Eswaraiah & Co. Chartered Accountants HIG 36, Phase V, KPHB Colony, Kukatpally, Hyderabad-85 Ph : 040-23390036 Email : contact@escas.in Website: www.escas.in To The Chief Executive Officer, SERP, Telangana Hyderabad. Introductory Paragraph We have audited the accompanying financial statements of the Telangana Rural Inclusive growth Project financed under World Bank Credit No. IDA Cr.5573-IN as of March 31, 2016. Our responsibility is to express an opinion on these financial statements based on our audit. Management's Responsibility for the Financial Statements The management is responsible with respect to the preparation of these financial statements that give a true and fair view of the financial position, financial performance of the scheme in accordance with the accounting principles generally accepted in India. This responsibility also includes the maintenance of adequate accounting records for safeguarding of the assets of the organization and for preventing and detecting the frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of internal financial control, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error. Scope Paragraph We conducted our audit in accordance with Auditing and Assurance Standards issued by the Institute of Chartered Accountants of India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Audit also includes assessing the accounting principles used and significant estimates made by Management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether Khairatabad Branch: Vijayawada Branch: Visakhapatnam Branch: 6-2-969/304, D.No. 40-12-5/2, Ramaswamy Street, D.No. 27-5-01, Intech Residency, Khairatabad, Beside Ram's Apartment, Padamatalanka, Old Karnavani Palem, Gajuwaka, Hyderabad - 500 004, T.S. Vijayawada - 520 010, A.P. Visakhapatnam - 530 044, A.P. Ir p\ Eswaraiah & Co. Chartered Accountants HIG 36 Phase V, KPHB Colony, Kukatpally. Hyderabad-85 Ph : 040-23390036 Email : contact@escas.in Website : www.escas.in due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Entity's preparation of the financial statements that give true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the financial statements. Opinion Paragraph In our opinion, the financial statements give a true and fair view of the Sources and Application of Funds and the financial position of Telangana Rural Inclusive Growth Project for the year ended March 31, 2016, in accordance with relevant national standards and the financial position for the period ended March 31,2016. In addition to the above, (a) with respect to IFRs adequate supporting documentation has been maintained to support claims to the World Bank for reimbursements of expenditures incurred; and (b) which expenditures are eligible for financing under the Credit Agreement IDA Cr.5573-IN. (c) the IFR submitted and procedure and internal controls involved in their preparation can be relied upon to support the withdrawals. For Eswaraiah& Co Chartered Accountants Firm RegistratioANo.006157S Steemyasa Rao G 43rier Place: Hyderabad Membership No: 027565 Date: 25.04.2017 Khairatabad Branch: Vijayawada Branch: Visakhapatnam Branch: 6-2-969/304, D.No. 40-12-5/2, Ramaswamy Street, D.No. 27-5-01, Intech Residency, Khairatabad, Beside Ram's Apartment, Padamatalanka, Old Karnavani Palem, Gajuwaka, Hyderabad - 500 004, TS. Vijavawada - 520 010, A.P. Visakhantnam - AA A 0 Eswaraiah & Co. Chartered Accountants HIG 36, Phase V, KPHB Colony Kukatpally, Hyderabad-85 Ph 040-23390036 EmaJl contact@escas in Website :wwwescas.in To The Project Management, Telangana Rural Inclusive Growth Project (TRIGP) In connection with our audit of the financial statements of the Telangana Rural Inclusive Growth Project for the year ended 31 March, 2016, we familiarized ourselves with Project documents and the internal guidelines / circulars applicable during the period under audit. We also reviewed the business of the Project and evaluated the accounting systems and related internal controls of the Project in order to plan and perform our audit. This Letter to Project Management includes observations noted during the course of our audit examination in the following areas: * Matters having a significant impact on the implementation of the Project * Opportunities for strengthening financial management records, systems and controls, together with recommendations for improvement * Status of maintenance of Project books and records * Accuracy of Project financial statements * Status of prior audit recommendations The matters contained in this Management Letter are intended solely for the information of Project management, for such timely consideration and action as Project management may deem appropriate. They have all been considered by us in formulating the audit opinion expressed on the project financial statements in our audit report dated March 31,2016, and they do not alter the opinion expressed in that audit report. We wish to take this opportunity to thank Project Management for the courtesies and cooperation extended to our auditors. For Eswaraiah& Co Chartered Accountants Firm Registrat n No.006157S Sreenivasa ao G Partner Place: Hyderabad Membership No:027565 Date: 25.04.2017 Khairatabad Branch: Vijayawada Branch: Visakhapatnam Branch: 6-2-969/304, D.No. 40-12-5/2, Ramaswamy Street D.No. 27-5-01, Intech Residency, Khairatabad, Beside Ram's Apartment, Padamatalanka, Old Karnavani Palem, Gajuwaka, Hyderabad - 500 004, TS. Vijayawada -520 010, A. P. Visakhanatnam - 53'40 (A A P Society for Elimination of Rural Poverty - Telangana Telangana Rural Inclusive Growth Project- World Bank Receipts and Paymcnets Account for the year ended 31 st March,20J16 Receipts Schedule Rs. Payments Schedule Rs. To Opening Bank balance 0 To Bank account opening 1,500 By Programme wise expenditure To Miscellaneous receipts By Value chain componeret 19,224,158 To Bank Interest 1 2,251,827 By Human development 4,355,475 To Grant Received from Telangana Govt By Digital local Government 324,997 To GrantS 2 75,000,000 By Project Implmentation Support 6,504,626 By Loans By SSP 50,000,000 Loans By closing outstanding advances 3 3,666,600 SSP 50000,000 By Closing Bank balances 4 33,177,471 Total 127,253,327 Total 12,53,327 For Eswaraiah & Co Chartered Accountants By ValechaicompoN 006n157S SERP- Telangana S RP-rt ngana eship No: 027565 Place: Hyderabad Date: -.t.-b Society for Elimination of Rural Poverty - Telangana Telangana Rural Inclusive Growth Project- World Bank Income and Expenditure Account for the year ended 31st March,2016 Expenditure Rs, Income Ras. To Miscellaneous payments BY Miscellaneous receipts To Programme wise expenditure BY Bank Interest 2,251,827 To Value chain componenet 19,224,158 BY Grant Received from Telangana Govt. To Human development 4,355,475 BY Grant 75,000,000 To Digital local Government 324,997 To Project Implementation Support 16,504,626 To Excess of Income over expenditure 36,842,571 Total 77,251,827 Total 77,251,827 For Eswaraiah & Co Chartered Accountants irm,Registration No,#06157S Sreex a Rao G Director (Finance) Chie'Ex E utive officer SERP- Telangana SERP-Tngana bership No: 027565 Place: Hyderabad Date. 17 Society for Elimination of Rural Poverty - Telangana Telangana Rural Inclusive Growth Project- World Bank Balance sheet as on 31st March,2016 Liabilities Rs. Assets SCH Rs. Opening Capital fund - Advances receivable 4 3,666,600 Add:Excess of Income over expenditure 36,844,071 36,844,071 Closing bank balances 3 33,177,471 36,844,071 36,844,071 For Eswaralah & Co Clart red Accountants Viin 'Restration N 06157S ree Ra Director (Finance) Chief Execi t cer SERP- relangana SERP-Tela gana mnbership No: 027565 Place: Hyderabad Date: -c0 -.orl Schedule-1 SPMU Bank Interest S.No Particulars Amount I Reserve 808,784 2 Nodal SBH 1,432,126 3 Cost Center 8,861 Total 2,249,771 Bank Interest S.No Particulars Amount I SPMU 2,249,771 2 Ranga Reddy 163 3 Warangal 4 Nalgonda 5 Medak 875 6 Nizambad 248 7 Mahabobnagar . 8 Adilabad 9 Karimnagar 493 10 Khammam 11 Badrachalam 12 Utnoor 277 13 Eturunagaram . 2,251,827 Schedule- 2 - Grants Sno Particulars Amount 1 Govt.Of Telangana 75,000,000 Schedule-3-Advances S.No Particulars Amount 1 SPMU 131,000 2 Khammam 28,000 3 Kowdipalli 1,095,000 4 Kaveri Mandal 1,095,000 5 Narayanpur 1,095,000 6 Adilabad 50,000 7 Karimnagar 60,000 8 Nalgonda 112,600 Grand Total 3,666,600 Schedule-4-SPMU Bank balances Name of the Name of Balance as on S.No. account the bank 31.03.2016 1 Reserve account IDBI 808,784 2 Cost Center SBH 29,931 3 Nodal SBH 32,306,665 Grand Total 33,145,380 DPMU Bank Balances S No Level District Account Closing Balances 1 DPMU Ranga Re Cost Centre 163 2 DPMU Warangal Cost Centre - 3 DPMU Nalgonda Cost Centre - 4 DPMU Medak Cost Centre 750 5 DPMU Nizambad Cost Centre 6,711 6 DPMU Mahabobr Cost Centre - 7 DPMU Adilabad Cost Centre 445 8 DPMU Karimnag, Cost Centre 23,739 9 DPMU Khamman Cost Centre - 10 TPMU Badrachal; Cost Centre - II TPMU Utnoor Cost Centre 277 12 TPMU Eturunaga Cost Centre 6 Total B 32,091 NOTES TO THE ACCOUNTS 1. The books of accounts of the Telangana Rural Inclusive Growth Project (TRIGP) were closed for the period ended 31st March 2016 (01-04-2015 to 31-03-2016). 2. Accounting policies adopted a) Income recognition The grants received from the Government has been recognized on receipt basis. The interest on deposits has been recognized on receipt basis. b) Expenditure The Expenditure is considered on cash basis. The advances are adjusted against utilization certificate and balance carried to the next accounting period. 3. The State Management has informed that the unspent balances at the period ended 31-" March 2015 were spent in subsequent period i.e. from 01-04-2015 to 31-03-2016 and sought to carried forward of the unspent balances for utilization of same as grants for the period 01-04-2016 to 31-03-2017. For Eswaraiah&Co., Chartered Accountants FRN:006157S Sreenivbsa Rao G .Partn r M.No.027565. Place: Hyderabad, Date: 25.04.2017 FAReport |SERP -SPMU, Telanigana Financial Audit Report of TRIGP-SPMU,Telangana Index for Contents S. No. Particulars Page No. I Audit Team 3 II Abbreviations 4-5 III Grand Index 1 SPMU 7-16 Page 2 FAReport I SERP - SPMU, Telangana |. Audit Team S.No. Name of the Member Designation i CA. Mallikarjuna K Partner 2 Harish .V Article Assistant 3 Ruthwik CM Article Assistant FAReport SERP - SPMU, Teang a a Abbreviations Abbrevia S. No. tosFul forrn tions 1 SERP Society for Elimination of Rural Poverty 2 SPMU State Project Monitoring Unit 3 DPMU District Project Monitoring Unit 4 ZS ZillaSamakhya 5 MS MandalaSamakhya 6 DCB Demand Collection Balance 7 BRS Bank Reconciliation Statement 8 DWCRA Development of Women and Children in Rural Areas. 9 SHG Self Help Group 10 NPM Non Pesticides Management 11 CA Community Activist 12 VA Village Activist 13 MSA Mandalasamakhya Accountant 14 CMLT Community Management Level Training 15 AC Area Coordinator FAReport SERP - SPMU, TeIa 16 OB Office Bearer 17 CIF Community Involving Fund 18 SGSY Swarnajayanthi Gram SwarozgarYojana 19 DPM District Project Manager 20 SHG Self Help Group 21 ESI Employee State Insurance 22 EPF Employee Provident Fund 23 FTE's Fixed Tenure Employee's 24 CC Community Coordinator 25 TA Travelling Allowance 26 DA Dearness Allowance FAReport SERP - SPMU, TOd, n, :.-a Financial Audit Report of Telangana Rural Inclusive Growth Project (TRIGP)-SPMU,Telangana Index for Contents S. No. Particulars Page No. Detailed Observations & Recommendations 1 Non Accounting of Advances 7 2 Misclassification of heads in recording expenditure Difference in claiming of expenditure with World 3 9 bank FAReport SERP - SPMU, Teangana Non Accounting of Advances * The SPMU has given an amount of Rs.32,85,000/- as advance on 02.04.2015 to Kowdipafli MS,Kaveri MS, Narayanpur MS @ Rs.10,95,000/- each. * The same routed through EFMS of Assistance to SERP by creating TRIGP budget line id and tagged with TRIGP bank account. So the same is not reflecting in the EFMS of TRIGP. Due to non accounting of the same it may lead to differences between the SPMU advances and the concerned MS advances. * It may also lead to misappropriation of funds if the accounts are not upto date. * We may also face difficulties while recovering or adjusting the above advances. * Reconciliation should be done. * The above advances are to be adjusted with immediate effect. * lobe received. FAReport SERP - SPMU, Telangana Misclassification of heads in recording expenditure rnO * An amount of Rs.4,29,379/- proceedings generated in Human Development Component on 31st March, it was rejected by Director Finance login on the same day, however the same was not deleted from DPM Finance Login, the same was shown as expenditure in the IUFR, it was deleted from DPM Finance login after submission of the IUFR. During our audit process we have observed that,the SPMU and DPMUs have misclassified some of the expenditure The details are as follows. Cost center Amount Actual head Misclassified as Khammam 5,200 Livestock-Capacity PG & RA building Khammam 4,400 Livestock-Capacity PG & RA building Nalgonda 7,200 Capacity building PG & RA SPMU 5,700 Retail chain PG & RA component - Capacity Building SPMU 5,000 Retail Chain - PG & RA Capacity Bu ilding * EFMS does not have facility to passing the journal voucher entries. * Once it is disapproved by Director-Finance login, the same was to be deleted by the DPM-Finance immediately. * The heads are to be verified before booking expenditure. 2 P FAReport SERP - SPMU, Telangana 0 * They are to be reviewed at regular intervals, * Journal Voucher entries screen shall be provided. * To be received FAReport SERP - SPMU, Tel,ng Difference in claiming of expenditure * SPMU have sent the claim for Rs.6,22,34,824/- out of Rs.4,35,64,376/- which is equal to 70% of the total expenditure through their quarterly IUFR's(interim unaudited Financial Reports). * But as per the audit the total expenditure is Rs4,04,09,256/-out of which the World bank share amounts is Rs.2,82,86,479/- only. * The difference of Rs.1,52,77,897/- is due to the following reasons. * The differential expenditure is that the proceedings generated on 31st March,2016. But the same was posted in cash book on 2nd April,2016 which fall in the following Financial Year i.e. 2016-17. But the SPMU have prepared the lUFR based on the proceedings generated on 31't March,2016 as per website report. This may lead to booking of excess expenditure than actually incurred. *The society is following Cash basis of accounting. So the expenditure is to be booked when the amount is paid. * To be received