Disbursement Procedure

for
Japan International Cooperation Agency
(JICA)
Assistance
 Outline of the presentation
 Part A – Reimbursement Procedure – I
 Statement of Expenditure Procedure – II
 Part B – Commitment Procedure – I
 Transfer Procedure
 Part C – Debt Relief
 Project Financing
(Budgeting)
Step-I
 Annual Requirement of Rupee resources for meeting
the expenditure of the Project Cost including External
funding is required to be approved by the Planning
Commission.

Step-II
 Inclusion of the funds requirement approved under
step-I, in the Annual Budget of the Government
 Pre-requisite for Disbursement
 Loan Agreement (L/A)
• Signed and becomes effective

 Contract between the Executing Agency and the

Supplier / Consultant
• Signed

• Concurred by JICA
 JICA Disbursement Procedures
I. Reimbursement Procedure
A. Reimbursement
B. Statement of Expenditure
II. Direct Payment
A. Commitment Procedure
B. Transfer Procedure
 Part – A
Reimbursement
Procedure
I
 Reimbursement Procedure
 Used For:
Payment already made to the suppliers
 In Short :
1. PIU makes payment to the Supplier / consultant /
contractor
2. PIU requests JICA through AAAD to reimburse
the amount paid
3. JICA makes disbursement
Cont.
 Reimbursement Procedure
 Documents Required
1. Request for reimbursement
2. Summary Sheet
3. Evidence ( Document showing delivery of goods /
services performed (e.g. Invoice, certificates ))
4. Contactor/consultant/Supplier’s receipt
 Documents for Reimbursement

Request for disbursement

JICA Summary sheet of Payment

Invoices
Supporting Documents
Reports
 Fund flow Chart for Reimbursement
Project Implementing Agency
Claims
AA&A Division
Claims

JICA
New Delhi
Advice
JICA Tokyo
Payment

Nominated Bank in Tokyo

Payment

AAAD Account
at RBI, New Delhi Advice to AAAD
through RBI, Mumbai
 Part – A
Statement of Expenditure Procedure
(SOE)
II
Statement of Expenditure Procedure (SOE)
 This procedure is a variant of JICA Reimbursement
Procedure.
 It is Used when large number of small payments
and/or complicated paperwork is there in preparation
of claim.
 It is useful in making timely disbursement with less
administrative work involved.
 Documents for SOE Claim

Request for disbursement

JICA Summary sheet of Payment

Invoices,
Supporting Documents,
& Reports
Statement of Expenditure Procedure (SOE)
1. JICA checks SOE Instead of Invoices and Receipts
2. The PIA Employs the Auditor
3. The Auditor checks invoices and receipts once a year
4. JICA checks the Audit Report
 Auditor points out the non-eligible expenditure in SOE,
Then borrower/PIA must adjust/ refund the amount to
JICA.
 Disbursement will be suspended if the Audit Report is not
submitted by due date or the adjustments required to be
made are not adjusted/refunded.
 When SOE is to be adopted

 When the Borrower / Executing Agency wishes and

JICA agrees to it, or

 When SOE Procedure is appropriate due to the nature

of the project, and JICA considering its suitability
makes it applicable for the project at the time of
Appraisal.
 Main points considered by JICA for SOE

 An independent audit

 Adequate fund management structure

 Appointment of Auditor

 The PIA should

 Select an auditor.

 Submit an engagement letter to JICA.

Requirement for appointment for Auditor
 Independent
 Expert

 Auditing Standards (GAAS)

 Responsibilities

(e.g. Timing of report submission, providing detail

information on unjustifiable SOE)
Note:-However for Government Departments
Comptroller & Auditor General of India shall be
Auditor.
 Maintenance of Accounts Records
 The Executing Agency should maintain records and
accounts that are adequate to reflect, in accordance
with consistently maintained sound accounting
practices, the expenditure financed from the proceeds
of the loan.

 JICA may inspect the Executing Agency’s status of

such custody from time to time.
 What should be audited

 Statement of Expenditure (SOE)

 Supporting documents
 Submission of Audit Report

The Borrower/Executing Agency should

 Furnish a certified copy of the Audit Report to JICA

 As soon as it is available but not later than 9 months

from the end of each fiscal year i.e. December

Note: The copies of SOE that are audited to be attached

with the Audit Report.
 Requirement of Auditor’s opinion
4 Types of Auditor’s Opinion
 Unqualified Opinion

 Qualified Opinion

 Adverse Opinion

 Disclaimer of the Opinion

 Adjustment
 In case when the use of a specified amount of the Loan
is not justified
 JICA will deduct this amount from the next
disbursement
 If the Borrower/ PIA fails to perform its obligation
(e.g. submission of an audit report in time)
 The Borrower is required to refund the amount to
the JICA or,
 Part or whole of its rights may be suspended.
 Important points for Auditor
 Late submission of Audit Report / Settlement
Certificate. The Auditor should explain
1. Role and the responsibility of the Auditor.
2. Critical points of the projects and time schedule to
be adhered to by the auditor.
3. Suspension of the disbursement in case of delay in
submission of audit report.
 Availability for tracing of the disbursement claims in
case of ineligible items
1. Clear indication of the claim No. in the Audit
Report is to be given.
 Project should avoid
 Tendency of delay in submitting SOE
 Payment for not eligible goods and service
 Inaccurate deduction, taxes calculation
 Discrepancy of contents in SOE with the supporting documents
 Double-Disbursement of Claims
 Wrong / omitted words
 Loss of all or part of supporting documents
 Long periods required in setting objection with the Auditors
 Time consuming process to trace the details necessary for
refund / adjustment of the objected amount.
 Part – B
Commitment Procedure
I
 Commitment Procedure
Used for :
 Foreign currency payment for import of goods and
services under Letter of Credit (L/C)
In Short :
 JICA issues a Letter of Commitment (L/Com) that
guarantees reimbursement made to the relevant L/C
Documents Required
 Evidence ( Document showing delivery of goods /
services performed (e.g. invoice/ certificate )
Commitment procedure issuing stage
JICA
Issue a L/Com Apply for L/COM

Nominated bank in Tokyo (Japanese Bank & Issuing bank)

L/C Apply for L/C

3) Evidence

Supplier’s Bank AAAD

L/C
Apply for L/C

Sign a contract
Supplier Project Implementing
Authority
 Commitment Procedure (Disbursement)
Documents
JICA
(5). Disbursement (4) Disbursement Request Money

Nominated bank in TOKYO (Japanese Bank)

(6) Disbursement (3) Evidence (7) Intimation

(9) Intimation
Supplier’s Bank` AAAD

(8)Disbursement (2) Evidence

(1)Delivery
Supplier Project Implementing
Authority
Commitment Procedure (Important Points)
 L/Com Amount is issued in Japanese Yen.
 JICA will not issue the L/Com until all the
discrepancies between the L/C and the contract are
resolved.
 At the time of issuing the L/Com, JICA will charge 0.1
% of its amount. This amount is treated as disbursed
to the borrower.
 JICA does not make disbursement until all the
discrepancies between the documents submitted and
the documents required by the L/C are resolved.
 Part – B
Transfer Procedure
II
 Transfer Procedure
 Used For:
 Payment to be made directly to the
suppliers/contractors in India
 In Short
 The Borrower issues Transfer Instruction to the
Bank of India, Tokyo (JAPAN)
 JICA makes disbursement to Bank of India, Tokyo
 The bank makes payment to the Supplier/contractor
in India in his bank account
 Transfer Procedure
 Documents Required
 Request for Disbursement

 Summary Sheet

 Claims for Payment

 Transfer Instruction

 Evidence (Document showing delivery of goods /

services performed (e.g. Invoice, certificate)

 Pre-receipt
 Transfer Procedure
Documents
(3). Disbursement JICA
Money
Bank in TOKYO
(Paying Bank) Non-resident Yen 2. Request for
Account of the disbursement and other
Borrower required documents

(2) Transfer
(4) Transfer Instruction Borrower

Project Implementing
Supplier (1) Claims for Payment
Authority
Evidence
 Check List
Covering Letter
 Official Address of PIA, Tel. No. & fax No.
 Reference No. & Date.
 Subject along with IDP No.
 Claim Amount in figures and words.
 Beneficiary Name etc. if Transfer Procedure.

Contd….
 Check List
I. Check list for Reimbursement Claims (Document-wise)
A. Summary Sheet of Payment
 Whether correct Loan No. and amount indicated?
 Whether Contract No., Contract Concurrence No.
Supplier’s Name indicated?
 Whether correct Category name and number indicated?
 Whether the amount of payment, amount applied for
financing correct?
 Whether the document signed by the authorized signatory?

Contd….
 Check List
B. Invoice
 Whether the Contract No. and the Supplier’s
name indicated?
 Whether the total amount, amount of deduction,
net amount for payment/Reimbursable amount)
indicated?
 Whether the document signed by the authorized
person?

Contd….
 Check List
C. Receipt
 Whether the Contract No. and Supplier’s Name
indicated?
 Whether the total amount (in the requested
currency), deduction, paid amount indicated
clearly?
 ‘Received’ Signature of Supplier with the
company name and seal, date of receipt and
“Received the amount’ on the Invoice is clearly
indicated.
Contd….
 Check List
Check list for Transfer procedure
 Documents required
A. Request for Disbursement
B. Summary Sheet of Payment
C. Transfer Instruction
D. Claim for Payment
E. Invoice
F. Delivery Certificate/Statement of Performance
G. Pre-receipt

Contd….
 Check List
A. Request for Disbursement
 Date, loan no and application S.No are given on
the top of request form.
 Same has been correctly mentioned in the request.
 Amount has been given in figure and word and the
same tallies with the amount mentioned in other
documents attached with the application.

Contd….
 Check List
B. Summary Sheet of Payment
 Contract Concurrence No., Contract No. should be
correctly indicated.
 Amount to be paid and amount applied for JICA
financing should be correctly indicated.
 Nature of Payment (e.g. Payment No., Period of
Payment, Period, Invoice No.) should be correctly
indicated.
 Reference No. of ‘Claim for Payment’ should be
indicated in Summary Sheet of Payment.
Contd….
 Check List
C. Transfer Instructions
 Date, loan agreement no and application sl. no are
given on the top of Transfer Instructions.
 Same has been correctly mentioned in the
Transfer Instructions.
 Amount has been given in figure and word and the
same tallies with the amount mentioned in other
documents attached with the application.

Contd….
 Check List
D. Claim for Payment
 Whether the Reference No. indicated ?
 Whether the Contract Concurrence No. and
Contract No. indicated?
 Whether the claimed amount correctly indicated?
 Whether the details such as Name & Address of
the Supplier, his Bank’s name and Account etc.
indicated correctly?
 Whether the Nature of Payment (e.g. Payment No.,
Payment Period, Invoice No. etc.) indicated ?

Contd….
 Check List
E. Invoice
 Are the Contract No., Supplier’s Name and
Amount indicated?
 Are the total amount, amount of deduction, net
amount for payment, amount applied for JICA
financing indicated?
 In case there are more than one Invoice, whether
an abstract sheet for all the Invoices has been
prepared?

Contd….
 Check List
F. Delivery Certificate/Statement of performance
 Whether the Contract No., Supplier’s Name and
Amount indicated?
 Whether it is signed by the authorized official?
 The certificate/statement is in English. In case it is
in some other language an English translation of
the same should be attached.
 In case there are more than one
certificate/statement, whether an abstract sheet for
all the Invoices has been prepared?

Contd….
 Check List
G. Pre-receipt
 Whether the Contract No., Supplier’s Name and
Amount indicated?
 Whether it is signed by authorized official?
 The Pre-receipt should be in English. In case it is
in some other language an English translation of
the same should be attached.
 In case there are more than one certificate/
statement, whether an abstract sheet for all the
Invoices has been prepared?

Contd….
 Check List
III. COMMITMENT PROCEDURE
1. Items of L/C should follow the Contract concurred
by JICA.
2. Loan Agreement No. and Contract No. should be
correctly indicated in the request.
3. Contract No. of L/C should be the number of
original Contract (not amendment No.) which was
concurred by JICA.

Contd….
 Check List
III. COMMITMENT PROCEDURE
 Expiry date of L/C should be prior to Loan closing
date i.e. expiry date of L/C should be at least one
month before Loan Closing date.
 L/C amount cannot be more than the Contract
concurred amount by JICA.
 Payment terms of L/C should be same as that of
Contract.

Contd….
 JICA Disbursement Policy
 Proper Use of Loan Funds
 Clear Flow of Loan Proceeds
 Speedy Transfer of Loan Proceeds
 Accountability
( Internal / External Audit System )
 Category of Expenditure

 In every loan agreement category wise allocation of

loan amount is given

 Illustration shown in the next slide

 Illustration

Category Amount of the Loan % of eligible

Allocated expenditure to be
( In Millions Japanese financed
Yen)
(A)

(B)

(C) -

Total
 Ineligible Expenditure
 In every loan agreement a list of Items not eligible for
financing is given. For example:
 General Administration expenses

 Taxes and duties

 Purchase of land and other real property

 Compensation

 Other Indirect Charges – fine, penalty, interest etc.

 Revolving Fund

 This is also known as Special account.

 This is established to help the borrower reduce cash
flow difficulties.
 This is kept with RBI Mumbai in JPY.
 This is maintained separately for each loan.
 This account is being operated by AAAD.
 AAAD is responsible for Annual audit of this account
by C&AG and sending audit certificate to the JICA.
 This is only a Proforma Account.
 Part – C
Debt Relief Grant
Flow Chart - Debt Relief Grant

Agreement
INDIA JAPAN

Payment

Bank of India, Tokyo

 Debt Relief Grant
 Grants are given by Government of Japan through
JICA (Japan International Cooperation Agency)
 Amount of grant is deposited in yen account in the
Nominated bank in, Tokyo
 The amount can be used for making imports
 Imports can be from any country
 Imports can be in any currency
 Amount of grant cannot be used for procurement in
India
 Debt Relief Grant – Control
 It is at the disposal of Japan Section, Ministry of
Finance (DEA), New Delhi
 Implementing Agency who want to use this grant is
required to approach Japan Section
 After its approval, importer will send request for issue
of A.P. (Authorization to Pay) to Japan Section in
prescribed format
 Japan Section will forward the same to AAAD
 Authorization to Pay (A.P)
 AAAD will scrutinize The request and issue A.P.
 A.P. means Authorization to Pay (A.P)
 It is used for authorizing Bank of India, Tokyo for
making payment out of grant funds provided by
Government of Japan for making Imports.
 Any change in A.P. can only be carried out with the
approval of Japan Section in Ministry of Finance
(DEA)
 For this purpose request, for any change like validity,
enhancement of amount, change in description of
import, change in quantity of items to be imported or
any other change, is to be made the Japan Section
and Japan Section will forward the same to AAAD.
 FLOW CHART FOR A.P
(1) Supply Order

Supplier PIA
(6) Supply
(2) Request for issue of A.P.

(6) Documents Min. of Fin.

(DEA)
(Japan Sec.)
Supplier’s (3) Request for issue of A.P
Bank
AAAD

(5) A P (4) issue of A.P

(7) Documents

(8) Payment
BOI, Tokyo (8) Advice