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1 OFFICE OF THE PRINCIPAL DIRECTOR OF AUDIT (CENTRAL), Cblllfcill >rcir ~~~1 J)'8j1q~e:rr (~). ~ m. LUCKNOW BRANCH OFFICE: ALLAHABAD m'8ll Cblllfcill : ~m ~: ~ocro (~o)/"ct.m. / / 327 ~: t' ,, I '.;/ /',....-~. ~ -:. ~5 -~ -..,_ r /:,,,,., ' r -. ', \ \.. " ) (. ' ~ ~ r. \ '\ \ :, ' \ I ~ t. ~ ;i;.( ',,.. ' ,.. 1,. ~... Y"'H:. ~ r >,'..., - ~... ; ~: ~ ~ ~ ~ ~ flt::lllr'la qrlj1\j1'113it ct c>l ~1q~e:rr >P1fUT 1f5r frrfu ~ vrr ct~ lf I ~. \3Ygcrn fc1cp:~ ~ Cbllllcill cfi ~: 1010 /<1lfr.~. \ff.\ff.i:lt. / ~ ~ cpq it ~ cf; Re; ~ ~ fh$1llr'ici YRlll\JF113TI Cf)f fl '011 q ~!ITT ~I w=rrut 1f'5r ~ Cb I 4CJ I g) 8J ~ ~ fcr<:tr '\J1T ffl ~ I 7:l'1_; tt?f ~ttr ~~~1, fl'8lly~!itt (~) cfi 0lj'il~'1 cfi \3Yxhi f.1rfcr fcn<rr '\J1T m ~: ~octo (~o)/"ct.m. / / ~: qfaf"mfq: ~. Fctrn Jio;;i1C"\ll, ~ ~ cnr fcr.wt. ~ flxcb1x. 5 err ~. m fct<t. \J1'1Y"~ ~. ~ ~ cpl- ~cl~ 011CJ~llCb Cbl4CJl6 1 8J ~I

2 OFFICE OF THE PRINCIPAL DIRECTOR OF AUDIT (CENTRAL), <P1~rC'1~ m:tr r:t~~1<p c>i'{sl1q~an (~). ~ m. LUCKNOW C'l '{Sl '"113? BRANCH OFFICE: ALLAHABAD ~ <Pl~fC'l~ : ~C'lll51~1C: Report of the Comptroller and Auditor General of India To The Project Director, UP Health Systems Strengthening Project, Block-C, Indira Nagar, Lucknow. Report on the Project Financial Statements We have audited the accompanying financial statement of the U.P. Health Systems Strengthening Project financed under World Bank Credit No IN which comprise the statement of sources and applications of funds and the reconciliation of claims to total applications of fund s for the financial year 20 l These statements are the responsibility of the project's management. Our responsibility is to express an opinion on the accompanying financial statements based on our audit. We conducted our audit in accordance with the auditing standards promulgated by the Comptroller and Auditor General of India. These standard s require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. Our audit examines, on a test basis, evidence supporting the amount and disclosures in the financial statements. It also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall statement, presentation. 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 sources and applications of funds of UP Health Systems. Strengthening Project for the year ended in accordance with Government of India accounting standards.

3 In addition, in our opinion, (a) with respect to SOEs, adequate supporting documentations has been maintained to support claims to the World Bank for reimbursements of expenditures incurred; and, (b) except fo r ineligible expenditures as detailed in the audit certifi cate to thi s audit report, expenditures, are eligible for fin ancing under th e credit agreement 5033-fN. During the course of audit, statement of expenditure and the connected documents were examined and these can be relied upon to suppo1i reimbursement under the aforesaid credit agreement. (Zin million) S!. No. Application No. Total Expenditure Reimbursable 1. Rf 8/890/ RF9/36l/O Total I This report is issued without prejudice to CAG's ri ght to incorporate the audi t observations in the report of the CAG of Indi a for being laid before Parliament/State or UT Legislature. Audit observation I. During the year , Z million was provided by the World Bank (WB) for executing different works relating to the Project, but the project authorities could spend onl y Zl million which was per cent of the total budget released by the WB. The poor pace of expenditure of the Project was attributable to the frequent transfers of the Proj ect Directors and delay in

4 , finalisation of tenders. As a result, the unit ultimately had to surrender per cent of the budget. Non-utilisation of a sizable proportion of the budget reflected poor financial management. 2. Under the head 16- Professional and Special Services, the unit incurred ~0.10 million for making payments to the arbitrators/advocates for pursuing cases not covered by the project period. Since the cases were very old and pertained to the previous project, this amount of~ 0.10 million is not eligible expenditure for reimbursement by the World Bank. 3. Physical verification of the fixed Assets and Dead Stocks had not been carried out since inception of the Project. As such, current status of the stores and stocks and fixed Assets could not be ascertained in the audit. 4. The unit incurred ~ million towards payment of bonus to gazetted employees. Since gazetted employs were not entitled to bonus, this amount of ~0.010 million does not qualify for the reimbursement by the World Bank. 5. As per provisions of the Financial Management Manual (FMM), the Internal Audit of the Project was to be undertaken by a firm of Chartered Accountant on quarterly basis. However, no report was made available to the audit and compliance with provisions of the FMM could not be verified in Audit. 6. The project incurred ~12.24 million under the head '46-Computers and Hardwares/Softwares'. However the unit did not produce the adjustment vouchers of~ million. Hence expenditure incurred on the purchase of computers and Hardwares amounting to ~12.24 million does not qualify for reimbursement by the World Bank. 7. The unit (Project) released ~0.97 million under the head 'Cleaning and Gardening to District Hospital (Male), Mirzapur'. However, no adjustment vouchers were made available for verification of expenditure. As such ~ 0.97 million does not qualify for the reimbursement by the World Bank. 8. As per Notification No. 30/2012-ST, dated issued by Ministry of Finance, in the case of supply of manpower for any purpose or security service, 75 per cent of total service tax payable is to be paid by the person receiving the service and 25 per cent by person providing the service. The

5 unit, however, paid full service tax resulting in overpayment payment of tax of '{ million. 9. Service Tax has been paid on reimbursable portion of the bill of the consultant Mis Ecorys Nederland BY towards technical ass istance provider consultancy. However, as per judgement of Delhi High Cou1i in the case of Mis Intercontinental Consultants and Technocrates Pvt. Ltd., reimbursement portion is not liable to service tax. Hence '{0.032 million does not qualify for reimbursement by the World Bank. (Nishi Kant Gautam) Dy. Director of Audit (CE)

R. Vaidyanathan Office of the Principal Accountant General Deputy Accountant General

Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Indian Audit & Accounts Department R. Vaidyanathan Office of the Principal Accountant