UP Audit: Introduction

Presented by:

Md. Aminul Islam (Joint Secretary on lien , Govt. of Bangladesh)

Senior Public Finance Specialist, LGSP-2

UP Audit: Introduction

LGSP-2, Procurement Methods, Administrative Arrangements, Monitoring

and Related Financial & Other Guide lines

Main Characteristics

• Provide Block Grants to UPs in the form of Basic Block Grants(BBG) and Performance Based Grants(PBG)

• Minimum Conditions for BBG:– Clean financial audit report– Participatory planning & budgeting– Timely submission of six-monthly report

• Transfer of funds directly to UPs bank accounts.

Components of LGSP-2

• Union Parishsad Grants

• Information Flows & Accountability

• Capacity Building

• Project Management

- Joint funding by GOB & IDA

- 90% fund for UP Grants

Union Parishad Grants

• Basic Block Grants(BBG)

• Performance Based Grants(PBG)

• Performance Based Grants(PBG) from Union Parishad Governance Project(UPGP) under 07(seven) districts one each from 07(seven) divisions.

Basic of BBG Allocation

• Indicative ceilings to UPs for 03 fiscal years under MTBF.

• Distribution of 25% of BBG to all UPs equally.

• Formula based distribution of the rest 75% to the UPs having clear audit reports.

• Weightage: 90% population & 10% area.• Disbursement of BBG fund in two tranches

to UPs.

Basic of PBG

• The top scorer 75% of UPs divided into three performance groups will receive the PBGs on a graded scale.

• The 1st best 25%: 30% top up on BBG

• The 2nd best 25%: 20% top up on BBG

• The 3rd best 25%: 10% top up on BBG

• The 4th group will get no incentive grants.

Methodology

• Participatory selection of schemes by the common people in ward level meeting.

• Priotization of schemes.• Appoval & priotization of schemes in Union

Parishad meeting.• Recommendation from BGCC headed by

UNO.• 30% of both BBG & PBG to be used in the

schemes priotized by women.

Negative list

• Salary or financial support to UP functionaries.

• Micro credit program.

• Scheme having environmental & social negative impact.

• Schemes for religious institution.

• Schemes for UP(infrastructure, wall, furniture, equipment etc)

Reserve 10% of BBG & PBG

• May be used for capacity building of UP.

• Identified areas: training, peer learning, estimates for schemes, accounts keeping, data entry, women development forum.

• Unspent balance of 10% reserve fund may be used for scheme implementation.

Procurement Methodology

04(four) methods under LGSP-2:

• Direct method- up to BDT 25,000

• Community procurement- up to BDT 5,00,000(only earthwork)

• Request for Quotation(RFQ)- up to BDT 5,00,000

• Open Tender Method(OTM)- up to BDT 10,00,000

Responsibility to procure/implement

• Direct method- WC: implement; SSC: supervise & recommend to pay.

• Community procurement- WC: procure & pay labor from the advance, maintain master roll; SSC- supervise & recommend to pay.

• RFQ- WC: process procurement, provide work order, preserve & handover scheme documents; SSC: supervise & recommend to pay.

Responsibility to procure/ implement(cont.)

• OTM- UP: process procurement, issue work order;

• TEC: evaluate proposal & recommend to procure;

• WC: supervise implementation;

• SSC: supervise & recommend to pay.

Related Financial &Other Issues

• Separate cash book for LGSP-2

• Monthly bank reconciliation

• Advance & adjustment

• Running bill

• Payment through cross cheque

• No cash or bearer cheque to anybody

Payment under LGSP-2

• Smooth completion of scheme

• Recommendation from SSC

• Payment through cross cheque to chair person of WC(in case of direct purchase & Community purchase)

• Payment through cross cheque to contractor/supplier(in case of RFQ/OTM)

IT & VAT

Income Tax(IT)

• Up to BDT two lakh- 0%

• BDT two lakh one to five lakh- 1%

• BDT five lakh one to fifteen lakh- 2.5%

VAT

• Civil work- 5.5%

• Supply-4.0%

Roll over

• General condition of GFR- any unspent balance will be lapsed on 30th June.

• Exceptional instruction for LGSP-2

• No lapses of unspent balance of LGSP-2 fund on 30th June that will be carried over to next fiscal year as closing balance.

• Different financial year for PBG under UPGP(January-December).

Overall UP Audit Process

• The financial audit, performance assessment and safeguards compliance assessment for FYs 2012-13, 2013-14 & 2014-15 will consist of:

• (i) audit timeline and orientation/training to audit and other staff(20); (ii) actual field work in the Union Parishad and at the Upazila level(55); (iii) draft report preparation & submission(20); (iv) final report submission(65); and (v) submission of financial database(20).

• Entry meetings with DDLG & UNO. Exit meeting with UNO in presence of UP chairs.

• DFs will facilitate smooth functioning of audit & audit team will maintain liaison with DF regularly.

Field work by Audit Team

• The field-work at the UP level will be conducted by a team consisting of two auditors and one audit manager. The two auditors will work at least four days and the audit manager one day in each of the UPs in order to carry out the financial audit, performance assessment and compliance assessment.

• This field-work will also include some hours working at the Upazila level at the UNO, Upazila Engineer (LGED) and PIO offices.

Main Activities under Audit1. Financial audit:

• Examination of the annual financial statements of UPs and express an opinion on whether their financial statements present a true and fair view of the financial position of the UPs and of their financial performance in accordance with the relevant laws, rules and regulations prescribed by the Government of Bangladesh.

• Express an opinion on the adequacy of the internal controls practiced by the UP.

• Physical verification of at lest 10 schemes under LGSP-2 and at least 01 scheme each from other funds. 2. Performance assessment:

• Using a pre-determined methodology and indicators, measure the performance of UPs in a range of FM-related areas and provide an overall performance score for each UP.3. Assessment of compliance with environmental and social safeguards:

• Provide assurance on UP compliance with procedures and policies on environmental and social safeguards, as per pre-determined methodology and indicators for at least one UP in each Upazila.

Administrative Arrangements

• List of UPs to be audited

• LGD letter to all UPs

• LGD Letter to Local Administration

Arrangements by Audit Firms

• Calendar of UP audit timeline to NPD

• Audit program to UP

• Visit every UP for conducting audit

• Carry a letter and a photo ID card

• Inform concerned UNO with schedule of visit with a request of required assistance.

History of UP Audit by CA Firms

FY AFS UP under Audit No. of Unqualified/ Qualified Opinion

2006-2007 2005-2006 1088 1060

2007-2008 2006-2007 2250 2247

2008-2009 2007-2008 3370 3350

2009-2010 2008-2009 4486 4441

2010-2011 2009-2010 4486 4459

History of UP Audit by CA Firms(contd.)

FY AFS UP under Audit No. of Unqualified/ Qualified Opinion

2011-2012 2010-2011 4561 4439

2012-2013 2011-2012 4547 4481

Players for monitoring UP Audit

• C&AG

• UP audit by FAPAD

• Quality Assurance Cell

• ICAB

• Local Govt. Division

Role of Local Administration

• Deputy Director Local Government

• Upazila Nirbahi Officer

• District Facilitator

THANKS