Controller of Aid Accounts and Audit An ISO

Controller of Aid Accounts and Audit (An ISO 9001: 2000 Certified Office) Department of Economic Affairs, Ministry of Finance Changes and Current Challenges Presentation by: Shri Shankar Banerjee Controller 1

Agenda • About CAAA § Challenges at CAAA § Critical Issues § Steps to meet Challenges § Project Components § Current Status § Achievements § Project Management strengths • Back to Back arrangements 2

About CAAA • CAAA is under external finance wing of Ministry of Finance (DEA) with total staff strength of nearly 50 members based at Delhi • Processes nearly 5500 claims, disbursement, debt payment and ACA • Training of project staff on disbursement claims submission • Total receipt during 2006 -07 $ 4. 17 billions [Grant: $ 0. 56 billions and Loan: $ 3. 61 billions] • Total payment during 2006 -07 of $ 2. 71 billions This include $ 1. 85 billions for Principal and $ 0. 86 billions for Interest 3

Govt. of India - Ministry of Finance Department of Economic Affairs Department of Revenue Department of Expenditure External Finance Wing Banking Division Fund Bank Division Economics Division Budget Division EEC Division F. T. Division Admin Division AAA&D Division ADB Division PMU Division Insurance Division ECB Division 4

Role of CAAA • Interfacing between the donors, Government of India (GOI) and project authorities • Debt Management – Loan agreement – Disbursements – Debt servicing • Consolidation and compilation – External assistance budget and brochure – MIS • Debt portfolio analysis 5

Disbursed Outstanding Debt (DOD) in Billion of USD Govt. Loans as on 31 st December, 2007 DONOR-(B) DOD DONOR-(M) DOD GERMANY 2. 595 ADB 3. 482 FRANCE 0. 560 IBRD 5. 375 JAPAN 9. 070 IDA RUSSIAN FED. 1. 530 IFAD 0. 295 SWITZERLAND 0. 005 EEC(SAC) 0. 042 USA 0. 527 OPEC 0. 005 14. 287 TOTAL 34. 727 TOTAL GRAND TOTAL (BILATERAL+MULTILATERAL) 25. 528 49. 014 6

Currency Composition of DOD 0. 63 6. 61 18. 84 Spl. Drawaing Rights DOD=44. 76% (IDA, IFAD) US Dollars DOD =29. 16% (IDA, IBRD, ADB, Russia etc. ) Yen DOD=18. 84% 44. 76 (Japan) Euro DOD =6. 61% (Germany, France etc) 29. 16 Others DOD= 0. 63% (Switzerland, EEC (SAC), Russia) 7

Interest rate wise breakdown of the Debt 16. 27 Upto 0. 75% DOD =59. 48% (IDA, IFAD, Germany (Treasury)) 0. 76 to 2. 50% DOD =12. 50% (Japan, France (Treasury) ) 11. 75 2. 51 to 4. 00% DOD =11. 75% 59. 48 (Japan, USA, OPEC ) 12. 50 More then 4. 00% DOD =16. 27% (IBRD, ADB, France, Germany) 11/27/2007 8

Coordination with various bodies Donor External Agencies PF-I State Govt. CAAA Project Authority RBI 9

Fund Flow/Disbursement Process Project Authority Claims Rejected Claims Fund Transfer Withdrawal Application Payment Advice CAAA ACA Advice PF-I State ACA Sanction Donor GFT Disbursal Spl A/C Advice RBI 10

System supported activities Loan Agreement Claim Handling Disbursements ACA Disbursement Process Donor’s Demand Repayment Sanction Recording of Repayments Repayment Process Budget Preparation Brochure Generation MIS Compilation Process Debt Management Interface with CS-DRMS Consolidation & Compilation Portfolio Analysis 11

Challenges at CAAA • Inclusion of Back to Back fund accounting • Enhancing functionality of old software for multi-state budgets, system alerts, MIS reports, etc. • Paper submission of claim • Lack of audit monitoring and tracking of audit disallowances by the division • Benchmarking to International Best Practices 12

Dynamics at CAAA • 19 donors with varied systems and procedures • Around 1200 active loans/grants • Maintenance of debt records in loan currency and INR • Maintenance of all subsidiary records • Correspondence with donors and project authorities in prescribed formats • Compilation on several parameters • Part of static web site updated on daily basis 13

Steps to meet Challenges • Development of new software (ICS): o Electronic submission of claim o Audit report monitoring o Accounting for back to back funding o System audit (of new system) • Conducting study tours for international best practices • Study of Fund Flow Processes • Training, development of Operations Guide, hardware & software procurement, etc. 11/27/2007 14

Project Components I. Development of new software (ICS) • New features: E-submission of claims, Audit Monitoring, Back to Back fund accounting • New system implemented from April 01, 2007 • System audit conducted of new system • Latest s/w and h/w procured in consensus with developer • E-submission of claims to start after necessary hardware installation and support from NIC 15

Project Components Technical aspects of the new system • Web based system • Latest version of MS SQL 2005 , VS. net 2005, . net framework 2. 0 and IIS server 5. 0 E-submission of the claims • Module to facilitate project implementing agencies for submission of claims electronically • Documents can be uploaded on system • Saving of transition time and loss of documents Audit report monitoring • Monitoring of timely submission of audit report to donors • Tracking of audit disallowances 16

New Functionalities 17

Project Components Operational Training • Operations Guide for laying work processes of the division. Project has recently commenced • IT Training on MSSQL and Office 2007 for select CAAA staff is in process • Trainings on claims processing, debt & risk management, risk analysis are in process 18

Key achievements of 2007 • Turnaround of work flows of the division through the new system • Upgrade to state of the art technology • Integration of the system with CAAA website • New features of the system developed o Audit Report Monitoring o E-submission of claims by select Project Authorities (pilot basis) o Handling of Back to Back Arrangement • Repayment module upgraded for Interest calculation, Commitment charges, use of Disbursement Profiles, etc. 19

Key achievements contd…. . • Benchmarking with International best practices based on Study Tours • Insight of Fund Flow at various levels • Change in ACA release mechanism with introduction of Back to Back arrangement • Development of Operations Guide for CAAA • IT and Operations support to CAAA staff 20

About our website • Static Website provides various type of data to all stake holder Ø Disbursement status of ongoing projects (updated on monthly basis) Ø Status of claims and release of funds through state govt. to project implementing agencies (updated of daily basis) Ø Current Debt Out standing on Govt. Account Ø External assistance broacher for past 10 years Ø Quarterly SDDS data Ø Terms and conditions of all major donors • url finmin. nic. in/caaa 21

Critical Issues concerning B 2 B • Terms and conditions to be same as per agreement with Donor and GOI • Funds to be transferred on daily basis i. e. ACA will be recommended on the same day as and when donors effects the disbursement • For multi-state projects initial funds transferred on the basis of % share in advance further on the claims submitted by the particular agency • Recoveries to be effected immediately from States after making the debt service payment to donor • Recoveries effected based on the percentage as defined in the loan or amount disbursed/ undisbursed. • Exchange risk to be borne by the State Govt. without access to foreign currency 22

Requirements for B 2 B • Loan ledger based on agency • State Govt. to be advised for budget requirements at the time of finalization of the Budget by CAAA • No change in the agreement being signed with funding agencies • Hedging, Swapping not yet permitted as receipt of foreign currency is kept with RBI only 23

Future Plans • Extension of E-submission of claims to donors on pilot basis • Rollout of E-submission of claim to all projects/donors • Activate linkage with PF-I for ACA release • Re-activation of dynamic web site developed under ADB-TA • Handling a single loan under Normal and Back to Back terms 24

25