39 TH REVIEW MEETING OF THE STATE FINANCE CONTROLLERS IPAI REVIEW-KEY OBSERVATIONS— PROCUREMENT ISSUES 28 TH -29 TH OCTOBER 2013.

39TH REVIEW MEETING OF THE STATE FINANCE CONTROLLERS

IPAI REVIEW-KEY OBSERVATIONS—PROCUREMENT ISSUES

28TH-29TH OCTOBER 2013

BACKGROUND

• SSA COVERS WIDE GAMUT OF ACTIVITES IN ALL THE STATES AND

UNION TERRRITORIES

• FOR UNIFORMITY AMONG THE IMPLEMENTING AGENCIES FINANCIAL

MANAGEMENT SYSTEMS AND PROCUREMENT PROCEDURES HAVE

BEEN LAID DOWN IN THE FMP MANUAL FOR PROPER

IMPLEMENTATION AND MANAGEMENT OF THE PROGRAMME

• SINCE SSA IS A CENTRALLY SPONSORED PROGRAMME,THE

IMPLEMENTING AGENCIES AT ALL LEVELS ARE REQUIRED TO KEEP

PROPER ACCOUNTS OF THE FUNDS RECEIVED BY THEM AND THE

EXPENDITURE INCURRED FROM THESE FUNDS

BACKGROUND

• TOENSURE EFFECTIVENESS ,EFFICIENCY OF OPERATIONS,

• RELIABILITY OF FINANCIAL AND OPERATIONAL

REPORTING ,COMPLIANCE WITH THE PROVISIONS OF THE

IMPLEMENTATION FRAMEWORK,

• ESSENTIALITY OF MONITORING OF BOTH PROGRAMME

IMPLEMENTATION AND OUTCOME INDICATORS ON A REGULAR BASIS

ESSENTIAL.

• SUPERVISION AND MONITORING AT THE COMMUNITY LEVEL,STATE

LEVEL AND NATIONAL LEVELHAS BEEN LAID DOWN

• INTERNAL CONTROL &INTERNAL AUDIT,EXTERNAL AUDIT,

• CONCURRENT FINANCIAL REVIEW AND MONITORING BY GOI

CONCURRENT FINANCIAL REVIEW AND MONITORING BY GOI

• INSTITUTE OF PUBLIC AUDITORS OF INDIA(IPAI) HAVE

CARRIED OUT THE FINANCIAL REVIEW OF ALL THE STATES

AND UNION TERRITORIES THRICE

• PHASE I COVERED THE PERIOD FROM2001-2002 TO 2004-05

• PHASE II COVERED THE PERIOD FROM2006-2007 TO 2008-

09(STUDY CONDUCTE D FROM OCT08-MAR10 IN THREE

SPELLS)

• PHASEIII COVERED THE PERIODFROM2008-09TO2009-

11(STUDY CONDUCTE D FROMSEP10-MAR 12 IN THREE

SPELLS)

IPAI-Purpose

• To analyze the Strengths and weakness in the implementation of the Scheme

• To suggest remedial measures to avoid repetition

• To Check the internal controls and procedural lapses in the various activities under the scheme.

• To address areas of concerns emanating from the financial reviews

• Procurement is an important component of SSA programme. It covers text books, teaching

learning equipments, furniture, school equipments, material required for teachers training,

office equipments, computer and accessories, civil works, hiring of experts for specific tasks

etc.

• Procurement procedure prescribed in para 111 of MFM&P for all the procurements under

SSA scheme (including NPEGEL and KGBV) is mandatory for SIS the various procedures to be

generally observed in procurements, like specific budget provision, assessment of requirement,

open tender system, floating of NIT in All India and local newspapers, constitution of Technical and

Commercial bids Evaluation Committees obtaining their recommendations in selecting the bidders,

issuing the supply orders, execution of contract/agreement etc

IPAI-Observations• IPAI OBSERVATIONS CAN BE CATEGORISED AS

1) General Observations

• Includes compliance of Statutory Provisions relating to SIS, EC

Meetings etc.

2) Specific Observations-Relates to Financial Management and

Procurement issues

a) Financial aspects includes/related to maintenance of records

writing of books of accts and non-compliance of provisions of FMP

Manual

b) Procurement aspects has dealt with lapses in Procurement

Procedures, Procurement process relating to both goods services

and Civil Works and non-compliance of provisions of FMP Manual

IPAI-Key Observations

•Irregular holding of GC/EC meetings, •Not taken EC’s approval on the audited annual accounts before sending to MHRD.•Delay in release of State Share, •Non-availing of e-transfer facilities resulting in delay of receipt of funds.•Treating advances as expenditure•Excess expenditure•Incurring inadmissible expenditure


• Re-appropriation of funds without obtaining sanction of the

competent authority;

• Weak accounting system;

• Non-maintenance of prescribed books of accounts like cash

book, ledger, stock & asset register, advance register;

• Not carried out annual physical verification of stocks/assets;

• Non-submission/delay in submission of UCs;

• Double entry system not followed;


• Delay in supply of uniforms;• Aids and appliances not supplied to needy CWSN• Non-adherence of the prescribed procurement procedure;• Purchases without obtaining quotations• Cost effectiveness and accountability should be strictly

followed.• States need to take immediate remedial action to avoid

recurrence of such irregularities in future.• Issue suitable instructions to all functionaries for strict

compliance of the SSA financial norms and the provisions of the FM&P Manual.

IPAI -Observations

CIVIL WORKS

•Delay in execution of works including spillover

•Deficiencies in execution of works

•Third Party Quality Assurance and Monitoring of Civil Works not done

•Toilets and drinking water facility notproperly done

Andhra Pradesh

• Procurement of two tier beds for Kasturba Gandhi Balika Vidyalaya KGBV.

• SSA programme suffered an avoidable loss of Rs.0.83 lakh

(Rs.33.49- Rs.33.66 lakh

• M/s Singhi Furnishing House in the earlier bid, quoted the lowest

cost of

Rs.32,66,250 for supply of 420 two tier beds but the quote could

not be accepted because the firm did not meet the annual

turnover limit of Rs.30,00,000 which in the later bid was reduced to

Rs.20,00,000.

PROCUREMENT ISSUES –Highlighted by IPAI-STATEWISE

ASSAM

• Procurement of School Bags for EGS I to IV/NRBC/DUC/AIE/SSK

• Procurement of two tier beds for Kasturba Gandhi Balika Vidyalaya (KGBV

• M/s Fabricon Structural being the lowest bidder at Rs.33,49,403 vide order No.

SSA/Estt/KGBV/Purchase/382/Pt-II/2006 dated 18 August 2008. Agreement was

executed with the firm on 25 August 2008.

• M/s Fabricon Structural in its earlier bid quoted Rs.42,55,052 for 420 two tier beds and

in the second bid quoted Rs.33,49,403 which was a month later when the

specifications and other terms and conditions of the tender were identical. Such a wide

variation of almost Rs.10 lakh within a month quoted by the same firm appears

unrealistic


BIHAR

• Text Books

• Fire extinguishers

• Teachers training

• Aids and Appliances(Non-Utlisation)

• Computer aided learning programme covering 9

districts


• CHHATISGARH• Payment of Central Excise Duty• Rajeev Gandhi Shiksha Mission is exempted

from payment of central excise duty. However, SPO did not avail of this benefit on purchasing computers in January 2010. Even though central excise duty was paid to the firmapply No refund claimed of the excise duty paid on this purchase


• CHHATISGARH• Payment of Central Excise Duty• Rajeev Gandhi Shiksha Mission is exempted

from payment of central excise duty. However, SPO did not avail of this benefit on purchasing computers in January 2010. Even though central excise duty was paid to the firmapply No refund claimed of the excise duty paid on this purchase


• Chattisgarh• Uniform Kits lying unused in DPO Janjgir


GUJARAT

• Printing of Educational cards/Modules

• the expenditure incurred for printing of such educational cards was

classified under 'Teachers Training' for which separate grant was

earmarked and the expenditure was incurred by diverting funds there

from.

• Printing of remedial work books

• expenditure was debited to “Teachers Training” while it should have

been debited under “Learning Enhancement Programme”.•


• Gujarat• Purchase of mini dictionary• The amount spent was to be debited to LEP

grant• The dictionary was to be purchased within the

ceiling limit of Rs.20 and it has to contain minimum 8000 words and explain verbs, adjectives, synonyms etc., which will be useful to the child up to higher secondary level.


• Haryana• Purchase of colour pencils• No action was taken to invite open tenders

and make a state level purchase at economical prices in terms of Para 112.2.6 of the Manual on Financial Management and Procurement.

• Infringement of conditions of contract by NIIT.


• Himachal Pradesh• Electrification and cabling work in 28 Upper

Primary schools to a contractor in June, 2010 at a total cost of Rs.1.62 lakh and was to be completed by July 2010

• Delay in execution of work deprived the children of training in computer.


• Himachal Pradesh• Procurement of material without inspection

and payment in anticipation of receipt of materials


• Jammu & Kashmir• Purchase of Computers and Accessories.• 2008-09.• purchase of computers and accessories resulted in blocking of

Rs. 5.69 crore in shape of Bank Draft for seven months resulting in loss of at least Rs. 11.19 lakh in interest.

• Purchase Of UPS & White Board.• without inviting any bids from companies on rate contract of

DGS&D, orders for purchases valuing over Rs.17.23 Lakh were placed directly with the company in gross violation of the prescribed procurement procedure.


• Kerala• IRREGULAR EXPENDITURE ON ACTIVITIES NOT

RELATED TO SSA - Payment of EPF.• Purchase of Laptops and LCDs for DIETs under Innovative

Activities – CAL• Purchase and supply of computer tables/chairs to BRCs during

2008-09 by the District Project Officer, Kottayam• Short supply of Maths Kit - District Project Office,Kottayam• LOSS ON PURCHASE OF HEARING AIDS• Purchase and distribution of Personal Weighing Scale and Dairy mats

to Anganvadies attached to Social Welfare Department during 2008-09• Child Census



• Madhya Pradesh.• Irregular expenditure of Rs 6.60 crore in the

purchase of Dev Putra Magazine and loss of interest of Rs 1.00 crore

• Purchase of Computers


• MAHARASHTRA• Computers, equipments, CDs, Operating System, Text Books

and work books during the period 08-09 to 2010-11. • Text books / work books

• Absence of Bulk Purchase benefits. • Procurement of Dot Matrix Printers


• ORISSA• In purchasing computers by placing huge

funds of Rs. 5.92 Crore• Supply of 316 upper primary science kits (UPSK)

and 316 upper primary mathematics kits (UPMK) during 2010-11

• Supply of 19,631 nos. of Hand Books for designing mathematics laboratories in schools.

•


• PANJAB• Improper maintenance of stock register• Non-consumable items/equipments issued to persons not

related to SSA Punjab Society• Non maintenance of list/ register of Major contracts

valuing Rs. 5 lakh and above• Avoidable Expenditure of Rs. 28.15 lakh1499 computers

were purchased during June 2009• Excess payment of Rs. 1,45,672/- in printing of text books


• Rajasthan• Purchase of green boards -purchase of green boards at

such a high cost • Printing of Work Books work books procured after the

expiry of the year 2009-10• Procurement of Science and Maths Kits• Delay in finalisation of tenders for printing work • Contract for Computer Aided Learning Programme (CALP) • Procurement of telecast film• Supply of bags to girl students

• Tamil Nadu• PURCHASE OF COMPUTERS 2008-09 and PURCHASE OF

COMPUTERS DURING 2009-10:• PROCUREMENT OF ABL CARDS AND WORK BOOKS –

PAYMENT OF V.A.T•



• Uttar Pradesh• PROCUREMENT OF TEXT BOOKS• PROCUREMENT OF COMPUTERS


• UTTARAKHAND• NON MAINTENANCE OF CONTRACT REGISTERS FOR GOODS AND SERVICES

PROCURED • PURCHASE OF COMPUTERS AGAINST CAL• CONSIDERATION OF BIDS NOT FULFILLING ELIGIBILITY CRITERIA• Tender for empanelment of printers ,• Tender for Procurement of Stationery• AWARD OF CONTRACT TO HIGHEST BIDDER ON GROUNDS OF

BETTER SPECIFICATION NOT PREVIOUSLY DEFINED

•

•

• WEST BENGAL• COMPUTER AIDED LEARNING.• PURCHASE OF COMPUTERS AND TRAINING OF TEACHERS

UNDER CAL IN NADIA DISTRICT• IRREGULAR AWARD OF PRINTING WORK• PROCUREMENT OF FREE TEXT BOOKS• PURCHASE OF AIDS AND APPLIANCES FOR CWSN• IRREGULAR SUPPLY OF BI-CYCLES TO CLUSTER

COORDINATORS OF NPEGEL PROGRAMMED LEARNING.


PROCUREMENT RISKS,CONSEQUENCES,ACTION• Identifying the need and planning the purchase

Risk Likely consequences Action

Understatement of the need Purchase of unsuitable product or service

Money wasted

Need not satisfied

Analyse need accurately

Overstatement of the need Greater expense

Poor competition

Analyse need accurately

Use functional and performance requirements

Misinterpretation of user needs Totally unacceptable purchase or not most suitable product or service

Time lostIncreased costsPossible downtime

Improve consultation with users

Obtain clear statement of work and definition of need

Impractical timeframe Inadequate responses from tenderers

Reduced competition

Delivery schedule not met

Improve forecasting, planning and consultation with users

Improve communication with potential tenderers


Narrow definition or commercial specification (eg. use of brand name)

Fewer alternatives

Most suitable product or service may not be obtained

Increased costs

Define the specification in terms of required outputs

Use functional and performance specifications

Biased specification Inadequate responses from tenderers

Claims of unfair dealings


Implement a control mechanism to review specification before release

Inadequate statement of requirements Variety of offers

Insufficient responses

Products offered not meeting needs

Difficult to evaluate

Be familiar with requirements


Use an Expression of Interest or Request for Information to clarify requirements (be careful not to infringe intellectual property rights or copyright)

PROCUREMENT RISKS,CONSEQUENCES,ACTIONDeveloping the specification

PROCUREMENT RISKS,CONSEQUENCES,ACTION


Failure to identify potential sources

Lack of offers from suitable tenderers

Improve procurement planning processes

Improve market knowledge

Seek industry participation

Use the Industry Capability Network (ICN)

Selecting inappropriate method Need to seek offers again

Possible cost variations

Failure to obtain value for money

Improve implementation of procurement policies, guidelines and practices

Improve tender documentation and clearly identify the evaluation criteria in Request for Tenders

Provide staff with appropriate training and experience

Selecting the purchasing method

PROCUREMENT RISKS,CONSEQUENCES,ACTION


Terms and conditions unacceptable to tenderers

Loading of costs in offers

Having to modify tender terms and conditions

Disruption

Low response

Use standard documentation prepared by Crown Law

Select appropriate documentation for purchase type (ie. goods, services, goods and services, or information technology related)

Improve tender planning

Assess and allocate risks appropriately

Consult with Crown Law

Use commercially acceptable terms

Provide staff with appropriate tender planning and procurement skills

Providing inadequate information Loading of costs in offers

Variations in offers

Having to provide clarifying information, causing delays in tender closing

Additional costs

Ensure staff have appropriate tender planning and documentation training and experience

Improve tender planning and preparation

Review tender documents before issuing them and ensure evaluation criteria contain the critical factors on which assessment of tenders will be based

Purchasing documentation

S NO

STATES PHASES POSITION OF SETTLEMENT

1 A & N Islands Phase-I PendingPhase-II PendingPhase-III Pending - Replies / comments awaited

2 Andhra Pradesh Phase-I PendingPhase-II PendingPhase-III Pending - Replies / comments awaited

3 Arunachal Pradesh

Phase-I SettledPhase-II SettledPhase-III Pending - Replies / comments awaited

4 Assam Phase-I SettledPhase-II PendingPhase-III Pending - Replies / comments awaited

5 Bihar Phase-I Settled

Phase-II Pending

Phase-III Pending - Replies / comments awaited

S NO


1 A & N Islands Phase-I PendingPhase-II PendingPhase-III Pending - Replies / comments awaited

2 Andhra Pradesh Phase-I PendingPhase-II PendingPhase-III Pending - Replies / comments awaited

3 Arunachal Pradesh

Phase-I SettledPhase-II SettledPhase-III Pending - Replies / comments awaited

4 Assam Phase-I SettledPhase-II PendingPhase-III Pending - Replies / comments awaited

5 Bihar Phase-I Settled

Phase-II Pending


S NO


6 Chandigarh Phase-I PendingPhase-II PendingPhase-III Pending - Replies / comments awaited

7 Chhattisgarh Phase-I PendingPhase-II PendingPhase-III Pending - Replies / comments awaited

8 D & N Haveli Phase-I PendingPhase-II PendingPhase-III Pending - Replies / comments awaited

6 Chandigarh Phase-I PendingPhase-II PendingPhase-III Pending - Replies / comments awaited

9 Delhi Phase-I Settled excepting Recovery of Rs.108.85 lakhs pending with Divisional Head.

Phase-II 3 paras pending reminder sent on 6TH June 2013.

Phase-III Response received. Examined and comments submitted on 16.10.2012. Reminder sent on 4.6.2013.

S NO


10 Goa Phase-I PendingPhase-II PendingPhase-III Pending - Replies / comments awaited

11 Gujarat Phase-I SettledPhase-II PendingPhase-III Pending - Replies / comments awaited

12 Haryana Phase-I Settled excepting Recovery of Rs.2985.12 lakhs ordered by Secy. Education-matter pending with Divisional Head.

Phase-II 16 paras pending reminder sent on 6th June 2013.

Phase-III Comments of State Govt. has been received recently and are under examination. Response not received last reminder sent on 4th June 2013.

13 Himachal Pradesh Phase-I PendingPhase-II PendingPhase-III Pending - Replies / comments awaited

S NO


14 J&K Phase-I PendingPhase-II PendingPhase-III Pending - Replies / comments awaited

15 Jharkhand Phase-I PendingPhase-II PendingPhase-III Pending - Replies / comments awaited

16 Karnataka Phase-I SettledPhase-II PendingPhase-III Pending - Replies / comments awaited

17 Kerala Phase-I SettledPhase-II PendingPhase-III Pending - Replies / comments awaited

18 Lakshadweep Phase-I File reported missing

Phase-II Pending


S NO


19 Madhya Pradesh Phase-I SettledPhase-II PendingPhase-III Pending - Replies / comments awaited

20 Maharashtra Phase-I SettledPhase-II PendingPhase-III Pending - Replies / comments awaited

21 Manipur Phase-I PendingPhase-II PendingPhase-III Pending - Replies / comments awaited

22 Meghalaya Phase-I PendingPhase-II PendingPhase-III Pending - Replies / comments awaited

23 Mizoram Phase-I Pending

Phase-II Pending


S NO


24 Nagaland Phase-I PendingPhase-II PendingPhase-III Pending - Replies / comments awaited

25 Orissa Phase-I SettledPhase-II One para for irregular expenditure of Rs.10.63

lakhs pending. Reminder sent on 6th June 2013Phase-III Response received. Some paras pending reminder

issued on 19th July 2012. (Discussion) 26 Puducherry Phase-I Settled

Phase-II PendingPhase-III Pending - Replies / comments awaited

27 Punjab Phase-I Settled excepting for 2 Paras due to pending court cases.

Phase-II 7 paras pending. Reminder sent on 6th June 2013.Phase-III Response received. Some paras pending

reminder sent on 4.6.2013.

S NO


28 Rajasthan Phase-I Settled.Phase-II 5 Paras pending last reminder issued on 29th May

2013.Phase-III Response received 120 paras settled. Pending 23

paras comments sent on 17th August 2012.

(Discussion)30 Sikkim Phase-I Pending

Phase-II PendingPhase-III Pending

31 Tamil Nadu Phase-I SettledPhase-II PendingPhase-III Pending

32 Tripura Phase-I PendingPhase-II PendingPhase-III Pending - Replies / comments awaited

S NO


33 Uttar Pradesh Phase-I Recovery of diversion of funds for Teacher Salary. Reminder sent on 6th June 2013.

Phase-II PendingPhase-III Response received. Only some paras relating to

procedures pending. Reminder sent on 4.6.2013.34 Uttarakhand Phase-I Settled

Phase-II PendingPhase-III Comments received and are under

examination.35 West Bengal Phase-I Settled

Phase-II PendingPhase-III Pending - Replies / comments awaited

IPAI –ITS AFTERMATH

• OUT COME OF IPAI• EC MEETINGS ARE BEING HELD AND STATUTORY PROVISIONS RELATING TO SIS ARE

ALSO BEING COMPLIED WITH• PROCUREMENT PLAN IS BEING PREPARED IN CONSONANCE WITH AWPB• IMPROVEMENT IN FUNDS FLOW DUE TO IMPROVED SYSTEMS AND BETTER BANKING

ARRANGEMENTS WITH ELECTRONIC MODE OF TRANSFER OF MONEY FROM SPD TO DISTRICTS

• STILL NEED TO ALSO FACILITATE QUICK AND CHEAPER TRANFER OF FUNDS TO VEC/SCHOOLS.

• NUMBER OF LEVELS/TRANCHES THRU WHICHFUNDS ARE FLOWING HAS IMPROVED MAINLY IN CASE OF CENTRE TOSTATE(SPD) AND FROM SPD TO DISTRICTS,BUT STILL SOMES STATES HAVE TO STREAMLINE THE SAME.

• TRENDS IN EXPENDITURE HAS INDICATED THAT CAPACITY TO UTILISE FUNDS HAVE GONE UP

• CPSMS Registration has improved• Web portal usages has shown improvement.

IPAI –ITS AFTERMATH• AREAS OF CONCERN

• Delay in release of State Share• Diversion of funds• Advances Settlement• Clearance of Audit observations• Procurement procedures not being followed• Monitoring at lower level inadequate• Training not result oriented• Community participation needs to be strengthened.• Non-Use of CAD• Miantainance and Non-Production of Records•

OUT COME OF IPAI, FINANCIAL REVIEW AND MONITORING IMPROVEMENT IN FUNDS FLOW DUE TO IMPROVED SYSTEMS AND BETTER BANKING ARRANGEMENTS WITH ELECTRONIC MODE OF TRANSFER OF MONEY FROM SPD TO DISTRICTSSTILL NEED TO ALSO FACILITATE QUICK AND CHEAPER TRANFER OF FUNDS TO VEC/SCHOOLS.NUMBER OF LEVELS/TRANCHES THRU WHICHFUNDS ARE FLOWING

HAS IMPROVED MAINLY IN CASE OF CENTRE TOSTATE(SPD) AND FROM SPD TO DISTRICTS,BUT STILL SOMES STATES HAVE TO STREAMLINE THE SAME.TRENDS IN EXPENDITURE HAS INDICATED THAT CAPACITY TO UTILISE FUNDS HAVE GONE UPPROCUREMENT PLAN PREPRATION WEB PORTAL UPLOADING

39 TH REVIEW MEETING OF THE STATE FINANCE CONTROLLERS IPAI REVIEW-KEY OBSERVATIONS— PROCUREMENT ISSUES 28 TH -29 TH OCTOBER 2013.

Documents

procurement procedures

financial reviews procurement

financial aspects

procurement process

funds slide

fmp manual slide

concurrent financial

reliability of financial