The Utilization Certificate and audit of utilization is required and asked by the authority Govt, Semi-Govt,Trust etc. This certificate is asked from Independent Chartered Accountants not related in any way to the Utilization entity. The Authorities as above who grant funds for specific purpose required to satisfy themselves that the Grant-in Aid, Funds etc are utilized for the purpose they are sanctioned and given.
Many a times the Grants, or Aid has to be used for Specific Purpose and during the Stipulated period. This certificate/audit has and assurance to the sanctioning authority that the Grants, Aid, Funds are utilized for the purpose they are sanctioned & disbursed and within the stipulated period, as well as there is no misuse, delay in use, improper use, of these funds by the utilization Agency/Utility/Entity. The type of Grant should be verified. Some grants, funds sanction on the basis of the estimates provided by the utilization entity and in some cases the funds are allotted for the purpose a specific sum and the same should be utilized for the stated purpose by the entity as per their programme & actual expenditure should be submitted as utilization. The type of Grants should be ascertained before beginning of the audit. The Audit Programme , records & purpose for the above type of audit is as follows.
1. To ascertain whether there are specific Guidelines for the management & utilization of the Grants. In case the same are available these should be studied and notes on the same should be prepared. In many cases, we have to also certify that the stipulated guidelines , and procedures are followed. Copy of these Guidelines be kept in audit file.
2. The persons, who has authorized to sanction & disbursement of the grants at the utilization entity should be known and proper authorization from the Head of the entity should be ascertained. Such authority letter should be kept in audit file.
3. Whether the guidelines prescribed a specific separate bank account be opened for the Grants then the statement of accounts and account operation authority should be verified. Copy of statement of account, FDR, RD any account related to the Funds/Grants should be kept in audit file. .
4. Receipt of Grants by the entity. The correspondence, sanction disbursement letter specifying the transfer of funds from the Govt etc to the Utilization entity. To ascertain that, the sanction, disbursement of grants are directly credited to the utilization entity account. The mode of transfer whether RTGS, NEFT, DD, or Cheque should be verified & matched to confirm the receipt. Copy of the receipt documents should be kept in audit file. …2… .
5. In case, the type of grants are sanctioned on the basis of estimates, then such estimates should be submitted to the authority before sanction. The spending of the Grants should be according to or in the line of the estimates submitted for the approval of the said grants. Copy of the Estimates should be kept in the audit file.
6. To ascertain the actual utilization of the grants, the vouchers, invoices, delivery challans, for receipt of payment ,the martial as well as disbursement proof of the same should be called for verification. Copy of major invoices, receipts, & proof of disbursement should be kept in audit file.
7. Details of authorization of the payments should be ascertained and the list of persons authorized for utilization should be obtained. This is to ensure and verify that only those persons who are authorized have sanctioned the utilization of the funds. Copy of authorized persons of the utilization entity be kept in audit file.
8. Confirmations, if the certificate is to be given for the financial year then, confirmation from bank & from third party of all the accounts for the opening and closing of the year be obtained. Copy of the confirmations should be kept in audit file.
9. Guidelines & procedures set by the utilization entity should be obtained to ascertain whether they are in conformity with the guidelines of the Govt, sanction authority. This also helps to ascertain that the said sanction guidelines are adhere to by the utilization entity. Copy of the guidelines & procedures of the utilization entity be kept in audit file.
10. In case a Project Monitoring Agency or any such agency is appointed by the utilization entity to monitored the utilization of the funds for the projects then the MIS reports , of the such PMA should be looked in to. If the PMA is certifying agency for the end use then whether such PMA has submitted the End Use certificate to be ascertained. The appointment of the PMA or such agency, their guidelines, procedures basis of the charges to be paid to them are to be ascertained. Copy of appointment & their role should be kept in audit file.
Generally, such certificate/ audit report has following phases.
1. Verification of the receipt of the grants, funds.
2. Verification of whether the Guidelines of the utilization of the funds are adhere to and are followed in Toto.
3. Verification of any deviation from the guidelines are approved before hand from the Grant sanctioned authority.
4. Verification of Utilization of the Grants as per guidelines for the purpose stated & with in stipulated time.
5. Review & verifying the correctness of the MIS Reports submitted by the PMA, if any for end use of the funds. …3…
6. Review of the Minutes of the meeting of the Utilization Entity monitoring the utilization of the grants.
7. Verification of the reports submitted by the Utilization Agency to different authorities and their Head office, to see whether all such reports matched and convey same details & information.
8. Review of the Comments, Notes, qualification of the auditors of the utilization entity on the use of these funds/Grants.
9. Management Certificate about adherence to guidelines & the funds are spend for the purpose in stipulated time & effectively monitored from any misuse or otherwise.
10. Reconciliation of the grants
Reconciliation statement of the Grants/Funds. Name of the Fund/Grant. Sanctioning Authority. For the Year/period from To. (Rs.In ) Particulars Rs. Rs. An Opening Balance ( All Type of Bank A/c &/Or with Third-Party) B Grants Received during the year (specifying Date, Mode, amount) C=(A+B) Total Receipt D Expenditure during the year. (Party wise, Contact wise, Invoice No. Date Rs.) E=(C-D) Closing Balance. (All Type of Bank A/c &/Or with Third Party) It is to note that, the Utilization of the Grants/aid will also be re-audited, reviewed,& re-verified by the Govt /CAG/ charity commissioner/Sanction authority at specific period or end of the disbursement or completion of the project. These agencies many a times rely on the certificate/reports issued by Independent Chartered Accountants.
In case the specific formats are devised by the Govt/ Sanctioning Authority the same should be studied and complete & specific information be given the respective formats. It is advisable to ask for NOC from the previous auditors/certifying authority for our better understanding of the specifics of the fund/Grant. I prefer Mobile communication along with the formal letter of NOC.
Hope the above Note will guide for any certification on Grants/Aid.