23rd Review Meeting of State Finance Controllers Findings on Procurement Emerging

1. Annexure ‘X’ 23rd Review Meeting of State Finance Controllers Findings on Procurement Emerging from IPAI Review Reports and TSG Post Review 5 November, 2009 New Delhi

2. Procurement Prescribed level of procurement was not followed. Method of Procurement of goods and services was not included in the procurement plan. Prescribed method of procurement was not followed and deviations reported in many cases. Single tender method was adopted instead of open tender method. Purchase orders were split up to avoid procurement without tenders/quotations. Key Findings on Procurement Emerging from IPAI Review Reports 2

3. Ignorance or disregard of prescribed procurement procedures common in purchase of computers and accessories including software and in printing of textbooks and workbooks. Printing of teacher’s hand book was carried out without providing technical specification and on single tender basis. Purchasing agencies were engaged without entering into MOU prescribing terms & conditions like cost, delivery date, inspection, liability of the seller during warranty period, liquidated damages for delay in delivery, rate of commission, payment terms etc. Contd./- 3

4. Cost of goods purchased through purchasing agency was in excess of the market rate. Many computer systems are lying idle for want of space or power (including purchase of defective inverters) or trained staff UPS and inverters purchased were found defective in inspection and the firm has not replaced the same and liquidated damages not paid. Contd./- 4

5. Procured printers for schools without ascertaining its utility. Excess purchase of text books, furniture and cycles. Computer systems and printers bought out of SSA funds installed in State Government offices. Computers bought without inviting open tenders and from suppliers not under DGS & D rate contract, selected by Zilla Parishad Purchase of computer books was made from Central Consumer Cooperative Store without negotiating for discount. Contd./- 5

6. Little control over local purchases made at school level, including civil work. Quality of materials not ensured and purchased substandard materials. Large sets of Vernacular Encyclopedia (17 volumes in a set) bought with apparently little relevance to elementary education. Penal provisions in contracts not enforced. No penal provisions included in the agreement for delayed or defective supplies. Liquidated damages not levied for delayed supplies. Non-recovery of sales tax/VAT Contd./- 6

7. VAT paid besides price when contract price was inclusive of VAT. Procurement documents were not available for review. Procured goods in excess of the requirement and lying in stock. Engaged NGOs without following the selection procedure. Part payment was made for part supply without provision in the agreement to avoid lapse of budget provision. Repeat orders were issued without following the prescribed procedure. Contd./- 7

8. Uniform procedure for the purchase of science and mathematics kits was not followed. Injudicious purchases in the month of March to avoid lapse of budget provision. Purchase orders were placed without assessing the actual requirement and the books are lying in stock for more than 3 years. While submission of samples are mandatory alongwith the bids, contract awarded to firm who failed to submit samples. Goods were accepted and payments made without inspection and certification. Contd./- 8

9. Financial control was not exercised in procurement. Security deposit was not obtained from the prospective bidders. Substandard school bags were purchased and the expenditure was not entered in the financial records. Non-availability of procurement documents Contd./- 9

10. Procured goods in excess of the requirement and lying in stock Delay in distribution of text books Feasibility of printing of text books through state government press not ascertained before inviting tenders from private printers Delay in construction of civil works Cont’d/- 10

11. Key Findings Emerging from TSG Review of SSA, Maharashtra State Project Office Books of Accounts Not maintained the following: - Journal - Register for Journal/Magazines/News paper - Register of grants of advances to mobilizing agencies/NGOs/Voluntary Agencies - Register of works - Fixed Assets Register Not carried out annual physical verification of stock and assets. 11

12. Cash Book Maintained under double entry system Not fully complied with the provisions of Para 77 of the Manual on FM&P: - Each entry not attested by DDO - Overwriting not attested by DDO - No entry made on the days of no transaction - Delay in recording receipt entries - Interest credited by the bank but not entered in cash book Non-SSA transactions like MDM Kitchen shed, State incentives are included. Cont’d./- 12

13. Cheque Issue Register : - Some of the entries not attested by the DDO. Advance Register: - Funds released to districts not entered - Advances of Rs.2.74 crore dating back from October 2004 outstanding for adjustment. Register of Investment: - Last investment was made on 8-4-2005. - Some entries remain incomplete Register of remittance made into the bank: - Delay in issue of DD - Cheque for Rs.10.67 lakh was issued to Bank of India on 25-9-09 for a DD in favour of a Consultant and the DD was issued only on 6- 10-09. Contd./- 13

14. Postal Account - Postal stamps in denominations of Rs.5/- only maintained - In case the transactions are not in multiples of Rs.5/-, proper accounting is not made. Bank Reconciliation Statement - Prepared upto September 2009. - Stale cheques dating back from 31-5-2007 are still included. Contd./- 14

15. Internal Audit Completed up to 2008-09 Engaged 23 CA firms on 1-9-09 for 2009-10 TOR includes audit of VECs receiving more than Rs.1 lakh per year in a cycle of 3 years Reports being pursued with the districts for taking follow up action Objections maintained in the computer and not in the Audit objection register Not submitted to SPD monthly Gist of observations submitted to EC Contd./- 15

16. Statutory Audit 9 CA firms are engaged for 2008-09 Continuing since 2006-07 and now completed 3 years The CA firms are not from C&AG’s empanelled list TOR do not include audit of VECs receiving more than Rs. 1 lakh per year in a cycle of 3 years as per amendment dt 1st May 2007. In the absence of provisions in the TOR, the auditors have not undertaken audit of VECs in 2008-09 audit. This year the last date for submission of audit report was 15-7-09, but nobody submitted it on due date. Audit reports of all districts except 2 districts in Pune region submitted to the lead auditor Contd./- 16

17. Statutory Audit The responsibilities of lead auditor prescribed in MHRD’s letter dt. 26-4-07 not included in TOR. Objections maintained in the computer and not in the Audit objection register Not submitted to SPD monthly Gist of observations submitted to EC Contd./- 17

18. Diversion of funds A cheque for an advance of Rs.10 lakh was issued to Director of Education, Pune for disbursement of pre-metric scholarhips to minority students on 24-10-08 and the same cheque returned and credited on 18-2-09. . An advance of Rs.7 lakh was paid to 2 advocates to file the petition in connection with 11th class admission in the High Court and the same is still outstanding. Rs. 10 lakh and Rs.30 lakh were diverted to NPEGEL and KGBV accounts respectively on 22-09-09 Contd./- 18

19. Mis-appropriation of SSA funds Remedial Teaching - Rs. 34.37 lakh was charged from the cash book on 31-3-09 towards prize distribution to good schools. - During 2008-09 no fund was allocated under remedial teaching. - In the management cost Rs. 40 lakh was approved to undertake external evaluation of remedial teaching and this was used for prize distribution. - Even though the DDs were taken on 31-3-09 the same are still lying un-disbursed and the validity stand expired. Contd./- 19

20. Unspent balances of DPEP funds The State has already refunded the entire unspent balances of DPEP funds as per the utilization certificate. However, it was observed that Rs. 3,38,783/- and Rs.1,59,680/- under DPEP I and DPEP II respectively were credited in the SSA cash book on 24-9-08 on account of interest paid by SBI, Backbay Reclamation Branch. 85% of this interest needs to be refunded to GOI. Contd./- 20

21. Opening of bank accounts The State has opened only one joint signatory savings bank account for each scheme as under: SSA - Bank of India NPEGEL - Union Bank of India KGBV - AXIS Bank Release of funds to districts Major portion of funds received from GOI and State are released to districts within15 days Contd./- 21

22. Mode of Transfer of Funds By E-transfer from SPO to districts By Cheques from districts to blocks (Some districts are using core banking facilities) By cheques/core banking facilities/e-transfer from blocks to VECs/Clusters. Backlog of State share The State has a backlog of 124.50 crore as on 30-6-09. It was reported by the SIS that Rs.120.15 crore was released by the State on 24-7-09. However, even after nearly 3 months of issuing the sanction order, this amount was not credited to SSA account. Contd./- 22

23. Staff position Contd./- 23

24. Training of accounts staff - Not provided any training during the current year of 2009-10. Annual Report - Submitted English version of the Report for 2007-08. - Hindi version is under print. Contd./- 24

25. Contd./- Procurement • A separate procurement cell with 3 staff is available in SPO. • Prepared procurement plan for 2009-10 on 20-7-09 and uploaded in the SSA web site. • All procurements are covered under the procurement plan. • Not prepared the list of major contracts above Rs.5 lakh • Shared the procurement audit check list developed by MHRD with both internal and statutory auditors. • The State Govt.ceiling for open tender is above Rs.50,000/- per contract and without quotation upto Rs. 1,000/- per purchase. 25

26. Contd./- Procurement • Items procured centrally. - Computers and its accessories - Maths kit, Science Kit and English Kit under LEP - Special equipment and aid and appliances for CWSN - Self Learning Cards and Teachers Hand Book 26

27. Contd./- Procurement • Empanelled list of printers. - After following the prescribed procedure 7 printers were empanelled for 3 years for undertaking printing work. - Whenever any printing work is to be undertaken quotations are taken from these printers only - This kind of empanelment is not permissible for value of contracts covered under open tender method. 27

28. Contd./- • Printing of self learning cards through open tender for Class I to IV - Exceeded financial ceiling prescribed. - Not provided class-wise & subject-wise schedule - Bid documents were not made available till the previous date for submission of bids. - Bids did not open promptly from the time of its last receipt (Delayed by 2 hrs) - Bid validity period of 1 year allowed instead of the normal 90 days 28

29. Contd./- • Procurement of English Language Kit and Maths Kits through open tender - Exceeded financial ceiling prescribed. - Not provided class-wise schedule - Bids did not open promptly from the time of its last receipt (Delayed by 3.30 hrs). - Bid validity period of 1 year allowed instead of the normal 90 days. - Approved outlay exceeded considerably in both the cases - While placing orders for additional quantity, variable rates approved was not considered, resulting in excess payment to suppliers. 29

30. Contd./- • Service Contract for third party evaluation of civil works - Expression of Interest and Request for proposal were called for together in one advertisement. - Not followed the procedure of short listing eligible firms first and issuing RPF to the short listed firms. 30

31. Contd./- • District Project Office, Thana • Accounts keeping is satisfactory except the following: - Not maintained Journal and audit objection register. - Not carried out annual physical verification of stock and assets - Advance of Rs.7.5 lakh dating back from 22-3-2005 is outstanding for adjustment. - Releases to sub-district level units are treated as expenditure. . 31

32. Contd./- District Project Office, Thana • Bank reconciliation upto 30-9-09 but stale cheques from 21-7-08 are included. • Procurement mainly under State Rate contract, limited tender, single tender and without quotation within the State ceiling of Rs.1,000/- per purchase. • Received all UCs from sub-district level units up to 2008-09. 32

33. Contd./- District Project Office, Mumbai Subrub • Accounts keeping is satisfactory except the following: - Not maintained Journal, Fixed Asset Register. - Not carried out annual physical verification of stock and assets - Advances of Rs.328.83 lakh dating back from 30-1-06 are outstanding for adjustment. - Releases to sub-district level units are treated as expenditure. 33

34. Contd./- District Project Office, Mumbai Subrub • Bank reconciliation upto 30-9-09. • No stale cheques included. • Procurement mainly under State Rate contract, limited tender, single tender and without quotation within the State ceiling of Rs.1,000/- per purchase. • Received all UCs from sub-district level units up to 2008-09. 34

35. Contd./- Block Resource Centre • One Accountant is available. • Cash Book on double entry system • Joint signatory savings bank accounts with one Bank. • Bank Reconciliation Statements prepared regularly. • Stale cheques are available in large numbers. • Interest not refunded to DPOs. 35

36. Contd./- Block Resource Centre • Not maintained ledger, journal, fixed asset registers. • Not carried out annual physical verification of stock and assets. • Release to VECs are treated as expenditure. • UCs not linked properly. • Procurements are mainly through quotations. 36

37. Contd./- Schools • VEC Manual is available. • Cash book on single entry basis. • UCs are submitted upto 2008-09. • Interest not transferred to blocks/DPO. • Fixed Asset Register not maintained in any schools. • Annual physical verification of stock and assets not carried out. • Procurement mainly on single tender method. • Display board is not available. 37

38. Thank You