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  Archives » Report of The Independent Auditor Dt . 22/2/06
 
To,
Ms. Reema Nanavaty,
Project Director,
Jeevika – SEWA,
Sewa Reception Center,
Opp. Victoria Garden,
Bhadra, Ahmedabad – 380001.
February 22, 2006
Dear Ms. Nanavaty,
 
Re.: -    Special Assignment
Findings of 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 February 7, 2006 & February 8, 2006 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 Assignment commenced on 8th February 2006.

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 04/10/2005 of M/s. K. S. Brahmkshatriya & Co., Chartered Accountants, finalized the "findings". 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.

Under the formal -“Project Loan Agreement” dated 18-02-2002, the SEWA has been entrusted with the overall responsibility for the Implementation of the project. The SEWA head office shall be responsible for co-ordinating ongoing technical & managerial support to the District Associations, with support from SEWA sister Agencies namely.

i)Project Management Unit
ii) Kutch Craft Association
iii) Banaskantha DWCRA Mahila SEWA Association
v)Sewa Trade Facility Centre
vi)Sewa Academy
vii) Sewa Bank
viii)Shri Swashrayi Mahila Lok Swasthy Sewa Sahakari Mandali Ltd
ix)Sewa Micro Insurance promotion Division
x)Disaster Mitigation Institute
xi)Mahila Housing Trust
   
 

The SEWA has entered into financing agreements / undertakings with the above-mentioned agencies for the effective implementation of the project. These agencies shall strictly follow the systems for Finance, Accounting, Reporting, Monitoring and evaluating set by SEWA. The activities as per work plan shall be carried out as per agreed modalities. The books of Accounts/related records like vouchers are maintained by the concerned agencies. At periodical intervals the relevant data /other required details are submitted to “PMU-JEEVIKA” mainly in soft version.

Further to above, under the same agreement dated 18-02-2002,the SEWA has been entrusted to outsource technical, marketing and other services to such governmental, voluntary or private sector agencies as agreed by the PRC (Project Review Committee). The SEWA has entered into contract / agreement with consultants.
   
  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:
   
 
  (i) "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.
 
  (II)"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)
- the nature of the item.
- 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.
   
 
  (iii) Auditing and Assurance Standard (AAS) 20 : "Knowledge of the Business", issued by the Council of the Institute of Chartered Accountants of India.
Obtaining the Knowledge

4. ". . . the nature of ownership, management and operations of the entity to be audited, . . . "
6. "Obtaining the required knowledge of the business is a continuous and cumulative process of gathering and assessing the information and relating the resulting knowledge to audit evidence and information at all stages of the audit.. . . "
8. The auditor can obtain knowledge of the industry and the entity from a number of sources. For example :
- Previous experience with the entity and its industry.
- Discussion with people with the entity (for example, directors and senior operating personnel).
10. The auditor makes judgments about many matters throughout the course of the audit where knowledge of the business is important. For example:
- Assessing audit evidence to establish its appropriateness and the validity of the related financial statement assertions.
- Evaluating accounting estimates and management representations.
   
  Appendix Knowledge of the Business – Matters to Consider
B. The Industry – Important Conditions Affecting the Client’s Business
- Specific accounting practices and problems
- Specific or unique practices (for example, relating to labour contracts, financing methods, accounting methods)
C. The Entity
· Management objectives, philosophy, strategic plans.
 
 
  (iv) Audit and Assurance Standard (AAS) 18: "Audit of Accounting Estimates", issued by the Council of the Institute of Chartered Accountants of India.
10. The auditor should adopt one or a combination of the following approaches in the audit of an accounting estimate:
(a) review and test the process used by management to develop the estimate;
(b) use an independent estimate for comparison with that prepared by management; or
(c) review subsequent event which confirms the estimate made.
Evaluation of data and Consideration of Assumption
12. "The auditor would evaluate whether data on which the estimate is based is accurate, complete & Relevant. When accounting data is used, it will need to be consistent with data processed through the accounting system. . . ."
 
  16. In evaluating the assumption on which the estimate is based, the auditor would consider, among other thing, whether they are ;
- Reasonable in the light of actual result in the prior periods.
- Consistent with those used for other accounting estimate.

18. "The auditor would review the continuing appropriateness of formulae used by management in the preparation of the accounting estimate. For this Purpose, the auditor's knowledge of the entity in prior periods, practices used by other entities in the industry and the future plans of Management as disclosed to the auditor would be useful."
   
 
  (v) Audit and Assurance Standard (AAS) : 13 "Audit Materiality", issued by the Council of the Institute of Chartered Accountants of India.
Materiality

" 3. Information is material if its misstatement (i.e., omission or erroneous statement) could influence the economic decisions of users taken on the basis of the financial information. Materiality depends on the size and nature of the item, judged in the particular circumstances of its misstatement. . . . "

8. Materiality should be considered by the auditor when -
(a)determining the nature, timing and extent of audit procedures;
(b)evaluating the effect of misstatements.

(vi) Eric Kohler defines fraud as "Fraud involves willful misrepresentation, the deliberate concealment of a material fact for the purpose of inducing another person to do or refrain from doing something to his detrimental."
   
 
  (vii) Audit and Assurance Standard (AAS) - 4 : "The Auditor's Responsibility to Consider Fraud and Error in an Audit of Financial Statements (Revised)", issued by the Council of the Institute of Chartered Accountants of India.

3. Misstatement in the financial statements can arise from fraud or error. The term "error" refers to an unintentional misstatement in the financial statements, including the omission of an amount or a disclosure, such as :

- A mistake in gathering or processing data from which financial statements are prepared.
- An incorrect accounting estimate arising from oversight or misinterpretation of facts.
- A mistake in the application of accounting principles relating to measurement, recognition, classification, presentation, or disclosure.
Procedure when Circumstances Indicate a Possible Misstatement

42. When the auditor encounters circumstances that may indicate that there is a material misstatement in the financial statements resulting from fraud or error, the auditor should perform procedures to determine whether the financial statements are materially misstated.
44. . . . Ordinarily, the auditor is able to perform sufficient procedures to confirm or dispel a suspicion that the financial statements are materially misstated resulting from fraud or error. . . .
   
 
  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;
c. 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.
 
   
  2.3 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.
2.4. 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.
 
   
  Shri Mahila Sewa Sahkari Bank Ltd. As per the special Auditor’s findings, the aggregate amount of findings is Rs.5.85/- lacs out of which Rs. 4.54/- lacs (Say 77.61%) relates to the expenses incurred and payments made to Shri Mahila Sewa Sahkari Bank Ltd. (Sewa Bank). It is pertinent to consider the relevant information about Sewa Bank, which is as follows :  In order to over come from the problem of lack of working capital and non-ownership of assets & terms of borrowing from money-lenders being exploitative and also the formal banking sector was not responsive to the special needs of informal sector women workers, the SEWA Bank was started & it was registered as a co-operative bank under the dual control of The Reserve Bank of India and The State Government. Since then it has been providing banking services to poor, illiterate self-employed women.
 
   
  Progress chart of SEWA Bank for the year starting from 2000-01 to 2004-05.
   
 
Particulars 2000-01 2001-02 2002-03 2003-04 2004-05 Increase in Percentage (from 2000-01 to 2004-05)
Number of Members 25,464 26,793 29,595 34835 44938 176.48
Number of Accounts 1,13,583 1,72,010 2,02,706 256617 276684 243.60
Total Deposits (in Rs.) 26,81,22,000 46,43,91,000 62,39,28,000 619699000 624766999 233.02
Working Funds (in Rs.) 38,99,79,000 62,54,26,000 84,90,95,000 872362000 891447000 228.59
Number of loans & Advances Accounts 39,284 44,187 50,849 53472 64326 163.75

Loans & Advances (in Rs.)

8,97,26,000 10,67,49,000 13,35,85,000 166944000 184172000 205.26
Profit(in Rs.) 18,22,000 35,70,000 51,76,000 8859000 6220000 341.38
   
  The financial indicators of business operations are positive & trend is more than satisfactory as indicated from the above-summarized details. 
   
  SEWA Vimo (Insurance) - Jeevika
   
 
SEWA Insurance is providing integrated insurance services to workers in the informal economy since 1992. Women are the policyholders at VimoSEWA - this increases their power within the family and in their communities. Vimo SEWA has brought its considerable experience of insuring poor women and their families of the three districts of Jeevika project.
In the earthquake's aftermath, VimoSEWA undertook immediate action and surveyed damaged and destroyed homes and equipment. Within a month more than 2000 women in Patan obtained Rs.2.3 million rupees by way of claims.

Instances of achievements of SEWA Vimo are:

- In its thirteen years of existence, SEWAVimo has collaborated with the LIC, UIIC, NIA, NIC ICICI-Lombard, OM-Kotak, Aviva insurers.
  - Partnership with London School of Hygiene and Tropical Medicine to undertake action-research on effectively of services and whether poorest   are being reached.
- Invited to be a member of the ICMIF, a global organization of insurance cooperatives.
- Partnered with Ministry of Finance and the IRDA for first-ever national workshop on microinsurance and the poor in 2003.
- Partnered with CGAP and the World Bank (South Asia team) for the first ever microinsurance at the World Bank, Washinton D.C., followed by   an international exposure dialogue programme on microinsurance at VimoSEWA.
- Developed own custom-made software for insurance with a unique database.
- Invited to be on the advisory board of IRDA, working groups on health insurance and microinsurance.
- VimoSEWA is being considered as a model for developing insurance countrywide by the National Commission on the Unorganised Sector.
   
 
 

SEWA Health – Jeevika

The prime focus of SEWA Health Center is on preventive action to safeguard women’s occupational health through designing proper work tools like handcarts for women who pulled these for a living. The activities of the SEWA Health Team include Curative Care, Maternal Health, Reproductive Health care including family planning, Immunization including polio and measles campaigns, Iron and Folic acid supplementation, Vitamin A, T.B. Treatment, Referral Services, Health Education etc.

Instances of achievements of SEWA Health Center are :
   
 
 
 
  • Largest partner of Gujarat government in health; implementing RCH programme in 3 blocks of 3 districts.
  • First organization to partner with Government of India in 1999 for RCH in three districts, after the Cairo conference and platform for     action.
  • First ever collaboration of a voluntary organization with WHO on TB.
  • First health cooperative of its kind in India.
  • First cooperative to be invited by government to run round the clock medicine shops in municipal hospitals.
  • Awarded best cooperative of all in district twice.
  • Awarded best service cooperative by National Cooperative Development Corporation.
  • Partnership with Canadian Cooperative Association for capacity-building of all health and child care cooperatives of the SEWA family of         organizations.
  •  
      Observations With Terms Of Referance
     

    Verification of the books and records – to ascertain that the findings pointed out are claimable and eligible expenses under the project.
    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.)
    [A] Shri Mahila Sewa Sahkari bank Ltd.
    1 1 Rent for usage of premises aggregating to Rs. 1,74,000/-

    While verifying the books of accounts it was noticed that the Sewa Bank (a sister concern of SEWA) has charged rent for usage of building @ Rs. 6,000/- per month from Jeevika Project Total Rent charged for the F.Y. 2002-03 is Rs. 30,000/- & 2003-04 , 2004-05 it is Rs. 72,000/- for each year. (Total Rs. 1,74,000/-).

     

    As explained, the office rent charged is as per market rate However, in our opinion & considering the work carried out, the rent charged is on higher side. In our opinion rent may be fixed by the R & B department of Govt. of Gujarat.

     

    Sewa-Jeevika had incurred liability for services received to them. Separate space of about 300 sq. ft. has been provided, where as generally seven persons were carrying on the activity, which is estimated and compared with the market rate. Quotations for the market rate have also been obtained. On the basis of quotations received, reasonableness of the estimates & assumptions made, the expenses are eligible & claimable under the project.

     

     

     

     

    Rs.1,74,000/-
    2 2 Salary of Rs. 1,56,647/-

    We have also observed that during the F.Y. 2003-04 & 2004-05 extra salaries, twice in a year were paid to the staff from the “Jeevika” project at the time of closure of books of accounts of the Bank (bankers are suppose to close their books of accounts twice in a year which has no relation to the “Jeevika” project), and one additional salary plus bonus @ 20% of Basic + D.A. were also paid.

     

    As explained, the bank is paying such extra salaries etc. to all its employees and total salaries does not exceeds the provisions made in Annual Work Plan & Budget. We have observed that there is no provision of such extra salaries in the budget and also observed that the employees working for the “Jeevika” project are also working for the Bank, but full salaries are being drawn from the project and in the circumstances like these we are of the opinion that such extra salaries cannot be debited to the “Jeevika” project. So far Bonus is concerned, it should be limited to 8.33% of the Salary.

    The staff has been paid as per the bank rules and regulations. The overall remuneration does not exceed the cut off limits stipulated in the AWPB submitted to GOG. Bonus of 20% is being paid to the employees since when SEWA Bank has started to earn profit. Allowances paid do not attract any statutory liability and the same can be discontinued at any point of time. On the basis of the fact that expenditure incurred is within the limits of the approved AWPB and in accordance with the Banking rules & regulations, the expenses are eligible & claimable under the project.

     

    Rs.1,56,647/-
    3 3 Vehicle usage charges aggregating to Rs.79,840.80/

    We have also noticed that whenever field visit required a vehicle (either Tata Sumo or Qualis) was provided to the staff of the Jeevika by the bank and Rs. 7.20/- per K.M. was charged to the project. It was also noticed that in almost all the cases field visit was undertaken by two persons only. In such circumstances small vehicle can be hired. But this was not done. Total vehicle charges collected by the bank from Jeevika project amounts to Rs. 23,140.80/- for the F.Y. 2003-04 and Rs. 56,700/- for the F.Y. 2004-05 we have verified the vouchers of traveling expense. We have also verified the summary sheet of total expenditure incurred on traveling submitted by the person who have traveled. In the summary sheet expenditure on Diesel was also shown (but not charged to Jeevika) for example, bank payment voucher dt. 17.07.04 shows the expenditure on traveling Rs. 5,093.60/- wherein Rs. 3,873.60/- was charged for vehicle expense @ Rs. 7.20/- per K.M. against diesel cost of Rs. 782/- as shown in the summary sheet attached to the voucher. Thus, in spite of re-imbursement of actual expenses, the bankers have charged at a very high rate.

     

    Additional information about the expenditure incurred, extended benefits, objectives of such expenses are satisfactory & reasonable. Proper administrative procedures were complied with and expenses are very well within the AWPB. We have analyzed the comparison of expenses actually incurred with the expenses, which would have been incurred if cars are hired from the outside. On the basis of reasonableness, the expenses are not on higher side and are eligible / claimable under the project.

     

    Rs.79,841/-
    4 4 Rs. Nil

    We have requested the bankers to provide us details of loans given to District Association, like amount of loan, date of disbursement, rate of interest charged, abstract of account for the F.Y. 2002-03 to 2004-05 etc. but no details were provided to us.

    There is no provision in the Project for giving loans to district association. SEWA’s role is only confined to trainings. On the basis of the above facts, the question of details regarding the loan sanctioned to the district associations does not arise.

     

    Rs. Nil
    5 5 Camera Rent

    We have also observed that the camera (still camera worth Rs. 2,000/-) rent of Rs. 10,000/- was charged by the bank to Jeevika project in the F.Y. 2004-05 but when objected by us the same were re-deposited in the account of the project on 23.07.2005 (during our audit).

    Under the circumstances, as the amount is re-deposited, & amount in Question not being substantial, do not warrant further comments.

     

    Rs. Nil
    6 6 Rent, Electricity, Telephone & Furniture usage charges aggregating to Rs.84,000/-

    During the F.Y. 2004-05, in addition to Rs. 72,000/- for rent, the following expenditures were also booked by J/Vs debiting expenditure and crediting Sewa Bank.

     

    • (1)  Rs. 30,000/- for Electricity expense @ Rs. 2,500/- per month.
    • (2)  Rs. 30,000/- for Telephone expense @ Rs. 2,500/- per month.
    • (3)  Rs. 24,000/- for Furniture usage charges @ Rs. 2,000/- per month.

    Looking to the training arranged and expenditure incurred for the Jeevika purpose, the expenditure booked as above are on higher side.

    Additional information about the expenditure incurred, objectives of such expense are satisfactory & reasonable. Proper administrative procedures were complied with and expenses recognized on estimated basis are very well within the AWPB. On the basis of the above facts the expenditure incurred is not on higher side and are claimable / eligible under the project.

     

     

    Rs. 84,000/-

    (i) Total         Rs. 4,94,487/-
    [B] Sewa Vimo (Insurance) – Jeevika
    1 1 Negative Balance of Cash Book amounting to Rs.653/ While verifying the cash book of the F.Y. 2003-04 it was noticed that on 7th oct. 2003, the cash balance was Nil, though Rs. 500/- has been shown as cash paid to Manishaben for training purpose and hence on that day cash goes negative by Rs. 500/-. Then after next transaction occurred on 11.10.03 where in again Rs. 153/- shown to have paid cash debiting training expense, on that day also cashbook shows negative balance by Rs. 653/-. As explained to us the said amount was borrowed from sister concern but entry in books were not passed. In our opinion Cashbook never shows a negative balance but here cash books shows negative balance and hence in a circumstances like this a question arises as to the reliability of the book’s accounts.

    There was a clerical error and the same was rectified immediately. Further, it is observed that the software has been improved to warn before the balance of cash becomes negative.  On the basis of test checking of cashbook vouchers & its book-keeping aspects, we have not come across any serious discrepancy which raises doubt about the credibility & reliability aspects of the recording of the transactions & maintenance of books of accounts.

    Rs.653/--
    2 2

    Rs.55,600/- Paid as Salary to Mrs.Sheela Menon

    During our audit it was observed that the following amounts were paid as salary to Mrs. Sheela Menon either paying to employee or by J/V entries debiting expenditure & cediting Vimo Sewa’s A/c.

     

    Thus, during the above period Rs.55,600/- were paid to her. We have requested them to produce time – sheet / work sheet of the above employee for verification and also explain as to how the amount of salary was arrived at .In reply, Xerox copies of time sheets (allocation sheets) were submitted to us. We have gone through all the Time sheets and are of the opinion that these have been prepared subsequent to the objections and are not reliable. For example time sheet of July 2003 shows dates as 01.07.2005 to 19.07.2005,time sheet of June 2003 shows dates as 09.06.2005 to 12.06.2005, time sheet of March, 2003 shows dates as 24.03.2003 to 29.03.2005 and time sheet of April, 2003 shows the dates of April, 2005.In our opinion these are not reliable but misguiding and hence salary debited in this mode is to be recovered.

    SEWA Jeevika had incurred liability for services received by them. The estimates & assumptions used in presenting (accounting) the same in the books of account is reasonable & appropriate and it is independent of evidences.

    The month wise reports submitted by the employee are on record. On the basis of reasonableness of the estimates / assumptions made & considering the evidences for work done, the expenses are eligible & claimable under the project.

    Rs.55,600/-

     
    3 3 Rent of Building amounting to Rs.6,000/- p.m During the F.Y. 2002-03 Rs.9,000/- were debited to building rent & credited to Vimo SEWA’s a/c by J/V no 18 on 31.03.2003 and shown to have paid for building for the period from 15th January to 15th February 2003. As per information given to us the work of Jeevika Project was given to / started by Vimo Sewa from March 2003 but office rent was paid for January – Feb. 2003. As explained by them in a letter dated 03.09.2005 (which was recovered by us on 17.09.2005) the rent paid is not for January & February, 2003 but is for period from 1.03.2003 30.04.2003 and it is calculated @ Rs.6000/- P.M. Their statement is again misguiding. As per voucher it is for January & Feb, 2003. Because again on 30.04.03 and on 31.05.03 Rs.6000/- each was debited to Building Rent expenses by J/Vs. In our opinion rent debited for January & February, 2003 is recoverable and in the absence of Justification the rent debited @ Rs. 6000/- P.M. is on higher side.

    The rent of Rs. 9,000/- was paid towards rent payment for the period 01/03/2003 to 15/04/2003. There is an error while mentioning the period of rent in the voucher. Based on the voucher, it cannot be said as the rent is paid January & February 2003. To the best of their estimates, rent has been charged. On the basis of reasonableness of the estimates / assumptions made & considering the evidences for work done, the expenses are eligible & claimable under the project.

    Rs.6,000/--
    4 4

    Printing Charges aggregating to Rs.8,260/-

    Payment of Rs.3,460/- and Rs.4,800/- were made on 10.05.2003 and 31.05.2003 vide BPV no 9 & 15 respectively. These Payment have been shown to have paid for printing charges of training materials being printing of pamphlets. We have gone through the pamphlets and have observed that no logo.of Jeevika was printed on it and no reference of jeevika has been given anywhere in the pamphlets but they have logo and address of SEWA and VIMO Sewa. In the circumstances like this, we are of the opinion that the expenditure booked as above are not related to the Jeevika Project and hence are recoverable.

    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 have 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.

     

    The said pamphlets have been developed by Vimo SEWA prior to start of Jeevika. Further, Vimo has not charged any expense relating to development cost or for intellectual rights in the said instants.

     

    As explained, due to the operational constraints, such error of not having logo had occurred.

     

    Under the circumstances the error seems to be bonafide and can be excused the expenditure incurred is eligible & claimable under the project.

    Rs.8,260/-

    5 5 Details of new insurance taken by beneficiaries

    During our audit, we have requested to the staff of Vimo SEWA to provide us with month wise details of new insurance taken by the beneficiaries of three district during the years 2003 to 2005 (March 05) We have not received details as asked.

    We are informed that members are enrolled annually. Hence, the details of new members enrolled month wise is not maintained systematically. The list of this membership for the last 3 years in three districts have been provided in the replies to the findings by the SEWA Health care.

     

    Rs. Nil
    (ii) Totalnbsp; Rs. 70,513/-
    [C] Sewa Health - Jeevika
    1 1

    Rent Paid amounting to Rs.10,600/-

    While verifying the books of accounts of the F.Y.: 2002-03, it was noticed that on 31st March, 2003, a J/V was passed for Rs.16,600/- debiting office Running Exp. and Lokswasthya Mandali for office rent for the two month (Feb. & March ) @ Rs. 8300/- Per Month. There after in the year 2003-04 the rent charged was @ Rs.3,000/- per month. Thus the rent Charges in the year 2002-03 was on higher side even though the quantum of activities was less and hence Rs. 10,600/- becomes recoverable. 

     

    Amount paid to Lokswasthya Mandali included payment towards Rent, Stationery & Printing, Telephone, Postage, Computer Maintenance, Vehicle and other miscellaneous expenses. In the subsequent month expenses have been increased but the provision for charging such expense was restricted up to Rs. 3000/-. Considering the above facts, the expenses are eligible & claimable under the project.

    Rs.10,600/-

    2 2

    Salary Paid amounting to Rs.50,175/-

     

    During our audit, it was also observed that the following amounts were paid as salary to Mrs. Ramolaben Trivedi – Trainer

     

    Year

    Amount

    2002-03

    8,700

    2003-04

    46,800

    2004-05

    44,850

     

    While discussing the activities carried out by her in the project, she informed us that she is working maximum for 15 days in a month for the Jeevika Project and other 15 days for other Projects. The Discussion was carried out in the presence Ilaben Shah- Manager and Dipikaben gajjar – Accountant. Ramola ben Trivedi has confirmed her statement in the presence of above mentioned  Manager and Accountant. Relying on the statement of the employees, we are of the opinion that 50% of the said amount (i.e. Rs.50175) is to be recovered. All above Queries was bought to the notice of the coordinator by letter dated 31.08.2005 but no reply was received by us till date.

    The concerned employee has worked for half of the month in the Jeevika project. Two other employees who had worked but their salaries have not been charged to the Jeevika Project as the same were not provided in the AWPB. Considering the above facts, the expenditure is not fully identifiable with the project, hence, considered as ineligible which cannot be claimed under the project.

    Rs.Nil

    -
    (iii) Total  Rs. 10,600/-  
    [D] Mahila Housing Trust – Rs. Nil
    Total (i) to (iii)Rs. 5,75,600/-  
     
      Conclution
     

    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. 6,25,775/-) 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. To the best of their estimates, expenses have been charged to the Jeevika project. 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.6,25,775/- pointed out as “the major points of findings”, needs reconsideration which includes amounts aggregating to expenditure of Rs.5,75,600/- 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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