2006年-世界发展银行全球_India___Note_on_Public_Financial_Management_and_Accountability_in_Centrally_Sponsored_Schemes_82页_5mb

Summary of Public Financial Management and Accountability in Centrally Sponsored Schemes (CSS) in India

Core Content

This document provides an analysis of the Public Financial Management and Accountability (PFMA) systems in Centrally Sponsored Schemes (CSS) in India, focusing on the challenges and potential improvements in financial governance. The study was conducted by the World Bank in collaboration with various Indian government officials and institutions, including the Ministry of Finance (MoF), Planning Commission, Comptroller and Auditor General (CAG), and the Institute of Chartered Accountants of India (ICAI). The report highlights the need for stronger financial accountability and management systems to ensure effective implementation and utilization of funds in CSS.

Main Objectives

• To better understand financial management issues in CSS and identify areas for improvement in the existing PFMA framework.
• To identify good practices across projects.
• To support the Government of India (GoI) in improving accountability arrangements in CSS.
• To contribute to the use of sector-wide approaches and pooling of funds by development partners.

Key Issues and Challenges

1. Design of Schemes

• Top-down approach: CSS are typically designed with uniform cost norms, limiting state flexibility and focus on outputs rather than inputs.
• Limited state ownership and accountability: The design process often results in a "principal-agent" relationship rather than a partnership between the GoI and states.
• Small schemes lose focus: These schemes often lack alignment with overall program objectives, leading to poor implementation and monitoring.

2. Implementation Arrangements

• Two models: The treasury model and the society model are used for fund flow, with the latter becoming more common due to fiscal stress.
• Weak management capacity: Many implementing units, especially PRIs and CBOs, lack the necessary skills and resources to manage funds effectively.
• Inadequate internal controls: Internal audit functions are often underdeveloped or non-existent, leading to risks of mismanagement and fraud.

3. Budgets and Annual Work Plans

• Uncertainty in fund allocation: States and districts are often unaware of the likely financial support from the GoI, making planning and budgeting an academic exercise.
• Need for better communication: Clear communication of resource allocation is essential to align state and district plans with available funds.

4. Funds Flow and Management

• Fiscal bottlenecks: The approval and release process is slow, often causing delays in fund disbursement.
• Lack of transparency: The society model leads to "off-budget" transfers, which are not reflected in state financial statements.
• Need for technology: There is a lack of use of modern banking and IT systems to speed up fund transfers and improve tracking.

5. Accounting Framework

• Inconsistent accounting policies: Different states and districts apply varying accounting practices, leading to a lack of uniformity.
• Weak financial reporting: Financial statements are not always prepared or reconciled with actual records, raising concerns about accuracy.
• Need for standardization: A uniform accounting framework is required to ensure transparency and accountability.

6. Internal and External Audit

• Internal audit shortcomings: Internal audit functions are often inadequate, especially in state societies.
• External audit limitations: The CAG audit process is delayed due to incomplete expenditure statements, and the society model lacks independence in auditor selection and audit terms.

7. Role of PRIs in CSS

• Low awareness: Communities have limited knowledge about CSS and fund releases.
• Separate financial management: PRIs often need to maintain separate accounts and submit audited UCs, which may not align with entity accounts.
• Social audit and RTI: Initiatives like social audit at the gram sabha level and the Right to Information Act help increase transparency and community involvement.

8. Capacity Building

• Need for professionalization: The Twelfth Finance Commission has emphasized the need to professionalize the accounting function.
• Training and hiring: Efforts are being made to build financial management capacity in PRIs through training and hiring of accountants.

Recent Developments and Initiatives

• Planning Commission initiatives: Merging small schemes and transferring them to states for better management.
• Program Outcome and Response Monitoring Division: Created to monitor the performance of government programs, including CSS.
• Revised GFRs: The task force recommends a shift from expenditure-based to output-based design, giving states more autonomy.

Recommendations for the Way Forward

1. Scheme Design

• Reduce the number of schemes by merging and closing unviable ones.
• Decentralize planning to ensure CSS reflect state and district priorities.

2. Implementation Arrangements

• Ensure that societies are not only funds flow mechanisms but also active implementing units.
• Strengthen management capacity and financial delegation.

3. Budgeting and Annual Work Plans

• Communicate likely fund allocations to states.
• Devolve budgeting responsibilities to districts and eventually PRIs.

4. Funds Flow

• Streamline the fund release process.
• Develop clear guidelines for fund release.
• Encourage the use of e-banking and MIS for better fund monitoring.

5. Accounting Framework

• Develop a standard financial reporting framework with consistent accounting policies.
• Require financial statements for projects implemented through the state treasury.
• Amend the Societies Registration Act to include better accounting and disclosure provisions.

6. Audit and Accountability

• Strengthen internal audit functions.
• Ensure independence in external audit processes.
• Implement a systematic performance reporting framework.

7. Capacity Building

• Provide technical and capacity-building support to states and districts.
• Train and hire accountants to improve financial management in PRIs.

Conclusion

The CSS are a vital source of development funding for Indian states, but their current PFMA framework is weak and fragmented. The study identifies the need for a more integrated, transparent, and accountable system that supports effective implementation and utilization of funds. By institutionalizing good practices and addressing key gaps, the GoI can enhance financial management and accountability in CSS, ensuring better outcomes for development programs.