( ,q)l~flil~ li6IPt~lTCf) cl6lIQfim(~ ~ "flcn Ii";;ililil ~)Office of the Director General of Audit(Economic & Service Ministries)~~S4~ ~c. ~ ~l"t'ft-110 002Indraprastha Estate, New Delhl-110 002

No. AMG-IIIIDC(MSME)/2(U)/TCSP-2014-15/World Bankl2015-1612:=J.S Dated '- 0 ~ 201t\ OCT ;]

Report of the Comptroller and Auditor General of India in respect of World Bank assisted"Technology Centre Systems Programme (TCSP)" - IBRD Loan No. 8330-IN - Ministry ofMicro, Small&Medium Enterprises, for the year 2014-15

To

The Secretary to the Government of IndiaMinistry of Micro, Small &Medium EnterprisesUdyog Bhawan, New Delhi

Sir,

We have audited the accompanymg Financial Statements of the World Bank assisted"Technology Centre Systems Programme (TeSp)" - IBRD Loan No. 8330-IN, Ministry of Micro,Small and Medium Enterprises which comprises the Statement of Sources and Application ofFunds and the Reconciliation of claims to total Applications of Funds for the year ended March2015. These statements are the responsibility of the Project Management. Our responsibility is toexpress an opinion on the accompanying Financial Statements based on our audit.

We conducted our audit in accordance with the Auditing Standards promulgated by theComptroller and Auditor General of India. Those Standards require that we plan and perform theaudit to obtain reasonable assurance about whether the Financial Statements are free of materialmis-statement. Our audit examines, on a test basis, evidence supporting the amounts anddisclosures in the Financial Statements. It also includes assessing the accounting principles usedand significant estimates made by management, as well as evaluating the overall statementpresentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the Financial Statements present fairly, in all material respects, the sourcesand applications of funds for the World Bank assisted "Technology Centre Systems Programme(TCSP)" - IBRD Loan No. 8330-IN, for the year ended March 2015 in accordance withGovernment of India accounting standards.

Telephone: +91-11-23702357, Fax : +91-11-23702359, E-mail : pdaesm@cag.gov.in

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In addition, in our opinion, with respect to Interim Financial Reports (IFRs), adequatesupporting documentation has been maintained to support claims to the World Bank forreimbursement of expenditure incurred; except for audit observations mentioned in theManagement Letter appended to this Audit Report, expenditure are eligible for financing under theLoan Agreement. During the course of audit, IFRs amounting to Rs. 538.82 lakh for the year2014-15 and connected documents were examined which can be relied upon to supportreimbursement under the Loan Agreement.

This report is issued without prejudice to CAG's right to incorporate the audit observationsin the Report of CAG of India for being laid before Parliament.

~~(MALA SINHA)

Director General of Audit

CfHllflilll '161Pi ~ ~Iif) Jt <SIlqflm(3nf~if) ~ ~ Ii ::f4lli1ll)Office of the Director General of Audit(Economic & Service Ministries)~~ ~c. ~ ~<R'ft-110 002Indraprastha Estate, New Delhl-110 002

No. AMG-IIIIDC(MSME)/2(U)/TCSP-2014-15/World Bankl2015-16h'7'3 Dated: 3 0 ~:;{ 2015

AUDIT CERTIFICATE

The Expenditure Statements/Financial Statements relating to the Project of World Bank assisted

"Technology Centre Systems Programme", Ministry of Micro, Small & Medium Enterprises for

the year 2014-15 attached hereto have been audited in accordance with the regulations and

standards of audit of the Comptroller and Auditor General of India and accordingly included

such tests of accounting records, internal checks and controls, and other auditing procedures

necessary to confirm,

a) that the resources were used for the purposes of the Project; and

b) that the expenditure statements/ financial statements are correct.

During the course of audit, Interim Financial Reports amounting to Rs. 538.82 lakh and the

connected documents were examined and these can be relied upon to support reimbursement under

the aforesaid loan/credit Agreement.

On the basis of the information and explanations that have been obtained as required and according

to the best of our information as a result of the test audit, it is certified that the Expenditure

Statements / Financial Statements read with the observations set out below represent a true and fair

view of the implementation (and operations) of the Project for the year 2014-15.

This certificate is issued without prejudice to CAG's right to incorporate any further/detailed audit

observation if and when made in the Report of CAG of India for being laid before Parliament/State

Legislature.

Jt~(MALA SINHA)

Director General of Audit

Telephone: +91-11-23702357, Fax: +91-11-23702359, E-mail: pdaesm@cag.gov.in

Cf)l~f(.il~ 't61P1~Wfi cl<Stlq~m(3I1f~Cf)~ ~ 't·~I(.iI~)Office of the Director General of Audit(Economic & Service Ministries)~~ ~c. ~ R(.i'tift 110 002Indraprastha Estate, New Oelhl-110 002

No.AMG-III/ DC(MSME)/2(U)/TCSP-2014-15/World Bankl2015-16/ 2.1-lt Dated:a 0 ~ 2 5OCT 01

To

The Secretary to the Government of IndiaMinistry of Micro, Small & Medium EnterprisesUdyog Bhawan, New Delhi

Sub: Management letter - Deficiencies noticed in accounting records

Sir,

We have audited the Annual Financial Statements of World Bank assisted "Technology

Centre Systems Programme (TCSP)", Ministry of Micro, Small & Medium Enterprises, IBRD

Loan No. E330-IN for the year 2014-15 and have issued the Audit Report/Certificate thereon vide

letter No.AMG-IIII DC(MSME)/2(l1)/TCSP-2014-15/World Bankl2015-16/l73 datedJ&/10/2015.

During the course of Audit, the deficiencies mentioned below which have not been included in the

Audit Report are being brought to your kind notice for corrective and remedial action.

1. Less deduction of TDS amounting to Rs. 0.94 lakh

As per clause 39.3 of the contract signed between the DC (MSME) and the consultant i.e.

Ms Ernst & Young LLP, tax was required to be deducted at source as per the prevailing

income tax rules. It was seen from the records pertaining to payment to consultant that an

amount of Rs. 4.77 crore (excluding service tax) was released upto 3151 March 2015

(Rs. 3.20 crore for phase I completed and Rs. 1.57 crore for ongoing phase II) but TDS

amounting to Rs. 0.94 lakh was deducted short.

Telephone: +91-11-23702357, Fax: +91-11-23702359, E-mail: pdaesm@cag.gov.in

2. Non adherence to the time schedule for submission of Interim Financial Reports

(IFRs)

As per clause B.2 of the Section II of the loan agreement signed with the World Bank, the

DC (MSME) was required to prepare and furnish, the Interim Financial Reports (IFRs)

covering the quarter to the bank within 45 days after the end of the each calendar quarter.

Audit scrutiny however, revealed that while submitting the IFRs to the World Bank the DC

(MSME) has not adhered to the conditions as laid down in the loan agreement.

(Rs. in crore)

No of Period to which Date of submission of Expenditure during claim

IFR IFR pertains IFR period

IFR2 10 November 14 to 18/03/2015 1.78

28 February 2015

IFR 3 March 2015 06105/2015 1.79

3. Unrealistic budget estimates

As per World Bank guidelines, the budget estimates should be as far as possible realistic

and optimistic. It must neither fall short of anticipated requirements nor over burden the

exchequer of the Government. However, it was noticed that DC (MSME) made provision

of Rs.150 crore for the project during 2014-15 against which the actual expenditure was

Rs. 5.03 crore i.e. only four per cent of the total budget estimates. This shows that huge

amount remained unutilized due to unrealistic budgeting and lack of planning as shown

below:

(Rs. in crore)

Object Heads Budget Expenditure

Domestic Travel Expenses 0.20 0.03

Foreign Travel Expenses 0.60 0.00

Other administrative expenditure 0.80 0.00

Professional services 35.40 5.00

Grants in aid capital 85.00 0.00

Major works 28.00 0.00Total 150.00 5.03

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4. Non formation of the PAC

As per the Project Appraisal Document, a Programme Advisory Committee (PAC) was

to be set up comprising of thought leaders from academia and industry associations to

provide strategic inputs on strengthening the Indian MSME ecosystem through this

programme. The committee was to work closely with National Programme Director,

Chairman and Implementation Committee through the design and execution phases of

the project i.e. Technology Centre Systems Programme to ensure continuity. It was

observed that the PAC had still not been constituted by DC(MSME). Thus, the design

phase and execution phase of the project is being executed without strategic inputs on

strengthening the Indian MSME ecosystem.

Encl: As above

Yours faithfully,

~~ --­(MALA SINHA)Director General of Audit

{~'\\. -)"',_...,

Technology Center System ProgramLoan No. 8330 - IN

Reconciliation of Claims to Total Applications of FundsReport for the year ended 31st March 2015

.80

Bank Fundsclaimed d

- IFRperiod ending io" November 2014989.60

- IFRperiod ending zs" February 20151,

- IFRperiod ending 31st March 2015

Bank Funds claimed (A)

iTotal Expenditure made during the year (B)5,02,82,892.00 35,9 760.00

1,42,51,088.80

1,43,15,243.20

4,31,05,321.60

5,38,81,652.00

enditures not claimed ('E

760.00

Notes:

1. Total expenditure made during the year (B above) must be the same as the Total Expenditures shown on theStatement of Sources and Applications of Funds (D on the Statement of Sources and Applications of funds)

2. Amounts A and G above must reconcile. If they indicate any excess/shortage, it needs to ~I~ned. and adjustedin future IFRs. ~1\<

5,02,82,892.00

28,79,008.00

5,38,81,652.00

05,321.60

Technology Center System Programloan No. 8330 -IN

Component Wise Claim Statement

Report for the year ended 31" March 2015

• Actual Claimsmade during the year includes claim amounting to Rs. 28,79,008/- i.e. 80% of 35,98,760/- for the period covering retroactive financing i.e. for the period ending 31stMarch 2014# Variation is due to the reason as the claim relating to expenditure incurred during 2013-14 as per above note (period under retroactive financing) has been claimed during current yeari.e. FY2014-15

Technology Center System ProgramLoan No. 8330 - IN

Statement of Sources and Applications of FundsReport for the year ended 31st March 2015

1,00,56,578.40 1,07,76,330.407,19,752.00

652.00

-Component -I TechnicalAssistance to TCs-Component - II Investments to upgrade

exist; !g/develop new TCs

-Component - III TechnicalAssistancefor ProgramImplementation & Monitoring & Evaluation 4,26,37834.25 35 760.00 4,62,36,594.25

4,26,37,834.25 760.00 4,62,36,594.25Advar c~sGiven (IC)

Total: pplications (D=8+C)760.00

* As tile TCSPprogram is on re-imbursement method the sourcesof funds have been taken on the basisof actual expenditureincun ed and bifurcated as per Gal and World Bankshare

!

I

Note This financial statements is basedon cash basisofaCCOl nting

Technology Center System ProgramLoan No. 8330 - IN

Component-wise Expenditure StatementReport for the year ended 31st March 2015

Renovation of existing TC

Procurement of Plant & Machinery

Operating Cost of New TCs

Consulting Services

-Implementation PartnerTotal- Component III

Notes: The expenditure as mentioned above should match with the expenditure reported in Statement of Sources &Application of Funds.i