A thought………………A thought………………

“The accounts of the government ought to be made as simple as those of the

common farmercommon farmer and capable of being understood by common farmerscommon farmers.”

- Thomas Jefferson

The Eleventh Finance Commission recommended that the C & AG prescribe the format in which local bodies should prepare their budgets local bodies should prepare their budgets and maintain their accountsand maintain their accounts.

C&AG and the Ministry of Panchayati Raj have finalised a Model Accounting System that uses a simplified cash-based system along with the list of codes for functions, programs and activities capturing receipts and expenditure in respect of all 29 subjects mentioned in Schedule XI of the Constitution.

The Finance Commission Mandate for PRIs

The 13th Finance Commission (13th FC) mandated that State Governments will be eligible for the General Performance Grant and the Special Areas Performance Grant only if they adopt accounting framework and codification pattern consistent with the Model Accounting System for Panchayats (MAS) as prescribed by the Comptroller and Auditor General (C&AG) of India and MoPR.

The Finance Commission Mandate for PRIs

Accounting Structure

Uses simple Four Tier Coding System i.e.

Major Head – 4 digits -Represents Functions

Minor Head - 3 digits -Represents Programme

Sub Head - 4 digits - (Hidden)

Object Head - 2 digits -Represents Object item

Function Major Head

Receipt Revenue Expenditure

Capital Expenditure

Market & Fairs

0206 2206 4206

A Capital Expenditure is money invested to acquire or upgrade fixed, physical, non-consumable assets, such as buildings and equipment or a new business.

Expenditure which is not for increasing the value of fixed assets, but for running the business on a day to day basis, is known as revenue revenue expenditure.expenditure.

Accounting StructureAccounting Structure

Example to book expenditure under Central Scheme 13 FC

Major Head 2059 Maintenance of

Community Assets

Minor Head 101 Maintenance & Repairs

Sub Head (Hidden)

Object Head 26Maintenance

Formats under Model Accounting Formats under Model Accounting SystemSystem

1. Receipt & Payment Account

2. Consolidated Abstract Register

3. Reconciliation Register

4. Statement of Receivable and Payables

5. Register of Immovable Property

6. Register of Movable property

7. Inventory Register

8. Register of Demand, Collection of Balance.

MasterMaster

Bank branch details; these are entered at the District Level

Mapping of Bank Branches

Bank account details; these are entered by the respective accounting units if the funds are kept in banks

Cheque book details pertaining to Treasury/Bank/Post Office Accounts

Opening Balance; these are entered by the respective accounting unit with respect to Treasury/Bank/Post Office Accounts corresponding to schemes till the scheme receipt head level

TransactionsTransactions

PRIASoft captures the most distinctive feature of the accounting system—the classification and differentiation of financial transactions under both receipts and payments.

Also captures the details of contra entries—deposits and withdrawals. Adding bank reconciliation statements for a given month.

Each accounting unit begins recording voucher entries as and when a transaction occurs.

Four types of vouchers are supported by PRIASoft.

Entries in‘Priasoft’Entries in‘Priasoft’

Implementation Through Implementation Through ‘Priasoft’‘Priasoft’

The End User will only enter any of the following The End User will only enter any of the following vouchers :vouchers :

Receipt Voucher (For any fund received by PRI)

Payment Voucher (For any fund paid by PRI)

Contra Voucher (For withdrawing/depositing cash)

Journal Voucher (For making adjustment)

Receipt VouchersReceipt Vouchers

Receipt Vouchers will be passed for following transactions:

Any money received on account of income from own sources

Funds received as Grants from Central/State/other sources directly or through Transfers from other PRIs

Funds received as Advance/Earnest Money/Deposit

Funds received on account of recovery of advance given.

Cancellation of Stale Cheques( not enchased)

Recovery of overpayment if any.

1.Direct Receipts2.Transfer Receipts3.Advance Receipts 4.Refunds of Advance Receipts5.Cancellation of Cheque6.Refunds of Excess Payment 7.Refunds Of OB Advance8.Diversion Receipt

The PRIs could have inflow of inflow of funds funds in the form of:

Payment Vouchers will be passed for following transactions

Payments made for Revenue like Salary, Telephone Bills, Electricity Bills etc.

Payments made for Capital Expenditure like Construction of Buildings & Infrastructure, Purchase of Vehicles & Machinery etc.

Transfer of Funds to other PRIs. Advances given to Employees/contractors/other PRIs Repayment of Advances/Loans and Interest Refund of revenue. Correction in wrong booking of Receipt if separate

bank accounts are in operation.

Out Flow of fund

Capital expenditureCapital expenditure

Revenue ExpenditureRevenue Expenditure

2216 (Rural Housing) 102 – (Construction of Houses) 56 (Individual Housing)

3054 : Transportation 101 : Roads 02 : Wages

2515 : Panchayati Raj Programmes101 : District Panchayat Programmes 17 : Grants in Aid

IAYIAY MGNREGAMGNREGA DDPDDP

Payment Vouchers

A Payment Voucher is required by accounting entity to record or capture the details of any outflow of funds from the Panchayat.

The accounting entity could record expenditure incurred by them in the form of

1. Expenditure Payments2. Transfer Payments3. Advance Payments4. Receipt Cancellation5. Fund Diversion

Contra VouchersContra VouchersContra Vouchers will be entered for following

transactions:

Withdrawing cash from the Bank for making payments in cash.

Depositing funds in the Bank received in Cash on accounting of revenue income or EM etc.

It may be noted that Contra Voucher shall not be used for transferring funds from one Bank account to another Bank Accounts related to separate schemes.

Journal VoucherJournal Voucher

Journal Voucher are adjustment vouchers and will be passed for non cash transactions like:

Correction in source of receipt when the accounts of both the sources are in same Bank

Correction in Payment transactions when accounts of both the Payers are in same Bank

Deductions from Payments to be paid to respective authorities later on.

Types of Journal Vouchers :

1. Receipt Rectification

2. Expenditure Rectification

3. Advance Rectification

4. Advance Adjustment

5. OB Advance Adjustment

6. Deduction

Pre-conditions::

The Day Book must be closed for the date on which the voucher was recorded, against which you want to make the rectification entry in the Journal Voucher.

Post-conditions ::

Once the day book is closed for date on which journal voucher was recorded it will not be available for further unfreezing and deletionunfreezing and deletion.

Once the journal voucher is saved you can view its details in Journal Book under reports.

Vouchers to be booked for different Transactions

Nature of Payment Voucher to be Passed

Cash withdrawn from bank Contra

Property tax received Receipt

Recovery of Advance (Cash/Cheque) Receipt

Stale Cheques (issued but not encashed) Receipt

Grants received form Central/State/Others Receipt

Salary paid to xyz Payment

Advance given to contractor/employee Payment

Transfer of Funds to other PRI Payment

Correction in Source of Grant (Same Bank A/c) Journal

Correction in Source of Grant (Separate Bank

A/cs)

Payment /Wrong SourceReceipt correct/Source

Cash deposited in bank Contra

a. Bank Reconciliationb. Reconciliation of Receivable c. Reconciliation of Payabled. Reconciliation of Advancese. Reconciliation of Loans

Bank Reconciliation

Need of Bank Reconciliation Statement Pin pointing mistakes in the Cash Book

maintained by the PRI and Pass Book of the concerned Bank.

Identifying delay in the clearance of cheques / remittances

Checking on embezzlement /mis appropiation

Checking the accuracy of Cash Book. Accounting for Bank charges levied by the

Bank and Credit of interest given by Bank.

Bank ReconciliationBank Reconciliation

1. Causes Responsible for the Difference Between the Balances of Cash Book and Pass book.

2. Cheques issued by PRIs but not yet presented for payment.

3. Cheques deposited into the bank but not yet collected by the bank.

4. Cheques directly deposited by the Lessee etc in PRIs account in the bank.

5. Interest credited by the bank but not recorded in the Cash Book.

6. Interest, bank charges charged by the bank but not recorded in the Cash Book.

7. Dishonored cheques not recorded in the Cash Book.

Bank Reconciliation

Steps for Preparation of Bank Reconciliation Statement.

PRIs must prepare the Bank Reconciliation Statement on monthly basis and should be completed by end of the first week of the next month. Bank reconciliation statement includes the following steps.

Firstly tick-out the transactions appearing in both Cash Book and Pass Book / Bank Statement of the relevant month.

Bank ReconciliationSecondly list out the transactions of Cash Book and Pass Book which are not ticked-out. Separate list of each of the following is to be prepared.

1. Un-ticked items of receipt side of the Cash Book. 2. Un-ticked items of payment side of the Cash

Book.3. Un-ticked items of deposit column of Pass Book /

Bank statement.4. Un-ticked items of withdrawal column of Pass

Book / Bank statement.5. Bank Reconciliation statement shall be prepared

separately for each Bank

Bank ReconciliationBank ReconciliationS.No. Items Amount (Rs.)

Plus (+) Minus (-)

1. Balance as per Cash Book √2. Cheque issued by PRIs but not presented

for payment √

3.3. Cheque deposited into bank but not yet Cheque deposited into bank but not yet collected collected √√

4. Cheque directly deposited by the Lessee in PRIs bank account.

√

5. Interest credited by the bank but not recorded in Cash Book

√

6.6. Interest / Bank charges / Collection Interest / Bank charges / Collection charges debited by the bank but not charges debited by the bank but not recorded in the Cash Book recorded in the Cash Book

√√

7.7. Dishonored cheques not recorded in the Dishonored cheques not recorded in the Cash Book Cash Book √√

8.8. Cheques received and entered in Cash Cheques received and entered in Cash Book but presented in BankBook but presented in Bank √√

9 Balance as per bank statement / Pass Book (Difference of plus and minus)

√ √

Voucher No – DDP/R1/2012-13/1

Voucher No – DDP/P1/2012-13/1

Problems & Problems & Delay in Delay in

ImplementatiImplementationon

Panchayats at different levels play an important role in the implementation of Rural Development Schemes. Panchayats are the principal Implementing agencies, however, most of the Gaon Panchayats of the district do not Gaon Panchayats of the district do not have internet connectivityhave internet connectivity.

For MIS activities under MGNREGA / IAY as well as PRIA Soft, the Computer Operators of Gaon Panchayats have to visit respective Block visit respective Block Offices and wait for their turn to get a Offices and wait for their turn to get a Computer System having internet Computer System having internet connectivityconnectivity. Further, Blocks also facing problems because they have only 2 – 3 2 – 3 Computers with connectivity, so, the Computers with connectivity, so, the progress of MIS at Block Level is also progress of MIS at Block Level is also suffered, as they have to spare the suffered, as they have to spare the Computer Systems with the Gaon Computer Systems with the Gaon PanchayatsPanchayats.

At Block level, most of the accountants have not shown any interest to maintain accounts in PRIA Soft, as they have not update their Cash Book Regularly.

At Block & GP priority is on MGNREGA & IAY only – as fund released on basis of MIS Report regarding utilization of fund.

1. For smooth, timely and effective implementation of PRIA Soft as well as other MIS activities in the District the core issues have to be resolved i.e. Internet Connectivity / Electrification etc at Gaon Panchayat Level.

2. In recently conducted training all Gaon Panchayat Secretaries are asked to submit proposals for installation of Telephone with Broadband Connectivity. The installation The installation Charges (Maximum – Rs 3,000/-) will be Charges (Maximum – Rs 3,000/-) will be borne by the Zilla Parishad and the borne by the Zilla Parishad and the recurring cost will be borne by the recurring cost will be borne by the respective Gaon Panchayat.respective Gaon Panchayat.

One of the Gaon Panchayat Office under a Particular Development Block may be identified as a “Hub” for Internet Connectivity. Depending upon No of Gaon Panchayats under a particular Block, 3 to 5 Computers with broadband connectivity may be installed. (The security of the Computers to be installed in the identified GP should also be taken in to consideration).

The GP Level Computer Operators will be using this GP Office for MIS Activities. This will reduce the work load of Blocks offices for MIS activities.

Planning at District level