S.CP. O M CSZ CO. 31-F, Connought Place Chartered Accountants New Delhi- 110 001 Tel: 91-11-23313495-6-7 Fax: 91-11-23713516 ICAI Regn.No. 000346N Web Site: www.spchopra.in E-mail: spc1949@spchopra.in INDEPENDENT AUDITOR'S REPORT To the Governing Body of Rajasthan Grameen Aajeevika Vikas Parishad (RGAVP) Jaipur, Rajasthan Report on the Financial Statements We have audited the accompanying financial statements of Rajasthan Rural Livelihood Project (RRLP) (financed under World Bank credit No. 4859-IN) being implemented by Rajasthan Grameen Aajeevika Vikas Parishad (a society registered under the Rajasthan Socities Registration Act, 1958) which comprise the Balance Sheet as at March 31, 2013, the Income and Expenditure Account, the Receipts and Payments Account for the year then ended and a summary of significant accounting policies and other explanatory information. Management's Responsibility for the Financial Statements Management is responsible for the preparation of these financial statements in accordance with Rajasthan Socities Registration Act, 1958. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation of the financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Society's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. *C rKED1e NAGEMENT Ar4FB ~1 W' 0C H Opinion In our opinion and to the best of our information and according to the explanations given to us, the financial statements of Rajasthan Rural Livelihood Project (RRLP) for the year ended March 31, 2013 are prepared, in all material respects, in accordance with Rajasthan Societies Registration Act, 1958. Emphasis of Matter Without qualiftying our opinion, we draw attention to our observations/ comments, as contained in the attached Management letter wherein internal control system on number of areas needs to be further strengthened including certain issues pertaining to non - compliances with certain statutes. The key matters are as under:- a) Statutory dues of Rs. 1,33,964/- and Rs. 1,000/- deducted from salary of the employees and TDS respectively have not been deposited with the concerned authorities. Further, there were instances of non deduction of TDS of Rs. 1,29,122/-, delay in deposit of statutory dues and non availability of challans for deposit of TDS of Rs. 1,95,070/-. Moreover there were delays in filing returns of TDS, non availability of TDS returns filed in some cases and in some cases incorrect TDS returns have been filed. b) Accountability and utilisation controls over each fixed asset are established by maintaining appropriate records and undertaking physical verification at approporiate intervals. However, no physical verification of the fixed assets has been undertaken by the management during the year. Further, the fixed asset register has not been properly maintained with the requisite details, codification for the identification of the assets has not been done and issue of assets to the project staff was not acknowledged by them in token of its receipt. c) The confirmations of the balances of Rs. 6.92 crores lying with various banks at the year end have not been provided nor the authority to obtain the confirmations been conferred. d) Material departure from the internal control policies was brought to attention, specifically in relation to: i. attendance and leave records for employees/ consultant/ PFTs/ contractual staff deployed through placement agencies; ii. procurement procedures including non availability of procurement files for Rs. 77,732/- and iii. maintenance of financial records including following of the laid down practices with regard to manuals. e) Governing Body meetings were not held during the year and 3 meetings of Empowered Committee were short held as against stipulated 4 meetings required to be held each year. Report on Other Matters a) With respect to Interim Unaudited Financial Reports (IUFRs) submitted to the World Bank, it was noted that the basis for consolidation of IUFRs submitted to the World Bank was not verified to us nor tallied with books of accounts and therefore we cannot comment on the accuracy of the same. COPRAf~ CH D CQ b) All terms and conditions as laid down under the relevant financing agreements (loan agreement and project appraisal document) have been met and the legal covenants mentioned in the financing agreement have been complied with other than non-payment of commitment and service charges payable to World Bank on unwithdrawn financing and withdrawan balances respectively. Further, a progress report reporting on project activities is to be submitted to the World Bank half yearly. However, the said report was not verified to us. c) Expenditures of Rs. 35,46,020/- not supported by invoice is not eligible for financing under the credit agreement. 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Basis of PreRaration of Financial Statements The accompanying financial statements are prepared under the historical cost convention and have been prepared in accordance with the applicable accounting standards issued by the Institute of Chartered Accountants of India. Financial Statements are drawn up on 'Cash basis'. 2. Fixed Assets Fixed assets are stated at cost of acquisition including taxes, duties, freight and other incidental expenses relating to the acquisition and installation. Capital fund, equivalent to cost of fixed assets purchased during the year is created out of fund received. 3. IntancOble Assets Intangible asset consists of computer software and is stated at cost of acquisition/ implementation less accumulated depreciation. It is amortized over a period of 5 years on straight line basis. 4. Depreciation Depreciation on fixed assets is provided at the rates prescribed under Income Tax Act, 1961, which is transferred to Capital Fund account at the end of the year. S. Recognition of Income/ Expenditure i. Funding from the State Government (GoR) is recognized as income to the extent of expenditure incurred and unspent balance is shown under fund. ii. Livelihood investment tranche-I released to Self Help Group (SHG) is accounted for as an expenditure on the release of funds. iii. Interest and other income are accounted for on cash basis. iv. Expenses are accounted for on 'cash' basis. Notes to Accounts 1. Brief description of 'RGAVP' society Government of Rajasthan (GoR) constituted a society, which was registered in the name of 'Rajasthan Grameen Aajeevika Vikas Parishad' (hereinafter referred to as 'RGAVP') with the Registrar of Societies, Government of Rajasthan under the Rajasthan Societies Registration Act, 1958 vide registration no. 770 Jaipur/2010-11 dated 27th October, 2010. The Society functions under the administrative control of Department of Rural Development and Panchayati Raj. It is mandated to implement the rural livelihoods programs associated with Self Help Group (SHG) based institutional architecture to create financially sustainable and effective institutional platforms of the rural poor, enabling them to increase household income through sustainable livelihood enhancements and improved access to financial and selected public services to build their capacities to deal with the rapidly changing external socio-economic and political world. The society handles various livelihood projects apart from 'RRLP' project. 2. Brief description of 'RRLP' project activities (i) Project Preparation Facility (PPF): Project Preparation Facility (PPF) for the Rajasthan Rural Livelihoods Project (hereinafter referred to as 'RRLP') was carried out by the Government of Rajasthan during the period 8th October, 2009 to 31st March, 2011 in terms of 'Advance agreement for the preparation of proposed RRLP project' - project preparation advance no. 0690-0-IN dated 8th October, 2009 wherein the Project Implementation Plan (PIP) was prepared and submitted to the World Bank for financing. (ii) Project Phase: The financing agreement - credit number 4859-IN dated 24th May, 2011 for the 'RRLP' project was entered between International Development Association (IDA) and Government of India for SDR 106,700,000 wherein the expenses upto 88.5% are to be financed out of the said credit facility and the balance by the Government of Rajasthan. Simultaneously, a Project Agreement was entered for the implementation of 'RRLP' project between International Development Association (IDA), Government of Rajasthan and Rajasthan Grameen Aajeevika Vikas Parishad Society. The project is to be carried out during the period from 24th May, 2011 to 31st October, 2016. The objective of project is to enhance economic opportunities, access to basic amenities and participation in community decision making for the poor with a focus on women, marginalized group in 18 targeted districts of Rajasthan namely Baran, Bhilwara, Bundi, Banswara, Bikaner, Chittorgarh, Churu, Dausa, Dholpur, Dungarpur, Jhalawar, Karoli, Kota, Pratapgarh, Sawai Madhopur, Rajsamand, Tonk and Udaipur. (iii) Funding Modality for the Project: The funds are transferred by 'IDA' to the Government of India, which are the ransferred to RGAVP through Government of Rajasthan. hPRA C0 2 q 2 0Fl 3. Other Notes (i) Enclosed financial statements includes the activities of 'RRLP' project of the society. These financial statements include the accounts of State Project Management Unit (SPMU) and 18 District Project Management Unit (DPMUs). The financial statements of both SPMU and DPMUs have been combined on a line-to-line basis by adding the book value of like items of assets, liabilities, income and expenditure. Intra-unit transactions have been eliminated on consolidation. (ii) RGAVP is a society where number of projects are carried out. As these accounts are of one of the project namely 'RRLP' hence considering the nature of its activities wherein no income is generated which attracts any tax accordingly no provision for tax is considered necessary in the enclosed accounts. (iii) In the opinion of the management, the Current Assets and Loans & Advances as at 31.03.2013 have a value on realization in the ordinary course of business at least equal to the amount at which they are stated in the Balance Sheet. (iv) Debit/ Credit balances are subject to confirmation/ reconciliation. The impact, if any, subsequent to the reconciliation will be taken in the year the confirmation/ reconciliation is carried out. (v) The staff for the project has been deputed by the Government of Rajasthan. The salary of the deputed staff is charged to the project and applicable statutory compliances such as provision of Employees Provident Fund Act, Employees State Insurance Act, Payment of Bonus Act and Payment of Gratuity Act are complied by the Government of Rajasthan. Further, certain staff for the project has been hired through placement agency on contractual basis for which the Society has no obligation towards employees benefits except for the remuneration paid accordingly to agency, in view of the management none of the statues as are applicable to employees are applicable to these contractual employees hired through placement agency. (vi) The office of SPMU located at Udhyog Bhawan, Jaipur is functioning from premises of Government of Rajasthan for which there is no agreement nor any demand towards various utility services provided i.e. rent, electricity, water etc. have been raised till date and accordingly no liability towards these expenditures have been accounted for in the enclosed accounts. (vii) Surplus funds are parked with the banks on which interest is earned, which is ploughed back to the project through fund account directly including any miscellaneous income. (viii) During the year, District Project Management Units (DPMU) were set up in all 18 targeted districts of Rajasthan. However, no funds have been transferred by Bundi, Chittorgarh, Karauli, Sawai Madhopur, Tonk and Pratapgarh DPMUs to the Utthan Sansthans and expense towards payment of salary and general office was incurred during the year. CO3 (ix) In accordance with Accounting Standard (AS 18) "Related Party Disclosures", disclosure in respect of transactions with the related parties are as follows: a. Name of related party and description of relationship: Key Management Personnel Name Relationship Ms. Poonam Malya (Upto 03.08.2011) State Mission Director Mr. PC Kishen (From 04.08.2011 to State Mission Director 04.06.2013) Mr. Subir Kumar (since 05.06.2013) State Mission Director Note: Related party relationship is as identified by the Society and relied upon by the Auditors. b. Details of transactions with the related party are as under: Nature of For the year ended For the period ended Transaction 31st March 2013 31st March, 2012 LRs.) Ms.) Salary NIL 2,10,183 (x) The Society is classified as Small and Medium Sized Enterprise (SME) of Level - II entity for the purposes of applicability of Accounting Standards as defined by the Council of the Institute of Chartered Accountants of India. Accordingly, the Society has complied with the Accounting Standards as applicable to a Small and Medium Sized Enterprise. Pursuant to the exemptions/ relaxations applicable to SME of Level - II, Accounting Standard (AS) 3 - Cash Flow Statements and AS 17 - Segment Reporting are not applicable to the Society for the current year. Further, certain exemptions/ relaxation from recognition, measurement and disclosure requirements in terms of Accounting Standard 15- Employee Benefits, Accounting Standard 19 - Leases, Accounting Standard 28 -Impairment of Assets and Accounting Standard 29 - Provisions, Contingent Liabilities and Contingent Assets have been extended to the Society for the current year. Accordingly, the Society has disclosed information to the extent applicable in these financial statements pursuant to the above exemptions/ relaxations. (xi) Claims against the Society not acknowledged as debts as at 31st March, 2013: Rs. Nil. 4 (xii) The previous year's figures have been regrouped/ rearranged, wherever considered necessary to make them comparable with the current year figures. As per our Report of even date attached For and on behalf of the Rajasthan For S.P. Chopra & Co., Grameen Aajeevika Vikas Parishad Chartered Accountants Firm Reg. No. 000346N Ram Kisiholrin Subir Kumar Ankur GoVa Financial Advisor State Mission Director Partner M. No. 99143 f Place: -t Date: -1 V>4A~I