No.
Ministry of Rural Development
(MGNREGA Division)
Krishi Bhavan, New Delhi;
Dated: June 21, 2012
Principal Secretaries/ Secretaries of States/ UTs
(In-charge of MGNREGA)
'clovernment of _
CIRCULAR
SUBJECT: Draft Framework for Certification of Accounts and Financial Audit of
MGNREGA accounts at Gram Panchayat Level by Chartered Accountant
Pursuant to the provisions of 24(1.}, MGNREGAAct and with the objective of
bringing in more transparency and accountability in management and deployment of
MGNREGAfunds at the GP level, Ministry of Rural Development, Govt of India proposes
to get GP accounts of the schemes formulated by States under Section 4 of MGNREGA,
certified by CAs in accordance with the guidelines, a draft of which is annexed with this
letter.
2. Comments on the draft may kindly be conveyed within a month's time.
l. ~d.b
~k~n) 1:.
Joint Secretary to the Government of India
end : as above
1
Ministry of Rural Development
(MGNREGA Division)
CIRCULAR
Draft Framework for Financial Audit and Certification of MGNREGA accounts
at Gram Panchayat Level by Chartered Accountants
1. Introduction:
a) As per the provisions of Section 16(5) of Mahatma Gandhi National Rural
Employment Guarantee Act , 2005 (MGNREGA), at least 50% of the works in terms of cost
under the scheme are required to be implemented through the Gram Panchayats (GPs).
Accordingly, funds for project implementation are being released to GPs mostly from the
State Employment Guarantee Fund (SEGF) and in some cases where the SEGF has not been
constituted, by respective DRDAs. In accordance with the provisions of Section 24 (2) of the
Act, which provides that accounts of the scheme shall be maintained in such form and in such
manner as may be prescribed by the State Government, GPs are required to maintain
accounts in the formats prescribed by the respective State regulations.
b) However, among others, the following registers are required to be maintained for
MGNREGA as part of records prescribed in the Operational Guidelines:-
(1) Cash book
(2) Receipt and Payment Statement
(3) Muster roll receipt Register
(4) Job Card Issue Register
(5) Employment Register
(6) Works Register
(7) Asset Register
(8) Monthly Allotment and Utilization Watch Register.
Register at serial number 8 above contains date-wise details of allotment of fund,
expenditure, availability of balance etc. and gives rise to maintenance of other subsidiary
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records like month wise reconciliation statement with Banks, Post offices and implementing
agencies, maintenance of serially numbered vouchers and challans etc. Similarly, in support of
the books/ records above, corresponding muster rolls issued by the Programme Officer (PO)
relating to payments are required to be maintained by the GPs
c) In accordance with extant guidelines, MGNREGA funds at the district level are audited by
CA firms, who are expected to do a check of the receipts and payment statements of the GPs.
The GP accounts are normally internally audited by officials at the Block level and later by the
Local Fund Auditors (nomenclature varies from State to State). In some cases, there is
considerable time lag between closure of accounts and audit by Local Fund Auditors and not
every GP may be audited by the Local Fund Auditor every year. The status of the MGNREGA
accounts being maintained by GPs may vary in quality across States.
d) In order to improve the accounting of MGNREGA funds and to ensure transparency and
accountability of GPs the Ministry lays out, pursuant to the provisions of Section 24(1) of
MGNREGA, the following scheme for certification of MGNREGA accounts at GP level and
financial audit thereof.
2. Scope of certification:
(1) With regard to MGNREGA, the CAs will examine and certify whether the following
books of accounts/ documents maintained by the GP in the form and manner specified
by the State Govt. in accordance with the provisions of Section 24(2) of MGNREG Act are
in agreement with supporting Muster rolls, vouchers and bills:
(i) Cash book
(ii) Receipt and Payment Statement
(iii) Bank & Post office reconciliation statements
(iv) Utilisation certificate(s) issued if any
In addition to these, the CA will examine all registers prescribed for MGNREGA (given in
para 1 (b) above)
(2) CA will
(i) Comment on the quality of accounts
(ii) Identify and list gaps/ deficiencies and weak areas in systems and controls and
make recommendations for improving these.
(iii) Comment on the wage- material ratio on works taken up by the GP.
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(iv) Certify whether MGNREGA funds have been deployed only on admissible
activities/works or otherwise
(v) Comment on other matters which may have a significant impact on
implementation of MGNREGA.
An indicative check list for this purpose is annexed (Annexure I)
3. Visit to GP by CAs:
It is envisaged that the CAs will visit the GP headquarter for the certification. To facilitate the
visits, the CA would give an advance tour programme to the District Programme Coordinator
(DPC) before commencing the certification process indicating the proposed dates of visit. The
DPC will be responsible to ensure that all necessary documents are provided to the CA firms
for the certification and concerned GP officials are available to the CA when he/she visits the
GP. For this purpose, the DPC will be assisted by respective POs.
4. Coverage- In the first year (i.e.accounts for the year 2012-13), it is proposed that the
accounts of 10% GPs in each State will be certified by CAs. 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.
5. Selection Procedure & Certification fees:
The CAs to be entrusted this work will be selected by the State Governments from the list of
CAs empanelled with C&AG/ State AGs. The remuneration for certification of accounts of GPs
will be fixed by MoRD in consultation with the office of C &AG. The same will be borne from
the 6 % administrative cost.
6. Compilation and Reporting of the certified Accounts:
(i) The CA will submit to the PO, a report for each GP visited enclosing a certificate in the
format annexed (Annexure II) to this circular within 15 days of completion of
certification of accounts of the GP. The report should contain the records verified,
discrepancies noticed if any, adequacy of documentation and findings on the items
listed in the check list.
(ii) In addition, 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
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the GPs visited including the dates of the visit. In this report, issues which require
immediate attention of the DPC should be highlighted. In addition adverse
observations and suggestion for improvement will also be indicated in the report
(iii) During the course of certification, 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.
(iv) 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.
(v) 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.
(vi) 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.
(vii) 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 .
(viii) This certification, observations and the Action taken reports will be examined
by the Ministry while releasing funds to the State Government.
7. Period of appointment: The period of assignment of CAs will be not more than 2
years. The assignment for the second year will be renewed only upon satisfactory
performance in the first year. Preferably one CA will be selected and appointed for each
district. In case MoRD/ State is of the view that it is not feasible for one CA/ CA to certify
accounts of all GPs selected in a district, more than one CA may be appointed. Likewise, a CA
may be assigned more than one district if adequate number of CAs are not available on the
panel in any State/ District.
8. Period of audit: Selection of GPs for certification, identifying CAs who would be
engaged in this and their assignment to Districts/ GPs will be completed before March, 2013.
The CAs will commence the certification from May 2013 and submit reports by end July 2013.
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The certification reports and the action taken report of the State will be a consideration for
release of the second instalment of MGNREGA funds in the year 2013-14.
9. Monitoring the certification process and follow up: The Principal Secretary, RD/ State
Commissioner, MGNREGA and the DPC shall be responsible for (i) monitoring the progress of
the certification (ii) taking corrective action (iii) submitting ATRs to concerned authority.
****
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ANNEXURE I
INDICATIVE CHECK LIST FOR AUDIT OF MGNREGA ACCOUNTS of GP
1 Did the GP provide all books of accounts and records for audit?
2 Do the muster rolls tally with the wages paid?
3 Do other payments tally with vouchers/ bills?
4 Whether drawal of money or payments made without proper vouchers or bills has
been noticed?
5 Does the bank/ PO Pass Book balance reconcile with cash book of GP account?
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
8 Whether any defalcation or misappropriation of funds has been noticed?
9 Whether the shelf of projects have been identified in the Grama Sabha ?
10. Whether all the works taken up are part of the annual work plan approved by the DPC
and covered by administrative sanction?
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?
14. Has necessary action been taken on the wrong or lost cheques issued, if any?
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?
Signed
CA
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ANNEXURE II
Certificate for MGNREGA accounts of GP
Name of the GP:
Block
District and State
Date visited
1) I/ We........... visited ..... GP of ...... block ......... in district on (Date ) and inspected the
books of accounts and other registers in the presence of (Give names of officials present)
2) To the best of information made available and according to the records given to us, it is
certified, that the Cash book and receipt and payment statement, except the following
transactions, are supported by proper vouchers, bills and muster rolls.
Entries that are not supported by appropriate vouchers/ Bills / Musters are as given in the
following table:
Table:
3) The cash book and bank / Post office reconciliation statement as at the end of FY ------are
in order/not in order. (In case these are not in order, details with suggestions for
corrective action may be provided).
4) The status of the registers maintained by the GPs are as under:
Register Quality of maintenance Remarks
Excellent Good Poor
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5) The internal control procedures are adequate/ not adequate.( In case these are found to
be not adequate, suggestions for improving these may be given). .
6) It is also certified that the GP has maintained/ not maintained the 60: 40 wage: material
ratio at the GP level. (In case of violation of 60:40 ratio, the exact ratio may be given)
7) It is certified that the GP has utilised the MGNREGA funds only for permissible purposes.
Or
The GP has incurred following expenditure that is not permitted under the Operational
Guidelines for MGNREGA.
S.No. Name of Work Expenditure incurred Remarks
Sd/-
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