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Learn about financial management principles, PFMS system, funding distribution, and accounting practices for TEQIP-III institutions. Enhance skills in budgeting, monitoring funds, and ensuring compliance. Improve efficiency and effectiveness in financial operations.
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ONLINE TRAINING MODULE ON FINANCIAL MANAGEMENT • TEQIP-III
About TEQIP- III Central Sector Scheme (World Bank Assisted Project) Aims : • Improving Quality and equity in low-income and special category state , • System-level initiatives to strengthen sector governance and performance, • Sustaining excellence in engineering education and widening impact through competitively-selected institutions in non-LIS/SCS.
Objectives : • Ensuring uniformity in FM Arrangement across all the participating institutions. • Make participating institutions familiar with the guidelines of the project. • Monitoring flow of funds from centre to lowest level of implementation through DBT System. • Payment to ultimate beneficiaries through banking channel. • ‘Just in time’ provision of funds to agencies. • Preparation and Submission of Budget in Time. • Maintenance of Books of Accounts • Completion of Audit in Time.
Institutional development grant • Autonomous Institute : INR 15 Cr. • Non- Autonomous Institute : INR 10 Cr. * • CFTIs : INR 15 Cr. • ATU : INR 20 Cr. • 1.3 Institutes : INR 7 Cr. • * If Non Autonomous Institute shall attend Autonomy during the Project Period, then 5 Cr more Grants shall be available.
About PFMS : • Direct Transfer of fund to beneficiaries • Administered by the Controller General of Accounts in the Department of Expenditure, Ministry of Finance, GoI • End to end solution for processing payments, tracking, monitoring, accounting Reconciliation and reporting Benefits of PFMS : • PFMS is a web based software-no requirement of any hardware or software • It is not platform specific – works on any operating system • Monitor the flow of funds at various level • Monitoring expenditure
DIFFERENT STEPS IN PFMS Institutional approval in PFMS by NPIU Submission of Action plan by the institution Approval of action plan by MHRD Uploading of action plan in the PFMS by NPIU Communication to institutions to make expenditure Allowing institutions to use Central Bank Account (one time process) Finally institutions can withdraw money from PFMS and make expenditure
FLOW OF FUND DIRECT FUND TRANSFER SYSTEM MINISTRY OF HRD through IFD Establishing, operation and recouping CENTRAL POOL ACCOUNT Programme Division (NPIU), SPIU’s monitor usage Registration in PFMS Project Institutions / Other Implementation Entities Vendor/ Other Beneficiary
Action Plan For incurring expenditure by the institutes/SPIUs action plan is required to be uploaded in the PFMS. • The action plan is prepared by the institutes/SPIUs Quarter-wise • The allocation of fund in the PFMS is also made quarter-wise by the NPIU • The institutes use the fund against the activities completed by making the payment to the vendor directly through PFMS. • There is a facility of increase and re-appropriation of the allocation in the PFMS.
Accounting Policies • Double Entry System of book keeping on Cash basis. • All payments will be charged off to relevant project activity account head at the time of making the payments, except advance payment. • Advance payments will be charged off to the relevant project activity account head on adjustment. • 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 project activities will be charged off to the relevant project expenditure head at the time of purchase itself.
Project Accounting & Standard Books of accounts Each of the TEQIP Institution will maintain following Books of Accounts : • Petty Cash Book: • Journal Book and Journal Voucher • General Ledger • Stock Register • Fixed Asset Register • Advances Register • Register of Contracts • Register of Audit Objection.
Proposal Approval By Competent Authority Adjustment in PFMS ADVANCE Payment through PFMS Approval of Expenditure Receipt of Goods & Services Bills & Vouchers For adjustment Advance Settlement Cycle
Mapping of Expenditure • The Mapping of Expenditure provides the information about the permissible & Non-permissible expenditure of the project under different components and sub-components to be reported under respective accounting head. • Since accounting is in the nature of project accounting, it is more important to account and report on the project activities. Information on traditional accounting heads like civil works, consultancy etc. may be recorded by using “cost centre” functionality which is commonly available in all financial accounting software .
Internal Control measures while making payments • Ensure that: • The expenditure or advance pertains to Project and approved in Budget. • Competent sanction order obtained. • Proper and formal claim/Bill/Invoices • Bill/Invoices should be of recent dates and original. • Name, address and TIN/TAN/GSTN etc should be pre-printed. • Purchases made are based on approved work order.
Challan are received while receiving goods. • The particulars of the claims are in compliance with the terms & conditions of contract. • It must be verified by finance personnel of the institute. • After passing the payment the bill/invoice has bee marked “ Passed for Payment or Adjustment” • All paid claims/bills /invoices are stamped with the seal “ Paid & Cancelled” • Statutory deduction shall be made as per the prescribed rate. • Ensure tax deduction are deposited with the Government account in time and returns are filed adequately.
Disbursement • The disbursement by the World Bank in the project is 50% against the eligible expenditure incurred. • The expenditure for the component 1 is DLI based. • The total disbursement in the project shall be 201.50 USDM. • The disbursement is made by the World Bank through office of CAAA after submission of IUFRs by NPIU. • The disbursement is made in US Doller.
Audit of TEQIP III • An “audit” is a systematic and independent examination of books, accounts, statutory records, documents and vouchers of an organization to ascertain how far the financial statements as well as non-financial disclosures present a true and fair view of the concern. • Ensuring internal control mechanism at all levels. This includes • (a) establishing appropriate budgeting system • (b) regular monitoring of Actual vs Budgets • Monitoring of Physical and Financial Progress • Establishing Internal Control System i.e. Checking of Expenditure, Appropriate documentation, levels of Authorization, bifurcation of duties, ensuring appropriate signatories, periodic bank reconciliation and physical verification etc.
Internal Audit Internal audit system is one of the important parts of financial management to examine and verify the adequacy and effectiveness of the inherent internal control system of an organisation/project. As there are multiple institutions in the project, financial management of the project can be strengthened by establishing a system of internal audit. Coverage of Internal Audit Report :
Frequency of Internal Audit System: A six monthly internal audit will be conducted by a “C.A Firm” appointed by SPIUs/1.3 institutions/CFIs for carrying out internal audit of their institution as per the Terms of Reference mentioned in Annex No. XXV of the Financial Management Manual. Scope of Internal Audit: (Refer to ToRs of Internal Audit in Annex – XXV).
Statutory Audit • External Audit : Annually • Auditor Selection: Practicing CA firms empanelled by C&AG as per the WB procurement procedure. • Audit ToR & Report: As per FM Manual of TEQIP-III. • Audit Report to be submitted by 30th June for each F.Y for each state institutions. • For this purpose, the institutions are required to furnish all documents / records to the auditors to facilitate timely audit
CHECK POINTS ON FM AUDIT • Whether the provisions and rules as per the Financial Management Manual (FMM), Project Implementation Plan (PIP) have been implemented properly. • Whether the proper books of accounts are maintained. • Whether the accounting software such as Tally etc. has been used. • Whether the transactions have been made through PFMS. • Whether the management of the advances have been done scrupulously. • Reconciliation of PFMS with the books of accounts.
Whether the payments vouchers are supported by proper documentation. • Checking of proper accounting system. • Checking of tax deduction etc. and its timely deposit with the Govt. authorities. • Whether corrective measures have been taken by entity on the observations made in the internal audit report. • To ensure maintenance of accounts on cash basis. • No creation of outstanding liabilities because the maintenance of accounts on cash basis and such expenditure of outstanding liabilities is not considered as a expenditure of the same F.Y. therefore, it is disallowed as a expenditure.
The payment of the last F.Y. can be made in next F.Y. also. • Whether the expenditure are as per permissible or non-permissible list provided in the PIP. • Whether all the procurement done as per World Bank guidelines. • Whether the Audit Committee have been formed by the institute for reviewing the audit observations of the previous year. • The advise to institute for controlling audit disallowances. • Whether the Accounting Standards as per the Institute of Chartered Accountants of India (ICAI) have been followed
To verify preparation of financial statements as per the Financial Management Manual (FMM). • Any other point needed to be checked in the fairness of Audit.
TEQIP-III : Financial Statements for Statutory Audit Report • Independent Audit Report • Balance Sheet • Receipts & Payment Account • Income & Expenditure Account • Statement of Sources & Application of funds • Reconciliation of Claims to the total Application of fund • Management Assertion Letter issued by Management • Utilization Certificate • Management letter issued by Auditor
Accounting Policies • Key observations Points • Notes to Accounts • All Schedules related to Balance Sheet • Separate sheet related to Audit Disallowance/Outstanding bills • PFMS Reconciliation Statement
Register of Audit Objection The institute shall maintain a separate register for audit objections as pointed out in the audit report by the auditor, which shall contain the following entries : a) Audit report for Financial year on dated b) Details of audit objection c) Submission made on audit objection dated ....... d) Details of audit objection resolved dated ..... e) Reason for pending audit objection
Audit Observation Register • The institute shall maintain a separate register for audit objections as pointed out in the Audit Report by the Auditor, which shall contain the following: A) Audit Report for F.Y.-------------- B) Details of Audit Objections C) Submission on Audit objection dated. D) Details of audit objection resolved dated… E) Reason for pending audit objection
Audit Observation Committee Each Institute shall set up Audit Observation Committee for which following ToR is proposed. • To study and examine the Audit Report. • To find out the factual position which has resulted to record the audit observations in the audit report. • Suggest remedial action for non re-occurence/prevention of such audit report. • To give proper details /proof to the auditor to declare ineligible expenditure as eligible. • To study the internal audit weaknesses and give suggestions for improving internal checks and supervision. • To keep a proper record of audit observations and its compliance on financial year basis. • Any other point.
Ineligible expenditure incurred at Institutions If any expenditure incurred by the institutions under TEQIP III is declared as ineligible by the Auditor, then such expenditure shall have to be refunded back by the institute to MHRD.
Permissible and non-permissible expenditure • The detailed statement is available in FM Manual at Annex-XXII • The institutes are expected to incur expenditure only after ascertaining its permissibility • The expenditure incurred which is non permissible may be treated as ineligible expenditure by the auditor/NPIU.
