Held from January 19-30, July 2010. Undertook desk review Basis for recommendations:

1. Recommendations of the 12th JRM on Financial Management & Procurement26h Review Meeting of State FCs- Chandigarh(5th - 6th Aug 2010)

2. 12th JRM recommendations on FM&P • Held from January 19-30, July 2010. • Undertook desk review • Basis for recommendations: • MHRD’s progress overview • Statutory audit reports of 2008-09 • IPAI’s review reports of IInd Phase • Minutes of the 25th Review meeting of Finance Controllers • Presentations made by some selected States.

3. 12th JRM recommendations on FM&P • Key recommendations made on Financial Management & Procurement: • MHRD and the States fully implement their respective Action Plans, with monitoring of progress assessed during the quarterly meetings of the Finance Controllers. • A special focus should be placed on staffing and audit issues, particularly in the 9 largest spending States. • A progress report on the implementation of the MHRD’s 2010.11 Action Plan would be shared with the January 2011 JRM.

4. 12th JRM recommendations on FM&P • A progress report on the implementation of the MHRD’s 2010-11 Action Plan would be shared with the January 2011 JRM. • States/UTs implement measures to enhance their capacities for absorbing the higher level of funds in the following years for implementation of the provisions of RTE Act.

5. 12th JRM recommendations on FM&P • Key observations: • Variations in Opening Balances in FMR and Closing Balance in audit reports: • Arunachal Pradesh, Chhattisgarh, Gujarat, Haryana, Himachal Pradesh, Jharkhand, Madhya Pradesh, Manipur, Orissa, Puducherry, Rajasthan, Sikkim & U.P. • Advances correctly included in FMR OB by: • Karnataka, Kerala, Orissa, Utter Pradesh & Uttarakhand.

6. 12th JRM recommendations on FM&P • Monitoring • Ensure effective utilization in compliance with the calendar of events around the year which necessitates close monitoring. • More particularly it would necessitate activity-wise quarterly budgets to ensure the funds are spent in accordance with actual needs of the calendar of activities. • Taking into account low expenditure in some States wrt to AWP&B and availability of funds, more realistic planning or more rigorous implementation of the planned activities is needed in these lagging States. • The Mission urges all States to plan activities under each expenditure head more carefully, to ensure full execution of funds available.

7. 12th JRM recommendations on FM&P • FM Action Plan • Some Plans reviewed by the Mission were a copy of the FM AP prepared by MHRD with an additional column on the due dates and persons responsible. • To make the plans more effective MHRD/TSG need to guide States into preparing a State specific Action Plan which addresses the unique issue in each State. • Plans from Bihar & Chhattisgarh do not refer to the issues highlighted in their audit reports. • Similarly UP does not consider treatment advances to be an issue though the same was highlighted in the JRMs/audit reports. • States would need to prepare more specific plans.

8. 12th JRM recommendations on FM&P • Teachers salaries • In majority of the cases funds are being provided to make payments through Treasury system. • SIS needs to monitor the end use of these funds. • SIS • to have a detailed documentation of the various steps through which the salaries finally reach SSA teachers (a funds transfer diagram) • monitor till what date/year the same has been audited by the C&AG (c) provide list of such teachers along with details of salaries paid on a quarterly basis to the State AG (Audit). • (MHRD already issued instructions on 24-6-2010)

9. 12th JRM recommendations on FM&P • Internal audit • Gaps in several States/UTs • 20 States to complete for 2009-10 • Pending for more than 2 years: Tamil Nadu, Nagaland (not conducted) & J&K. • Haryana upto 2007-08, Manipur 2008-09 in progress, Sikkim upto 2006-07, Daman & Diu – CA yet to appoint.

10. 12th JRM recommendations on FM&P • Statutory audit findings 2008-09 • Huge and old unadjusted advances: • Advances exceeding the norm, in some cases by nearly 3 times the expenditure, needs examination. • Outstanding advances: • Bihar : Rs.3032.50 crore • Chhattisgarh: Rs. 1454 crore • Jharkhand : Rs. 887 crore • West Bengal : Rs.815 crore

11. 12th JRM recommendations on FM&P • Incomplete audit reports : • Chandigarh – Auditor not provided any opinion • Meghalaya – Audit opinion unclear • Lack of compliance with audit objections: • Old audit objections not complied with in 28 States. • Procurement procedures not followed: • Kerala, Madhya Pradeh, Jharkhand. • Some of the prescribed records not maintained: • Fixed asset register not properly maintained in Bihar, Nagaland, Tripura etc.

12. 12th JRM recommendations on FM&P • Audit coverage of VECs not indicated or inadequate: • Inadequate coverage of units in 5 States – Jharkhand, Karnataka, Maharashtra, Uttar Pradesh & West Bengal. • BRC/CRC/VECs not covered in Maharashtra, Uttar Pradesh. • Advances treated as expenditure: • Maharashtra – Rs.283 crore released to civil works • Uttarakhand – Rs. 304 crore released to sub districts • Orrisa - Rs.407.14 crore released to VEC & civil works • Bank reconciliation irregular: • Bihar, Maharashtra, Madhya Pradesh.

13. 12th JRM recommendations on FM&P • Staffing & Training • 12 States with inadquate staff and 8 of them are among the largest spending States. • At SPO level 64 vacant posts and DPO level 561 vacant posts are a serious concern. • Vacancies 25 – 50% in Haryana, J&K, Jharkhand, Madhya Pradesh & Rajasthan. • Vacancies be filled up as per sanctioned posts. • UP need to urgently move towards providing Accountants at Block level. • If filling of vacancies by deputation is not a viable option, States to explore engaging trained staff on contract basis.

14. 12th JRM recommendations on FM&P • Corrective measures • Compliance with IPAI recommendations: • States are advised to submit final ATR for early settlement of observations. • Phase I compliance awaited from A.P, Chhattisgarh, Chandigarh, Dadra & Nagar Haveli, Daman & Diu, Delhi, Goa, HP, J&K, Jharkhand, Lakshadweep, Meghalaya, Mizoram, Nagaland, Punjab, Sikkim & Tripura. • Phase II observations are pending with all the States/UTs.

15. 12th JRM recommendations on FM&P • Mode of transfer of funds • 13 States are advised to take measure in consultation with the banks to adapt e-transfer mode: • A&N Islands, Arunachal Pradesh, Delhi, Goa, Haryana, HP, Kerala, Maharashtra, Manipur, Meghalaya, Sikkim, Tamil Nadu & Tripura. • Revised VEC Manual • States/UTs are advised to revise the VEC Manual in accordance with revised FM&P Manual.

16. 12th JRM recommendations on FM&P • Procurement • Efforts made by Karnataka, Gujarat and A.P for adapting e-procurement and the detailed activity wise planning and budgeting presented by Gujarat are commendable and best practices that the Mission recommends other States to follow: • JRM recommends the following for focused attention in the next six months: • It will be appropriate for MHRD/TSG to organize a discussion of the integration of Procurement MIS with PMIS during the quarterly meeting of FM Controllers;

17. 12th JRM recommendations on FM&P • Many States are yet to finalize and up link their plans to their websites. • MHRD include this in its engagement with Financial Controllers. • MHRD and several large spending States (on sample basis) conduct a study comparing text book paper specifications in bid documents issued recently by State Text Book Corporation in a given year with actual textbook paper supplied and used in textbooks distributed to students the following year, to examine whether paper specifications were fully complied with.

18. 12th JRM recommendations on FM&P • A special effort is made in all States, district and BRC/CRC levels in the next six months for updation and registration of all assets up to 31 March 2010, at least for those larger items (eig. Computers, beds, furniture) which are most susceptible to being used for other purposes outside of SSA.

19. Thank You