Transcript World Bank - Ministry of Finance (DE A )

Disbursement Procedure
For
World Bank Assistance
1
Objective
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Understanding different disbursement procedures
Issues connected with claim preparation.
To understand funds flow mechanism
Maintenance of accounting records and audit
procedures.
Project Financing
Budgeting
Step-I
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Annual Requirement of Rupee resources for meeting
the expenditure of the Project Cost including World
Bank funding is required to be approved by the
Planning Commission.
Step-II
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Inclusion of the funds requirement approved under
step-I, in the Annual Budget of the Government.
World Bank Assitance
World Bank extends financial assistance through its
three Constitutions namely:
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International Development Agency (IDA)
International Bank for Reconstruction and Development
(IBRD)
Trust Fund (IDF)
World Bank also
Multilateral agencies
co-finances
with
Bilateral/
Terms and Conditions of lending-IDA
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Lending from internal resources in the form of
contribution from member countries.
Carries no interest charges.
But levies service
charges of 0.75% p.a. on the amount drawn and
outstanding.
Carries commitment charges of 0.50% p.a. on the
undrawn balances of the credit subject to waiver.
Repayment maturities upto 35 years including 10
years grace period.
Terms and Conditions of lending-IBRD
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Lending from market borrowings
Carries interest charges based on LIBOR base rate
(plus variable spread)
Charges 0.25% of the total amount of the loan as
front end fee.
Carries commitment charges of 0.75% p.a. on the
undrawn balances of the loan subject to waiver. The
commitment charges have however been abolished
for new loans signed/approved after May 2007.
Repayment maturities upto 20 years including 5 years
grace period
Disbursement Procedures
I.
Reimbursement
a.
b.
Through Special Account
Outside Special Account
II. Direct Payment
a.
b.
Direct Payment with claim
Direct Payment by Special Commitment
III. Report Based Disbursement
a.
F.M.R. -Based Disbursement
Cont.
Disbursement Procedures
I.
a. Special Account
World Bank makes an advance disbursement from
the loan account for deposit to an Special Account
to be used exclusively for its share of eligible
expenditures
b. Outside Special Account
World Bank pays from the loan account to the
Borrower’s account for eligible expenditures which
have been incurred and paid for by the project out
of its budget allocation or its own resources.
Cont.
Disbursement Procedures
II.
a. Direct Payment
The Borrower may request World Bank to pay
the supplier/contractor directly from the loan
funds.
b. Special Commitment
World bank at the request of the Borrower,
provides an irrevocable undertaking to reimburse a
commercial bank for payments made or to be made
to a supplier against a Letter of Credit (LC)
financed from the loan account.
Cont.
Disbursement Procedures
III. Financial Management Report (FMR) -Based
Disbursement
Under this procedure FMR as prepared by Project
Implementing Authority and submitted to Financial
Management Specialist & AAAD, are used to
withdraw funds from the loan account by AAAD.
For this purpose AAAD will prepare a withdrawal
application as the case may be, and forward to
World Bank Chennai office. Project is required to
submit the actual for the past quarter and estimate
of expenditure for next two quarters.
Claims
Reimbursement
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Withdrawal
Application (By AAAD)
Abstract
Summary Sheets
Documents : Invoice /
Bills Evidence of Payment
(for documented Claims)
Direct Payment
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Withdrawal
Application (By AAAD)
Summary Sheet
Invoice / Bill
Bill of Lading / Airway Bill
Copy of LC in case of
Special commitment
Conditions Precedent to Disbursement
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Loan Agreement to be declared effective.
Procurement Procedures as laid down in the
agreement to be followed.
Authorised signatory of AAAD to withdraw funds to
reach the Bank.
Authorised Signatory of Project to sign claims to
reach Aid Account and Audit Division.
Participatory Agreements to be entered into between
Government of India / State Government and the
Project Executing Agency, if applicable.
Special Account
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This is also known as desginated account.
This is maintained with RBI Mumbai in US Dollar
currency.
This is maintained separately for each loan/credit/
grant.
This account is being operated by AAAD.
AAAD is responsible for Annual audit of this account
by C&AG and sending audit certificate to the World
Bank.
This is only a proforma account.
Additional Central Assistance (ACA)
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ACA under replenishment procedure (through Special
Account) to the projects is released on the basis of
exchange rate of RBI for USD on the date when Special
Account is debited by RBI for normal loans.
The ACA for Back to Back loans/grants is released
after disbursement from World Bank based on the
exchange rate on the disbursement date.
For reimbursement outside Special Account ACA is
released to the projects after getting disbursement
from World Bank.
Rupee deposit by Ministries/
PSUs/ Autonomous Bodies
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All Central Ministry/ Departments/ PSUs/ Autonomous
Bodies are required to make provisions in their budget
for Direct payments made from External Assistance.
Counterpart rupee for such payments is to be
deposited in AAAD account maintained at RBI, New
Delhi or SBI, Tis Hazari, Delhi.
In addition to it, interest at prescribed rate will also be
payable by PSUs/ Autonomous Bodies.
---------------------------Project
(Illustration)
Significant dates
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Date of Agreement:
------------Date of Effectiveness:
------------Project Completion date
------------Terminal date of Disbursement:
------------Retroactive period
------------- To ----------(Retroactive financing amount ---------- )
Schedule – I
(----------------------Project )
Credit/Loan/Grant No.------Sl.
No
Category
Description
1
2
3
Total
Amount of the Loan
% of Expenditure
allocated (in SDR/USD)
to be financed
Contract Review
Prior review
Civil Works
Goods
Consultancy
Consultancy
World Bank
More than USD ----------More than USD ----------More than USD ----------(For Firm)
More than USD --------(For Individual)
Contract Review
POST REVIEW
Civil Works
Goods
Consultancy
Consultancy
WORLD BANK
Less Than USD ----------Less Than USD ----------Less Than USD --------(For Firm)
Less Than USD -------(For Individual)
Note-Training and Operating cost will be claimed in
SOE forms.
INELIGIBLE ITEMS
Goods/Equipments:
Local Expenditure
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For Claiming 100 % Reimbursement
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Sales Tax
Central Sales Tax
Excise
For Claiming 80 % Reimbursement
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Above Taxes are admissible but the charges such as Latter
of Credit opening charges and Bank charges are not
admissible
Ineligible Items
Civil Works
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Recovery of Security Deposit.
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Recovery of mobilisation advance
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Land acquisition cost
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Penalty paid to Govt. or any Govt. Organisation
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Levy of penalty on contractor for delayed/defective
execution
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Recovery towards fund
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Interest paid to the contractor on account of delayed
payment
Ineligible Items
Consultancy Bill
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For claiming 100% reimbursement
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Income Tax
Service Charge
For Claiming 90 % or 80% Reimbursement, above
items are admissible
Form 1-B
Schedule of Withdrawal of Proceeds
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Date _________________
IDA/IBRD Loan No.
_______
Application No. _________
Summary Sheet No. _____
Payments made during the Period ____ to ______
2
3
4
6
7
8
Currency
and
Cumulative
Amount
Paid during
this Period
9
Amount
Eligible for
Financing
(% from
Col. 8
Applied to
Amount in
Col.7)
10
Exchange rate
Currency and Cumulative Amount Paid
to Date
Contract Amount
Brief Description of Works, Goods or
Services
Category No.
Item No.
Name of
Contractor/
Supplier/
Consultant
Address, Contract
No. & Date (if USA,
please also indicate
the city and state)
5
IDA/IBRD Financing %
1
11
US$
equivalent
withdrawn
from the
Special
Account
1 In the case of U.S. Suppliers, please provide us with complete names and addresses ( including city and State)
If this application is not for replenishment of the Special Account, leave columns 10 and 11 blank.
12
Remarks or
Invoice
reference
(including
no-objection
telex date)
Form 1-C
Statement of Expenditures (SOE)
Date _________________________
IDA/IBRD Loan No
____________
Application No.________________
Summary Sheet No. _____________
Payments made during the Period _______________to____________________
Item No.
Category No.
3
Name of
Contractor/
Supplier/
Consultant
Address,
Contract No. &
Date (if USA,
please also
indicate the city
and state) 2/3
4
Name of
Contractor/
Supplier/
Consultant
Address,
Contract No. &
Date (if USA,
please also
indicate the city
and state) 2/3
5
Total
Amount of
Invoices
covered by
Application
(net of
retention
6
7
8
9
Amount
eligible for
financing %
from Col. 6
applied to
the amount
in Col. 5
US $
equivalent
withdrawn
from
Special
Account
Exchange rate
2
IDA/IBRD Financing %
1
Total
Supporting documents for this SOE retained at _____________________*
1/ Items should be grouped by category, or alternatively, a separate SOE form may be used for each category
2/ Consolidate payments by country of Supplier, except for US suppliers
3/ For all suppliers or contractors from the US, the address should include the city and State.
I certify that detailed information on expenditures incurred is available at a central location in the State Govt.
10
Remarks
Abstract of Summary Sheet
Name of the Project: ___________ IDA/IBRD CR./Loan No.___________
Reference Period: ___________ Application No._________Date :__________
Summary
Sheet No.
Category
No.
Total
Expenditure
% of
Reimbursement
Claimed for
reimbursement
Remarks
1
2
3
4
5
6
Total___________________________________________________
Category-wise Break up
Category
Amount
DOC
1
Project
Authority
2
3
Total
SOE
Total
Summary Sheet Form 1-B.
To be used for expenditure under contracts prior reviewed by
the bank. Such claim should have W.B.R. No. In the remarks
column against each contract. Post review contracts should
not be claimed under form 1-B.
1.
2.
3.
The period of the claim should be specific as
from ………………… to ………………..…
Separate summary sheet to be used for each category of
expenditure.
Separate claim to be prepared for each currency of
expenditure.
Cont.
Summary Sheet Form 1-B.
4.
5.
6.
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The claim should be in the currency in which the contract is
concluded and not in the currency of expenditure.
Each Summary Sheet is independent by itself.
The bank financing percentage should be correctly indicated
as per schedule I to the loan agreement.
The claim in INR should be entered in millions with three
decimals whereas the claim in foreign currency should be in
full with decimals. (E.G. .Rs.1,23,05,146 is to be shown as
12.305 million)
Summary Sheet Form 1-C.
To be used for expenditure under contracts post reviewed by the
bank
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To be used for all training expenses, incremental operating
costs, study visits etc.
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The period of claim should be specific as
from ……………. To ……………..
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The claim should relate to total expenditure during the period
category wise separately. No need to list separately each
expenditure under a contract.
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Separate summary sheet to be used for each currency of
expenditure.
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The claim should be in the currency in which the contract is
concluded and not in the currency of expenditure.
Cont.
Summary Sheet Form 1-C
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The claim in INR should be entered in Millions with three
decimals whereas the claim in Foreign Currency should be in
full with decimals ( e.g. Rs. 1,78,56,423 is to be written as
Rs..17.856 million).
The bank financing percentage should be correctly indicated
as per schedule 1 of the loan agreement.
The Summary Sheet in form 1-C should have additional
certificate as to the location at which the documents are
retained.
The Summary Sheet in form 1-C under goods if claimed
100% furnish additional certificate that the claim is ex-factory
and does not include taxes and duties and other charges.
Deficiency in Summary Sheet
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WBR No. is not given in case of prior review
contracts
Summary Sheets are not signed by the authorized
signatory.
Retroactive Expenditure claim and Proactive
Expenditure claims are prepared in the same
summery sheet.
Incorrect percentage claimed.
Approval of World Bank wanting for the revised
contract cost when expenditure exceeds more than
15% of the original contract value.
Cont.
Deficiency in Summary Sheet
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Foreign Currency payments are claimed in INR.
Name of location where the documents have been
kept not mentioned in case of SOE Claims.
Passed/pay order not given on the invoice/voucher.
More than one No. of application in case of same
category.
General / Miscellaneous
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Claims are sent before the loan is declared effective.
Incomplete documents attached with the claim.
Illegible documents
Amount claimed not conforming with the detail given
in the voucher.
Alterations in Pay order or Memorandum of
payments leads to confusion.
Cont.
General / Misc. Deficiencies
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Inadequate payment instructions in respect of Direct
Payment Claims.
Insufficient Funds in loan or category.
Incomplete evidence of payment.
Taxes to be claimed when payment is actually done and
not independently.
Extra rounding off.
Non submission of audit report to the World Bank in case
of SOE claim.
Not giving reason for lodging the claim after six months of
the period of Expenditure.
Unacceptable evidence of payment especially in case of
third party payment, e.g. Commercial Bank’s advice
simply confirming debit to project account does not form
evidence of payment. It should be either receipt of
payment by supplier/contractor or Commercial Bank’s
advice indicating name of beneficiary and amount paid.
Audit Covenants
1.
2.
World Bank
Furnish to the Bank within 6 months from the end of
each financial year (i) Certified copies of the Balance
Sheets, Statement of Income and Expenses and
related statements duly audited and
Furnish to the Bank within 6 months after the end of
financial year the Report of Audit on the records and
accounts of the project in such details as the Bank
shall have reasonably requested.
Scope of Audit
Audits of financial Statements for Bank funded Projects include1.
An assessment of the adequacy of accounting and internal
control systems to monitor expenditures and other financial
transactions and ensure safe custody of project-financed
assets.
2.
Determination as to whether the project implementing
agencies have maintained adequate documentation of all
relevant transactions.
3.
Verification that the expenditures submitted to the Bank are
eligible for Bank financing, and identification of any ineligible
expenditures, and
4.
Verification that the annual financial statements can be
reconciled with the total Claims made during the year
Financial Reporting – Audit
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As per financing agreement the borrower has to submit
acceptable financial statements /Audit certificate to the
Bank with in six (6) months of the close of the financial
year.
If Audit reports/certificate are not received on the above
date, a notice giving three(3) months time is served by the
World Bank and if Audit Report / Certificate are still not
received the use of SOE may be suspended.
After this date the World Bank gives a four (4) months
final notice and if the Audit Reports / Certificate are not
received after expiry of this period, disbursement for the
Project may be suspended.
In case suspension continues for 30 days the Bank may
cancel the part of Loan that was subject to suspension.
General deficiencies in the Audit Reports
1.
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5.
6.
7.
Non-consistency and uniformity in the format of the financial
statements.
Non-disclosure and consistency in the accounting standard
adopted.
Non-mentioning of management letter from the auditors
highlighting internal control weaknesses observed.
Non submission of reconciliation of the SOE claims with the
audited expenditure as per the financial statements.
Non submission of records to audit.
Including of expenditure in SOE claims which is not actually
incurred.
Claiming the advanced amount in the SOE and treating the
same as final expenditure without obtaining utilisation
certificates from the institutions / agencies to whom the
advances were given.
General deficiencies observed by the Audit
1.
Timely and periodic bank reconciliation not done.
2.
Non maintenance of fixed assets registers.
3.
Non monitoring of advances.
Project Financial Management - I
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Project Activities-Implementation
Ensure proper procurement procedures are followed
before incurring Expenditure.
Ensure availability of funds in the Budget for the
year.
Ensure Expenditure is within the approved contract.
Take advance action for revision of contract and its
approval if the expenditure is likely to exceed the
contract value.
Ensure that no advance is given to the contractor
beyond the ceiling provided in the contract.
Project Financial Management - I
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All advances to contractors should be supported by a
Bank Guarantee.
Advances are not to be treated as final expenditure in
the accounts, till the expenditure is incurred.
No Payment is to be made without a valid invoice/bill
duly supported by receipt by the payee.
Ensure production of all vouchers, etc. to the
Accounting authority for compilation of Accounts
and reconciliation of expenditure periodically.
Project Financial Management - II
EXTERNAL FUNDING
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Strictly observe Financial covenants as per Loan
Agreement and Project Agreement in so far as they
relate to Project Funding, Maintenance of Accounts
and Audit.
Ensure Periodical submission of Reimbursement
claims to CAA&A and monitor its reimbursement.
Maintain Records/Registers to monitor that eligible
expenditures as per the Agreement are claimed for
reimbursement.
Maintain Records/Registers to monitor the categorywise disbursement status both in Rupees and USD.
Project Financial Management - III
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AUDIT
Ensure Audit Report for each year is sent to World
Bank within due date.
Take timely action to resolve the Audit disallowances
to get revised Audit certificate sent to World Bank.
Wherever World Bank recovers the disbursement
made based on unresolved Audit disallowances,
prompt action be taken with the audit to get the
revised audit certificate and obtain approval of the
World Bank for reclaiming the Recovery made.
Submit reimbursement claim through CAA&A for
all such recovery as soon as the Bank conveys their
approval for the same.