Financial Management Under NRHM 7 th October 2008 Presentation to Secretary (HFW)

1. Financial Management Group National Rural Health Mission Ministry of Health & Family Welfare Government of India Financial Management Under NRHM7th October 2008Presentation to Secretary (HFW)

2. Overview of Fund Releases under NRHM Total 11th Plan Outlay : Rs.90,558 Crores

3. Trend of Expenditure since 2005-06

4. BE v/s Exp. up to Sep. 2007-08 & 2008-09 44% 41% 49% 36%

5. Allocations and Utilization Mission Flexible Pool Release upto 2nd Q Exp. upto 1st Q

6. Allocations and Utilization RCH Flexible Pool Release upto 2nd Q Exp. upto 1st Q

7. Genesis of FMG • Weak Financial Management in WB/DFID funded RCH-I (1997-2004): • Release and Utilization tracked by each Prog. Div. separately. • Disjointed picture of the programme (even for Exp. Monitoring) • Fin Management confined to mere collection of UCs • Multiple interface for States and Development partners • FMG, as a new entity, came into existence in 2004 with the creation of a new post of Director (RCH-Fin), only to look after RCH-II

8. FMG under NRHM • After launch of NRHM, the mandate of FMG was expanded to cover NRHM. • Key features are: • Concept of flexi pool • Single nodal point for release, accounting, tracking of utilization and audit reports. • Single Window interface for all stake-holders • Holistic picture of the programme

9. Functions of FMG • Reforms in the area of financial processes • Financial Management studies of States • Fund releases under Mission • Monitoring of FMR & UCs , etc. • Audit arrangements • Analysis of financial data and generation of FMIS. • Skill upgradation of PMU staff at State, District and Block levels.

10. Reporting Requirements • Financial Monitoring Report (FMR)– Within a month after the close of quarter • Statement of Fund Position (SFP) – Within a month after the close of quarter and to be sent along with FMR • Monthly Bank Balance Statement– (within 10th of the following month) • Audit Report: annually by 31st July of the following year • A consolidated audit report for the integrated Society (including all programmes under NRHM) from 2006-07 onwards. • Utilization Certificates: • Final UCs along with Audit Report. • Provisional UCs along with March 07 FMR

11. Initiatives & achievements in the area of Financial Management

12. e-transfer of funds Intended outcome: • To send funds electronically to the lowest possible level. • 100% of funds going to States/UTs electronically. • Delay in DDs reaching and loss in transit a thing of past. • In the last 3 years not even a single complain. • In many states funds are transferred to Districts electronically too. Trigger: • FMG study showed that it took 1-3 months for the funds to just reach the society. • Reporting of utilization taking undue time through multifarious levels.

13. Delegation of Administrative & Financial Powers Intended outcome: • Power to spend money travels in the same envelop in which money goes. • Due to local and hence faster decision making, increased absorption capacities in the public health delivery system. Trigger: • A comparative study of decision making processes in Orissaand Haryana by FMG showed that what took 3 days in Haryana, in Orissa it took 1 year 6 months to approve a similar proposal. This study led to mainstreaming of the ‘Delegation’ agenda under NRHM.

14. Unification of Financial, Accounting, Auditing & Banking processes Intended outcome: • To synergise the manpower and other related resources scattered earlier under different societies under NRHM. • To provide the Mission with unified financial and accounting processes for fund flow and reporting back of utilization. • For the first time provided a framework for unification of NDCPs with other components of NRHM. Trigger: • NRHM fund flow scattered and as a result reporting of utilization also disjointed. • At any given time financial position of NRHM not available at a single point either at District, State or Centre. • Financial and accounting manpower artificially segregated under different NRHM components like RCH, NDCPs, etc.

15. Concurrent Audit of DHS Intended outcome: • Enhanced quality and timeliness of book keeping. • Faster adjustment of advances leading to quicker reporting of utilization. • Enhanced level of internal controls in the system. • Made a mandatory requirement under NRHM. Trigger: • Various reviews by FMG and independent agencies pointed out dismal quality of book keeping at District and State levels. • Many instances of advances being reported as expenditure.

16. Appointment of Director (Fin. & Acc.) in SHS Intended outcome: • To provide the professionals in the SPMUs and DPMUs with a distinct leadership. • To put in place a credible system of internal control in the system. Trigger: • Spiralling allocations to State Health Societies under NRHM. • Quality concerns with regard to accounting and financial management.

17. Capacity building • State level Finance and Accounts staff trained by FMG • District level staff in Chhattisgarh, Jharkhand, Rajasthan, Bihar & Maharashtra trained by FMG. • Other States need to undertake the training of District staff on a similar line. • States need to take this training exercise up to their Block and PHC level for accounts staff. • Seeing big training load, we have advised States to rope in institutions of repute for training State, district & block level fin. and Acc. personnel on a regular basis.

18. Improved Timeliness of Reporting • Audit Reports & UCs have started coming faster as compared to earlier timelines. • Average Delay in receipt of FMR has reduced progressively (from almost a month):

19. MTR feedback: Structures • PMUs have good no. of staff now. But the following issues need attention: • retention • role definition (financial management staff often viewed more as accountants rather than as a member of the team for planning and monitoring) • Remuneration issues. • overstretched due to new responsibilities for the broader NRHM – which with JSY and untied funds includes more funding flows to many more entities

20. What can be done: Structures • Provide long term contract (2 yrs) to PMU personnel. • Objective appraisal based on performance as per TOR. • Need to enhance compensation to retain skilled manpower. • Annual increments. • At lease one training annually. • Regular interaction with State HQs.

21. MTR Feedback: Fund Flow • Fund movement has become faster in almost all states. • Many states are sending funds electronically to the lowest level possible. • GOI has piloted an e-banking initiative in Kerala • Closure of redundant bank accounts. • Fund flow available but not being utilized in want of guidelines.

22. What is being done: Fund Flow • Focus on streamlining last mile fund flow below district level. • Bank accounts of CHCs/PHCs/Sub-Centres and VHSCs need to be mapped and e-transfers to the extent possible to be started from District bank. • Rapid expansion of RBI’s RTGS/NEFT facility will make it possible. • Card based solution for paying ASHAs to be explored. • E-Banking to be scaled up. • Guidelines to be made for the grassroots users: clear and precise.

23. Financial Management:The Road ahead

24. Finance & Accounts Manual for NRHM • Presently the RCH-II and a few NDCPs have their own F&A Manual. • Unified F&A Manual under NRHM is under submission for formal approval. • Handbook on F&A processes for Block level accountant will also be developed once the manual is approved.

25. Peculiar problem under Mission Flexi-pool • Complete grant under Mission Flexible Pool is treated as Recurring Grant(for which UC is due immediately after close of FY). This does not take into cognizance: • 7 tier structure of fund flow: Centre  State  District  Block (CHC)  PHC  Sub-Centre  VHSC. • Annual committed grants (Untied Grants, AMG & Corpus Grants to RKS) to VHSC, SC, PHC, CHC & Distt. Hospitals which are to be used over the whole year. • Civil work component under which funds are advanced to PWD, etc.. • Procurement component under which funds are advanced to procurement agencies.

26. Likely mandatory float in the system under Mission Flexi-Pool(at any given time)

27. Civil Work Component • Up to 33% in High Focus and 25% in Non-High Focus States. • We could have got 12 month’s time (in the old GFR it was 18 months)after the closure of FY for this non-recurring grants. • However, due to Flexible Pool mechanism, 100% grants are presently being clubbed under ‘Recurring Grants’, for which UC is due immediately after the close of Financial Year.

28. How to tackle these problems-1 • MOF was approached to allow us to release funds under Mission Flexi-Pool by not taking into account funds released in the preceding year, as utilisation reporting takes time to reach us climbing through the 7-tier structure. • MOF had allowed this up to 31st Dec. 2007. • We may need to take up this issue for allowing this dispensation for at least 2 more years.

29. How to tackle these problems-2 • The three annual grants for local action – AMG, Untied Grant & Corpus Grant may be taken as expenditure after devolution to respective entities. • Audit of RKS in DH, CHC & PHC will take care of accountability issues. • A standing committee of Gram Panchayat may conduct social audit of AMG and Untied Grant going to Sub-Centre and VHSC . • In addition, the mandatory district concurrent audit may cover 100% of RKS and a sample of 10% of Sub-Centres and VHSCs.

30. How to tackle these problems-3 • The advances reported by States may be taken into cognizance for the purpose of further releases to States. • The accounting principles will not be compromised as States will not be asked to report advances/releases as expenditure.

31. Audit arrangements • Audit of SHS & DHS is being done by CA firms. However, quality of audit is a concern. To address this: • CAG may be approached to provide bigger CA firms. • Alternatively, the process of selection needs to be revisited, so that more reliable and bigger audit firms are hired. • Hold entry conference for selected auditors of bigger States to orient them to specificities of NRHM. • Ask SHSs to constitute Standing Finance/Audit Committees to take follow up action of audit findings.

32. Renewed emphasis on Financial Management Studies • Previous studies have helped identify: • Non-delegation of powers as a major reason for low utilization. • Financial & accounting processes being run vertically even after creation of an integrated SHS/DHS. • Weak co-relation between physical & financial data flow. • Declining State budgetary support to institutions and declining resource generation by RKS. • Weak FM processes in Treasury Route funding. • Greater emphasis on such studies is planned this year.

33. Creating a unified FMG • MOHFW (EPC) brought out a notification in 2006 vide which it provided for a unified FMG. Going by the prevalent situation then, a weak link was sought to be established with NDCPs. • However, NDCPs have continued their verticality in fund releases and gathering of utilizations. • There is a need to at least establishing a system whereby the FMG is in know of all funds released under NRHM and overall utilization reported by states. • States were also supposed to create unified FMG at State and Distt. Level. Orissa has operationalised such arrangement. Other States need to follow this model.

34. Emphasis on the larger E-banking initiative, an industry first. • The initiative as being implemented in Kerala was reviewed by AS&MD in Kerala. • It was found out that the initiative has a huge potential for providing a robust FMIS. • TN and Gujarat have shown keen interest in the FMIS system. • Beginning with these two States, more states need to be covered under the initiative.

35. Kerala: Growth in Online Transaction

36. Pre-Health-i-checkpay Pre-Health-i-checkpay What we have achieved so far … • All Remittance by way of Demand Draft • Delay in Fund Transfer • No Transaction Confirmation • Top- Down MIS needs to be prepared • No cheque books in the NRHM set-up. • 100 % e-transfer from State-to-Districts (within hours) • Almost 100% e-transfers from Districts to lower units. • 100% e-transfers to CHC/PHC • Majority of transfers to Sub-Centre and Panchayats electronic. • 100 % transaction confirmation. • Top-down MIS available real time online. Post-Health-i-checkpay

37. Disbursement to Districts

38. Institutionalising Central FMG • The FMG is functioning with skeletal staff – 2 Finance Controllers (from ICAS) and 3 Finance Assistants. • Originally set up to see RCH-II, now the FMG is looking after Mission components as well. • A demand for 9 more staff has been sent to DFID. 2 consultants are likely to be hired by November. • The existing 2 consultants from ICAS are nearing reversion to their cadre. • A permanent structure under Govt. set up needs to be established with DS/Dir. level posts from finance & accounts services.

39. Analysis of State’s Performance on Financial parametersduring 2007-08

40. DPMU Impact: Correlation b/w Skill & Output They have imparted training to their District staff.

41. State with significant progress on Block Level Accountants

42. No Correlation between Skill & Output – minimal computerization

43. Lack skilled staff & training

44. Delegation of Financial Powers • Following States have intimated that they have not yet issued orders for Delegation of Administrative and Financial powers: • Haryana, • Himachal, • Chattisgarh, • Tamilnadu, • Rajasthan, • Triupra • Meghalaya

45. 15 States which have implemented Concurrent audit mechanism in place • Madhya Pradesh • Orissa • Rajasthan, • West Bengal • Gujarat • Maharashtra • Tamilnadu, • Uttar Pradesh • Kerala • Karnataka • Andaman, Puducherry • Arunachal, Assam, Meghalaya

46. Reporting Compliances - FMR

47. Reporting Compliances - FMR

48. Reporting Compliances - FMR

49. Audit 2006-07 – States with timely submission

50. Audit 2006-07: States with 2 to 3 months Delay (by October 07)