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Committee For Cooperatives & NPO Sectors

An Overview of Financial Audit for MGNREGA. Committee For Cooperatives & NPO Sectors. The Mahatma Gandhi National Rural Employment Guarantee Act, 2005.

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Committee For Cooperatives & NPO Sectors

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  1. An Overview of Financial Audit for MGNREGA Committee For Cooperatives & NPO Sectors

  2. The Mahatma Gandhi National Rural Employment Guarantee Act, 2005 The Mahatma Gandhi National Rural Employment Guarantee Act aims at enhancing the livelihood security of people in rural areas by guaranteeing hundred days of wage-employment in a financial year to a rural household whose adult members volunteer to do unskilled manual work.

  3. Cont…. • This act received the assent of the President on 5th September, 2005 • It extends to the whole of India except the State of Jammu and Kashmir. • The Central Government by notification constitute a Council to be called the Central Employment Guarantee Council to discharge the functions, and perform the duties, assigned to it by or under this Act. • For the purposes of regular monitoring and reviewing the implementation of this Act at the State level, every State Government shall constitute a State Council.

  4. Books of Accounts • Accounts of the scheme shall be maintained in such form and in such manner as prescribed by the state government and GPs are required to maintain accounts in the formats prescribed by the respective State regulations. • The following registers are required to be maintained for MGNREGA as records (1) Cash book (2) Receipt and Payment Statement (3) Muster roll receipt Register (4) Job Card Issue Register (5) Employment Register

  5. Cont… (6) Works Register (7) Asset Register (8) Monthly Allotment and Utilization Watch Register. • Month wise Bank & Post office Reconciliation statements • Vouchers • Challans, etc. (9) Muster Rolls issued by the Programme Officer (PO) relating to payments

  6. Role of Chartered Accountants in MGNREGA • At District Level – MGNREGA funds at district level are audited by Chartered Accountants who are expected to do a check of the receipts and payment statements of Gram Panchayats. • At GP Level – In order to improve the accounting of MGNREGA funds and to ensure transparency and accountability of GPs the Ministry lays out the scheme for certification of MGNREGA accounts at GP Level and financial audit thereof.

  7. Cont… The objectives of engaging CA Firms for GP accounts are- • Getting an expert opinion on the effectiveness of the accounting arrangement for MGNREGA funds at the GP Level • Assessing gaps/ deficiencies in maintenance of accounts • Assessing the need of training at GP • Improving the quality of accounts • Bringing transparency and accountability • Ensuring the funds under MGNREGA are being used for intended purpose

  8. Selection Procedure of Auditors • A Chartered Accountant can be appointed as an auditor by the State Government to certify the accounts of all GPs selected in a district from a panel of auditors maintained by C & AG/ State C & AG. • One auditor will be appointed for one district. • More than one CA can also be appointed in case MORD is of the view that it is not feasible for the selected CA to certify accounts of all GPs selected in a district. • An auditor may be assigned more than one district if adequate number of CAs are not available on the panel.

  9. Fees of Auditor in MGNREGA • The remuneration of auditors for certification of accounts of GPs will be fixed by the MORD in in consultation with Comptroller and Auditor General. • The audit fee will be borne by the 6% administrative cost.

  10. Period of appointment • The period of appointment of auditors will not be for more than 2 years. • The assignment for second year will be renewed only upon satisfactory performance in the first year.

  11. Period of Audit • It is proposed that the accounts of 10% GPs in each state will be certified by CAs for the year 2012-13. • These GPs will be selected based on a criteria to be decided by MoRD in consultation with States. • After evaluating the results and efficacy of the system, a decision on extending these provisions to other GPs/ Implementing agencies will be taken. • The engagement of CAs to be completed before March 2013. The CA will commence the certification from May, 2013 and submit the reports by end July, 2013.

  12. Scope of Financial Audit in MGNREGA • CA can visit the GP headquarters for certification with the District Programme Coordinator. The DPC will be responsible to ensure that all necessary documents are provided to the CA firms for certification and concerned GP officials are available to the CA when he/she visits the GP. • Examine the books of accounts or documents maintained by the GP such as Cashbook, registers, muster rolls, vouchers, bank passbook, BSR, Job card registers, work register, etc.

  13. Cont… The auditor can express his opinion on- • The Quality of accounts • Gaps/ deficiencies and weak areas in systems and controls and make recommendations for improvement. • Wage Material Ratio. • MGNREGA funds have been deployed only on admissible activities/works • Other matters which may have significant impact on implementation of MGNREGA.

  14. Cont… An indicative checklist is also drafted for audit of MGNREGA accounts of GP in which comments on the following points are to be given- • Did the GP provide all books of accounts and records for audit? • Do the muster rolls tally with the wages paid? • Do other payments tally with vouchers/ bills? • Whether drawal of money or payments made without proper vouchers or bills has been noticed? • Does the bank/ PO Pass Book balance reconcile with cash book of GP account?

  15. Cont… 6. Whether expenditure has been incurred for the purposes intended for? 7. Whether expenditure incurred by the GP has been correctly classified and is admissible in accordance with Operational Guidelines and instructions? • Whether any defalcation or misappropriation of funds has been noticed? 9. Whether the shelf of projects have been identified in the GramaSabha ? 10. Whether all the works taken up are part of the annual work plan approved by the DPC and covered by administrative sanction?

  16. Cont… 11. Were the procurement procedure prescribed by the State government adhered to by the GP while making procurement? 12. Is proper record maintained of the job cards issued? 13. Whether the demand for work is registered and dated receipts given? • Has necessary action been taken on the wrong or lost cheques issued, if any?

  17. Cont.. 15. Whether all vouchers and receipts are authorized by GP President and Secretary? 16. Whether the assets created find place in the Asset register of the Panchayat and MGNREGA? 17. Does the GP make timely data entry in MGNREGA Soft?

  18. Reporting Procedure of Certified Accounts • The auditor will have to submit a report to the PO for each GP visited within 15 days of completion of certification of accounts of the GP. The report shall contain the following- • records verified • discrepancies noticed if any • adequacy of documentation and findings on the items listed in the check list.

  19. Cont… 2. A consolidated summary for all GPs taken up for certification and assigned to the CA within a district, will be submitted to the DPC within 15 days of completion of certification for all such GPs. In the consolidated summary the CA firm will indicate- • The GPs visited including the dates of the visit. • Issues which require immediate attention of the DPC should be highlighted. • Adverse observations and suggestion for improvement will also be indicated in the report • If the CA notices any defalcation or misappropriation of funds, it shall be immediately brought to the notice of the DPC who would proceed to take necessary action.

  20. Cont… 3. District wise summary of observations made by CAs will also be included as an annexure to the audit report of the State Employment Guarantee Fund. 4. While auditing the MGNREGA funds at the district level, the auditor will take into account the certification and observation of the CAs made while certifying GP accounts. 5. The Secretary/ Commissioner, MGNREGA at the State level and the DPCs at the district level would be responsible to ensure that the accounts of selected GPs are certified by the empanelled CAs within a given time frame.

  21. Cont… 6. DPC will submit to the State Govt an Action taken Report (ATR) on the observations of the CA and likewise, the State Govt will submit to this Ministry by 30th September each year, a consolidated ATR for all the districts that have GPs that have been audited by CAs under this arrangement . 7. This certification, observations and the Action taken reports will be examined by the Ministry while releasing funds to the State Government

  22. THANK YOU

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