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  Archives » Report of The Independent Auditor Dt . 30/11/05
 
To,
Ms. Reema Nanavaty,
Project Director,
Jeevika - SEWA,
Sewa Reception Center,
Opp. Victoria Garden,
Bhadra, Ahmedabad – 380001.
November 30, 2005
Dear Ms. Nanavaty,
 
Re.: -    Special Assignment Special Audit of recoveries of Rs. 33 Lakhs raised by the special Auditor
  Verification of books and records of JEEVIKA – Livelihood security Project for Earth Quake Affected Rural Households in Gujarat, jointly implemented by
   
  (i) IFAD (International Fund For Agricultural Development)
(ii) WFP (Food Assistance)
(iii) GOI (Government of India)
(iv) GOG (Government of Gujarat)
(v) SEWA (Self-employed women's Association)
 
   
Pursuant to your office letter dated November 19,2005, we have carried out verification of books and records with reference to the terms and conditions mentioned therein. The verification of the books and records is conducted on the understanding that the SEWA being the one of the joint implementing agencies is entitled to conduct such verification. This Special Audit commenced on 21st November 2005. We have relied and considered the information & explanations given by the SEWA to us as genuine and on the basis of such information and explanations & verification of books of Account and records of “Jeevika Project” made available to us, We report as under :-
 
  History And Activities Profile :
  Self Employed Women’s Association (SEWA), Ahmedabad, is a member-based organization of poor self- employed women was established in 1972. The current membership of SEWA is 7,18,000 approx.

SEWA is the Lead Implementing Agency for the “Jeevika” – Livelihood Security Project for Earth Quake Affected Households in Gujarat programme, in partnership with International Fund for Agriculture Development (IFAD), Government of India (GOI) and Government of Gujarat (GOG). The project is being implemented since 2002.
 
  Purpose Of Special Audit :
  The purpose of this special audit is to present a report as per the terms of reference listed in the appointment letter. The government of Gujarat initiated a special audit of the Jeevika project from 29th April 2005 to 23rd August 2005. The Special Audit Report dated 23/08/05 of M/s. K. S. Brahmkshatriya & Co., Chartered Accountants, finalized the “recoveries to be made” aggregating to Rs. 33,23,914/-.

The purpose of our special assignment is to conduct special audit – to ascertain whether the “recoveries of Rs. 33,23,914/- pointed out are eligible and claimable expenses under the project.
 
  Factors / Points Considered By Us :
 
  We have conducted the special audit by applying generally accepted auditing practices in accordance with auditing standards generally accepted in India.
  We have based our report by considering the duly audited general purpose financial statements and the figures from the audited general purpose financial statements have been used and relied upon.
  “Jeevika” is an all encompassing project aimed at economic recovery of 40,000 rural households in the three affected districts of Gujarat. For the first time, the National Government, the state government and a local grassroots membership based organization - all three – have jointly entered into a partnership agreement with a multilateral global organization such as IFAD. This pioneering initiative of the Government of India may also serve as a model for other member countries of IFAD. Unlike many development projects, Jeevika situates the responsibility for programmed planning, implementation and monitoring with the communities themselves. SEWA’s role is that of a convener, facilitator and capacity builder. As a project’s lead Implementing Agency, the SEWA has been recognized as the trustworthy institution and the discretionary powers / authorities exercised by it, needs to be treated with due regard.
 
 
  We have noted the contents of Para – 22 of dated 25-04-2005 of the Review Report of UNOPS (United Nations Office for Projects) for the review conducted in January 2005, which assumes importance in viewing the utilization of grants by SEWA. It is mentioned as follow:               Currently all SEWA staff who are involved with the project are paid less than those recruited as consultants or professional / technical staff, whilst in terms of workload and commitment they share them equally if not more. The Mission recommends that all SEWA staff who are directly involved with project activities should be provided with a project allowance to compensate for the “extra” workload undertaken by them at the same time this would be developed for various levels of SEWA staff with responsibility for project activities. This scale and concept be taken to the next PRB for approval and implementation.
  We have considered all the interim as well as final replies / responses by the SEWA to the Special Audior’s comments / observations / remarks / queries. We have also considered the audit reports of M/s. Pankaj R. Parikh & Co., Chartered Accountants and M/s. Asim Mehta & Associates, Chartered Accountants, who have conducted audit for the 3 years (F.Y. 2002-2003, 2003-2004 & 2004-2005). It is relevant to note that no serious / adverse comment or any exceptional or unusual matters has been disclosed by them on the matters regarding (i) review of accounting system & related internal controls, (ii) monitoring of operations, (iii) examination of financial & operating information, (iv) examination of the economy, efficiency & effectiveness of operations including non-financial controls of an organization. It is pertinent to note that their reports do not disclose any amount, which is not eligible & which can not be claimed under the “project”. Further, due consideration is given to their professional & Technical competence, experience, & reputation which they posses. The Special Auditors M/s. K. S. Brahmkshatriya & Co., Chartered Accountants, has also not given any other observations, other than final Audit responses on the “Amounts to be recovered”. Further to above, we have obtained additional information and explanations, which to the best of our knowledge and belief were necessary for the purpose of our audit.
  We have noted that the SEWA JEEVIKA organization (Auditee-entity) to the best of their knowledge has generally obtained and kept on record such evidences, which are appropriate in terms of its relevance and reliability.
 
  We have considered various guidance notes, statements & standards issued by the Institute of Chartered Accountants of India.                
  The relevant standards are mentioned as follow :
 
"Accounting Standard - 12" : "Accounting for Government Grants" issued by the Institute of Chartered Accountants of India.
Definitions :
3.1 Government refers to government, government agencies and similar bodies whether local, national or inter national.
3.2 Government grants are ..... for past or future compliance with certain conditions.
"Auditing and Assurance Standard - 20" : "Knowledge of the Business" issued by the Institute of Chartered Accountants of India.
1. ...... the auditor should have or obtain knowledge of the business sufficient to enable the auditor to identify and understand the events, transactions and practices that, .....
 
 

"Auditing and Assurance Standard (AAS) 5" : "Audit Evidence", issued by the Council of the Institute of Chartered Accountants of India.
1. "Basic Principles Governing an Audit", states :
"The auditor should obtain sufficient appropriate audit evidence through the performance of compliance and substantive procedures to enable him to draw reasonable conclusions there from on which to base his opinion on the financial information. Sufficient Appropriate Audit Evidence

2. Sufficiency and appropriateness are interrelated and apply to evidence obtained from both compliance and substantive procedures. Sufficiency refers to the quantum of audit evidence obtained; appropriateness relates to its relevance and reliability. Normally, the auditor finds it necessary to rely on evidence that is persuasive rather than conclusive. He may often seek evidence from different sources or of different nature to support the same assertion.

3. The auditor's judgment as to what is sufficient appropriate audit evidence is influenced by such factors as:
(a)
(i) The nature of the item.
(ii) The nature or size of the business carried on by the entity.
(b) The materiality of the item.
(c) The experience gained during previous audits.

6. Obtaining audit evidence from substantive procedures is intended to

Occurrence - that a transaction or event took place which pertains to the entity during the relevant period.
Measurement - that a transaction is recorded in the proper amount and revenue or expense is allocated to the proper period.

7. The reliability of audit evidence depends on its source - internal or external, and on its nature - visual, documentary or oral. While the reliability of audit evidence is dependent on the circumstances under which it is obtained.

9. The auditor should be thorough in his efforts to obtain evidence and BE OBJECTIVE in its evaluation.

 
  We have noted the various directions & terms / conditions of loan agreements. The relevant paragraphs are mentioned as follow : -
   
  [A] Project Loan Agreement (Livelihood Security Project For Earthquake - Affected Rural households In Gujarat) between the Republic of India and the International Fund for Agricultural Development Dated 18 February 2002.
Article III The Project
Section 3.01: Project Implementation. ....... the Borrower shall ensure or cause the State to ensure that the Lead Project Agency and each of the other Project Parties shall carry out the Project :
a. with due diligence and efficiency;
b. in conformity with all appropriate administrative, engineering, financial, economic, operational, environment, agricultural development practices (including rural development practices) and good governance;
d. substantially in accordance with the AWPBs;
   
 
  Article V
Financial Reporting and Information
Section 5.02: Audit Reports. (a) Within 90 days after the Effective Date, the Lead Project Agency shall appoint, in consultation with the PRC and with the prior approval of the State and the Fund, independent auditors selected in accordance with the procedures and criteria agreed upon by the Lead Project Agency, the State and the Fund to audit.
Schedule 1 : Project Description
All the clauses from 1 to 5.6
Project Areas ...
Target group ....
Goal ........
Purposes .....
Components ....
Schedule 2 :
Allocation and Withdrawal of Loan Proceeds
3. Statements of Expenditure. Withdrawals from the Loan Account in respect of expenditures and contracts valued at less than USD 50,000 or its equivalent shall be made against certified statements of expenditure. The records evidencing such expenditures need not be submitted to the Fund, but shall be retained by the Borrower for inspection by the representatives of the Fund and the Cooperating Institution,
 
Schedule 3:
Project Implementation
A. Organization and management
2. Lead Project Agency
2.1 Designation and Composition.
SEWA in its capacity as Lead Project Agency, shall have overall responsibility for the implementation of the Project.
2.2 Responsibilities, SEWA shall implement the Project within its existing organizational structure and operating procedures, consistent with it obligations under the Project. The SEWA head office shall be responsible for coordinating ongoing technical and managerial support to the District Associations, with support from SEWA Sister Agencies, and shall outsource technical, marketing and other services to such governmental, voluntary or private sector agencies as agreed by the PRC.
   
 
  3.3 Project Review Committee: The State shall establish a joint project review committee (“PRC”). The PRC shall be comprised of senior State government officials, SEWA senior management and outside development experts accepted by the Fund.
13. Disaster preparedness capacity building :- This sub-component shall be implemented by the Disaster Mitigation Institute …………. Which has already successfully developed and piloted such approaches with communities in the project aread.
   
  Schedule 4 :
Procurement
Part B. Procurement of goods
7. Local Competitive Bidding: Each contract for the supply of goods estimated to cost USD 25,000 equivalent or more shall be awarded on the basis of competitive bidding advertised locally, in accordance with procedures approved by the Cooperating Institution.
8. Local Shopping: Each contract for the supply of goods estimated to cost USD 10,000 equivalent or more but less than USD 25,000 equivalent shall be awarded on the basis of local shopping or competitive bidding advertised locally, in accordance with procedures approved by the Cooperating Institution.
9. Direct Contracting: Each contract for the supply of goods estimated to cost USD 10,000 equivalent or less may be awarded through direct contracting with the contractor or supplier on terms and conditions approved by the Cooperating Institution.
 
   
  [B] Project Agreement (Livelihood Security Project For Earthquake - Affected Rural households In Gujarat) between the International Fund for Agricultural Development, The State of Gujarat and the Self-Employed Women's Association Dated 18 February 2002.
Article II :
The Project
Section 2.01 Project Implementation. ........such goals and purposes, each of the State and SEWA shall, and shall ensure that each other Project Party shall, carry out the Project in the State :
a. with due diligence and efficiency ;
b. in conformity with all appropriate administrative, engineering, financial, economic, operational, environment, agricultural development practices (including rural development practices) and good governance;
d. substantially in accordance with the AWPBs;
 
  [C] Financing Agreement
.....entered into by government of Gujarat and SEWA with IFAD Use of funds
19. The project fund should be utilized according to the objectives and in the manner approved in the AWPB. Every amount under the project will be utilized by the implementing agency for the specific purpose for which it was sanctioned in the AWPB and approved by the PRC.
20. There will be no discrimination in the use of fund and in selection of beneficiaries/participants on the basis of race, caste, community or membership of any organization.
21. The total administrative costs under the project will be limited to 12% of the total project cost. The administrative cost will be defined and approved by the PRC.
   
  [D] International Fund For Agricultural Development.
General conditions for agricultural development financing. Dated : 2 December 1998.
“Project Agreement” means any agreement between fund and project party relating to the implementation of all or any part of the project, as such agreement may be amended or otherwise modified from time to time. The term “Project Agreement” includes these general conditions to the extent applied thereto, and all schedules, annexes and agreement supplemental there to.
   
 
  Section 4.10. Eligible expenditures.
(iv) The expenditure shall be incurred in accordance with the Loan Documents.
Article VII :
Implementation of the Project.
Section 7.01. Project Implementation.
The lead Project agency and each of the other Project Parties shall carry out the Project.
(a) with due diligence and efficiency;
(b) in conformity with appropriate administrative, engineering, financial, economic, operational, environment, and agricultural development practices (including rural development practices) and good governance;
(d) in accordance with the provisions of the Loan Agreement, any Project Agreement and any other Loan Document; and

Section 7.17 Use of the Name and Insignia of the Fund
To the fullest extent practicable, all Project facilities and vehicles shall bear the name and insignia of the fund and otherwise identify the Project as being financed by the Fund. Publication by any Loan Party or Project Party concerning the Project shall mention the fund and contribution to the Project.
Article IX
Financial Reporting and Information.
Section 9.03 Audit of Accounts.
(a) ........ audited in accordance with appropriate auditing principle consistently applied by independent auditors specified in the Loan Documents.
 
  The expression "due diligence" has been mentioned by the loan & other agreements for the purposes of Project Implementation. It is to be understood in the context of the prevailing circumstances under which the transaction / activity is being carried out .

The Black's Law Dictionary defines the term 'due diligence' as a measure of prudence, activity, or assiduity, as is properly to be expected from, and ordinarily exercised by, a reasonable and prudent man under the particular circumstances. The Dictionary further mentions that Due Diligence can not be measured by using any absolute standard. Due Diligence depends upon the relative facts of the special case.

The interpretation will have to be viewed by the exercise of judicious discretion and judgment taking into account all the relevant factors. There will always be several factors, e.g. exigencies of the requirements, quality & integrity of the management, sincerity of the efforts, adequacy of care, circumstances prevailing at the time of incurring of the liability etc.
 
  Further, the expression "substantially in accordance with the AWPBS" is also mentioned by the loan and other agreements for the purposes of project implementation. It is relevant that all the expenditures incurred are well within the Budgeted amounts & are approved & sanctioned in PRC meetings. It can be construed that even in cases of small amounts where it is not in accordance with AWPBS, than also such expenses are eligible & claimable under the project.
As contemplated by the loan & other agreements, the SEWA - JEEVIKA project had constituted the Project Review Committee (PRC) comprising of senior state level officials, Sewa senior organizers and outside professional. Meetings were organized and various Agenda items were transacted during those meetings.
Relevant items & dates of meetings are as follow :
Date Agenda (Only important items)
2-07-2002 Approval of AWPB
26-12-2002 Manpower recruitment / structure for the project. Purchase plan / procurement
8-4-2003 Approval of AWPB for the year 2003-2004 Staff recruitments, formation of PRC committees
30-5-2003
7-6-2004 Approval of AWPB 2004-2005

We have noted that in the PRC meting held on 8-4-2003, Item regarding maintenance of Time & Activity sheets for staff of sister organizations was discussed. It was decided that the system be implemented only on "trial basis" only. The meaning which is understood is that the worksheets of the staff of the sister organizations do not assume significant importance and it should not be accorded as absolute & necessary requirement. At best, it be considered as secondary / allied evidence for Audit purposes.
 
We have considered the source data used, the assumptions & methods used and the underlined substance of the transaction. In exceptional cases, to understand the inconsistencies / deviations, further additional records / information which constitute appropriate audit evidence in support of the financial information have been obtained and considered by us.
 
We have noted that all the expenses paid to AIDMI, SEWA ACADEMY, STFCC, SEWA BANK - amount of Salaries, allowances, hire charges, etc. is based on the summarized working sheets (mandays), % of expenses or any other justifiable basis. We further note that as per the internal financial and accounting control systems followed, the calculations adopted is followed for all the projects and the same is followed for the Jeevika. The assumptions and methods are fair and its appropriateness & reasonableness of such methods & their applications are exercised with high degree of responsibility & care. In absence of SEWA - Jeevika's own field staff for carrying allied / similar activities, we are of the view that the systems followed are appropriate & adequate.
 
  All India Disaster Mitigation Institute (AIDMI) As per the special Auditor’s opinion, the aggregate amount to be recovered is Rs.33.24/- lacs out of which Rs. 19.91/- lacs (Say 60%) relates to the expenses incurred and payments made to all India Disaster Mitigation Institute. (AIDMI) It is pertinent to consider the relevant information about DMI, which is as follows : 
All India Disaster Mitigation Institute (AIDMI) is a community based action research, action planning, and action advocacy organization that bridges the gap between policy, practice, and research from the community to national level. It was established after the repeated droughts in India between 1987-89 and has since been working with the victims of different types of disasters including the January 2001 Gujarat earthquake. AIDMI’s paramount interest is in the poor among the victim and vulnerable communities. AIDMI’s objective is to make more resources (financial and other) flow to these communities. Established after the 1987-89 repeat droughts in Gujarat, it has four programs: food security, water security, shelter security and livelihood security.
 
 
  In response to the December 2004 tsunami, AIDMI carried out an impact and need assessment and accordingly supported population affected due to Tsunami in coastal villages of Tamil Nadu and Pondicherry.

In July 2005, sudden and heavy fall rain in a short time span; unplanned development of roads, housing, industries, canals, and irrigation without regard for flow of water course; and lack of resources- trained human and financial-with local panchayats and bodies resulted into floods in Gujarat, India, causing heavy damage. AIDMI also undertook the relief / other operations.
  After 2005 Kashmir Earthquake, AIDMI conducted a rapid assessment in the affected low-income communities.
Further, it is to be noted that the activities of DMI is reviewed favourably by IFAD & UNOPS (United nations office for projects) at regular intervals (e.g feb.2003, Dec.2003 & January 2005). Relevant abstracts are as follow :

Agreed Minutes of Negotiations
1. The negotiations between the Government of India (GOI), SEWA and IFAD on the above project were held in IFAD Headquarters in Rome on 3 to 5 September 2001.
9. (iv) ................... The SEWA Delegation represented that in view of the expertise that the Disaster Mitigation Institute (DMI) has developed and its involvement with similar activities in Gujarat, the sup-component related to the disaster preparedness capacity building will be implemented by the DMI.
Review Mission - 8-17 December 2003
AIDE MEMOIRE

Conformed Copy
1. Introduction
1. .................. A wrap-up meeting to review the findings and recommendations with GOG and SEWA was held at Ghandhinagar on 17 December 2003 and chaired by Mr. J.N. Sinh, Secretary, Rural Development Department..........
Disaster Preparedness & Mitigation
40. The Mission visited one community-learning center at Kharagodha, where disaster mitigation training was conducted. The mission is impressed with the coverage of materials, presentation and methodology used. The Mission recommends that similar orientation and use of practical situations be used in the training of other activities in the project.
41. Although the first batch of Disaster Preparedness Training are the spearhead teams of the villages, follow-up of their field based training to their counterpart villagers should be monitored. The Mission was informed that a mock disaster preparedness exercise would be conducted to test the effectiveness of the training.
42. The store of the range of equipment to serve as a library of equipment and materials should be expanded to include as many of the day-to-day tools used by the landless to earn their daily wage as labourers. It should be supported and maintained through training and record keeping facilities by select representative of VDC who would be responsible for this activity. It should also include facility for sharpening of the tools.
Follow-Up Mission-29 June to 3 July 2004
AIDE MEMOIRE
Conformed Copy
I. Introduction ...........A Wrap-up meeting with GOG and SEWA was held at Ghandhinagar on 3 July 2004 and chaired by Mr.P.K.Laheri. Chief Secretary of GOG.
Disaster Preparedness: DMI
6. The Mission was briefed on the progress made by DMI at its on 2 July. The Mission is pleased with the progress made.
   
  Sewa Academy
   
  As per the Special Auditor’s opinion, “the amounts to be recovered” includes expenses incurred and payments made to SEWA-ACADEMY

          The summarized data of expenditure of SEWA-ACADEMY is as follow :
 
 

Sr. No Particulars 2002-2003 2003-2004 2004-2005 Total
(i) Total Expenses of SEWA Academy 64.64 71.15 181.93 317.73
(ii) Expenses of Jeevika 1.24 17.38 15.88 34.50
% of (ii) to (i) 1.92 24.42 8.72 10.86
(iii) Recoveries to be made as per Special Audit 0.07 0.45 1.95 2.47
% of (iii) to (i) 0.10 0.63 1.07 0.78
   
  Year wise Summarized position of “Amounts to be Recovered” pointed by Special Auditor is as under :
   
 
          (Rs. in Lakhs)
Districts / Sister Concerns
2002-2003 2003-2004 2004-2005 Grand Total

Grant Utilised Recove-ries as per Special Audit Grant Utilised Recove-ries as per Special Audit Grant Utilised Recove-ries as per Special Audit Total of Three Years -Grant utilised Recove-ries as per Special Audit (%) of total Expen-se
Trade Facilitation Unit 1.76 0.00 10.09 4.15 39.17 0.00 51.02 4.15 8.13
Project Management Unit, Disaster Miti. Institute, Kutch Craft Association, Surendranagar Mahila Bal Vikas Madal 29.58 6.23 172.24 3.41 443.71 16.99 645.53 26.63 4.13
Sewa Academy 1.24 0.06 17.38 0.45 15.88 1.95 34.50 2.46 7.13
Sewa Bank 1.81 0.00 9.69 0.00 11.79 0.00 23.29 0.00 0.00
Sewa Micro Insurance Promotion Div 0.35 0.00 2.68 0.00 4.25 0.00 7.28 0.00 0.00
Health Care 0.91 0.00 2.02 0.00 1.69 0.00 4.62 0.00 0.00
Mahila Housing Trust 0.00 0.00 0.10 0.00 0.00 0.00 0.10 0.00 0.00
Grand Total 35.65 6.29 214.20 8.01 516.49 18.94 766.34 33.24  4.34%
   
  From the above it is understood that aggregate amount of “Amounts to be recovered” is 4.34% of the total grants utilized by the Jeevika Project. When viewed in totality, it indicates that overall the project is implemented satisfactorily.       
   
 
  Observations With Terms of Referance :
   
  Verification of the books and records – to ascertain that the recoveries of Rs. 33,23,914/- pointed out are claimable and eligible expenses under the project.               We have verified the observations of Special Auditors M/s.K.S. Brahankshatriya & Co., where the amount to be recovered is mentioned as “Pending”, “Allowed” or “Accepted by Jeevika and allowed by Special Auditor”. These expenditures are either allowed / accepted or the Special Auditors have not finalized its conclusion. We have observed that in all such cases there are adequate supportings / proper justification to treat the same as eligible & claimable expenditure under the project. In view of this, comments on such items are excluded from our report. In other cases, on the basis of our verification of the books of accounts & records of “Jeevika” project & after obtaining sufficient appropriate audit evidences as we considered appropriate, we report our comments / observations as follow :
   
 
Sr. No. Ref. No. Special Auditor’s Objections & Amounts involved (in Rs.) Special Auditors' Responses Our Observations / Comments Eligible & Claimable Amount (in Rs.)
Disaster Mitigation Institution
1 1 Expenses on Community Curriculum A/C

131770/-
232120/-
125780/-
As per the Reply to the Special Auditor, no time Sheet or Work Sheet was maintained. But later on after one month they have submitted time sheet, which was prepared only after the audit. These sheets are not reliable as some of them are post dated. It represents expenses incurred mainly for inter-review with DMI - co-ordination - Rs.1,60,000/- 7 (seven) Experts / Consultation exp. - Rs.2,22,595/- Brochure,Layout, Designing Typing & Module Draft Rs. 81,375/- The payments are made to DMI. The SEWA has maintained the summarized data / records for the expenses which is adequate for the monitoring purpose. We have noted that the timesheets / worksheets of the payee-entity do not warrant for the close / detailed checking by SEWA. However, on consideration of the out-put of the workshop - i.e. modules etc. the expenditure is proper & reasonable and is eligible & claimable under project. Rs.4,89,670/-
2 2 Expenses booked under the CBDR, CBDM, and EMR.

14,11,445/-
  It pertains to 28 meetings conducted on various dates and at various places. (different villages) It is noted that adequate documents / supportings i.e. Training programme, Registration details, group photos of participants, summarized report are on the record. The expenditure comprises mainly of projector, computer time, Telephone expenses, Electricity charges, Team members' time, etc. It is further noted that the expenses incurred are systematically monitored & the expenses are apportioned / linked on rational basis by the DMI (payee-entity) and these are reasonable and are not excessive as compared to market rates. As explained by SEWA-Jeevika, certain costs such as designing costs are not charged by DMI. It is given free to SEWA & to the project. On consideration of the various related papers & details, all the expenses aggregating to Rs. 14,11445/- is eligible & claimable. Rs.14,11,445/-
3 3 Payment of Festival Allowance to their employees and it is a rule of the DMI.

89,402/-
The Festival allowance given to the DMI consultants or non employees are recoverable. The SEWA-Jeevika has made payments to DMI. The expenditure incurred is accounted as DMI-festival allowance as part or in lieu of the remuneration / employee / consultant expenses for the services received / rendered. We have noted that the nomenclature used by payee-entity-DMI and whether it is allowable or not do not warrant any extra verification by SEWA - JEEVIKA. Further, the accounting treatment and presentation of transactions and events should be governed by their substance and not merely by the legal form - i.e. account heads etc. Hence the expenses are considered as eligible & claimable. Rs.89, 402/-
(a) Total Rs. 19,90,517/-
SEWA Academy
4 4 Hall rent charged by SEWA MAHILA GRAM HAAT (SGMH)

Rs. 24,250/-
As the SGMH project is funded by the Government of Gujarat and also as per the terms and condition of the project the building cannot be given on rent basis. It is noted that meetings were held, minutes as evidence are on record. It is established that Sewa-Jeevika had incurred liability for services rendered /received to them. The estimates & assumptions used in presenting (accounting) the same in the books of account is reasonable & appropriate and it is independent of the rights & obligations of the payee-entity (SGMH). On the basis of reasonableness of the estimates & assumptions made, the expenses are eligible & claimable under the project. Rs.24,250/-
5 6 Payments related to Research activities

Rs. 45,680/-
All the expenses were made on the various dates. And all the payments related to research activities of SEWA Academy. Without the compulsion of auditor they have reversed the entry & cheque deposited but to misguide the authorities, it was rebooked. - Not acceptable. Proper administrative procedures were complied. On erroneous understanding it was reversed by J.V dated 31-3-2005. But later on, the error was noticed and on its rectification, it was debited as expenses as of "Jeevika". Further, we have observed that stock register with details as to balance stock is also maintained. On consideration of the genuineness of the expenses, the expenses of Rs.45680/- are eligible & claimable under the project. Rs.45,680/-
6 7 Contract with Dr. V.K. Mishra to complete the CCNAA

Rs. 28,632/-
As per the mutually worked out budget a total sum of Rs. 2,80,500/- (including the consultancy fees of Rs. 1,60,000/-) is approved as a lump sum amount to be paid to Dr. V. K. Mishra, by Jeevika project to carry out and complete the CCNAA assignment. However, "Jeevika shall provide the transport facility for field visits from SEWA. Ahmedabad to district (village level) and return to Ahmedabad. But the expenditure mentioned here are booked for lodging, boarding, and transportation charges for Dr. V.K. Mishra, which should be recovered The expenditure is within the budgeted amount. The terms of reference had not strictly specified the conditions as to re-imbursement of expenses. However, on consideration of the factors like, Dr. Mishra's (recipient) old age, his expertise, prevailing practice of re-imbursement of expenses to consultants, post approval of the expenses, business environment, the quantum of expenses, its proportion to total consultancy charges, the expenses are genuine & reasonable and are eligible & claimable under the project. Rs.28,632/-
7 10-a Printing of various books and posters

Rs. 8,300/-
Payment for preparation of media resource materials cost of 3000 books there were no logo of project. No proof was given as to how this is related to the Project. Section 7.17. - Use of the Name and Insignia of the fund of Article - VII Implementation of project of general conditions for agricultural development financing dated 2nd December 1998 as referred in the loan agreement mentions that "to the fullest extent practicable..." It also contemplates that there could be situations when it may not be practicable and it is not mandatory & strict condition for adherence. Nevertheless the underlying intentions has been complied in subsequent publications either by having logo printed or by affixing the stickers etc. However, the expenditure relating to publication of books / posters have been incurred. As explained, due to the operational constraints, such error of not having logo had occurred. Under the circumstances the error seems bonafide and can be excused. On notice of such discrepancy, it was rectified by affixing stickers bearing logo of the project. On consideration of the, subsequent developments, the initial expenditure incurred is eligible & claimable under the project. Rs.8,300/-
8 10-b Preparation of posters newsletters.

Rs.22, 000/-
The same expenditure is not relates to the Jeevika project which is accepted by them and hence recoverable. The expenditure is not fully identifiable with the project hence, considered as ineligible which can not be claimed under the project. Rs.Nil 
9 10-c Payment for printing expenses

Rs. 7,900/-
Rs. 7,900/-
Rs. 7,300/-
Rs. 7,900/-
As per the minuets of purchase committee the demand raised from SEWA-Health. Hence, it should be booked there. Recoverable. Additional information about the expenditure incurred, objectives of such materials & its utilization is satisfactory & reasonable. Proper administrative procedures were complied with. Further, we have observed that stock register with details as to balance stock is also maintained. On consideration of the genuineness of the expenses, the expenses of Rs.31,000/- are eligible & claimable under the project. Rs.31,000/-
10 10-d Printing charges of a book titled "Sahiyari Saurat"

Rs. 21,250/-
Rs. 4,000/-
While going through the book nowhere the logo of the project was used or name of the project was mentioned on the book. Hence, the expenditures are recoverable. Additional information about the expenditure incurred, objectives of such materials & its utilization is satisfactory & reasonable. Proper administrative procedures were complied with. Further, we have observed that stock register with details as to balance stock is also maintained. On consideration of the genuineness of the expenses, the expenses of Rs.25,250/- are eligible & claimable under the project. Rs.25,250/-
11 10-e Preparation of Media Resource Materials.

Rs. 37,594/-
As per the minutes of purchase committee it is clearly mentioned that the expenditure is of SEWA forestry and not of SEWA Academy. Hence, the same should be recovered. If possible can be booked in SEWA forestry. Additional information about the expenditure incurred, objectives of such materials & its utilization is satisfactory & reasonable. Proper administrative procedures were complied with. Further, we have observed that stock register with details as to balance stock is also maintained. On consideration of the genuineness of the expenses, the expenses of Rs.37,594/- are eligible & claimable under the project. Rs.37,594/-
12 10-f Preparation of posters, newsletter, library expenses.

Rs. 21,000/-
Preparation of posters and newsletters and library exp. Being poster printing charges of vermicompost posters. It is also an expenditure of SEWA forestry and not of the Sewa Jeevika Project can be booked in forestry. Additional information about the expenditure incurred, objectives of such materials & its utilization is satisfactory & reasonable. Proper administrative procedures were complied with. Further, we have observed that stock register with details as to balance stock is also maintained. On consideration of the genuineness of the expenses, the expenses of Rs.21,000/- are eligible & claimable under the project. Rs.21,000/-
13 15 Payments made to Gawara Graphics for snatching developing photographs of forestry.

Rs. 2,160/-
The expense is relates to Forestry and should not be booked under the SEWA Academy. Recoverable. Additional information about the expenditure incurred, objectives of such materials & its utilization is satisfactory & reasonable. Proper administrative procedures were complied with. Further, we have observed that stock register with details as to balance stock is also maintained. On consideration of the genuineness of the expenses, the expenses of Rs.2,160/- are eligible & claimable under the project. Rs.2,160/-
14 16 Excess Salary payments to Hinaben Patel

Rs. 933/-
Excess salary should be recovered from Hinaben and same was recovered. The excess amount has resulted due to arithmetical error since rectified. The amount can not be claimed under the project. Rs. Nil 
b) Total Rs.2,23,866/-
Sewa (Pmu)
15 1 Rent of Jeevika

Rs. 2,72,133/-
Rent of Rs. 2,70,883/- is reversed but not deposited back in the Jeevika accounts. The rent was paid to SGM for using their premises the said premises was funded by GOG and as per the terms and conditions no rent can be charged hence above is to be recovered. It is noted that meetings were held, minutes as evidence are on record. It is established that Sewa-Jeevika had incurred liability for services rendered /received to them. The estimates & assumptions used in presenting (accounting) the same in the books of account is reasonable & appropriate and it is independent of the rights & obligations of the payee-entity (SGMH). On the basis of reasonableness of the estimates & assumptions made, the expenses are eligible & claimable under the project. Rs.2,70,883/-
16 2 Rent of TFC office

Rs. 3,80,000/-
Rent of Rs. 3,80,000/- paid to SGMH is to be recovered. It is noted that meetings were held, minutes as evidence are on record. It is established that Sewa-Jeevika had incurred liability for services rendered /received to them. The estimates & assumptions used in presenting (accounting) the same in the books of account is reasonable & appropriate and it is independent of the rights & obligations of the payee-entity (SGMH). On the basis of reasonableness of the estimates & assumptions made, the expenses are eligible & claimable under the project. Rs.3,80,000/-
17 7 New year greeting card and purchase of dupatta

1) Rs.2,700/-
2) Rs. 100/-
3) Rs.8, 841/-
1) New year cards of Rs.2,700/- acceptable.
2) Dupatta gift to employee not acceptable
3) Explanation for computer installation charges of

Rs. 8, 841/-
Considering the amount involved, i.e. Rs. 100/-, the customary practice of appreciating, motivating the female employee, the amount of Dupatta gift is considered as eligible & claimable under the project. Rs.100/-
18 8 Salary of PMU office
Rs.21,000/- (as per the calculation of SEWA)
Salary of PMU staff paid in excess then what is approved by budget is to be recovered. After considering the effect of increment @ 15% for the next year budget, the expenses of Rs.21,000/- are eligible & claimable under the project. Rs.21,000/-
(c) Total Rs.6,71,983/-
Jeevika Trade Facilitation Center
19 12 International and national exhibition expenditure

Rs.3, 83,372/-
As per the explanation, it is expenditure on market research, development and product development, which is not acceptable at all. The expenditure of Rs.3,83,372/-was incurred at the exhibition cum sales fare. This expenditure incurred was for sales. As no details of sales and beneficiaries was provide to the special auditor hence cannot be allowed.
(Rs. In Lacs)
Particulars Berlin Bombay Banglore
Expenses 1.29 1.3 1.24
Total Sales 5.6 3.68 3.47


The STFC had participated in the trade fairs, All the above expenses has been part of the AWPB and approved by PRC. On consideration of the details as regards the sales made, exhibition and trade fair reports, products promoted sample distributed to reputed corporate houses, business initiation efforts with brands business houses, customer study etc. The expenditure of Rs.3,83,372/- is eligible and claimable under the Jeevika project.
Rs.3,83,372/-
20 14-a Other Remarks

Rs.18,201/-
Rs.13,042/-
Debited to market survey expenses. No details of expenses available. No reply from their side means they agree with us and recoverable. It represents Travelling, Lodging, Boarding Expenses incurred for Bombay Exhibition. The supporting evidences like room rent of YWCA, local train tickets, Rly-tickets tour reports of meetings with reputed business houses & on consideration of its relevance, the expenditure of Rs.31,243/- is eligible and claimable under the Jeevika project Rs.31,243/-
(d) Total Rs.4,14,615/-
   
  Conclusion
 
  Reasonableness and eligibility criteria of the expenditure should be based on true nature of the under lying transaction and the nature of the relevant circumstances under which such transactions have been incurred. In the context of SEWA - "Jeevika" project, consideration is given to the prevailing circumstances, nature and style of functioning of organization, transactions are viewed for its substance, correct interpretation of compliance of the terms & conditions / stipulations of the various agreements.

It is reasonably certain that all the above amounts (i.e. Rs. 33,00,981/-) are incurred & there are adequate supportings as to the documentary evidence and / or other evidences, which may / may not be conclusive but in substance is considered as adequate for the purposes. We are of the view that all the expenses (costs / fees / charges) are clearly attributable to the furtherance of goals & purposes of the "Jeevika" project which are considered as incurred in accordance with the loan documents, and therefore are eligible & claimable expenditure under the project.

Based on the above & on consideration of all the factors / points, & after application of suitable - normal & additional audit procedures for verification of the books & records, We are of the opinion that different amounts aggregating to Rs.33,23,914/- pointed out as "the amount to be recovered" as recoveries, needs reconsideration which includes amounts aggregating to expenditure of Rs.33,00,981/- which are eligible and claimable under the project.
   
  Thanking you,
  Yours faithfully,
  For M/S. KANTILAL PATEL & CO.,
CHARTERED ACCOUNTANTS
   
  ASHWIN AMIN
Partner
   
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Self Employed Women's Association
SEWA Reception Centre, Opp. Victoria Garden, Bhadra, Ahmedabad - 380 001. India.
Phone : 91-79-25506444 / 25506477 / 25506441, Fax : 91 - 79 - 25506446, Email :mail@sewa.org
     
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