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Indian Audit and Accounts Department                       *iwi      f aT *w Tme f4mT
-Principal Accountant General (Audit)                         4  +a051ACEER (* htr)
Himachal Pradesh, Shimla- 171 003                        f rIF TkK, fDRFIT-171 003
Report of the Comptroller and Auditor General of India on the financial statements of
World Bank aided National Hydrology Project for the year ended 31st March 17.
Nodal Officer-cum-superintending Engineer, Irrigation and Public Health Department,
Tuttikandi, Shimla
Report on the Project Financial Statements
We have audited the accompanying expenditure statements of World Bank aided
National Hydrology Project (Financed under World Bank Loan No.8725-IN) which comprise the
Statement of Sources and Applications of funds and the reconciliation of claims to total
application of funds for the year ended 31st March, 2017. 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 Standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free
of material misstatement. Our audit examines on a test basis, evidence supporting the amounts
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 World Bank aided National Hydrology Project for the year
ended 31st March, 2017, in accordance with Government of India accounting standards.
In additional, in our opinion, (a) with respect to statements of expenditure,
adequate supporting documentation has been maintained to support claims to the World Bank for
reimbursement of expenditure incurred; and (b) except for ineligible expenditure as detailed in
the audit observations appended to this audit report, expenditure is eligible under the Loan
Agreement No.8725-IN. During the course of audit, statements of expenditure/IUFR


(Annexure-A) and connected documents were examined and these can be relied upon to support
reimbursement under the Loan Agreement.
This certificate is issued without prejudice to CAG's right to incorporate the audit
observations in the Report of CAG of India for being laid before State Legislature.
Audit Observations: -
Sr. No.  Para No. Subject:                                 Amount (Rs. In lakh)
1       1         Slow  pace of execution under National ---
Hydrology Project
2       2         Ineligible expenditure                   0.50
3       3         Non-utilization fund                     83.34
83.84
Deputy Accountant General
(CASS)


Government of India                                       qT TRWR
Indian Audit and Accounts Department                     WT I *T iT *M    1fat tqTIr
Principal Accountant General (Audit)                      7TWr ass WR (Arlsas)
Himachal Pradesh, Shimla-171 003                       f6wr    hfik, DFIT-171 003
Annexure-A
Component of Expenditure for year 2016-17 (National Hydrology Project)
(Rs. in lakh)
Sr.    Component Name of the Project   Target   Achievement Balance
No                                                            Amount
1      A           Water     Resources 88.20    8.91         79.29
Monitoring Systems
2      B           Water     Resources 0         0            0
Information System
3      C           Water     Resources 0         0            0
Operations     and
Planning Systems
4      D           Institutional Capacity  11.80  7.75        4.05
Enhancement
100       16.66        83.34
Deputy Accountant General
(CASS)


Government of India
Indian Audit and Accounts Department                      *,T -ffu *M 'sr fq%TM
Principal Accountant General (Audit)                  74m          (M      )
Himachal Pradesh, Shimla- 171 003                   f anirl  W, DRIMI-171 003
Management Letter
As no other material came to the notice during audit other than audit
observations mentioned in the audit report on financial statements of the National
Hydrology Project (Credit No. 8725-IN) for the year 2016-17, no management letter has
been prepared.
Deputy Accountant General
(CASS)


Audit and Inspection report on the accounts of the National Hydrology Project (Loan No.
8725-In) for the year 2016-17.
Part-I      (A)          Introduction
National Hydrology Project (NHP) is World Bank aided project to improve the
extent, quality, and accessibility of water resources information and to strengthen the capacity of
targeted water resources management institutions in IndiaThe project was approved by Ministry
Government of India on ,GR &RD ,of Water Resources .23.06.2016The Project consists of
following four components:
A. Water resources monitoring systems
B. Water resources information system
C. Water resources operations and planning systems
D. Institutional capacity enhancement
A Loan agreement (No. 8725-In) was signed on 18.04.2017 between Government of
India and International Bank for Reconstruction and Development (IBRD).
A Memorandum of Agreement (MoA) was signed on 14.10.2016 between Ministry
of Water Resources, Ganga Rejuvenation and River Development (MoWR, GR & RD),
Government of India and Irrigation and Public Health Department, Government of Himachal
Pradesh for the implementation of NHP from 2016-17 to 2023-24 as a Central Sector Scheme. The
project will be of 08 years duration and would be taken in two phases of four years each.
Geographical Jurisdiction:- The Office of Nodal Officer-cum-Superintending Engineer,
Tutikandi, Shimla-4 is situated at Tutikandi in District Shimla.
Budget and financial performance
The details of budget and expenditure incurred there-against during 2016-17 is as
under:-
Year                      Grant-in-Aid       Expenditure
2016-17                   Rs. 100 Lakh       Component A       Rs. 8.91 lakh
Component B       0
Component C       0
Component D       Rs. 7.75 lakh
Total             Rs. 16.66 lakh


(B)         Scope of audit
The present audit certification which embraced verification of expenditure, test check
of records and examination of books of accounts of National Hydrology Project implemented by the
Irrigation and Public Health (I & PH) department Shimla for the year 2016-17 was conducted by an
audit party consisting of Sh. Yogendra Yadava, Audit Officer and Sh Arun Arora, Auditor w.e.f.
27.11.2018 to 18.12.2018. Besides, Sh Ramesh Sharma, Assistant Audit Officer (w.e.f. 28.11.2018
to 3.12.2018), Sh. Anshu Goyal (w.e.f. 05.12.2018 to 18.12.2018),Sh. Jitender Auditor (on
04.12.2018) period from 27/11/2018 to 18/12/2018.
The Inspection Report has been prepared on the basis of information supplied and
records made available by the auditee unit. The Principal Accountant General (Audit), H.P. Shimla
disclaims any responsibility for misinformation and non-supply of information/ records by the
auditee. The results of the current audit have been incorporated in the succeeding paragraphs.
Part-I            Audit findings
The result of the current audit has been incorporated in the succeeding paragraphs.
(A)           Serious Irregularities  -Nil-
(B)           Other Irregularities
Para: 1    Slow pace of execution under National Hydrology Project.
With the objective of to improve the extent, quality, and accessibility of water
resources information and to strengthen the capacity of targeted water resources management
institutions, the National Hydrology Project (NHP) was started in 2016-17. The Project consists of
following four components:
A. Water resources monitoring systems
B. Water resources information systems
C. Water resources operations and planning systems
D. Institutional capacity enhancement.
Further, As per Memorandum of Agreement (MoA) signed between Ministry of
Water Resources, River Development & Ganga Rejuvenation (MoWR, RD&GR), Government of
India and Irrigation and Public Health Department, Government of Himachal Pradesh on
14.10.2016 for the implementation of NHP, the project will be of 08 years duration (2016-17 to
2023-24) and would be taken up in two phases of four years each. Each Implementing Agency


will prepare 08 years Project Implementation Plan (PIP) and every year an Annual Work Plan
(AWP) for the Project. These plans will be appraised and approved by MoWR and RD&GR.
Scrutiny of records revealed that Project Implantation Plan (PIP) and Annual work
Plan (AWP) were prepared for the year 2016-17 and accordingly an amount of Rs.100 lakh was
made available under this Project for the year but against this amount, only an amount of Rs. 16.66
lakh was utilised under five activities during the year 2016-17 as per details given below.
(Rs. in lakh)
Sr.     PIP             Activity Name        Quantity  Achievement  Fund   Expenditure
NO. Component                                          (per cent)  allocated  incurred
Incremental O&M cost for complete
1.  A1.9.05   operation of HP-II                           90%     10.00        8.91
2.  D2.2.01   Workshops                                    75%      2.00        1.49
O&M of SPMU, TA & DA,
3.  D3.2.01   stationery charges etc         ----          70%      1.80        1.26
4.  D3.2.02   Outsourcing of vehicles        ----         100%      2.00        2.00
Incremental Data Entry operators,
5.  D4.1.02   other office staff             ---          100%      3.00        3.00
Total                                      18.8       16.66
It was also seen that no expenditure was incurred under other activities as per
Annexure-X of this para. It was further seen that out of the utilised amount i.e. Rs. 16.66 lakh,
Rs.8.91 lakh was incurred on Incremental O&M cost for HP-II and no expenditure was incurred
on purchase of any equipment or site development under NHP which is major component of the
project. It is evident that there was an overall 83 per cent shortfall in achievement of targets set
under Annual Work Plan (AWP) for the year 2016-17. As no expenditure was incurred on
purchase of any equipment or site development under NHP, the shortfall in achievement of targets
on that part remained 100 per cent.
Thus, due to slow pace of execution of work under project, only 16.66 per cent of the
available fund was utilised. Besides, there was a shortfall in achievement of targets set under
Annual Work Plan (AWP) for the year 2016-17.
In reply to Audit Memo Number 01 dated 06.12.2018, the Nodal Officer confirmed
the facts and figures as correct. No concrete reply was furnished by the department regarding slow
pace of work.
Para: 2      Ineligible expenditure of Rs.0.50 lakh
As per payment clause (GCC clause 16) of special condition of contract payment for
Goods and Services shall be made as follow:


(i)    On delivery: 70 percent of the contract price shall be paid on receipts of Goods and upon
submission of the documents specified in SCC Clause 6 above.
(ii)   On Successfully installation, testing and commissioning at each site: Ten (10) percent of
contract price;
(iii)  On successful training of officers: Ten (10) percent of contract price;
(iv)   On Final acceptance: The remaining ten percent of the contract price shall be paid to the
supplier in two installment i.e 5% after satisfactory completion of 12 months warranty
period and 5% after satisfactory completion of 24 months warranty period within 30
days after the date of the acceptance certificate issued by the purchaser's representative
for the respective delivery.
(v)    Payment for post warranty annual maintenance charges shall be paid after the end of
completed half year on production of certificate for satisfactory performance during the
issued by the purchaser representative.
During scrutiny of records of Nodal Officer-cum-Superintending Engineer(Hyd),
Shimla, it was noticed that two agreements for supply, installation, testing &commissioning of
water quality testing of equipment were made during 05/2014 at a tendered cost for
Rs.2794283(Rs.2185000+Rs.609283) including three years AMC after warranty period. As per
above provisions, 95 % cost of the equipment was already paid and remaining 5% cost of the
equipment i.e Rs. 99714 were paid to suppliers during 03/2017 and charged to National Hydrology
Project which actually pertains to Hydrology Project-II(HP-II) (other project). As only O&M cost
for complete operation of HP-II is admissible under NHP and the above payment is not a part of
O&M of HP-II, the said payment is inadmissible under NHP. The details are as under:
Sr.  Agreement   Work (Sub head)  Tendered  Cost    of 5% cost of Vr No. vide Remarks
No   No.& year                   amount     equipment   equipment  which
(In Rs.)                          payment
made
1    3 for 2014- Supply,         2185000    1595000     79750      01/07   of 1595000:
15         installation,    (1615000+                         03/2017    cost    of
testing      &  570000)                                      equipment+
commissioning of                                             20000:
water    quality                                             training
testing equipment
for level-lI
2    4 for 2014- -do-   (Cyanide 609283(    399283      19964       1/08   of 399283:
15          Distillation    414283+                           03/2017    cost    of
Apparatus)      195000)                                      equipment
+15000:
Training
Total:                     1994283     99714     i          I


Thus, cost of equipment which pertains to HP-II, charged to NHP is irregular.
In reply to Audit Memo Number 02 dated 06.12.2016, the Nodal Officer confirmed
the facts and figures as correct and stated that this component covers the cost incurred for operation
and maintenance of network established under HP-II.
The reply is not acceptable as above expenditure/ cost was 5% of cost of equipment
and charged to NHP which actually does not pertains to this project. As only 0 & M cost for
complete operation of HP-II is admissible under NHP and above payment is not a part of 0 & M of
HP-II. Thus, the said payment of Rs. 0.50 lakh was ineligible for reimbursement and inadmissible
under NHP.
Para: 3      Non-utilization fund of Rs.83.34 lakh.
As per paragraph 38 of Project Appraisal Report of World Bank, the opening
balance of the PMUs not to exceed 10% of the allocation of the previous year; central funds would
be proportionally reduced for unutilized amount. The milestones for release of payments are as
under:
Tranche          Period        Condition of Release
First (up to 60 April-May         e  Approval of the AWP and Annual Procurement Plan
percent of the                    *  On fulfilling condition(s) imposed at the time of
AWP)                                 release of previous tranche
*  IUFR for the previous half year and utilization
certificate for the previous period
*  Audit report for the previous financial years, which
are due before the tranche is requested.
Second (balance October-       On the request of PMUs of all lAs, in prescribed pro forma
of the AWP)      November      and on fulfillment of the following conditions:
*  Utilization of at least 60% of the total available
funds (including opening balance) and submission of
utilizing certificates
*  The opening balance of the PMUs not to exceed
10% of the allocation of the previous year;
central funds would be proportionally reduced
for unutilized amount
*  Auditor report for the last fiscal year (with auditor's
remarks)
*  Utilization  certificates and  bank reconciliation
statement for the previous year furnished along with
non-diversion of fund certificate
* IUFR for the previous half year
* Achievement with reference to the AWP
,         _       *  Other terms and conditions stipulated at the previous


release having been met
During scrutiny of records of Nodal Office, it was noticed that against the allocated
funds of Rs. 100 lakh under NHP for the year 2016-17, only Rs.16.66 lakh was spent for the
implementation of project which resulted in saving of Rs. 83.34 lakh (83.34% saving). Saving of
83.34 per cent of against allocated fund of Rs. 100 lakh during 2016-17 is against the above
provision. Component-wise details of expenditure are as under:
Sr.    Component      Target        Achievement (Rs. in Remarks
No                    (Rs. in lakh)  lakh)
1      A              88.20         8.91                  10% achievement only
2      B              0             0
3      C              0             0
4      D              11.80         7.75                  66% achievement
Total          100.00        16.66                 16.66%
It was further noticed that an amount of Rs. 48219/- was credited to the bank account
of the Nodal officer as interest on dt. 25.03.2017. Thus, the opening balance for next financial year
i.e 2017-18 remained Rs.83.82 lakh (Rs.83.34 lakh: saving +0.48 lakh: interest).
In reply to Audit Memo Number 05 dated 07.12.2016, the Nodal Officer confirmed
the facts and figures as correct and stated that due to late receipt/ at the fag end of year, the amount
could not be utilized.
The reply is not tenable as the department should have prepared AWP for the said
financial year, keeping in view the situation mentioned above.
Part (III):  Review of old objections
-NIL-
Part (IV):   Best practices.
Nothing worth mentioning has been noticed during course of audit.


Part-V      Acknowledgement
Nodal Officer-cum-Superintending Engineer, National hydrology Project and his
staff extended all possible co-operation and the records called for audit. The environment of audit
was very cordial and professional on the either side. At the time of audit, Sh. Sanjeev Kaul,
Superintending Engineer was holding charge of the office of Nodal Officer, IPH Department,
National Hydrology Project, Tutikandi, Shimla-4.
Deputy Accountant General (CASS)


Annexure-X
(Rs. in lakh)
Sr.       PIP                               Qua0000                 Fund     Expenditure
NO.    Component         Activity Name       0000000  Achievement  allocated  incurred
ntity  (per cent)
Gauge plate/staff
gauge/manual gauge
1.    A1.1.01    equipment (25 sites)        25              0       5.00        0.00
Procurement of water quality
equipments/accessories/fumi
2.    A1.6.01    shing for existing lab     .0....          0%       5.00         0.00
3.    A1.7.02    Auto Current Meter          2              0%      10.00        0.00
4.    Al.7.03    G&D manual site.            2              0%       1.00         0.00
5.    Al.7.03    Gauge Site (new)            5              0%       1.25         0.00
6.    Al.7.03    Gauge Site (Reconstruction)  30            0%       6.00         0.00
Sampling Pump, for Ground
7.    A1.7.07    Water Abstraction          ----            0%      15.00         0.00
8.    A1.7.07    Auto level                  5              0%       1.50         0.00
9.    Al.7.07    GPS hand held               5              0%       1.50         0.00
10.   Al.7.07    Total station               1              0%      10.00        0.00
11.   A1.7.07    Borehole Camera.            1              0%       3.75        0.00
Renovation and allied works
12.   A3.2.01    for SDC Mandi              ....            0%      15.00        0.00
Computer along with
13.   A3.4.01    Software and Accessories    4              0%       3.20        0.00
National/ International Study
14.   D2.3.01    tours                      ...             0%       3.00        0.00
Total                                       81.2          0.0
Assistant Audit Officer


NATIONAL HYDROLOGY PROJECT
Ministry of Water Resources
Project Name:                          National Hydrology Project
k.iplementing Agency Name:             Himachal Pradesh
Period for Which IUFR is Submitted     Fourth Quarter-2016-2017
(Amount in Rupees)
Particulars                         Quarter JAN-MAR     Year 2016-2017
Opening balance with Implementing Agency*                                 0.00               0.00
Receipts from GO[                                                 1,00,00,000.00     1,00,00,000.00
Interest                                                              48,219.00          48,219.00
Income from Other Sources                                                 0.00               0.00
Total Available Funds                                             1,00,48,219.00     1,00,48,219.00
Uses of Funds
Component A                                                         8,91,219.00         8,91,219.00
Component B                                                               0.00               0.00
Component C                                                               0.00               0.00
Component D                                                         7,75,337.00         7,75,337.00
Total use of funds                                                 16,66,556.00        16,66,556.00
Closing Balance                                                    83,81,663.00        83,81,663.00
Closing Balance + Security deposit(s) (if any)                     83,81,663.00        83,81,663.00
* Opening balance without Security deposit
This is a System Generated Report, signature not required.
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