Focus Area

India is regarded as a country with second largest urban population in the world. The 74^th Constitutional Amendment Act sought to improve the urban governance and management of services. India needs to improve its urban areas to achieve objectives of economic development. This entails requirement of huge funds. Since public fund in this sector is not sufficient, the Urban Local Bodies (ULBs) need to look for innovative approaches for financing and management of urban services. This scenario stirs up infrastructural reforms in ULBs. One of the weakest infrastructural states in Indian ULBs is accounting and financial module and naturally it has become first priority to the Government of India to look into.

The reforms in the sector of accounting and financial module has the ultimate objective of converting the traditional approach of maintaining only receipts and payments in a cash book to a complete set of books of accounts through introduction of Double Entry Based Accrual System of Accounting (DEAS).

As a part of this reform process a comprehensive Fixed Assets Register for the ULBs needs to be introduced. Since no base records are generally available with the ULBs or available in incomplete manner, preparation of Fixed Assets Register will need to observe following steps:

• •  Identification of assets at each location
• •  Physical verification of assets obtaining measurement, specification as applicable
• •  Classification of assets as per the National Municipal Accounting Manual (NMAM) guidelines.
• •  Valuation of Assets as per prescribed method by obtaining replacement cost providing depreciation to arrive at the net depreciation value.
• •  Preparation of the Register following relevant manual.

Since the manpower resources in the ULBs are not habituated with the modern methodology of maintaining DEAS, to observe sustainability, it is pertinent to equip the human resource with these techniques. This entails a continuous hand holding and formal training of the ULB’s accounts team.

MBP has a dedicated team with specialized expertise in this field. This team has a vast experience of successfully implementing the reforms in 14 ULBs all over the West Bengal and Bihar and led MBP to become front runner in the field of accounting reforms in ULBs in Eastern India.

Apart from this reform process, MBP also gained a substantial exposure in other specialized assignments in ULBs like Capacity Building, Stores Management, Investigation Audit etc.

MBP’s Approach to Internal Audit

Now a day, the Internal Audit has changed its approach to support the clients with more proactive role. The tools for various critical analyses like risk evaluation, identification and focusing on high risk zone, analyzing the process to formulate strategies on risk mitigation are developed and improved on day by day. The present scenario of business outlook prompts the Internal Audit to go through a continuous process of research and innovations. Thus the traditional concept of “CARO Compliance” is no longer in existence.

Over and above an Internal Auditor should have the quality and experience on advising the strategic steps, the client should take in order to mitigate the identified risks. In this area the MBP’s view is that, an Internal Auditor should take active part in implementing the steps to reduce the risk to a tolerant level.

MBP believes in the approach of risk based Internal and Management Audit and we are proud to serve our esteemed clients with these servicesthrough formulating very effective and customized processes. Acknowledgment of benefits of our services and providing further opportunities in challenging areas by our clients also helped us in promoting innovative ideas and research in the specialized field.

MBP has a substantial client base and having a very good exposure in Internal and Management Audit in an ERP (especially SAP) environment. Our dedicated team for Internal Audit is also well equipped in analyzing incompleteness in the system at a situation of new-sprung ERP system.

For augmentation of rural, health, education and other social sector, non-profit organizations in India plays a very important role. With successes in various target oriented projects this sectors has become pioneer in national mission of poverty eradication and social uplift. Their repeated successes have attracted many of the international donor agencies to pump in funds for various projects in social sectors in India. The recent trend of Corporate Social Responsibilities (CSR) has also made an add-on to this mission.

In addition to some Non-profit organization, various departments under State and Central Governments are also entrusted with the role of implementation in social sector reforms. Typically these are generally big-budget projects and are funded by the international funding agencies like World Bank, DFID etc.with certain contribution from the Governments.

We as Chartered Accountants are coming forward to ensure a systematic methodology in the whole process of fund management and utilization. Our assurance provides a critical evaluation of the performance of the non-profit organization to the fund providers. The process of evaluations also ensures physical verification of the end-point use of the funds. This helps the fund providers in taking critical decisions like continuation / discontinuation of the project, opportunities for new avenues that can be explored through the partner organization, new action to be formulated keeping in view the practical bottlenecks etc.

We in MBP have gathered substantial experience in this field. Our dedicated team for this type of specialized sector leads the firm becoming a top liner in the field of externally funded project audit.

Background

An incomplete record situation signifies an accounting system which falls short of the double entry. This may be due to lack of records at all or insufficient records that will or should facilitate the preparation of final accounts.

Reasons for insufficient or incomplete records

1. 1.  Managers or owners may not have the skills or expertise to prepare and maintain accounting records.
2. 2.  It may not be economical for the business to maintain accounting records due to volume and nature of
   transactions e.g. small scale businesses.
3. 3.  Where records have been destroyed , stolen or misplaced.

The main problem is how to prepare a full set of final accounts where there are incomplete records.

Prepare an opening balance sheet at any cutoff date.

• ► Scrutinise major areas like :

⇒  Cash and bank balances

⇒ Recognisition of revenue (based on accounting policy followed)

⇒  Completeness of booking of expenditure

⇒  Ascertaining total liability and assets(based on accounting policy followed)

⇒  Screening of other liabilities like loans , advances ,govt. dues etc.

⇒  Preparation of revised trial along with notes on accounts

⇒  Capacity building

• ► For government or allied departments or other nonprofit making institutions the following additional areas are investigated

⇒  Tracking of government grants with respective GOs’.

⇒  Expenditures made out of such grant for revenue and capital expenditures.

⇒  Preparation of grant matrix.

⇒  Scrutinizing SOE submitted to the respective grantees, etc.