded in the
11

register based on the bills, while the issues will be based on the indents approved by competent authority. There will be a physical verification of stores on half yearly basis and the same will be completed within 15 days after the end of the half-year. Result of such verification will be noted in the stock register under dated signature of verifying officer. G. Fixed Asset Register The Agency will maintain Fixed Asset Register (the format is attached at Annex XII) to record the assets acquired and created out of project funds. Individual asset-wise entries will be recorded in the Fixed Asset Register. An identification number for each item of asset would be assigned for easy identification of the assets. These identification numbers would be painted on each item prominently, and the same would be recorded in the Fixed Assets Register. There will be an annual physical verification of fixed assets. The result of such verification will be recorded in Fixed Asset Register under date and signature of verifying officer. Any significant difference will be dealt with in the books of accounts properly. 4.1.2 The institutions will follow the applicable statutory procedures for maintaining accounts. However, records of expenditure incurred under the Programme will be kept separately for claiming reimbursement. The institutions, SPFUs, NPIU would retain all records (contracts, orders, invoices, bills, receipts and other documents) for at least one year after the audit reports for the fiscal year are submitted to the World Bank. There are well-defined components and expenditure categories for the purpose of claiming reimbursement under the Programme. Proper linkages will have to be established between the accounting head and the components/categories of expenditure. To ensure transparency in the system, accurate records will be kept at LIPMU, NIPMU, SPFU, and NPIU. These records will have to be supported by documents/vouchers, etc. in order to establish accuracy and authenticity of expenditures. Financial reports generated from the above accounting system will be comparable to Programme allocations, yearly budgets, forecasting and utilization of funds relating to physical and academic achievement as targeted under the Programme.

4.1.3

4.1.4

4.1.5

4.1.6

12

6. 6.1.

Internal Checks & Controls All the institutions to be funded under the Programme would be well performing institutions. Annual report containing audited accounts and audit report of all centrally funded institutions under the Programme will be laid on the table of both Houses of Parliament within a specified time frame of nine months from the date of closing of the financial year. Similarly, all State funded institutions will lay their accounts on the table of their respective Legislative Assembly. The process of laying of audited annual accounts is very rigorous. The administrative Ministry/Department is required to review the reports and prepare a Review Statement and Delay Statement (explaining the reasons of delay, if any). These are required to be approved by the Minister In-charge and laid along with the Audited Accounts Reports. A Parliamentary Committee on Papers Laid on the Table conducts a detailed examination of these documents. It ensures the sound internal control mechanism at the institution level. In addition, internal control mechanism at institutional, State and National levels i.e. by LIPMU, NIPMU, SPFU, and NPIU would include the following: Establishment of appropriate budgeting systems Regular monitoring of actual financial performance with budgets and targets Monitoring of physical and financial progress Establishment of procedures and systems for ensuring standard internal control such as checking of expenditures, appropriate documentation, levels of authorization, periodic bank reconciliation and physical verification For the purpose of proper checks and control at the institutional level, the institutions will ensure the following: Maintain basic day-to-day transactions on a regular basis in separate registers and ledgers. Generation of Trial balance, reconciliation statements, receipts and payment, income and expenditure statements, etc. The formats are attached as Annex XIII to XVII. Comparison of Statement of expenditure with the annual budgetary allocations, Programme components and categories of disbursement.

6.2.

6.3.

a) b) c) d)

6.4. a) b)

c)

13

d)

Periodic checks on delay of payments on the pending bills and an immediate corrective action to be taken by LIPMU/NIPMU/SPFU and NPIU. A finance committee at the institution level for yearly physical verification of assets independently. Staffing and Training Finance cell of NPIU will be headed by a qualified finance professional as Financial Management Specialist. The specialist will be assisted by a qualified accountant designated as Accounts Manager. The Financial Management Specialist will be responsible for establishment of the agreed financial management arrangements, providing timely financial reports, facilitating smooth and timely flow of funds and providing overall guidance in respect of financial management issues including monitoring of expenditures, audit and internal control to SPFUs and the participating institutions. At SPFUs, a Finance Coordinator who will be assisted with adequate support staff will head the finance function. He will be responsible for providing timely consolidated financial reports to the State authorities and the NPIU, monitoring of expenditures, providing overall guidance to the institutions, facilitating smooth flow of funds to all institutions and conduct of timely audit and ensuring consolidation of reimbursement claims. At the institutional level a senior staff will be designated as in charge of the accounts function for the Programme funds. He will be responsible for complying with the disbursement procedures, financial reporting requirements, monitoring of Programme expenditures and audit. Accounts personnel to work exclusively on the Programme will be identified. Entire financial staff under the Programme at institutional, State and National levels would be given training on financial management, and reimbursement procedures, etc.

6.5. 7. 7.1.1.

7.1.2.

7.1.3.

7.1.4.

14

SECTION III AUDIT REQUIREMENTS 1. All accounts maintained by the institutions in respect of funds released under the Programme would be audited as per existing agreed audit procedure(s). A firm of Chartered Accountants empanelled with or acceptable to the Comptroller & Auditor General of India / State AG will audit accounts of NPIU and SPFUs. The Terms of Reference (TOR) for such audit are attached at Annex II. The audit at SPFU level will include audit of Statement of Expenditure (SOE), and the Programme accounts. The SPFU will be required to maintain the records of SOE and the Programme accounts separately to enable the auditor to carry out necessary checks and verification effectively. Further if the auditor feels necessary, they can audit the Programme accounts of the institutions. The SPFU will be required to submit to the NPIU a consolidated audit certificate within four to five months of the closure of financial year i.e. by July/August every year and the same will be forwarded to the World Bank. For this purpose the institutions are required to furnish all documents / records to the auditors to facilitate timely audit. A firm of Chartered Accountants will audit the Centrally funded institutions. The Terms of reference for such an audit are attached at Annex II. Central institutions will submit their audit report to NPIU within four to five months of closure of financial year i.e. July/August every year. For this purpose the institutions are required to furnish all documents / records to the auditors to facilitate timely audit. NPIU will consolidate the audit reports received from the Central institutions. This consolidation will focus on checking the arithmetical accuracy of the reports. The World Bank will receive only eight audit reports (audit report of NPIU, 6 reports from SPFUs, and a consolidated audit report of the centrally funded institutions) through the NPIU within six months after close of financial year i.e. by September every year. The Audit Reports will be unqualified and in the proforma prescribed. A sample proforma is given at Annex I. In case there are audit queries, all units (institutions/SPFUs/NPIU) will maintain and retain records of such queries and their settlement.

2.

3.

4.

5.

6.

7.

8. 9.

15

SECTION IV REIMBURSEMENT PROCEDURES 1. 1.1. External Assistance and Reimbursement Procedure The Programme is an externally assisted project and attracts the provisions of GOI policies in respect of externally assisted projects. Relevant extract from the External Assistance Manual of Ministry of Finance, GOI is given below: Under externally assisted projects, the external assistance received from various multilateral and bilateral agencies is passed on by GOI to the States as Additional Central Assistance (ACA) on the same terms and conditions as Central Assistance for State Plans. These are different from the conditions at which external assistance is received from various multilateral/bilateral agencies. For States not falling under the special category status, assistance is given in 30:70 mix of grant and loans. With effect from 1st April 2001 a loan with 20years maturity period will carry a rate of interest of 12%. Further, half of it carries a grace period of 5 years. All external-aid disbursed by external agencies to GOI is first received by the Central Government in the Ministry of Finance (MOF), Department of Economic Affairs (DEA), office of Comptroller of Aid Accounts and Audit (CAA&A). The fund flow process in case of Central and State Sector Project is as below: Central Sector Projects In case of Central Ministry/Department implemented projects, the external aid takes the following route: Based on Project provision, the Ministry spends money on the project Ministry sends claims for reimbursement to CAA&A. (In the Programme central institutions will submit their reimbursement claims to NPIU with intimation to BTE. BTE within 15 days indicate to NPIU any inconsistency) CAA&A arranges reimbursement from the external agencies, which gets into the Central budget as a receipt.

a)

b)

16

State Sector Projects For the projects implemented by the State Govt. departments, the external assistance follows the route given below: State Government makes budget provisions for the project State Finance Department authorizes Department by releasing funds. the implementing

The Departments concerned makes payments and sends the reimbursement claims to CAA&A CAA&A scrutinizes the claims and forwards application to External Agency The External Agency reimburses CAA&A after examining the claims. CAA&A advises Project Management Unit (PMU) in DEA about receipt of funds The PMU advises Plan Finance-I of the Department of Expenditure (DoE) to release funds in the form of ACA to the States. Plan Finance I authorizes Chief Controller of Accounts, Ministry of Finance to effect the transfer of funds. The Chief Controller of Accounts advises the RBI Central Account Section, Nagpur to debit the Central Government Account and credit the State Government Account for the amount. The States initially incur expenditure on externally aided projects and thereafter claim reimbursement from GOI. In order to prevent any adverse effect on Project implementation by the States due to fund constraints and for expeditious utilization of external aid, a system of advance release of ACA is available up to 25% of the budgetary provision which is released by the Department of Expenditure on advice from the Department of Economic Affairs in the first month of a financial year. The States subsequently adjusts this against the reimbursement claim during the last 3 to 4 months of the financial year. All State level institutions will send their claims to the SPFU and the Central institutions will send their claims to NPIU. SPFU after the scrutiny will send the claims to the NPIU, which will forward the same after necessary checks and verification to CAA&A for claiming disbursement every quarter. The Financial Coordinator at SPFU and
17

c)

1.2.

Finance In-charge at the institutional level will be responsible for preparing quarterly claims and the Head of the Institution will ensure timely submission of these claims for the purpose of disbursement. CAA&A will examine these claims and take appropriate action for claming disbursement from the World Bank. CAA&A will provide information on periodic disbursement status to NPIU, and the States.
Flow of Reimbursement Claims for Centrally funded Institutions
Intimation to BTE Institution NPIU CAA&A Funding Agency

Flow of Reimbursement Claims for State-funded Institutions

Institution SPFU NPIU CAA&A Funding Agency

1.3.

The disbursement will be made in the traditional system (reimbursement with full documentation and against statement of expenditures). Under the traditional system of claiming disbursement, the Programme implementing agencies initially incurs the expenditure and then reimbursement is claimed by way of reimbursement claims. The reimbursement claims constitutes three parts: 1. Withdrawal Application 2. Summary Sheets 3. Documents such as invoices, bills, payment receipts, etc.

2. 2.1. 2.2.

Guidelines For Correct Preparation And Presentation Of Claims Formats to be used in the preparation of claims The claim forms to be used for claming reimbursement are given as Annex XVIII. The size of the formats would be in A4 only and be in original and no photocopy. Amount eligible for reimbursement which is to be claimed The percentage of reimbursement of the eligible expenditure is as follows:
18

2.3. 2.4.

Expenditure Category

Financing Percentage

Institutional Development sub-projects

80% 100% of foreign expenditures, 100% of local expenditures (exfactory cost) and 80% of local expenditures for other items procured locally 100% 80% 100% 80% until 31/3/2004, 65% until 31/12/2006, and 25% thereafter

Goods

Books & Learning Resources Consultant Services Training & Workshops Incremental Operating Cost including salaries 2.5. 2.6. 2.7.

Wherever reimbursement percentage is 100% the claim will not include taxes and duties levied in India. Wherever the reimbursement percentage is less than 100% the claims will include taxes and duties levied in India. Amount not eligible for reimbursement (i) Earnest money deposit, secured advances recovered form the contractors bill are not eligible for disbursement at the time of such recovery. However, the same may be claimed at the time of final release of the money after completion of the work. Amounts recovered from contractors bill towards Liquidated damages/penalty imposed. Amount recovered from contractors bill towards any fund managed by SPIU/PPIU. Expenditure on cost of land for project activities. Advances given to consultants are not eligible for reimbursement (except for mobilisation advance of the consultant).

(ii) (iii) (iv) (v)

19

3. 3.1.

Documents to be sent along with claims The following supporting documents are required to be submitted alongwith Form 1-B : (i) (ii) (iii) (iv) (v) Contractors Running Account Bill for civil works Suppliers or Consultants Invoice Summary statement of works performance signed by supervising engineer or any other authorised representative. Evidence of payment in the form of receipt from contractor, etc. Bank guarantee in case claim is towards advance payment.

3.2.

When summary sheet (Form 1-C) is used where no documents are required to be sent with the claim, the documents are to be retained in SPIU claim application-wise and must be readily available for review by auditors. Other points to be adhered to (i) Separate summary sheet is to be prepared for each category of expenditure as per schedule of withdrawal of proceeds to the credit agreement. The consolidation sheet (abstract of summary sheet) of all the summary sheets in a claim would be prepared and placed on the top of each set of the summary sheet. Four copies of Summary sheet and the documents wherever applicable would be submitted to NPIU in A4 size, paper in original. The photocopy would not be submitted. If the claim is delayed for more than six months, a certificate that the amount has not been claimed/reimbursed to the State in any of the earlier claims and the reasons for the delay would also be given in the remarks column of Abstract of Summary sheet/SOE Form 1-C/DOC Form 1-B. Reference period would be Day-Month-Year format. Overlapping of the reference periods would be avoided. The claims would be ink-signed by the person authorized to sign the claims. The authorized person would duly attest any cutting or overwriting.
20

4.

(ii)

(iii)

(iv)

(v) (vi)

5. 5.1. 5.1.1.

The instructions of filling up of summary sheets are given below : Summary Sheet with Documents (FORM 1-B) This form is to be used for expenditure relating to contract prior reviewed by the bank, e.g. I.C.B. (International Competitive Bidding). These would be sent for the prior review contracts and for contracts, which are above threshold limits of SOE. The Following instructions are to be followed sequentially while filling up the columns in the summary sheets 1. 2. 3. 4. 5. Application No.: This column is to be left blank by the SPIU. Summary Sheet No.: Each page (Summary Sheet) is to be numbered sequentially under each claim. IDA Credit Number: Insert full reference (number and letter) as it appears on the Credit Agreement. i.e. Item No.: Identifies item sequentially within each summary sheet and facilitates identification of the relevant item in any related correspondence. Category No.: Obtain category reference from schedule 1 of the credit agreement. Separate summary sheet is to be used for each category of expenditure. Brief description of Goods, works or services: Give brief description e.g. pumps; electrical equipment; constructions of school, etc. Name and address of contractor or supplier: Give the name, city, state and country. Contract or purchase order No. and date: Give full reference to ensure that the contract or purchase order can be readily identified. In respect of contract having more than one package, identify each package separately. Currency and total amount of contract : Give currency name and value, including any price escalation. Wherever contract is revised and approved by the Bank, revised contract value to be indicated. Currency and Cumulative Amount Paid to Date: Cumulative amount of expenditure including the expenditure of the current claim is to be shown against each currency of the contract amount. Currency and Amount paid during the period: Give currency and total value of invoices net of retention and other deductions for
21

6. 7. 8.

9.

10.

11.

ineligible items. When there are more than one invoice in an item in the Summary Sheet, an annexure showing the details of each invoice would be sent with the claim. When the currency is Indian Rupees, the same would be indicated in Millions into three decimals. 12. 13. Financing percentage: Eligible percentage taken from appropriate category of schedule 1 of the Credit Agreement. the

Amount eligible for financing: Total amount of invoices covered by the application multiplied by the eligible percentage. Amounts are net of retention money or any other deductions. Exchange Rate: This column is to be left blank. US Dollar charged to Special Account: This column is to be left blank. Remarks (including W.B.R.No.): Include invoice references, if applicable. Also indicate WBR No. related to contract above the procurement prior review limit. Total: The total of Col.7 and Col.9 of the Summary Sheet is to be struck for each summary sheet. Authorized Representative: The Project Director or any other person authorized to sign a claim has to give his full signature with designation under each of the summary sheet.

14. 15. 16. 17. 18.

5.2. 5.2.1.

Summary Sheet without Documents (FORM -1-C -S.O.E) This summary sheet is known as Statement of Expenditure. This summary sheet is tailor-made to suit the individual Project in respect of expenditure, relating to the contract, which are post-reviewed by the Bank. This instructions outlined above as are relevant would be followed while filling up the statement of expenditure' summary sheet. In addition the following certificates arc to be furnished at the bottom of the summary sheet. a) b) "Supporting Documents for this (insert location). SOE Retained at

Where the amount claimed for reimbursement for goods under SOE is 100% of the eligible expenditure incurred, an additional certificate is also required to be furnished as given below: a. "Certified that the expenditure claimed above does not include local taxes and duties."

c)

Where the amount claimed under Civil Works; Equipments and Consultancy are large as to exceed the equivalent of USD
22

mentioned for SOE threshold, an additional certificate is required to be furnished as given below: a. 'Certified that the value of the contracts against this claim does not exceed the SOE threshold."

23

SECTION V CONTRACT AND PROCUREMENT MANAGEMENT SYSTEM 1. 1.1. Procurement Plan Before start of the project, each unit would prepare a procurement plan containing the procurement schedule and procurement arrangements for the entire project period giving year wise breakup in respect of items to be procured during execution of the project. The procurement of civil works, goods and services will occur at the institutional level under the Programme Component-I (Institutional Development). The details of requirement including the cost of civil works, goods and services for each institution will be reflected in the Proposals of the institutions and will vary from proposal to proposal as per their individual needs in pursuit of excellence. The participating institutions will, among others, form four working committees namely, Academic Committee, Building and Works Committee, Finance Committee and the Procurement Committee. These Committees will function under the supervision of the BOG of the institution and these Committees will seek approvals on all institutional project related procurements and activities from the BOG. Goods and works would be procured in accordance with the provisions of Section I of the Guidelines for Procurement under IBRD Loans and IDA Credits published by the Bank in January 1995 and revised in January and August 1996, September 1997 and January 1999 (the Guidelines) and the provisions of the following Parts of this Section I. The limits of procurement of various goods, civil works and consultant services will be applicable as per the details contained in the legal agreements. Except as otherwise provided in Part C of this Section, goods estimated to cost $ 200,000 or more per contract, will be procured under contracts awarded in accordance with the provisions of Section II of the Guidelines and Paragraph 5 of Appendix I thereto. Procurement Procedures National Competitive Bidding Works to be carried out under an Institutional Development Subproject and estimated to cost $ 50,000 or more per contract and equipment estimated to cost more than $50,000 equivalent per contract but less then $200,000 equivalent may be procured under contracts awarded in accordance with legal agreements.

1.2.

1.3.

1.4.

1.5.

2. 2.1.

24

2.2. 2.2.1.

National and International Shopping Vehicles, equipment and furniture estimated to cost less than $50,000 equivalent per contract may be procured under contracts awarded on the basis of shopping procedures in accordance with the provisions of paragraphs 3.5 and 3.6 of the Guidelines. Direct Contracting The following items be procured in accordance with paragraph 3.7 of the Guidelines and in accordance with the legal agreement:
a)

2.3. 2.3.1.

Equipment which is of a proprietary nature and is estimated to cost less than $20,000 equivalent per contract; books and learning resources estimated to cost less than $50,000 equivalent per contract, and small items estimated to cost less than $500 equivalent per contract.

b)

c)

3. 3.1.

Civil Works The Programme does not envisage large scale civil works but has provision to meet essential requirements of developmental plans of institutions for acquiring excellence. Three types of activities under civil works are envisaged: (a) construction of buildings as extensions, b) refurbishing of the existing infrastructure and c) improvement of facilities. Each institution will be required to create a special Cell in their institution to undertake the responsibility of civil works comprising of faculty from Civil Engineering Department or hire a consultant for undertaking the civil works in consultation with the SPFU. Procurement of Small Works Works to be carried out under an Institutional Development Subproject and estimated to cost $50,000 equivalent or less per contract may: (i) be procured under lump-sum, fixed-price contracts awarded on the basis of quotations obtained from three (3) qualified domestic contractors in response to a written invitation. The invitation will include a detailed description of the works, including basic specifications, the required completion date, a basic form of agreement acceptable to the Association, and relevant drawings, where applicable. The award will be made to the contractor who offers the lowest price quotation for the
25

3.2.

3.3.

3.4. 3.4.1.

required work, and who has the experience and resources to complete the contract successfully; (ii) (iii) be procured under the unit/piece rate systems through qualified contractors; or as a last resort, be carried out by force account provided such works meet the requirements of the provisions of paragraph 3.8 of the Guidelines.

3.5. 3.5.1. 3.5.2.

Review of Procurement Decisions Procurement Planning Prior to the issuance of any invitations to bid for contracts, the proposed procurement plan for the Project will be furnished to the World Bank for its review and approval, in accordance with the provisions of paragraph 1 of Appendix 1 to the Guidelines. Procurement of all goods and works will be undertaken in accordance with such procurement plan as approved by the World Bank, and with the provisions of said paragraph 1. Prior Review a) With respect to the first contract for goods by each SPFU and the NPIU procured under national competitive bidding procedures, regardless of the value of such contract, the procedures set forth in paragraphs 2 and 3 of Appendix 1 to the Guidelines will apply. With respect to the first contract for works by each Project Institution under national competitive bidding procedures, regardless of the value of such contract, the procedures set forth in paragraphs 2 and 3 of Appendix 1 to the Guidelines will apply. With respect to each contract estimated to cost the equivalent of $200,000 for goods and $300,000 for works or more, the procedures set forth in paragraphs 2(f), 2(g) and 3 of Appendix 1 to the Guidelines will apply.

3.5.3.

b)

c)

3.5.4. 3.5.5.

Post Review With respect to each contract not governed by paragraph 2 of this Part, the procedures set forth in paragraph 4 of Appendix 1 to the Guidelines will apply.

26

3.6. 3.6.1.

Employment of Consultants Consultants services would be procured in accordance with (a) the provisions of the Introduction and Section IV of the Guidelines: Selection and Employment of Consultants by World Bank Borrowers published by the Association in January 1997 and revised in September 1997, January 1999, and May 2002 subject to the modifications thereto set forth in paragraph 2 of this Part A of this Section II (the Consultant Guidelines), and (b) the provisions of the following Parts of this Section II. Quality- and Cost-based Selection Except as otherwise provided in Part C of this Section, consultants services would be procured under contracts awarded in accordance with the provisions of Section II of the Consultant Guidelines, paragraph 3 of Appendix 1 thereto, Appendix 2 thereto, and the provisions of paragraphs 2.13 through 2.18 thereof applicable to quality- and costbased selection of consultants. The following provisions would apply to consultants services to be procured under contracts awarded in accordance with the provisions of the preceding paragraph. The short list of consultants for services for procurement of works and goods including procurement planning and development of technical specifications, estimated to cost less than $500,000 equivalent per contract, may comprise entirely national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. Other Procedures for the Selection of Consultants Selection Under a Fixed Budget Services for academic aspects of Institutional Development Subprojects estimated to cost less than $200,000 equivalent per contract may be procured in accordance with the provisions of paragraphs 3.1 and 3.5 of the Consultant Guidelines. Selection Based on Consultants Qualifications Services for conduct of performance, reforms, quality and efficiency audits and for policy research studies estimated to cost less than $ 100,000 equivalent per contract may be procured under contracts awarded in accordance with the provisions of paragraphs 3.1 and 3.7 of the Consultant Guidelines. Individual Consultants Services for tasks that meet the requirements set forth in paragraph 5.1 of the Consultant Guidelines will be procured under contracts
27

3.7. 3.7.1.

3.7.2.

3.8. 3.8.1. 3.8.2.

3.8.3. 3.8.4.

3.8.5. 3.8.6.

awarded to individual consultants in accordance with the provisions of paragraphs 5.1 through 5.3 of the Consultant Guidelines. 4. 4.1. 4.2. Procurement Method The procurement methods applicable to the project as per World Bank guidelines are National Competitive Bidding (NCB) It is an open tender inviting quotations/bids at the national level subject to the following conditions (i) (ii) (iii) (iv) (v) (vi) (vii) a) Only the model bidding documents agreed with Government of India will be used. Tender Notice Inviting for Bid will be published in at least one widely circulated national newspaper at least 30 days prior to the deadline for submission of bids. There will be no preference for any bidder including State/Central Government undertaking or Small Scale Enterprises. DGS&D rate contracts will not be valid. There would be no price negotiation even with the lowest evaluated bidder except with the prior concurrence of the World Bank. Except in cases of force majeure and/or situations beyond the control of borrower, extension of the bid validity will not be permissible without prior concurrence of Association. Re-bidding will not be carried out without prior concurrence of Association.

National Shopping This method of procurement will be adopted for procurement of goods, which are readily available off-the-shelf or standard specification commodities. It would be ensured that at least 3 quotations are obtained for comparing the prices and the lowest is selected. DGS&D rate contracts are valid for National Shopping procedure.

b)

Direct Contracting This is procurement from a single source where no advantages could be obtained by further competition. This could be adopted for extension of existing contracts for works or goods justifiable on economic grounds, proprietary items and for early delivery to avoid cost delay in case of need.

c)

Force Account This is for construction using own material, labour and equipment (generally limited to 10% of the total cost of civil works) where:
28

(i) (ii) (iii) (iv) 4.3.

Quantities of Work cannot be defined in advance. Works are for small value, scattered or in remote locations. Work has to be carried out without disrupting on going operation. There are emergencies.

Thresholds for Procurement Methods and Prior Review

Contract Value (threshold) a) Civil works estimated to cost the equivalent of US$50,000 or less per contract may be executed by: i) Fixed price contract ii) Unit/Piece Rate system through qualified contractors iii) By Force Account as a last resort in a manner satisfactory to the Association b) Civil works estimated to cost more than the equivalent of US$50,000 per contract. National Shopping Rate Contract Post Review only Post Review only Procurement Method Contract Subject to Prior Review / Estimated Total Value Subject to Prior review

Expenditure Category Civil Works

Force Account

Post Review only

National Competitive Bidding (NCB)

First works contract by each Institution under NCB regardless of value and all contracts above US$300,000 by prior review in accordance with paragraphs 2 and 3 of Appendix 1 to the Guidelines for Procurement under IBRD Loans and IDA Credits of January 1995, revised January, August 1996, September 1997 and January 1999. All others by post review.

Goods (a) Equipment

(i)

US$50,000 equivalent or less per contract

International shopping and National Shopping (includes DGS&D rate contracts). Direct Contracting

Post Review only

(ii)

Proprietary equipment of US$20,000 equivalent or less

Post Review only

29

per contract Contracts of more than US$50,000 equivalent but less than US$300,000 equivalent. (iii) Contracts of more than US$ 300, 000 equivalent National Competitive Bidding (NCB) First bidding document and first contract from each SPFU/NPIU by Prior Review.

International Competitive Bidding National Shopping Direct Contracting

First bidding document from NPIU and all contracts for prior review Post Review only Post Review only

(b) Furniture (c) Books, Proprietary Software, Learning Resources and Educational Materials (d) Vehicles

US$50,000 equivalent or less per contract US$50,000 equivalent or less per contract

US$50,000 equivalent or less per contract,

National Shopping procedures (includes DGS&D rate contracts). Direct Contracting

Post Review only

(e) Small Items

US$500 equivalent or less per contract upto an aggregate of US $ 1,000,000. Consultant services may be procured by: (a) More than US$200,000 equivalent per contract.

Post Review only

Services Procurement agent, research contracts, professional services, training, workshops and fellowships.

Quality- and Cost-Based Selection (QCBS)

Prior Review of all consultant contracts shall be governed by the provisions of paragraphs (i), (ii) and (iii) below: (i) With respect to each contract for the employment of consulting firms estimated to cost the equivalent of US$ 100,000 or more, the procedures set forth in paragraphs 1, 2 and 5 of

Quality- and Cost-Based Selection (QCBS) with short list (would comprise entirely of national consultants for all contracts
30

Appendix 1 to the Guidelines for Selection and Employment of Consultants by World Bank Borrowers of January 1997, revised September 1997, January 1999 and May 2002 shall apply

(b) More than US$100,000 and up to US$ 200,000 equivalent.

below US$500,000) Selection based on a Fixed Budget (SFB)

(ii)

(c) US$100,000 equivalent or less per contract

Selection based on Consultant's Qualification (CQ)

With respect to each contract for the employment of individual consultants estimated to cost the equivalent of US$50,000 or more, the qualifications, experience, terms of reference and terms of employment of the consultants shall be furnished to the Association for its prior review and approval. The contract shall be awarded only after the said approval has been given. Terms of Reference for all consultant contracts estimated to cost the equivalent of US$12,000 or more per contract in the case of firms, and the equivalent of US$5,000 or more per contract in the case of individuals shall be furnished to the Association for its prior review and approval. The contract shall be awarded only after the said approval has been given.

(iii)

All other cases Miscellaneous Incremental operating costs. Expenses incurred on maintenance of equipment, vehicles and buildings, hiring cost of vehicles and offices, and consumables may be executed by: (i) Each package not exceeding US$5000, or On the basis of National Shopping Direct Contracting National Shopping

Post Review

Post Review only

(ii)

Post Review only

31

SECTION VI FINANCIAL REPORTING AND FINANCIAL MANAGEMENT REPORTS 1. Financial Reporting The Quarterly Financial Management Report (FMR) will include a) b) Comparison of budgeted and actual expenditure and analysis of major variances. In case the disbursement is converted to FMR based, additional FMRs on (a) Withdrawals (b) Cash Forecast (c) Procurement Management for major contracts (d) Physical progress would have to be generated.

The formats are attached at Annex III. Project Financial Statements and FMRs will be generated manually. In addition to the above, monthly statements of expenditure as per expenditure category/Components showing the allocations, current and cumulative expenditures at institutional, State and National levels i.e. by LIPMU, NIPMU, SPFU, and NPIU will be prepared. 2. Review And Analysis
a)

The Financial Reports will be reviewed by LIPMU/ NIPMU/BOG/ SPFU/NPIU/State Government/BTE. Each review will focus on physical and academic progress in the Programme, and make recommendations for future course of action to be taken by the institution. The LIPMU/NIPMU will ensure the correctness and reliability of financial data by comparing with the previous reports. The discrepancies found at the NPIU level will be referred to SPFU for reconciliation. Wherever delays occur in the reimbursement claims or the error/mistakes are noted, the same will be communicated to the concerned SPFU to take corrective measures by the NPIU.

b)

c)

3.

In addition a quarterly review of the financial controls of the institutions and SPFUs will be conducted by NPIU.

32

Annex I

MODEL AUDIT REPORT Unqualified Opinion (for Project Financial Statement Including SOE) Addressee *

Introductory Paragraph We have audited the accompanying financial statements of the [_____________] Project [financed under World Bank Loan No. ___________/IDA as of December 31, 20XX [indicate any other additional years necessary] for the year(s) then ended. Our responsibility is to express an opinion on these financial statements based on our audit. Scope Paragraph We conducted our audit in accordance with International Standards on Auditing [or relevant national standards or practices, and/or World Bank guidelines]. Those Standards and/or World Bank guidelines require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. A Opinion Paragraph

In our opinion, the financial statements give a true and fair view of the Sources and Application of Funds** of _______________________ Project for the year ended December 31, 20XX, in accordance with [indicate International Accounting Standards or relevant national standards. Add financial position at December 31, 20XX where a balance sheet is required] In addition, (a) with respect to SOEs, adequate supporting documentation has been maintained to support claims to the World Bank for reimbursements of expenditures incurred; and (b) which expenditures are eligible for financing under the Loan/Credit Agreement [Ln/Cr. _______________]. (c) the SOE submitted and procedure and internal controls involved in their preparation can be relied upon to support the withdrawals. [Name and Address of Audit Firm] [date Completion Date of Audit] * The auditors report should be appropriately addressed as required by the circumstances of the engagement and local regulations. ** A Source and Application of Funds statement is always required for each project. A balance sheet is also required where the project has assets and liabilities.

33

Annex II

SAMPLE TERMS OF REFERENCE FOR THE AUDIT OF PROJECT FINANCIAL STATEMENTS (and Accompanying SOE and SA Where Applicable) Objective The objective of the audit of the Project Financial Statement (PFS) is to enable the auditor to express a professional opinion on the financial position of [__________] project at the end of each fiscal year and of the funds received and expenditures for the accounting period ended mm/dd/yy, as reported by the PFS, [as well as an opinion on the Statement of Expenditures]. The project accounts (books of account) provide the basis for preparation of the PFS and are established to reflect the financial transactions in respect of the project, as maintained by the project-implementing agency [_____________]. Scope The audit will be carried out in accordance with International Standards of Auditing, and will include such tests and controls, as the auditor considers necessary under the circumstances. In conducting the audit, special attention should be paid to the following: (a) All external funds have been used in accordance with the conditions of the relevant financing agreements, with due attention to economy and efficiency, and only for the purposes for which the financing was provided. Relevant financing agreements are (-------name of loan agreement); Counterpart funds have been provided and used in accordance with the relevant financing agreements, with due attention to economy and efficiency, and only for the purposes for which they were provided; Goods and services financed have been procured in accordance with the relevant financing agreement; All necessary supporting documents, records, and accounts have been kept in respect of all project ventures [including expenditures reported via SOEs or SAs]. Clear linkages should exist between the books of account and reports presented to the Bank. Where Special Accounts have been used, they have been maintained in accordance with the provisions of the relevant financing agreement. The project accounts have been prepared in accordance with consistently applied International Accounting Standards and give a true and fair view of the financial situation of the project mm/dd/yy and of resources and expenditures for the year ended on that date. Whether the PMR or SOE submitted during the fiscal year, together with the procedure and internal controls involved in their preparation can be relied upon to support the necessary withdrawals. Review of outstanding previous years audit observations and their compliance.

(b) (c) (d) (e) (f)

(g) (h)

Project Financial Statements The Project Financial Statements should include (a) (b) (c) A Summary of Funds received, showing the World Bank, project funds from other donors, and counterpart funds separately; A Summary of Expenditures shown under the main project headings and by main categories of expenditures, both for the current fiscal year and accumulated to date; and A Balance Sheet showing Accumulated Funds of the Project, bank balances, other assets of the project, and liabilities, if any.

As an annex to the Project Financial Statements, the auditor should prepare a reconciliation between the amounts shown as "received by the project from the World Bank" and that shown as being disbursed by the Bank. As part of that reconciliation, the auditor should indicate the

34

Annex II

mechanism for the disbursement, i.e. Special Accounts, Statements of Expenditures, or direct reimbursement,

Statements of Expenditures In addition to the audit of the PFS, the auditor is required to audit all SOEs used as the basis for the submission of withdrawal applications. The auditor should apply such tests and controls, as the auditor considers necessary under the circumstances. These expenditures should be carefully compared for project eligibility with the relevant financing agreements, and with reference to the Staff Appraisal Report for guidance when considered necessary. Where ineligible expenditures are identified as having been included in withdrawal applications and reimbursed against, these should be separately noted by the auditor. Annexed to the Project Financial Statements should be a schedule listing individual SOE withdrawal applications by specific reference number and amount. The total withdrawals under the SOE procedure should be part of the overall reconciliation of Bank disbursements described above. Special Accounts In conjunction with the audit of the Project Financial Statements, the auditor is also required to audit the activities of the Special Accounts associated with the Project. The Special Accounts usually comprise Deposits and replenishments received from the Bank Payments substantiated by withdrawal applications Interest that may be earned from the balances and which belong to the borrower; and The remaining balances at the end of each fiscal year.

The auditor must form an opinion as to the degree of compliance with the Bank's procedures and the balance of the Special Account at year-end. The audit should examine the eligibility and correctness of financial transaction during the period under REVIEW and fund balances at the end of such a period, the operation and use of the SA in accordance with the financing agreement, and the adequacy of internal controls for this type of disbursement mechanism. For this project, the Special Accounts are referred to in [cite references] of the relevant financing agreements. Special Accounts statements and the auditor's report should with the Project Financial Statements. Audit Opinion Besides a primary opinion on the Project Financial Statements, the annual audit report of the Project Accounts should include a separate paragraph commenting on the accuracy and propriety of expenditures withdrawn under SOE procedures and the extent to which the Bank can rely on SOEs as a basis for loan disbursement. The financial statements, including the audit report, should be received by the Bank no later than [three to six] months after the end of the accounting period to which the audit refers. The auditor should submit the report to the borrower's designated agent rather than to any staff member of the project entity. The agent should then promptly forward two copies of the audited accounts and report to the Bank. Management Letter In addition to the audit reports, the auditor will prepare a " management letter,' in which the auditor will: (a) (b) Give comments and observations on the accounting records, systems, and controls that were examined during the course of the audit; Identify specific deficiencies and areas of weakness in systems and controls and make recommendation for their improvement;
35

Annex II

(c) (d) (e)

Report on the degree of compliance of each of the financial covenants on the financing agreement and give comments, if any, on internal and external matters affecting such compliance; Communicate matters that have come to attention during the audit which might have a significant impact on the implementation of the project; and Bring to the borrower's attention any other matters that the auditors considers pertinent.

General The auditor should be given access to all legal documents, correspondence, and any other information associated with the project and deemed necessary by the auditor. Confirmation should also be obtained of amounts disbursed and outstanding at the Bank [and of amounts disbursed under [specify other donor, loan or grant, if any]. Bank Task Managers can assist in obtaining these confirmations. It is highly desirable that the auditor becomes familiar with a copy of the Bank's Guidelines on Financial Reporting and Auditing of Projects Financed by the World Bank, which summarizes the Bank's financial reporting and auditing requirements. The auditor should also be familiar with the Bank's Disbursement Manual. Both documents will be provided by the Task Manager.

36

Annex III

FINANCIAL MANAGEMENT REPORT (FMR) Quarterly Financial Management Reports would be prepared each of which Sets forth actual sources and application of funds for the project, both cumulatively and for the period covered by said report, and projected sources and application of funds for the project for the six months period following the period covered by said report Shows separately expenditures financed out of the proceeds of the Credit during the period covered by said report and expenditures proposed to be financed out of the proceeds of the credit during the six months period following the period covered by the said report.

Technical Education Quality Improvement Programme of Government of India Use of Funds by Component/Expenditure Category for the Quarter Ending _____________ Rs. In Million Component/Category Actual Planned Variance Current Current Current Cumulative Cumulative Cumulative Quarter Quarter Quarter

Programme Component - 1 : Institutional Development (Competitive Funding) 1 2 3 4 5 6 Civil Works Goods* Books & LRs Consultancies Trainings, fellowships and workshops Incremental Operating Expenses Total Programme Component - 2 : System Management Capacity Improvement ( NonCompetitive Funding) I Goods*

II Books & LRs III Consultancies IV V Trainings, fellowships and workshops Incremental Operating Expenses Total * Goods includes Equipment, Furniture & Vehicles
37

Annex III

Technical Education Quality Improvement Programme of Government of India

Cash Forecast for Quarter ending . Rs. In Million

Cash World Bank 100% Cash Total Cash requirement Government World Eligible Cash Govt. requirement requirement for the next & World Bank Bank requirement for the next for six Financed financed eligible for the six second first Quarter months Expenditu months expenditures Quarter % ending ending res ending ending 1 2 3 = 1+2 4 5 6 7=5X6

Disbursement Category

Sl. No.

Particulars

Programme Component - 1 : Institutional Development (Competitive Funding) 1 2 3 4 5 Civil Works Goods* Books & LRs Consultancies Trainings, fellowships and workshops Incremental Operating Expenses Total Programme Component - 2 : System Management Capacity Improvement ( Non-Competitive Funding) I II Goods* Books & LRs

III Consultancies Trainings, IV fellowships and workshops Incremental V Operating Expenses Total * Goods includes Equipment, Furniture & Vehicles

38

Annex III

Technical Education Quality Improvement Programme of Government of India Withdrawl for Quarter ending In Million
Disbursement Category Expenditure Eligible Expenditure incurred Expenditure for incurred Eligible during the reimbursement during the % age Quarter during Quarter Quarter (Rs.) (Rs.) (USD) Eligible Expenditure for reimbursement during Quarter (USD) Total Bank Disbursement To-date Bank Credit

Programme Component - 1 : Institutional Development (Competitive Funding) 1 2 3 4 Civil Works Goods* Books & LRs Consultancies Trainings, fellowships and workshops Incremental Operating Expenses Total Programme Component - 2 : System Management Capacity Improvement ( Non-Competitive Funding) I Goods*

II Books & LRs III Consultancies Trainings, fellowships IV and workshops Incremental V Operating Expenses Total * Goods includes Equipment, Furniture & Vehicles

39

Annex III

Technical Education Quality Improvement Programme of Government of India

Procurement Progress Report of Works & Goods as on (For Contracts Valued at US $ 1,00,000 and above) Contract Bid Name & Award Bank's Date of Expendit Descripti Method of Design Docume Banks decided Contact Address Bids Bids NOC Sl. Estimate Contra Completi ure nt of WBR No. Procurem Completi on of NOC Invitatio Opening (Date Contract Signed No. d Cost on of Incurred ct No. date ent on Date Preparati date n date Works Date Contract /Value/ Award Contract to date Currenc Date on Date or y)

40

Annex III

Technical Education Quality Improvement Programme of Government of India Programme Target Achievements as on Physical Targets Amount Spent (Rs.)

Sl. Programme No. Targets

Planned Achieved Variance Remarks Planned Achieved Variance Remarks

41

Annex IV

TECHNICAL EDUCATION QUALITY IMPROVEMENT PROGRAMME OF GOVERNMENT OF INDIA (TEQIP)

CASH BOOK
Month & Date Receipt No. RECEIPTS Particulars Head of Account L.F.No. Amount Cash Bank Rs. Rs. Month & Date Voucher No. PAYMENTS Particulars Head of Account L.F.No. Amount Cash Bank Rs. Rs.

TOTAL

TOTAL

42

Annex V

TECHNICAL EDUCATION QUALITY IMPROVEMENT PROGRAMME OF GOVERNMENT OF INDIA (TEQIP)

PETTY CASH VOUCHER

Petty Cash Vr. No: Date Petty Cash Book Folio No: Debit ____________________________________________________________________ Account. a sum of Rupees ___________________________________________________________________ Paid to ___________________________________________________________________________ by Cash/ Cheque No. _______________________________________________________________ Towards _________________________________________________________________________ _________________________________________________________________________________ Rs. Received By

Prepared by (Cashier)

Checked by (Accounts Incharge)

Approved By (Appropriate Authority)

43

Annex VI

TECHNICAL EDUCATION QUALITY IMPROVEMENT PROGRAMME OF GOVERNMENT OF INDIA (TEQIP)

PETTY CASH BOOK

Sl. No. Receipt Date Amount Date Payment Vr. No. Amount Balance Printing and Stationery Postage Particulars of Expenditure Travelling and Conveyan ce Refresh ment Expens es Vehicle mainten ance Rates & Taxes News paper & periodicals Others* Initials of Cashier Signatur e of Asst. Director (Financ e)

*Suitable Columns to be provided for appropriate expenditure heads

44

Annex VII

TECHNICAL EDUCATION QUALITY IMPROVEMENT PROGRAMME OF GOVERNMENT OF INDIA (TEQIP)

JOURNAL VOUCHER
Journal Voucher No: Date : J.B. Folio No: PARTICULARS WITH HEAD OF ACCOUNT DEBIT Rs. CREDIT Rs.

Prepared by (Accountant)

Checked by (Accounts Incharge)

Approved By (Appropriate Authority)

45

Annex VIII

TECHNICAL EDUCATION QUALITY IMPROVEMENT PROGRAMME OF GOVERNMENT OF INDIA (TEQIP)

JOURNAL BOOK

Particulars with Head of Account

Journal Voucher No.

Ledger Folio No.

DEBIT Rs.

CREDIT Rs.

46

Annex IX

TECHNICAL EDUCATION QUALITY IMPROVEMENT PROGRAMME OF GOVERNMENT OF INDIA (TEQIP)

GENERAL LEDGER Head of Account: Budget provision for the year Revised Budget provision

Date and Month

Particulars

Vr. No./ Receipt No. / Journal Vr. No.

CB Folio/ JL Folio No.

DEBIT Rs.

CREDIT Rs.

Balance Rs.

47

Annex X

TECHNICAL EDUCATION QUALITY IMPROVEMENT PROGRAMME OF GOVERNMENT OF INDIA (TEQIP)

BANK RECONCILLATION STATEMENT

MONTH: Banks Name: Sl. No. A B Particulars Balance as per Bank Statement ADD: (i) Amount Deposited but not Credited by Bank (ii) Amount debited but not taken to Cash Book SUB TOTAL (A+B) LESS: (i) Cheques issued but not presented in the bank (ii) Amount credited by bank but not taken to Cash Book Balance as per Cash book (C-D) Amount Rs. Amount Rs.

C D

List of Cheques not presented in the Bank as per D (i) Cheque No.

Amount

Date of Encashment

TOTAL

Prepared by (Cashier)

Checked by (Accounts Incharge)

Approved By (Appropriate Authority)

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Annex XI

TECHNICAL EDUCATION QUALITY IMPROVEMENT PROGRAMME OF GOVERNMENT OF INDIA (TEQIP)

STOCK REGISTER
Name of the article Date Particulars Bill No./ Indent No. Quantity Receipts Issues Balance

49

Annex XII

TECHNICAL EDUCATION QUALITY IMPROVEMENT PROGRAMME OF GOVERNMENT OF INDIA (TEQIP)

FIXED ASSET REGISTER

Asset Group:

Sl. No.

Date of Purchase

Bill No.

Suppliers Name

Details of Asset

Type and Make

Quantity

Amount Rs.

Location

Identification

Date of Physical Verification

Signature

Remarks

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Annex XIII

TECHNICAL EDUCATION QUALITY IMPROVEMENT PROGRAMME OF GOVERNMENT OF INDIA (TEQIP)

REGISTER OF CONTRACTS FOR CONSULTANCY SERVICES

Sl.No. Contract No. Consultants Name and Address Brief description of the consultancy service Date of contract Date of scheduled Completion Amount of contract with stages if any Date of actual completion Remarks

51

Annex XIV

TECHNICAL EDUCATION QUALITY IMPROVEMENT PROGRAMME OF GOVERNMENT OF INDIA (TEQIP)

RECEIPTS AND PAYMENT ACCOUNT FOR THE MONTH OF/ QUARTER OF ________________ (From ___________________ to __________________)

Sl.No.

RECEIPTS Particulars For the month Amount Rs. Opening Balance a) Cash b) Bank Received from

Cumulativ e Amount Rs.

Sl. No. 1

Particulars

PAYMENTS For the month Amount Rs.

Cumulative Amount Rs.

Release to

Other Receipts, if any

3 4 5

Payment to Consultants, Seminars & Workshops Procurement of Assets Administration Expenditure Closing balance a) Cash b) Bank TOTAL

TOTAL

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Annex XV

TECHNICAL EDUCATION QUALITY IMPROVEMENT PROGRAMME OF GOVERNMENT OF INDIA (TEQIP) TRIAL BALANCE AS ON __________________ Sl.No. L.F.No. HEAD OF ACCOUNT DEBIT Rs. CREDIT Rs.

TOTAL

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Annex XVI

TECHNICAL EDUCATION QUALITY IMPROVEMENT PROGRAMME OF GOVERNMENT OF INDIA (TEQIP) INCOME AND EXPENDITURE ACCOUNT FOR THE YEAR ENDED ______________

Previous Year

Particulars

EXPENDITURE Amount Rs.

INCOME Amount Rs. Previous Year Particulars Amount Rs. Amount Rs.

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Annex XVIII

TECHNICAL EDUCATION QUALITY IMPROVEMENT PROGRAMME OF GOVERNMENT OF INDIA (TEQIP) BALANCE SHEET AS AT ______________

Sl. No. A

PARTICULARS SOURCE OF FUNDS 1) Amount received from: 2) Contribution from: 3) Excess of income over Expenditure

SCHEDULE NO.

CURRENT YEAR Rs.

PREVIOUS YEAR Rs.

TOTAL B APPLICATION OF FUNDS 1) Fixed Assets 2) Work in progress Scheme work under implementation 3) A. Current Assets, Loans and advances a. Cash Balance b. Bank balance c. Advance for Capital goods d. Loans and Advances B. Less: Current Liabilities Net Current Assets (A-B) TOTAL

55

Annex XVIII

SCHEDULE OF WITHDRAWAL OF PROCEEDS

Form 1 B Details of Payments made from the Special Account During the Period Expenditures under contracts valued above the SOE thresholds : * Expenditures on goods contracts equivalent to USD 300,000 equivalent or more * Expenditures on works contracts equivalent to USD 300,000 equivalent or more * Expenditures on contracts with consulting firms equivalent to USD 100,000 equivalent or more and * Expenditures on contracts with individual consultants equivalent to USD 50,000 equivalent or more 1 2 3 4 5 6 7 8 IDA Financing Currency Currency Name of Percentage Brief and and Contractor, from Subloan/ Descripti Category Cumulative Amount Address, Schedule 1 Contract on of Amount Paid Contract No. No. to the Amount Goods or Paid to during this Contract Development Services Date period Date Credit Agreement Date IDA Credit No. Application No. _____________ Summary Sheet No.

10

11

12

Item No.

Amount eligible for IDA Financing Exchange (% in Rate Column 8 applied to Amount in Column 7)

U.S. Dollar Equivalent Charged to Remarks/N the Special o Account Objection (Exchange Date/ Rate in Country of Column 10 Origin Applied to Amount in Column 9)

TOTAL Column 4 should be filled in respect of ALL suppliers/contractors from U.S., the address should include the city and the state. If this application is not for replenishment of the Special Account, leave columns 10 and 11 blank.

56

Annex XVIII

STATEMENT OF EXPENDITURES (SOE) Payments made during the period from For Expenditure under : * Goods contracts less than $ 300,000 equivalent * Civil works contracts less than $ 300, 000 equivalent * Consulting firms contracts less than $ 100,000 equivalent * Individual consultants contracts less than $ 50,000 equivalent * Books and Instructional Material * Training, fellowships and workshops; and * Incremental Operating Costs Date : IDA Credit No. Application No. _______________ Summary Sheet No.

2
Category No.

3
Country of Supplier

4
Name and Address of Supplier/ Contractor

AMOUNT Rs. IN Million 8 9

Exchange rate (amount in Column 7 divided by amount in Column 8)

10
Name of Participating State

Item No.

Currency & Total Amount of Amount Paid from Invoices covered by Amount Eligible the Special Application (net of for Financing Account (if retention) applicable)

Remarks

EACH CONTRACT VALUE DOES NOT EXCEED THE SOE LIMIT

TOTALS Supporting documents for this SOE retained at A separate SOE form should be used for retroactive financing Items should be grouped by category or alternately, a separate SOE form may be used for each category Consolidate payments by country of supplier except for US suppliers Column 4 should be filled in respect of ALL suppliers/contractors from the U.S., the address should include the city and the state It is certified that the expenditure claimed above were incurred with the terms and conditions of Credit Agreement. All documentation authenticating these expenditures is retained by the project offices and available for review by IDA supervision mission. By : _____________________________ (Authorised Representative )

57

Annex XVIII

Abstract of Summary Sheet Name of the Project :

State/UT

Application No. ______________ IDA Credit No.

Reference Period : Date : 1 Summary Sheet No. 2 Category No. 3 Total Expenditure Rs. in Millions 4 Percentage of Reimbursement 5 Amount claimed for Reimbursement Rs. in Millions 6 Remarks

TOTAL

Project Authority

For Government of India

58

Annex XIX

Chart of Accounts
Main Sub Component Component Indicative Activity Account Code Disbursement Category

Institutional Development Promotion of Academic Excellence

01-00-0000

Investment Costs Civil Works (a) Refurbishment (b) Classrooms for Existing Programmes (c) Classrooms for New Programmes (d) Improvement of Facilities Furniture Equipment Vehicles Books & LRs Consultant Services Trainings & Workshops (a) Training & Fellowship Programmes, etc. (b) Workshops & Seminars, etc.

01-01-0000 01-01-01-00 01-01-01-01 01-01-01-02 01-01-01-03 01-01-01-04 01-01-02-00 01-01-03-00 01-01-04-00 01-01-05-00 01-01-06-00 01-01-07-00 01-01-07-01 01-01-07-02 Institutional Development Institutional Development Institutional Development Institutional Development Institutional Development Institutional Development Institutional Development Institutional Development Institutional Development Institutional Development Institutional Development

Recurrent Costs Salaries of Key Staff Consumables Operation & Maintenance

01-90-00-00 01-90-01-00 01-90-02-00 01-90-03-00 Institutional Development Institutional Development Institutional Development

59

Annex XIX

Chart of Accounts
Main Sub Component Component Networking of Institutions Indicative Activity Account Code Disbursement Category

Investment Costs Civil Works Furniture Equipment Vehicles Books & LRs Consultant Services Trainings & Workshops

01-02-00-00 01-02-01-00 01-02-02-00 01-02-03-00 01-02-04-00 01-02-05-00 01-02-06-00 01-02-07-00 Institutional Development Institutional Development Institutional Development Institutional Development Institutional Development Institutional Development Institutional Development

Recurrent Costs Salaries of Key Staff Consumables Operation & Maintenance Services to Community & Economy Investment Costs Civil Works Furniture Equipment Vehicles Books & LRs Consultant Services Trainings & Workshops

01-91-00-00 01-91-01-00 01-91-02-00 01-91-03-00 01-03-00-00 01-03-01-00 01-03-02-00 01-03-03-00 01-03-04-00 01-03-05-00 01-03-06-00 01-03-07-00 Institutional Development Institutional Development Institutional Development Institutional Development Institutional Development Institutional Development Institutional Development Institutional Development Institutional Development Institutional Development

Recurrent Costs

01-92-00-00

60

Annex XIX

Chart of Accounts
Main Sub Component Component Indicative Activity Salaries of Key Staff Consumables Operation & Maintenance Account Code 01-92-01-00 01-92-02-00 01-92-03-00 Disbursement Category Institutional Development Institutional Development Institutional Development

System Management Capacity Improvement Establishment / Strengthining of Programme Investment Costs Management Structure Furniture Equipment Vehicles Books & LRs Consultant Services Trainings & Workshops

02-00-00-00

02-01-00-00

02-01-01-00 02-01-02-00 02-01-03-00 02-01-04-00 02-01-05-00 02-01-06-00

Goods Goods Goods Books & LRs Consultant Services Trainings & Workshops

Recurrent Costs Salaries of Key Staff Consumables Operation & Maintenance

02-90-00-00 02-90-01-00 02-90-02-00 02-90-03-00 Incremental Operating Expenses Incremental Operating Expenses Incremental Operating Expenses

Research & Training in Education Planning & Management

Investment Costs

02-02-00-00

Consultant Services

02-02-01-00

Consultant Services

61

Annex XIX

Chart of Accounts
Main Sub Component Component Indicative Activity Trainings & Workshops Recurrent Costs Salaries of Key Staff Consumables Operation & Maintenance Account Code 02-02-02-00 02-91-00-00 02-91-01-00 02-91-02-00 02-91-03-00 Incremental Operating Expenses Incremental Operating Expenses Incremental Operating Expenses Disbursement Category Trainings & Workshops

Receipts: Code OO1 OO2 OO3 OO4 1 2 3 4 Funds from Government IRG Miscellaneous Receipts Alumni Contribution Particulars

62

Annex XIX

Notes to Chart of Accounts Expenditure Activities under TEQIP are grouped under Components, Sub Components and Activities. The first two digits are assigned to Components. The next two digits are assigned to Sub Components. The coding of Sub Components codes 01 to 89 represents Investment Costs and codes 90 to 99 represents Recurrent Costs. The Activities are assigned next two digits. The last two digits represent Sub- Activity. The Activity or Sub-Activity (wherever applicable) is the final head of payment. The illustration is given below: Component: (A) Institutional Development Sub Component: (1) Academic Excellence Activity: (i) Civil Works Sub-Activity: (a) Refurbishment (b) Classrooms for Existing Programme (c) Classrooms for New Programmes (d) Improvement in Facilities The Code Assigned for expenditure on Refurbishment: Disbursement Categories I II III IV V VI Institutional Development sub-projects Goods (including equipment, furniture & vehicles) Books & Learning Resources Consultant Services Training & Workshops Incremental Operating Cost including salaries 01-01-01-01 01 01 01 01 02 03 04

Receipts The Codes assigned to Receipts heads are as follows: 1) 2) 3) 4) Funds from Government IRG Miscellaneous Receipts Alumni Contribution 001 002 003 004

63