OFFICE OF THE PRINCIPAL ACCOUNTANT GENERAL (AUDIT) PUNJAB, CHANDIGARH

MANUAL OF THE INSPECTION CIVIL WING

VOLUME I

Fourth Edition

PREFACE TO THE FIRST EDITION This Manual is intended to be a guide for the officers and staff of the Outside Audit Department. All important orders issued upto 28th February, 1950, have been incorporated in this book. It is published in two volumes: Volume I deals with

constitution, functions and the rules and procedure of the Department and Volume II contains instructions regarding the detailed processes of audit of the various offices and institutions, and compilation of rulings, and important orders issued in this connection. 2. The Superintendent, Outside Audit Department, will be responsible for keeping the Manua l up-to-date and for seeing that the orders necessitating any modifications, additions etc., are incorporated in the Manual with care and promptitude. The auditors employed in the Outside Audit Department should make themselves familiar with the procedure contained in this Manual. 3. The manual is not intended for the use of officials of other departments and Auditors should not quote it as an official reference in their reports. 4. Any errors or omissions and suggestions for improvement should be brought to the notice of the Examiner, Outside Audit Department, Punjab.

Simla The 31st March, 1950. R.C. KHANNA Accountant General, Punjab, Simla

PREFACE TO THE SECOND EDITION In this second edition of the Manual of the Outside Audit Department, Volume I, the material contained in the previous edition has been adopted with such modifications as have been necessitated by the changes which have taken place after
st the publication of the 1 Edition in 1950.

The latest orders issued by various

authorities have also been incorporated. 2. The Superintendent, O.A.D. (N.C.W.I.) Section will be responsible for keeping the Manual up-to-date and for ensuring that all orders of an important nature which may affect the practices or procedures followed in the O.A.D. are incorporated in the Manual with care and promptitude. 3. Any errors and omissions noticed in this Manual or any suggestions for its improvement will be appreciated and should be brought to the notice of the Accountant General through O.A.D. (N.C.W.I.) Section.

SIMLA The 30th January, 1961. P.D. SETH Accountant General, Punjab, Simla

PREFACE TO THE THIRD EDITION In this third edition of the Manual of Inspection Civil Wing Volume I, the material contained in the previous edition has been adopted with the modifications considered necessary on account of the changes which have taken place and orders issued subsequent to the publication of previous edition in 1961. The latest orders issued by various authorities have also been incorporated.

2. Chapters VIII and IX dealing with the audit of Commercial Accounts have been omitted as the Commercial Audit has since been separated under Commercial Audit Wing. Chapter X relating to audit of Grant-in-aid has been re-drafted in order to incorporate the orders of the Comptroller and Auditor General, regarding Audit of Receipts and Expenditure of Bodies or Authorities substantially financed by Grants or Loans. A new Chapter on Efficiency-cumPerformance Audit has been added.

3. The Section Officer Incharge, Inspection Civil Wing Headquarters Section will be responsible for keeping the Manual up-to-date and for ensuring that the orders necessitating any modifications, additions, etc., are incorporated in the Manual with care and promptitude.

4. Any errors or omissions and suggestions for its improvement should be brought to the notice of the Accountant General through Inspection Civil Wing.

CHANDIGARH The 9th January, 1980. L.P. KHANNA, Accountant General (Audit) Punjab, Chandigarh

PREFACE TO THE FOURTH EDITION This is the fourth edition of the Manual of Inspection Civil Wing (Volume I), brought out after the separation of Audit and Accounts functions in the Indian Audit and Accounts Department with effect from March, 1984. In this edition, the material contained in the previous edition has been adopted with the modifications considered necessary on account of the changes which have taken place and orders issued subsequent to the publication of previous edition in 1980. This edition also includes Indian Auditing Standards published by IA&AD in May 1994 and also incorporates the latest instructions issued by various authorities from time to time and wherever possible best International Audit practices consistent with IA&AD mandate. The instructions contained in this Manual are supplementary to those contained in Comptroller and Auditor General's Manual of Standing Orders (Audit) Edition 2002. This Manual has been compiled for use in I.A.&A.D. only and should not be quoted as authority in any correspondence with other offices. The Inspection Civil I wing will be responsible for keeping the Manual up to date and ensure that all orders affecting changes are incorporated in the Manual with due care and promptitude. Suggestions for improvement of this Manual are welcome and should be brought to the notice of the Principal Accountant General through Inspection Civil Wing.

SUNIL VERMA Principal Accountant General (Audit) Punjab, Chandigarh

TABLE OF CONTENTS
Chapter-I 1.1 to 1.5 1.6 1.7 to 1.8 1.9 1.10 1.11 1.12 to 1.13 1.14 to 1.17 Chapter-II 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 Chapter III 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 3.10 3.11 3.12 3.13 3.14 3.15 3.16 3.17 3.18 3.19 3.20 3.21 3.22 3.23 3.24 General Constitution and Functions Constitution and Sanctioned strength Functions Preparation of tour programme Undertaking of New Audit Special Audit Incidence of the cost of the Department Consent Audit Method of calculation of Audit Fee. Duties and Powers Duties and Powers of the Senior Deputy Accountant General/Deputy Accountant General (I-C). Embezzlement Inspections Duties of Senior Audit Officer/Audit Officer (Headquarters) Duties of Inspecting Officers Duties of Headquarter Section/Audit Units and other sections Distribution of work at Headquarters Duties of Assistant Audit Officer/Section Officer-(Headquarters) General Rules and Procedure Applicability of Manual of Office Procedure and of G.S.M. Branch. Conduct Rules Hours of Attendance Attendance Register Penalty for late attendance Combination of half casual leave with Regular leave Sitting late hours Attendance on holidays Absence without leave Arrangement of work when Group Officer (Inspection Civil) on tour. Sectional duty lists. Verification of sanctioned strength Skeleton Register Marking of Sectional Diary Report of pending cases Remarks on letters Report of outstanding letters Sending out of letters and Memoranda received from the Comptroller and Auditor General. Signing of letter and statements to be sent to the Comptroller and Auditor General/Government of India/State Government. Issue of Telegrams Disposal of unofficial references Complaints Anonymous or Pseudonymous letters Issue of Reminders I

3.25 3.26-3.27 3.28 3.29 3.30 3.31 3.32 3.33 3.34 3.35 3.36 3.37 3.38 3.39 3.40 3.41 3.42 3.43 3.44 3.45 3.46 3.47 to 3.49 3.50 Chapter IV4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10 4.11 4.12 4.13 4.14 4.15 4.16 4.17 4.18 4.19 4.20 4.21 4.22

Annotated reply of Inspection Reports Opening and Maintena nce of files Transfer of cases to other Sections Closing of files and cases Dictionary of references Monthly Reports Calendar of Returns Failure of Audit Register of serious financial irregularities Co-ordination between Central Audit and Local Audit. Making available Departmental files to Audit Loss of Accounts records having financial implications. Check Register of weekly Diaries of Local Auditors Leave other than casual leave Casual Leave Compensation leave Travelling Allowance Drawl and disbursement of Pay Attachment of Pay Pre-requisites in connection with the production of official documents in a Court of Law Office Records Scrutiny of Rules and Orders Correction to the Inspection (Civil) Manual Rules of Procedure for the Local Inspection Staff General Duties of the Inspection staff Strength of Local Audit Parties Time allotment Extension in time allotment Time allotment for Important/long duration Audit. Review of time allotment. Programme Telegrams Weekly Diaries Period covered by local Audit Quantum of Gazetted Supervision Intimation of dates of Audit and Inspection Accommodation Intimation to the Head Office and Monthly Report Working hours and Pattern of holidays Attendance Calling of list of payment for local audit. Distribution of work on Inspections Defalcations and frauds Guidelines for Detection of defalcations and frauds Conduct of local Audit. Organising local audit work of Important/long duration audit inspections

II

4.23 4.24 to 4.26 4.27 to 4.36 4.37 4.38 to 4.39 4.40 to 4.42 4.43 4.44 4.45 to 4.46 4.47 4.48 Chapter-V 5.1-5.2 5.3 5.4-5.6 5.7 5.8 5.9 5.10 5.11 5.12 5.13 5.14 5.15 Chapter-VI 6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 6.9 6.10 6.11 6.12 6.13 6.14 6.15 6.16 6.17 6.18 6.19 6.20

Postponement and suspension of local Audit Attitude of Auditors General Audit Instructions Check of Cash Depreciation Raising and Pursuance of objections Settlement of old objections Report on failure of Audit Fixation of responsibility on failure of audit Certificates to Government servants of office inspected Matter dealt with by auditors to be kept confidential. Central Audit Central Audit Central Audit Parties Duties of Central Audit Parties Audit enfacement on the vouchers Completion of Audit Objections on vouchers Central Audit Support Section Audit of Sanctions Co-ordination between CAP and CASS Section Audit of Loan and Deposit vouc hers Quantum of Central audit Review of vouchers Audit Reports Collection of information, copies of documents in support of objections etc. Issuing of advance copies of para to the Head of Office Compilation of results of Audit Pattern of Audit and Inspection Report Instructions for drafting of Audit and Inspection Report Language and tone of the Audit and Inspection Report Discussion of Audit and Inspection Reports Test Audit Notes Submission of Audit and Inspection Report Documents to be appended with the Audit and Inspection Reports Procedure for dealing with draft Audit and Inspection Reports in the Head Office Preliminary checks Vetting of Audit and Inspection Reports Issue of Audit and Inspection Reports Time schedule for issue of Audit and Inspection Reports Signing of typed copies of Audit and Inspection Report Records of objections in the Objection Book Authorities to whom copies of Audit and Inspection Reports are to be sent Audit of entertainment and other allowance of President/Governors. Audit undertaken on behalf of other Accountant General III

6.21 6.22 6.23 6.24 Chapter VII 7.1 7.2 7.3 7.4 7.5 7.6 7.7 Chapter VIII 8.1-8.3 8.4 8.5 8.6 8.7 8.8 8.9 8.10 8.11 8.12 8.13 8.14 8.15 8.16-8.17 8.18 8.19 8.20 8.21 8.22-8.23 8.24 8.25 8.26 8.27 8.28 8.29 8.30 8.31 8.32 8.33 8.34-8.35 8.36 8.37

Progress Register of Settlement of Audit and Inspection Reports Production of Audit and Inspection Note in a Court of Law. Advance Audit Comments Annotated copies - Material for Audit Report Material to be supplied to Report Section by Inspection Civil Wing Selection of material Procedure for preparation of draft paras for inclusion in the Audit Report Draft Para on rush of expenditure Outstanding audit observations and Inspection Reports Expeditious finalization of material for Audit Reports (Central and Civil) Miscellaneous instructions - General Principles and Processes of Local Audit General Instructions General Examination of Accounts Detailed Test Audit Audit of Receipt Audit of Demand Register Audit of Receipt Books Audit of Cash Audit of Cash Book Physical verification of cash by Audit Accounts of Permanent Advances Register of valuables Accounting of non-Government money Scrutiny of Treasury challans Audit of Expenditure Audit of vouchers relating to Central/Punjab Government Employees Insurance Scheme Bill Register Money order Acknowledgments Value Payable covers Rush of expenditure Audit of Stores and Stock Accounts Stores and stock Accounts Stock Books Registers of Immovable Property Registers of Forms Stationery Registers Registers of Telephones and Trunk Calls Accounts of Securities Audit of contingent expenditure Transmitting of paid vouchers to field parties Audit of Contingent Registers Audit checks to be applied to contingent expenditure Audit of Purchases IV

8.38 8.39 8.40 8.41 8.42 8.43 8.44 8.45 8.46 8.47 8.48 8.49 8.50 8.51 8.52 8.52 (A) 8.53 8.54 8.55 8.56 8.57 8.58 8.59 8.60 8.61 8.62 8.63 8.64 Chapter IX 9.1-9.5 9.6 9.7 9.8-9.10 9.11-9.13

9.14 9.15 9.16-9.19 9.20-9.26 9.27 9.28-9.29 9.30-9.31

Check of Service Books Check of Leave Account Check of increment certificates and records of Arrear Payments Check of tenders and comparative statements Check of Contracts and Agreements Verification of Remittance to Treasury. Verification of withdrawal from the Treasury Check of Log-Books of Government Vehicles Audit of Establishment Pay Bills Test Check of T.A. Bills in regard to counter Signatures Audit of T.A. Bills Nominal Audit of Establishment Pay Bills Nominal check to be conducted during local Inspection Checks exercised in local Audit of Establishment charges Checks of Stamp Account Audit of General Provident Fund Accounts Audit of Pay and Accounts Offices and D.D.OS Procedure regarding verification of withdrawal by the D.D.O. of the Ministries/Department during local Audit. Procedure regarding local Audit of Accounts of Public Sector Banks Sending copies of Inspection Reports to Bank Authorities and Ministry of Finance Audit of Pension Payment through Public Sector Banks Audit checks to be exercised in local audit of Pension Payments Audit of Public Provident Fund Scheme 1968 Introduction of vertical Audit Introduction of Audit Planning Portfolio Section Appropriation of Departmental receipts for meeting Departmental expenditure. Audit of Personal Ledger Account Audit of Grants/Loans under Section 14, 15 and 20 of C.A.G.S (DPC) Act, 1971. G.I.A. Section Audit under Section 14 of the C.A.G.s (DP&CS) Act, 1971 Scope of Audit Arrangement of Audit under Section 14 before Certification of Accounts Audit of the Accounts of Small Farmers Development Agencies/Marginal Farmers and Agricultural Labourers Age ncies situated in various States under Section 14 Guidelines for conducting Audit under Section 14 Keeping on record copies of Accounts of Bodies/Authorities audited Audit under Section 15 of C.A.Gs (DP&CS) Act, 1971 Scope of Audit Grants-in-aid pertains to the year of its drawl Specific purpose grants/loans to Government Companies and other organizations under audit of the Commercial Wing Audit of Accounts of Co-operative Societies V

9.32 9.33 9.34 9.35 9.36 9.37 9.38 9.39 9.40 9.41-9.47 9.48 9.49 9.50

Chapter X 10.1 10.2 10.3 10.4-10.5 10.6 10.7 10.8 10.9-10.10 10.11-10.14 10.15-10.16 10.17-10.24 10.25 10.26 10.27 10.28 10.29 10.30 10.31 10.32 10.33 10.34 10.35 10.36 10.37 10.38 10.39

Audit of the Punjab State Co-operative Supply and Marketing Federation Audit under Section 20 of C.A.Gs (DP&CS) Act 1971 Quantum of Audit Audit of Accounts of Central School Organization (Kendriya Vidyala Sanghathan) under Section 20. Recovery of the cost of audit of bodies and authorities under C.A.Gs (DP&CS) Act, 1971. Issuing of Inspection Reports Drafting of Inspection Reports Certificates to be furnished with Audit and Inspection Report under Section 14 and 15 of C.A.G.s Act, 1971. Pursuance of Inspection Reports Reporting of results of audit under Section 14 and 15 Certificate of accounts of Autonomous Bodies and State Legislature and laying of certified Accounts on the table of Parliament/State Legislature. Laying of audited accounts and separate audit reports of Central/State Autonomous Bodies before Parliament/State Legislature(s) Improvement in quality and contents of Separate Audit Reports (SARs) and Certification of annual accounts of Central/State autonomous bodies whose audited accounts are placed before the Parliament/Legislatures Efficiency-cum-Performance Audit Introduction Nature of Audit Selection of the Scheme Process of Review Preliminary study Report to Headquarters Office based on preliminary study Development of Audit Plan Review Drafting of Report Review Parties Collection of the material Data Bank Audit of World Bank and other Externally Assisted Projects - Audit objectives and scope Source documents Document essential for Audit certification Audit approach Issue of Audit Certificate Main points to be checked in Different Audit Areas Project decision and implementation Audit of implementing agencies Audit Certificate Systems Audit/Introduction General principles Source documents Main stages of systems audit Organisational analysis

VI

10.40 10.41 10.42 10.43 10.44 10.45 10.46 10.47 10.48 10.49 10.50 10.51 10.52 10.53 10.54 10.55 10.56 10.57 10.58 10.59 10.60 10.61 10.62 10.63 10.64 10.65 10.66 10.67 10.68 10.69 10.70 10.71 10.72 10.73 10.74 10.75 10.76 10.77 10.78 10.79 10.80 10.81 10.82 10.83 10.84 10.85 10.86

Analysis of system of authorization and recording Analysis of system of accounting Examination of system of internal control Evaluation of standards of quality and performance Examination of the system of internal audit Review and evaluation Manpower Audit/Introduction Audit approach Source documents Issues for audit scrutiny - Job analysis, description and specification Assessment of manpower requirements Allocation and regulation of manpower resources Norms/standards adopted for computation of requirements Control of manpower Training of manpower Use of computerized data base Audit of Computerised Systems/Introduction Controls in a Computer System Significance of controls Objectives of Computer Controls Audit objectives and scope Preliminary evaluation Audit methodology Audit techniques Issues for audit scrutiny - Audit of Acquisition Audit of Systems Development Categories of Systems Development Audit Association of audit in systems development Main points to be checked by audit Audit of Operation and Maintenance - General Controls Organizational controls Segregation of duties Physical Access Control Authorisation Control Logical Access control Operation and File Controls Change Management Controls Network Communication Security Controls Service Continuity Planning Important points to be checked in audit Application Controls Documentation Standards Input Controls Data Transmission Controls Processing Controls Output controls Master/Standing Data File Controls

VII

10.87 10.88 10.89 10.90 10.91 10.92 10.93 10.94 10.95 10.96 10.97 10.98 10.99

Audit requirements Important points to be checked Audit Trail Internal Audit Introduction Arrangements for Internal Audit Use of VLC data in Audit - Audit with VLC Audit of accounts Audit of vouchers Audit of entitlement work Audit of sanctions Use of VLC in field audit - Audit planning Local audit and scheme reviews Use of VLC in Certification Audit

VIII

APPENDICES I II III IV List of registers and forms etc., used in the Inspection Civil Destruction of Records Calendar of Returns Instructions issued by the Comptroller and Auditor-General of India for the calculations of the daily rates of Audit Fee

IX

CHAPTER I GENERAL CONSTITUTION AND FUNCTION Constitution and Sanctioned strength 1.1 The Inspection Civil Wing has been cons tituted for conducting local audit of

the accounts of Civil Departments/Offices of the State and Central Government. The audit conducted centrally in this office is supplemented by periodical test audit of initial accounts, documents vouchers etc., with a view to ensure the propriety and the accuracy of the original data on which the accounts of an office are based and submitted to this office. Due to increase in the volume of work, the wing is divided in two parts i.e. Inspection Civil I & II. 1.2 (a) The organisation chart of the Inspection Civil Wing as on 31-12-2004 was as under: Organisation Chart IC-I

Sr. DAG/DAG IC-I

Sr. AO - HQ

Sr. AO (Vetting)

Sr. AO DP

Sr. AO (CAP/CASS/VLC)

AAO-1

Vetting-I

Vetting-II

AAO-1

VLC

SR/AR-7

AAO-1

AAO-1

SR/AR-3

AAO -1

SR/AR-2

Clerks-2

SR/AR-5

SR/AR-7

Clerk-1

CASS-1

Clerks-1

Clerks-1

AAO-1

SR/AR-2

Clerks-1

Typists-1

CASS-2

AAO-1

SR/AR-2

Clerks-1

CAP-1

AAO -1

SR/AR-10

CAP-2

AAO-1

SR/AR-10

CAP-3

AAO-1

SR/AR-4

Field Parties 19

Sr. AO/AO 17

AAO/SO 32*

SR/AR 12

including one Supervisor

Organisation Chart IC-II

Sr. DAG/DAG (IC-II)

Sr. AO HQ

Sr. AO Vetting

Sr. AO DP

AAO-1

Vetting I

Vetting II

GIA

AAO-1

SR/AR-4

AAO-1

AAO-2

AAO-1 SR/AR-5

AR-3

Clerks-2

SR/AR-6

SR/AR-8

Clerks-1

Clerks-1

Clerks-1

Typists-1

Typists-1

Typists-1

Field Parties 28

Sr. AO/AO -22

AAO/SO 31*

SR/AR 25

including 2 Supervisors

Headquarters section of Inspection Civil I & II is the controlling section and exercises control over the administration and working of field audit parties. 1.2 (b) The field audit work has been distributed among the following types of field audit parties: (i) (ii) Review parties for carrying out efficiency cum performance audit. Audits under Sections 14, 15, 19 & 20 conducted locally by scrutiny of records of the sanctioning authorities and autonomous bodies. (iii) Field Audit Parties for conducting local audit and inspections of the accounts of the State and Central Government Offices falling under the jurisdiction of this Office. 1.3 The local audit party normally consists of one Section Officer/Assistant Audit

Officer and two auditors. However, parties which conduct important audits consist of two Section Officer/Assistant Audit Officers and one auditor. 1.4 It has been decided by the Comptroller and Auditor General that two auditors

for three parties in the field plus one auditor for preparation of programmes and other miscellaneous work should be posted at Headquarters section and where the number of field parties is more than 20, one additional auditor may be given. 2

(Comptroller and Auditor Generals letter no. 1644-Admn. III/268-80, dated 12th August, 1960) 1.5 It has also been decided that the posts of relieving Section Officer/Assistant Audit Officer may be provided in the Wing at the rate of 15 percent of the total number of regular field parties subject to availability of Section Officers/Assistant Audit Officers. (Comptroller and Auditor Generals Circular No. 47-T.A./1/80 issued vide no. 844T.A. I/102-80, dated 23rd August, 1980 as modified vide circular No. 39-T.A. I/81/assessed vide Endst. No. 1186/TA I/102-80, dated 28.9.81) Functions 1.6 The Inspection Civil Wing is responsible for conducting local audits and inspections of the accounts of the State and Central Government offices and departments for the audit of which the Comptroller and Auditor General is statutory responsible under the Comptroller and Auditor Generals (Duties, Powers and Conditions of Service) Act, 1971 Annexure I to this Chapter. Preparation of Tour Programme 1.7 (a) Maintenance of Master Programme Register Master Programme Registers should be maintained at the Headquarters section of Inspection Civil wing district wise to show: (i) (ii) (Iii) (iv) the name of the office with full address and telephone number, if any to be inspected. periodicity. time allotment and the month and year last audited The register should contain suitable column to record the dates of audits for five years after which it should be prepared afresh, after deleting the offices not in existence and adding newly formed offices. Any additions and alterations in the existing entries in the register should be made at once quoting full reference to the relevant orders under the dated initials of the Branch officer. The register should be put up to Branch Officer on Ist of each month and to Group Officer quarterly on 15th April, July, October and January. (b) With the help of the Master Programme Register, quarterly Tour Programme

of the local audit parties should be prepared. No hard and fast rules can be laid down in this behalf, but the following requirements should be ensured:-

(i)

The tour programme of the local audit parties should be prepared indicating

(1) Designation of the D.D.O. and name of office, telephone No., if any, (2) periodicity,(3) period from which an audit is due and (4) time allotment (5) Holidays. (ii) An office should normally be included in the programme of audit in the month

in which the inspection falls due. (iii) As far as possible all inspections to be carried out in a particular station or area

should be conducted at a single visit in each quarter of the year to ensure maximum economy in T.A. The programme should be so framed that normally the field parties follow the shortest and direct routes, and there is no-over- lapping or covering of the same routes again by the same party or any other party. (iv) the dates of inspection of commercial or civil units where proforma accounts

have to be checked and certified, should normally be fixed in such a way that all the work may be completed in a single visit to that office, sufficiently before the due date of transmission of proforma accounts to the State Govt./Government of India or the Accountant General. (v) To ensure maximum output transit days to the field parties should be allowed

on Sundays and holidays. 1.8 (a) The local audit programme may be organized in such a way as to ensure that audit of bodies and authorities selected under Section 14 and 15, and the audit of which is entrusted under Section 19 of the Comptroller and Auditor General (DP&CS) Act. 1971 and other institutions the audit of which devolves on Comptroller and Auditor General under any law made by Parliament is completed according to the Audit Plan drawn out annually before hand. The reviews of schemes selected should also be completed with the existing staff. The balance of staff may then be deployed on the normal work and it may be ensured that this is suitably phased so as to complete it with the available staff. For this purpose, it may be necessary to review the existing frequency and duration of the inspection of offices coming under the usual local audit programme of the wing with regard to the importance of the audit of particular office/institution. For example, the institutions, expenditures of which relate mainly to salary and allowances and which are not likely to throw up important points for inclusion in the Audit Report need be given only comparatively low priority in such programme. The intention is that while all institutions should be covered in the local audit programme over a period of time, it is not necessary to adhere to fixed schedules of annual or triennial local audit in respect of institutions, financial 4

transactions of which are more or less of a routine nature and which do not generally deal with development programme. The old yard-stick of fixed schedules of annual and triennial local audit in respect of institutions have become obsolete and the concept of any arrears in local audits should therefore not arise. All institutions should, however, be covered in local audits over a period of time without any fixity of schedules. (Comptroller and Auditor Generals letter No.1062-BRS/192-74, dated 23rd April, 1975 and No.380-Codes-1/41-74/Gr.V dated 5th August, 1975) (b) The programme of audit of accounts in respect of which financial statements etc., are incorporated in the Appropriation Accounts and Audit Report, should be arranged in such a manner that all the audits are concluded well in advance of the date by which material has to be supplied to Appropriation Section. Undertaking of new Audit 1.9(i) If the Accountant General is requested by Government or any other authority to undertake audit which does not pertain to his office or regarding which the Comptroller and Auditor General has issued no orders, he should refer the matter to the Comptroller and Auditor General for orders. (Para 1.1.8 C.A.G.s M.S.O. (Audit) Edition - 2002 (ii) The Comptroller and Auditor General shall have the authority to audit and report on the accounts of stores and stock kept in any office or department of the Union or of a State under Section 17 of Comptroller and Auditor Generals (Duties, Powers and conditions of Service) Act, 1971. Special Audit 1.10(a) The special audit of an office or institution may be undertaken at the request of the State Government when a report of fraud, misappropriation or any other serious financial irregularity is received or when such irregularities are suspected. (b) Where a special audit of an office/institution is demanded by the Government

for special reasons, e.g. suspected fraud, misappropriation or any other serious financial irregularity, the Accountant General should comply even though extra cost is involved. Before taking up the special audit of any department, the scope and extent of such audit should be decided in consultation with the department and/or the Government concerned under orders of the Accountant General. The Comptroller and Auditor General may also be informed of the extent and scope of special audit undertaken at the request of Government. The special audit undertaken for such 5

special reasons at the request of the State Government, will be in pursuance of the statutory function of the Comptroller and Auditor General and cost thereof will fall on the Audit Budget, vide rule (iii) of Appendix 3 to Account Code, Volume I, viz., COther charges-VIII incidence of expenditure involved in audit and keeping of accounts. (c) The question of recovery of cost of audit will arise only when the audit of

certain formation/office is not to be the statutory function of the Comptroller and Auditor General and has been undertaken on consent basis. (d) In cases where special audit of accounts of guarantee institution is proposed by

the Government on account of suspected irregularities, the audit should be undertaken with the least possible delay, irrespective of whether the accounts are complete or not. An audit of even imperfect records would establish, prima facie, the nature of the irregularities. On conducting this preliminary scrutiny of accounts, the institutions may be permitted to complete their records after which a second and more complete audit may be undertaken. (e) With the departmentalisation of accounts of Central Government it has been

decided that in the case of Central Ministries/Departments whenever request for special audit, investigation of frauds, etc., is received, the ministry/department concerned should be advised to approach the Pay & Accounts Officer concerned first for arranging the investigation as a part of internal audit. If in any case P&AO requires the assistance of audit, only then the special audit may be undertaken. However, the review should be done in detail of such of the cases of fraud/embezzlements and other serious irregularities which come to notice during audit or otherwise and critical review should be conducted, inter alia, of the results and effectiveness of the internal audit investigation. Accountant General has

however, a right to take up on his own initiative, special audit of any office in which fraud, etc. had taken place after obtaining the approval of the Comptroller and Auditor General of India, wherever necessary. (C.A.G.s letter no. 285-T.A.I./110-77, dated 18th April, 1978) Incidence of the cost of the Department 1.11 The cost of the Department is a Central charge and is debited under head

2016Audit

Consent Audit 1.12 With the promulgation of the C.A.Gs (DP&CS) Act, 1971 the practice of

undertaking audit on consent basis ceases and audit undertaken by the C.A.G. has to be under one or other section of this Act or any other enactment of Parliament. 1.13 (a) Where the audit is super- imposed on the local body or institution having its own auditors, i.e. with a view to safeguard government interest and to ensure that the grants or loans by Government have been utilised for the purpose for ;which they are given, the Comptroller and Auditor General will be acting in discharge of his statutory functions and the audit will be at government cost. (b) The question of recovery of cost of audit will arise only when the audit is not

the statutory function of the Comptroller and Auditor General and is undertaken on a consent basis. Method of Calculation of Audit Fee 1.14 Audit Fee recoverable from bodies and authorities is to be worked out as

detailed below: (i) The Daily rates of Audit Fee on party basis as recoverable from non- govt bodies is calculated by dividing the total of Direct Charges and Indirect Charges for a year by number of working days in a year and is rounded of in multiples of Rs.5. (ii) Direct charges for the actual cost of the party engaged in local audit are worked out by adding together the average cost under F.R. 9(31) and appropriate allowance thereon. The average cost of the posts should be worked out from time to time with the revision of scales, etc. (iii) The Indirect charges in connection with the gazetted supervision of the local audit and the work done in audit office are taken to be 125 per cent of the Direct Charges worked out in (ii) above. (iv) The daily rates of Audit Fees should be worked out and approved by the head of the Department within two months of the revision of the rates of pay and allowance necessitating the revision of rates. Immediately after the rates are revised and approved, a copy thereof should be sent to the Comptroller and Auditor General and its regular submission watched through the Calendar of Returns of Inspection Civil (Headquarters) Section.

(v)

The accuracy of the daily rates of audit fees calculated should be checked independently by the Internal Test Audit Section before the rates are approved by the Head of the Department.

(vi)

The accuracy of the daily rates of Audit Fees approved in each office should be got checked by the Director of Inspection at the time of inspection of that office and a report to this effect sent to Comptroller and Auditor General after the inspection is over.

(vii)

The powers of sanction of daily rates of Audit Fees have been delegated to the Heads of Department in the Indian Audit and Accounts Department with effect from the revision of daily rates of Audit Fees due on Ist September 1968, subject to the following condition :-

(a) The Direct Charges should be calculated on the basis of average cost of posts involved; and (b) The Indirect charges should be computed at 125 percent of the direct charges. (c) (i) While calculating the Direct charges, the average cost of each category of nonGazetted post should be calculated first as per instructions contained in Audit instructions below F.R. 9.31. (ii) By applying the formula prescribed in audit instruction in F.R. 9(31) average cost of each category posts generally utilised in parties should be as under for the period 1.1.04 to 30.6.04: Category I Punjab Offices observing 5 days week Category II Punjab Offices observing 6 days week Category III Central Offices observing 5 days week Category IV Central Offices observing 6 days week Period 1.1.04 to 31.3.04 Category I II III IV Category I II III IV AAO 2115 1790 2050 1760 AAO 2270 1920 2200 1885 SO 1875 1590 1820 1560 SO 2010 1700 1950 1670 Sr. Auditor 1590 1345 1540 1320 Sr. Auditor 1710 1450 1660 1420 Auditor 1260 1070 1220 1050 Auditor 1360 1150 1320 1130

Period 1.4.04 to 30.6.04

The figures of average cost would, however, be changed whenever there is revision of pay. 8

(iii)

To the amount of average cost determined in (ii) above, would be added, the

element of DA, ADA, House Rent Allowance, Compensatory allowance etc. based on the average cost, wherever admissible. The rates of H.R.A. may vary from place to place. Actual rates of these allowances as applicable may be taken into account. (iv) Indirect charges would be calculated at 125% sum total of average cost and

allowances as detailed in (iii) above. (v) For working out the daily rates, the cost as worked out by adding items (ii),

(iii), and (iv) above has to be multiplied by 12 and divided by actual number of working days available in a year The daily rates so worked out should be rounded to the nearest rupee for each post separately. (Authority : C.A.G. circular no. 41-TAI (RUL)T-81 issued vide number 1513-TA I IC(RGL)-81 dated 23.11.82) (viii) In working out the daily rates of Audit Fee, Allowance may be made for Sundays, Saturdays, casual leave restricted and gazetted holidays and transit time. (ix) The number of working days in a year for calculating Audit Fee is limited to 258 days and 218 days in respect of Government offices observing six days week and five days week respectively. (x) On the closing day of audit, the local audit party should serve on the Authority/Body audited by them, a memo indicating the amount of Audit Fee recoverable and keep two copies thereof on the Audit and Inspection Report to be submitted to Head of Office. (xi) The amount of Audit Fee is required to be paid by the institutions inspected under the Head of Account 0070-Other Administrative Services-Fees for Government Audit. (xii) Recovery of Audit Fee in respect of Government Departments should be made according to the instructions contained in F.R. 127 and Government of India decisions there under read with F.R. 9(31) and F.R. 116. (Comptroller and Auditor Generals letter number 151/Codes-I/10-76-Gr. I, dated 3rd April, 1976). 1.15 The cost of concurrent audit i.e. audit conducted by the Resident Audit Parties in respect of Government commercial concerns will be worked out according to the average cost method as laid down in F.R. 127.

In cases where the immediate gazetted supervision of the audit party is arranged on a part-time basis, the cost of such supervision will be worked out proportionately with reference to the approximate time spent on such supervision while the cost of Headquarter's supervision will be worked out in the same manner as in the case of local audit. 1.16(a) The realization of the audit fee is watched by Grant- in-aid Section through the Register of Audit Fees maintained in Form S.Y. 338 by G.I.A. The amount of Audit Fee, calculated on the basis of the rates prevalent, during the period when the audit is conducted, is entered in the register in columns I-II, when the audit Note relating to Institution from which the fee is recoverable is received. When the i ntimation of credit is received from the Treasury Officer or the Administrator concerned, the fact is noted in the Register in the remaining columns. A report of the amounts of audit fees outstanding at the end of each month should be prepared on the 5th of each month and submitted to the Branch Officer. The register should be submitted to Group Officer on 15th of April, July, October, January for his information. (b) Where audit of any body or authority is done as sub auditor on behalf of any

other Accountant General or Principal Director of Audit and Audit Fee is recoverable from that body or authority, the A.G. auditing the same as sub auditor should prepare a demand and keep a record to this effect in their register for making recovery of cost of audit and for sending a demand to their Principal Audit Officer on whose behalf the audit of that body or authority is conducted. The Principal Audit Officer will enter the demand in the requisite register. The recovery of audit fee from the apex body would then be the responsibility of the Principal Audit Officer. (Authority: Note 1 Note 2 CAGs circular Number. 36-TAI/83/issued vide CAGs Number. 15th TAI/RUL/7-81/vd I dated 1.12.83) Audit fees are leviable for whole days even though only a part of the day may have been devoted to the Audit work. If a Sunday or holiday is devoted to audit, no audit fee is leviable for that day unless the auditor actually puts in a full days work on such Sunday or holiday. It does not, however, imply that the local officials can be compelled to attend to audit on any Sunday or holiday. The recovery of audit fee in the case of local bodies or funds which bank with

1.17

treasuries is made by the Treasury Officer by book adjustment out of the funds of the bodies concerned on receipt from the Audit Party of a requisition to that effect specifying the amount due for recovery. In cases, where such bodies or funds do not 10

bank with the treasuries, the audit fees are credited into the treasury by the administrator of the funds at the instance of audit.

11

ANNEXURE I (Para 1.6) Extracts of Section 2.13 to 20 and 24 of the Comptroller and Auditor Generals Duties, Powers and Conditions of Service Act, 1971 Definitions 2. (a) In this Act, unless the context otherwise requires Accounts, in relation to Commercial Undertakings of a Government, includes trading, manufacturing and profit and loss accounts and balancesheets and other subsidiary accounts; (b) Appropriation Accounts means accounts which relate to the expenditure brought to account during a financial year, to the several items specified in the law made in accordance with the provisions of the Constitution or of the Government of Union Territories Act, 1963 (20 of 1963) for the appropriation of moneys out of the Consolidated Fund of India or of a State, or of a Union Territory having a legislative Assembly, as the case may be; (c) Comptroller and Auditor General means the Comptroller and Auditor General of India appointed under article 148 of the Constitution; (d) (e) State means a State specified in the first schedule to the Constitution; Union includes a Union Territory, whether having a Legislative Assembly or not. General provision relating to audit 13. (a) It shall be the duty of the Comptroller and Auditor Generalto audit all expenditure from the Consolidated Fund of India and of each State and of each Union Territory having a Legislative Assembly and to ascertain whether the moneys shown in the accounts as having been disbursed were legally available for and applicable to the service or purpose to which they have been applied or charged and whether the expenditure conforms to the authority which governs it; (b) to audit all transactions of the Union and of the State relating to Contingency Funds and Public Accounts; (c) to audit all trading, manufacturing, profit and loss accounts and balance sheets and other subsidiary accounts kept in any department of the Union or of a State and in each case to report on the expenditure, transactions or accounts so audited by him. 12

Audit of receipts and expenditure of bodies or authorities substantially financed from Union or State Revenues 14(1) Where any body or authority is substantially financed by grants or loans from the Consolidated Fund of India or of any State or of any Union Territory having a Legislative Assembly, the Comptroller and Auditor General shall, subject to the provision of any law for the time being in force applicable to the body or authority, as the case may be, audit all receipts and expenditure of that body or authority and to report on the receipts and expenditure audited by him. Explanation Where the grant or loan to a body or authority from the Consolidated Fund of India or of any State or of any Union Territory having a Legislative Assembly in a Financial year is not less than rupees twenty five lakh and the amount of such grant or loan is not less than seventy five percent of the total expenditure of the body or authority shall be deemed, for the purpose of this sub section, to be substantially financed by such grants or loans, as the case may be.

(2)

Notwithstanding anything contained in sub section (1), the Comptroller and

Auditor General may with the previous approval of the President or the Governor of a State or the Administrator of a Union Territory having a Legislative Assembly, as the case may be, audit all receipts and expenditure of any body or authority from Consolidated Fund of India or of any State or of any Union Territory having a Legislative Assembly, as the case may be, in a financial year is not less than rupees one crore. (3) Where the receipts and expenditure of any body or authority are by virtue of

the fulfilment of the conditions specified in sub-section (1) or subsection (2) audited by the Comptroller and Auditor General in a financial year, he shall continue to audit the receipts and expenditure of that body or authority for a further period of two years not withstanding that the conditions specified in sub section (1) of sub section (2) are not fulfilled during any of the two subsequent years. Functions of Comptroller and Auditor General in the case of grants or loans given to other authorities or bodies 15.(1) Where any grant or loan is given for any specific purpose from the Consolidated Fund of India or of any State or of any Union Territory having a Legislative Assembly to any authority or body, not being a foreign State or international organisation, the Comptroller and Auditor General shall scrutinize the procedures by which the sanctioning authority satisfy itself as to the fulfillment of the condition subject to which such grants or loans were given and shall for this purpose 13

have right of access, after giving reasonable previous notice, to the books and accounts of that authority or body; Provided that the President, the Governor of a State or the Administrator of a Union Territory having a Legislative Assembly, as the case may be, may where he is of opinion that it is necessary so to do in the public interest, by order, relieve the Comptroller and Auditor General, after consultation with him, from making any such scrutiny in respect of any body or authority receiving such grant or loan. (2) Except where he is authorised so to do by the President, the Governor of a

State or the Administrator of a Union Territory having a Legislative Assembly as the case may be, the Comptroller and Auditor General shall not, while exercising the powers conferred on him by sub section (1) right of access to the books and accounts of any corporation to which any such grant or loan as is referred to in sub section (1) is given if the law by or under which such corporation has been established provides for the audit of the accounts of such corporation by an agency other than the Comptroller and Auditor General; Provided that no such authorisation shall be made except after consultation with the Comptroller and Auditor General and except after giving the concerned corporation a reasonable opportunity of making representations with regard to the proposal to give to the Comptroller and Auditor General right of access to its books and accounts. Audit of receipts of Union or of States 16. It shall be the duty of the Comptroller and Auditor General to audit all receipts

which are payable into the Consolidated Fund of India and of each State and of each Union Territory having Legislative Assembly and to satisfy himself that the rules and procedures in that behalf are designed to secure and effective check on the assessment, collection and proper allocation of revenue and are being duly observed and to make for this purpose such examination of the accounts as he thinks fit and report thereon. Audit of accounts of stores and stocks 17. The Comptroller and Auditor General shall have authority to audit and report

on the accounts of stores kept in any office or department of the Union or of a State. Powers of Comptroller and Auditor General in connection with audit of accounts 18(1) The Comptroller and Auditor General shall in connection with the performance of his duties under this Act, have authority14

(a)

to inspect any office of accounts under the control of the Union or of a State, including treasuries and such offices responsible for the keeping of initial or subsidiary accounts, as submit accounts to him;

(b)

to require that any accounts, books, papers and other documents which deal with or form the basis of or are otherwise relevant to the transactions to which his duties in respect of audit extend shall be sent to such place as he may appoint for his inspection;

(c)

to put such questions or make such observations as he may consider necessary, to the person in charge of the office and to call for such information as he may require for the preparation of any account or report which it is his duty to prepare.

(2)

The person in charge of any office or department, the accounts of which ;have

to be inspected and audited by the Comptroller and Auditor General, shall afford all facilities for such inspection and comply with requests for information in as complete a form as possible and with all reasonable expedition. Audit of Government Companies and Corporations 19(1) The duties and powers of the Comptroller and Auditor General in relation to the audit of the accounts of Government companies shall be performed and exercised by him in accordance with the provisions of the Companies Act, 1956 (I of 1956). (2) The duties and powers of the Comptroller and Auditor General in relation to

the Audit of the accounts of corporations (not being companies) established by or under law made by Parliament shall be performed and exercised by him in accordance with the provisions of the respective legislations. (3) The Governor of State or the Administrator of a Union Territory having a

Legislative Assembly may, where he is of opinion that it is necessary in the public interest so to do, request the Comptroller and Auditor General to audit the accounts of Corporation established by law made by Legislature of the State or of the Union Territory as the case may be, and where such request has been made, the Comptroller and Auditor General shall audit the accounts of such corporation and shall have, for the purposes of such audit, right of access to the books and accounts of such Corporation : Provided that no such request shall be made except after consultation with the Comptroller and Auditor General and except after giving reasonable opportunity to the corporation to make representation with regard to the proposal for such audit. 15

Laying of reports in relation to accounts of Government Companies and Corporation 19A(1) The reports of the Comptroller and Auditor General in relation to the accounts of a Government company or Corporation referred to in Section 19, shall be submitted to the Government or Governments concerned. (2) The Central Government shall cause every report received by it under sub-

section (1) to be laid, as soon as may be after it is received, before each House of Parliament. (3) The State Government shall cause every report received by it under sub

section (1) to be laid, as soon as may be after it is received, before the Legislature of the State. Explanation For the purposes of this Section Government or State Government in relation to Union Territory having a Legislative Assembly , means the Administrator of the Union Territory.

Audit of accounts of certain authorities or bodies 20(1) Save as otherwise provided in section 19, where the audit of the accounts of any body or authority has not been entrusted to the Comptroller and Auditor General by or under any law made by Parliament, he shall, if requested so to do by the President or Governor of a State or the Administrator of a Union Territory having a Legislative Assembly, as the case may be, undertake the audit of the accounts of such body or authority on such terms and conditions as may be agreed upon between him and the concerned Government and shall have, for the purposes of such audit, right of access to the books and accounts of that body or authority: Provided that no such request shall be made except after consultation with the Comptroller and Auditor General (2) The Comptroller and Auditor General may propose to the President or the

Governor of a State or the Administrator of a Union Territory having a Legislative Assembly, as the case may be, that he may be authorised to undertake the audit of the accounts of any body or authority, the audit of the accounts of which has not been entrusted to him by law, if he is of opinion that such audit is necessary because a substantial amount has been invested in, or advanced to such body or authority by the Central or State Government or by the Government of a Union Territory having Legislative Assembly, and on such request being made, the President or the governor or the Administrator as the case may be, may empower the Comptroller and Auditor General to undertake the audit of the accounts of such body or authority. 16

(3)

The audit referred to in sub-para (1) or sub section (2) shall not be entrusted to

the Comptroller and Auditor General except where the President or the Governor of a State or the Administrator of a Union Territory having Legislative Assembly, as the case may be, is satisfied that it is expedient so to do in the public interest and except after having a reasonable opportunity to the concerned body or authority to make representations with regard to the proposal for such audit. Powers to dispense with detailed audit 24. The Comptroller and Auditor General is hereby authorised to dispense with, when circumstances so warrant, any part of detailed audit of any accounts or class of transactions and to apply such limited check in relation to such accounts or transactions as he may determine.

17

CHAPTER II DUTIES AND POWERS Duties and powers of the Senior Deputy Accountant General/Deputy Accountant General (I.C.) 2.1 Each Inspection Civil Wing is under the direct charge of the Group Officer who is responsible fo r general Administration of the Wing ensuring its smooth and efficient working. His main duties and powers are given below:(i) (ii) General Administration of the Wing. Personal Supervision of important audits by inspection during the course of audit; as per requirement of HQ's office. (iii) Preparation of audit Plan/Programmes/Tour notes of Group Officer

(Authority: PAG/Secy/4091 dated 11-11-2003) (iv) (v) Scrutiny, editing and approval of all audit notes. Active involvement in the review work at every stage as per instructions conveyed by Sh. P.K. Lahri, Director General (R.S.) vide d.o. letter dated 21.7.1994. (vi) Marking of such paragraphs of the Audit and Inspection Reports at the time of approving the reports, as are of sufficient importance for inclusion in the Register of Serious Financial Irregularities and in Annual Report of the department/Government. (vii) (viii) (ix) Scrutiny and approval of the weekly diaries of local audit parties. Approval of all extensions in the time allotments for local audit. Preparation of tour programmes including any deviation of all Gazetted and Non Gazetted staff of the Inspection Civil Wing for local audit for obtaining approval of Pr. A.G. (x) Postings and transfers of all Gazetted and non-Gazetted staff to Headquarters or to various local audit parties within the Inspection Civil Wing after approval of the Pr. Accountant General. (xi) Waiving of objections having monetary value up to the limits prescribed and subject to the fulfillment of conditions laid down in Para 7.1.16 of the Comptroller and Auditor Generals Manual of Standing Orders (Audit) 2nd Edition 2002. (xii) Granting of regular leaves to Section Officers/Asstt. Audit Officers and Sr. Audit Officers for periods upto 40 days and Sr. Auditor/Auditors and 18

Class IV for periods upto 30 days without substitute. For sanctioning casual leave he has full powers in respect of the staff working under him. (Authority: Admn. I/A/70 dated 9-8-2004). Embezzlement 2.2 When the audit note reveals errors beyond the ordinary he will bring the matter to the notice of Pr. Accountant General. He will personally deal with all cases of defalcation or embezzlement, if necessary, by visiting the office in which it is detected or suspected. Besides the entry in the audit note, he will at the time of detection separately report all cases of embezzlement to the Pr. Accountant General and when the case is complete he will submit a second report fully explaining the case, pointing out the faults in the system of accounts which led to the defalcation and suggesting remedies to prevent their recurrence. Inspections 2.3(a) The Group Officer is to supervise the field parties more often to meet the laid down requirement of spending 7 working days in a month in the field. He should submit the tour note in the prescribed format alongwith his tour programme for the following months to Pr. Accountant Generals approval by 25th of the month, preceeding the month to which it relates. He should not leave headquarters without the permission of the Pr. Accountant General The tour programme shall be framed in such a way that the Group Officer is available at Headquarters on the dates of PAC/COPU meetings (Comptroller and Auditor Generals letter No. 4473-GEIP 31-61, dated 19th July, 1961 and his D.O. No. 5117-GEI/53-58, dated 31st October, 1958 and PAG No. PAG/Secy./4091 dated 11-11-03). (CAG letter No. 1271-O&M/7-81 V dated 24-9-85) The Group Officer (IC) shall prepare his tour programmes for local and outstation units, giving coverage to maximum number of units, rotation of stations, parties and units so as to avoid deviation at a later stage. However, any deviation from approved programme in respect of party unit, station (local or outstation) dates of supervision and transit shall have the prior approval of the PAG. (Authority: PAG/Secy/4091 dated 11-11-2003) (b) The Group Officer (I-C) is liable at any time to be recalled from tour by the

Pr. Accountant General for special purpose.

19

(c)

Other annual, biennial etc. audit should be supervised as under:Supervision Units have more than Rs one crore expenditure 100% excluding establishment and will be audited annually Units having expenditure between Rs 25 lakhs to 50% by one crore and will be audited bi-annually Sr. AO/AO Units having expenditure less than 25 lakhs and No supervision will be audited once in three/four years required

Category A

Category B Category C

Authority: File No. IC-I/HQ/TP/Audit-Plan/2004-2006 In addition to that as far as possible full gazetted supervision should be provided for the following items of local audit : (i) (ii) Efficiency-cum-Performance Audit Audit under section 14, 15, 19 and 20 of the Comptroller and Auditor Generals (D.P. & C.S.) Act, 1971. (iii) (iv) System audit wherever special audit of specific systems are taken up. Audit of district and higher level offices which deal with development activities under plan programme. (v) (vi) Special Audits (Frauds, embezzlements). Other annual, biannual etc. audits should be supervised to the extent of 50% subject to a minimum period of 3 days towards the closing stages of each local audit. (Authority- C.A.G. letter number. 974-O&M/7-81/Vol. V dated 30.11.82 and 1271-O&M/7-81-V dated 24.9.85) Duties of Sr. Audit Officer/ Audit Officer (Headquarters) 2.4 The Sr. Audit Officers/Audit Officers incharge of Civil audit Wing

Headquarters Section shall be responsible for supervision and efficient working in the sections under their charge. They will assist the Group Officer (Inspection Civil) in performance of his duties and in the discharge of the duties enumerated in clauses (iii) to (vi) in para 2.1 above and will undertake such other items of work as may be entrusted to them by the Group Officer (Inspection Civil). Sr. Audit Officer/ Audit Officer (Headquarters) may allow extension in time allotments upto 4 days with the approval of Group Officer. The Audit Officer /Sr. Audit Officer will have power to grant casual leave up to 8 days at a time to the staff working under the Assistant Audit Officer/ Section Officers, when the period exceeds the Assistant Audit Officers/ 20

Section Officers power of sanction. In addition, he may sanction regular leave with pay and allowances to the Assistant Audit Officer/ Section Officer, Sr. Auditor/ Auditor working under him up to a maximum period of 30 days at a time provided he does not require a substitute. Sr. Audit Officer/ Audit Officer may sanction regular leave upto 30 days to the Auditors working under him. (Authority: Admn. I/A/70 dated 9-8-2004) Duties of Inspecting Officer. 2.5 The Inspecting Officers are responsible for supervision and efficient working

of local audit parties entrusted to their charge. The Inspecting Officers of local audit parties will have the following duties. : (i) The duties and responsibilities assigned to the Inspecting Officer according to

the provisions in Section VI of Manual of Stand ing Orders (Audit) are sufficiently exhaustive. Besides performing the coordinating functions to achieve over-all-

efficiency in performance and seeing that necessary process of audit of the various documents have been carried out by the staff under him, the Inspecting Officer will do a certain amount of original work and examine personally with reference to original documents all important points raised by the staff. He should personally review all tenders and agreements and also see whether the state of accounts in the office inspected is satisfactory. He should himself draft the Inspection Report and discuss it with the head of the office inspected, wherever he is present at the close of the inspection.. (Annexure to Para 6.1.7 of MSO (Audit) 2nd Edition - 2002 (ii) In case of important audits he should ensure that he gets necessary briefing

where required from the Group Officer (Inspection Civil) well in time with regard to any special point to be examined during such local audit. Likewise in the case of special audits he has to ensure that necessary guidelines on which special audit is to be conducted are obtained from the Headquarters and the period for which the records are to be examined in detail is also to be ascertained. (iii) The Inspecting Officer shall make it a point to call on the Head of Office

being inspected in the beginning of audit and ascertain from him if he has any suggestions for looking into any point of importance in greater details. He should examine such suggestions and also other matters which come to his notice for deciding upon the lines on which the local audit is to be started. 21

(iv)

The Inspecting Officer has to acquaint himself with the system of finance of

the office /institutions, the accounts of which he is inspecting what makes up i ts receipts and how its money is expended. He should then make up his mind as to what system of accounts is necessary for these receipts and expenditure, what registers are necessary for internal check purpose and how far the existing system conforms to this standard. This is the elementary and primary responsibility of the Inspecting Officer to be discharged at whatever stage he comes in on the inspection. (v) The Inspecting Officers should guide their staff, do a certain amount of

original work in respect of important transactions and should personally examine with reference to the initial documents all important points raised by their staff. (vi) The settlement of outstanding paragraph of the earlier inspection reports is one

of the important duties of an Inspection Officer. (vii) He should try to get all the facts and explanations on the spot by discussing the

points raised during inspection with the Heads of Offices concerned. Wherever the Inspecting Officer feels that the points raised by him are so important that they may ultimately find a place in the Audit Report of the Comptroller and Auditor General, he should take particular care to examine all the issues involved, collect all the relevant information and also take attested copies of those documents which are likely to be useful in pursuing the matter with higher authorities so that, while editing the draft paragraphs for the Audit Report, Headquarters should not find themselves at a loss because of missing links in the facts and arguments set forth necessitating a fresh reference through the next audit party resulting in avoidable loss of time. (Comptroller and Auditor Generals D.O. Number. 1307/Admn. I-388-85 dated 24th September, 1985) (viii) It should be recognised as one of the important duties of Inspecting Officer to report immediately to the Group Officer (Inspection Civil ) anything really serious or important which comes to light in the course of his inspection without waiting to be included it in the inspection report. (ix) It is essential that in the case of supervised audits, the Inspection Reports

should be drafted and edited by the Sr. Audit Officers/Audit Officers. (Comptroller and Auditor Generals letter number. 1307-Admn I/388-55, dated 24th January, 1955 and Number. 76-Tech-Admn I-385-65 dated 14th January, 1966) (x) The Inspecting Officer shall personally attend to the following items of work during local audit :22

(a) (b)

Disposal of last Inspection Reports including review of old objections. Conduct a general review of the cash book and scrutiny of transactions involving heavy expenditure and receipts of peculiar nature.

(c)

Examination of system of stores, purchases and general review of purchases made.

(xi)

The Inspecting Officer shall approve the distribution of duties between the

members of audit party. The issue regarding sanction of leave to the members of field parties on a uniform pattern by all the Groups was examined in the light of the Headquarters letter number. 766-TA I/137-80 dated 16.8.1980. Accountant General accordingly ordered that the procedure underlined below should be followed by all the Groups: (1) Casual leave All kinds of leave shall be applied for in advance. Assistant Audit Officer/ Section Officer incharge of the field Inspection Party may sanction casual leave upto 5 days to the Sr. Auditor/ Auditors and other staffs working under them. Similarly Sr. Audit Officer/ Audit Officer supervising the field party may sanction casual leave to the Assistant Audit Officer/ Section Officer upto 3 days at a time. In case of emergency and urgent necessity, the Sr. Audit Officer/ Audit Officer/ Assistant Audit Officer/ Section Officer may themselves avail of casual leave not exceeding 2 days at a time. They, shall, however inform the Headquarters Section telegraphically before proceeding on leave. For further extension of leave, they shall apply to the Headquarters sections in advance. (2) Regular leave In all cases applications for regular leave should be sent to the Headquarters Sections for sanction by the Competent authority i.e. Sr. Audit Officer/ Audit Officer/ Group Officer. However, in case of emergency/urgent necessity when casual leave is not due to the official/officers, provisions as outlined in sub para I above shall apply. The leave applications in all cases shall be despatched under Registered cover on the same day to the concerned Headquarters Section. Headquarters Section in all the Groups shall maintain the casual leave account and verify the same with weekly diary reports. (Authority: Control/11-1/Field Parties/leave/87-88/2159-62 dated 21.12.87)

23

(xiii)

The Inspecting Officers are required to report important and interesting cases

on the prescribed proforma to the Pr. Accountant General every month, demiofficially by 5th of the following month with a copy to the Group Officer concerned. Duties of Headquarters Section/Audit Units and other Sections 2.6 The Civil Inspection Wing Headquarters Section is responsible for the

following items of work :(i) (ii) Keeping up to date the list of offices to be locally audited. To draw out an audit plan of units to be audited in the next financial year for approval by the Pr. Accountant General. (iii) Preparation of tour programmes of audit parties and Inspecting Officers under the orders of the Group Officer/Sr. Audit Officer/ Audit Officer (Headquarters). (iv) (v) Sending intimations of dates of local audit to the concerned offices in time. Ensuring that the local audit and inspection are carried out in accordance with the approved programmes. (vi) To get the month/months account selected for detailed audit and intimate the same to the local audit parties. (vii) To ensure that Audit Note/ Inspection Report of each office, the audit of which is completed, is received at Headquarters in time and is not detained by the local audit party beyond the prescribed period. (viii) To ensure that all Audit Notes/ Inspection Reports received are properly and promptly edited and issued to the concerned offices after approval by the Group Officer within the framed schedule of time. (ix) Scrutinize the annotated copies of Audit and Inspection Notes received from the Departmental Heads, issue further remarks, if any, or take any further action on the same until all points raised in the Audit and Inspection Notes are finally settled. (x) To review the outstanding paras and the Audit Inspection Notes monthly and maintain an up-to-date position of outstanding paras/IRs in the Para Registers (xi) (xii) Maintenance of all prescribed Registers and issue of reminders when due. Supplying the local audit parties with copies of all important orders, interpretations of rules and books, codes and manuals which are useful for local audit purposes. (xiii) Correspondence with the State/Central Government regarding local audit. 24

(xiv)

To see that photo copies of list of payments and schedules of drawls relating to selected months are promptly supplied to the local audit parties after obtaining the original from D.C. Sections of the office of A.G. (A&E) Punjab.

(xv)

Furnishing material required by the Report Section for inclusion in Audit Reports.

(xvi)

To see that amount of the Audit Fee charged from auditee organisatio ns as circulated to the local audit parties has been correctly worked out.

(xvii) Rates of Audit Fees are revised promptly as and when the occasion arises. (xviii) Examination of the weekly diaries and stamp accounts received from the local audit parties. (xix) Checking of movements of the party personnel shown in their T.A. bills with the sanctioned tour programmes, weekly diaries and casual leave registers, etc., and passing on the T.A. bills to Administration Section with certificates regarding verification of dates, etc. (xx) Staff requirements of the Inspection Civil Wing for each financial year are correctly worked out and sanction obtained from the Pr. Accountant General/ Comptroller and Auditor General well in time. (xxi) Budget Estimates are prepared well in time and sent to Administration Section

(xxii) Seeing that all the local audit work is done punctually and regularly. (xxiii) Preparation of periodical arrear reports and other returns. (xxiv) Maintenance of important orders files for guidance of the Headquarters Sections and local audit parties, and keeping the Manual of Inspection Civil Wing up to date. (xxv) Casual leave accounts of the staff of the Inspection Civil Wing and applications for casual leave of local audit parties and Headquarters establishment will be kept in Headquarter Sections. (xxvi) All other miscellaneous and policy matters relating to the Inspection Civil Wing in connection with local audit/inspection and disposal of Inspection Reports etc., should be dealt with promptly. (xxvii) Maintenance of all the prescribed registers shown in Appendix I. These

registers should be examined by the Assistant Audit Officer/ Section Officer and submitted to the Sr. Audit Officer/ Audit Officer (Headquarters ) and Group Officer (Inspection Civil) on the due dates given in the Calendar of Returns maintained as per Appendix III of this Manual. 25

(xxviii)All other miscellaneous and ancillary items of work as may be entrusted. Distribution of Work at Headquarters 2.7 There are 12 sections at the Inspection Civil Headquarters each under the

charge of an Assistant Audit Officer/ Section Officers. The distribution of work amongst the Headquarters Sections is as under :Inspection Civil Headquarters Section (I & II) (i) (ii) General Administration, Co-ordination and policy matters. Preparation of Audit Plan, tour programmes and dealing with matters relating to local audit. (iii) (iv) Preparation of staff requirements and budget estimates. Postings and transfers.

IC-I Audit Unit I General Administration, Police, Punjab Home Guards, Justice, Revenue, Finance, Hospitality, Election, Small Savings, Gratuitous Relief, Village & Khadi Board, Printing & Stationery, BSF, ITBP etc. IC-I Audit Unit II Food & Supply, Jails including Central Jails, Central offices, Medical, Ayurvedic, Homoeopathic, Family Welfare and other Misc. Units viz. Controller of Stores, Director Colonisation, Government Work Centre Rajpura, Central Medical Store Patiala, Government Aero Engine Workshop Patiala, Government Central Workshop Chandigarh, University Text Board IC-II Audit Unit I Industries, Agriculture, Soil Conservation, Cooperation, Economic & Statistics, Transport, Tourism, Sainik Welfare, Welfare of SC & BC, Planning Department, Rural Development, Urban Development, Fisheries, Animal Husbandry and Dairy Development etc., Labour Employment, Social Security and Welfare of Women and Child Development, PUDA, Punjab Mandi Board. IC-II Audit Unit II General Education, Technical Education, Sports and Youth Services, Art & Culture, Public relations/Information, N.C.C., Language, Library, Archeology and Museum, Industrial Training Institutes etc., Pension Audit of Banks. (AG's orders issued vide No. AG/Secy/99-2000/2076 dated 18-6-99 and No. PAG/Secy/3882 dated 12-1-2003) G.I.A. All work related to Audit under Section 14, 15, 19 and 20 of C.A.G.s (DP&Cs Act) 1971. Preparation of SAR, Externally aided projects, issue of audit certificates including/maintenance of guard files of World Bank Project. (Authority: O.O. Insp (c)/HQ/93-94/26 dated 31.3.94 26

(Authority:

A.G.s order dated 5.10.87 in CASS I Section file (IC/CASS I/Portfolio/87-88/Vol. I) Draft Para Section/Port Folio Section Maintaining port folio files in respect of State and Central Plan and Centrally sponsored scheme. Processing of SIRs for finalisation of Draft Paras and P.A.C. matters connected with D.Ps. Central Audit Support Section - I (i) (ii) Processing of material for Chapter I & II of Audit Report (C). Preparation of draft paras in respect of losses and defalcation, write off of losses etc., utlization of contingency fund. (iii) Issue of audit certificates in respect of State/Central Plan Schemes, Centrally Sponsored Schemes. (iv) Scrutiny and verification of Finance and Appropriation Accounts as per C.A.G.s Office Circular Number. 1378-Rep (s) 59.84 dated 5.3.84 (vide para 5.2 of MICA) (v) (vi) Vetting of Rules/notifications proposed to be issued by the State Government. Review of five grants and omnibus paras. Central Audit Support Section II (i) Coordination and framing of audit programmes, deployment of parties, the audit of compilation Sections (except DC Forest) including RAO Nangal & Patiala (A&E Sub Offices). (ii) (iii) (iv) Vetting, issuance and pursuance of Audit Notes of CAPs. Audit of sanctions/Agreements. Scrutiny of material for audit report and its transmission to CASS-I.

(Authority : O.O. Number. 103 dated 4.1.1988) Duties of Assistant Audit Officers/ Section Officers (Headquarters) 2.8 The Assistant Audit Officers/ Section Officers at Inspection Civil Wing

Headquarters hold the supervisory charge of the sections and are required: (i) to exercise a methodical, complete and clear supervision over the working of their sections to see that orders are understood and correctly followed, to maintain discipline and tidiness in the sections, to see that the work of the section is evenly distributed, to see that standing orders regarding attendance, leave and general conduct are strictly observed and to bring to the notice of the 27

Sr. Audit Officer/Audit Officer, incharge any irregular habit, disorderly conduct, neglect of duties or insubordination on the part of their staff as detected by them. (ii) To maintain a Calendar of Returns showing the due and actual dates of submission of reports and returns to the various authorities. This should be submitted for Branch Officers review on the 2nd, 8th 15th and 22nd, of each month. Blank note sheets should be appended to and bound with the Calendar of Returns for the purpose of submission of the weekly reports in the form given below. The Assistant Audit Officer/Section Officer should indicate on them if any return has been delayed. The Branch Officer should record the result of his scrutiny and his further instructions, if any. The Calendar of Returns should in addition be submitted every month to the Branch Officer for signatures at the end in the space provided for along with the monthly report on the state of work. The timely submission of the calendar of Returns should be watched through the Calendar itself. Page Item No. Brief particulars When due To whom Reasons due for delay Probable date by which it will be submitted.

(Para 1.6.I of Manual of Office Procedure and General Services and Maintenance Branch, Vol-I Part- A). (iii) To maintain and keep in safe custody the Attendance Register, casual leave Registers, Register of Financial Irregularities and to submit all reports (including Diary Reports), Registers, Statements etc. due from the section. (iv) (a) To see that :the old records requisitioned from the records branch are not unnecessarily retained in the section; and (b) all correspondence files and other records are duly arranged and delivered to the Branch whe n due. (v) To see that no arrears of any kind accumulate and to submit to the Branch Officer on the first of each month an arrear report in the prescribed form O.A. 9 (given in Appendix I to this Manual) reflecting the true state of work in the section. This report should reach Group Officer (Inspection Civil) by the end of each month. 28

(vi)

to overhaul thoroughly at least once a month all papers on his assistants tables, racks stools, pigeon holes, drawers, almirahs etc. to see that nothing has escaped or escapes disposal and that all disposed of papers, vouchers etc., are regularly and properly filed. The result of overhauling should be reported to the Gazetted Officer- incharge on the 15th of every month through a Register which should be submitted quarterly to the Group Officer (Inspection Civil ) on the due date.

(vii)

to see that all codes and reference books supplied to the Section are kept upto date and are readily available.

(viii)

to see that the Sectional Order Book and other files containing office orders, circulars, government letters, etc., are properly maintained and kept up to date.

(ix)

to see that the particulars of all documents etc., sent out are noted in the registers prescribed for the purpose.

(x)

to ensure the correctness of all information, facts, figures, communicated to government departmental authorities other Audit Offices as also to Control E.C.P.A. and G.I.A. Sections in this office.

(xi) (xii)

to pursue vigorously all cases of financial irregularities, losses, etc. to maintain a note book for recording the various points which he has to watch but which are not required to be noted in any one of the prescribed registers and to put it up to the Branch Officer on the 5th of each month. This record should be handed over to the successor whenever there is a change in incumbency. (Para 1.14 of Manual of office procedure and of the General Services and Maintenance Branch)

(xiii)

to sign ordinary, routine and printed letters for the Sr. Audit Officer/ Audit Officer whether he is on tour or at Headquarters.

(xiv)

to go through carefully the letters received daily through the Diary to mark specially those letters which require prompt action and reply and to see that no delay occurs in their distribution and disposal.

(xv)

to see that the disposal of correspondence and bills received through Sectional Diaries marked under the signatures of Auditor is not only correct but also complete viz, the case number of the relevant file is given where the disposal is marked as Filed. The Sections despatch number is given in case reply has been issued and the number and date of transit register is quoted when a 29

letter is finally transferred to another section for disposal and for this purpose to check and initial cent percent the entries of disposal in case of letters from the Government of India, Punjab Government and the Comptroller and Auditor General of India and five per cent of other entries and give a certificate to this effect on the weekly diary reports. (Office order no. TM-119-1/117, dated 4th February, 1958 read with para 4.4.1 of the Manual of office procedure and General Service and Maintenance Branch) (xvi) to dispose of, himself, as far as possible, after obtaining necessary information from his assistants all U.O. references and important letters from the Government of India, State Government and Comptroller and Auditor General and to see that where necessary a copy is invariably taken of all unofficial references for inclusion in the office files. (xvii) to see that letters and other papers which are of interest to more than one section of the office as also the ruling and orders of general applications which are received direct in the section are circulated/communicated without delay to other Assistant Audit Officers/ Section Officers for information and necessary action. (xviii) To pass file orders on all letters, half margin, etc.-except letters from the Government of India, State Government and Comptroller and Auditor General of India, which should be filed only under orders of Sr. Audit Officer/Audit Officer/ Group Officer incharge. (xix) To review the half- margin and despatch registers periodically and to see that reminders are issued where necessary in accordance with the instructions laid down in Para 4.22 of the manual of General Office Procedure and General Services and Maintenance Branch Volume. I Part-A. (xx) To review the Sectional Transit Register at the end of each month to see that all letters entered therein for transmission to other Sections are duly received by them under dated initials without undue delay; that effective steps are taken to dispose of the disputed letters and undelivered letters are shown as outstanding in the diary report. (Office order No.-TM/H-7-11/40, dated 4th April, 1957 read with para 4.20(vi) of Manual of office procedure and of General Services Maintenance Branch Vol-I Part-A)

30

(xviii) Following powers have been delegated to the Assistant Audit Officer/ Section Officers by the Comptroller and Auditor General of India :(a) Monthly indents of forms and stationery will be signed by the Assistant Audit Officer/ Section Officers. (b) The Assistant Audit Officers/Section Officers will be competent to give file orders on all letters except letters from the Comptroller and Auditor General of India, the Punjab Government and the Government of India, which should be filed only under the orders of the Branch Officer/Group Officer. (c) The Assistant Audit Officer/ Section Officers of the Controlling Sections viz. Control Section and Inspection Civil Wing (Headquarters) may communicate important orders received for circulation and orders issued by the Pr. Accountant General and Deputy Accountant General as the case may be. (d) The Assistant Audit Officer/ Section Officers may grant casual leave to Sr. Auditors/ Auditors etc. working under them up to five days at a time. They may also condone late attendance of the members of staff for a maximum of two days in a month. Not-withstanding the aforesaid delegation in favour of Assistant Audit Officer/ Section Officer, the Attendance Registers may continue to be submitted to the Sr. Audit Officer/ Audit Officer daily. (C.A.G.S Letter no. F-40SD(P) 73, Volume II, dated 25th August, 1973).

31

CHAPTER III GENERAL RULES AND PROCEDURE Applicability of Manual of Office Procedure and of GSM Branch 3.1 The Manual of Office Procedure and of the GSM Branch and orders of general

application in other Manuals of the office apply also to the staff of Civil Inspection Wing except to the extent that this Manual specifically authories variations from those orders. Some of the important provisions of the Manual of Office Procedure and of GSM Branch are reproduced below:Conduct Rules 3.2 The standing orders of the Government of India regarding the conduct of all

public servants holding or exercising any civil office (other than a menial office) under the Government are contained in a separate pamphlet entitled The Central Civil Services (Conduct) Rules, 1964. The rules are applicable to all members of the office, including all Gazetted Officer and they should make themselves acquainted with these. Hours of Attendance 3.3 (i) Normal office hours of attendance on all working days are from 9 a.m.

to 5.30 p.m., with a lunch break for half an hour from 1.00 p.m. to 1.30p.m. However, the Assistant Audit Officers/ Section Officers have powers to require early or late attendance when the wo rk is in arrears or the interest of public service requires it. In the case of compulsory attendance on holidays, Assistant Audit Officers/ Section Officers should obtain prior sanction of the Branch Officer concerned. (Government of India, Department of Personnel OM NO.-13/4/85-JCA dated 21.5.85 and O.O.No. Admn./A/3057 dated 12.11.86) (ii) No official should leave office during the day without the permission of his Assistant Audit Officer/ Section Officer nor should Assistant Audit Officer/ Section Officer do so without the permission of his Branch Officer. (iii) Leave of absence should be given to Muslim employees for a period sufficient

to enable them to attend Juma prayers, provided the time so spent is made up, if necessary, outside the office hours, on the same or other day of the week. (iv) The Comptroller and Auditor General of India in consultation with the

Ministry of Home Affairs has decided that no Government servant should get any privilege like coming to office late or leaving office early on the ground of his community or religion alone. 32

(C.A.G.s circular Number. 301-NGE I/211-66, dated 17th February, 1967). Attendance Register 3.4 (i) All assistants are expected to be in their places punctually at 9.00 a.m.

An Attendance Register in the prescribed form will be maintained in the office and kept on the table of the Assistant Audit Officer/ Section Officer for marking attendance by the staff. As each person arrives, he should put his initial in the attendance register and then commence work. (ii) At 9.10 A.M., the Asstt.Audit Officer/Section officer will make red cross mark

against the names of the absentees under his initials and submit the register to the Senior Audit Officer/ Audit Officer- incharge. Any member of the staff coming late, should put down in the red ink the exact time of his attendance below the cross mark in the presence of the Branch Officer. (iii) The nature of the absence should be stated in the case of all absentees. After

the register is seen by the Sr. Audit Officer/Audit Officer incharge, it should be kept under lock and key by the Asstt. Audit Officer/Section officer. Note: The names of permanent incumbents making up the sanctioned scale of the Section should invariably be shown in order of seniority in the Attendance Register and below them the names of the temporary or officiating clerks working in the Section in leave or other vacancies.

(Authority: Comptroller and Auditor General letter No.301-NGE I/211-66 dated 17.2.67). Penalty for Late Attendance 3.5 The Government of India have, with a view to ensuring the observance of

punctuality and efficiency in the transaction of work in Central Government Offices, decided to discontinue the practice of allowing a government servant to attend office late, and have laid down the following instructions:(i) Half a day's casual leave should be debited to the C.L. Account of a

Government servant for each late attendance but late attendance upto one hour on not more than two occasions in a month may be condoned by the Sr. Audit Officer/Audit officer if he is satisfied that it is due to unavoidable reasons like illness in the family, cycle puncture, late running of buses/trains etc. In case such a course does not ensure punctual attendance of Government servant, suitable disciplinary action may be taken against him in addition to debiting day's casual leave to his casual leave account, on each occasion of such late attendance.

33

(Comptroller and Auditor General letter No.3186-NGE I/12-73 Dated 12.9.75 filed in Admn. IV/punctuality 75-76). (ii) Half a days causal leave for the first half or second half may be granted if applied for by a Government servant to attend to some urgent private work which does not require a full days casual leave e.g., when one has to go to Railway Station or Bus Stand to receive a guest or a friend or to go to a dispensary to have himself or a member of his family treated. (iii) For the grant of day's casual leave, as mentioned in sub-para (ii) above, the

lunch break will be dividing line, e.g., a person who takes days casual leave for the forenoon session, is required to come to office at 1.30 P.M.. Similarly, if a person takes leave for the afternoon session he can be allowed to leave office at 1.00 P.M. (iv) In view of the decisions contained in the preceding paragraphs, the balance at

credit in the casual leave account of government servants can be in terms of full day or half day. In such cases there is no objection to the grant of days casual leave in conjunction with full day or days casual leave, if so applied for. Likewise, even when the casual leave at the credit of a government servant is in terms of full days, there is no objection to the grant of days casual leave in conjunction with full day or days casual leave. The existing restriction imposed on the number of days casual leave that can normally be granted at a time will, however, continue to apply. (v) In the case of a government servant who having exhausted his casual leave

attends office late upto one hour at a time for unavoidable reason mentioned in para (i) above such late attendance may be condoned on not more than two occasions in a month. If however, he attends office late on subsequent occasion (s), in a month, disciplinary action may be taken against him. (vi) As no orders regarding punctual attendance would be fully effective unless

strict measures are taken for their enforcement, the supervisory staff should be very particular in scrutinizing the Attendance Register. The lunch break must be

scrupulously observed even by the supervisory staff. Surprise daily check must be carried out in one or two sections by the Branch Officer. Combination of half casual leave with Regular leave. 3.6 (i) In case where a Government servant has got, only days casual leave

due in his casual leave account and avails of the same after the lunch break, and is unable to resume duty on the next day due to unexpected illness or some unforeseen compelling grounds, he may as an exception to the general rule be permitted to 34

continue half a days casual leave with regular leave. Those who have only half casual leave due to them and will not attend office on the next working day (having already applied for the leave of kind due and admissible to cover their absence for that working day and for subsequent days, if any) should not be allowed the last half a days casual leave for the afternoon. (ii) In cases where an official has casual leave at his credit but not sufficient

enough to cover the period of leave applied for, there should be no objection to the grant of a days casual leave in combination with regular leave, if the other conditions mentioned in the last sentence of sub-para (i) above are satisfied. In such a case it has been held by the C.A.G. of India that, since the casual leave does not constitute absence from duty and the pay is not intermitted, the Government servant should hand over charge on the afternoon of the date of commencement of casual leave. In the case of non-gazetted officers, the officer concerned would be deemed to have been relieved from the afternoon of the date of the commencement of casual leave. (iii) At the end of each month, the Assistant Audit Officer/ Section Officer will see

that the abstract (last 4 columns) in the Attendance Register of his section is comp lete and then have number of days on which each Auditor/Clerk attended late, entered in the casual leave Register. The deduction for casual leave forfeited for late attendance, during December of any year or when no casual leave be at credit, will be made from account of casual leave ordinarily admissible during the next year, unless the period is treated as regular leave. The abstract should be submitted to the Sr. Audit

Officer/Audit Officer- incharge in the first week of the following month. Sitting late hours 3.7 If in the interest of the office work, it becomes absolutely necessary for some

members of the staff to sit after 7 p.m., they should obtain the prior permission of the Group Officer concerned and communicate it to Administration Section concerned for information. Attendance on Holidays 3.8 It has come to notice that some assistants attend office on Sundays and

holidays even when their Assistant Audit Officer/ Section Officer do not attend the office and experience inconvenience when the chowkidars refuse to open the section for them. In such cases the Assistants should obtain written permission from the 35

Branch Officer/Group Officer to the effect that they will attend office on holidays without their Assistant Audit Officer/ Section Officer. (Office order no. B/44, dated 10th August, 1950) Absence without leave 3.9 Staying away from office without leave renders a person liable to dismissal,

except when the cause is sudden illness, or unforeseen circumstances of a pressing nature. In every case of absence without prior sanction, the reason of absence should be communicated at once and, if it is due to illness, a medical certificate should be produced, if so directed by the Branch Officer/Group Officer concerned. Arrangement of work when Group Officer on tour 3.10 When Group Officer (Inspection Civil) is on tour, all letters on which orders

are required to be passed by him which are to go to Pr. Accountant General through him should be got approved from the Group Officer who may be looking after the work of the wing in the absence of Group Officer (Inspection Civil). During this period if any delay in the disposal of a reference is apprehended, the matter should at once be brought to the notice of the Group Officer by the Assistant Audit Officer/ Section Officer explaining the reason for the delay. Sectional duty lists 3.11 With a view to facilitating fixation of responsibility against any of the

Auditors and Assistant Audit Officer/ Section Officer at fault, it has been decided by the CAG of India that the Sectional Duty lists showing the details of work allotted to each Auditor in the Section, may be properly drawn up and that continuous record of incumbents with specimen of their signatures and initials with dates should be carefully maintained. T o give effect to this decision the following instructions are issued for strict compliance by all concerned :(i) Statements showing the detailed particulars of duties on which each member of the office establishment is employed, duty approved by the Group Officer, having the supervisory charge should be drawn up and kept up-to-date in each section of the office. (ii) The statements referred to in sub-para (i) above should be formally got seen by each individual concerned and his dated signatures and initials obtained on the relevant duty lists. (iii) Whenever a person in a section is transferred to another section or office or relieved to proceed on leave, etc., the Assistant Audit Officer/ Section Officer 36

should obtain the dated signatures and initials of the relieved and relieving Sr. Auditors/ Auditors on the relevant duty list and submit the duty list to the branch Officer concerned in the following manner :Made over Taken over the relieving

Dated signatures of the relieved Sr. Auditor/ Dated signatures of Auditor Sr. Auditor/ Auditor (Dated initials) Dated signatures of the Assistant Audit Officer/ Section Officer. (Dated initials ) Sr. Audit Officer/ Audit Officer (Dated initials)

Besides the relieved Auditor may also be required to submit a detailed charge report as at present, showing the state of work on his seat to his Branch Officer through the Assistant Audit Officer/Section Officer at the time of his transfer. The Assistant Audit Officer/ Section Officer may also submit such a report to the Group Officer concerned through his Branch Officer at the time of his transfer. Note :- The specific form of notes to be submitted by Assistant Audit Officer/ Section Officer and Sr. Auditors/ Auditors on the eve of their transfer or proceeding on leave is given in para 1.2.2 to 1.2.6 of the Manual of office procedure and of the General Services and Maintenance Branch Vol. I Part A. (iv) The detailed duty lists may be kept in the personal custody of the Assistant Audit Officer/ Section Officer and a specific mention to the effect that the duty lists have been made over o the successor, Assistant Audit Officer/Section Officer should invariably be made in charge reports of the Assistant Audit Officer/Section Officer, whenever necessary. (Office Order no. Admn I/A/342, dated 16th January, 1960) Verification of Sanctioned Strength 3.12 The Administration Branch circulates a statement showing the sanctioned strength of each section both permanent and temporary as on 1st April and 1st October each year. The controlling sections are required to confirm the strength shown therein within 15 days of the issue of the statement otherwise it will be presumed by the Administration Branch that the sanctioned strength shown in the statement has been accepted as correct. 37

Skeleton Register 3.13 (i) The Skeleton Registers containing the sectional dak should first be

submitted to the respective Branch Officers so that they can avail themselves of the earliest opportunity of perusing the sectional dak and recording thereon such instructions as they may consider necessary. With a view to expediting disposal of inward dak, the Branch Officer should also give proper guidance and indication for suitable disposal, wherever possible, on the letters received before passing them to the section. The Skeleton Register should then be passed on to the section concerned. The Assistant Audit Officer/ Section Officer should examine the letters, etc., received in dak of the section and after initialing each letter, etc., mark them to the respective Sr. Auditors/ Auditors. The Assistant Audit Officer/ Section Officer should also record such instructions on the letters as may be necessary for their disposal. (A.G.s orders dated 11th November, 1963, File Admn. I/Misc./63-94) (ii) While doing so, the Assistant Audit Officer/ Section Officer should keep a

note of all important and urgent letters received in the section either on his engagement pad or in separate note-book to be started for the purpose. The diarist of the section will check up the letters entered in the Skeleton Register, give acknowledgement in this register and enter the dak in the sectional diary (Form SY 318A). The first seven columns of the diary as also the subject-matter of the letters received in the section will be duly written up by him. He will make over the letters to the Sr. Auditors/ Auditors concerned promptly after taking their initials in the diary. The Sr. Auditors/ Auditors should similarly keep a note-book through which the receipt, disposal and movement of the letters should be watched. Letters not pertaining to the section and marked as such under the dated initials of the Assistant Audit Officer/Section Officer will be passed on to the section concerned or in case of letters entered in the general/registered diary, G.S.M. Section for further disposal. Marking of Sectional Dairy 3.14 (i) In respect of the documents received from other branches of the office

all columns of the sectional diary will be written up by the diarist of the section receiving them. The disposal of letters should be noted in the diary under the full signatures of the Sr. Auditors/Auditors concerned and in case of reply sent out, the sectional despatch number of the letter forwarding the reply should be noted. Where no reply is necessary, the letter F will indicate Filed. The case number of the 38

relevant file should be given against it. If a letter is transferred to a section other than G.S.M. for disposal, the fact will be entered in the column how disposed of and the particulars of the letter will be entered in the transit register. In order to ensure the correctness of the entries of disposal recorded by the Sr. Auditors/Auditors concerned, the Assistant Audit Officer/Section Officer should check cent percent the entries of disposal in the case of the letters received from the Government of India, Punjab Government and Comptroller and Auditor General of India and 5 percent of other entries and record full signatures in the diary in token of this check and give certificate to this effect in the weekly reports on the disposal of inward letters. (Orders of the Accountant General, dated the 6th July, 1955 on page 2 of the file TA/2-3/and D.A.G. (Sr.)s note NO. TA/2-3/17, dated the 31st December, 1955) (ii) The Assistant Audit Officer/Section Officer should personally verify that all

the outstanding letters against which disposal has not been marked in the diary register have been included in the list of outstanding and append a certificate to this effect in the report of the outstanding. (Authority: Orders of Accountant General, dated the 18th February, 1956) Report of pending cases. 3.15 (a) (i) Pending cases are of two kinds, viz. cases which are held up awaiting a reply to a reference outside the

office, or the receipt of a document. (ii) cases in which definite orders have been passed by the Branch

Officer/Group Officer In charge to hold over. (b) (i) A register of pending cases should be kept in all sections in Form.

S.22, where number of pending cases is usually large (say 10 in number) and a serial number should be given to the items. The remarks column should be used to show the date of removal of the item from the register and this entry should be made and attested by the Assistant Audit Officer/Section Officer. (ii) The sections in which the number of pending cases is usually small

(less than 10 in number), the maintenance of separate register of such cases may be dispensed with. A systematic record of such cases should, however, be kept and a report on them drawn up and recorded in the Sectional Diary below the weekly Report on outstanding letters.

39

(iii)

It should invariably be ensured that timely reminders are issued in

pending cases and that correct certificates are recorded in the despatch registers in this behalf. (A.G.s orders, dated 9th August, 1961). (c) A report on the pending cases should be submitted to the Branch Officer In

charge weekly and to the Group Officer concerned twice a month along with the report on outstanding letters prescribed in paragraph 4.3.4 of the Manual of Office Procedure and of the General Services and Maintenance Branch Vol. I Part A. (d) When an item has been removed from the register either because it has been

finally cleared, or because a reply has been received to an outward reference which transforms the case into a current one, the Assistant Audit Officer/Section Officer should indicate the fact (in addition to attesting the date in the last column) by striking out the remarks in the subject column by a diagonal line in red ink. (e) When replies from more than one officer are awaited to an outward reference,

the designation of each officer should be given as separate subsidiary item, in the Pending Register in the subject column. As each reply is received, the date of receipt should be noted against the entry and immediately the last reply is received, the Assistant Audit Officer/Section Officer should deal with the case as indicated in clause (d) above. (f) All ad interim replies received in connection with pending cases should also

be entered in the Pending Register so that effective watch over the progress of disposal of such cases may be ensured. Remarks on Letters 3.16 No remarks or orders should be written on letters, etc. received in the office

except File order or other prescribed orders. Report of outstanding letters 3.17 (a) Every Tuesday morning, each section will prepare in the prescribed

form the report on the unanswered correspondence. This report is intended to show all letters etc. received upto the Friday of the 2nd preceding week, i.e., for example, all letters received up to Friday, the 12th March, 2004 and not disposed of by 19th March, 2004 must be shown in the report drawn up on Tuesday, the 23rd March, 2004. The list for the week under report should start with an abstract in totals thus :-

40

Balance as shown in Last Report Cases retransferred from pending Register Receipt of the period under report Total : Cases disposed of in period under report Cases transferred to Register of Cases Pending Total Deduction : Balance outstanding : The balance outstanding at the end of the week as worked out above should be analysed and shown as below:Details of Balance (a)
S. No.

___________________ ___________________

___________________ ___________________

Letters more than 3 weeks old :

of Diary No. Date of office stamp Brief subject From whom received Section Officer/Assistant Audit Officers explanation for delay in disposal (in Section Officers/Assistant Audit Officers own handwriting).

Name Asstt.

2 (b)
Name Asstt. of

Letters less than 3 weeks old:

Diary No. Date of office stamp Subject Section Officer/Assistant Audit Officers explanation for delay in disposal in cases of receipt over a week old (in Section Officers/Assistant Audit Officers own handwriting).

Diarist

Section Officer/Assistant Branch Officer Audit Officer

Group

Officer

(Inspection Civil )

Note I Urgent diary letters received upto Thursday of the preceding week may be taken into consideration at the time of preparation of report of this diary. (D.O. No. TM I/9/61-62/1119 Dated 28th August, 1961). (Authority Note I under para 4.3.4 of Manual of office Procedure and of General services and Maintenance Branch Vol. I Part A (Office Procedure). Note II All letters received from the Government of India, Punjab Government and the Comptroller & Auditor General of India which are not disposed of within 3 weeks from the date of receipt should be separately shown in the monthly 41

report on the state of work and the monthly arrears consolidated reports submitted to the Accountant General by Control Section. (Orders of the Accountant General, dated the 5th July, 1955, in file T.A./2-3 and D.A.G. (Sr.)s note No. T.A./2-3/21, dated the 31st December, 1955). (b) Such reports will be submitted to the Branch Officer weekly and to the Group Officer concerned twice a month, viz. on the second and fourth Tuesday, in each month. Branch Officers are required to guard against the tendency to treat letter disposed of when only an interim reply has been sent, or to give as an explanation for delay, that the letter has been sent to some other section. A full and satisfactory explanation should be insisted upon whenever letters remain outstanding for an unreasonable period. When the fault lies on another office, a strongly worded letter addressed to the officer by name and signed by the Pr. Accountant General may sometimes be effective. Similarly by running their eyes over the entries for the past week, Branch Officers will in almost all cases be able to tell from their own knowledge, whether any letter has been wrongly shown as disposed of. A section must show as outstanding against itself all letters which have to be finally disposed of by it even if such letters be not with it at the time the abstract is prepared and the report submitted. (c) The monthly report of outstanding pending diary letters in respect of the entire

office should be put up to the Pr. Accountant General by the Control Section on receipt of reports from the co-ordinating sections every month. All the co-ordinating sections in the office should, therefore, send a report to Control Section concerned in the Proforma given below on the last Tuesday of every month. These reports should exhibit the position in respect of all the letters pertaining to Urgent diary, Ordinary diary and other diaries. The reports will also incorporate the position in respect of letters received from the Comptroller and Auditor General of India. The co-ordinating Sections will also submit separately a weekly report of outstanding and pending letters received from the Comptroller and Auditor General to the Pr. Accountant General through their Group Officers in a consolidated form in respect of sections under the group officer concerned. The reasons for increase in pending letters as compared to previous month, should also be clearly indicated. The Assistant Audit Officer/ Section Officer and the Branch Officer should ensure that the reports are sent to co-ordinating/Control Section on due date and if any 42

Branch Officer is unable to send the report to co-ordinating/Control Section on that date he should obtain extension of time from Accountant General through the respective Group Officer and co-ordinating/Control Section should be informed accordingly. Form of Report Name of Section _______________________________________ Monthly Report of Ordinary/Urgent Diary for the period from _____________ _________________Sr. No. No. Of letters outstanding as per last report Number of letters received during the month Total Number of letters disposed of during the month Total balance outstanding

to
Remarks

Branch Officer Note: - In remarks column brief reasons for increase in the number of letters outstanding at the end of the month as compared to the number outstanding in the last report, may be stated. (d) All complaints received in the office should be diarised in a separate register to be maintained by each section in the same form as other diaries and the reports of the disposal of complaints should be submitted to the Branch Officer every Tuesday as in the case of ordinary letters and to the Group Officer of the wing concerned on second and fourth Tuesday of the month. The respective co-ordinating sections of the various wings will, in turn submit through the respective Group Officer, the consolidated fortnightly report of all the sections in their wings to the Accountant General for his information. (A.G.s order at page 9/c and 16/N on the file Admn. I/Misc./CS 65-68). Note :- Where letters are outstanding for more than one month and two months, individual details of these complete reasons for their non-disposal and the stage at which these letters are pending should be given in the report of outstanding letters. The Branch Officer should also particularly investigate into the reasons for each of the outstanding letters and take immediate action to dispose them quickly. The Pr. Accountant General has further desired that wherever possible the concerned coordinating/Control Section should conduct a review of the letters outstanding for more than two months, shown outstanding in monthly report, and bring out any special points for his information while submitting the consolidated report. (Office order No..2170/Dy.Report/67-68/639 dated 24.7.1967) 43

Sending out of letters and memoranda received from the Comptroller and Auditor General 3.18 Sending out to Government and other authorities copies of letters and memoranda received from the Comptroller and Auditor General, is strictly forbidden. There is, however, no objection to communicating where necessary the substance of such letters to Government or other authorities or in some cases to mentioning in these communications that they represent the views or orders of the Comptroller and Auditor General. (Para 4.5.3 of the Manual of Office Procedure and of the General Services and Maintenance Branch, Office Procedure Vol.I Part A). Signing of Letters and Statements to be sent to the Comptroller and Auditor General, Government of India and State Governments 3.19 (a) All letters to the Comptroller and Auditor General of India other than on routine matters, should ordinarily be issued under the signatures of the Pr. Accountant General. Whenever, Comp troller and Auditor General is required under a statutory provision to certify any figures and they are based upon the figures furnished by the Pr. Accountant General, the latter should personally sign the statements and certify their correctness. (b) All important communications should be issued to the Comptroller and

Auditor General office with the full knowledge of the Pr. Accountant General particularly in respect of cases involving errors or delays, etc. so that Headquarters office may know that in all such cases suitable action has been taken and remedial measures adopted by the Pr. Accountant General, whenever necessary. Whenever, an important communication is issued by a Group Officer, or other officer, with the concurrence of the Pr. A.G. the fact should be indicated in the letter itself. (c) Normally, all important communications emanating from this office be issued

after obtaining the approval of the Pr. A.G. or Group Officer particularly when a Department or an officer indicate to this office clearly their views as to the manner in which a particular cases should be dealt with. The Pr. A.G. has, therefore, ordered that in future in all cases where reply/reference is issued under the orders of a Branch Officer to a department/an officer stating that their views are not accepted in audit and if the officer/department reiterate their views giving reasons therefore, the case must be submitted to the Group Officer for orders if the Branch Officer does not propose to accept the view/clarifications given by the officer/Department. In cases where the 44

initial reference is issued after obtaining the orders of the Group Officer, the reply of the department should also be submitted to him for further orders. (d) The Comptroller and Auditor General has no objection to the Pr. Accountant

General's authorising the Branch Officers to sign acknowledgements of receipt of C.A.G's letters. (e) All communications addressed to the Comptroller and Auditor General will

require to be forwarded ultimately to Central Government or other authority (for example applications for revision of pay, for increased establishment, for extra grants, etc.) should be submitted in duplicate. (f) Confidential papers should be placed in double covers, the inner cover being

marked Confidential and superscribed with the name only of the addressee, the outer cover being addressed to him by his official designation without the addition of his name. Issue of Telegrams 3.20 Telegrams should not be sent in cases where letters would serve the same

purpose equally well. In cases where the stations to be addressed are within a days reach by post and there is no special necessity that the communication should reach in less than 24 hours, letters should be issued instead of telegrams. Disposal of unofficial references 3.21 The unofficial reference from the Government of India and also of C.A.G. of

India should be dealt with on priority basis. If for any reasons, it is not possible to give final reply, the non-official papers should be returned without dela y with an interim reply and related copies retained for necessary action. (Sr. D.A.G. Order on C.A.G. Letter no. 916-(AC)/192-65 KW dated 20th September, 1965) (Authority : Para 4.13 and Note 2 of Manual of Office Procedure and of the General Services and Maintaince Branch Volume I Part A (Office Procedure) ). Complaints 3.22 The complaint letters received in the Inspection Civil Wing shall be submitted

direct to Group officer (I-C) translated into English, if these are in vernacular (along with the original letters) and the Group Officer(I.C) shall use his discretion in dealing with them .The information contained therein shall not be made use of by any member of the office except as directed by the Group Officer.

45

Anonymous or Pseudonymous Letters 3.23 It has been decided that the following procedure may be adopted in case of

anonymous and pseudonymous complaints:(a) It is not incumbent on any Ministry or Department to take any notice of anonymous and pseudonymous complaints as these are to be filed in accordance with government instructions. (b) Even if any administrative authority chooses to investigate into such an anonymous or pseudonymous complaints under the impression that it is genuine signed complaint or for any reason, Central Vigilance Commission need not be consulted, if it is found that the allegations are without any substance. But if the preliminary investigation indicates that prima- facie there is some substance in the allegation then the Central Vigilance Commission should be consulted as to the future course of action to be taken. (Para 4.15 of Manual of Office Procedure and of the General Services and Maintenance Branch Vol. I Part A (Office Procedure) ). Issue of Reminders 3.24 (a) Ordinarily not more than one reminder should be issued and sufficient time should be allowed for a reply according to the nature of the case. If no reply is received, a telegram may be issued in important cases or a special letter addressed to the officer concerned and a reply asked for within a reasonable but definite period. The issue of several routine reminders is ordinarily a mere waste of time. If the special or the telegraphic reminder, again proves fruitless, no further time should be wasted on the officer concerned and a formal report should at once be made by official letter to the next higher authority who may be Commissioner of the Division, the Head of the Department, the Superintending Engineer etc. A reasonable time for investigation and necessary action must be allowed and report asked for of the action taken to remove the objection etc. Should this also prove to be unsatisfactory, there will be no alternative but to report the matter fully by special letter to Government and to ask that the due notice may be taken of the matter and the result communicated to this office. (b) In the case of Half Margins, their returns will be watched and reminder issued

through the Half Margin Registers, which contain necessary columns for the purpose.

46

(c)

When a reminder is received in this office it should be submitted immediately

with a brief not explaining the delay even if the case has been submitted to the Group Officer in the meantime. Annotated reply of Inspection Reports 3.25 (i) Annotated reply to an inspection report is due to be received within

four weeks of its issue, otherwise, a printed reminder should issue. (ii) In addition, a list of the inspection reports, for which first replies have not

been received within four weeks from the dates of issue of Inspection Reports should be prepared separately (Form enclosed) for offices under each Head of the Department and reminder sent demi-officially under the signatures of the Group Officer (Inspection Civil) to the appropriate heads of the departments with copies to the Administrative Secretaries and Finance Secretary by the 5th of each month and they should be asked to furnish progress reports in regard to the disposal of the Inspection Reports within a month. The covering letter should also indicate how many reports have remained unreplied for over six months, over one year and over two years. (iii) Where replies have been received, but objections have not been finally settled,

for more than 6 months, a list of such objections for the various offices under a particular Administrative department/Ministry should be prepared every half year, showing the name of the office which has failed to clear the audit objection with a yearwise analysis of objections, and indicating the nature of the objection in brief, money value if any and particulars of the latest reference, if any, in chronological order. The list should be sent to the appropriate department/ministry and they should be asked to furnish progress report in regard to settlement of objections. For this purpose, the following dates should be observed:Sr. No. Particulars Audit objections contained in report issued between. April and September but not settled by March next 1. Half-yearly return due from the Audit Office to the Administrative Department/Ministry Half-yearly return showing progress in settlement due from the Administrative Department/Ministry to Audit Office. 15th June next October and March but not settled by September next 15th December next

2.

15th September next

15th March next

47

Opening and Maintenance of Files 3.26 (i) The subject matter should be recorded on the cover of each file. It

should be as brief as possible, but should give at glance sufficient indication of the contents of a file. Additions and alterations in the file should be made as and when required. (ii) When the main file is under submission, a skeleton or keep with (K.W.) file

should be started to dispose of the papers. Subsequently this file should be merged with the main file after renumbering the pages of notes and correspondence sides of the skeleton file and also correcting internal references. 3.27 The importance of filing papers properly and submitting them in proper order

cannot be overemphasized. It does not only lead to greater efficiency but it also saves time all round. The more important points are enumerated below for the guidance of all concerned :(a) (b) a separate file should be opened for each important subject; all matter which do not justify the opening of a separate file should be dealt with in a miscellaneous file; (c) sub- files should be opened as and when necessary to deal with important subjects subordinate to a main subject; (d) all files and sub- files should be entered in a register of cases which is supposed to be maintained in each section. Section Officers/ Assistant Audit Officers are expected to see that this is invariably done; (e) each file and sub- file will be maintained in two separate parts the correspondence side and the note side; (f) (g) the papers should be so filed that these can be read as in the case of a book; all the pages both in the correspondence side and the note side should be numbered; (h) (i) every page whether it is blank or written will carry a number; the obverse side of each page will bear odd numbers and reverse side even number; (j) (k) the number should be indicated on the right hand corner of each page in ink; whenever a reference is received from outside or another section in this office it should first be placed in the file and properly page numbered; (l) if it is in reply to any reference from his office or section the words reply at page ...................................... should be recorded on the said references; 48

(m)

before dealing with the P.U.C. it should be properly referenced and every letter should be referenced by indicating the page and file number;

(n) (o)

if the reference is in the same file it is not necessary to quote the file number; on the note side the disposal should start by quoting the letter number and the date alongwith the designation of the authority from whom it has been received.

(p)

In the margin, the page number at which the P.U.C. can be found should only be quoted;

(q)

all documents referred in the notes should be duly referred by quoting the page number and the file at which these could be found;

(r)

notes should be brief and informative, these should not reproduce the substance of the paper under disposal;

(s)

Assistant Audit Officers/Section Officers and Branch Officers need not reproduce the arguments already recorded by the section. In important cases, however, it may be necessary to give self- contained precise but that should be an exception rather than the rule;

(t) (u)

all notes should be signed in full by the persons writing the same; if the signatures are illegible the name should be given below the signatures in block letters;

(v)

wherever a reply is to issue, the Assistant Audit Officer/ Section Officer should ensure that the draft reply is submitted for approval along with the notes;

(w)

similarly when the case is submitted to the Group Officer/A.G., the draft should be submitted alongwith the notes according to the views expressed therein. It will avoid re-submission of the file and save time. If the higher authority does not agree with the views, the draft can be amended. In very rare cases where decision of the Group Officer/A.G. is absolutely necessary, a note should be submitted first and the draft put up afterwards;

(x)

Assistant Audit Officer/ Section Officers will examine the drafts approved by higher officer and point out any factual mistakes. After the draft has been approved and issued it should be placed in the proper file and page numbered;

(y)

the words reply at page ........................ should be noted on the letter to which it is a reply; 49

(z)

when dealing with the case it is normally not necessary to reproduce the previous notes. It should suffice, excepting in a few important cases, to refer to the previous noting. The above instructions are not intended to be comprehensive. The idea is to

ensure that the papers are dealt with in a manner which would enable any one to study the case without difficulty. This procedure, if properly fo llowed, should eliminate the use of flags. (Office Order No. AG/PA/125, dated 10th June, 1960). Transfer of cases to other sections 3.28 Cases referred to other sections should pass through Branch Officer except in

case of purely-routine matters, e.g., when some information is only to be obtained. The Branch Officer should see that consultation with other sections is confined to the minimum required for the efficient working of the Section. (O.O. 625, dated the 24th June, 1938) Closing of files and cases 3.29 Cases in which correspondence is going on or in which further matter is likely

to be included, should not be closed at the end of the financial year unless they have become bulky. Apart from this, where it is convenient to keep the papers relating to different financial years separately, cases should be closed when they are complete for the financial year. All other cases except those dealt with in clause (b) should be closed at the end of the financial year. Whenever a case is closed the year proposed for its destruction should be recorded prominently on the outer cover over the dated initials of the Assistant Audit Officer/ Section Officer. Every section will be

responsible for the custody of its files and cases whether closed or not till they are sent to Record Section. Record Keeper will acknowledge their receipt in the Case Register of the section under each file heading. (Para 9.4 of Manual of Office Procedure and of the General Services and Maintenance Branch Vol.I Part B ). Dictionary of references 3.30 A Dictionary of References should be started in Form Number SY 256 which

should contain a gist of all important orders, rulings or decisions of Group Officer and Accountant General on Audit and Accounts matters. It will ensure uniformity of interpretation and practice. (O.O. No.79/TM, dated the 3rd March, 1949) 50

Monthly Reports 3.31 (i) Headquarters section of Inspection Civil Wing will prepare a statement

showing the state of work in the section in Form O.A. 9 given in Appendix I incorporating inter-alia, the reports received from the Assistant Audit Officer/ Section Officer in pursuance of para 4.13 supra. The consolidated report on the state of affairs in the Inspection Civil Wing will be submitted monthly by the Assistant Audit Officer/ Section Officer, Inspection Civil Wing, Headquarters to the Group Officer (IC) through Branch Officer (Headquarters) by the 5th of every month. The report is to be submitted to the Pr. Accountant General quarterly through Control Section. (ii) In the preparation of quarterly arrears reports, it should be seen in particular,

among other things that-(a) the arrears on account of the inspections scheduled but not carried out during the year are shown in the quarterly report for the period ending 31st March. The same is, however, not to be carried over to the subsequent quarterly reports. (b) The time taken in special audits not provided in the regular programme is shown separately in the arrear reports and is not deduced from the arrears of inspection scheduled but not carried. Note- Group Officer (I-C) will state if he is satisfied with the state of affairs indicated in the report and if not, he will suggest the steps necessary to improve them. (Authority:- Comptroller and Auditor General Order No. 1095-Admn.II-286-62, dated the 19th/21st June, 1963 in file OA/NCW/I/I-17/1963-64). Calendar of Returns 3.32 (a) A calendar of returns in Form No. SY.264 showing the due and actual

dates of completion of various items of work shall be maintained at the headquarters Section. Blank note sheets should be appended to and bound with the Calendar of Returns for the purpose of the submission of weekly reports in the following form to the Branch Officer on the 2nd, 8th , 15th , and 22nd of each month.
Page Item No. Brief Particulars When due To whom due Reasons for delay Probable date by which it will be submitted

51

Asstt. Audit Officer/ Section Officer will be responsible for seeing that the sectional Calendar of Returns is at all times complete and kept up to date. (b) (i) The Calendar of return will be maintained in form SY.264 and should be kept in four different sections as indicated below:Section I All returns of a permanent or recurring nature due to authorities outside this office. Section II All reports, objection books register etc. of a permanent or recurring nature due for submission to Branch Officer or other sections within the office. Section III All returns, reports, registers etc. of a permanent or recurring nature due either from outside authority or from other sections of the office. Section IV Unforeseen entries, which a section is required to make in the calendar of return in respect of matters to be taken up for disposal in or about a given date on or in respect of occasional matters on which information or reports are expected from outside offices or office sections. Entries in this section should be made as soon as the occasion for doing so arises. (ii) Section I, II and III should be sub-divided into (A) Annual (B) Half yearly (C) Quarterly (D) Monthly (E) Fortnightly and (F) Weekly. Enteries in each of these sub-sections should be arranged in the order of dates on which they are due, Sufficient spaces should be allowed after each sub-division for new enteries occurring during the year. (iii) The first 5 columns of the calendar viz. (1) Serial No. (2) Name of return (3) To whom due or from whom due in case of Section III (4) When due; and (5) authority, should be entered at the beginning of each official year from the previous years calendar, the enteries being re-arranged as necessary. The Asstt. Audit Officer/ Section Officer will check all the enteries and record a certificate on the fixed page of the calendar. Any addition due to orders received in the course of the year should be made at the end of the sub-division concerned without altering serial number of existing items. (iv) Section Officers/ Assistant Audit Officers will be responsible for seeing that their respective sectional calendars are at all times complete and kept upto date. Separate enteries in respect of each unit or each Auditor should be made in calendar in case of items like Half Margin register, Auditors Note Book 52

etc. which are to be submitted by the different Auditors in the section and which may not always be submitted or despatched in respect of all units or Auditors on the same day. (Authority: Para No. 1.6.2(i) of Manual of Office Procedure and of General Services and Maintenance Branch Vol. I Part A (Office Procedure First Editio n 1987). (C) A list of various returns indicating the due dates of their submission /receipt is at Appendix III. Failure of Audit 3.33 A separate report of every serious case of failure of audit as soon as it comes

to light including those pointed out by the Director of Inspection, if any, irrespective of any report which may be required for other purposes should be submitted to the Pr. Accountant General through the Group Officer. The report should explain the manner in which the failure occurred and mention the names of the persons responsible and the disciplinary action taken or recommended. (Para 47 of C.A.G.s Manual of Standing Orders (Admn.), Vol. II). Register of Serious Financial Irregularities 3.34 (i) A register of Serious Financial Irregularities in Form SY-276-A is

maintained in the Inspection Civil Wing for recording serious financial irregularities noticed during the local audit. This register is intended to furnish the material which merits inclusion in the Audit Reports. (ii) The Asstt. Audit Officers/ Section Officers while submitting Audit and

Inspection Notes to the Headquarters should indicate in the covering Title Sheet, the important paras which in their opinion merit inclusion in the Audit Report. After the approval of the editing note by the Group Officer (I-C), these paras will be transferred to the Draft Para Section for recording in the S.I.R. for further processing. Reports of the Register of Serious Irregularities shall be submitted on 5th of the month to the Group Officer and on 10th of the month to the Pr. Accountant General. This Register should be kept in the personal custody of the Asstt. Audit Officer/Section Officer, who shall be personally responsible for properly recording the progress of each case therein and for keeping it up to date. (O.O. No. Control/10-1/93-94/5 dated 29.12.1993 Authority- AGs orders dated 28.12.1993 in file Control/362/AR/93-94)

53

Co-ordination between Central Audit and Local Audit 3.35 The audit conducted in the Audit Office is supplemented by periodical test

audit of initial accounts and such other accounts, vouchers, etc., as are not rendered to the Audit Office or as cannot be checked adequately except during local audit. It is of the utmost importance that close co-ordination should exist between Central and Local Audits and that the system should be viewed as a whole and not in separate compartments. It is essential that the two wings of audit should function as they are intended to do, that is to say, one supplementing the other and not independently. The following instructions are, therefore, laid down for careful and strict observance by the Central Audit Support Sections and the Inspection Civil Headquarter's Sections. (1) (i) Co-ordination of Audit arrangements for new schemes or institutions:As soon as a new scheme comes to the notice of the Central Audit Support

Section concerned either through the E.C.P.A. Section or from an examination of the Budget Estimates or on receipt of a sanction to establishment, grant of loan, subsidy or other grant etc., relating to a new scheme, detailed enquiries shall be made immediately by the Central Audit Support Section concerned from the departmental authorities to secure full particulars and detailed literature relating to the scheme, so that timely action may be taken in this office for laying down a suitable procedure for the audit and accounting of the transactions of the scheme. All relevant orders of the Government of India bearing on the financial and other arrangements relating to the execution of the schemes shall also be obtained. In making these enquiries special emphasis shall be laid on the urgency of drafting an adequate system of initial accounts for the scheme by the Government in consultation with this office, and, as far as possible, issuing it for the guidance of all concerned before the actual execution of the scheme is taken up by the departmental authorities. (ii) When the necessary information is received, it should be supplied to the

Inspection Civil Headquarter Section concerned immediately to enable them to include the scheme in the local audit programme and to examine other arrangements for local audit side by side with the scrutiny of the scheme in Central Audit. On receipt of particulars of the scheme from the Central Audit Support Section, concerned Inspection Civil Headquarter. Section shall consider the arrangement for its 54

local audit and shall call for from the departmental authorities direct such further information as is not available from the Central Audit Support Section and is necessary to evolve a proper system of local audit. It should be seen whether; (a) Adequate procedure, rules and account forms suited to the activities of, and transactions involved in the scheme have been laid down for the maintenance of initial accounts. (b) Proper financial powers have been delegated to the authorities responsible for the execution of the scheme and that the responsibility of the various

authorities in regard to the maintenance of the accounts have been specified fully and in a clear cut manner. (c) All the necessary accounts and returns which should be submitted to audit office have been duly prescribed in the rules relating to the scheme. (iii) In the light of the above examination a suitable audit procedure shall the n be

drafted by the Central Audit Support Section in consultation with Inspection Civil Headquarter Section concerned and if necessary, also E.C.P.A. and orders of the Pr. Accountant General obtained thereon through the Group Officer. (iv) A copy of the audit procedure relating to the scheme, as approved by the

Group Officer shall be supplied by the Central Audit Support Section to Inspection Civil Headquarter Section concerned without any delay. On receipt thereof, the concerned Section at Inspection Civil Headquarter shall review and finally settle all the detailed arrangements regarding the local audit of the accounts, e.g. the quantum and frequency of audit, any special checks to be applied during local audit, etc. (2) (i) Selection of points or cases by Central Audit Support Section for detailed investigation or settlement through Local Audit :Each Central Audit Support Section should carefully review each month the

audit conducted by it (with reference to Objection Books, Audit Register etc.) of institutions which are locally audited by the Inspection Civil audit parties. Any

important cases or points in regard to which a detailed or further scrutiny in local audit is desirable, should invariably be communicated to the concerned Headquarter Section and a report obtained and dealt with in the Central Audit Support Section in the normal course. The points referred to the concerned Headquarter Section should include important objections in respect of which satisfactory replies are not being furnished by the departmental authorities to Central Audit Support Sections or those

55

relating to delay in the submission of vouchers, detailed accounts, etc. in support of expenditure incurred by the institutions concerned. (ii) The visits of the Inspection Civil aud it parties may further be utilized by the

Central Audit Support Sections in getting points settled not only in relation to that particular institution which is visited by them according to their local audit programme but also of other offices or any other departmental offices where objections which can best be settled by personal discussion have remained unsettled for a long time inspite of the exchange or considerable correspondence. (iii)(a) Besides the objections taken in Central Audit on individual transactions, it may at times be considered desirable by a Central Audit Support Section, in view of heavy expenditure or imperfect control exercised by Disbursing and Controlling Officers, or again, as a result of general extravagance in particular office or department, that the accounts of that office should be subjected to a special examination in local audit. The Sr.A.O./A.O. (CASS) has been assigned a target for indicating, as a result of scrutiny of sanctions, suggesting at least 5 specific points each quarter, for detailed examination during local audit. (A.G.s orders No. A.G Sectt/CAGs Inspection/94-95/378-80 dated 6.8.1994) (b) A proper and complete record of important points or cases noticed in Central

Audit requiring further investigation in local audit should be personally maintained by the Asstt. Audit Officer/ Section Officer of each Central Audit Support Section. This register should be scrutinised by the Branch Officer each month to ensure that all important points, cases, etc., which can be speedily and more appropriately settled through local audit are duly noted in the register and communicated to the concerned Headquarter Section. The Central Audit Support Section shall keep a watch, through this register, over the receipt of reports from the concerned Headquarter Section on the points referred to the latter for investigation in local audit. (c) All the Central Audit Support Sections should furnish a report to the

Inspection Civil Headquarters on the 5th of each month containing the following information:(i) The names of new schemes undertaken or proposed to be undertaken

by the Government. (ii) Full particulars regarding these schemes when received from the

departmental authorities. 56

(iii)

Important points and cases requiring further investigation and intensive

scrutiny in local audit. The above report, even though nil, must be furnished to the Headquarters Section by the prescribed date. (Office Order No. TM/II-I/Insp.-1077, dated the 7th July, 1954 read with office order No. OAD/C/1375, dated the 23rd June, 1955). (iv) With a view to securing the speedy settlement of outstanding objections in coordination with local audit, the following procedure should be followed:(a) The Asstt. Audit Officers/Section Officers (field) shall call from Central Audit

Support Section, the statements of the outstanding audit objections in respect of the particular office, audit of which is to be conducted by them at least 15 days in advance of the date of audit. The Central Audit Support Sections concerned shall furnish these statements in duplicate within three days of the receipt of the requisition of the Asstt. Audit Officers/Section Officer (field) clearly indicating the action required to be taken by him in respect of each objection. The objections pertaining to the last three months preceding the month in which the local audit is scheduled to be conducted need not be included in these statements unless any specified points requires immediate local investigation or discussion. (b) After the objections have been discussed with the departmental authorities, the

Asstt. Audit Officer/ Section Officer (field) will record his findings on the statement and send one copy of it to the Branch Officer in charge of the Central Audit Support Section concerned and the other to the concerned headquarters Section along with his Inspection Note, diary etc. in justification of the additional time, if any, taken by him. The Central Audit Support Section will then take further necessary action towards settlement of the objections on the basis of the remarks offered by the Asstt. Audit Officer/ Section Officer (field). (Comptroller and Auditor Generals No. 2585-Admn.I/195-55, dated the 19th December, 1955 and Office Order No. TM/9-62/Genl/3415, dated the 10th February, 1956). (3) (i) Points or irregularities detected in local audit requiring further investigation in Central Audit:While conducting local audit, the Inspection Civil Audit parties should keep a

vigilant eye for selecting any points or irregularities (including those relating to personal claims) in respect of which it may be desirable that the Central Audit Support Sections should conduct a more comprehensive or general examination of the 57

complete accounts of an office or institution or in regard to a group of offices. If during local audits, it is found that the audit of any particular expenditure requires closer scrutiny than can be given during a periodical test audit, the work should be entrusted to the Central Audit Support Section concerned provided it is otherwise susceptible of such treatment. To enable the Central Audit Support Section to acquire a general idea regarding the state of accounts of any particular office or institution, as brought out during local audit a copy of each Audit and Inspection Note shall be furnished to the Central Audit Support Section concerned. The points and

irregularities mentioned in the Audit and Inspection Note which require to be scrutinised in detail and pursued in Central Audit and any special points with

reference to which examination in Central Audit is to be conducted should invariably be specified clearly. (ii) In regard to important objections or irregularities taken up in the Audit and

Inspection Notes as a result of local audit of the initial accounts of an office or institution, the Audit Unit concerned shall be responsible for pursuing with the Head of the Departments of Government all such important objections or irregularities in order to develop them into paras for inclusion in the Audit Report. However, such irregularities or objections as figure in the accounts rendered by the office or institution to the Audit office and require a general scrutiny of the bills, vouchers and other documents rendered to the Audit office over a certain continuous period sha ll be pursued with the departmental authorities or Government by the Central Audit Support Section concerned. The concerned Headquarter section shall pass on to the CASS section concerned any further information which they may receive in such cases. Info rmation in regard to the settlement of any objections which are raised in local audit, but are finally settled in Central Audit will be furnished immediately by the Central Audit Support Section concerned to the Audit Unit concerned to enable them to keep a note against the original objections in the audit notes. 4. Intimation regarding termination of a scheme or closure of an office or institution:As soon as any particular scheme, office or institution is terminated/closed, an intimation thereof shall be sent by the Central Audit Support Section to the Inspection Civil Headquarters Section concerned promptly so as to enable them to make such changes in the local audit programme as may become necessary on this account.

58

(Office order No. T.M./II I/Inspection/1077, dated the 7th July, 1954 read with office order No. O.A./N.C.W./II, dated the 3rd February, 1958). Note: - The Assistant Audit Officer /Section Officer (field) should pay proper attention to the settlement of Central Audit Objection during local aud it. The list of such objections should not be left with the departmental authorities but the Head of Party should see that the wanting information is collected and forwarded to the concerned Central Audit Support Section as soon as the audit is concluded. (O.A./I-35/772, dated 26th May, 1960) Making available Departmental files to Audit 3.36 (a) During the course of local or Central Audit, the production of files of

the Administrative offices should not ordinarily be required unless they are absolutely necessary for the investigation or settlement of an objection. Files which have not been shown by the Heads of Offices when their audit was conducted may be requisitioned by an officer not below the rank of a Deputy Accountant General, who would mention in the requisition that the Accountant Generals approval was obtained to call for the files. Objections raised as a result of scrutiny of such files should be issued only at a level not below that of the Deputy Accountant General. Further, if any part of the objections required production of the notings in the file, it should be done only after discussion with a senior officer of the department concerned. (Office order No. B. 163, dated the 27th June, 1955, and Comptroller and Auditor Generals letter no. 1447-Rep./209-58, dated the 12th July, 1958 filed in file no. W.M.I. 14-I-Misc.) (b) In this connection, the instructions issued by the Punjab Government to all the Heads of the Departments are reproduced below: I am directed to address you on the subject noted above and to state that Government have decided that in future office files which have not been shown when the audit was conducted in the various offices, should, ordinarily, be made available to the Pr. Accountant General, Punjab, on request. The Pr. Accountant General, Punjab, on his part will ensure that the files are sent for in case of absolute necessity and that these are seen by officers of the rank of Deputy Accountant General and above only. Further, if any part of the noting will be required it will be only after discussion with the Senior Officers of the department concerned. (Punjab Government letter No. 3551-P-55/14284, dated the 30th May, 1955, from the Chief Secretary to Government, Punjab to all Heads of the Departments, etc.)

59

Loss of Accounts records having financial implications. 3.37 The Comptroller and Auditor General of India has decided that the loss of

records having financial implications does not require write off. It was further laid down that in order to meet the requirements of audit in such cases, normally the records which had been lost, should be reconstructed, as far as possible. Where, however, it is not possible to reconstruct them it would suffice if a certificate covering the following points is furnished by the head of office duly countersigned by some responsible superior authority :I. II. III. That it is not possible to reconstruct the lost record; That the loss was accidental; and That all the transactions (both receipt and issue, payment/consumption etc.) for the relevant period required to be accounted for in it were duly entered in it and that expenditure etc. accounted for in it was incurred in the public interest in accordance with the relevant rules and orders.

Accountant General, can ask for such additional information and certificate as he may consider necessary in individual cases depending upon the nature of the record. Notwithstanding the above certificates, any case of loss of accounts records, where audit is not satisfied with the certificate or where it is fe lt that the loss involves grave financial implications meriting notice of the Finance Department, should be brought to the notice of the Government in the Finance Department The above instructions of the Comptroller and Auditor General of India, must be kept in view by all, while dealing with cases of loss of records. (Letter No. OA/NCW/, I/6-15/3092 dated 22nd September, 1960) Check Register of Weekly Diaries of Local Auditors 3.38 (a) While checking the weekly diaries (Form S.Y. 324) received from the local audit parties it should be seen: (i) (ii) (iii) (b) that the work done by each auditor is shown in sufficient detail. that the certificate regarding spending of holidays and Sundays in camp is recorded. that leave applications are received, where necessary. A check register of weekly diaries should be maintained in Form S.Y. 325 to

watch the receipt of diaries. This register should be posted from the weekly diaries of auditors on each Wednesday morning. It will be put up to the Senior Audit Officer/Audit Officer 60

(Headquarters) on that day alongwith the weekly diaries which have been scrutinised in the office, any deviation from the approved programme, waste of time, either in regular audit or in transit being brought to the notice of the Senior Audit Officer/Audit Officer (Headquarters). He will also see whether the details of the work done

represent a full days work. The diaries should, thereafter, be carefully filed for each party in chronological order and preserved for the prescribed period for reference. Leave other than Casual Leave 3.39 Procedure regarding grant of leave contained in the Manual of Office

Procedure and of the G.S.M. Branch applies to Inspection Civil Wing as well. Casual Leave 3.40 All kinds of Leave shall be applied for in advance, Assistant Audit

Officer/Section Officer incharge of the field Inspection Party may sanction casual leave upto 5 (five) days to the Sr. Auditors/Auditors and other staff working under them. Similarly, Sr. Audit Officer/Audit Officer supervising the field party may

sanction casual leave to the Assistant Audit Officer/Section Officer upto 3 (three) days at a time provided that no deviation in the approved tour programme is caused as a result of grant of such leave. In case of emergency and urgent necessity, the Sr. Audit Officers/Audit Officers/Assistant Audit Officer/Section Officers may themselves avail of casual leave not exceeding 2 (two) days at a time. They shall, however, inform the For further

Headquarters Section telegraphically before proceeding on leave.

extension of leave they shall apply to the Headquarters Sections in advance. The leave applications in all cases shall be despatched under registered cover on the same day to the concerned Headquarters Section. Headquarters Sections shall maintain casual leave accounts and verify the same with weekly diary reports. (Control/11-1/Field Parties/87-88/2159 dated 18.12.1987). Compensation Leave 3.41 Compulsory attendance except for clearing arrears on Sundays or other public

holidays under the Negotiation Instrument Act entitles a person to compensation leave for the number of days he attends. Assistant Audit Officer/Section Officers will put up a memorandum to the Sr. Audit Officer/Audit Officer (Headquarters) for their Sr. Auditors/ Auditors, with their monthly reports, stating the holidays in the month that 61

they attended office and orders requiring them to attend. The number of days of compensation leave allowed will be entered in red ink in the casual leave register against the name of the person concerned. Travelling Allowance 3.42 (a) The Travelling Allowance bills of the inspecting staff of Inspection

Civil Wing are received in Headquarters sections. After applying checks as laid down in clause (d) below they may be sent to the Administration branch for further action. (b) The members of the Inspection Civil Wing are paid travelling

allowance for journeys and halts in accordance with the Government of India Supplementary Rules. (c) The field staff should submit their travelling allowance bills in duplicate to the Headquarters section by the 4th of every month. (d) The bills should be checked with the approved tour programmes and

weekly diaries of the AAOs/SOs/Sr. Auditors/Auditors and casual leave register. (e) Casual leave or compensation leave enjoyed by the officers/officials

should in all cases be noted in the margin of travelling allowance bills, as they are solely responsible for dates and correct charges in accordance with rules. Daily allowance is not admissible for holidays and Sundays unless the claimants are actually and constructively remained in camp on those days. (f) No daily allowance will be drawn during casual leave, whether an

auditor is remained in camp or not. (g) Hotel receipt should be pasted on the fair copy of the T.A. bills. It may

be ensured that the Room No. of the hotel is indicated in the cash receipt. (Office order No. Admn. III/TA/78-79/239, dated 23rd February, 1979). Drawal and disbursement of Pay 3.43 The pay is drawn along with the main office staff for both the Head Office as

well as the field staff. Attachment of Pay 3.44 (a) The rules relating to the attachment of pay contained in Rules 225 to

229 of the Central Treasury Rules, Volume I, are applicable to all members of staff both Gazetted Officers and Non-Gazetted Officials of the Audit Department. (b) The Comptroller and Auditor General has disapproved of an employees

standing surety to another and has observed that the heavy indebtedness arising out of 62

a Government servants standing surety for another is by itself an imprudent act not due to circumstances beyond his control. (Ar. Generals letter No. 1972, NGE/292-3-6 dated 17th December, 1937) Note: - The above instructions have been relaxed by the Comptroller and Auditor General in case of co-operative credit societies in the various Audit Offices. Pre-requisites in connection with production of official documents in a court of law 3.45 In order to expedite the fulfillment of pre-requisites in connection with the production of official documents in a court of law, the Pr. Accountant General has ordered that on receipt of summons from a court in this office, the following procedure should be observed: (a) All the summons will, in the first instance be received in the concerned Summons

sections/officials concerned through their respective Branch Officers.

requiring the attendance of the official in their private capacities will, however, continue to be received by them direct without intervention of office. (b) On receipt of the summons in the section concerned, the Assistant

Audit Officer /Section Officer will immediately examine its requirements and if the attendance is not in the private capacity of the government servants, he will submit a detailed report to the Group Officer/Pr. Accountant General through his Branch Officer. The case should be expedited at all stages and should reach the Group Officer as early as possible and in any case within two days of the receipt of summons in this office. When asking for the sanction of the State Government or Central Government as the case may be, it should be mentioned that the Court has been informed that the sanction of the authority concerned is being obtained. The

confidential orders issued by the Ministry of Home Affairs/Comptroller and Auditor General from time to time on the subject may also be referred to as and when necessary. (Para 5.6 of Manual of Office Procedure and of the General Services and Maintenance Branch, Volume I Part A (Office Procedure) ). Office records 3.46 The records of the Inspection Civil Wing are preserved for the period specified in Appendix II. Scrutiny of Rules and Orders 3.47 In relation to audit of expenditure against regularity, it is the duty of Audit to examine all financial rules and orders affecting expenditure and other transactions 63

subjected to audit issued by the Executive authorities, to see that rules, etc. are themselves interavires and that the audit of transactions which they govern may be effectively conducted against them. (Para 2.2.26 of C.A.G.s M.S.O. (Audit) IInd Edition 2002). 3.48 All general rules and orders of a financial character (including those relating to conditions of services) issued by the President are scrutinised by the Comptroller and Auditor General himself. Other rules and orders of a financial character issued by the President, which are not of a general nature but are applicable exclusively to specified departments, and all rules and orders of a financial character issued by authorities subordinate to the President are scrutinised by the Accountant General concerned but when such rules and orders concern more than one Accountant General, the following procedure should be followed: (i) The Principal Director of Audit, Economic and Services Ministries will scrutinise all rules and orders which affect him and one or more of the State Accountant General but not the Director General of Audit, Central Revenues. (ii) The Director General of Audit, Central Revenue will scrutinise other rules and orders. The Director General of Audit, Central Revenues and the Principal Director of Audit, Economics and Services Ministries may consult other Accountants General concerned where necessary. Note1: In the case of delegation of powers to the Comptroller and Auditor General, no scrutiny by the Indian Audit and Accounts Department is necessary as such delegation are made by the Union Government after consultation with Comptroller and Auditor General. Note2: Rules and orders issued by the Comptroller and Auditor General of India himself are not subject to the scrutiny of any officer subordinate to him. Note3: The Accountants General will act on the assumption that such rules and orders have been scrutinised by the Director General of Audit, Central Revenues/Principal Director of Audit, Economic and Service Ministries and have been accepted in audit. However, the Accountants General may, if they so wish, bring to the latter's notice any specific constitutional or legal infirmity in the rules and orders. (Para 2.2.5 of C.A.G.s M.S.O. (Audit) 2nd Edition 2002). 3.49 All rules and standing orders of a financial character issued by State Governments or by authorities subordinate to State Governments should be scrutinised finally by the Accountant General of the State concerned. 64

(Para 2.2.7 of C.A.G.s M.S.O. (Audit) 2nd Edition 2002) Corrections to the Inspection (Civil) Manual 3.50 (a) Instructions and decisions of a permanent nature relating to the Inspection Civil Wing should be incorporated in this Manual with reference to the number and date of the letter, the case etc. Draft correction slips, if it involves mere incorporation of the orders issued by the Government, Comptroller and Auditor General or the Accountant General will finally be approved by the Group Officer (IC) while in other cases the draft correction slips should be submitted to the Accountant General for approval. After approval, each correction slip should be pasted in the register of correction slips in serial order of issue. The Assistant Audit Officer/Section Officer (Headquarters) is personally responsible that this is done regularly and the Manual is kept up-to-date. The register of Correction Slip should be submitted to the Group Officer (I-C) on 15th of each month and quarterly to the Accountant General on 10th of April, July, October and January each year. The approved correction slips for each quarter should be sent to G.S.M. Branch for printing on the 15th of April, July, October and January. (b) Whenever it is possible or necessary to issue a correction slip an office order

should not be issued, but the copies of the correction slips should be circulated.

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CHAPTER IV RULES OF PROCEDURE FOR THE LOCAL INSPECTION STAFF General Duties of the Inspection staff 4.1 The inspection staff is responsible for carrying out the actual

audits/inspections, drafting of the audit reports and despatching of such reports to the concerned auditee units at Headquarters of the Inspection Civil Wing alongwith all necessary documents. All the remaining work of the Wing is carried out by the unit concerned. The inspection staff should, however, draw the attention of the

Headquarters Section by separate notes to the defects in this Manual and should scrutinise at each inspection the relevant portion of the Manual to see whether it requires amendment in any respect. Strength of Local Audit Parties 4.2 Ordinarily one Section Officer/Assistant Audit Officer, one or two

Auditors/Senior Auditors are attached to each local audit party. The Auditors/Senior Auditors work under the supervision of the Section Officer/Assistant Audit Officer. Where there are two Assistant. Audit Officers/Section Officers in a local audit party, the Senior Assistant Audit Officer/Section Officer will be the incharge of the party. Time allotment 4.3 The time allotment for each account is fixed in terms of (single) mandays after

taking into consideration the quantum of work in each account and past experience of the same account as well as additional work, if any, to be done during local audit. Extension in time allotment 4.4 (a) The time allotment for the audit of an office/unit should not be

exceeded except for very special reason and with the previous sanction of the Group Officer (Inspection Civil). The local audit parties should take care to send the request for extensions well in advance so that the orders of the Group Officer (Inspection Civil) in this regard are communicated to them before the time originally allotted expires. In no case may an extension be availed of before it is actually sanctioned. (b) While submitting request for extension in time allotment for any audit, full

particulars of the additional work involved i.e. No. of vouchers, amount of expenditure vis--vis figures for months selected in the previous audit and other information concerning the accounts necessitating such extension should invariably be given to justify the request for extension in time allotment. 66

Time allotment for Important/Long duration Audits 4.5 Ordinarily, the period of local audit should never exceed 50 days. The

composition of local audit party should be determined keeping in view the nature and complexity of the work of the organisation to be inspected. The composition of the party can be varied, particularly in respect of major and important local audits. For really important local audits, even 3 or 4 Assistant Audit Officers/Section Officers can be deputed with one or two Auditors and full time gazetted supervision provided with a view to improve the quality of local audit and cutting down its duration. It is also imperative to ensure that before starting the local audit the party undertakes a detailed and in-depth study at the Headquarters of the functions, nature and extent of activities and magnitude of its financial transactions of the office or organisation to be inspected. The Inspecting Officer should himself undertake some important and

original work and a brief description of the work done by each member of the inspection party should be kept on record. Detailed planning of the work should, from its very inception be the personal responsibility of the supervisory officer at the level of the Group Officer, who should ensure effective supervision of inspection work and provide necessary guidance. Their close supervision would be required particularly in the second half of inspection of major department offices and organisations. It is also necessary to ensure that the personnel of local audit party particularly Assistant Audit Officers/Section Officers and Audit Officers/Sr. Audit Officers are not changed in the midst of inspection. In all cases in which it is considered necessary to allow local audit party more than 50 days, full facts of the case with detailed justification should be reported to the Comptroller and Auditor Generals Office. A register for this purpose should be maintained by Inspection Civil (Headquarters). (Deputy Comptroller and Auditor Generals D.O. letter No. 673-TAI/ID (TA)/75 dated 5th August 1976). Note 1. The time allotted in tour programmes includes the time for writing of the audit notes, but excludes time taken on journeys and Sundays and holidays on which work cannot be done. It should be understood that auditors are liable to have their daily allowance stopped if they exceed the time allotted in the programmes of work. Note 2. Local holidays and any other holidays declared by the State Government should be observed by the Auditors only if the office in which they work is actually closed. A copy of the orders in support thereof should be submitted to Head office alongwith the relevant weekly diary. 67

Note 3. If any audit or work for a part of any working day, it should be considered as full day for the calculation of time allotment. Exception: - These orders have been waived in the case of accounts the time allotment for which it is not more than two days. Note 4. If transit from one station to another falls on a holiday such a day should be utilised for transit and not availed of as holiday. Note 5. The auditors will not be allowed a day or as a part of a day during working hours for looking for accommodation or attending to papers received from the Head Office. Auditors arriving at a station before 12 noon are expected to put in at least half a days work. Note 6. The time allotted for local audits also includes time for the disposal of old objections. Disposal of Dak should be done after office hours. Review of Time allotment 4.6 A review of time allotments should be carried out every third year in order to

see that the time allowed for the local audit of various types of offices is adequate and not more than adequate. (Comptroller and Auditor Generals Confidential letter No. 380-Admn. III/517-61, dated 5th March, 1962) Programme 4.7 No variation is allowed from the prescribed programme without the previous

permission of the Group Officer (Inspection Civil). Note 1. The accounts allotted to a Section Officer/Assistant Audit Officer at the station at which he may be working should be audited by him before leaving that station. If for any reason any account can not be audited before leaving that station, previous orders of the Group Officer (Inspection Civil), should be obtained. A note of such orders having been obtained should always be given in the weekly diaries. The tour programme should also be arranged in such a manner that journey to the same side is not undertaken more than once. Note 2 In some cases weekly diaries indicate several accounts in hand; audits once commenced should be completed before another one is taken up and suspension of audits without adequate reasons is strictly prohibited. Where, however, due to unavoidable circumstances and pressing reasons an audit has to be suspended the reasons for doing the same should promptly be brought to the notice of the Group Officer. (Office Order No. OA/1-53/1960-61/1188 dated 14th June 1960). Telegrams 4.8 When a telegram is sent by the Group Officer (Inspection Civil) to a Section

Officer/Assistant Audit Officer/Inspecting Officer for any specific purpose it s receipt should at once be acknowledged by post. Similarly, when a telegram is sent by a Sectio n Officer/Assistant Audit Officer/Inspecting Officer to the Group Officer 68

(Inspection Civil), a copy of the same should be sent on the same day to the Head Office by post. Weekly Diaries 4.9 (a) Preparation and Submission of Weekly Diaries Each auditor is

supplied with a bound diary. The entries of work done by him should be made in the diary each day or on the morning of the next day. Once a week (on Friday afternoon) the weeks entries should be copied into the diary extract in Form SY 324. Section Officer/Assistant Audit Officer incharge of the party should not omit to fill in the reverse of the Form. Weekly diaries of the auditors should be countersigned by the Section Officer/Assistant Audit Officers who should also record a certificate to the effect that the work of auditor was reviewed and found satisfactory or otherwise as the case may be. Weekly diaries should be forwarded to the Headquarters on the last working day of the week or on the morning of the next working day. Where duration of local audit exceeds seven working days, weekly diary report forwarded by the Inspecting Officer should be scrutinized by the Audit Officer/Sr. Audit Officer (Headquarters) and submitted to the Group Officer. The other weekly diary reports should be finalised by the Audit Officer/Sr. Audit Officer (Headquarters). (Comptroller and Auditor Generals letter No. 173-OLM/12-75/1 dated the 24th September 1975). If on any day a local holiday or half- holiday is observed it should be stated in the diary that the office where the auditor was working was actually closed. (b) (i) Review of the work done by the auditors during Local Audit by the Supervisory Staff At present the supervisory staff conduct only a general review of the work

done by the auditors during local audit. No record of the items of work specifically reviewed, the extent and the result of such a review is kept in any register or return. With a view to ensuring that the items of work attached to the audit or have been checked adequately during the local audit, it has been decided that the Section Officer/Asstt. .Audit Officer incharge of the party (senior most among them in case there are more than one Section Officer/Asstt. Audit Officer) should conduct a test check of the work done by the auditor including the check of totals expected to be made by the latter. While recording a certificate of the general review the Section 69

Officer/Asstt. Audit Officer should also specify the items test checked by him. The quantum of test check in this regard may be fixed by the Accountant General, according to local needs. (Comptroller and Auditor General letter No. 48-T.A.-79, dated 17th January, 1979 filed in Pilot File). (ii) The Section Officer/Assistant Audit Officer field should carry out the following quantum of test check of the work done by the auditors: (i) (ii) If there is one auditor, 10% of each item checked by the auditor. If there are more than one auditor, 5% each item checked by the auditors. The details of the items checked by the Section Officer/Assistant Audit Officer should be given in his weekly diary reports as well as in the duty list attached with the Audit and Inspection Note. The Section Officer/Assistant Audit Officer at the time of his transfer should specifically bring these orders to the notice of successor Section Officer/Assistant Audit Officer. The Inspecting Officer while countersigning the diary reports should ensure that the requisite details are given by the Section Officer/Assistant Audit Officer. (Circular No. OAD/C/78-79/5830 dated 25th February 1979). Period covered by Local Audit 4.10 (a) As far as practicable, every local audit or inspection should cover

transactions from the date upto which the account was last audited to the month preceding the month in which inspection takes place. The Cash book should,

however, be checked upto date. The local audits and inspections should be complete and thorough in respect of the transactions covered by them. There have been cases in which local audit by our staff failed to bring to light serious irregularities and even defalcations, which were later discovered by other agencies. It is needless to point out that even single instance of this kind brings the whole Audit Department into disrepute. The inspecting staff should be very careful in this regard and ensure that no such case goes undetected. (Comptroller and Auditor Generals D.O. letter No. 1307/Admn. I/388-55, dated 26th April, 1955). (b) In case of accounts in respect of which an audit certificate is required to be issued by this office i.e. Family Planning, Sainik Welfare Department, World Bank Schemes etc. period of audit would be upto end of the last financial year. As regards

70

half yearly accounts, the period of audit would be upto the end of preceeding halfyear. Quantum of Gazetted Supervision 4.11 (a) As far as possible full gazetted supervision at the level of Audit

Officer/Sr. Audit Officer, should be provided for the following items of local audit: (i) (ii) Efficiency cum performance audit. Audit under Section 14, 15, 19 and 20 of the Comptroller and Auditor Generals (DP&CS) Act, 1971. (iii) (iv) System audit wherever special audit of specific system are taken up. Audit of district and higher level offices which deal with development activities under Plan Programme and (v) Special audits (frauds, embezzlements etc.)

(Authority CAG letter No. 1271-O&M/7-81 V dated 24-09-1985). (b) Other annual, biennial etc. audits should be supervised as under:Units having more than Rs one crore expenditure excluding establishment expenditure and will be audited annually Units having expenditure between Rs 25 50% by Audit Officers/Sr. lakh to one crore and will be audited Audit Officers biennially Units having expenditure less than No supervision required Rs 25 lakh and will be audited once in three/four years Intimation of dates of audit and Inspection 4.12 (i) Before an audit is taken up, an intimation of the date of inspection Supervision 100%

Category A

Category B

Category C

(Authority: File No. IC-I/HQ/TP/Audit Plan/2004-2006)

should be sent to the Head of Office to be inspected in Form SY 330 a week or 10 days in advance of the actual date of commencement of audit of the concerned office so as to permit any representations from the officers concerned for the postponement of the audit, being received before the local audit party leaves the station where they are working and that request for postponement could be considered and resultant adjustments made without much disturbance in the approved programme. (ii) Immediately after the programme of local audit for an audit party is approved,

a copy thereof should be sent to the Sections (audit units) concerned so that these 71

sections may take necessary steps to keep their records ready for being sent to the local audit parties. (iii) Copies of the approved programmes of local audit parties and Inspecting

Officers as well as subsequent amendments made therein should also be supplied to the respective Inspecting Officers/ Section Officers/ Asstt. Audit Officers for their guidance. (iv) Intimation regarding change of dates of audit of any office consequent upon

grant of extension/ postponement or otherwise should be sent to the Head of Office concerned immediately. Note: - The Codes and Manuals provide for suitable notice to be given before an inspection is taken up. This notice is provided for on practical considerations so that the required books/records may be kept ready for audit as otherwise the time of audit party might be wasted. A surprise inspection when temporary misappropriation is suspected is, however, a different matter. Such inspections should not be undertaken too frequently or frivolously but only on reasonable suspicion of temporary misappropriation. Such inspections may, in view of absence of notice of regular inspection, have to be confined to the limited purpose of verification of cash and of the books relevant to that purpose. The verification should be undertaken as soon as the necessity for the same is felt and this should preferably be done at a time when the officerincharge is present. (Comptroller and Auditor Generals confidential D.O. to the Accountant General, Madhya Pradesh, Nagpur No. 70 Admn 1-54 dated 26th July 1954 and copy endorsed to all Accountant Generals and Comptrollers. (Original letter filed in case TM-4A/ 1954-55). Accommodation 4.13 If Auditors wish to enlist help from local authorities to secure suitable

accommodation for themselves or for their assistants at any place of work, they should write privately to the person concerned. They are not entitled to address the Head of Offices on this subject officially. Intimation to the Head Office and Monthly Reports 4.14 (a) Before an Auditor leaves a station and as soon as he arrives at a new

station he should send intimation in form SY 342 to the Head Office. The office will put it up to the Audit Officers/ Sr. Audit Officer (Headquarters) before it is filed. (b) When the audit of an account has been taken up, intimation should be sent to

the Head Office promptly in the Form No. OA 5 given in Appendix I. The office should verify the period of audit and months selected for test audit before making 72

necessary entries in the progress registers (Form SY 326). Where selected months differ from those approved by the Group Officer (Inspection Civil), the deviation should be brought to his notice. (c) Sections Officers should maintain a calendar of Returns and note therein all

the returns required to be submitted to the Head Office to avoid any delay in the submission of any return and for the guidance of their successors also. The register should be submitted to the Audit Officer/Senior Deputy Accountant General (Inspection Civil) whenever any of them happens to visit the party. Calendar of Returns is given in Annexure I to this Chapter for guidance. (OA/M.C.W. 1/19 dated 10th February, 1959). Working hours and Pattern of Holidays 4.15 (a) The local audit parties will observe the working hours and the pattern

of holidays of the office/department visited by them. Every Saturday and Sunday, however, will continue as full closed holidays for Central Government Offices. While every endeavour should be made to observe the above instructions as far as practicable, there would be no objection to minor adjustments being made in working hours or pattern of holidays in case of such parties to suit administrative convenience. (Comptroller and Audit Generals letter No. 2492-NGE I/295-65 II, dated 24th September 1966 and No. 208/NGE I/295-65 II dated 2nd February 1967). (b) The Punjab Government observes the working hours from 9 a.m. to 5 p.m. with half-an-hour break and every Saturday closed in the Punjab State. (c) The local audit parties should observe these working hours. Attendance 4.16 (a) All the members of local audit party must attend the office which they

inspect during the regular hours. (b) Each local audit party should maintain an Attendance Register in which each

member of the party shall mark his attendance. The attendance register should be closed in accordance with the instructions laid down in the Manual of Office Procedure and of the General Services and Maintenance Branch and para 3.6 (iii) of this Manual. The attendance register should be submitted to the Inspecting Officer at the time of his visits to supervise the work of the party. 73

Calling of lists of payments for local audit 4.17 In partial modification of the existing procedure regarding collecting of the

original paid vouchers for check with reference to the records of auditee organization, a revised procedure for sending a copy of list of payments and also schedule of drawals for the selected month to the field parties is laid down for verification during the course of audit of an auditee organization. Accordingly the requisition for list of payments etc. will be sent to the concerned D. C. Section of the office of the Accountant General (A&E) in time by Inspection Civil (Headquarters). After receipt of documents from the office of the Accountant General (A&E), the Inspection Civil (HQ) will photocopy them as required and send them to the field parties in accordance with the programme. The original list of payments etc. will be sent to D.C. Section thereafter. In cases where documents are not received by the field parties at the commencement of audit they should prepare the list of drawals/ receipts from the treasury for verification of transactions with the records of DDO viz cash book etc. (Authority: - Comptroller and Auditor Generals letter no. 642-Audit II/ 87-87 (ii), dated 27.5.92 circulated vide Insp (c) HQ/C.Slip /92-93/1854 dated nil). Distribution of work on Inspections 4.18 It is always convenient in the matter of practical results to entrust the

more mechanical and routine portion of the work to the Auditors and the Section Officer/ AAO doing the more important work and pursuing other complicated investigations. Distribution of duties amongst the members of Audit party should be approved by the Inspecting Officer in case of supervised audit. The broad line of the distribution of work as laid down in annexure appended to para 6.1.7 of Comptroller & Auditor General's Manual of Standing Orders (Audit) 2nd Edition should be kept in view (Annexure II of Manual) Defalcations and Frauds 4.19 (a) In the event of Auditors finding anything likely to lead to the discovery

of a defalcation or fraud or any serious irregularity, the circumstances should be communicated to the Group Officer (Inspection Civil) at once and daily reports should be sent of the progress made in the investigations. Such reports must not be postponed to the following day. When defalcation is of an important nature and in the auditors mind beyond doubt, intimation should be sent to the Group Officer (Inspection Civil) by wire. 74

(b)

In cases where frauds are suspected during the course of local audit, local

Audit Party should take note of the detailed particulars of the documents on the basis of which the fraud is likely to be established and bring the matter promptly to the notice of Inspection Civil Headquarters by means of special D.O. letter to the Audit Officer/ Sr. Audit Officer (Headquarters) with a copy to the Head of the Office. Inspection Civil headquarter should bring them to the notice of the next superior authority of the department and, if necessary, to the Head of the Department. It would not be necessary for inspecting parties to bring the documents to headquarters for taking photostat copies. Inspection Civil Headquarters should maintain a register in this behalf where details of the cases are kept on record and action taken by the departmental offices are watched in the usual manner. This register should be put up to the Group Officer (Inspection Civil) once every month on the 10th . (Comptroller and Auditor Generals Secret D.O. No. 684/TA-I/164-175 dated 2nd August 1976). (c) As per instructions contained in Headquarters letter No. 843-Rep(S)/40-2001 dated 31.8.2001, cases of fraud and corruption appearing in the Audit Report which warrant vigilance investigation are to be communicated by the Accountant General (Audit) to the Chief Secretary/Administrative Secretary to the State Government for taking up the matters with State Vigilance Authority. It was further clarified in

Headquarters letter No. 932-Rep(S)/187-2003 dated 30.6.2003 that such cases should be forwarded for obtaining prior approval of the Headquarters only after the Audit Report has been approved. In order to streamline and regulate the process, it has now been decided that all Group Officers, while approving an Inspection Report should identify and submit to the Principal Accountant General/Accountant General the cases of suspected fraud, malafide and corruption warranting vigilance investigation. Accountant General

would examine the cases and record speaking orders before forwarding the extracts of Inspection Report paras to the Administrative Secretaries of the Department concerned demi-officially in strict confidentiality, highlighting the need of making vigilance investigation under intimation to the ADAI. The matter would be followed up with the Government till finality. Meanwhile, in case the matter is proposed for inclusion in the Audit Report, the fact of having intimated the State Government for taking urgent action on the matters may also be mentioned in the final Audit Para. (CAGs office DO No. 1149-Rep(s)/187-2003 dated 28-8-2003) 75

Guidelines for detection of defalcations and frauds 4.20 The efficacy of local audit depends largely on the intelligence, thoroughness

and resourcefulness which are brought to bear on it. Even an apparently minor defect or irregularity might conceal a potential fraud or misappropria tion which may come out through intelligent probe. The inspecting staff should be alive to this and exercise the checks intelligently and not in a mechanical way. An illustrative list of

irregularities which are likely to conceal potential frauds is give n below for guidance:(i) Erasures, over-writings, interpolations, alterations and un-attested corrections in figures, pass orders etc. in account books and registers, bills presented at treasuries, invoices, sales bills, receipts etc. (ii) (iii) Removal of pages from account books and registers. Tamperings in totals and carry forward of totals, specially in cash books and stock books. (iv) (v) (vi) Errors in totaling in bills Errors in carry over figures from subsidiary registers to main registers Delay in disbursement of money drawn from treasury to payees (including moneys recovered against court attachment, undisbursed salaries etc.) (vii) (viii) Non availability of challans in support of remittance entries in cash book. Tampering of figures in challans.

Note: Fictitious entries of remittance in Cash book will be brought to light during the verification of credits for remittances for selected month/months direct from the books of the Treasury. (ix) Persistent delay in submission of payee stamped receipts, suppliers invoices and counter signed detailed bills to audit. Note: For this purpose a list of such items should be furnished by the Audit units to the Inspection Civil Wing along with the vouchers and other documents for check in local audit. (x) Payments made on duplicate invoices, absence of proper reference in invoices to entry in stock books. (xi) Issue in stock accounts not supported by proper indents and acknowledgement issued on free transfer bills not acknowledged by the recipients. (xii) (xiii) Failure to cancel sub vouchers or paid vouchers. Bills presented at the treasury without entry in the Bill Register, interpolations and alterations of entries in the Bill Register. 76

(xiv)

Items of stores, works, etc. paid for in bills and not being traceable in the relevant registers, viz., stock accounts, works registers measurement books, etc.

(xv)

Signing office copies of bills in full, difference between the entries in the office copies and fair copies of the bills.

(xvi)

Persistent failure to conduct physical verification of stores or to take action on the verification reports.

(xvii) Entries in important records like Cash Book stock accounts, etc, not being attested. (xviii) Absence of proper periodical scrutiny of cash book, stock books, contingent registers by the Head of Office or the authorized Gazetted Government Servant. (xix) (xx) Non reconciliation of departmental figures with those of Treasury. Non accountal of cheques drawn from the treasury in DDO's Cash Book. Necessary guidelines for dealing with frauds and corruption cases as issued by ASOSAI and INTOSAIs auditing standards i.e., General Principals, General Standards, Field Standards and Reporting Standards may also be kept in view during audit of records of any organisation/office. Conduct of Local Audit 4.21 Before taking up the audit of a Government office or body/authority, the Asstt.

Audit Officer/Section Officer/Inspecting Officer should (i) study the documents in Inspection Civil Headquarters relating to the office and make themselves conversant with its set up, i.e. if a government office, whether it is an attached or subordinate office and if a body or authority whether it has been set up under an Act of Parliament or a Registered Society, etc., its Governing body and General body, the functions entrusted to it and the system of finance obtaining in the office, i.e., what makes up its receipt and how its money is expended, what system of account is being followed, what accounts books are prescribed and what are the details of its budget etc. The Act of Parliament, Memorandum and Article of Association, Regulations, Rules etc. relating to the body or authority, the Annual Administrative Reports, the Departmental Manuals, Delegation of Financial Powers relating to the office or any other publications or Evaluation Reports should also be examined in addition to Inspection Reports of previous years. 77

(ii)

Study the Comptroller and Auditor General's Secret Memorandum of Instructions where in some of the important matters to which attention should be given by the local audit party and the Inspecting Officer are indicated. (Para 6.1.25 of the Comptroller and Auditor General's Manual of Standing Orders (Audit) Second Edition 2002).

(iii)

Ensure that the records which are required to be received from the Inspection Civil Headquarters/Audit Units concerned have been received.

(iv)

Call on the Head of the Office, the accounts of which are about to be audited at the very commencement of audit and seek his assistance in settlement of old objections, supply of records and information for the current audit and provision of office accommodation and facilities for the conduct of audit. The officials directly concerned with audit, namely Drawing and Disbursing Officer, Administrative Officer, Accounts Officer etc. should also be met.

(v)

Obtain in writing from the Head of office an exhaustive list of various fields of activities and the records maintained so as to ensure that all fields of activities of the office inspected and all financial records maintained in the office are covered during local audit.

(vi)

Ensure that distribution of work among the members of local audit party has duly been made. It should also be ensured that full details regarding the nature of work allocated to each member of the party is attached to the Inspection Report.

(Comptroller and Auditor Generals letter No. 3010/Admn I/463-60 dated 2nd November 1962) Note: The auditors in the course of their audits should not express independent opinions on their own authority connected with the interpretation of various Act or Rule nor give rulings of doubtful points or procedure etc. Organising local audit work of important/long duration audit inspections 4.22 The local audit arrangement should be organised with a view to ensuring that

in every important/long duration local audit, the local audit parties go reasonably prepared and briefed from the Headquarters office and that the supervision is closed. With a view to having an effective, purposeful and result oriented audit, briefing should be done at the level of senior officers. It has been decided that before an Audit party proceeds to a particular Ministry/Department for conducting important/long duration audit, all members of the party should be briefed by a Senior Audit Officer/Group Officer at the Inspection Civil wing Headquarters about the functions, 78

nature and extent of the activities and the magnitude of the financial transactions of the offices/organisations to be inspected. The inspection staff may also be provided with suitable guidelines on the salient points to be examined during such audits. (Comptroller and Auditor Generals D.O. letter No. 673-T.A. I/JDD(TA)/75 dated 5th August 1976 and D.O. No. 184-TA-I/13-80 dated 6th March 1980) Postponement and suspension of Local audit 4.23 Requests for postponement of audit are considered only in exceptional

circumstances. All cases of postponement should have approval of the Group Officer (Inspection Civil). In cases whose requests for postponement of audit were not received through the Head of the Office/Department and the departmental office fails to produce the records on the scheduled date of audit, the Sectio n Officers/Assistant Audit Officer of the field audit parties should ascertain the reasons for non production of records in writing from the Head of the office. The position should be brought to the notice of the Inspection Civil Wing Headquarters before taking up next audit in the programme. Where due to non production/non availability of prescribed account records of vital importance an audit party is unable to proceed with the audit of an office, a detailed note indicating reasons for non production/no n-availability of records alongwith the remarks of the Head of the office inspected may be sent by the Section Officers/Assistant Audit Officer/Inspecting Officer of the audit party to Inspection Civil Wing (Headquarters) seeking suspension of audit. Such note, if any, received from any party shall be accorded priority and orders thereon shall be obtained from the Group Officer (Inspection Civil). without his prior permission. Where any audit is ordered to be suspended the reasons for suspension of audit shall immediately be intimated to the next higher authority of the office inspected with a request to trace/re-construct the concerned records for facility of audit. Attitude of Auditors 4.24 The Auditors should be careful to see that no grounds are afforded for No audit should, however, be suspended

complaint from local authorities against the manner in which Inspection and Audits are conducted or in regard to the tone or the substance of their inspection reports. If the work of inspection of audit is to be of any value it should be conducted with tact and discretion and in a manner to avoid as far as possible all irritation to the local officers. They should also bear in mind that unnecessary meticulous or badly 79

expressed objections not only bring discredit on audit and give rise to reasonable irritation but also cause an increase of work in both the Audit and the local offices. 4.25 Auditors, while yielding in nothing they consider to be part of their official

duty should be careful to avoid friction with any of the officials with whom they come in contact. If they convince the officers by the manner in which they go about their work that they are there not to complicate procedure but to simplify it not merely to criticise but to assist they will meet with little difficulty in this direction. They should assist the local authorities with advice and may show by means of practical example, if necessary, how account registers should be posted and how a proper check is exercised, in order that there may be n o possibility of mistake or omission due to ignorance on the part of the local officials. It is much better to prevent mistakes that in procedure than to discover such mistakes after they have been committed. 4.26 The Inspection staff is strictly prohibited from being in any way under the

obligation of any member of an office whose accounts are being or will be inspected by them and should not ask for, or obtain free any supply or service which has a definite financial implication. In the matter of house accommodation, outside help may be enlisted but it should be strictly on payment of rent and other charges by the members of the inspection party themselves. The use of the transport pertaining to any local departmental office for private purpose is definitely prohibited. The

reputation of the office regarding honesty and efficiency depends to a large extent on the behavior of the Inspecting staff. Any breach of these instructions should be

reported forthwith by the Section Officers/Assistant Audit Officer/Audit Officer/Sr. Audit Officer to the Group Officer (Inspection Civil) confidentially. General Audit Instructions 4.27 For an intelligent and efficient audit or inspection of accounts it is necessary

that the local Auditors should have an intimate acquaintance with the various Acts, Codes and Manuals relating thereto, and they should also be conversant with the subsidiary rules and orders issued from time to time. Local Auditors will be supplied with copies of all Acts Codes and Manuals required and they should also keep a note book in which they should record briefly important decisions contained in Government orders and in the orders issued from the department or in the papers sent for circulation. The formal rules for audit should be strictly complied with. Many of these rules represent in concise form the experience of many years and their value can not be overlooked. Only they must not be converted into a fetish and applied in a 80

rigid spirit or considered as all sufficing under circumstances where they are obviously inadequate. But when anything less is done than is laid down in them, the Auditors must bring the fact to the Audit officers notice. Ordinarily they must be taken as the minimum of a good audit. 4.28 The value of an audit depends la rgely on the intelligence and thoroughness

with which the work is done. Sometime some informality, some irregular payment or some slight discrepancy is detected in the course of audit. The tendency is to embody this in a formal objection statement, which in course of time is replied to the requirements of the Audit Department. These are complied within the particular case in question and there the matter ends. But that is where it should not end. Small circumstances like these if taken up may lead to the detection of larger irregularities or a defect of system liable to lead to fraud, and their value as such must be borne in mind. The Section Officers/Assistant Audit Officer should look at everything in a fresh and original way, and when he realizes that he had touched on a matter which may repay investigation, he should go into it with an exhaustiveness which will leave no detail undiscovered. He must take nothing for granted. It is not, however, the function of an Auditor, except under special orders, to undertake such duties as enquiry into alleged oppression, the taking down of statements of witness, the examination of books of traders, the taking or checking of stock. If there are suspicious circumstances in the accounts, the Auditor should report the fact to the Group Officer (Inspection Civil). It is not the business of the Auditor but that of the executive to undertake an enquiry. 4.29 As the object of the account is to present a true financial picture, intelligent

and proper audit requires the visualising of all financial transactions in their proper perspective as a whole and not merely the examination of the details of the transactions which work to the final result. The Auditors should, therefore, prior to taking up the audit of the accounts of any particular institution, consult the printed administrative report of any other Government publications where the accounts of income and expenditure of the institution appear, so that they may obtain a correct perspective of the financial side of the institution and make their audit both intelligent and useful instead of allowing it to become merely a process of checking registers in a disconnected and mechanical way. (CAGs letter No. 57/Admn-I/135-34 dated the 28th January 1935). 81

4.30

It is most undesirable in local inspections that the check of initial records such

as the cash books should be neglected in favour of material which may provide cases for Higher Audit. The Comptroller and Auditor General of India has emphasised that the primary duty of the Indian Audit Department is to secure the correctness of accounts and not criticism of a higher audit character of the executive work of a department. (Comptroller and Auditor Generals letter No. 31 Admn.-I/205-36 dated 15th January 1937). 4.31 No auditor is competent to undertake any investigation which is not strictly within the scope of the test audit whether such an investigation results in extra time being taken or not. If anything is noticed in the course of an audit, the Section Officer, Asstt Audit Officer and Senior Auditor should bring it specially to the notice of Group officer. In no case can Senior Auditors undertake any special investigation work of any kind at the instance of administrative authorities without the Group Officers sanction. 4.32 Auditors should confine themselves to facts which have a bearing on accounts

and finances and matters not falling strictly within the scope of audit should not be touched by them. 4.33 Auditors must call in writing for all registers and accounts of the offices

inspected, required for audit purposes. Note: Section Officer/Assistant Audit Officer must examine all records required for audit and if any records can not be produced they should make sure of the reasons for its non production and bring such failure, to the notice of the Head of the Office etc. The production of this record at the following audit should also be insisted upon. 4.34 In auditing accounts all entries checked should be ticked by the Auditors and all vouchers, registers etc. examined should be initialled by them. For this purpose special audit pencils should be used. Assistant Audit Officer/Section Officer/Auditors should not make notes, corrections or remarks in any of the registers or documents of the office which they ma y audit. 4.35 The State Government has permitted the Audit Officers to make use of the

unsolicited information which comes to their hand in the course of Audit. Note: For procedure in connection with anonymous letters received, see para 3.23 of the Manual. 4.36 Auditors should not apply merely mechanical checks to payment vouchers e.g. seeing that there is a proper acquittance in support of payments, that amounts charged 82

are arithmetically correct and that the rates are in accordance with the schedule of rates. In the interest of thorough audit it is necessary to see that the charges in the bill are not extravagant and if doubt arises, the prevailing market rates may be ascertained through the District Officer. Cases of different rates paid for the same a rticles

observed in auditing the accounts of two or more offices in the same locality should be investigated and the auditors should find out carefully the causes of such difference. In such cases, however, no hard and fast rules can be laid down as it demands the exercise of great care on the part of the Section Officer/AAO. Such cases should generally be reported to the Group Officer (Inspection Civil) for orders. Check of Cash 4.37 The Inspecting Officers are not required to verify by count the cash balance of

the office inspected. It is, however, not the intention that an Inspecting Officer is debarred from verifying the cash of an office if the circumstances in any case warrant this. In such a case, the verification should be undertaken as soon as the necessity of the same is felt, and this should preferably be done at a time when the officer incharge is present. In this connection it may be borne in mind that if in any case the cash balance pertaining to a cash book is counted, a simultaneous count of all cash balances (with relevant accounts) in the charge of the disbursing officer or other custodian of the cash chest is desirable. The same consideration applies in respect of surprise inspections. Wherever cash is verified it should be seen that the cash book is written up to date and all entries should be vouched to the date of verification. It should also be seen in audit that the cash chest contains nothing but the Government money and Government valuables. Depreciation 4.38 Depreciation should be shown as an item in the Stores Accounts only when

there is a definite policy of writing down stores values by such means. Where there is no such policy actual writes off of surplus, unserviceable or lost stores should be shown or losses on revaluation. This principle will apply both to Commercial as well as non-commercial department. These instructions should be carefully borne in mind when auditing the stores accounts. (Comptroller and Auditor General of Indias letter No. 235 RS 95.36, dated the 29th October, 1936) 83

4.39

The following criteria may be kept in view, while checking prices fixed by

Government for various commodities:a) Where Government or Government owned or controlled institutions are

monopolistic producers of the commodities, it should be seen that a policy has been laid down by the authority competent to do so and that the policy is properly implemented. For instance, if the policy is that prices should be based on cost, it should be ensured that cost data are properly collected and prices are actually based thereon. It is not for us to comment on the merits of the policy but our view should bring out the financial results of the policy adopted we should then leave it to P.A.C. to make comments, if any. b) Where the Government owned or controlled institutions are not monopolistic

producers but their production form a significant proportion of the total production of the article consumed and the price of the article is fixed under orders of Governments, the duties of audit are more or less the same as in (a) above. Where, however, the Government fixed prices on the recommendations of Tariff Commission and the Commission has recommended the prices for a certain period only and has also recommended their revision on the basis of certain variations in the cost data and the Government have agreed to such review or to an escalation on a certain basis it should be seen that these are actually implemented. c) Where Government or Government owned or Government controlled

institutions are not producers or do not produce any significant portion of the total production and the Government (a) are not major consumers of such commodities (b) may consume a significant portion of the total production, it may be more desirable not to embark upon the scrutiny of the fixation of prices. It is a matter which may be left to the executive to be controlled by Parliament and unless we are specifically requested to look into a particular price fixation case by Government, we need not get ourselves involved in this matter. Cost is certainly one of the important factors taken into account in fixation of prices. But it is not the only factor, there are so many considerations involved in fixing controlled prices that we should not question them unless some thing looks very patently wrong. (Authority- Comptroller and Auditor Generals letter No. 515-Tech Admn. 1/167-64 dated the 3rd March 1964 filed in CW-8-9/X-page 227/C.)

84

Raising and pursuance of objections 4.40 (a) The Section Officer/Asstt. Audit Officer in the course of audit should use

the following forms: (i) (ii) (iii) S.Y. 322-A S.Y. 327 S.Y. 335 All points on which any information is required or are important enough to go into the audit note should be noted in Form SY 327. Urgent and important

information should, howeve r, be obtained on Form SY 322-A. Any remarks for note and guidance should be written on Form SY- 335, which after being noted by the local authorities will be filed after scrutiny. These will be sent to the Section Officers conducting the next audit for verification. (b) All memos/other documents issued during the local inspection should bear the dated signatures of the issuing officers. (AGs orders dated 8.12.1992) (c) Replies to memoranda in Form SY 322-A and SY 327 should be carefully scrutnised by the SO/AAO. An attempt should be made to remove as many

objections as possible during the course of audit. The items settled should be struck off and initialled by the SO/AAO. Before the close of the audit the objection memos should be received back from the officer incharge. The efficiency of an Auditor will be judged partly by his success in having the objection cleared before he leaves. (d) At the end of the audit the Auditor will remove such of the objections as can be removed in the light of the explanation given by the officials and divide the remaining items into two categories (i) Those that are fit for inclusion in the Audit Report and (ii) those that are to go

in the Test Audit Notes (Form SY-348). He will then draft the audit note and submit it to the Group officer (Inspection Civil) according to the instructions in Chapter 6 of this Manual. The minor items that remain will be classified and abstracted on Form SY 348. In doing so, the Auditors concerned will in the light of the explanation given proceed to draft the objections in the final form and these final objections alone will be incorporated in the Test Audit Notes. The Test Audit Notes should also be drafted according to the instructions given in Chapter 6 of the Manual in duplicate. One copy of the Test Audit Note should be issued on the spot to the Head of the Office 85

inspecting after obtaining acknowledgement. Duplicate copy of the Test Audit Note should be sent to Head Office alongwith the draft Audit and Inspection Report. Note 1: Section Officer/Assistant Audit officer should see that the requisitions and memos are promptly dealt with during audit and except in very exceptional circumstances which should be reported to the Group Officer (Inspection Civil) these must not be left wit h the local officials after the Auditors departure from the place of audit. Note 2: If in any circumstances any of the objections finally included in the list of unsettled objections have not been made over to the officer whose accounts have been audited a note to that effect should be made at the foot of the last sheet of the Test Audit Notes. Note 3: Auditors should omit from the Test Audit Notes, all individual items where the sum involved is less than one rupee. Where there are many petty items of similar nature and the total involved is more than one rupee they can be grouped together in the Test Audit Notes and one remark made against the lot. When individual items are omitted from the Test Audit Notes under this order, the Auditor should make a query mark with the audit pencil against the particular items in order that the Group Officer (Inspection Civil) may see, when inspecting, that the Auditor have noticed discrepancy. Note 4: In the case of Government Institutions all small irregular, payment should be specially reported so that the Branch officer (Headquarters), the Group officer (Inspection Civil) or the Accountant General may waive the recovery thereof under para 7.1.16 of the Comptroller and Auditor Generals Manual of Standing Orders (Audit) 2nd Edition 2002. A waiver register is kept in the Central Office for this purpose. The amount proposed to be waived under para 7.1.16 of Comptroller and Auditor Generals Manual of Standing Orders (Audit) 2nd Edition 2002 together with the nature of the payments and the reasons for the proposed waiver, should be listed and submitted for orders along with each audit note. Note 5: When objections can be settled at the time of audit there is no need of incorporating them in the Test Audit Notes (Form SY 348) sent to the local office. Note 6: It should be understood that only replies enabling an objections to be totally withdrawn, can be accepted. Replies such as noted, 'will be done, etc. and partial answers to objections are of no value. Note 7: When in any case a Test Audit Note is blank the Auditor will/make a note of the fact in the Audit Note as well as in the forwarding memo. Note 8: The fair copy of the Test Audit Notes should be prepared by the Assistant or Assistants who are working with the Section Officer/Assistant Audit officer at the time the draft Audit Note is despatched by them to the Head office. The list of unsettled objections should not contain the original objections and the reply recorded at the preliminary stage but each objection should be drafted afresh after taking into account the reply of the local officials. In fact each item of the list of unsettled objection should be a self contained paragraph drafted after due considerations of the reply and not merely a verbatim copy of the original objection issued at the preliminary stage. 86

4.41

The Section Officer/Assistant Audit Officer should invariably record a

specific objection in the Audit and Inspection Note in respect of all vouchers, documents or other relevant records as are not produced by an office at the time of local audit but are promised to be shown later on. These objections could

subsequently be dropped when vouchers are made available either before conclusion of audit or at the time of next audit. (Authority- Accountant Generals order dated 30th December 1953 on P-22/N of File O.A./12-6/ Conf. 28 of 1957-58-59). 4.42 Oral orders and explanation should not be given by Auditors. When oral instructions are given the same should always be repeated in the objection memos. Settlement of old objections 4.43 (a) Settlement of outstanding paras of the earlier Inspection Report is one

of the important duties of an Inspecting Officer and should be given adequate attention. The Inspecting Officer should take up the work relating to discussion of outstanding paras of previous Inspection Reports with the Head of Office and other concerned authorities soon after the audit commences and follow up the discussion with actual settlement of objections on the spot. This aspect of the Inspecting

Officers work is important and the Inspecting Officer should devote considerable portion of his time and attention to this work. The discussion and settlement of such items of objections in respect of office situated at a station visited by the Inspection party but which are actually inspected by that party should normally be done by the Inspecting Officer himself. Settlement of outstanding objections/paras ultimately depends on the merits of each case and should be dealt with extreme care and caution. However, the following guidelines may be kept in view for settlement of objections/paras which are outstanding in the old reports:(i) The Inspecting Officers before treating objections/paras in the previous

Inspection Reports as settled should ensure that the office concerned has furnished written reply/explanation for each objection so settled and their reply is placed on record. Based on replies/discussion with the authorities he should also record brief justification for dropping the objection in the original Inspection Report. In no case an outstanding objection/para should be treated as settled merely by recording discussed and dropped.

87

(ii)

Paras which are instructive in nature may be dropped provided the instructions

are noted in writing by the department concerned. (iii) Paras on non-completion of minor records may be dropped, if their completion

has been made and got verified in audit. (iv) Paras on procedural matters like non- maintenance of a record, non-obtaining

of a certificate relating to personal matters, non-attestation of some entries, etc., may be settled when complied with. When such type of procedural objections/paras are outstanding in one or more previous Inspection Reports and the irregularity has continued during current audit, the outstanding objections/paras in the previous reports may be dropped and a para included in the current report mentioning it that it was pointed out in earlier Inspection Reports. (v) Paras which are more administrative in nature may be dropped subject to the

noting of the correct procedure by the departmental authorities. (vi) Recoveries of petty amounts falling within the powers of the waiver under

para 7.1.16 of the Comptroller and Auditor Generals Manual of Standing Orders (Audit) 2nd Edition 2002 m ay be waived by the Inspecting Officer or proposed for waiver by the Group Officer/Pr. Accountant General, after issuing suitable instructions to the officers concerned. (b) It is an important part of the duties of the field staff to see that the defects

reported in previous Audit and Inspection Notes/Test Audit Notes have been remedied and old objections are settled after review. There is a general tendency on the part of the field staff, to leave the review of old objections on the plea either that the annotated replies to the Audit and Inspection Notes have not been prepared by the office concerned or these have been submitted to Headquarters Section and further comments thereon are awaited. Leaving the review of old objections uncovered or making a half hearted approach to this work does not help in reducing the number of old objection but also defeats the purpose of audit as it gives an impression to the office/ department concerned that we are not serious about the pursuit and settlement of the objections raised by the previous audit parties. It may also be possible to develop certain points into draft paras, if their latest position is ascertained and incorporated in the Audit and Inspection Notes. The Comptroller and Auditor

General is also laying great emphasis on the settlement of old outstanding paras and Inspection reports. 88

All Section Officers/ Assistant Audit Officer (Field) and Inspecting Officers are, therefore, directed that this item of work should be taken up in all seriousness. Immediately on reaching the office to be inspected, the Head of the Office should be requested for preparation of annotated replies to previous objections if not already sent to Central Audit. Special attention should be paid to settle maximum number of old objections (including those for which reply has been sent to Central Audit) by the discussion with the Heads of Offices and obtaining information on the spot. (Office Order no. OA/PB/Civil/Arrear Reports/78-79/44-51 dated 13th December, 1978) (c) It has been decided by the Comptroller and Auditor General of India that the objections remaining outstanding for more than eighteen months from the date of issue, may be reviewed and a joint meeting of the concerned departmental officers, with the Audit Officers and Section Officers/AAOs of the respective Audit Units of Inspection Civil Wing may be arranged for linking of record/papers sent by the former, for discussion and settlement. The objections remaining outstanding even thereafter may be taken up at the Group Officers level and those which would be really important may be proposed for inclusion in the Audit Reports. The following proforma has been prescribed for reporting the results of reviews of outstanding paras which should be adopted and included in the audit and inspection not properly filled in.
Sl. No. Number and Year of Para no. Inspection Report Gist of para Latest position Recommendation of Orders of Inspecting Officer D.A.G./Sr.DAG

All the Inspecting Officers/Section Officers/Assistant Audit Officers should incorporate the latest position of the outstanding paras including the reasons as to why these are outstanding and their recommendations as a result of the discussion which they have with the departmental officers in the above proforma. (Office order no. OA/C/79-80/Review of old objections/6038 dated 31st October, 1979). (d) It has been decided by the Comptroller and Auditor General of India that:State Level Audit Committees may be activated to ensure that fruitful meetings are organised on continuing basis. The meeting should be carefully

organised in order to elicit written replies during the meeting and on the basis of the 89

discussions and minutes drawn, objections should be treated as settled wherever compliance is satisfactory. (i) The inspection party should compulsorily hold discussions with the Executive

on the outstanding audit objections in the field and draw up minutes of the discussions for the settlement of audit objections which should subsequently be approved by the Group Officer. The inspection report should not contain objections of more than 3 to 5 years old and all efforts should be made by the inspecting parties either to settle the objections through discussion or transfer the old objection to the new inspection report by updating them and dropping these from the old inspection reports. (ii) The Group Officer should draw up an Action Plan for holding discussions on

outstanding Inspection Reports and objections with the Executive either at Headquarters (AG office or department) or during his inspection to the field offices. Detailed minutes should be drawn up indicating the compliance reports/replies and settle the objections on the spot on the basis of compliance. (iii) Accountant General may bring the matter of outstanding audit objections to

the notice of Finance Secretary/Chief Secretary during periodical meetings with them. (CAG letter DO No. 27 Audit (AP)/34-2001 dated 4-6-2002). (e) Objections for more than 10 years old which are of routine nature i.e. petty

recoveries, non reconciliation with treasury, excess expenditure over budget allotment, recoveries from other Government Departments etc. may be transferred to the respective Administrative Departments with a copy to the Finance Department for follow up of the objections departmentally. These objections will however, be

watched through quarterly returns by the respective wings/sections but these will not be shown as arrears. The department wise list of outstanding paras showing the period, nature of objectio n, para number and brief gist along with all relevant papers may be forwarded demi officially to Government after approval of Principal Accountant General. (f) Objections which have already become a part of Audit Report but are under

discussion in PAC/COPU shall continue to be pursued till final settlement of objections by PAC but these will not form part of arrears. (Authority: ECPA/Audit Committee/2002-03/1054-58 dated 29-11-2002) Report on failure of Audit 4.44 The Civil Accountant General should submit to the Comptroller and Auditor

General a separate report of every serious case of failure of audit as soon as it comes 90

to light (including those pointed out by the Director of Inspection, if any) irrespective of any report which may be required for other purposes. The report should explain the manner in which the failure occurred, and mention the names of the persons responsible and the disciplinary action taken or recommended. (Para 47 of the Comptroller and Auditor Generals Manual of Standing Orders (Admn.) Volume 1). Fixation of responsibility for failure of audit 4.45 With a view to facilitating fixation of responsibility for failure of audit against

any of the Auditors and Section Officers/ Assistant Audit Officers it has been ordered by the Comptroller and Auditor General of India that proper records bearing the signature of each Auditor indicating work done by him should be maintained. Accordingly a proforma in the form given in Annexure II to this Chapter indicating duties allotted and work done by each auditor, bearing dated signature of the Auditor concerned should be appended with each audit and inspection note. (O.A./1-53/NCWI/5507 dated 9th March, 1980) 4.46 Each Section Officer/Asstt. Audit Officer should ascertain whether the Group

Officer (Inspection Civil) has issued any notes on the inspection of any of the accounts and see that the defects have been remedied. Certificates to Government servants of offices inspected 4.47 Auditors are forbidden from giving certificates of any kind to the Government

servants of the offices inspected by them. Matter dealt with by Auditors to be kept confidential 4.48 Auditors should note that matters with which they have to deal are

confidential. The audit is intended to be for the assistance of local officers and the Audit Department is not justified in permitting their shortcomings to become public.

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Annexure I Calendar of returns_________________ to be maintained by the Local Audit Parties. (Vide Para 4.14 (C) of the Manual)
Sl. No 1 1. Name of Return or report When due To whom due 4 Authority 5 CW/1-47/855 dated 28.5.58

(a) (b) 1 2 3 4 i) ii) 5

2 3 Weekly Weekly Diaries accompanied by the By Wednesday Head following documents. following the Office Saturday to which the diary pertains. Review certificate on Auditors work. Reports of letters outstanding. Monthly Monthly Arrear Report By the last of the --do-month Pay addresses By the 25th of --do-each month T.A. Bills of the party By the 3rd of --do-each month Intimations:of taking up and completion of audit Immediately --do-after the occasion of change of address -do-doAudit Notes and Test Audit Notes Within 3 days of the completion of audit. --do--

--do---do---do--

(Para 4.14 of the Manual) (Para 4.15 of the Manual) CW/1-47/855 dated 28.5.58

Quarterly Certificates of possession of Secret 31st March memo of Instructions 30the June 30th September 31st December Half yearly Progress report of audit of grants-in-aid. Ist April Ist October

--do--

O.O./1-53/New 5689, dated 21.3.60

--do--

OA/Misc/37-12/ 372 dated 18.11.59

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Annexure II to Para 4.45 PROFORMA Office of the Pr. Accountant General (Audit) Punjab, Chandigarh Proforma showing work done by members of field parties. (Referred to in Para 4.45) S. No. 1. Name/Designation 2. Duties allotted 3. Signatures 4.

Signature of Section Officer/ Assistant Audit Officer Place: Dated:

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CHAPTER V CENTRAL AUDIT 5.1 Central audit is conducted by the Central Audit Parties (CAPs) of this office in

the office of A.G.(A&E) every month and by the Central Audit Support Section (CASS). Instructions relating to Central Audit are contained in C.A.G.s Manual of Instructions for Central Audit and Chapter I of Section-III of C.A.G.s M.S.O. (Audit) 2nd Edition 2002. Important instructions are reproduced below:5.2 Central audit of vouchers pertaining to a month should as a general rule be

conducted as soon as the monthly accounts are closed and the posting of vouchers in the registers prescribed is completed by the Accountant General (A&E) Punjab. This general instruction may be departed from only in special circumstances and with the express sanction of the Pr. Accountant General (Audit). Central Audit Parties 5.3 The Central Audit work is carried out every month by Central Audit Parties of

the Audit Office in the Office of A.G. (A&E) Punjab. Central Audit Support Section of this office coordinate and pursue the work of Central Audit Parties and carry out all supporting functions like drawing up audit programmes of the parties, auditing sanctions and follow-up work like maintaining objection books, selecting potential material for audit reports etc. Generally, each Central Audit Support Section will be under the charge of an Audit Officer/ Sr. Audit Officer while two Central Audit Parties will be under the charge of one Assistant Audit Officer. The Checks required to be exercised by Central audit parties and Central Audit Support Section are incorporated in Annexure I to IV to this Chapter. 5.4 The duties and responsibilities of various members of the Central Audit

Support Sections and Central Audit Parties are broadly indicated in Annexure I and II. It is open to the Pr. Accountant General (Audit) to entrust any other item of work to any member of the section or party to authorize the Group Officer, Audit Officer/Sr. Audit Officer incharge of Central Audit Support Section or the Assistant Audit Officer incharge of the Central Audit Party to make such changes as may be necessary from time to time in the distribution of work, considering the persons available and their suitability for particular types of work. Such changes should be made in writing keeping in view the need for clear demarcation of duties for personnel in the 94

section/party to ensure accountability and identification of performance in execution of work. 5.5 Each member of the Central Audit Party including the Assistant Audit Officer Normally Sr.

will be individually responsible for the duties entrusted to him.

Auditors/ Auditors should be able to finalise audit memos on their own, but on important or doubtful questions they may seek the guidance of the Assistant Audit Officer. Note:- The Assistant Audit Officer should determine the extent of independent action to be allowed to each member of the party with reference to his experience, quality and capacity to act independently. Final audit memo will be sent to the Central Audit Support Section vide Para 5.8 below only after they are vetted by the Assistant Audit Officer. 5.6 Assistant Audit Officer incharge of the Central Audit Party will ensure that all members of the party perform their duties promptly, regularly and efficiently. He will be responsible for the audit as a whole, guiding the staff under him and always keeping himself posted with the progress of audit. Selection of vouchers and records to be audited and reviewed will be made by the Assistant Audit Officer of the party on the spot. 5.7 The audit enfacement on the voucher vide paragraphs 3.1.21. of CAG's M.S.O. (Audit) 2nd Edition 2002 should indicate the amount admitted/objected to in audit. Current review of vouchers audited by the auditors will be conducted

immediately after the audit is over to the prescribed extent by the Assistant Audit Officer, who, as he passes each voucher will place distinct mark (either his initial or some shorter distinctive mark) below the enfacement on the voucher. 5.8 After audit and review is over, the Central Audit party will forward the

Selection Register, the Completion Certificate and the Audit Notes/Memos (in triplicate) to the relevant Central Audit Support Section. 5.9 In regard to objections of an accounting nature, such as want of D.C. Bills,

want of vouchers, want of payees receipts, errors in treasury/divisional accounts etc., which are required to be watched by the Accountant General (A&E), the system, procedure and effectiveness of pursuance of the objections will be watched by the Pr. Accountant General (Audit). He will audit these documents as and when they are received to the prescribed extent as per provision of paragraphs 3.1.24 of C.A.G.s M.S.O. (Audit) 2nd Edition 2002.

95

Central Audit Support Section 5.10 Central Audit Support Sections will coordinate and pursue the work of CAPs.

After scrutiny and editing of the audit note/memos where necessary, CASS will send them in convenient batches every month to the departments concerned, with a copy to the Accountant General (A&E) Punjab. CASS will deal with all connected correspondence there after upto finality. CASS will also carry out supporting functions like drawing up audit programme of CAPs and auditing sanctions, and follow-up work like maintaining objection books, selecting potential material for audit reports and co-ordination work generally Each CASS will normally comprise one Sr. Audit officer/Audit officer, two Assistant Audit officers/Section officers, eight Auditors /Sr. Auditors and two clerks. The duties of Central Audit Support Section are broadly indicated in Annexure I. 5.11 (a) Copies of sanctions issued by the Central/State Government and

subordinate authorities will be received by the concerned Central Audit Support Section where they will be examined in accordance with the provisions of Paragraphs 2.2.27 to 2.2.45 of C.A.G.s Manual of Standing Orders (Audit) 2nd Edition 2002. Arrangements for receipts/scrutiny and processing of sanctions and maintenance of files/folders in a regular and systematic manner will be made by the Pr. Accountant General (Audit). Objections arising out of audit of sanctions should be communicated by Central Audit Support Section to concerned department with a copy to the Accountant General (A&E) and their settlement closely watched. (b) In addition, it has been ordered by the Pr. Accountant General that henceforth

each CASS Section in Inspection Civil Wing shall also submit all sanctions for and above Rs.10 lakhs to the Group Officer in suitable lots. Out of these, the sanctions of Rs.25 lakhs and above shall be submitted for further perusal by the Pr. Accountant General. The Sr. Audit Officer (CASS) would be assigned a target for indicating, as a result of the scrutiny of sanctions, suggesting at least 5 specific points each quarter, for detailed examination during local audit. Besides targets for contributing tentative draft paras annually would also be allocated to the CASS Section. (No. AG Sectt/C.A.G.s Inspection/94-95/378-80 dated 6 June, 1994). (c) The above procedure will, however, not absolve the concerned officers of their responsibilities prescribed for conducting proper scrutiny of such sanctions. 96

(Office Order No. Control/0.0/1 dated 22.4.93 issued by endorsement No. Control/24/MICA/93-94/42-46 dated 22.4.93) 5.12 There should be close coordination between each Central Audit Support Section and concerned Central Audit Parties. The results of scrutiny of all sanctions should be made readily available to the latter before actual central audit of the transactions concerned takes place. It is the duty of the concerned Central Audit Support Section to supply the relevant sanctions files along with important points to the Central Audit Parties when such parties take-up audit. 5.13 Audit of vouchers in Loan Sections, Book Sections, Deposit Sections and

Account Current Sections in the Accounts Office will be done by a Central Audit Support Section. The Finance Accounts and Appropriation Accounts prepared by the Accountant General (A&E) will also be checked by a Central Audit Support Section. Quantum of Central Audit & Review 5.14 The quantum of central audit to be followed will be the same as was in force

prior to the reorganisation of offices, except to the extent indicated in the Manual of Instructions for Central Audit. The quantum has been increased by the A.G. vide orders dated 30-4-98 (Annexure V). 5.15 Current review is limited to 10% of each Auditors work by Assistant Audit

Officer. Post review is discontinued. The relevant provisions of the Comptroller and Auditor Generals Secret Memorandum of Instructions regarding the extent of Audit stand modified accordingly.

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Annexure -I (vide para 5.3) Duties of members of Central Audit Support Section a) (i) Audit Officer/Sr. Audit Officer Coordination and General Supervision. Framing of audit programme, deployment of audit parties and watching completion of audit/audit performance. (ii) Audit of sanctions exceeding Rs.50,000 other than those relating to entitlement. Audit of sanctions of general nature relating to entitlement. (iii) (iv) (v) Audit of guarantees. Audit of contract agreements. Review of files containing objection memos issued to entitlement/accounting sections. (vi) Review of Portfolio files, Central, Centrally sponsored and State plan schemes. (vii) Scrutiny of materials for audit reports. Audit of Appropriation Accounts and Finance Accounts. (viii) Preparation of quarterly report in the working of each department with reference to the material collected, objection memos received from Audit teams etc. (ix) (x) b) (i) Examination of rules and regulations proposed/issued by Government. Report regarding failure of Audit. Assistant Audit Officer Audit of sanctions to expenditure upto Rs.50,000/- other than those relating to entitlement. (ii) (iii) (iv) (v) (vi) (vii) (viii) Disposal of reference seeking clarifications and allied correspondence. Review of files containing objection memos issued to departmental officers. Check of consolidation of statistics. General check of objection book and approving the closing. Processing materials for audit reports Scrutiny and pursuance of cases of losses, frauds, embezzlement etc. Check of reports/returns. 98

(ix)

Quarterly review of broadsheets of PAO (Suspense) and R.D. Suspense (Headquarters) in Account Current Sections.

(x)

General scrutiny of accounts of loans by Central Government to State Government.

(xi)

Quarterly review of broadsheets of loans and advances by Central Government to State Government.

(xii)

Quarterly review of adjustment register for inward accounts in A.C. Sections to see that there is no undue time lag in adjustment.

(xiii)

Quarterly review of outward claims register in A.C. Sections to see that timely action is taken for adjustment.

(xiv) (xv)

Quarterly review of the register of valuables. Quarterly review of the position of outstanding differences under the head 875-R.D. deposits as per the figures of A.G. and Reserve Bank of India.

c) (i) (ii)

Senior Auditors Audit of loan and deposit vouchers. Maintenance of portfolio files-Central, Centrally sponsored and State Plan Schemes, which are susceptible of performance appraisal.

(iii)

Issue and pursuance of objection memos with accounting/entitlement sanction and with departmental officers.

(iv) (v)

Maintenance of register of important points for local audit. Compilation and consolidation of statistics including those for calculation of Staff requirements.

(vi) (vii) (viii)

Preparation and consolidation of reports/returns. Half yearly report of digest of important and interesting cases. Quarterly review of broadsheets of loans and advances granted by the State Government.

(ix) d) (i) (ii)

Preparation of audit certificates on plan schemes; World Bank Projects etc. Auditors Maintenance of objection book and closing. Providing assistance in Administrative work like posting and transfers, leave etc.

(iii) (iv)

Other routine work not specifically listed, or other work entrusted by the Audit Officer/Sr. Audit Officer. Quarterly review of departmental figures with account figures. 99

Annexure II (vide para 5.3) Duties of the Members of the Central Audit Parties A) (i) (ii) (iii) (iv) B) (i) (ii) (iii) (iv) (v) (vi) C) (i) (ii) (iii) (iv) Assistant Audit Officer Over all supervision and co-ordination of work of audit parties. Selection of vouchers for audit and review. Audit of contingent vouchers over Rs.50,000. Review of vouchers audited by Sr. Auditors/ Auditors. Sr. Auditors Audit of T.A. Bills including L.T.C. Bills of Non- gazetted Officers. Audit of contingent bill upto Rs.50,000/Audit of medical bills of non- gazetted officers. Audit of grants in aid vouchers. Audit of P.W. and forest cheques Audit of other miscellaneous vouchers. Auditors Listing of vouchers for selection of audit and review. Audit of establishment vouchers of non-gazetted officers. Audit of vouchers in respect of advances to Government servants. Any other routine work or other work entrusted by Assistant Audit Officer.

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Annexure III (See Para 5.3) Duties and responsibilities of the members of CAPs
Sr. No.

Assistant Audit Officer/Sr. Auditors/ Auditors

Periodicity/due dates given in brackets/sections involved.

1.

Register of O.B. Suspense To see tha t in case of wanting vouchers proper and timely action had been taken to obtain the wanting documents.

33 1/3 % of the register maintained every month. (4/92 to be completed by 15.7.92) Annual All D.C. Sections to be selectively covered in a year. and Book Sections. (31st July) Annual Compilation

2.

Combined transfer ledger See that all the adjustments necessitated due to misclassification or otherwise in previous

month(s) had been incorporated and the mode of adjustments adopted was correct. 3. Check of action taken on Reconciliation statements See that all the adjustments necessitated due to misclassification or otherwise in the previous month(s) had been incorporated and the mode of adjustment adopted was correct. 4 Monthly checks/check of Classification To see that full classification as per Budget has been recorded; where classified any amount is

All D.C. Sections to be selectively covered in year. Compilation and Book Sections. (31st July).

The check will be carried out as per provisions in para 2.3.1 of MSO (Audit) and para II of Secret Memorandum of Instructions and para 2.4 read with Annexure 2.4.1 of MICA (Appendix 23 of MICA)

provisionally

under

other

receipts/other expenditure on the basis of insufficient/incomplete classification; proper

follow up action has been taken to get the particulars from the D.D.O.s.

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The classification of loans should receive special attention to see that all the repayments have been booked properly.

(Department Compilation Section) The sentence Classification

checked by the Assistant Audit Officer will not be subject to review by the A.O. or any higher officer in para B(a) of Appendix 23 page 77 of MICA requires modification. Now 20 percent of the vouchers checked by the A.A.O. will be reviewed by the .A.O. The group officer can also undertake test check of

classification from time to time at his discretion. Broadsheet of Departmental Adjusting

Accounts Suspense to ensure that all the transactions which are required to be accounted for have been accounted for. Item in respect of vouchers actually received but not compiled are not transferred to O.B. Suspense. All suspense slips have been received from various sections and incorporated in the accounts. All Suspense Slips which were to be issued had actually been issued. (Departmental Compilation section) (e.g. 15th July for April) 33 1/3 percent of the Broadsheets maintained every month.

102

Annexure IV to Para 5.3 Duties and responsibilities of Appropriation Accounts and Finance Accounts parties (CASS-I) Assistant Audit Officer Periodicity/due dates brackets/Sections involved. given in

Register of loans and grants from Government of India. To see that loans and grants released from Monthly (15th of each month) Government of India were promptly adjusted, in (Loan and Book Section) case where Government of India sanctions were found wanting immediate action was taken for obtaining the same. Adjustments to see that all adjustments relating to ways and Monthly (15th of each month) means advances, shortfalls in cash balances, (Book Section) overdrafts cash balances investment accounts were promptly carried out. Inward/Outward Claim register to see that all outward claims were preferred Quarterly. (15th July, October, January & April) against the concerned accounting authorities (Account Current Section) promptly and all inward claims were promptly examined and to the extent the claims were found acceptable necessary action was initiated for adjustment and payment of claims. Adjustment Register to see that the suspense slips in respect of Quarterly. (15th July, October, January & April) adjustments affecting revenue and service heads (Account Current Section) were promptly prepared and sent to the concerned corporation. Objection book/broadsheet relating to unclassified suspense to see that adequate action was taken for Quarterly. (15th July, October, January & April) obtaining wanting particulars/documents from (Account Current Section) the concerned accounting authority, clearance of items placed under the head was made promptly 103 compilation section for in

on receipt of wanting particulars/documents. Broadsheet of R.B. suspense PAO suspense to see that timely and effective action was taken Quarterly. (15th July, October, January & April) for clearance of balances under these heads in (Account Current Section) respect of claims referred against outside authorities awaiting reimbursement, a proper pursuance was made. Broadsheet of R.B. Deposits (CAO and Headquarters) to see that broadsheets had been maintained Quarterly. (15th July, October, January & April) properly and difference between A.G.s figures (Book Section and Account Current and RBIs figures were properly analysed and Section) suitable action was taken for settlement of differences. Register of Valuables in A.C. sections to see that Bank Drafts received from outside Quarterly. (15th July, October, January & April) accounting circles in reimbursement of claims (Account Current Section) were promptly deposited in the Bank for Credit to Government account and the Bank Drafts obtained in reimbursement of inward claims were promptly despatched. Adverse Balances to see that cases of adverse balances noticed on Annual To be checked at the time of annual annual closing of accounts were promptly closing of accounts along with the other brought to the notice of concerned groups for checks already prescribed. (Book Section) investigation and initiating rectificatory action. Classified Abstracts/Consolidated Abstracts to check whether these had been maintained 3rd & 4th quarter to be checked full (Departmental compilation sections) properly/timely.

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Annexure V to Para 5.14 Sr. No. 1. 2. 3. 4. 5. 6. Nomenclature of vouchers Pay T.A. Medical Scholarships Returns Contingency vouchers Upto Rs 1000 Rs 1001 to 5000 Rs 5001 to 10000 Rs 10001 to 50000 Above Rs 50000 7. Grants in aid voucher Upto Rs 50000/Above Rs 50000/8. 9. Loans and Advances Transfer Entries 25 100 100 100 10 100 100 100 8 8 25 100 100 10 10 10 10 10 %age to be audited by %age to be reviewed Adr/Sr. Adr. by the AAO 8 8 8 8 8 10 10 10 10 10

Accountant General (Audit) vide orders dated 30-4-98 ordered to triple the quantum and scope of audit.

105

CHAPTER-VI AUDIT REPORTS Collection of information, copies of documents in support of objections, etc. 6.1 (a) All objections detected during the course of local audit should be

communicated to the Head of the office inspected through Audit Memoranda/HalfMargin issued over the signature of the Inspecting Officer/ Assistant Audit Officer/ Section Officer. The Audit Memoranda/Half-Margin should be brief, precise and to the point. They should only seek confirmation/ information and not suggest any conclusion or pre-disposition on the part of the local audit party. Wherever possible, the return of these Audit Memoranda/Half margins within three days from the date of issue should be insisted upon and cases of delay should be brought to the notice of the head of the office by the Inspecting Officer/ Assistant Audit Officer/ Section Officer promptly. considering Paras for the Audit and Inspection Report should be prepared after the information/arguments advanced in the replies to Audit

Memoranda/Half-Margin. Where no replies are received, the para should be prepared on the information gathered from records. (b) The Inspecting Officer and the audit party should try to get all information

through accounts and other connected records and obtain explanations on the spot by personal discussion so that Audit Memoranda/Half-Margins are reduced to the minimum. The issue of Audit Memoranda/Half- Margins should mostly be confined to confirmation of objections. (c) The finalisation of material on each objections should not be postponed till the

final stages of local audit as this is likely to lead to accumulation of unverified data and it may not be possible to include these objections in the Draft Inspection Report due to shortage of time towards the close of Audit. (d) The Inspecting Officer/ Assistant Audit Officer/ Section Officer should ensure

that the paras which merit inclusion in the Comptroller and Auditor Generals Report are fully supported by attested copies of all the documents referred to in the paras, the view of the Department on the paras and other relevant facts and arguments so that there is no difficulty in the Inspection Civil Wing Headquarters in processing and finalisation of the paras for the Audit Report. (e) The full financial implications of each objection, or approximate value thereof,

calculated from the data in hand should be brought out in the Inspection Report to stress the significance and gravity of the audit objection. 106

(f)

The amount of overpayments or other irregular payments which have to be

kept under objection should be worked out to the extent feasible during the inspection itself and not left to be calculated by the office inspected and intimated to Audit later on. (g) Where important initial records e.g. cash book, pass books, security registers,

etc., are not maintained properly, the Inspecting Officer and the audit party, besides mentioning the technical defects and shortcomings in keeping these records should make a probe to see if the defective maintenance or non- maintenance indicates any misappropriation, etc. 6.2 In the case of audits of longer duration, advance copies of the paragraphs

proposed to be included in the draft Inspection Report should be issued to the Head of the Office from time to time so that discussion of the draft Inspection Report is not postponed by the Head of the Office on the ground that he requires time for studying the Report prior to discussion. Compilation of results of Audit. 6.3 The results of local audit by the Inspection staff are communicated through

Audit and Inspection Reports and Test Audit Notes in Form S.Y. 203. Audit and Inspection Reports should include only important points and cases of serious financial irregularities. Test Audit Notes should contain minor irregularities to which should be attached a schedule of items settled on the spot. The procedural irregularities in respect of which the head of the office has held out assurances about following the correct procedure in future should be noted in the Schedule. (Comptroller and Auditor Generals letter no. 1647-Admn. III/268-60, dated 16th August, 1960) The Audit and Inspection Report alongwith Test Audit Note should be submitted by the local audit parties to the Headquarters duly attached with a Title Sheet in Form No. OA 8 given in Appendix I. 6.4 (a) The Audit and Inspection Report should be drawn upon in the

following pattern:Part I Introduction This part is divided into the following three parts:(a) (b) (c) Introduction Review of old objections Schedule of Persistent Irregularities. 107

(b)

In Part- I(a) (i) (Introduction) brief introductory remarks about the office/body

audited giving broad financial position main source/sources of receipts of money and the purpose of expenditure and activities in which the department/Institution is engaged should be mentioned. Further, the period of audit and the date of

commencement and completion of local audit as well as the name of the Section Officer/ Assistant Audit Officer who headed the audit party which conducted the local audit should be given. The name of the Inspecting Officer in case the audit was supervised by him may also be mentioned in this part of the report. The amount of Audit fee in cases where recoverable should also be indicated together with the details of calculations either in the sub-para itself or in an Annexure to be attached with the Report. Part- I(a) (ii) Non production of records. (Comptroller and Auditor Generals letter no. 1647-Admn.III/268-60, dated 16th August, 1960). Part I-(B)-Review of old objections (c) In part I(b) the latest position of the outstanding objections /paras from the

previous Audit and Inspection Report and the action still to be taken by the Department should be incorporated. Part I-C- Schedule of persistent irregularities (d) Part I(c) will contain irregularities which are being pointed out from time to

time but which continue to persist although the Department/Office may, at the time of earlier inspection have noted the observations for future compliance. Part II Present Audit (e) In Part II of the Audit and Inspection Report are incorporated important

irregularities, i.e. irregularities involving recoveries, questions of principle or losses, etc., which are likely to materialize into draft paragraphs for Audit Reports. The Part - II of the Audit and Inspection Reports should be sub divided into Section A and B as under:Section AConsisting of major and important irregularities which are likely to

materialize into draft paragraphs for the Audit Report. Section BConsisting of irregularities which though not major but are to be

brought to the no tice of higher authorities and followed up by the Pr. Accountant General. Broadly speaking, all cases where the Head of the office inspected has to approach higher authority for obtaining orders of rectification/regularisation/ 108

condonation/write off should figure in Part II-B.

Besides cases of financial

irregularities such as extra expenditure, avoidable expenditure, infructuous expenditure, losses, etc., should find place in this part. Where final action to settle a point of objection rests at the level of office inspected such points may be included in Part - III - Test Audit Note unless the defects pointed out reflect lapses of a serious nature. (Comptroller and Auditor Generals letter no. 1647-Admn. III/268-60, dated 16th August, 1960 and No.2583-Admn.III/KW 268-60, dated 2nd January, 1961) Part III-Test Audit Note (f) In this part a mention of the issue of Test Audit Note to the head of the office

inspected, containing minor and procedural objections not settled on the spot, should be made, indicating the no. and date of the forwarding letter. In case no Test Audit Note was issued and minor and procedural objections were settled on the spot, the fact should be mentioned as such. Instructions for drafting of Audit and Inspection Report. 6.5 (i) Audit Notes should be entirely in the handwriting of the Sr. Audit

Officer/ Audit Officer in respect of the units supervised by him. Where, however, no supervision has been provided, the audit note should be written by the Assistant Audit Officer/ Section Officer. (ii) Audit Notes should be in a legible hand prepared on one side of the paper only

and in half margin with sufficient space for corrections. The pages must be serially numbered. paragraph. (iii) Audit Notes should be written in a clear and concise manner, the value of a All headings of paragraphs should be written on the top of each

report is not to be judged by its length or number of paras, though every point worthy of notice must be included by the Auditor who should give special attention to all matters which cannot be covered by a set of formal audit rules. Reports must be clearly expressed so that there can be no doubt as to the meaning of the point at issue. (iv) In view of the necessity of treating the percentage of audit in the case of

statutory audit as secret, the Comptroller and Auditor General had decided that, in the Audit Notes/ Inspection Report issued, it should be sufficient to state in the opening paragraph that a test audit was conducted without specifying the months for which the accounts were subjected to detailed check or other quantum of audit checks applied.

109

In the office file, however, a note should be kept as to months accounts which were subjected to detailed audit. (Comptroller and Auditor Generals letter no. 12/Admn.II/1954, dated 6th February, 1954). (v) Each paragraph should first explain the transaction objected to, narrating the order of their occurrence, next the rules or orders infringed and then the nature of the irregularity with its likely results and lastly the action suggested/required to be taken for removing the objection. (vi) The Audit and Inspection Reports should contain only such cases/objections as

are really important and likely to be eventually developed into draft paras for the Audit Reports. These should be very carefully drafted as potential draft paras and should invariably include dates (at least 1 month) of various events or stages involved, e.g., in respect of drawal of amounts from the Treasury, date(s) of supplier bills, date(s) of payments and receipts of suppliers, date(s) of relevant sanctions or orders, particular financial rules or departmental requirements or orders infringed. The

financial implications in respect of overpayments, irregular expenditure, nonaccountal or short recoverie s, losses and shortages etc., should always be mentioned, the full money value involved being assessed or worked out together with person(s)/Official(s)/Officer(s) involved or held responsible. (vii) The draft paras should be drafted in a detached and dispassionate language and

should be factually correct, brief and include all relevant information and financial aspects and dates, and emphasis should be laid on the exact point to be brought out, and only really essential comments which obviously follow may be added as statements or observations without qualifying words Audit thinks that or The audit comments, etc. are. Copies of relevant correspondence/notings from the

departmental files or the original files should also be sent along with the Draft Paragraphs. (viii) All cases of minor irregularities and audit objections pertaining to procedural

defects in initial accounts and records, non-production thereof in audit, and other minor objections and contravention of rules, etc. shall be relegated to Test Audit Note. (ix) All corrections of minor errors or compliance of financial rules and

requirements should be got rectified and attended to and dropped during audit after discussions locally with Heads of Offices. Serious efforts should be made to have as many items as possible settled on the spot by giving proper guidance to the 110

accounting staff, holding discussion with the Heads of Offices and ensuring as far as possible, the rectification of the irregularities during the pendency of audit or at leas by obtaining commitments to that effect on the rough sheets. (x) When an Auditor feels doubtful whether to include a certain objection in the

Audit Note or in the Test Audit Note, he should include it in the former. (xi) Details of facts should, as far as practicable, except in serious cases, be shown

in separate statements attached as Annexure to the Audit Note. This makes it more effective and easier to handle. (xii) The Report should be couched in polite language. Offensive or strong words,

sarcastic language, etc should always be avoided. (xiii) Mention of the names of officials should be avoided except in the case of However, the names of the officials responsible for the

personal claims, etc.

irregularities should be kept on record in the Rough Notes i n all cases of serious irregularities. (xiv) No suppositions, assumptions or allegations should be included in the Report.

Only facts should be mentioned and inevitable conclusions drawn. There should be no reference to responsibility being fixed for any irregularity. administrative authority to take action in this respect. (xv) No abbreviations should be used. If a set of words, for which an abbreviation It is for the

is commonly used in the Office locally audited, occurs repeatedly in the Report, the words in full should be used on the first occasion, with the abbreviation in brackets, and thereafter only the abbreviation may be written. Note 1. The State Government desires that the Audit Officer should not merely examine accounts and point out defects, but also convey some assurance to the administration that the accounts are satisfactorily maintained and that there are no indications of dishonesty. All Auditors should, therefore, add a general paragraph in sufficient detail in their draft audit notes indicating the general state of accounts and bringing to notice serious cases of failure in duty and of financial irregularities and likely and actual cases of embezzlement, in a concise form quoting reference to the paragraphs in the report. Note 2. Serious notice will be taken if any serious defects or irregularities omitted are subsequently discovered. Note 3. If in any case, complete account records are not available of an individual item or head of accounts it will ordinarily be sufficient, to comment on it in the audit note and mention it in the general remarks. In cases, however, where the amount involved is considerable or where the completeness of the records and information supplied effect the general system of accounts the matter should be promp tly brought to the notice of the Group Officer (Inspection Civil) 111

setting forth full facts for deciding if the audit should be suspended. Till orders are passed the Auditor will continue to check the items for which papers are available. Note 4. In the draft audit notes relating to the accounts of Jails, names of the Deputy Superintendents incharge during the period under audit should be specified. (xvi) When higher sanction for any charge or practice is called for; the rule under which the authority sanctioning the charge in the first instance is not competent must be distinctly stated and the authority whose sanction is necessary specially named. Terms like this appears to require higher sanction or the sanction of competent authority, is needed only shows the inefficiency of the Auditor. (xvii) Auditors will avoid repetition of what has already been said, but it will be open to them to bring fresh criticism on the accounts. (xviii) Auditors should quote freely in the audit notes the rules in the various codes and rules and sections of the Acts to which reference has been made. When a letter or a Government order is quoted, a copy should be attached to the audit note unless there is a copy in the central office. (xix) When an Auditor finds clear evidence or mal-practice or dishonesty on the

part of the member of a Board, he should privately bring it to the notice of the President and report the facts to the Group Officer (Inspection Civil). Remarks reflecting on the conduct of a member of a Board must not be made in published notes. (xx) When Auditors come across cases of shortages in Government stores or

defalcation of public money, they should report the case in detail separately alongwith the draft audit and inspection note for transmission to the main office for necessary action under Rule 2.34 read with Annexure B of Chapter II of Punjab Financial Rules Volume I and Para 7.1.28 M.S.O. (Audit) 2nd Edition 2002. If such cases have not already been reported to that office by the departmental officers as required by these rules, the omission to do so should be specially mentioned in Assistant Audit Officer/ Section Officers report. The shortages as usual will have to be commented upon in the audit notes. (xxi) When an Auditor comes across cases where an allowance is being paid to a

Government Servant and Government sanction has not been obtained to the allowance he should report the case to the Group Officer (Inspection Civil) who will inform the CASS concerned. 112

(xxii) When any irregularity is noticed, which occurred during or which related to, periods covered by earlier inspections, the Inspecting Officer should specifically indicate, in a covering letter addressed to the Group Officer (Inspection Civil), his definite opinion whether the irregularity, in question, could have been noticed in the earlier inspection or inspections, and what in his opinion were the circumstances in which this was not noticed earlier. It will be the duty of the Headquarters Section editing the report to verify the previous inspection reports, find out whether this irregularity or any aspect of it was actually noticed and to get the circumstances of any omissions investigated fully. Where necessary, explanations of previous

inspection staff and officers should be called for under the orders of the Group Officer. (Authority-D.A.G.s order File no.1-19). Language and tone of the audit and inspection reports. 6.6 (a) Paras in the draft Inspection Report should be self contained and

written in simple language so that it is intelligible to one, not familiar with the details of the working of the office locally audited and not fully conversant with audit language. (b) In order to bring about uniformity in the style of reporting Style Guide for

Audit Reports has been issued by the CAG of India vide No. 138-Audit (AP)/6-2003 dated 29-9-2003 for adoption which seek to encourage the use of plain simple English - short words, short sentences and short paragraphs. Discussion of Audit and Inspection Reports 6.7 (a) The Draft Inspection Report should be discussed with the Head of the

Office inspected on the last day of the audit. The discussion should not be postponed and the Inspecting Officer should have prior arrangements with the Head of Office or in his absence his Deputy. The Report should be finalised on the last day of audit after discussion. In cases where no supervision at the level of Sr. Audit Officer/ Audit Officer has been provided, the Draft Inspection Report should be discussed and finalised by the Assistant Audit Officer/Section Officer himself. Where there is difference of opinion, the views of the Head of the Office should be fully recorded against the relevant paras. (b) After discussion the Head of the office should be asked to record on the last

page of the Audit and Inspection Report Seen, discussed and fa cts verified over his dated signatures in token of his acceptance of the facts. 113

Test Audit Notes 6.8 (a) A Test Audit Note is issued in Form S.Y. 203. All minor points

should, as far as possible, be settled on the spot and only those which are not possible of such settlement should find a place in Part-III of the Audit and Inspection Note (i.e. Test Audit Note). The procedural irregularities in respect of which the Head of the Office had held out assurances about following correct procedure and objections where final action to settle a point of objections rests at the level of office inspected should be included in the Test Audit Note. Persistent omissions and defects and those which remain unrectified for many years should be specially discussed with the Head of Office and commented upon in the Audit and Inspection Report. The Test Audit Note (Part III of Audit and Inspection Report) should be issued on the spot to the Head of the Office inspected, over the signatures of the Inspecting Officer in the case of supervised audit and the Assistant Audit Officer/ Section Officer in other cases for necessary action and verification at the subsequent audit. A copy of the Test Audit Note should be sent to the Headquarters alongwith the draft Inspection Report. (Comptroller and Auditor Generals letter No.2374-Technical-Admn./367-65, dated 7th August, 1965). (b) In case no Test Audit Note is issued by the local audit party, the fact should be mentioned in Part III of the Audit and Inspection Report. Submission of Audit and Inspection Reports 6.9 (a) The draft Audit and Inspection Reports after having been discussed

with the Department/Office concerned together with the duplicate copy of Test Audit Note and where possible tentative draft-paras, should invariably be despatched to the Inspection Civil Headquarters within three days from the date of completion of an audit. The responsibility for securing back the objection/audit memos from the Head of Office concerned and preparing tentative draft paras devolves entirely on the Assistant Audit Officer/ Section Officers and any delay in this regard will not be accepted as an excuse for delay in the submission of Audit and Inspection Reports/Tentative Draft Paras to the Headquarters. (b) The Headquarters Section should ensure that the Audit and Inspection Reports

are received within three days from the date of completion of an audit. Whenever the submission of the Audit and Inspection Reports is delayed by an Assistant Audit Officer/ Section Officer by more than 3 days, an express reminder should be issued by 114

the Headquarters for securing early submission of the reports to Headquarters. The cases of delay in submission of Audit and Inspection Reports by the local audit parties without adequate reasons should be brought to the notice of the Group Officer (Inspection Civil). Documents to be appended with the Audit and Inspection Reports 6.10 The following document should invariably accompany a Draft Audit and

Inspection Report submitted to Head Office:(i) Forwarding Memo. in form No. O.A. 6 given in Appendix I, which should be properly filled in. (ii) Title sheet in Form No.O.A.8 given in Appendix I duly completed in all respects and signed by ;the Assistant Audit Officer/ Section Officer. (iii) Four spare copies of all the Appendix/Annexures attached to the Inspection Report. (iv) Duty List showing the distribution of work among the members of local audit party in the proforma given below duly approved by the Assistant Audit Officer/ Section Officer and by the Inspecting Officer where supervis ion is provided, should be attached with the Draft Audit and Inspection Report. This duty list should also indicate the work done by each member of the party under his dated signature. Pro-forma Proforma showing the work done by Members of field parties.
Serial No. Name/Designation Duties Allotted Signatures

Place: (Authority-O.A./I--53-NCWI/5507, dated 9th March, 1960). (v) List of Service Books checked alongwith the list of Service Books in respect of the persons who are likely to retire during the next five years. (vi) (vii) A copy of Test Audit note as issued to the office audited. Certificates prescribed from time to time to be furnished by the Local Audit Party. A list of certificates is given in Annexure I to this Chapter.

115

(viii)

Where Audit Fee is recoverable from the Institution/Office inspected, a copy of the Audit Fee Memo served on the Institution/Office. Procedure for dealing with draft Audit and Inspection Reports in the Head Office

6.11

Watching the receipt of Audit and Inspection Reports:- A Register for

watching the receipt and issue of Audit and Inspection Reports is maintained in Form S.Y. 336 in the head office. Columns 1 to 5 of this register are filled in from the weekly diaries of the local audit parties on each Wednesday. On receipt of the Audit and Inspection Report, columns 6 and 12 of this register should be filled in. The remaining columns are to be filled in after the issue of the Audit and Inspection Report. The register shall be reviewed from time to time to ensure that all the Audit and Inspection Reports are received within three days from the last day of audit. Where the Audit and Inspection Reports are not so received, reasons thereof should be ascertained by reference to the Assistant Audit Officer/ Section Officer concerned and steps taken to secure early submission of the Reports to Headquarters. The register shall be submitted to the Sr. Audit Officer/ Audit Officer on the Ist of each month with a report indicating the number of Audit and Inspection Reports outstanding at the beginning of the previous month, the number of accounts audited upto 20th of the previous month, the number of reports issued during the month and details of Audit and Inspection Reports which have not been issued finally indicating the stage at which the various Audit and Inspection Reports stand in the process of issue. The register should be submitted to the Group Officer for his review quarterly on 15th April, July, October and January. Preliminary Check 6.12 After the Audit and Inspection Reports is diariesed it shall be subjected to

preliminary examination to see that :(i) (ii) Local audit has been carried out to the extent prescribed. All columns of the Title Sheet have properly been filled in and the Assistant Audit Officer/ Section Officer has signed at all places provided for in the title sheet. (iii) All statements, certificates and proformas, etc required as per title sheet and paras of the Audit and Inspection Report have been received. (iv) The Audit and Inspection Report has been discussed with the Head of Office. 116

(v)

Test Audit Note containing minor objections, has been issued where necessary to the office inspected and acknowledgement thereof exists.

(vi)

Where Audit Fee is recoverable a copy of the Audit Fee Memo issued to the Institution is attached.

(vii) (viii)

There are no blank s and omissions of any data etc. The endorsements made on the forwarding memo of Audit and Inspection Report are correct. Vetting of Audit and Inspection Reports

6.13

In the case of local audit/inspections supervised by Sr. Audit Officer/ Audit

Officers, the Inspection Reports should be drafted and edited by the Sr. Audit Officer/ Audit Officers themselves. Scrutiny and vetting of these Inspection/Local Audit Reports drafted by the Inspecting Officers by another Sr. Audit Officer/ Audit Officer or Assistant Audit Officer/ Section Officer at the Headquarters will take away the initiative of the Officers supervising the local audit/Inspection and is likely to lessen their responsibility in careful drafting and vetting of the Reports. These reports

should be vetted only by the Group Officer (Inspection Civil) who may be assisted by the Sr. Audit Officer/ Audit Officer of Audit Units in verifying the facts in the Reports of the inspections supervised by Inspecting Officers. Sr. Audit Officers/ Audit Officer (Headquarters) should be entrusted with the work of vetting the reports of Inspections/local audits supervised by Section Officers/ Assistant Audit Officers, finalising and issuing them at their level unless there are important points to be brought to the notice of the Group Officer (Inspection Civil). (Comptroller and Auditor Generals letter No.76-Tech. Admn I/385-65, dated 14th January, 1966). Issue of Audit and Inspection Reports 6.14 (a) The important paras which in the opinion of Assistant Audit Officer/

Section Officer merit inclusion in the Audit Report of the Comptroller and Auditor General should be transferred to the Draft Para Section dealing with Draft Paras cases who will process them into draft paras on the lines given in Chapter VIII of this Manual. (b) On receipt of the draft report, duly approved by the Group Officer/Sr. Audit

Officer/ Audit Officer (Inspection Civil), his orders, if any, should be complied with and after noting the date of return of the report from the Group Officer/Sr. Audit Officer/ Audit Officer (Inspection Civil) in the Register for watching the receipt and 117

issue of Inspection Reports, the report should be handed over to the Typist and his dated acknowledgement taken in the register. The typists should prepare the requisit e number of copies of the Inspection Report according to the endorsement given on the Forwarding Memo and return the report alongwith fair copies to the auditor concerned through a Transit Register and obtain dated acknowledgement of the recipient. Fair copies of Inspection Report should be compared by auditors by mutual co-operation and the persons comparing the fair copies are responsible to see that all errors and mistakes are duly corrected in all the copies. In order to ensure that there is no undue delay in the comparison and issue of the Audit Reports, the Auditors should indicate the date of receipt of typed copy by them and the date of comparison on the office copy of the Inspection Report itself at the time of submission of fair copy for signature. Cases of delay on the part of Auditors, in this regard, should be brought to the notice of the Branch Officer. (c) After necessary action has been taken as indicated above, the Audit and

Inspection Report should be submitted to the Sr. Audit Officer/ Audit Officer (Vetting). Time Schedule for issue of Audit and Inspection Reports 6.15 The Audit and Inspection Reports should be issued within one month from the

date of completion of the inspection. (Comptroller and Auditor Generals letter No. 799-TAI/83-83 dated 16-7-83). The following Time Schedule has been prescribed in order to observe these orders:(i) The Audit and Inspection Report should reach Inspection Civil Wing Headquarters within 5 working days of completion of audit. (ii) The Audit and Inspection Report should be put up to the Branch Officer or Group Officer (Inspection Civil) within 5 working days of its receipt from Audit party. (iii) The Group Officer (Inspection Civil)/Branch Officer will take 4 working days to pass the report. (iv) The Report as finally approved should be typed, compared and issued within 10 working days of its approval. Any departure from this time schedule should be brought to the notice of the Group Officer (Inspection Civil) and his orders obtained. 118

In the cases in which the Audit and Inspection Reports have been received but have not been vetted, typed out, compared and issued within one month from the date of completion of the inspection, the concerned Auditors/typists should be reminded and such cases of delay brought to the notice of the Group Officer (Inspection Civil). Delay in issue of Inspection Reports upto one month may be condoned by the Group Officer after satisfying himself about genuineness of reasons. The audit and

Inspection Reports which are not issued within one month of the date of the completion of audit should be shown in arrears and the delay should be got condoned from the Pr. Accountant General. Office order No. Control (ITA) 24, dated 28.11.88 circulated vide endst. No. Control (ITA)/5-7/88-89/1684 dated 28.11.88 and CAG letter No.799-TAI/83-83 dated 16-7-83). 6.16 In case of supervised audits, the Audit and Inspection Report will be approved by the Inspecting Officer either in camp or at Headquarters if the audit is not concluded in his presence. This approved copy will be typed in the Headquarters office and will be signed in full over the name and signatures of the Sr. Audit Officer/ Audit Officer (Headquarters) irrespective of the fact that the office copy has been approved by any other officer. In the case of unsupervised audit also, even though the office copies of the report will be signed by the Assistant Audit Officer/ Section Officer on field inspection duty, the fair copy of the report will be signed over the name and signatures in full of the Sr. Audit Officer/ Audit Officer (Headquarters). These reports after signatures by the Sr. Audit Officer/ Audit Officer (Headquarters) will be sent with a forwarding letter in Form No. OA6 to the parties concerned. The Assistant Audit Officer/ Section Officer should send the draft forwarding letter with the Audit and Inspection Reports instead of making endorsements on the Report itself. (Comptroller and Auditor Generals Secret letter no. 418-Admn. I/165-57, dated the 9th February, 1959 and office order no. NCW-1/20, dated the 23rd February, 1959). Record of objections in the objection Book 6.17 As required under Note 1 below para 7.2.7 of Comptroller and Auditor Generals Manual of Standing Orders (Audit) 2nd Edition 2002, all objections arising out of local audit as embodied in the audit and inspection reports should be registered in Objection Books with the exception of those objection raised in local audit which cannot be expressed in money values. Necessary action to note the objections in the objection books should be taken after the draft audit and inspection reports have been 119

approved by the Group Officer. The No. and month of the item of objection books should be noted against each item in the Audit and Inspection Report. (Authority- Comptroller and Auditor Generals letter no. 40-Admn1/684-54 dated the 10th January, 1955). Note 1: The Comptroller and Auditor General has decided that following categories of objections should also be noted in the objection Books maintained at the Headquarters section: 1. Outstanding dues to Government on account of credit sales for which accounts are kept by the departments for the purpose of effecting recoveries. 2. Advances made by departmental Agencies pending recovery in respect of which accounts are kept either in the Department or by the Pr. Accountant General. 3. Short or non-recovery of departmental receipts noticed during the course of audit of initial accounts in the departmental office. 4. Cases of shortages in department balances of stock and difference between book balances of stock and counted balances noticed by Departmental authorities. 5. Discrepancy or shortage arising out of local audit in the initial accounts of stores and of a department the audit of which has not been entrusted to the Pr. Accountant General by the Go vernment (Authority- Comptroller and Auditor Generals endorsement No.2666 Admn./385-60, dated 28th August, 1960, File OA/1-28). Before marking any item for keeping in objection book of Headquarters it should be ensured that(i) Where credit sales are a normal feature of the activities of a concern, only delayed recoveries, which need to be pursued specially with the department are marked for keeping in Objection Book. (ii) Where detailed records to watch recovery of a particular item are already kept in the various sections (such as D.C., Loan) of the office of the Accountant General (A&E) (for example advance of pay and allowances, house building and conveyance advances etc.) the items need not be kept in Objection Books of Inspection Civil Sections. (iii) The items to be kept in Objection Book should invariably be specified on the titled sheet of the Audit and Inspection Report by the Assistant Audit Officer/ Section Officer. The approving officer should also pass orders on the items 120

finally approved by him for keeping them in Objection Books of Headquarters sections. (Authority-OA/NCW-1/1-38/4933-35, Dated 17th February 1961). 6.18 In addition to the copy or copies sent to the head of the Government office or

institution inspected, a copy of the inspection report of non commercial accounts is also sent simultaneously to the next higher authority and his attention is invited specially to important items or serious irregularities or other points requiring his special attention. If the next higher authority happens to be an officer other than the Administrative Ministry/Department of Government, it is for this officer to consider the necessity of forwarding a copy of the Inspection Report to the Ministry or Department in whole or in part. Necessary endorsements to this effect should invariably be recorded by the Auditors on the forwarding memos, attached to the audit note. (Comptroller and Auditor Generals letter No.2205-Admn II/608-Admn. I/58, dated the 11th September 1959). In cases of offices, where the copies of Inspection Report of non-commercial accounts are at present, endorsed to two or three next higher authorities other than the Administrative Ministry/Department of Government for instance schools, sub-judges etc. the endorsements may continue to be made to more than one authority upto Head of the Department only. The endorsement to Section Officer/ Assistant Audit Officer concerned may also continue to be made as usual. Endorsements to the

Administrative Ministry/ Department should not be made unless they happen to be the next higher authority. (Office Order No. OA/NCW I/3385, dated the 28th October 1959). Audit of entertainment and other allowances of President/Governors 6.19 The local audit of the account of Entertainment and other allowances of the

Governor will be supervised by the Group Officer (Inspection Civil). All preliminary objection memos will be issued over the signature of that officer to ensure that frivolous and petty objections are avoided. (Authority: Comptroller and Auditor Generals letter no. 939-Admn.I/21-56(II), dated 28th April, 1962). Note: The audit of Punjab Vidhan Sabha will also be supervised by the Group Officer. The guidelines for conducting audit of the accounts/records etc. of the Governor and the Punjab Vidhan Sabha stand framed and should be collected by the Audit parties before conducting audit of these offices. 121

Audits undertaken on behalf of other Accountants General; 6.20 In the case of local audit of Government Departments/Autonomous bodies

conducted on behalf of the othe r Accountants General, the Inspection Reports and Audit Comments etc., should be forwarded to the main Audit Officer viz., the Accountant General concerned on whose behalf the audit had been entrusted who will issue the Report and pursue the same to finality. (Authority: Comptroller & Auditor General letter No. 1836-Admn. I/Admn. III138/62, dated the 28th July, 1962) Progress Register of Settlement of Audit and Inspection Reports 6.21 A register in Form SY-328 to watch the progress in the settlement of

inspection reports should be maintained. Separate pages may be allotted to each unit. At the time of issue of the inspection report, it should be entered in the particular page giving number of paras contained in it. The old paras existing in the old reports already entered in the register should be scored by drawing a pen indicating the month of settlement. This register will be concise one depicting the position of inspection reports/paras outstanding at any given time or for more than six months old. A report of the register should be submitted to Branch Officer on the Ist of each month as laid down in Para 6.11. The register should be put up to Group Officer for his review quarterly on 15th April, July, October and January. Production of Audit and Ins pection Note in a Court of Law. 6.22 It has been decided by the Comptroller & Auditor General that once the inspection report has been made available to the Head of the Office inspected in its final form, the question whether or not a privilege should be claimed for its production in a court of law should be decided by the Pr. Accountant General in consultation with the departmental authorities concerned, and Audit need not claim any privilege for a report already issued if the departmental authorities do n ot wish themselves to claim any privilege to produce in a court the audit office record, only the finally approved office copy should be produced and not the original notes or drafts. Note: The audit notes should be put up to the Pr. Accountant General for perusal, if there are any important points, which in the opinion of the Group Officer (Inspection Civil) should be specially brought to his notice. (Accountant Generals orders dated the 11th January, 1940, case OA/3-1, Volume II)

122

Advance Audit Comments 6.23 It will be open to the Audit Department to bring at once (i.e. even in advance

of the ordinary report) to the notice of the higher authority irregularities which may be held to be so serious as to justify this course. Annotated Copies 6.24 The receipt of annotated copies is watched through register in form SY-328 as

described in para 6.21 above. After the issue of the audit and inspection report, all the subsequent correspondence regarding the audit note is to be noted in the relevant columns of the register. In the remarks column of the register should be indicated individual No. of paras outstanding after six months of issue of the report. Paras which are subsequently settled should be circled and cross reference, to the letter No. etc. with which settled as per column 13 of the register, be given. Paras in respect of which the explanation etc. given by the department has been accepted, subject to verification at the time of next local audit, should be treated as settled for the purpose of the report of the register to be prepared monthly. A report of the register should be prepared on the Ist of each month and submitted to the Senior Audit Officer/Audit Officer (Headquarters). The report should detail cases in which annotated copies were due by the end of the preceeding month have not been received. Cases of outstanding Inspection Reports for over six months should be indicated separately. The total number of paras outstanding after six months of the issue of the Inspection Report should also be indicated in the report. [Comptroller & Auditor Generals letter No. 1656-Admn.III/152-60, dated 16th August, 1960. (File/I-Misc./R)]

123

ANNEXURE I to Para 6.10 (vii) CERTIFICATE TO BE ATTACHED WITH AUDIT NOTES 1. Certificate of verification of credits paid into the Treasury/Bank. Certified that the credits as shown in the books of the Office of the _________ for the months selected for detailed audit and such other items as came to notice during the general review of accounts for the period from _________ to ________ or as a result of disposal of old and current Audit Objections were duly verified by Sh. _____________ member of audit party with reference to the record of Try./SubDivision-Treasury/Bank concerned/except which have been commented upon in the Audit and Inspection Report. Signature of the person certifying the credits 2. Certificate of time allotment. Certified that the time allotted for this audit was adequate or inadequate. Note - In case the time allotment is considered inadequate full justification supported by facts and figures to be attached. Section Officer/AAO 3. Certificate of Check of record. Certified that the records were checked and test checked in accordance with the Rules/instructions issued from time to time and the irregularities noticed have been brought out in the Audit and Inspection Note/Test Audit Note or got settled at spot. Section Officer/AAO 4. (i) Certificate of Service Books and Leave Accounts Certified that the Service Books and Leave Accounts to the extent of Section Officer/AAO

prescribed percentage have been checked and the audit certificate in the prescribed form recorded in the Service Books under the full dated signature of the Section Officer/Asstt. Audit Officer subject to the remarks in the Test Audit Note. (ii) It is certified that the total No. of responsible personnel whose service books

are required to be checked in the Office of ___________ and out of this ________ Service Books and _______Leave Accounts have been checked by consuming time allotment of _____________ party days/no extra time allotted. 124

Sr. Auditor

Section Officer/AAO Audit Party (IC) Dated___________ Countersigned ____________

5.

Certificate regarding check of totals of cash book. Certified that the total of cash book for payments and receipt side for the

month of ______________ and _____________ have been checked to the extent of 100% by Shri ___________ under my supervision. Signature of Auditor in token of check 6. Asstt. Audit Officer/ Section Officer

Certificate regarding check of receipt side of Cash Book Certified that the receipt side of the cash book has been checked with

reference to the counterfoils of the receipt books to the extent of 100 per cent. Section Officer/AAO 7. Certificate regarding check of GPF and CDS Accounts. Certified that the GPF and CDS Accounts have been checked.

Section Officer/AAO 8. Certificate regarding Calling of Records Certified that the records were called for from the Main Office and returned after verification as under: a) b) c) No. and date vide which records called for. Whether records were received. No. and date, vide which the records were returned to Audit Unit. Section Officer/AAO

125

CHAPTER VII MATERIAL FOR AUDIT REPORT 7.1 The Inspection Civil Wing Headquarters is required to furnish the under-

mentioned material for inclusion in the Audit Reports in respect of Central and State Government to Report Section, on the dates prescribed from time to time:A - General (1) Draft Paragraph relating to financial and other irregularities of the kind

mentioned in Chapter 3 of Section VII of the Comptroller & Auditor Generals Manual of Standing Orders (Audit) 2nd Edition 2002. (2) A review of the working of the Inspection Civil Wing covering typical

irregularities noticed in local audit of the offices concerned, to be included under Other topics of Interest. (3) Accounts and review of Government concerns (other than Commercial) under

the audit of Inspection Civil Wing. (4) Information regarding the number of Civil Offices test-audited during the

course of the year and comments on the results of such audits. B-Returns relating to Audit Report of Punjab State The revised returns due to Report Section are mentioned below:
Sr. No. 1. 2. 3. Name of return Material for the Report including reviews selected by ECPA Section* Withdrawal of requirements funds in advance of From whom due Inspection Civil -do-doDue date latest by 31st May every year -do-do-

Financial assistance to local bodies and others, audits under section 14, 15, 19 and 20 of the C.A.Gs D.P.C.S Act, 1971 Results of review of outstanding Audit observations of selected departments etc. as per C.A.Gs letter No. 1204/Rep (s)/76-82 dated 30.7.82, copy supplied vide Report Section d.o. letter No. Rep-I/I-5/Inst-IV/Vol.II/82-83/99498 dated 18.1.1983

4.

-do-

-do-

For reviews selected by the Headquarters, dates are those as fixed by the Headquarters. The Wings should send the reviews to Report-I Section 20-25 days in advance of the scheduled date(s) fixed by Headquarters

126

5.

Results of review of outstanding inspection reports of selected departments (as per C.A.G letter No. 222-Rep(s)/89-87, dated 26.2.88, copy supplied vide Rep-I Section No. RepI/Insp/407-4/Chap. III, IV,V/83-88/418-21 dated 16.3.88) issued upto 31st December and remaining outstanding on 30th June of the following year. Grant and their utilisation Write off of losses revenue etc. Misappropriations, defalcation etc. Para on non-receipt of replies to paras/reviews from Government (for this para, it would be necessary for the wings to report the delay in receipt of replies to the Administrative Secretary and Chief Secretary, demi-officially in a concerned manner. only if, no reply is still received, this para should be attempted). Copy of draft Finance Accounts duly checked Copy of draft Appropriation Accounts duly checked. Paragraph on excess over Budget grants still awaited regularisation Shortfall/excess in recoveries Rush of expenditure towards the end of the financial year in the proforma supplied vided Rep-I/i-5/1-574 dated 2.3.1981 Draft Para on New Services. Irregular utilisation of Contingency Fund. Para on non-reconciliation of figures by the departments with AG(A&E) as per instruction contained in C.A.Gs of India circular 19Audit-II/85 issued vide No. 753-Audit II/12085, dated 25.5.1985 Preparation of Chapter I as modified vide C.A.Gs office D.O. No. 491-Rep(s)/134-90, dated 12.4.91. Comment on delay in rendering of initial accounts by State Government for incorporation in Chap-I as per C.A.G. of India Circular No. 7 Rep(s)/90 issued vide No. 526/Rep(s)/67/90, dated 17.5.90 (copy supplied vide No. Rep-I/407-2/Imp Chap II/7576 dated 19.6.90).

-do-

15th July every year

6. 7. 8. 9.

IC-II (G.I.A.) Inspection Civil Wing -do-do-

31st May every year -do-do-do-

10. 11. 12. 13. 14.

Inspection Civil -do-do-do-do-

5th October every year 15th October every year -do-do31st May every year

15. 16. 17.

-do-do-do-

-do-do-do-

18.

-do-

15th October every year -do-

19.

-do-

127

20.

Preparation of Chapter II on the pattern intimated vide No. Rep-I/5/Inst II/84-85/241 dated 16.8.84. Review of 5 to 10 grants as per C.A.G of India Circular No. 3/85 issued vide No. 212-Rep(s) 59-84/K-II/dated 25.2.85 copy supplied vide No. Rep-I/407-2/Inst/Chap-II/84-85/394, dated 6.3.85 Any other material of interest meriting inclusion in the report

-do-

20th October every year 20th October every year

21.

-do-

22. 23.

All Sections

15th June every year 5th October every year

Para regarding delay in reconciliation of united Inspection accounts of State Government for inclusion in Civil Wing Audit Report Cases likely to be developed as draft Paras. -do-

Authority : Report I/405-I/Return/Audit/92-93/904, dated 23.3.93 24. 10 to 25th each month 10th April every year 30th July every year

Authority : Report I/405-I/Return/Audit/86-87/1534, dated 12.3.1987 25. Programme of local audit conducted under the supervision of Audit Officers Information regarding number of civil offices and institution test audited during the course of year and comments on the results of such audit Copy of draft finance accounts duly checked -do-

Authority: Insp(C) No. OA(C)/H/110/599-604, dated 10.6.87 26. -do-

Authority : Insp(C)/HQ/Misc/833, dated 15.6.93 27. -do5th November every year 25th November every year 25th November every year 15th November every year

Authority : CAG /74-AC-I/1986 issued vide No. 1377- AC-I/217-86, dated 17.12.86 28. Copies of draft appropriation accounts duly checked Paragraphs on excess over Budget grants still awaiting regularisation Short fall/excess in recoveries -do-

Authority : CAG /74-AC-I/1986 issued vide No. 1377- AC-I/217-86, dated 17.12.86 29. Inspection Civil Wing -do-

Authority : CAG /74-AC-I/1986 issued vide No. 1377- AC-I/217-86, dated 17.12.86 30

Authority : CAG /74-AC-I/1986 issued vide No. 1377- AC-I/217-86, dated 17.12.86

The manner in which the above material should be prepared is laid down from time to time but the important instructions and orders contained in the succeeding paragraphs should also be borne in mind.

128

Selection of Material 7.2 It is difficult to lay down any hard and fast rule in regard to the choice of the material to be included in the Audit Report. Audit Officers will keep in view the following points in selecting material for comment in the Report:(a) Cases involving transgression of statutory provisions, rules or orders and other cases which have led to or are likely to lead to substantial loss of public money may be mentioned individually. Common defects in financial control or administration may be commented upon collectively. Normally, however, such irregularities should not be considered for comment, if adequate remedial action has been taken by the administration. The importance of an irregularity or a case of loss should be judged in the context of size of a scheme or project and the condition in which the work has been executed. (b) Cases which are Sub-judice will not be mentioned in such a way as to prejudice the claim or defence in a court. Similarly, caution should be

exercised in referring to cases which though decided in a lower court are likely to be taken to a higher court on appeal. (c) The Audit Report should not normally include very old cases. Exceptions may be made only where the cases could not, have come to notice of audit earlier and some questions of principle is involved. Cases where there has been lack of response to constructive suggestions made by Audit for the rectification of defects in financial or accounts control may be commented upon, if the continuance of the unsatisfactory features is fraught with risk of fraud or loss to Government. (d) Cases on which Government are taking or have promised reasonably adequate action should not ordinarily be included in the Audit Report] unless in any case there are any special features to be brought of the notice of the legislature. See also para 7.3.2.3 of M.S.O (Audit) 2nd Edition 2002 in regard to the inclusion of such cases in the Audit Report on Revenue Receipts. (e) It is difficult to question on grounds of financial matters which are predominantly administrative or technical in character, if it is considered necessary to draw attention to any such case in the Audit Report, the Pr. Accountant General should assure himself that he has properly apprehended the facts and that the raising of the question would serve some practical purpose from the financial point of view. 129 In all such cases,

discussion between the Pr. Accountant General and the Administrative Department and if necessary, the Finance Ministry/Department of the Government concerned, must be the first step and drafting a paragraph for the Report almost the last. It is inadvisable to initiate a controversy by making a premature mention in the Audit Report of cases involving administrative or technical issues which have not been finally considered in consultation with Government (f) While Audit is not precluded from drawing attention to the adequacy or otherwise of the disciplinary action taken in any case, Audit should not as a normal rule criticise the decision of the Administrative authorities in regard to the nature of quantum of punishment imposed. On the other hand, Audit would be in order in offering comments, for example, when in a series of cases occurring more or less continuously, the disciplinary action taken has been obviously and extremely lenient. Similarly if a marked difference is noticed in the standards of disciplinary action observed by different departments of Government, this feature may be brought to notice through the Audit Report with adequate supporting evidence. Critical comments regarding the adequacy of disciplinary action taken should not, however, be conveyed to Government without the approval of the Comptroller & Auditor General. (g) Some of the important points which can form the subject matter of comment in Audit Reports are indicated in Annexure I; this list is only illustrative and not exhaustive. (h) Measurement of effectiveness of audit While sending material for audit report, the following instructions received from CAG on Audit Effectiveness may be kept in view. 2. Measurement of effectiveness of audit could be for two purposes: a) for external dissemination of the contribution made by us towards the larger end of improved governance and to meet public expectations and b) for internal evaluation so that performance could be assessed and benchmarks could be set for enhancing results in the future. Such internal evaluation would take into account the different circumstances in which offices function and comparisons of performance would necessarily be inter temporal rather than inter state. 130

The Coverage 3. The Committee recognise that the impact of audit cannot be assessed only

from the limited stand point of Audit Reports placed before the Le gislature. A considerable part of the audit effort stands reflected in Inspection Reports that are issued to auditee units. Other SAIs also take into account audit impact generated through management letters i.e. Inspection Reports. Such recommendations/

observations included in IRs which have been accepted by auditee units or where remedial action has been taken could also be reported in an omnibus para in the Audit Report. This is suggested since it will not be possible to report all findings contained in Inspection Reports to the Legislature. External dissemination 4. The Committee considers that it is time that we communicate more effectively

with the society at large in order to disseminate knowledge of the impact of audit and the role played by us in promoting effective governance and in improving the management of public finances. Currently, the Audit Reports are perhaps our only instruments of communication. These are not able to highlight the impact of audit because of the time lag involved in follow up on audit findings/recommendations. 5. The following could be included in developing a document to be periodically

released for external dissemination (a) Recoveries of public monies carried out at the instance of audit; (b) Audit observations/recommendations accepted by Government and the financial implications thereof; (c) Changes in law, procedures or schemes attributable to observations by Audit and financial implications thereof; (d) Recommendations made by the Public Accounts Committees that are accepted by Government and the Financial implication thereof; (e) Acceptance of audit observations/details of remedial action taken through Action Taken Notes of audit paras not discussed by the PAC. 6. It is emphasized that the impact of audit, for the purpose of external

dissemination, will be reported in a year irrespective of the audit cycle in which the actual observation arose. In order to reflect the results of audit comprehensively findings contained in the Audit Reports presented during the period should also be incorporated in such dissemination. It would be possible to quantify, with a

reasonable degree of accuracy, the financial impact of the audit effort in comparison 131

to overall costs of the Department. For the purpose of enhanced readability and professional presentation, it is suggested that the preparation of the document of audit impact be outsourced. Internal evaluation 7. The Committee also considered the development of appropriate criteria for the

purpose of internal evaluation of the audit effort. Separate criteria are suggested for Revenue Audit and Financial Audit (expenditure audit). These criteria are indicative and not exhaustive. They could be developed further if required. Developing criteria for expenditure audit is more complex in comparison to revenue audit. In some cases, like schematic reviews and All India Reviews, it is difficult to quantify impact since such reviews are largely directed towards examining the overall achievement of scheme objectives. Similarly, the audit effort of offices like DGACR and PDSAESM which examine Central Ministries has to be viewed in the context of resource transfers to the States (where expenditure is audited by the State Accountant General). Desirability-Acceptance matrix 8. The criteria developed for revenue and expenditure audit are contained in the

enclosed matrices (Annexure I). While developing the criteria, the Committee has taken into account the kind of findings that audit has reported in the past. The findings have been categorized and arranged hierarchically i.e. greater emphasis is placed on audit findings that would lead to enhanced impact. The hierarchy of paras will need to be tempered by an acceptability index since the impact of audit would be greatly enhanced if audit observations were responded to/accepted by the concerned management. This would increase credibility of audit findings. Weights have been assigned relying on both the criteria. Each bond copy will need to be accompanied by a weighted aggregation of money values as shown in Annexure II. Beyond the matrix 9. Adoption of the matrix will result in the following benefits: (a) more efforts will be made to obtain Government's responses to audit findings. (b) increased emphasis would be placed on raising material issues and making sound recommendations and (c) the focus of audit planning, execution and reporting will correspond to the para hierarchy leading to an overall improvement in the Audit Reports. 132

Caveat 10. The Committee recognized that the criteria developed could not be uniformly

applicable. For example, the audit/certification of the accounts of companies of Autonomous Bodies are a distinctive type of audit. A considerable part of our audit effort is deployed in this area. This effort would need to be separately evaluated. For example, recasting/revision of corporate accounts at our instance/modification of Annual Accounts based on the previous year's audit comment would constitute a significant contribution of audit to the integrity and accuracy of the entity's financial statement. Similarly, there could be other distinctive areas of audit that may need to be separately evaluated. Annexure I ALLOTMENT OF WEIGHTS ON THE DESIRABILITY ACCEPTABILITY MATRIX EXPENDITURE AUDIT REPORTS
Acceptability Index/Para Desirability Index Fraud/misappropriation/ embezzlement/losses detected in audit Recoveries at the instance of audit Overpayments detected in audit Violation of contractual obligations, undue favour to Contractors Avoidable/excess expenditure Waste/infructous expenditure Regularity issues Idle investments/idle establishment/Blockade of funds Delays in commissioning equipment Non achievement of objectives Miscellaneous G1 (2) Recovered Accepted by the Dept./ Govt. A2 (4) Not accepted by the Dept/Govt but effectively rebutted by audit A3 (2) No reply from Dept or Govt. A4 (1)

A1 (5) B1 (5) C1 (4) D1 (4)

C2 (3) D2 (3) E2 (2) F2 (2) G2 (1.50) H2 (1) I2 (1) J2 (1) K2 (1)

C3 (2) D3 (2) E3 (1) F3 (1) G3 (1) H3 (0.75) I3 (0.75) J3 (0.50) K3 (0.50)

C4 (1) D4 (1) E4 (0.75) F4 (0.75) G4 (0.75) H4 (0.50) I4 (0.50) J4 (0.25) K4 (0.25)

Note: Weights in brackets 133

RECEIPT AUDIT REPORTS

Acceptability Index/Para Desirability Index Non compliance to law, rules etc. Lacuna in law/procedure, policy Control Weakness T1 (1.50) Recovered Accepted by the Dept./ Govt. R2 (4) S2 (2) T2 (1) Not accepted by the Dept/Govt but effectively rebutted by audit R3 (2) S3 (1) T3 (0.75) No reply from Dept or Govt. R4 (1) S4 (0.75) T4 (0.50)

R1 (5)

Note: Weights in brackets Annexure II WEIGHTED AGGREGATE OF MONEY VALUE (AUDIT REPORT) (FOR THE YEAR ENDING)
Para No. (4.2) Total Financial Money period value (2001-02) (50 lakh) Premium Matrix for identify timeliness (55 lakh) (H4) Matrix weight (0.50) Weighted Contributing money office value (27.50 lakh)

Note 1 : Money value of paras pertaining to transactions of preceding two years will be enhanced by 10 percent. Note 2 : The last column needs to be filled up only for the reports for which material is contributed by more than one office. Figures in bracket are shown as illustration. (CAG letter No. 745-RECA(D) Audit effectiveness dated 9-9-2003) (i) In addition, the following points may be kept in view while finalising material for Audit Report. The HQ's office has made the following suggestions for improving the quality of Audit Reports 1. An Audit para should present a complete picture and wherever necessary different wings i.e. Works and Commercial should be integrated so that a complete picture is presented. 2. Paras which are repetition of earlier audit findings and are awaiting discussion by Public Accounts Committee should not be included in the Audit Reports (with change of department and amount). 3. Reviews should not be based on response to questionnaires issued to the departmental officers without adequate scrutiny. 134

4.

Non performance or short performance in any area should be analysed by the audit parties on the basis of available records and reasons given by the departments should be cross checked.

5.

Wherever audit parties had an opportunity to detect a mistake, but failed to and a subsequent party detected it, responsibility should be fixed. This would firm up audit and keep audit parties fit.

(Authority: CAG letter No. 745 REC A(D) Audit Effectiveness dated 9-8-2003) Procedure for preparation of draft paras for inclusion in the Audit Report 7.3 (a) Whenever any case of financial irregularity, fraud, embezzlement, loss

etc., comes to notice, the section concerned should expeditiously call for from the departmental authorities concerned by special letters (as per specimen given in Annexure II to this Chapter) such further information as may be necessary on the subject for the examination of the case in accordance with the instructions contained in para 7.1.2 of MSO (Audit) 2nd Edition 2002. On receipt of the complete

information, the case should be submitted for orders of the Pr. Accountant General as to whether or not it is a fit case to be brought to the notice of the Legislature/Public Accounts Committee through the Audit Report. If it is decided to do so; a report should be made to the Administrative Department and the Finance department according to the procedure in para 7.1.8 of M.S.O. (Audit) 2nd Edition 2002, it being specifically mentioned in the report that the case has been registered provisionally for inclusion in the next Audit Report. A note of the case should also be made in the Register of Draft Paras for the Audit Report on the Appropriation Accounts which should be reviewed fortnightly by the Branch Officer and action at higher level taken in respect of all outstanding cases. The result of review should also be submitted quarterly to the Pr. Accountant General for orders. (b) After the comments of Government have been received, a draft paragraph

along with a detailed key should be prepared and submitted to the Accountant General for approval together with a forwarding letter to Government in the Administrative Department (with a copy to the Finance Department) requesting for the acceptance of the facts stated therein. A model draft of the forwarding letter, which may be adopted by Audit in the case of the draft paras relating to the Punjab Government, is given in Annexure III. In the case of Central Government and in other peculiar cases, the draft of this forwarding letter may be suitably modified according to requirements. 135

(c)

The draft para should be brief but should contain all the important points

relating to the case as laid down in Chapter 3, Section VII of M.S.O. (Audit) 2nd Edition 2002 including disciplinary action taken by the Government against the officials(s) at fault. (d) The office and fair copies of the draft para should be annotated in the margin

with full particulars (not merely flag or page numbers but with full references). A copy of the forwarding letter with two attested copies of the draft para and key together with a copy of the relevant correspondence referred to in the key, should also be sent to the Report Section for keeping a consolidated record of all the draft paras sent to the Government. (e) If the Administrative Department/Government have no comments to offer, the

draft para already prepared should be treated as final after obtaining the approval of the Pr. Accountant General. The copies thereof with a copy of the letter containing the acceptance of the Administrative Department/Government should then be sent to the Report Section. If any comments necessitating a change in the original para are received from the Administrative Department/Government, orders of the

Pr. Accountant General in the matter should be obtained and copies of the para, as finally adopted sent to the Administrative and Finance Department as also the Report Section (in duplicate). A copy of the correspondence which is exchanged with the Government/Department should also be sent to the Report Section. (f) If any abnormal delay is apprehended in any individual case, the paragraph According to the instructions

should be finalized making it factually correct.

contained in the Punjab Government Finance Department Circular letter No. 7755-850/6016, dated the 30th November, 1950 and Government of India, Finance Department Office Memorandum No. F.II(8) F II/46, dated the 25th April, 1946, the departments are required to see that the draft paras received from the Pr. Accountant General are returned to him as early as possible and in any case within a period of six weeks failing which Audit is at liberty to consider the draft para as final. (g) A register of Draft Paragraph should be maintained in Form given in

Annexure IV to this Chapter to show the number of Draft Paragraphs issued, cases in which acceptance or comments have been received, action taken in the remaining cases and draft paragraphs finalized and sent to Report Section. A monthly report of this register should be submitted to the Audit Officer/Sr. Audit Officer on 5th of every month D.P. Section should submit a monthly report of this Register to the 136

Pr. Accountant General through the Report Section regarding the number of draft paras issued, cases in which acceptance or comments have been received and action taken in the remaining cases. (h) If in the light of the subsequent developments, any paragraph required

amendments before its incorporation in the Audit Report, the amendments should be submitted to the Pr. Accountant General for approval and R eport Section informed accordingly. Any development occurring after the Audit Report have been finally printed, should also be brought to the notice of the Pr. Accountant General under intimation to the Report Section, so that the up-to-date position of the case may be available at the time of examination of the Audit Report by the Public Accounts Committee. (i) A separate case file should be started in connection with each draft para and

all references relating thereto should be kept in the file. (j) Some of the draft paragraphs, more particularly Reviews, might be understood

better if supporting maps, charts, sketches, etc. having proper authenticity are given at appropriate places. This may be kept in view while submitting Draft Paragraphs. It would of course be necessary to keep in view the point that if maps etc. are to be printed, it would need clearance from the concerned authorities. It might also be useful in some cases, particularly in case of reviews to add a summary at the end of the paragraph. This may also be kept in view when submitting draft paragraphs. (Paras 3 & 4 of Comptroller & Auditor Generals letter No. 720. Rep/202-77, dated 2nd September, 1977). (k) While sending the draft para to the Report Section, the following particulars should invariably be furnished :(i) The brief subject matter of paragraph. (ii) The name of the department, office etc. (iii)The names(s) of the official(s) responsible for the irregularities. (iv) The case number in which the papers have been filed (v) It should be particularly seen that(1) The copies of the draft paras, correspondence, etc. are cleanly typed in double space and that they contain no typographical or drafting errors. (2) There are no abbreviations as far as practicable and sub paras are not numbered, and (3) The copies are duly attested by the Branch Officers. 137

(O/O No. B/100, dated the 14th October, 1954 issued by the Appropriation Section). (l) The draft paras, duly approved by the Group Officer (Inspection Civil) should be routed through Report Section before submission to the Pr. Accountant General. (O/O No. B/104, dated 8th November, 1954) (m) After a para has been approved by the Pr. Accountant General all subsequent correspondence in connection therewith exchanged between the Administrative Department and Audit should be invariably shown to him through Report Section expeditiously in every case. (Authority Officer Order No. B/6 dated 4th may, 1959) (n) The Audit Reports are treated as confidential documents till these are presented to Parliament. Accordingly, while sending the draft paras, which are also considered as confidential to the Comptroller & Auditor General of India or to the Government for approval/verification of facts, and the subsequent correspondence thereto, these should invariably be marked as confidential in order to maintain secrecy. (Comptroller & Auditor Generals letter No. 1752-Rep/256-68, dated 2nd September, 1968) Draft para on rush of Expenditure 7.4 The Financial rules require that expenditure is evenly phased throughout the

year as far as possib le. But, in practice, much of the expenditure is incurred towards the end. The disproportionate expenditure during the last three months, with

particular emphasis on expenditure in March, may be highlighted in Chapter II with reference to the flow of Governmental expenditure during the year. Specific mention may be made of departments in which this type of distortion is pronounced. While doing so, due allowance would have to be made for factors like expenditure incurred earlier but adjusted in the accounts towards the end of year (e.g. for supplies) as also expenditure due towards the end of the year (e.g. interest payments. loan repayments, interest on G.P.F) etc. Apart from presenting the broad picture, it would be desirable to include specific comments on the causes and consequences of the rush of expenditure like non- finalisations of proposals resulting in money being drawn and remaining unutilized and payments being made before receipt of goods. (Copy of D.O. letter No. 1053-Rep/104-80, dated 28th /30th June, 1980 from Shri G.B. Singh, Addl. Deputy Comptroller & Auditor General (Report) to Sh M.Y. Priolkar, Accountant General, Punjab, Chandigarh) 138

Outstanding Audit Observations and Inspection Reports 7.5 The last Chapter in the Civil Audit Report gives statistical information on the

number and amount of Audit Observations pending settlement and the number of Inspection Reports and paragraphs outstanding. A paragraph on outstanding Audit Observations and Inspection Reports should be prepared for inclusion in the Civil Audit Report in the following manner:(i) Besides giving the total number of outstanding Inspection Reports and the

total number of unsettled paragraphs, the department wise and age-wise break-up highlighting the departments having the oldest and maximum number of outstanding items may also be indicated. Similarly, department-wise break- up of the Inspection Reports in respect of which even first replies were not received, may also be mentioned. (ii) In addition to the statistical material, special review of a few selected

departments/offices may be undertaken and an analysis of the pending Inspection Reports and paragraphs relating to both Outstanding Audit Observations for this purpose will be done by the Pr. Accountant General (iii) Based on such a review, a synopsis of the pending paragraphs may be

prepared under specific and meaningful categories bringing out the implications of the outstanding items. The irregularities such as non-maintenance of initial records, nonadherence to the prescribed procedure for dealing with cash, etc. may be specifically highlighted. Instances where the irregularities have persisted even after having been pointed out by Audit may also be specifically mentioned. (iv) The paragraphs containing the Review/Synopsis prepared in the above manner

may be issued to departments/ Government for obtaining their comments, as is being done for the other draft paragraphs. It is essential to obtain comments of the

Departments/ Government as department replies might not have been received for the Inspection Reports in many cases. Copies of paragraphs relating to both Outstanding Audit observations and Outstanding Inspection Reports may be sent to the Comptroller Auditor and General as and when sent to Government. (The Comptroller Auditor and Generals letter no. 801-Rep./82-75 II, dated 12th June, 1979). Expeditious finalization of material for Audit Reports (Central & Civil) 7.6 The objections taken in local audit take long time to finalize for incorporation

in the Audit Report and hence lose their importance by the time they come to the 139

notice of the Public Accounts Committee.

In order that the major irregularities

mentioned as a result of local audit are incorporated in the Audit Report for the year following the financial year to which the accounts relate, the following procedure should be strictly observed:The Inspecting Officers should see that the replies to the Audit queries which are issued to the Heads of Offices, etc., are received within the stipulated period of 3 days and any lapses on this account should be promptly brought to the notice of the highest officer available on the spot. The Inspecting Officers should endeavour to have as much of personal contacts and discussions with the head of the office as possible so that the number of formal written audit queries is reduced to the minimum. Wherever necessary, the explanation given by the department during the course of discussions should be recorded. Miscellaneous Instruction7.7 (a) Material required for the Audit Reports should be sent to the Report

Section in duplicate. (b) Paise should be eliminated from figures relating to amounts which should be

shown to the nearest rupee except in the case of rates, when a smaller unit may be quoted.

140

ANNEXURE-I Referred to in para 7.2 (g) Important Points which can form the subject matter of comments in Audit Reports 1. (a) Administration of grants and control over expenditure Any notable changes in the arrangement of grants e.g. notable increase or decrease in their number, their amalgamation and sub-division. (b) (c) Matters affecting the completeness or accuracy of the accounts. Any expenditure on a Service which has not been duly authorized in the schedule to an Appropriation Act. Note : In the absence of an authoritative definition of the term New Service, the Pr. Accountant General should be guided by such case- law as may have been evolved by the Committee on Public Accounts concerned, and in doubtful cases he should take the orders of the Comptroller and Auditor General. (d) Expenditure not in accordance with instructions of Legislature or which indicates gravely faulty Administration of the grant or appropriation. Any reappropriation required to be brought to the notice of the P.A.C. (e) Any expenditure on any object disapproved by the Legislature or requiring but incurred without retaining its approval. (f) Any important expenditure incurred without necessary sanction or contrary to a valid condition or restriction imposed by the Legislature. (g) 2. (a) Expenditure in excess of the Grant or appropriation. Revenue Actual realization from additional or fresh taxation as compared with the forecast at the time of Budget. (b) (c) Any disproportionate increase in recent years in the cost of collection of taxes. Non-revision of rates of forest produce etc. sold by Government in the light of prevailing market prices. (d) (e) Arrears and any other irregularities in realisation of the revenue. Delay in issuing detailed rules for collection of taxes after an Act has been passed by Legislature. (f) Existence of an efficie nt Internal Audit System in the major revenue earning Departments. Review of the results of such internal audit.

141

(g)

If the amount of extra-ordinary receipts realized by Government every year is considerable and appears to be a continuous source of revenue this feature of the revenue position may be elucidated.

(h)

Remissions of revenue (except land revenue remissions) and abandonments of claims to revenue, which are required to be reported to the Audit Office by Heads of Departments.

(i)

Any large claim against a foreign Government, local body or other outside party which has been outstanding for an unduly long-time.

3. (a) (b) (c)

Expenditure Expenditure not in conformity with the authority which governs it. Irregularities connected with contracts. Important items of extraordinary or apparently unnecessary expenditure such as:-

(1) (2) (3) (4) (5)

Ex gratia payments. compensation paid for damage sustained. Payments in excess of amounts admissible under a statute, contract or rule. Payments necessitated by failure to enforce the terms of a contract. Irrecoverable balances of advance payments made on account of services, etc. which were ultimately not rendered.

(d) 1)

Any uneconomical or apparently wasteful expenditure due to :the inception of works without adequate investigation of their utility or

feasibility. 2) the execution of works by a Government agency which lacks the ability or the

facilities to execute them properly. 3) 4) the unsatisfactory working of Government Commercial Undertakings. expenditure on schemes and Projects not commensurate with the physical

achievements. 5) (e) 4. (a) Other causes. Important cases of losses, write off, nugatory or improper expenditure. Debt, Deposits and Remittances transactions Debt Position of the Government A consolidated statement of debt may be given and salient features e.g. the magnitude of debt, expenditure on the service of debt, amortisation, arrangements, arrears in repayment of debt, etc. may be brought out. 142

(b) (c) (d) (e)

State of loan records Arrears in realization of loans. Acceptance and verification of balances. Whether the proceeds of loans are expended only on objects for which the loans were originally raised or to which borrowed money may properly be applied in accordance with sound principles of public finance.

(f) (g) 5.

Review of Reserve Fund-how far the objectives of the funds are fulfilled. Review of outstanding under suspense and remittance heads. Grants-in aid (a) Irregularities connected with the Administration and utilization of grants- inaid. (b) Over payments and irregular payment. (c) Review of the result of audit of bodies or authorities receiving substantial financial assistance from Government in the form of grants-in-aid and loans under section 14 and 15 of the Comptroller Auditor and Generals (D.P.& C.S.) Act, 1971.

6.

General Any irregularity in connection with the withdrawal and disbursement of

money, designed to bring expenditure into closer accord with allotment such as : (1) Withdrawal of money in advance of requirements, particularly towards the

close of a financial year, and (2) (b) Postponement of payment which are due and fully matured. State of initial accounts and delay in submission of accounts by Treasuries,

Public Works and Forest Divisions-the types of irregularities generally committedSteps taken by Government to improve the efficiency of working. (c) Absence of Administrative regulations and procedure sufficient to secure a

proper and effective check upon monetary transactions e.g. Purchase and control of stores. (d) Points arising out of a scrutiny of the utilization of Central assistance by the

State Government. They will be reported by the State Accountant General to the Central Ministry concerned and after obtaining the comments of the Central Ministry, Pr. Accountant General will propose suitable draft paragraphs for incorporation in the Central Audit Report. 143

Note : Any serious delay in the issue of necessary financial or accounts rules (Statutory or non-statutory) by a Government should receive suitable notice in the Audit Report, unless the Pr. Accountant General considers that the rules to be framed are not so important as to cause any serious loss of efficiency, or is satisfied that there will be no further delay. When making any comments, he should, however, state the cause of the delay, particularly in cases in which it would be unfair to comment without indicating the causes.

144

ANNEXURE II Referred to in Para 7.3 (a) OFFICE OF THE PRINCIPAL ACCOUNTANT GENERAL (AUDIT) PUNJAB, CHANDIGARH. No. ______________________ To The _____________________, _________________________, _________________________. Subject :_______________________________________________ _______________________________________________ _______________________________________________ Sir, With reference to your letter/endorsement No. _________________ dated ___________________ I am to request that as required by Rule 2.34 and 2.35 of Punjab Financial Rules, Volume I/Rule 20 and 21 of the General Financial Rules, Volume I, this office may be furnished as soon as possible with a complete report (in duplicate) on the subject indicated above showing clearly the following particulars :(i) The exact nature of the defalcation/loss and brief description as to how it was detected (a copy of the loss of defalcation to higher authority may also be sent). (ii) (iii) (iv) The full extent of the loss. The actual period covered by the defalcation/loss. The defects in or neglect of rules by which the loss was rendered/possible and the circumstances which facilitated the defalcation/loss. (v) The names of officials held personally or technically, directly or indirectly and wholly or partly responsible for the irregularities committed in the case and the action taken or proposed to be taken against them. Dated ____________________

145

Note :- In the assessment of personal responsibility in such cases the General principles laid down in Para I of Appendix I to the Punjab Financial rules, Volume II, should be followed. (vi) Whether the case has been judicially tried in a court or not, if so, copies in duplicate of the judgment thereof may please be furnished. If not, the reasons for not doing so may be stated and a copy of the police report, if any furnished. (vii) (viii) The remedial measures adopted as safeguards against such losses hereafter. The prospects of the recovery of the loss. The amount of their security taken from the Government servants at fault or their pay, pension allowances, etc. withheld and their other property confiscated may be stated. Otherwise, sanction to the writing off of the loss may be obtained and furnished. (ix) 2. The progress of the departmental enquiry if conducted and the result thereof. The report may please be submitted to this office in duplicate through the ___

__________________________________________________________.

Yours Faithfully,

Sr. Deputy Accountant General (Inspection Civil Wing), Punjab.

146

No. __________________

Dated _____________

Copy forwarded to the __________________________ ______ ______ for information with reference to ______________________ ___________ his letter no. _________ dated ________________ . The letter no. _____ ______ _ ___________________________________ dated __________________ from the ________________________________ (and with the request that the above report along with his comments thereon in duplicate) may please be furnished to this office at a very early date.

Sr. Deputy Accountant General (Inspection Civil Wing)

147

ANNEXURE III Referred to in Para 7.3 (b) OFFICE OF THE PRINCIPAL ACCOUNTANT GENERAL (AUDIT) PUNJAB, CHANDIGARH. No. ______________________ From The Pr. Accountant General (Audit), Punjab, ____________________ Section. To The Secretary to Government, Punjab, _________________________ Department, _________________________. Subject :Sir, I am to invite a reference to the correspondence noted in the margin (copies enclosed) and to state that it is proposed to mention the case indicated above in the Audit Report for the year _______________. A copy of the draft para which has been registered in this office for this purpose is sent herewith. 2. It is required that the facts stated in the para, may please be verified _______________________________________________ Dated ____________________

and your acceptance thereof communicated to this office within a period of six weeks, as prescribed in the letter from the Secretary to Government, Punjab, Finance Department addressed to all Heads of Departments No. 7775-B-50/6016, dated the 30th November, 1950. In case of your reply is not received within a period of six weeks, the draft para will be treated as final. 3. Action taken or proposed to be taken against the official(s) responsible

for the irregularities/loss of Government money, etc., may also please be intimated. In this connection a reference is invited to this office letter No. _____________ dated __________. 4. For facility of reference a copy of the key to the draft para is enclosed. Yours faithfully, Pr. Accountant General (Audit) Punjab 148

No. _________________________ dated the ___________________ Copy together with a copy of the enclosures, forwarded to the Secretary to Government, Punjab, Finance Department, Chandigarh for information and necessary action. Pr. Accountant General (Audit) Punjab No. _________________________ dated the ___________________ Copy together with a copy of the enclosures, forwarded to the Report Section for information and necessary action.

for Pr. Accountant General (Audit) Punjab

149

Serial No. Name of Department Subject of Paragraph

1 2 3 4 5 6 Date of approval by the Sr. DAG (IC) Date of handing over to Report Section No. and date of letter with which sent to Government for comments No. and date with which reply received from Government 7 8 Date on which approved by the Pr. Accountant General 9 Date on which sent to the C.A.G. of India. 10 Date of receipt of comments from the C.A.G. of India 11 Date on which replies to comments sent to C.A.G. of India Remarks 12

Annexure IV

Referred to in para 7.3 (g)

Register of Draft Paragraphs

150

CHAPTER VIII GENERAL PRINCIPLES AND PROCESS OF LOCAL AUDIT GENERAL INSTRUCTIONS 8.1 This Chapter deals with the general rules and principles in regard to the Local

audit of receipts and expenditure. The special rules applicable to individual accounts or types of accounts are given in volume II of this Manual. They are explanatory of, supplementary to the rules and instructions contained in the M.S.O. (Audit) and other appropriate codes issued by the Comptroller and Auditor General. It must be clearly understood that these instructions represent the minimum that is expected of an intelligent auditor and should never be construed as limiting the auditor's duties. 8.2 (a) It should not be forgotten that what differentiates a local audit from the

central audit is that the local auditor has access to basic facts and to the men who deal with them. The auditors should look at everything in a fresh and original way and when they notice that they repay investigation, they should go into it with exhaustiveness which will leave no detail unexamined. Some time some irregular payment or some slight discrepancy is detected in the course of audit and the tendency is just to embody them in a formal Test Audit Note and there the matter usually ends. Matters apparently of no moment, if properly pursued may and do lead to the detection of a large irregularities or of a defect of system liable to lead to fraud and their value as such must be borne in mind. (b) Local audit has to regard the detection of fraud as one of its duties. Such

detection is almost impossible except at the verification of the original records. The local inspections give the expert eye of the trained auditors an opportunity to detect from the original records suspicious factors which could not come to notice in the Central Audit Office. Necessary guidelines for dealing with fraud and corruption (October 2003) as approved during IX ASOSAI Assembly October 20 26, 2003 Manila, Philippines may be kept in view during audit of records of any organization. (Authority: CAG letter No. 283-Audit/M&C/252-2000 dated 8-11-04) 8.3 A pre-requisite to an intelligent examination of account is also a study of the

budgets, annual accounts and the administrative reports of the institution concerned. The reports of the departmental auditors wherever they exist, should also be studied. A comparative study of the financial results obtained in more than one institution of the same kind might also be profitable. 151

GENERAL EXAMIANTION OF ACCOUNTS 8.4 (a) The Accounts of assessments and collection of receipts, stores, cash,

measurements, muster rolls, etc., for the entire period covered by the Inspection should be inspected and examined generally to see that they are maintained and checked in accordance with the prescribed rules and that the writings do not indicate any attempt to tamper with the records or to evade the requirements of rules. The recorded transactions should be surveyed intelligently and, if necessary, doubtful and abnormal items should be examined closely. Ordinarily, this general examination should be conducted by the Section Officer/AAO himself and not left to his auditors. Where subsidiary registers of cash and stores accounts are kept it should be verified that they are properly maintained and the totals and balances are correctly taken over to the main registers. b) The nature of accounts records kept in an office depends upon the nature of

business the department/office has to transact. Nevertheless, every office handling cash and establishment matters is expected to maintain the following basic accounts records:(i) (ii) (iii) (iv) (v) (vi) Cash Book. Bill Register. Contingent Register. Stock Registers. Service Books. G.P. Fund ledger and Broadsheets.

Besides the basic records referred to above, there are other accounts records which an Audit Party has to see quite frequently during local audit. The most

common records and procedures which have to be scrutinized in local audit are indicated in this Chapter. c) In examining various registers, etc., it should be seen in general that :(i) (ii) the Registers under scrutiny are maintained in the prescribed form. the registers are page numbered and a certificate of page counting is recorded by a responsible officer on the first page. (iii) (iv) (v) all the columns provided therein are correctly filled in. the transactions recorded therein are entered in chronological order. there is no evidence of tampering with the entries or pages of the registers. 152

(vi)

There are no overwritings, erasures, etc. all transactions are properly made by drawing a line through the erroneous entry and inserting a fresh entry under proper attestation by the competent authority.

(vii)

Each register is kept up to date and is reviewed by the competent authority at regular intervals, as provided in the Rules.

(viii)

The recorded transactions should be surveyed intelligently and, if necessary, doubtful and abnormal items should be examined closely.

(ix)

Ordinarily the general examination should be conducted by the Section Officer/AAO and not left to his auditors. Detailed Test Audit

8.5

The months, the accounts of which are to be subjected to detailed test audit are

selected by the Group Officer (I-C) and intimated to the Section Officer/AAO confidentially from time to time. consists of (i) (ii) (iii) (iv) audit of the accounts of Receipts. examination of the Cash Book. Audit of the accounts of Stores. examination of vouchers, which are submitted to Central Audit with original records and with contracts, etc. (v) audit of all vouchers not submitted to Central Audit. Audit of receipts 8.6 (a) The audit of receipts of Government revenues entrusted to the The detailed test audit of the selected month

Comptroller and Auditor General under provisions of Section 16 of the CAG's (Duties, Powers and Conditions of Service) Act, 1971 is conducted by the Revenue Audit Wing of this office. Petty departmental receipts, in respect of the office locally audited by Inspection Civil Wing are, however, exa mined in local audit to see that general rules regarding the audit of receipts as laid down in Chapter 3 of Section II of CAG's Manual of Standing Orders (Audit) 2nd Edition 2002 and Instructions for grant of receipts to payee as laid down in Rules 82 and 86 of the Compilation of Treasury Rules are observed by the office inspected. b) Departmental receipts of the Central and State Government are generally in

the nature of receipts for services rendered or supplies made and issue of licences and receipts of miscellaneous nature, the sale proceeds of condemned dead stock, etc. These receipts are at present being checked by audit, while conducting audit of the 153

expenditure of the department concerned. After the enactment of Comptroller and Auditor General Duties and Powers Act, 1971, the responsibility of C.A.G. in respect of departmental receipts is as great as in respect of statutory receipts and as such intensive audit of departmental receipts is necessary for this purpose. in respect of some types of receipts as a general measure in addition to the check and guidelines already in practice, our basic aim should be to see whether (i) The amounts collected as service fees, license fees, etc. are in accordance with the provisions of the Act and the rules framed there under. (ii) The procedure prescribed by Government or any other authority specified in the Act have been followed. (iii) Instructions or orders issued by higher authorities have been complied with. A few illustrative cases of these types of receipts are given below :(1) (2) (3) Receipts under Arms Act. Receipts under weights and measures enforcement Act. Receipts under registration of companies, under the Indian Companies Act, 1956. (4) (5) Petroleum Concession Fee and Royalties under Petroleum Act. Permit fees under Bombay Essent ial Commodities and Cattle (Control) Act. (6) (7) (8) (9) c) Inspection fees under the Factories Act. Receipts from Employees State Insurance Corporation. Audit fees under Co-operative Societies Act. Betterment levy.

Audit of Receipts consists in seeing that : (a) (b) (c) sums due are regularly recovered and checked against demand; and sums received are duly brought to credit in the accounts. adequate regulations and procedures have been framed to secure an effective check on the determination of revenue realizable for the services rendered at the rates if any prescribed and their collection and the proper allocation of revenue so collected and such regulations and procedures are observed. 154

(d)

where any financial rule or order prescribed the scales or periodicity of recoveries, there is no deviation without proper authority from such scales or periodicity.

(e)

A register of all recurring and non-recurring demands is kept in accordance with the rules and the collections are watched against it.

(f)

Arrangements for collection are satisfactory and there are no outstandings requiring special notice.

(g)

Payee are invariably granted machine numbered receipts in the prescribed form, a proper stock account is kept of all receipt books, the stock thereof is periodically verified, certificate to count of receipt forms is recorded before a receipt book is issued from stock.

(h)

moneys received are brought to account immediately and ordinarily there is no undue delay in their remittance into treasury.

(i)

the return of the counterfoils of used receipt books is properly watched and the counterfoils are recorded after check to ensure that there has been no delay or omission in bringing the receipts to account.

(j)

there is a system of internal check and the responsibility of conducting the internal check is entrusted to some responsible official and there is recorded evidence to the effect that these checks have been exercised. (CAG'S circular No. 3, letter No. 1320-RW-A/8-73, dated 5-3-73 filed in OA/Pb/Civil/Receipt).

(k)

the receipts are not directly appropriated to departmental expenditure, except to the extent provided in the rules.

(l)

any remissions granted are duly supported with the sanction of the competent authority.

(m)

for cancelled receipts both the original and duplicate foils are on record.

(n)

the amount realised on a receipt has been clearly written in words and figures. Any indistinct and doubtful entry, should be viewed with

suspicion and further proof regarding the amount actually realised should be demanded from the office inspected. (o) the amount realised as per the receipt issued has been correctly noted in the Demand Register. 155

Audit of Demand Register 8.7 a) b) c) The Demand Register should be examined to see that :all demands have been correctly noted in it; all sums due are received and checked against demands; and the demands are punctually and fully realised. It should be examined whether the names of all persons from whom taxes, fees or other revenue are due have been noted in the Demand Register. The register should, therefore, be checked with any other register, roll or othe r records maintained showing their names to ensure correctness of the entries made therein. It should further be seen that the closing balance of the previous demands have been correctly brought forward, and all amounts shown in the counterfoils of the receipts granted to the parties have been noted in the Demand Register and also credited in the Cash Book. Audit of receipts books 8.8 The stock account of receipts books should be examined to see that (i) the number of blank receipt books received agrees with the indent or requisition sent to the press or other authorities and that all such receipt books are kept under lock and key by a responsible officer. (ii) only one book is issued to an individual officer on return of the previous used up book and the issues are in chronological order. (iii) the number of receipt forms contained in each book have been counted and a certificate to the effect recorded on the covering page under the initials of a responsible officer and all the forms are machine numbered. (iv) the issue of a receipt book and the return of a used up book are duly recorded and acknowledged. (v) for cancelled receipt form there should be both the original and the duplicate portions in the receipt book. (vi) the stock is periodically verified and the closing balance in the stock account is verified by the Head of the office by actually counting the numbers of receipts books in hand periodically and a certificate to that effect is recorded in the stock account. (vii) the return of the counterfoils of the used receipt books is properly watched and that counterfoils are recorded after check. 156

(viii)

Similar verification should be done by the auditors as well. Audit of cash

8.9

It should be seen that :(i) The arrangements for obtaining cash from treasuries and of realization from other sources and for the custody, payment and accounting thereof should be examined to see that they are in conformity with the prescribed rules. (ii) Moneys received as revenue and creditable to Government are deposited in full into the Government treasury without undue delay and without appropriating them to meet departmental expenses which is strictly prohibited under Rule 7 of the Punjab Treasury Rules. (iii) No money is drawn from the treasury in anticipation of demands or to prevent lapse of budget grants. (iv) Government money is kept in strong treasury chests secured by two locks of different pattern. All the keys of the same lock should be kept in the same person's custody and, as a general rule, the keys of one lock should be kept apart from the keys of the other lock and in a different persons custody. (v) Advances paid for departmental purpose do not remain unadjusted for unduly long periods for want of accounts supported by vouchers or refund, as may be necessary. (vi) Private cash (collection of Cooperative dues etc.) is not mixed up with the regular cash balance of government. (vii) Accounts of imprests and Temporary Advances if any, should be examined to see that they are regularly closed and rendered punctually every month, and that they are properly examined by the recouping officer before recoupment. (viii) Audit of system of cash management by various DDO's. It has been desired by the Headquarter office that with a view to

examine the system of cash management, our field audit parties while conducting the audit of various DDO's may ask the DDO's to carry out physical verification of cash. Keeping in view above orders of the headquarter the audit parties are requested to get physical verification of cash done by DDO's during the course of audit. Findings of 157

physical verification should be processed to develop comments on the following lines and incorporated in the LARs. (i) Whether there is any shortage of cash? The reasons for shortage may be

investigated and reported. (ii) Whether any advance have been given unauthorisedly to the staff out of

undisbursed cash balances and the purposes for which these advance were given may also be examined. (iii) (iv) Whether any cash has been held in vouchers? Cases where amount was withdrawn from the treasuries but were not entered

in cash book may be examined. (v) (vi) (vii) Was the cash physically verified at the end of month by Head of Office? Undue retention of heavy cash balances by the DDO's may also be examined. Whether there has been any misappropriation and misutilisation of

Government money? (viii) Any other point which may merit mention in the Report may also be

commented upon. (O.O. No. WHQ/Inst/3 dated 12-7-99) Audit of Cash Book 8.10 The Cash Book should be checked in detail for the selected months and for

other months a general scrutiny should be made. A General Examination : General examination of the Cash Book is conducted to ensure that it is being maintained properly, in the prescribed form and the provisions of rules in this regard are being observed. It should be seen inter alia that :(i) All transactions of receipts and payments are correctly recorded in a cash book strictly in the order of occurrence and on the dates they actually took place and attested by the Head of the Office in token of check. (ii) The totals of the cash book if not checked by the officer-in-charge of the cash book are verified by a responsible subordinate other than the writer of the cash book who initials it as correct. (iii) (iv) The cash book is closed and balanced on the prescribed dates. At the end of each month, the cash in chest is verified by the officer in charge of the cash book who has to mention in his own handwriting 158

and over his dated signatures the cash actually found at the time of verification and whether the same tallies with the balance appearing in the cash book. (v) There are no erasures or interpolations and that errors are rectified properly. (vi) Adequate security as envisaged in Rules in respect of the Cashier has been obtained, accepted by competent authority and relevant document kept in the safe custody of the department. (vii) There is no tendency to keep an unduly large cash balance in hand and that cash in hand of cashiers, etc. does not exceed the amount of security taken from them. (viii) A complete account of the permanent advance held, if any, is available in the cash book, full details of the cash in hand and unrecouped vouchers are being worked out and clearly recorded whenever the cash book has been closed. (ix) The expenditure has not been incurred in excess of the permanent advance by spending irregularly from departmental receipts or other undisbursed balances of amounts drawn from treasury for different specific purposes. (x) Full details of the money (other than permanent advance) held in the cash balance are also worked out and recorded in the cash book whenever the cash book has been closed. (xi) In the case of undisbursed amount of pay and allowances, the dates of their withdrawal are recorded and no item is held in hand undisbursed for more than three months. (xii) There is no evidence of removal of or tampering with the pages of the cash book, and that its pages are duly machine numbered; that the certificate of count of pages contained in a cash book is recorded under the signatures of the Head of the Office in the fly leaf before bringing the same in use. (xiii) The expenditure has not been incurred in excess of the permane nt advance by spending from the departmental receipts which is a serious irregularity. 159

(xiv)

When the cash book is closed at the end of the financial year, it is to be seen that the permanent advance is fully recouped and does not exceed the sanctioned amount of the advance.

(xv)

In the case of annual audit of accounts having annual periodicity, in addition to the detailed check of accounts of one month, arithmetic accuracy of cash book should be checked for one more month selected as heretofore, at random. This should include checking of the opening balance for proper carry forward from the closing balance of the months selected for the scrutiny to the next month. In the case of biennial or triennial audits and audits in arrears, checking of arithmetical accuracy of the cash book may be confined to two months selected for test check.

(Control O.O. No. 17 dated 24-10-85) Physical verification of cash by audit 8.11 (i) The inspecting officers are not required to verify by actual count the It is, however, not the intention that an

cash balance of the office inspected.

inspecting officer is debarred from verifying the cash of an office, if the circumstances of any case warrant this. In such a case, the cash verification should be undertaken as soon as the necessity for the same is felt and this should preferably be done at a time when the officer in charge is present. The same consideration applies in respect of surprise inspection too. (ii) It may, however, be mentioned that if, in any case, the cash balance pertaining

to a cash book is counted, a simultaneous count of all cash balances (with relevant accounts) in the same office with the disbursing officer or other custodian of the cash chest is desirable. (CAG's D.O. No. 70-Admn. 1/54, dated 27th June, 1954). (iii) Whenever cash is verified, it should be seen that the cash book is written up to

date and all entries should be vouched to the date of verification. (iv) A note of the count specifying the amount counted both in words and figures,

should be made in cash book or the account concerned and a memorandum, may, if necessary be drawn up as follows :-

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Previous day's balance as per cash book AddAmount received during the day as in the cash book and as verified with reference to the counterfoils of receipts, cheques etc. Payments made during the day as per cash book and as verified with reference to sub-vouchers Net total =

Deduct-

The amount of cash in hand should agree with this total. It should also be seen in audit that the Government safe contains nothing but Government money and Government valuables. (CAG's U.O. No. 1965-Admn/244-50, dated 28th July, 1951 and D.O. No. 70/Admn.1/54, dated 26th July, 1954). Accounts of permanent advances 8.12 i) The permanent advance accounts should be examined to see that :The amounts of permanent advances held by various disbursing officers are

not in excess of their normal monthly requirements as judged from the expenditure incurred out of these advances; ii) These advances are not multiplied unnecessarily by obtaining separate

advance for subordinate officers in the same office who may require petty sums for their use; and iii) Where an officer spares small portion of his own advance for use by his

subordinates who may require petty sums, acknowledgements therefor are obtained and retained properly on record. Para 3.13.12 of M.S.O. (Audit) 2nd Edition 2002. Register of valuables 8.13 In the case of offices/departments which receive a sufficient number of

valuables such as bank drafts, cheques, postal orders, etc., it should be seen that all these valuables are noted in a valuable register maintained for the purpose. The register should be examined to see that :i) receipt. ii) full particulars of each valuable, i. e. the nature of valuable, its number and each valuable received is entered in this register on the day of its actual

date, the name of person and office from whom received, the name of the bankers, if any, on whom drawn, the amount, the purpose of deposit and the reference to the

161

authority under which each valuable has been received is invariably recorded in this register. iii) iv) proper and complete reference to remittance is shown against each valuable. there has been no undue delay in remittances of valuable to treasury for credit

to Government account. Accounting of non government money 8.14 Where, under any special sanction a Government servant deals with both

Government and non government money, in his official capacity, the government money should be kept in cash box separate from the non-government money and the transactions relating to the latter should be accounted for in a separate set of books and kept entirely out of Government account. (Punjab Government, Finance Department letter No. 42003-(Fin. Genl.) dated the 9th December, 1935). It should be seen in audit that orders are observed. Scrutiny of treasury challans 8.15 i) Treasury challans should be examined to see : that they are presented to the treasury in the prescribed form and are prepared in accordance with instructions contained in Rules 92 to 95 of the Compilation of Treasury Rules indicating full particulars of remittances. ii) that the authorised official of the treasury or the bank has given a legible receipt of the amount received over his official stamp and that it tallies with the amount both in words and figures for which the challan was prepared. It should also be seen that the Treasury Challans have been signed in full as required under Treasury Rules. iii) that the challan by its appearance does not suggest any tampering in the entry of the amount deposited; and that due precautions are taken in writing the amount (both in words and figures) to exclude the possibility of a fraudulent interpolation. iv) that wherever practicable the signatures of the bank or treasury official signing the receipt on the challan should be compared with those on other challans, and the genuineness thereof got confirmed from the Bank or Treasury, if they differ.

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Audit of expenditure 8.16 The expenditure of Government offices and Departments is audited centrally.

But the accounts and supporting documents consist partly of original records and partly of copies of original records. The audit conducted centrally is largely

dependent for its efficiency on the degree of care exercised by the departmental authorities over the accuracy of the original records from which the public account is built up. The main object of the local audit of the accounts of expenditure, therefore is :i) to review such original records as are not received in the Central Office for audit. ii) to test the degree of care exercised by departmental authorities over the accuracy of such records and to see that they are properly maintained in the prescribed forms; and iii) to apply a test audit to such accounts, vouchers etc. as are not audited centrally or cannot be checked completely except at a local audit. 8.17 (a) Before commencing the audit of expenditure in local audit the budget

estimates and the actual expenditure incurred by the office under various heads of account should be examined to know the nature and extent of expenditure under each head of account. It should be seen that the financial rules, delegation of financial powers and other orders specifically pertaining to the office for regulations of its expenditure are themselves intravires and that the audit is effectively conducted against them. The general instructions governing the audit of expenditure are contained in Chapter 2 of Section II of Manual of Standing Orders (Audit) 2nd Edition 2002. These instructions have to be borne in mind and carefully applied in the audit of expenditure so as to yield practical and material results (b) Besides INTOSAI's auditing standards i.e. Basic principles, General

Standards, Field Standards and Reporting Standing which contain the basic postulates and principles for carrying out of audit work by the auditors may also be kept in view. The auditing standards of the International Organization of Supreme Audit Institutions (INTOSAI) which have been adopted with due consideration of the Constitution of India, relevant statutes and rules for the auditing standards for the Supreme Audit Institution of India (SAI) are as under:The auditing standards consist of four parts: a) Basic postulates 163

b) General Standards c) Field Standards d) Reporting Standards A. (i) Basic Postulates The basic postulates for aud iting standards are basic assumptions, consistent

premises, logical principles and requirements which help in developing auditing standards and serve the auditors in forming their opinions and reports, particularly in cases where no specific standards apply. (ii) The basic postulates are:

a) The SAI should comply with the INTOSAI auditing standards in all matters that are deemed material. b) The SAI should apply its own judgement to the diverse situations that arise in the course of Government auditing. c) With increased public consciousness, the demand for public accountability of persons or entities managing public resources has become increasingly evident so that there is a need for the accountability process to be in place and operating effectively. d) Development of adequate information, control, evaluation and reporting systems within the Government will facilitate the accountability process. Management is responsible for correctness and sufficiency of the form and content of the financial reports and other information. e) Appropriate authorities should ensure the promulgation of acceptable accounting standards for financial reporting and disclosure relevant to the needs of the Government, and audited entities should develop specific and measurable objectives and performance targets. f) Consistent application of acceptable accounting standards should result in the fair presentation of the financial position and the results of operations. g) The existence of an adequate system of internal control minimizes the risk of errors and irregularities. h) Legislative enactment's would facilitate the co-operation of audited entities in maintaining and providing access to all relevant data necessary for a comprehensive assessment of the activities under audit. i) All audit activities should be within the SAI's audit mandate. j) SAIs should work towards improving techniques for auditing the validity of performance measures. 164

k) SAIs should avoid conflict of interest between the auditor and the entity under audit. B. General Standards in Government Auditing

The standards common to auditors and audit institutions are: a) The auditor and the institutions must be independent. b) The auditor and the institutions must possess the require competence. c) The auditor and the audit institutions must exercise due care and concern in complying with these auditing standards. This embraces due care in planning, specifying, gathering and evaluating evidence, and in reporting findings, conclusions and recommendations. The general auditing standards for the audit institutions are that they should adopt policies and procedures to a) Recruit personnel with suitable qualifications. b) Develop and train employees to enable them to perform their tasks effectively, and to define the basis for the advancement of auditors and other staff. c) Prepare manuals and other written guidance notes and instructions concerning the conduct of audits. d) Support the skills and experience available within the audit institutions, and identify the skills which are absent; provide a good distribution of skills to auditing tasks and assign a sufficient number of persons for the audit; and have proper planning and supervision to achieve its goals at the required level of due care and concern. e) Review the efficiency and effectiveness of internal standards and procedures. Besides, the following audit standards which have ethical significance may be followed: The auditor and the SAI should be independent and should avoid conflicts of interest with the audited entity on matters that may impair their independence materially. The auditor and the SAI must possess the required competence. The auditor must exercise due care and concern in complying with the auditing standards. The auditor should at all times maintain absolute integrity and devotion to duty. 165

Auditors should not disclose information obtained in the auditing process to third parties, either orally or in writing.

C.

Fields Standards in Government Auditing

The field standards applicable to all types of audit are: a) The auditor should plan the audit in a manner, which ens ures that an audit of high quality is carried out in an economic, efficient and effective way and in a timely manner. b) The work of the audit staff at each level and audit phase should be properly supervised during the audit; and a senior member of audit staff should review documented work. c) The auditor, in determining the extent and scope of the audit, should study and evaluate the reliability of internal control. d) In conducting regularity (financial) audits, a test should be made of compliance with applicable laws and regulations. The auditor should design audit steps and procedures to provide reasonable assurance of detecting errors, irregularities, and illegal acts that could have a direct and material effect on the financial statement amounts or the results of regularity audits. The auditor also should be aware of the possibility of illegal acts that could have an indirect and material effect on the financial statements or results of regularity audits. In conducting performance audits, an assessment should be made of compliance with applicable laws and regulations when necessary to satisfy the audit objectives. The auditor should design the audit to provide reasonable assurance of detecting illegal acts that could significantly affect audit objectives. The auditor also should be alert to situations or transactions that could be indicative of illegal acts that may have an indirect effect on the audit results. Any indication that an irregularity, illegal act, fraud or error may have occurred which could have a material effect on the audit should cause the auditor to extend procedures to confirm or dispel such suspicious. The regularity audit is an essential aspect of government auditing. One important objective, which this type of audit assigns to the SAI, is to make sure, by all the means put at its disposal, that the State budget and accounts are complete and valid. This will provide Parliament and other users of the audit report with assurance about the size and development of the financial obligations of the State. To achieve this objective the SAI will examine the accounts and financial statements of the administration with a view to assuring that all 166

operations have been correctly undertaken, completed, passed, paid and registered. The audit procedure normally results, in the absence of irregularity, in the granting of a "discharge". e) Competent, relevant and reasonable evidence should be obtained to support the auditor's judgement and conclusions regarding the Organisation, program, activity or functio n under audit. f) In regularity (financial) audit and in other types of audit when applicable, auditors should analyse the financial statements to establish whether acceptable accounting standards for financial reporting and disclosure are complied with. Ana lysis of

financial statements should be performed to such a degree that a rational basis is obtained to express an opinion on financial statements. D. Reporting Standards

The following standards apply equally to all these reports with variations in the scope of these reports. a) On the completion of each audit assignment, the Auditor should prepare a

written report setting out the audit observations and conclusions in an appropriate form; its content should be easy to understand, free from ambiguity and supported by sufficient, competent and relevant audit evidence and be independent, objective, fair, complete, accurate, constructive and concise. b) The auditor should issue the reports in a timely manner for use by

management, legislature and other interested users. c) The audit report may be presented on other media that are retrievable by other

users and the audit organisations. Retrievable audit reports include those, which are in electronic formats and may be released on the internet. d) With regard to audit of fina ncial statements, the auditor should prepare a

report expressing opinion on the fair presentation of the financial position of the audited entity in the financial statement. Form and content of this report and the nature of opinion is discussed in the following paragraphs. e) With regard to fraudulent practice or serious financial irregularities detected

during audit or examined by audit, a written report should be prepared. This reports should indicate the scope of audit, main findings, total amount involved, modus operandi of the fraud or the irregularity, accountability for the same and recommendations for improvement of internal control system, fraud prevention and 167

detection measures to safeguard against recurrence of fraud/serious financial irregularity. f) With regard to Performance or Value for Money Audits, the report should

include a description of the scope and coverage of audit, objective of audit, area of audit, main findings in respect of the efficiency, economy and effectiveness (including impact) aspects of the area (subject matter) which was audited and recommendations suggesting the improvements that are needed. g) With regard to regularity audits, the auditor should prepare a written report

which may either be a part of the report on the financial statements or the value for Money Audit or a separate report on the tests of compliance of applicable laws and regulations. The report should contain a statement on the results of the tests to indicate the nature of assurance i.e. positive or negative obtained from the tests. h) Reporting standards constitute the framework for the audit organization and

the Auditor to report the results of audit of regularity or performance audit or expressing his opinion on a set of financial statements. i) These standards are to assist and not to supercede the prudent judgement of

the Auditor in making audit observations, conclusions and report. j) The expenditure 'Reporting' embraces both the Auditor's opinion on a set of

financial statements and the Auditor's report on regularity, performance or value for money audit and also the reports prepared on periodical inspection of the records of an audit entity. Follow up of Audit Reports (i) Adequate, prompt and proper follow up action by the entity on and in the light

of audit conclusions projected will enhance the effectiveness of audit and promote public accountability. (ii) Systems and procedures should be in place and implemented for securing In

appropriate conclusions and preventive follow up action on audit reports.

subsequent audits and otherwise, the Auditor should examine and report whether satisfactory action was taken on the audit reports. Report distribution Written audit reports are submitted by the audit Organization to the appropriate officials of the Organization audited. Copies are also sent to other

officials who may be responsible for taking action on audit observations and 168

conclusions. However, the report is not a public document till it is presented to the legislature. Internal controls (a) Auditors should report the scope of their work on management controls and

any significant weakness found during the audit. (b) Reporting on management controls will vary depending on the significance of

any weaknesses found and the relationship of those weaknesses to the audit objectives. (c) In audits where the sole objective is to audit the management controls,

weaknesses found of significance to warrant reporting would be considered deficiencies and be so identified in the audit report. The management controls that were assessed should be identified to the extent necessary to clearly present the objectives, scope and methodology of the audit. In a performance audit, auditors may identify significant weaknesses in management controls as a cause of deficient performance. In reporting this type of finding, the control weaknesses would be described as the "cause". The form and content of audit opinion and report. The form and content of all audit opinions and reports are founded on the following general principles: (a) Title. The opinion or report should be preceded by a suitable title or heading,

helping the reader to distinguish it from statements and information issued by others. (b) Signature and date. The opinion or report should be properly signed. The

inclusion of a date informs the reader that consideration has been given to the effect of events or transactions about which the auditor became aware up to that date (which, in the case of regularity (financial) audits, may be beyond the period of the financial statements). (c) Objectives and scope. The opinion or report should include reference to the

objectives and scope of the audit. This information establishes the purpose and boundaries of the audit. (d) Completeness. Opinions should be appended to and published with the

financial statements to which they relate, but performance reports may be free standing. The auditor's opinions and reports should be presented as prepared by the auditor. In exercising its independence CAG may acquire information from time to time, which in the national interest cannot be freely disclosed. This can affect the 169

completeness of the audit report. In this situation the auditor should consider the need to make a report, possibly including confidential or sensitive material in a separate, unpublished report. (e) Addressee. The opinion or report should identify those to whom it is

addressed, as required by the circumstances of the audit engagement and local regulations or practice. This is unnecessary where formal procedures exist for its delivery. (f) Identification of subject m atter. The opinion or report should identify the

financial statements (in the case of regularity (financial) audits or area (in the case of performance audits) to which it relates. This includes information such as the name of the audited entity, the date and period covered by the financial statements and the subject matter that has been audited. (g) Legal basis. Audit opinions and reports should identify the legislation or

other authority providing for the audit. (h) Compliance with standards. Audit opinions and reports should indicate the

auditing standards or practices followed in conducting the audit, thus providing the reader with an assurance that the audit has been carried out in accordance with generally accepted procedures. (i) Timeliness. The audit opinion or report should be available promptly to be of

greatest use to readers and users, particularly those who have to take necessary action. The general principle for guidance in the audit of expenditure are :i) that a proper vouchers, complete in all respects and in the proper form where one is prescribed, exists in support of every item of expenditure and bears evidence of due scrutiny of the claim and 'Pay Order' by the Head of the Office concerned; ii) that full detail of each item of expenditure is either recorded on the voucher itself, or is available in a reliable and recognized subsidiary records; iii) that the expenditure incurred does not contravene any financial rules and procedure laid down by the Government and all pre-requisites to the incurring of expenditure have been complied with; iv) that there is provision of funds for the expenditure duly authorized by competent authority; v) that expenditure is in accordance with a sanction either special or general properly accorded and is incurred by an officer competent to incur it; 170

vi)

that expenditure sanctioned for a limited period is not incurred beyond that period without further sanction;

vii)

that the rules regulating the method of payment have been duly observed by the disbursing officer;

viii)

that payments has, as a fact, been made, and has been made to proper person, and that it has been so acknowledged and recorded in connected records that a second claim on the same account is impossible;

ix)

that the charge is correctly classified and that if a charge is debitable to the personal account of a contractor, employee or other individual or is recoverable from him under any rule or order it is recorded as such in a prescribed amount;

x)

that the payment have been correctly brought to account in the original accounts;

xi)

that the expenditure has been incurred with due regard to financial rules and in conformity with the cannons of financial propriety, e.g. supplies in excess of requirements have not been obtained, the purchases have not been made at higher than reasonable prices and the expenditure has been incurred only for legitimate objects, etc.;

xii)

that the rates paid for work done or supplies made are in accordance with any scale or schedule prescribed by the competent authority;

xiii)

that the sub vouchers and acquittances not required to be sent to Audit Office are on record and are cancelled or so defaced after payment in such a way that they cannot be used again to prefer a second claim and are not destroyed before the expiry of the period of preservation;

xiv)

that the expenditure has not been incurred to prevent the lapse of budget allotment or that the charges incurred in the year have not been met from the budget allotment of the next year.

Audit of vouchers relating to Central Government Employees Group Insurance Scheme/Punjab Government Employees Group Insurance Scheme 1982 8.18 The scope and extent of audit of the transactions relating to the Central Government Group Insurance Scheme and Punjab Government Employees Group Insurance Scheme 1982 introduced, vide Government of India, Ministry of Finance (Department of Expenditure) O.M. No. F-60/14/77-IC, dated 23-6-77 and Punjab

171

Government notification No. 7 (10)-WD (F)-82/6494 dated 2-10-82 has been under consideration of this office and it has been decided that : a) the monthly contribution recove red from the employees towards the Insurance Scheme may be checked, while conducting audit of the pay bills, selected for audit in the same way as other recoveries like GPF/CPF/CGHS/etc. are checked during audit of pay bills. b) the nominations made by the go vernment servants under the scheme and pasted in their service books may be checked at the time of checking of Service Book during local audit of the D.D.O's/Heads of Offices concerned. c) the vouchers relating to insurance payments made to the Government servants under the scheme may be audited/reviewed to the following extent :Percentage of audit/review by
i) ii) Vouchers in respect of cash sum payable on retirement Vouchers in respect of lump sum amo unt payable to the nominees of the Government servant who dies while in service Section Officer 33 % 25% A.A.O. 10% 10% Branch Officer 10% 5%

The quantum of audit prescribed above may be reviewed after a period of two years and your views intimated to this office. (CAG secret Memo No. 932 TA 1/168-78 dated 20th September, 1978 filed in File No. OA/Pb/Civil/Dept./Accounts/Vol. I/76-79). Bill Register 8.19 A Bill Register in the prescribed form (given in Annexure to this Chapter) is

maintained by every officer authorized to draw money from the treasury on bills signed by him. In examining the bill register it should be seen that :i) ii) no bill drawn on the treasury escapes entry in the bill register.' the bills are entered in chronological order and on the day on which they are actually signed by the competent officer. iii) the dates of encashment of bills and the amounts of the bills are correctly traceable in the cash book. iv) all the columns provided in the bill register are filled in and the entries made therein are attested by the Drawing and Disbursing Officer. v) the register is reviewed monthly by a Gazetted Officer and the results of review are recorded therein.

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Money order acknowledgements 8.20 Money order acknowledgement may be accepted in audit a sufficient voucher

in support of payment as the payee cannot be compelled to furnish any other receipt but the nature and particulars of money remitted should be written by sender after the words printed "Received the sum specified" before the money order is issued or by the payee when signing receipt of the amount remitted. Value payable covers 8.21 Value payable covers may be accepted as sufficient for audit purposes in lieu

of receipts from actual payees for amounts paid on account of articles received through the post office per value payable post. The fact of payment should, however, be supported by a bill or invoice of the payee (firm sending the articles) and payment endorsed on the covers by the disbursing officer. Rush of expenditure 8.22 The expenditure brought to account during the month of March of the last

financial year should be scrutinized to see :i) that the charges against the appropriations of the year, as brought to account, are regular. ii) iii) that the liabilities of one year are not brought to account in another year; and that irregular methods of dealing with assets and liabilities of the year have not been resorted to, which might either have caused actual loss or extra expenses or might possibly result therein or be otherwise not conducive to financial efficiency. 8.23 The irregularities liable to occur after accounting heavy expenditure at the end

of a year are :i) Payments charged off in the accounts but not actually made to the parties concerned at the time; ii) Payments made before the work or service representing the payment is performed. Audit of Stores and Stock Accounts General 8.24 (a) Audit of Stores and Stocks accounts kept in any office or Department is conducted in pursuance of provisions contained in Section 17 of the Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Act, 1 971 and is directed to ascertaining that the departmental regulations governing purchase, receipt 173

and issue, custody, condemnation, sale and stock taking of stores are well devised and properly carried out. Important deficiencies in quantities of stores held or any grave defects in the system of control detected in audit are brought to the notice of the Government. (Para 2.4.3 of the CAG's MSO (Audit) 2nd Edition 2002 ) (b) Detailed instructions with regard to the audit of stores and stock kept by

various offices or departments are contained in Chapter 4 of Section II MSO (Audit) 2nd Edition 2002. Stores and Stock Accounts 8.25 i) ii) The accounts of stores should be generally examined to see :that they are kept in the prescribed form; that entries of receipts of all stores purchased or otherwise obtained and of their issues are made in them as transaction actually occur; iii) that issues are supported by requisitions and indents approved by the proper authority; iv) v) that proper acknowledgements of the recipients exist; that an accurate and detailed account of consumption of consumable stores, is maintained by the indentors to whom these stores are issued; vi) that where a scale has been prescribed by Government or other authority for issue of stores of any particular kind, the same has not been exceeded; vii) that some official is held responsible for checking that this is done properly and for seeing that balances are worked out correctly; viii) that the accounts of balances which were audited in the previous inspection have been produced complete in all respect and that no entries in them have been tampered with; ix) that all transactions and balances in the stock registers, ledgers have been attested by a responsible officer; x) that stores are periodically counted, weighed or otherwise examined, and a certificate to this effect recorded in the stock registers by some responsible official, other than the custodian of stores or his subordinates and verified with the balance in the stock book; and that necessary action has been taken to adjust the surplus or shortages noticed as a result of the verification; xi) that the system of verification adopted by the Executive is adequate and proper; 174

xii)

that the staff responsible for the verification of stores is independent of the staff entrusted with the custody of stores or for keeping their accounts;

xiii)

that a reserve limit of stock has been fixed by Government or other competent authority;

xiv)

that the balances in hand does not exceed the limit, if any, prescribed by competent authority and is not in excess of requirements for a reasonable period;

xv)

that adequate action has been taken to survey, segregate and arrange for the disposal of surplus, obsolete and unserviceable stores;

xvi) a)

that where a period account is maintained the stores are priced with reasonable accuracy and the rates initially fixed are reviewed from time to time and revised where necessary so as to bring them within the market rates;

b)

the value accounts tally with the accounts of works and of departments connected with stores transactions that the total of the valued account agrees with the outstanding amount in the general account; and that the numerical balance of stock materials is reconcilable with the total of value balances in the account at the rates applicable to the various clauses of stores; and

c)

the value of the balance of stock is worked out at reasonable rates within the current market rates and includes cost of storage, etc. and it agrees with the value deducted from the account for which purpose and adjustment entry may be made if necessary;

d)

the value accounts as a whole are correct and the allocation of the debits to the various heads of the accounts for the cost of stores issued is correct;

e)

there is a certificate recorded in all stores registers or ledgers, etc. signed by a responsible officer, that the articles in stores have been periodically counted or otherwise physically verified with the balance shown in the accounts;

f)

steps are taken for the adjustment of profits or losses due to revaluation, stock taking or other causes, and that the se are not indicative or any serious disregard of rules. Stocks books

8.26 i)

The Principal points to be looked into in auditing the Stock Books are :see that the stock books are maintained in the prescribed form and correctly written up; 175

ii) iii)

see that the transactions are recorded in the stock books as soon as they occur; see that all purchases made and articles received from other sources have been duly recorded in the stock books;

iv)

see that a distribution list of Government property/stores, especially of furniture is maintained to show its distribution amongst the various officers and sections in the office/institution;

v)

see that all losses are duly recorded immediately as they occur or brought to light and formal sanction of competent authority is obtained in this respect;

vi)

see that the periodical verification/valuations/reviews are duly carried out and certificates to this effect 'Recorded in Stock Books';

vii)

see that articles are not held in excess of the requirements of reasonable period and that report of surplus articles classifying them as serviceable/ unserviceable/obsolete, is made to the competent authority as and when noticed;

viii)

see that unserviceable articles are written off under the orders of competent authority and duly disposed of. Credits of sale-proceeds of such articles sold should be verified;

ix)

see that

library and furniture registers are properly maintained and that

periodical examination and verifications are duly made and certificate to this effect recorded on the register; x) see that service stamps purchased from the Treasury are duly entered in the stamp register; xi) see that the pages of stock books are machine numbered and a certificate of page count is recorded therein by a responsible officer; xii) see that the closing balance of previous year/stock book have not been tampered with and carried over to the current year's stock book; xiii) see that all stores when received are examined, counted, measured or weighed as the case may be, before delivery is taken and are entered in the appropriate stock register after verifying that the quantities are correct, their quality is good and they are according to the specification where prescribed; xiv) see that full particulars of all stock articles are entered in the stock registers as are sufficient to identify the articles; xv) see that for all stores transferred to other offices there are proper acknowledgements on record in support thereof; 176

xvi)

see that totals and closing balances have been correctly worked out and there are no erasings/overwritings etc. Audit may call attention to cases of uneconomical purchase of stores and to

any losses which may be clearly and definitely attributed to the defective or inferior nature of stores which were accepted and certified to be satisfactory in quality. In respect of stores stocked in excess of requirements leading to locking up of Government money a list of such stores indicating the date of purchase and value should be obtained duly attested by the officer in charge. Where maximum limits are not prescribed the average of the actual consumption during the previous three years may be taken as the fair basis for working out the maximum limit of stores to be maintained in an office and the quantum of surplus stock worked out. In some cases, overall position of stock may be considered as satisfactory. In some of the component parts comprising the overall stock may remain stagnant and unmoving, thus resulting the locking of Government money. Such items of stores should be taken into account for working out stores stocked in excess of requirements. Registers of immovable property 8.27 The Section Officers/AAO should pay adequate attention to immovable

property registers and conduct an effective audit of property records with a view to safeguard the financial interest of Government. In this connection the instructions contained in Rule 16.7 of PFR Vol. I may be strictly followed and the following further points should be kept in view at the time of local audit of the various offices :i) that the registers of Land and Buildings are maintained in the prescribed form, and are correct and upto date. ii) that the cost of residential buildings shown in the registers agrees with that shown in the last Capital and Revenue Accounts for such buildings. iii) that the cost of land, fittings and installation has been shown separately from that of the cost of the buildings. Lands (a) It should be verified in the case of purchase of lands whether the procedure for the acquisition of land through Land Acquisition Officers was followed. (b) (c) Whether mutation deeds have been obtained and are on record. In case lands have got any Agricultural Cultivation, fruit trees, gardens, etc. it should be looked into whether the receipts realized therefrom are properly accounted for. 177

Buildings (a) In the case of buildings leased out to private individuals and Government servants on rent, it should be ascertained that the rents are being properly realized and there are no outstanding arrears. (b) It should be seen that proper estimates for annual repairs (special and ordinary repairs etc.) prepared and repairs are carried out. (Authority: Comptroller and Auditor General's letter No. 83-Admn/1/152-61, dated the 11th January, 1962) Registers of forms 8.28 In case of registers of Forms, besides other checks, special care has to be taken

in the scrutiny of stock account of saleable forms, license forms, or the receipt forms to ensure that no such forms are issued without realisation of the cost thereof which should be traceable in the Cash Book. Stationery Registers 8.29 i) It should be seen that :All purchases of stationery and stationery received from the Controller of Printing and Stationery, Chandigarh or Stationery office, Calcutta during the period of audit has duly been accounted for in the stationery register. ii) Issues of stationery articles are regulated by the sanctioned scale and all issues, are bona fide. iii) Periodical inspections and verifications are made in accordance with instructions contained in the Stationery Manual. iv) Totals and closing balances should be checked. Registers of Telephones and trunk calls 8.30 In local audit it should be seen that the instructions issued by the Government

regarding the expenditure on official as well as residential telephones are being followed and the registers meant for keeping records of calls made, bills paid for telephone calls etc. are properly being maintained in forms prescribed for the purpose. It should be seen that :i) All trunk calls have been made under proper authority and signed by the person making the call. ii) iii) Dues have been paid without delay. In case of private calls necessary recovery has been made, and credited to Government. The receipts may be traced in cash book. 178

iv)

The bill may be checked with trunk call register to ensure that the trunk calls have been recorded and over charging if any has not gone unnoticed. Accounts of securities

8.31 i)

It should be seen that :that security is taken as required under rules from persons entrusted with the custody of cash or stores and from contractors for works and supplies; and is in the form prescribed by the Government;

ii)

that security deposits are covered by a properly executed bond or agreement setting forth the conditions under which the security is held;

iii)

that Government paper tendered as security is taken at its market value and that a readjustment is made if there is subsequent depreciation in value;

iv)

that the register of the receipts and disposal of securities is properly maintained and that all entries since last audit are correct, and specially that acknowledgement of depositors for return of securities exist against the corresponding entry of receipt.

v)

that the register as well as securities are examined at least once a year by a gazetted officer of the Department.

vi)

that either the securities or the acknowledgement of their authorized custodians (vide Government Securities Manuals) are produced for inspection;

vii)

in the case of Post Office Saving Bank Pass Books see also that they are hypothecated to the Head of the Office for the full amount of security required and are kept in his custody;

viii)

that in the case of recovery of security deposits from subordinates in installments the monthly installments are regularly recovered, and correctly accounted for in Government account and promptly deposited into the Post Office Saving Bank and the prescribed registers are maintained correctly;

ix)

securities and security bonds are kept in safe custody according to the rules in this regard and are not released without specific orders of a competent authority. Audit of Contingent Expenditure

8.32

The audit of contingent expenditure requires a detailed knowledge on the part

of the auditor of the rules and orders governing the transactions of the department whose account is inspected. All financial rules, delegations and orders affecting

expenditure and the other transactions subjected to audit, must be scrutinized before 179

the audit of transactions which they govern is conducted. This should be done with a view to seeing that they do not conflict with the orders of any higher authority and in case they have not been separately approved by a competent authority, the issuing authority possesses the necessary powers. If these powers are clearly defined it should be ascertained that the orders defining the powers are exactly obeyed in every instance. 8.33 In partial modification of the existing procedure laid down vide Headquarter's

office circular No. 16-Admn-II/86 issued vide No. 794-Audit-II/284-85 dated 21-51986 regarding collecting, segregating and transmitting the original paid vouchers to the field audit parties for check with reference to the records of the auditee organisations, a revised procedure of sending a copy of list of payments and also schedule of drawals for the selected months to the field parties is laid down for verification during the course of audit of the auditee organisation for effective implementation as under :i) the requisition for list of payments etc. will be sent to D.C. section of the

office of the A.G. (A&E) in time by OAD Headquarter. ii) After receipt of documents from A.G. (A&E), OAD Headquarters will

photocopy them as required and send them to field parties in accordance with the programme. The original list of payments etc. should be returned to the D.C. Section thereafter. iii) In cases where documents are not received by OAD, parties before the audit

commences, they should prepare the list of drawals/receipts from the treasury for verification of transaction with the records of DDOs viz. Cash Book etc. The above procedure will apply to Civil Audit only excluding Public Works, first where existing procedure for sending vouchers would continue. (Authority: Comptroller and Auditor General's letter No.642-Audit-II/87-87 (ii) dated 27-5-92) Audit of Contingent Registers 8.34 i) ii) The contingent register should be examined to see :the contingent register is maintained in the prescribed form. no bill for contingent expenditure drawn at the treasury is left unentered in this register. iii) charge represented by each sub- voucher is correctly entered in the column provided for the head to which it relates. 180

iv)

appropriation for each head of contingent expenditure has been noted at the top of the column allotted to it.

v) vi)

progressive totals of all columns are struck monthly. that it is an accurate record of the contingent expenditure incurred in cash as well as by book adjustment.

vii)

that charges are recorded properly under the detailed heads of contingent expenditure and no items have been omitted.

viii) ix)

that each entry is initialed by the drawing officer; and that total expenditure during the year under each head of classification does not exceed the allo tment noted at the top respective columns.

8.35

while generally reviewing the contingent register, particular attention should

be paid to bills of heavy amounts, which should be intelligently and carefully examined in detail after linking with other bills for similar items of expenditure. Audit checks to be applied to Contingent Expenditure 8.36 (a) (i) It should be seen that all sub vouchers pertaining to the contingent bills relating to the months selected for detailed check, as are not submitted to Audit Office are made available to Audit. ii) See that the rates paid agree with the rates given in the approved quotations contracts, agreements, etc., executed for the supply of material purchased. iii) Where acknowledgements of payments are received in advance and the actual payment are made subsequently, separate acknowledgements of payees are obtained at the time of payment. Such subsequent acknowledgements need not be stamped, if the acknowledgements obtained in advance are already stamped. iv) Where a single stamped receipt is obtained from a payee in acknowledgement of payment against more than one voucher at a time, a preference is tiven on all concerned vouchers and the total amount of such vouchers agrees with the amount for which acquaintance is obtained. v) See that all paid vouchers and sub vouchers are stamped 'PAID' or so cancelled as to prevent a second claim being preferred against the Government on the same score. vi) Cash Memoranda from tradesmen are not taken as sub-vouchers unless they contain an acknowledgement of receipt of money and are affixed with stamp where the amount paid exceed 181 is Rs 500.00 In cases where

acknowledgements cannot be obtained, the cash memoranda should be stamped 'PAID' and initialed by the Drawing and Disbursing Officer. vii) See that all vo uchers for purchase of stores bear certificate by the competent officer regarding entry of stores in the relevant stock register indicating the page number of the stock register. Such voucher also bear certificate of the competent authority to the effect that the quantities of stores received are correct. Their quality good and they are according to the approved

specifications, where prescribed. viii) See that there are no erasures, over writings or alterations of total amount of the bill written in figures or in words. Corrections, if any, are properly

attested by the disbursing officer and the amount of bills tally with the actual payees receipts. ix) See that suitable notes regarding payments having been made on various sub vouches are also kept on the relevant purchase orders, indents and invoice/bills to prevent double payments. x) See that where Sales Tax has been paid it was payable on the stores purchased under the provisions of Sales Tax Act and that the tax paid was in accordance with the specific provisions of the Act and the amount paid was correct. xi) Records relating to the under mentioned items of contingent expenditure, if any, should also be scrutinized in accordance with the rules, orders, restrictions or scales laid down by the State Government:a) b) c) d) e) f) g) xii) Purchase/repairs of bicycles for office use. Conveyance hire charges. Hire of office furniture, electric fans, heaters, coolers, clocks and call bells etc. Rent for accommodation for office or residential. Staff paid from the contingencies. Purchase of stationery articles. Entertainment/light refreshment. See that every public office exercises the same vigilance in respect of contingent expenditure as a man of ordinary prudence would exercise in spending his own money and that the rules regarding the preparation of vouchers as laid down in rule 269 to 278 of Punjab Treasury Rule, Part I are observed by the Drawing Officer (Rule 8.34 PFR Vol. I). 182

xiii)

See that the charges are of obvious necessity, are made at fair and reasonable rates and previous sanction for any special item requiring such a sanction has been obtained.

xiv)

It should be seen that every payment is supported by a payment order signed by the head of the Office or disbursing officer serving under his authority in this behalf under Note 1 below Rule 269 to 278 of Punjab Treasury Rules Part I. The payment order should specify the amount payable both in words and figures and that all pay orders are signed by hand and in ink. Every payment should be acknowledged by the payee and dated. When the

acknowledgement on a voucher is given by a mark or seal or thumbimpression it should be seen that it has been attested by a responsible officer. xv) See that all payments for sums in excess of Rs 500/- bear a revenue stamp and has been defaced unless they are exempted from stamp duty. xvi) Check all payments with vouchers. Those vouchers which sent to the office of the Accountant General (A&E), Punjab, in accordance with the Rule 8.2 (III) of the PFR Vol. I should be obtained from the office. Necessary procedure in this behalf has been laid down in paragraph 4.17 of this Manual. If any voucher or sub- vouchers, which under the aforesaid rule, should have been submitted to the Accountant General are found to have been retained, the reasons for their retention should be enquired and their submission insisted upon. xvii) See that sundry ruling in Chapter VIII of PFR Vol. I and Appendix 9 of PFR Vol. II are observed and that the powers of sanctioning expenditure on various matters delegated in the book of financial powers have not been exceeded. xviii) See that liveries, boots and warm clothings to peons and other inferior servants are supplied subject to the conditions in the rules for the supply of liveries, etc. contained in appendix X of PFR Vol. II. xix) See that the purchase of typewriters, duplicators and duplicating machines, as well as stationery are made in accordance with the rules contained in the printing and stationery manual and that typewriters are not hired for a period exceeding two months without the previous sanction of the State Government in the Finance Department. xx) In the case of labourers employed at daily or monthly rates see that muster rolls have been duly maintained and written up daily by the official immediate 183

in charge, checked periodically by the supervising officer and that a certificate in terms of note 5 is recorded by the disbursing officer. Check the entries in the Muster rolls with daily reports, if any, submitted by the official in immediate charge to the disbursing officer showing on what work each labourer was employed on a particular date. xxi) see that (i) each item of payment has been recorded in the contingent register and is initialed by the Head of the Office or other Gazetted Officer authorised in this behalf (PFR 8.15 and Rules 269 to 278 of Punjab Treasury Rules Vol. I Part I (ii) that the amounts of work bills posted in the Contingent Register and included in the total is initialed by the disbursing officer (S.T.R. 4.55 and Rule 8.21 of PFR Vol. I (iii) that progressive totals of expenditure are made from month to month and do not exceed the budget allotment noted at the top of the register under cash head (Para 8.17 of PFR Vol. I (iv) that sub vouchers are properly numbered. xxii) see that (i) the permanent advance is recouped whenever it is running short and in any case at the end of each month (STR 4.47) (ii) the amount of the permanent advance is not in excess of monthly requirements and larger than absolutely necessary (para 2.8.4 of PFR Vol. I) and that only petty contingent expenditure is met out of it except as provided in notes 2 and 4 of Rule 2.8 of PFR Vol. I. xxiii) see that subordinates who have been given advances out of the permanent advance of the Head of the Office submit acknowledgements at the transfer of charge and in April each year to the Head of the Office and that the latter submits one to the Accountant General (A&E) in respect of the total permanent advance held by him (Rules 2.8 of PFR Vol. I). b) i) The following points should also receive attention :that the flow of expenditure is even (Rule 8.26 of PFR Vol. I) and that if expenditure is unusually large in March, it does not lead to financial irregularities. ii) that the expenditure is within the available appropriation and that all steps have been taken by the drawing officer with a view to obtain an additional appropriation if the original has either been exceeded or is likely to be exceeded (Rules 8.24 of PFR Vol. I) 184

iii)

an appropriation is intended to cover all the charges including the liabilities of past years, to be paid during the year or adjusted in the accounts of it. It is operative until the close of the financial year. Any unspent balance lapses and is not available for utilisation in the following year. It should, therefore, be seen that no money is withdrawn from the treasury to prevent the lapse of budget grant (Rule 17.19 of PFR Vol. I).

iv)

all charges incurred must be paid and drawn at once, and under no circumstances they may be allowed to stand over to be paid from the grant of another year (Rule 17.18 of PFR Vol. I).

v)

that no money is withdrawn from the treasury unless it is required for immediate disbursement (Rule 2.10 (b)(5) of PFR Vol. I).

vi)

that charges which are inadmissible or in excess of the sanctioned scale have not been sought to be concealed by showing them under contract contingencies or by splitting them into two or more different bills or classes.

vii)

that telephone connections have been made with the sanction of the State Government.

viii)

that remittances to places where there are treasuries or Sub-treasuries have been sent by Government Bank Drafts or Cash Orders whenever rules permit and money order fee is not unnecessarily spent. (Rules 11.10 to 11.14 of PFR Vol. I). Audit of Purchases

8.37 i)

Purchases are examined to see that : They are properly sanctioned by competent authority and are made subject to usual restrictions, regarding the existence of necessary appropriations and to any monetary limits and other conditions prescribed generally or in regard to specific articles or class or articles as laid down in the Schedule V and Annexure thereto of Delegation of Financial Powers Rules 1978.

(Rule 101 of G.F.R.) ii) The instructions governing purchase of stores as laid down in rules 102 to 105 of G.F.R. and Punjab Government letter No. 14/130/78-61B/425 dated 29-2-1978 (Annexure I) are followed so as to ensure that they are made in the most economical manner in accordance with the definite requirements of the public services and the purchase orders are not split up to avoid the necessity 185

for obtaining the sanction of higher authority with reference to the total amount of the order; iii) In so far as can be ascertained from the purchase files, demands of other indenting officers received at the time of purchase have been bulked together, as far as possible, to secure the advantage of bulk supply rates, etc. and the total quantity in respect of all the individual contracts issued against the bulked indents does not exceed the quantity of bulked indents; iv) Whether purchase has been effected by single tender or negotiation. If so, whether sanction of the competent authority has been obtained and reasons recorded for resorting to this method of purchase; v) All tenders were opened on the due date and numbered and intialled with date by the officer opening them; vi) The comparative statement duly signed is on record and has been checked with original tenders; vii) Whether any delayed/late tender has been incorporated in comparative statement and considered, and whether orders of the competent authority have been obtained to the consideration and acceptance of these tenders; viii) The lowest offer has been accepted. If not, the difference between the lowest offer and the offer accepted and the reasons recorded for rejecting this lower offer should be examined. It should also be seen whether the reasons are adequate. When favourable quotations are rejected on the ground that the capability of the firm was not tried before hand it should be seen if the matter regarding placing of a trial order with a view to secure economy in future purchases have been considered and appropriate action taken; ix) The successful tenderer has not indirectly derived an advantage over the other tender by the insertion of special conditions which have the effect of raising the rate quoted by him; x) The purchase price accepted is within the required limit of the estimated price of the indentor and if not, it should be examined whether confirmation about the availability of additional funds was obtained; xi) Suitable security as also sanction of the competent authority has been obtained. xii) No stores of defective and inferior nature are accepted and certified to be satisfactory in quality. 186

(Para 2.4.4 of MSO (Audit) read with para 3.7.18 of MSO (Audit) 2nd Edition 2002. xiii) The specifications indicated in the quotations agree with those shown in the notice inviting tender/quotations. xiv) That the articles against Government requirements were purchased from approved sources i.e. Jail factories/Institutions/Indian Red cross Society Punjab State Branches run by Department/State Government. In the event of non availability the articles were purchased against rate contracts if available otherwise made local purchases within his competency. (Controller of Stores Punjab letter No. 40553 dated 2-12-91 and Punjab Government letter No. 1/210/98-23/8502 dated 1-6-98). Check of Service Books General 8.38 (a) The local audit party should obtain from the office inspected the sanctioned strength of gazetted/non- gazetted staff under various categories as also a list of staff employed there against on the date of commencement of audit. It should be

ascertained whether service books for all Government servants in employment are maintained. In case service books for some of them are not maintained reasons therefore should be ascertained. With the discontinuance of Annual Establishment returns the service books are the only document for the verification of service for pensions and as such adequate attention should be paid during local audit to the verification/check of service books. The list of staff members obtained from the office inspected and the list of service books checked in the course of local audit should be attached with the Audit and Inspection Report. A separate Test Audit Note (in duplicate) on the check of service books should be prepared on the spot, issued to the office inspected and copy thereof sent to vetting section along with audit note. Audit checks (b) i) ii) In the audit of service books it should be seen that :the service books are maintained in the prescribed form; each service book is maintained for a Government servant from the date of his appointment and is kept up-to-date. iii) all entries on the first page of the service book are complete, particularly the date of birth, and are attested at least after every five years.

187

iv)

every step in the Government servant official life is recorded in his service book and each entry is attested by such superior officer as may be authorised in this behalf;

v)

the official concerned signs his name in the relevant column of the service book in token of his scrutiny and acceptance of entries made in his service book;

vi)

the period of suspension from employment or any other interruption of service; is promptly recorded in the service book with full details of its duration under attestation of authorised officer.

vii)

certificates of verification of service are recorded in each service book by the Head of Office. Where, however, the official was on foreign service, similar certificate is recorded by the audit officer in respect of the period spent on foreign service;

viii)

except in the case of clerical error, no alteration in the date of birth once recorded in the service book is made without sanction of the head of the department.

ix)

entries in pay columns agree with those shown in office copies of pay bills for the month or months selected for detailed audit;

(CAG's letter No. 928-Admn.II/349-61, dated 26th June, 1962 filed in TM I/II-I/Inspn. (Ares/61-62-63). x) increments have been granted correctly after excluding periods not counting for increment and where efficiency bar is prescribed in a time scale of pay the next increment is not granted without obtaining a certificate of fitness to cross efficiency bar granted by a competent authority; xi) all leave sanctioned to a Government servant is recorded in his service book and the debit thereof is traceable in the leave account; xii) no pay is allowed to a Government servant from the date of superannuation or on the expiry of a term of extension of service sanctioned by a competent authority. Condition, if any, of passing of departmental examination, before grant of Annual increment may also be kept in view, xiii) the certificates regarding verification of antecedents as also of medical fitness are recorded in the Service book; xiv) the Service Books selected for check should include those of all Government servants who are due to retire during the next five years. The check envisaged 188

in para 3.3.7 of MSO (Audit) 2nd Edition 2002 should also be exercised during local audit. xv) audit checks of pay fixation cases of Group A & B Officers may be exercised to the extent of 8 % of pay fixation cases.

(CAG letter No.352-Audit/M&C/227-2003 dated 31-12-2003) The Service Books checked should bear an audit endorsement duly signed by the Section Officer/A.A.O. under his dated signatures in the following forms:"Certified that the entries in the Service Book regarding verification of service with reference to pay bills and acquittance rolls have been checked upto . and the defects noticed have been incorporated in the Inspection Report/Test Audit Note". Check of Leave Accounts 8.39 a) The following procedure should be followed in checking the leave accounts :The total number of employees gazetted/non-gazetted in the office visited should be ascertained with reference to the gradation list, establishment bills or other records. This will enable the auditor to make sure that all service books and leave accounts have been put up for inspection. b) The object of inspection of leave account is mainly to educate the local officers to maintain these accounts correctly and to discover any mistakes with a view to their ultimate rectification. The auditors should not make any

corrections or alterations in the leave accounts themselves but get them corrected by the office concerned, but when these cannot be got corrected on the spot, these should be incorporated in objection memos. c) (i) The leave accounts of the persons likely to retire before the next inspection should be selected first and checked carefully, thereafter those of men who have taken long leave and finally of men who have taken leave rather frequently. (ii) If for any reason the service records of persons, due to retire before the new audit falls due are not put to audit, AAO/Section Officers will furnish a list showing the names and designations of such persons to Inspection Civil Headquarters in duplicate along with the draft inspection report and will also incorporate the fact of non production of such records in the Test Audit Note specially instructing the office concerned to send relevant service books to the Audit Unit concerned directly for necessary checking. d) It should also be seen that :189

i) ii) iii) iv)

Leave accounts are maintained in the prescribed form in all cases. Credits afforded to leave accounts are correct. The leave debitable to leave accounts are correct. Balances have been correctly worked out. Check of increment certificates and record of arrear payments

8.40

The increment certificates of Government servants whose names are omitted

from pay bills under rule253 of Sub Treasury Rules Part-I Vol. I should further be verified to see that notes of the arrear claims due to increment, revision of pay sanctioned retrospectively, supplementary claims in respect of allowances etc., of Government servants whose names do not appear in the pay bills, vide Rule ibid are duly kept in the office copies of the original bills for the period to which the arrears pertain. (T.M. Section Endst. No. T.M. 1/2/9/58-89-60/1160 dated the 24th September. 1959). Check of tenders and comparative statements 8.41 The tenders received and the comparative statements prepared should be

examined to see :i) that the widest possible publicity was given for calling the tenders and due (Sufficient) period of notice was allowed; ii) iii) iv) that tenders have been received on the prescribed forms in sealed covers; that all tenders bear the dated initials of the officer opening them. that the rates quoted by the tenderer have not been overwritten or changed without attestation by the tenderer and have been correctly transcribed in the comparative statement; v) that comparative statements have been duly checked and approved by the competent authority and contain his orders about the tenders accepted; vi) that a complete and regular stock account of receipt and consumption of blank tender forms has been kept. vii) that the sale proceeds of tender forms have been correctly accounted for in the books and promptly credited to Government Account. viii) That the lowest tender has been determined by working out the cost of all items of work or supplies on the basis of an estimated quantity of work to be done or supplied and not merely by usual comparison of the tendered rates, without reference to the cost of work or supplies involved. 190

Check of contracts and agreements 8.42 The audit has power to examine contracts and to being to the notice of the

proper authority any cases where competitive tenders have not been sought or where high tenders have been accepted or where other irregularities have come to light. Standing contracts should be reviewed occasionally and if audit has reasons to believe that the rates accepted in those contracts are c onsiderably higher than the rates prevailing at the time of review such variations should be brought to the notice of the competent authority. The general checks to be exercised in the course of scrutiny of contracts or agreements are detailed in paragraphs 3.7.1 and 3.7.21of the Comptroller and Auditor General's Manual of Standing Orders (Audit) 2nd Edition 2002. The contracts and agreement should further be scrutinized to see that :(i) that the terms of contract are precise and definite and there is no room for ambiguity; (ii) that standard form of contracts have been adopted, wherever possible, and as far as possible legal and financial advice has been taken in the drafting of the contracts; (iii) that the terms of contract once entered into are not varied without the previous consent of the competent authority; (iv) that the contracts are placed only after tenders have been openly invited and in cases where the lowest tender is not accepted, reasons therefore have been recorded by the officer competent to accept the tender; (v) that in case where formal written contract is not made no order for supplies etc. has been placed without at least a written agreement as regard to price; (vi) that provision has been made in contracts for safeguarding Government property entrusted to a contractor; (vii) that deviation from conditions of contracts are duly authorised by the competent authority. (viii) that no payments outside the strict terms of the contract or in excess of contract rates have been made without the consent of the competent authority; (ix) that, as far as possible, legal and financial advice has been taken in the drafting of contracts and before they are entered into; 191

(x)

that no contract involving an uncertain or indefinite liability or any condition of unusual character is entered into without consent of the competent financial authority;

(xi)

that in selecting the tender to be accepted the financial status of the individual and firms tendering has been taken into consideration in addition to all other relevant factors;

(xii)

that when a contract is likely to endure for a period more than five years, it wherever feasible includes a provision of an unconditional power of revocation or cancellation by Government at any time after the expiry of six months notice to that effect;

(xiii)

the contract or agreement has been signed by an authority which is competent to enter into the contract;

(xiv)

if the acceptance of tender provides full payment to a party other than the contracting firm/supplier, a power of attorney is already registered on the books of the office;

(xv)

there is no omission of any important clause, e.g., inspection of stores, dates and place of delivery, despatch instructions, name of consignee, penalty for delay etc.

(xvi)

the provisions for the payment of Sales Tax, Excise Duty, etc. should be checked with reference to the instructions issued by the Government from time to time. Vague provisions such as 'Sales tax will be paid, if legally leviable' should be objected to and the contracting officers asked to state in definite terms whether sales tax, excise duty, etc. are payable, and if so, at what rate and on what amount.

(xvii) acceptances of tenders placed in the later part or fag end of a financial year should be specially scrutinized and any tendency to rush of expenditure brought to notice. (xviii) the contract has not been made by or on behalf of a minor; (xix) the security deposit in the appropriate form and of correct amount has been deposited within the period stipulated in the contract and that in the event of default, penalties leviable under the conditions of the contract have been enforced; (xx) all the conditions and requirements printed on the contract form have been complied with; 192

(xxi)

if the contract has been entered into with a firm, each one of the partners has signed all the documents constituting the contract and if any partner be absent, these forms are signed by his duly constituted attorney. Verification of remittances to treasury

8.43

(a)

The State Government had required all the subordinate offices to carry

out monthly reconciliation of the departmental figures of receipts remitted into the Treasury with the treasury figures so that discrepancies in the amounts remitted and the amounts credited by the Treasury may not remain unreconciled and frauds or embezzlements of receipts may not remain undetected. For this purpose these offices are required to maintain Remittance Book. At the end of every month, the Head of office should prepare a consolidated receipt and forward the same to the Treasury Officer for signatures. The Treasury Officer will send back the consolidated receipt to the Head of the Office after affixing his signatures thereon in token of acceptance or pointing out the discrepancies, if any. Detailed instructions in this regard issued by the Punjab Government are incorporated in Annexure II to this Chapter. b) It should be seen during local audit whether the `Remittance Book is being

maintained in the offices inspected and whether monthly verification with the treasury records is being made. With a view to facilitate early detection of embezzlement of moneys, if any, by entry of fictitious remittances in the Cash Book, the Comptroller and Auditor General had decided that during local audit, credits for the receipts entered in the Cash Book for the months selected for detailed check should be verified directly from the books of the treasury. The Section Officer/AAO should have a list of remittances in respect of the selected months prepared from the entries in the Cash Book. He should then arrange to have the credits verified from the books of the treasury by deputing an auditor whenever necessary. The verification should be made in respect of all remittances made by the office inspected during the months, selected for detailed check, including those made at sub-treasuries. As every sub-treasury is required to render a daily sheet accompanied by challans in support of receipts and as these daily sheets are extracted from the initial records maintained at sub-treasuries, it will be sufficient if the remittances made at sub-treasury are verified in the District Treasur y from the subtreasury returns. In case the verification to be made relates to one sub-treasury and 193

the sub-treasury is situated in the same station as the office locally audited the verification may be made in the sub-treasury. (C.A.G.`s letter No. 1986-Admn/1/425-52, dated 23rd July, 1953 and No. 2465/Admn. 1/425-52, dated 6th September, 1953). (c) Discrepancies coming to notice of the Section Officer/AAO in the course of the above verification should be investigated and the discrepancies which are not satisfactorily reconciled should be reported in the Audit and Inspection Report. The Section Officer/AAO should furnish alongwith the Audit and Inspection Report a certificate to the effect that the amounts deposited into the treasury by the Head of the office during the months selected for detailed check (months to be specified) as recorded in the Cash Book have been verified with the Treasury Records and agree with the same or discrepancies have been reported in the Audit and Inspection Report. Verification of withdrawals from the treasury 8.44 The withdrawals made from the Treasury by a Drawing Officer as recorded in

his cash book should be verified at the time of local audit with the entries of those transactions, in the Treasury Officer records. For this purpose the local audit party should call for copies of the Treasury payment Schedules for the months selected for the detailed check from the Audit Unit concerned. The requisition for these schedules should be sent by the Section Officer/AAO well in time so that the requisite copies of schedules are received by the local audit party before the actual commencement of an audit. In case, copies of schedules are not received, the local audit party should prepare list of withdrawals from the cash book and verify it with the Treasury records. This list duly verified and audit observations in regard to discrepancies, if any, should be sent to the Audit Unit concerned for further necessary action. The discrepancies noticed in the two sets of figures should be investigated and the items remaining unreconciled should suitably be commented upon in the Audit and Inspection Report. A certificate of verification of withdrawal should also be furnished by the Section Officer/AAO with the Audit and Inspection Report submitted to Headquarters. Check of log books of Government vehicles 8.45 (a) A list of Government vehicles including staff cars, jeeps, station wagons

and trucks, etc. should be called for in local audit from the office inspected. It should be ascertained whether rules and regulations regarding their use and maintenance have been framed and got approved by the Government. It should also be examined 194

whether these rules are being observed in actual practice. It should further be seen whether the fo llowing essential records are maintained:(i) (ii) Log Books for each Government vehicle. A record of repair and replacement indicating the cost and the dates on which

carried out and of spare parts. (iii) A record of cost of petrol etc. consumed and all incidental receipts and

expenditure. b) i) The log books of Government vehicles should be examined to seethat the log books are maintained in respect of each vehicle in the prescribed form; ii) that the vehicle is used only for bonafide public purposes permissible under the rules and orders of Government and not for any private purposes without the orders of the competent authority. iii) That full details of all journeys undertaken are recorded covering the mileage done, places visited and relevant miles in meter recordings; iv) that in the case of authorised private or non-official journeys the charges recoverable, at the prescribed rates, have been recovered and credited to Government; v) that the purpose of journey is always recorded in detail under the signatures of the official using the vehicle, counter signed by controlling officer of the vehicle; vi) that all issues of petrol, mobil oil and other lubricants and consumable stores are duly recorded in the log books; vii) that the log books are closed after the prescribed periodical intervals and average number of kilometers run per liter of petrol or diesel oil is worked out; viii) that the yield of the kilometer per litre is not unduly low and where it is so the causes, leading thereto should be investigated; ix) that the petrol in tank of the vehicle is periodically verified by dip stick measurements or by any other standard method of estimation and a certificate recorded in the log book; x) that a kit of equipment and tools kept with the driver of the vehicle is entered in the log book; xi) that full details of all repairs to vehicle and replacement of parts are duly recorded in the log book; 195

xii)

that in cases where frequent repairs to vehicles, engines or replacement of some parts have been carried out, they are not indicative of any foul play;

xiii)

that a stock account of the condemned and replaced parts and accessories is maintained and their final disposal has been made to the best advantage of Government

xiv) xv)

that entries made in the log books are in ink or copying pencil; that entries of mileage at the start of journey as also at the Completion of the trip are noted in the log books by the officers using the Government vehicle, in their own hand writing and these entries have been signed by such officers;

xvi)

that all officials journeys outside the headquarters or jurisdiction of the vehicle (s) are supported by written sanction of the competent authority;

xvii)

that Government vehicles are not used for non-duty purposes to places of entertainment, public amusements, parties and pleasure trips etc. and by officers on leave.

c)

The records of repairs and replacements kept in the log books or separately

should be examined to see:i) ii) iii) that the cost of repairs and replacements is not on the high side; that the replacement of some part/parts is/are not repeated in quick succession; that the reasons for frequent repairs/breakdown of Government vehicles are not such as to indicate negligence of the drivers or laxity of control; iv) that such repairs and replacements have been executed either by Government workshops or by authorised dealers or garages in accordance with the orders of Government or Transport Commissioner in this behalf; v) that the replacement of parts, for which a life has been prescribed i.e engine, tyres, etc. have been made only after completion of the prescribed life;. vi) that the vehicles have been periodically tested and inspected by the Transport Department. (d) The inventory of equipment is scrutinised to see that it is checked by the

Controlling Officer every month and losses, if any, due to negligence or fault are promptly recovered. Audit of establishment pay bills 8.46 Office copies of Establishment Pay bills obtained by the local audit party from

the DDO`s concerned are checked in local audit to see that: 196

i)

there is proper and legally valid acquittance for each amount disbursed duly stamped where necessary and the amounts are disbursed to the persons entitled to receive them.

ii)

an amount of undisbursed pay and allowances is kept in a register and accounts remaining undisbursed for three months are refunded either in cash or by short drawal from subsequent bills.

iii)

arrears of pay, allowances, leave salary etc. are not drawn through regular monthly pay bills but are drawn in separate bills and a note of payment of arrears in the office copies of the bills for the period to which claim pertains is being made;

iv)

disbursements made are traceable in the Cash book on the dates on which they are actually made.

v)

Where pay and allowances are remitted through postal money order it should be seen that the commission due/paid on the money order has been deducted from the amount remitted and that the money order acknowledgment containing the nature and particulars of remittances and the period to which pertain, are on record with the Department and compare with the remittances shown in records.

vi)

The bills relating to Class IV Government servants and such class III Government servants whose names do not appear in the pay bills under the orders of competent authority are audited in the Central audit to see that the number of emplo yees for whom pay has been drawn agrees with the sanction strength of the establishment. The nominal check which consists in comparing the rate of pay of each individual drawn in the bill is correct cannot be exercised in Central Audit since the pay of such employees from time to time is not recorded in the Fly Leaf of the audit register. In respect of such bills the nominal audit should be conducted in local audit with the help of service books. Test check of T.A. bill in regard to counter-signatures

8.47

The countersignatures of the Controlling Officers of the T. A. Bills are taken

as sufficient proof that they have, before countersigning, fulfilled the responsibility entrusted to them. With a view to ensure that the duties assigned to the controlling 197

officers in respect of T.A Bills are properly exercised by them, the T.A. Bills in the offices/institutions visited by them should be test-checked by the local Audit parties on the following lines:i) that stations which could conveniently be visited in one continuous circuit were visited on different occasions necessitating more than one journey from Headquarters in the same direction; ii) that claims to travelling expenses for journeys performed by special means of conveyance were only paid in cases where the journey had actually been performed by such special means of conveyance and that were the good reasons for using the latter; iii) that there is adequate evidence on which the Controlling Officer has been satisfying himself regarding the necessity, frequency and duration of journey and halts. It should also be seen that where the journey was performed by a State Conveyance, necessary recovery at prescribed rates for the use of the conveyance has been made in cash or deducted in the bills. The results of this test-check and the cases in which the controlling officers did not discharge the responsibilities assigned to them should be incorporated in the audit and inspection note of office concerned Inspection Civil Wing (Headquarters) will keep a record of cases of failure of Controlling Officers, noticed during local audit and report them to control Section in the first week of April each year for onward transmission to Comptroller and AuditorGeneral of India. (Office Order No. B/42, dated 24th November, 1959) Audit of T.A. bills 8.48 i) While auditing travelling allowance bills it should also be seen that:travelling allowance advance drawn by individuals are adjusted promptly and in full and that a second travelling allowance advance is not drawn before an account of the first advance is received. ii) Travelling allowance bills not preferred within one year from the date on which they become due (i.e. the date following the date of completion of 198

journey in respect of which the claim is made) are not entertained and the travelling allowance advance granted in relation thereto are recovered in full. iii) Legally valid acquittance of the person entitled to receive the payment has been obtained in accordance with the provisions of Rule 283 of the Compilation of Central Treasury Rules. iv) Amounts in respect of travelling allowance bills remaining undisbursed for three months are refunded in cash or by short drawl from the next bill. Nominal Audit of Establishment Pay Bills 8.49 (a) Consequent upon the revision of Establishment Audit Procedure, the

nominal audit of establishment has been entrusted to Inspection Civil Wing. It has, therefore, been, decided by the Comptroller and Auditor General of India that the nominal audit of the Pay and allowance drawn by the individual should be conducted during local inspection in the manner and to the extent indicated in the following paras. (b) The Inspecting Officers/Section Officers/AAO should include, in separate

para of the Inspection report either in Part-II (a) or (b) or Part-III as the case may be, the results of Local audit of Establishment, the service books and leave account. The covering memo of the Inspection Report should indicate clearly the checks exercised and include a certificate to the effect in respect of nominal audit, audit of increment certificates, pay fixation on promotion/reversion, check of service books and leave accounts and check of office copies of bills and acquittance rolls. Nominal check to be conducted during local inspection 8.50 (i)(a) The nominal check during local Inspection will be conducted in respect

of pay bills of establishment of the month/months selected for test audit (under the extent instructions in the case of annual inspections, one month is selected for detail test audit and in the case of biennial or less frequent inspections, two months are selected for detailed test audit. The months so selected for test audit will be the months for conducting the nominal check of establishment). b) The nominal check will be exercised with reference to initial and primary

records containing the authority for the events necessitating the regulation of pay and allowances of Government servants such as increment certificates sanctioning the 199

increment, orders declaring him fit to cross the efficiency bar, orders of promotion/reversion and fixation of pay on such promotion/reversion, sanctions of leave and the leave salary, orders of suspension if any and the subsistence allowance granted to him, general orders of Government governing the pay scales, different types of allowances admissible and specific orders of Government in regard to grant of special pay or compensatory allowance to any number of establishment or type of establishment. For this purpose, the local audit party will maintain a guard file of general orders governing pay and allowances of establishment. Copies of specific orders relating to particular establishment should be made available to local audit. The photo copies of payment for the month selected for audit should invariably be made available to the local audit parties well in time. Apart from comparing the pay and allowances drawn by each Government servant in the pay bills of selected test audit month/months with the corresponding entries in the pay columns of the service books and checking the acquittance rolls to ensure that the pay and allowances drawn have been disbursed and acquittances obtained properly and accurately, the admissibility of pay and allowances drawn for each individual Government servant in these pay bills should be checked completely in the manner indicated above. c) The above checks should be integrated with the check of service books as

already prescribed and when service books are not made available they should be checked independently with reference to the initia l and primary records mentioned above. d) In addition to audit of pay and allowances drawn in the pay bills of

establishment for the month/months selected for test audit in the manner prescribed above, 20 per cent of (a) cases of increments sanctioned to the members of the establishment of the office under inspection and (b) cases of fixation of Pay on promotion or reversion during the period covered by local audit should also be checked during local inspection. e)(i) The Inspecting Officers should include in a separate para of the inspection

report either in Part II (a) or (b) or Part-III as the case may be, the results of local audit of establishment, the service books and leave accounts. The covering memo to the Inspection Report should indicate clearly the check exercised and include a 200

certificate to that effect, in respect of nominal audit; audit of increment certificates, pay fixation on promotion/reversion, check of service books and leave accounts, check of office copies of bills and acquittance rolls. ii) It has also been decided that nominal audit of establishment will be conducted

during the regular local audit of departmental offices and that it is not necessary to form separate local audit parties nor to prescribe separate periodicity of local audit for the purpose. In case any departmental office is not subject to local inspection at all because of smallness of contingent expenditure incurred by that office it should be ensured that such offices should be subject to local audit at least once in 3 to 5 years for establishment audit. iii) As regards the procedure of audit of pay bills of gazetted officers in whose

cases the system of issue of pay slips by audit offices has been dispensed with and salary and allowances are drawn in the same manner as the non-gazetted establishments, the existing system will continue. Instructions contained in Chapter 2 titled Gazetted Government Servants Audit of CAGs Manual of Standing Orders (Edition 2002) shall also be applicable.. Checks exercised in local audit of establishment charges 8.51 (a) Office copies of the establishment vouchers relating to the test audit

month or months selected for check of the initial and subsidiary records kept in the departmental offices are taken by the Inspection parties fo r checking them with cash book, office copies of the pay bills, acquittance rolls, treasury bill book etc. Acquittance rolls and the register of undisbursed pay and allowances are examined to see that each amount shown as disbursed has been disbursed to the person entitled to receive them and the arrangement for keeping a proper watch over the undisbursed amount is satisfactory. b) Besides, the overtime allowance claims, Childrens education claims,

reimbursement of tuition fees claims, T.A. bills, are checked with reference to the local records kept in the departmental accounts offices to satisfy about the correctness of the certificates on the basis of which the claims have been drawn and to see that the rules and regulations in regulating such claims have been followed. Check of Stamp Accounts 8.52 Stock account of postage stamps should be scrutinised to see that201

i)

Balances of stock of service stamps have been correctly carried over from previous month or months and that the totals and closing balances have been correctly worked out during the months selected for detailed check.

ii)

All purchases of stamps whether by cheque/contingent bills/cash, made during the selected months are traceable in the stock register of service stamps.

iii)

Balances of service stamps in hand at the end of each month is physically verified by the competent authority and a certificate to that effect is recorded in the stock register.

iv)

All issues of stamps relating to the registered letters are supported by postal receipts.

v)

Where stamps are issued in bulk to branches/sub-offices of the same office for use, proper accounts thereafter are rendered by such branches/sub-offices.

vi)

Service stamps have been used strictly only for official purposes. Audit of General Provident Fund Accounts

8.52

(a) General Provident Fund Accounts of the Central and State Government

employees are maintained by the Departmental Officers as per annexure III & IV of this Chapter. (b) In the local audit of General Provident Fund accounts of employees, the

Section Officer/A. A.O. shall be responsible to see that the requirements of the Government of Indias letter, dated 27th June, 1960 and the Punjab Governments letter dated 19th May, 1978 are duly complied with by the Departmental Officers who are responsible for maintaining the accounts. He should further supplement his audit with reference to the various rules and orders in the General Provident Fund Rules of the Central and State Government. To make himself conversant with the detailed instructions and procedure for the maintenance of the General Provident Fund accounts, the Section Officer/AAO may do well to refer to the relevant G.P.F. Rules. It should be seen in the local audit of General Provident Fund accounts whether subscriptions have been properly recovered and credited to the accounts of the subscribers concerned. Whether interest has been calculated properly and whether advances and withdrawals from the Fund have been properly sanctioned and accounted for. It may also be seen that suitable notes regarding receipt of all 202

nominations and Insurance Polices have been kept and physical verification thereof carried out from time to time. Final payment cases should be specifically scrutinised. It should also be seen that the various provisions of G.P. Fund rules are duly observed by the Departmental Officers. Local audit should be conducted annually for every head of office. (c) i) ii) iii) iv) v) d) The following records are to be checked in local audit:Index Register and Applications for admission. Provident Fund Ledger Accounts. Broadsheet. Statement indicating the totals of debits and credits for each month. Stock Register of Insurance Policies. Index Register and Application Forms.

These records are checked to see that:i) The General Index Register is maintained in the prescribed form No. PF.II(ATM65) in case of Central Government Offices) and is kept up to date; ii) the Account number was allotted by the Departmental officer only after obtaining the application for admission duly supported by a nomination in the prescribed form. It should also be seen that particulars of member to whom an Account number has been allotted are noted in the General Index Register and the Ledger. iii) for each subscriber there is a nomination or record which has been accepted as valid by the officer competent to do so. The entries of the nomination form are attested by the competent officer in the Index Register; iv) a separate ledger folio is opened for maintaining the account of each subscriber. Applications for admission to General Provident Fund are examined to see that they are obtained in the form prescribed under the G.P. Fund Rules, duly completed in all respect and no employee whether permanent or temporary except reemployed pensioner, is admitted to G.P. Fund unless he has been in continuous service for more than one year. 203

e)

Nomination of the Subscribers. It should be seen that nomination in the form prescribed under G.P. Fund rules

has been received from each subscriber and a note to that effect is kept in the General Index Register and the ledger account of the subscriber. In scrutinising nominations it should be seen that if at the time of making a nomination the subscriber has a family, the nomination is not in favour of any person or persons other then the member of his family as defined in the G.P. Fund Rules. f) i) Subscriptions. The subscribers are contributing at the rate of not less than 6 percent of the

basic pay as defined in F.R.9(a)(21) and para 2.44 of Punjab, C.S.R. Vol. I and not more than their basic pay. ii) No subscriber is allowed to discontinue subscribing to the Provident Fund

except during leave which either does not carry any leave salary or carries leave salary equal to or less than half pay or half average pay or during the period he is placed under suspension. iii) The amount of subscription fixed by the subscriber is not enhanced or reduced

more than once at any time during the course of a year. (g) i) Withdrawals The refundable and non-refundable advances from the Provident Funds are

sanctioned by the competent authority only for the purposes laid down in Rule 15 of the G.P.F. (C.S.) Rules and relevant orders on the subject. ii) The temporary advance is refunded in not more than 24 installments or in not

more than 36 installments in cases they exceed three months pay, or equal amount in whole rupees. iii) The advances are regularly recovered from the monthly pay bills and that the

interest on the advance is recovered in the following manner. iv) Audit check of final payment cases/transfer advances may be exercised to the

extent of 25% of such cases (CAG letter No. 352-Audit/M&C/227-2003 dated 31-12-2003 Interest:h) i) Amount of advance X No. of installments of recovery/500.

Interest The interest on subscriptions and withdrawals is allowed at the current rate

prescribed by the Government of India, Ministry of Finance from year to year in the manner laid down in rule 14 of the General Provident Fund (Central Services) Rules. 204

The interest worked out for recovery by the Departmental Officers should be actually checked by the Section Officer/AAO at the time of local Inspections. ii) The interest in fractions of a rupee exceeding 50 paise is rounded to the next

higher rupee. (i) Provident Fund Ledger The provident Fund Ledger is examined to see that:i) ii) the ledger accounts are maintained in the prescribed form; the name and designation of subscriber, his account number, particulars of the

insurance policy/policies being financed from G.P. Fund and the fact of nomination having been accepted are neatly recorded on the ledger folio assigned to each subscriber the entries relating to acceptance of nominations are also attested by the Competent authority; iii) the pay of the subscriber as on 31st March each year is noted in the column

prescribed in the ledger; iv) the subscription to G.P. Fund is not less than 6 percent of the pay of the

subscriber as on 31st March of the preceding year; v) vi) the G.P. Fund account is maintained in whole rupees; the head of the office or a gazetted officer nominated by him initials the

Provident Fund Accounts monthly in token of having verified that the amount of subscription deducted, refund of advances and temporary and final withdrawals are posted correctly; vii) sanctions to withdrawal from the General Provident Fund are promptly

recorded in the ledger accounts and the entries made in the ledger are initialled by the Head of office or a Gazetted Officer nominated by him, while signing the bills for withdrawal from Provident Fund; viii) subscriptions and refunds of advances as shown in the G.P. Fund schedules

duly signed by competent authority and the payment of advances and withdrawals as per vouchers are correctly posted in the ledger accounts of the concerned subscribers; ix) where balances at the credit of subscribers have been received from other

offices complete details thereof are recorded in the ledger under the attestation of competent authority; x) Ledger accounts are closed regularly every year and correct amount of interest

has been credited to the ledger accounts of the subscribers; 205

xi)

G.P. Fund Accounts statements are issued regularly to the subscribers every

year and their acceptance of the balance noted in their respective ledger account. xii) General review of ledger cards unposted items, missing credits are to be

checked to the extent of 3% of the account maintained with reference to original Provident Fund Schedules. (CAG letter No.352 Audit/M&c/227-2003 dated 31-12-2003) (j) Broad-sheet Broad-sheet is examined to see that:i) ii) iii) it is maintained in the prescribed form; it is closed regularly every month; the total amount of credit booked every month in the broad-sheet agrees with

the total of the G.P. Fund deductions made in pay bills for that month and that the total of the debits booked in the broad sheet agrees with the total of payment made out of the Provident Fund in that month as abstracted separately. iv) at the end of each year the ledger balances are agreed with the broad-sheet

balances and the broad-sheet is squared up to ensure its accuracy. k) Statement of totals of debits and credits It should be seen that the statements of totals of debits and credits as worked out in the Broad-sheet each month are correctly prepared in Form (PF-14) and sent to the Head of the Department regularly every month. l) Insurance policies The facility of financing new insurance policies from G.P. Fund account had been withdrawn with effect from 17.12.1960. Insurance policies in respect of which at least one withdrawal has been made from G.P. Fund before 17th December 1960 will, however, continue to be financed from G.P. Fund Account. The conditions governing financing of such insurance policies from G.P. Fund are laid down in rules 17 to 28 of the G.P. Fund (CS) rules. It should be seen in local audit that:i) the Insurance policy is one which can, under Rule 17 of the G.P Fund (CS) Rules, be financed from the provident Fund. ii) the Policies already financed from G.P. Fund are entered in the Stock Register of Insurance Policies maintained in Form P.F.R. 13 (ATM 68) under the signatures of the Head of Office; 206

iii)

the details of the policies including r ate of annual premium, the date of payment of premium and the stock register number of policy have been noted on the top of the ledger folio of the subscriber, under proper attestation;

iv) v)

the policies are kept in the safe custody of the head of the office; not more than the amount of annual premium is being drawn from the G.P. Fund for financing the policy every year;

vi)

the policy has been assigned in favour of the President of India and the assignment has been executed strictly in accordance with the rules and regulations and that it is good in law.

Note:- Detailed instructions regarding maintenance of G.P. Fund Accounts of Class IV employees by the Government of India,- vide circular letter No. F52(a)EV/60, dated 27th June, 1960 and by the Punjab Government, vide letter No. 64-OSD(F)-78-17507 dated 19th May, 1978 are incorporated in Annexure III and IV to this Chapter. m) i) Interest the interest on subscriptions and withdrawals is allowed at the current rate prescribed by the Government of India, Ministry of Finance from year to year in the manner laid down in rule 14 of the General Provident Fund (Central Services) Rules. The interest worked out for recovery by the Departmental officer should be actually checked by the Section Officer/A.A.O. at the time of local inspections. ii) The interest in fraction of rupee exceeding 50 P. is rounded to the next higher rupee. n) i) Withdrawals the refundable and non-refundable advances from the Provident Funds are sanctioned by the competent authority only for the purposes laid down in Rule 15 of the G.P.F.(C.S.) Rules and relevant orders on the subject. ii) the temporary advances are refunded in not more than 24 installments or in not more than 36 installments in case they exceed three months pay or equal amount in whole rupees. iii) the advances are regularly recovered from the monthly pay bills and that the interest on the advance is recorded in the following manner Interest:Amount of advance X No. of installments of recovery/500

207

Audit of Pay and Accounts Offices and D.D.O.s 8.53 1. After the Departmentalization of accounts in Central

Ministries/Departments with effect from 1.10.76 all payments as a general rule made by the pay and Accounts Office after pre-check except in case of bills paid by the D.D.O.s with cheque drawing powers under the powers vested in them. In the later cases, the Drawing and Disbursing Officers render account duly supported by vouchers to pay and Accounts Offices who exercises post check. The scope and extent of pre-check and post check by the P.A.O.s have been laid down in Chapter IV of the Hand Book of Accounting Instructions under the Departmentalised Accounting system. 2. Pending finalisation of the scope of audit of the P.A.O.s and the cheque

drawing D.D.O.s of the Ministries/ departments of the Government of India, the Accountants General were advised vide C.A.G.s circular D.O. No. 966- TA-1/75-76 dated 1.11.76 to adopt as an interim arrangement, the same scope and extent of audit as was being applied by the Director of Audit, Commerce, Works and miscellaneous in regard to P.A.O.s of the department of Food, rehabilitation and supply where the separated accounting system was established in 1953. After taking into consideration cent per cent checks applied by P.A.O.s to the various categories of bills and the quantum of checks and general reviews of accounts records by the internal Audit organisation of each Ministry/ Department it has been decided to revise scope and extent of audit of the departmentalised Pay and Accounts Officers and cheque Drawing Officers. It has also been decided that local audit of Pay and Accounts Office be directed towards testing the adequacy and efficiency of Internal checks and checking the efficiency and effectiveness of working of systems. 3. The quantum of check prescribed for audit parties are grouped under the

following categories:i) ii) Checks to be exercised on the transactions relating to the month selected. Checks to be exercised in respect of cases and records covering the period since last inspection. iii) Checks to be exercised for examining the efficiency of the working of Internal Audit units. 208

iv)

Review of Central records. While the annual audit of Pay and Accounts Offices can take care of the first

three categories referred to above, an horizontal inspection for critical review of all the central records in the Pay and Accounts Offices under each Ministry can be under taken with advantage once in three years for in depth examination. 4. At present audit of sanctions to the payments of grants in aid is done in the

main office and audit of payments is done in the Pay and Accounts Offices and check of utilisation and audit of effectiveness of expenditure is conducted in the office of the sanctioning authority. For this purpose P.A.O's can be asked to give voucher wise details of the grants paid in a year so that audit under Section 13 and Section 15 can be done with the advantage in the offices of the sanctioning authority. 5. Audit of contingencies can be effective only by an intelligent scrutiny of the

transactions with the purchase files and other related documents available in the offices of the D.D.O.s. A list of important and heavy transaction under contingencies should be prepared from the records of P.A.O.s during local audit for further audit of transactions. In view of the disposal of records in the P.A.O.s and D.D.O.s for the same type of transactions a equential local audit of the P.A.O.s and D.D.O.s as far as possible would be preferable. 6. The Drawing and Disbursing Officers with cheque drawing powers act on

behalf of the P.A.O.s in discharge of the functions. The paid folios (cheques) and original vouchers are with the Pay And Accounts Office concerned. Hence the checks to be exercised during local audit of these offices (D.D.O.s) will be of limited scope and confined to the following:i) Verification of the correctness of the net amount drawn and shown in the pay

bills register or office copies of the paid vouchers for the selected month with the amount noted in the counter foil of the cheques. ii) Verification of the entries in the Cash Book and other relevant records with

reference to the accounts noted in the office copies of the vouchers. iii) Verification of the entries relating to the paid cheques in the copies of the

Bank scrolls received by the D.D.O.s from the bankers with the amount noted in the counterfoils and;

209

iv)

Check of other accounts records maintained by the D.D.O.s with cheque

drawing powers. 7. Taking into account the smaller percentage of checks now prescribed in

duration of audit of Pay and Accounts Offices has been fixed at 12 to 15 days and that of D.D.O.s with cheque drawing powers at 3 to 5 days for the limited purpose of check of amounts records maintained on behalf of the P.A.O.s. 8. (a) It has further been decided that :The present system of local audit of P.A.O.s and D.D.O.s with cheque

drawing powers by paripatatic parties should continue. The resident audit parties in the Lok Sabha, Rajya Sabha, B.S.F. & C.R.P.F. which were set up before departmentalisation may now be discontinued. (b) The existing composition of audit parties i.e. double Section Officer party for

audit of Pay and Accounts Offices and single Section Officer party for audit of D.D.O.s with cheque drawing powers and the existing gazetted supervision of 50% will continue. (C.A.G.s circular No. 36 TA.I/147-81 dated 14.8.81) Procedure regarding verification of withdrawal by the D.D.O. of the Ministries/Departments during local audit. 8.54 Prior to departmentalisation of accounts drawals of bills made from the Treasurie s by an office taken up for local audit were verified with original vouchers available in the Audit Office and for this purpose all the vouchers paid in selected months in respect of drawing officer used to be taken from the Headquarters by the inspecting parties for being traced in the initial records. After the departmentalisation of accounts, the paid vouchers are not available in the Audit Office, but will be finally recorded with the P.A.O.s concerned who will retain in their possession, not only the vouchers paid by them but also the vouchers sent by the DDOs having cheque drawing powers. A question has now arisen, how audit can satisfy itself whether all the payments made by the PAOs to a drawing officer, or drawn by a cheque Drawing and Disbursing Officer have been properly accounted for in the initial records of drawing officer concerned. The following instructions are issued for this purpose:(i) In the case of D.D.Os with cheque Drawing powers, the counterfoil of

cheques will be available with them, though the paid foils and the original vouchers 210

would have been sent to and recorded by the PAOs concerned. In these cases, the net amounts drawn as shown in the office copies of the vouchers should first be compared for the selected months with the amounts noted in the counter- foils of cheques and after this tally, the entries in the Cash book and other records should be verified, with reference to the amounts noted in the said office copies. In order to verify that the amounts in the paid foils of the cheques are not different from the amounts noted in the corresponding counterfoils, the entries relating to the paid cheques in the copies of bank scrolls, received by the D.D.O should be verified with the amounts noted in the counterfoils. If these checks are carried out carefully, audit can be reasonably satisfied that all the amounts, drawn by the drawing officer have been entered his initial accounts. Any serious and important discrepancies, during any of the foregoing

checks should be promptly reported by the Inspection staff to the P.A.O concerned for immediate investigation and report, apart from making the usual mention of such cases in the Inspection report. Before the local audit of a cheque drawing D.D.O is taken up, the P.A.O concerned should also be asked to inform audit, before the commencement of the audit or during its progress, any case of discrepancy, defect or irregularity noticed by him in the course of his check of the bank scrolls with paid cheques and of the original vouchers received from the drawing officer. If there are any case in which cheques have been drawn by the P.A.O and sent to the D.D.O for disbursement, a list of such cases, during the period taken up for audit should also be obtained from the P.A.O for being traced in the initial records of the D.D.Os (ii) in the case of D.D.Os without cheque powers, the payments will be made by

cheque issued by the P.A.Os directly. It will be necessary in these cases to obtain lists of cheques issued by the P.A.Os alongwith all relevant particulars for the period covered by audit in order to enable the local audit party to verify whether all these cheques have been accounted for in the initial records of the drawing officer. (iii) The requests for information, lists of payment etc, from the P.A.Os should be

made within a reasonable time before the audit is due to commence. (iv) In carrying out these checks though the audit may be restricted to a test audit

of the transactions of a month or two, the information about the actual months selected for detailed audit should not be divulged to the P.A.O or the D.D.O.

211

(v)

In case where the D.D.O proposed to be audited and the concerned P.A.O. are

under the jurisdiction of different Accountant General, the information etc. required for the audit of D.D.O in terms of the foregoing instructions, may be directly obtained from the P.A.O. concerned without routing such requests through the A.G. incharge of the audit of the P.A.O. (C.A.G`s letter No. 226- TA-I/75/76/KW/VI dated 23rd March, 1978 filed in the file No. OA/Pb. Civil Deptt./Accounts/Vol.1/76-79. Procedure regarding local audit of the accounts of the Public Sector Banks (including State Bank of India and its subsidiaries) handling receipts and payments on behalf of various Ministries, Departments under the scheme for departmentalisation of Union Ministries account 8.55 Under the departmentalised accounting system, the receipts and payments of each Ministry Department of Government of India are handled by the Public Sector Banks (including S.B.I. and its subsidiaries) nominated for the particular Ministry/Department by the Reserve Bank of India in accordance with the Memorandum of Instructions issued by the R.B.I for the guidance of the Public Sector Banks concerned, reproduced in Appendix 3 to the `Hand Book of Accounting Instructions. In para 29 of these instructions provision has been made for a The

percentage audit by this department of the transactions under this scheme.

manner in which the audit is required, to be conducted by this department in the branches of the Public Sector Banks has been under consideration of this office and it has now been decided that the following procedure may be followed for the audit of the transactions in these banks on Government account:i) The banks will no doubt be audited by their own auditors who are expected to

cover also the transactions of Government. The scheme does not provide for an internal audit by the organisation of the Controller General of Accounts, who has also informed this office that no decision has been taken in this matter so far. The scope of our scrutiny should therefore take into account these factors. ii) Since the branches of the Public Sector Banks are discharging more or less the

treasury functions the inspection should be on the lines of treasury inspection in accordance with the general principles contained in Section VI B of the M.S.O. (T) Vol. I and Section V.C. of the secret memorandum of instructions regarding the extent of audit.

212

iii)

All Public Sector Banks conducting Government business should be inspected

annually by the Civil Inspection parties. The Primary object of inspection by the Audit Department is to assist the Banks/Government in establishing a system of sound working strictly in accordance with the prescribed rules. It is thus intended to

supplement the system already existing in these banks. The audit inspections can do no more than check generally that the rules prescribed by the Government are observed, apart from any other special enquiries which the Government may desire. iv) a) It will be ensured during local audit thatthe procedure observed at the Public Sector Banks transacting Government business meets all requirements of audit and that the accounts are properly maintained; b) the scrolls and challans are being despatched in time and credits are being afforded to the Ministry, Department of office of Government concerned without any delay; c) the specimen signature of all drawing officers are properly recorded and are referred to by the Bank officials before they make the payments; d) The procedure for dealing with the cheques, the encashment of which is subject to the limitation of assignments, letters of credit, etc., should be examined to ensure that the rules are complied with. At present Civil Inspection parties visit branches of the Public Sector banks (including S.B.I. and its subsidiaries) in connection with the audit of Public Provident Fund Accounts, Special Deposits Accounts, and Pension payments. The same

inspection parties should also be entrusted as far as possible with audit of the accounts of these banks transacting Government business so as to avoid multiple visits to the banks. (C.A.G.`s letter No. 349-TA 1/222-78, dated 24th April 1979) Sending of copies of Inspection Reports to Bank Authorities and Ministry of Finance 8.56 (a) In the case of audit of Public Sector Banks including State Bank of India and its subsidiaries handling receipts and payments on behalf of various Ministries/Departments, a copy of the inspection Report may be sent to Public Sector Bank inspected, with a copy to the Head office/link office of the branch inspected. In 213

cases where a particular bank may be having transactions with the departments/offices of the various Ministries, as such instead of sending a copy of the report to the Administrative Ministry, a copy of report may be sent to the Ministry of Finance (Banking Department) in terms of instruction contained in para 7.1.12 of the Comptroller and Auditor Generals M.S.O. (Audit) 2nd Edition 2002. Half yearly lists of outstanding paras of the Inspection Reports may also be furnished to the Ministry of Finance as per instructions issued from time to time. (C.A.G.`s letter No. 590-TA 11/93-80, dated 17th May, 1980 addressed to Accountant General, Tamil Naidu, Madras) Note 1:In partial modification of the above orders, it has been decided that separate reports regarding audit of pension payments made by banks may be prepared in respect of each category of pensioner i.e., Central, Civil, Defense, Railways and State and copies thereof may be sent separately to the authorities mentioned below, instead of sending a consolidated report to the Ministry of Finance (Banking Division) besides copies of reports being sent to the concerned branch of the bank as also to the head office/Link office of the branch. 1. 2. 3. Central Civil Pensioners Defence Pensioners Railways Pensioners Controller General of Accounts. Controller (Pension) of Defence Accounts

Deputy Director Finance (Accounts) Ministry of Railway, Railway Board. New Delhi.

(C.A.G.`s le tter No. 1470-TA 11/93-80, dated Ist November, 1980). Note2: In partial modification of the orders contained in Note I, it has been decided that copies of inspection Reports in respect of the pensions paid to Railway Pensioners by the Public Sector Banks may be sent to the designated Financial Advisor and Chief Accounts Officer of the respective area (as per list attached to the scheme of disbursement of pensions to Railway Pensioners by the Public Sector Banks) instead of the Deputy Director of Finance (Accounts), Ministry of Railways as earlier laid down. (C.A.G.`s letter No. 848-TA-11/17-80 dated 16.7.81) Note 3:- It has been decided that Reports relating to audit of Direct and Indirect taxes collected at the Branches of the State Bank of India, its subsidiaries and by other Public Sector Banks may also be prepared separately and sent to the under mentioned authorities instead of sending a consolidated report to the Ministry of Finance (Banking Division) in addition to copies being sent to the concerned designated branch of the Bank. 214

i)

Receipts relating to Income tax Chief Controller of Accounts, Central and other Direct taxes Board of Direct Taxes. to Central Chief Controller of Accounts, Central Board of Excise and Customs

ii).

Receipts

relating

Excise and Indirect Taxes.

(C.A.G.s letter No. 233-TA 11/27-81 dated 23-2-81). Note 4: It has been decided that reports relating to audit of Public Provident Fund Accounts and Special Deposit Scheme at the State Bank of India, its subsidiaries and other Public Sector Banks may be prepared separately and copies of such reports may be sent to the (Controller of Accounts), Ministry of Finance, in addition to copies being sent; to the concerned branches of the Bank. The inspection reports relating to reconciliation with Public Sector/Reserve Bank may be sent to the concerned Controller of accounts and Pay and Accounts officers with a copy to the Reserve Bank deposits group of C.C.A`s office. (C.A.G.`s letter No. 210-TA.I/235/79 dated 27-2-81.) 8.56(b) The recovery of amount, if any, overpaid or erroneously paid to pensioners by the paying branches which comes to notice during local audit should be watched through the objection book in the usual manner. The recovery when effected will be noted in the objection book quoting reference to its particulars appearing in Column 5 of the original payment scroll (annexure IV) furnished to this office by the Treasury Officer with the relevant monthly accounts. In cases where over-payment or an

erroneous payment becomes irrecoverable and the amount involved is found to have been paid in excess of the authorised amount or in violation of the instructions issued to the paying branches by the Government or by the Reserve Bank of India from time to time, the matter will be taken up with the Reserve Bank of India/State Bank of India or its subsidiary responsible for reimbursement of pensioners payments to the linked branches of the concerned paying branch (which has made the over- payment) with copies to the paying branch and its link branch. The former bank (Reserve Bank of India/State Bank of India) and its subsidiary will ensure early recovery of that amount and will deduct the same from the subsequent amount to be reimbursed on account of pensioner payments made by it or by other Paying Branch of the same Public Sector Bank at the same place. The amount short reimbursed will be

prominently indicated in the debit advice quoting particulars of Accountants General communication as an authority for the deduction made so as to enable the 215

Accountants General to clear the amount from the objection book and will give credit in the Government accounts on receipt of the copy of the debit advice alongwith the monthly accounts from the treasury. (C.A.G.s letter No. 1074-T-11/34-80, dated 5th January, 1981) AUDIT OF PENSION PAYMENTS TO THE CENTRAL CIVIL PENSIONERS AND PUNJAB GOVERNMENT PENSIONERS THROUGH THE PUBLIC SECTOR BANKS. 8.57 The Scheme for the payment of Pension to the Civil Pensioners of the Central Government through Public Sector Banks was introduced in Punjab with effect from the pensions for the month of November, 1976 payable in December, 1976, by the Government of India-vide Ministry of Finances letter No. O.M. No.

F10/23(B)/TR/76 dated 11th June, 1976. This scheme was also introduced by the Punjab Government for its pensioners with effect from the pensions for the month of July, 1977 payable in August, 1977 vide Punjab Government Finance Department letter No. 473 OSD(F)/77/15357 dated 13th June, 1977. The audit of pension

payments by Public Sector Banks has been entrusted to the Inspection Civil Wing by the Pr. Accountant General. Before taking up the audit of pension payments by the Public Sector Banks, the Inspecting Officer and the local audit party should study the files containing orders/instructions issued on the subject in Inspection Civil Wing Headquarters and make themselves conversant with all the aspects of the scheme and the checks to be applied in local audit. INSTRUCTIONS FOR CONDUCTING LOCAL AUDIT ISSUED BY THE COMPTROLLER AND AUDITOR GENERAL a) The accounts records and registers maintained in the branches of the Public Sector Banks and also in link branches of the banks making pension payments should be audited as follows:i) Local audit should be done in such a way that it supplements the checks

exercised in Central Audit, while doing so it should be ensured that the provisions of the scheme are strictly followed by the Public Sector banks. If they are not following the provisions strictly, they should be asked to do so. Such a check should, inter-alia, include the following points particularly:-

216

a)

Income Tax is deducted at source wherever required and certificates of tax deduction is issued in April each year.

b)

Payment is made only upto the date of death of the pensioner and any over-payment made has been recovered and refunded to Government.

c)

Payment of life-time arrears of pension has been made only to the heir of the pensioner.

d)

When a pension ceases to be payable, the P.P.O. is returned by the paying branch to the Treasury Officer through the link branch after making necessary entries in the P.P.O. as well as in the records of the bank. In addition to the above checks with reference to the provisions of the Scheme,

the following checks should also, interalia, be applied. a) b) No amendment or change is made in the P.P.O. by the Bank itself; The correct amount of pension has been credited to the pensioners account on the basis of the P.P.O. issued by the Accountant General and received through the Treasury und er proper authorisation. c) The amount claimed by the link branch of the public Sector Bank from Government on account of Pension payments agree with the total amount credited to the accounts of pensioners. (C.A.G.`s letter No. 2795-T.A. 11/86-76 dated 24th December, 1976) Audit checks to be exercised in local Audit of Pension Payments. 8.58 The following audit checks should be exercised during local audit of pension payments made through the Public Sector Banks:I i) CHECKS AT LINK BRANCH: Check all the entries in the bank scrolls brought from the Headquarters in the Index Register to ensure that there are no discrepancies. ii) In respect of payments, if any, made directly by Link Branch the checks prescribed for paying Branch should be exercised. iii) Ensure that total amount claimed from Government agrees with the total amount credited to individual ledger accounts of pensioners.

217

II. i)

CHECK AT PAYING BRANCH Check that no payment, prior to the date upto which pension has been shown credited by the Treasury Officer has been made by the Bank.

ii)

Check that all the payments of the relevant Bank Scrolls brought from the Headquarters tally with credits posted in ;

a) b)

the pensioners accounts in the ledger; and record of Pension payments in Form Annexure (IV). The payment entries in the later bear authentication by the authorised officer of the bank.

Note-

The exercise of this check in all the paying Branches of the Bank in the District will ensure that the amount claimed by the Bank from the Government agrees with the total amounts credited to the individual ledger accounts of the Pensioners. Conduct general review of the ledger accounts of the pensioners to see that:the ledger account is not a joint or either survivor account. Monthly pensions are credited within first seven days. Income tax is deducted at source and a certificate to that effect issued to

iii) a) b) iv)

pensioner in April each year. v) No payment of adhoc relief is made without authorisation from the Treasury

Officer. vi) Payment is made only upto the date of death and any overpayment made is

recovered and refunded to Government. vii) viii) Payment of life time arrear of pensions is made only to the heirs. When pension ceases to be payable, necessary entry is made in P.P.O. and the

same is returned to the Treasury Officer. ix) Bank. x) a) b) Ensure that procedures as mentioned below is followed correctly:Life certificate as per Annexure V(i) is obtained in November each year. Declaration in Form Annexure V(ii) is obtained from Central Service Class I and All India Service Officers in May/November each year regarding commercial employment. 218 No amendment/change is made in the PPO by the Link/Paying Branch of the

c)

An undertaking from widow recipients of family pensions is obtained for reporting re- marriage. In case of other recipients family Pension Certificate of re-marriage is obtained in May/November each year.

d)

Before commencing payments to any pensioner, he is called for identification; undertaking is obtained regarding recovery of excess payment/credit of pensions, Specimen signatures or thumb impression is obtained on the disbursers portion of PPO.

e)

After all the pages of P.P.O. are fully used up, the paying branch may add extra sheet(s) for noting further payments and number of pages available are noted on P.P.O.

III.

DRAFTING OF AUDIT NOTE: Audit Note should be prepared Link Branchwise/Paying Branch in each

District and submitted to Headquarters immediately after the completion of audit. IV. Norms for conducting local audit of pension payments through the Public Sector Banks, are as under:For Paying Branch 1. 2. 3. 4. Upto 25 pensioners Between 26 and 100 Pensioners Between 101 to 200 pensioners Above 200 Pensioners For Link Branches 1. 2. Making payment to State or Central 2 days Pensioners Making payments to both State and 3 days. Central Pensioners Time Allowed Nil 1 party day 2 party days 3 Party days

(C.A.G.`s letter No. 46-TA 11/1982 issued vide letter No. 663-TA-11/111-82 dated 17.6.82.) Audit of Public Provident Fund Scheme 1968 8.59 The records maintained in connection with the Public Provident Fund Scheme

transaction in each branch of the State Bank of India and its subsidiary whether 219

conducting Government Business or not should be test-checked alongwith the Annual Audit of the returns of the Banks undertaken for arriving at the cost of Govt. Business. The local audit of the Public Provident Fund transaction will, however, be conducted on a selective basis i.e for the purpose, the branches in the State shall be divided into the following three categories. Category-I Category-II Category-III Those having more than 5000 Accounts Those having accounts above 1000 but not more than 5000. Those having accounts upto 1000.

The information as to the names of the branches falling into the respective categories will be called for by OAD(C) from the Head office of the banks in the beginning of each financial year and the selection of the branches for audit purpose will be made to the extent laid down in (ii) below. (ii) In respect of the branches falling under category 1 the audit will be conducted

once a year, for category II once in two years and in respect of category III once in three years. iii) The quantum of audit to be conducted during local Inspection of the selected

banks should be more or less on the scale prescribed for Employees Provident Fund organisation vide Annexure to C.A.G.s letter No. 4222-TA 1/13-66-KW-(I) dated 28.12.67 which is reproduced as an Annexure to this para. The procedure to be

followed during local audit of the individual fund accounts with connected and subsidiary documents is also indicated in the said annexure. ANNEXURE LOCAL AUDIT PROCEDURE In addition to the check of relevant records right from application for admission to the fund till the stage of final refund of the amount maintained in the branches of the State Bank of India and its subsidiaries the individual transaction should be test checked to the extent of 10% with reference to the statements already in OAD(C) from various branches. These statements will be supplied by OAD(C)

Inspection Party concerned, local audit will specifically be directed to verification of :-

220

i)

The correctness of the amount of interest allowed with reference to the rate prescribed for the purpose.

ii) iii)

The signature of the office of the Bank authorised the payment. The quantum and manner of the test audit of accounts of employees Provident Fund Organisation to be applied to the Public Provident Fund Transaction.

1. a)

Audit of individual Fund accounts with connected and subsidiary documents:One month transaction in 10% of the total number of accounts covering all factories with a general scrutiny in respect of other months.

b)

Calculation of employees subscriptions and the employees contributions should be confirmed to one month transaction 5% of the total number of accounts selected relating to all the factories.

c)

Calculation of interest should be checked for all previous years since it was test checked in respect of accounts selected as per (b) above.

d)

Scrutiny of the transaction to advance from the accounts selected as per item (a) above.

e)

Check of the nominations in respect of the accounts selected as per item (a) above.

f)

Final payments i) ii) iii) iv) Below Rs.1000 Rs.1000/- and above but below Rs.5000/Rs.5000/- and above but below Rs.10,000/Rs.10,000/- and above 5% 10% 50% 100%

II a)

AUDIT OF FINANCE AND ADMINISTRATIVE ACCOUNTS Cash accounts of contributions etc. i.e. their receipts investments and refunds and accounts of securities. Four months accounts selected at random with a general review of the rest of the accounts as a whole.

b)

Accounts of administrative expenses (including Cash Book). One months accounts in full with a general scrutiny of the years accounts as a whole.

221

c)

Audit of vouchers relating to pay, Travelling Allowance and contingencies10%. Introduction of Vertical Audit

8.60

Consequent on receipt of instructions from the Headquarters office for

implementation of scheme of vertical audit, it was decided to give effect to vertical audit to the following departments : 1. 2. 3. 4. Animal Husbandry Department Soil Conservation Social Welfare Director Research, Medical Education. The strategic plan will thus be a rolling plan for 2-3 years to be framed each year. The second aspect which is a crucial component in Operational Planning. This will be the detailed planning for major institutions taken up for audit in a year, in accordance with the strategic plan. Identification of issue, extent of scope of audit and speaking out methodology would be required at this stage. The strategic and Operatio nal plans should serve to ensure coverage and depth according to an acceptable standard utilising the available manpower optimally. The Planning process is to be made on annual exercise the results of which should be well documented. This will serve as an effective aid for the management of audit. In order to make the local audit programme more effective and taking into account the time and staff constraints and the number of units to be audited, it will perhaps be necessary to reconsider the cycle of audit in respect of certain items of works/units. For this purpose, an A.B.C. analysis type should be made in order to identify units and items of audit which require yearly audit on a statutory basis and other units/items of check which could be conducted in a phased manner on a 3 year cycle without sacrificing the audit obligations and broad objective in regard to these routine items. Before taking up inspection by the parties, a meaningful discussion with the Group Officer/Audit Officer (Headquarters) of the concerned party should be held. The audit Plan could also perhaps include departmentally oriented audit for comprehensive examination of the activities of a Department/Ministry. Perhaps one 222

Ministry could be selected in a year for such study. It will be difficult to foresee the efficacy of such a review till report is ready. However, as an Audit Plan items departmentally oriented audit is worth considering on a regular basis. To make the Audit Plan effective, it is also necessary to restructure the audit parties in such a way that it becomes more officer oriented. Only a small beginning has been made in this direction after the formation of the Assistant Audit Officer cadre. For important audit coming under 'A'` category and also audit of Autono mous Bodies etc. It is perhaps worthwhile to consider induction of more officers at the Audit Officers/Assistant Director of Audits level to man the audit parties. Introduction of Audit Planning 8.61 Consequent on the receipt of instructions from the H eadquarters Office for

implementation of the scheme of Audit Planning new procedure is to be adopted. The salient features of which are as follows: a) b) c) d) denovo examination of periodicity of audit and duration of individual audits, Prioritization of audit assignment, matching the available audit resources with the audit requirement and acquiring in-depth knowledge of the auditee organisation and developing appropriate data base. In formulating the audit plans consistent with the availability of manpower resources, the existing norms relating to periodicity, composition of audit parties etc. need not be considered inflexible. AG`s have also been empowered to relax the percentage of audit prescribed in the memorandum of secret instructions wherever necessary. After providing for statutory and/or obligatory audits (as mentioned

below) it is necessary to undertake necessary rigorous examination, each year of the periodicitys and during of the other units. Any omission of unit/organisation in the Audit Plan sho uld be deliberate and well considered and so should be the inclusion of any particular Audit. a) Audits necessary for certification as Sole auditor of accounts including Finance and Appropriation accounts. b) Audits under section 19 of CAG`s (DPC`s) Act, 1971. 223

c) d) e)

Audits Under Section of 20 of DPC`s Act. All India reviews and local reviews. Audits under Section 13,16 and 17 of the Act ibid likely to give rise to paragraphs for Audit Reports.

f)

Audits under Section 14 and 15 of the Act ibid likely to give rise to paragraphs for Audit Reports. The requirement at (a), (b), (c), are mandatory and admit no flexibility. The

requirement of (d) should be next charge on available Audit resources. The remaining Audit resources should be utilized on audits mentioned at (e) and (f) after carefully reviewing the necessity and potential of each Audit assignment and the number of Party days required for it priority being accorded to audit of accounts of DRDA'S. as huge amounts of grants- in-aid are released to these agencies. The audit staff is expected to develop an in-depth awareness about the auditee. Understanding the mandate and objectives of the auditee organisation and the environment in which it operates including the element of risk involved will help in ensuring that the auditor is able to provide constructive cost effective and creative service. In some cases preliminary survey could be very useful for acquiring a working knowledge of auditee and its environment. Necessary data bank and documentation covering reports of various Committees, study Reports, Plan/Budget documents, newspaper and journal clippings etc. Should be carefully built up under functional heads or subject wise as these will be of immense help in Planning for Audit and for detailed Audit. Portfolio Section 8.62 A portfolio in respect of each scheme and programme which is susceptible of

performance appraisal, should also be built up. It should inter alia contain complete details or the progress covering the objectives, financial and fiscal targets, performance standards, time schedules for the different components of sanction and copies of sanctions etc. In this context, various documents brought out by Planning Commission/Planning Department of the State Government, National Statistical Organisation and other institutions of national importance dealing with financial and fiscal areas should be made use of. These portfolios should form the basis and 224

provide the necessary basic data and information for conducting meaningful audit. Needless to say that the portfolio files should be regularly updated. The percentage of audit for Central Audit work may be fixed by the Accountant General/Group Officer taking into account the volume of vouchers for audit and the availability of staff in the Central Audit Group. Deployment of staff for Central Audit and the percentage of audit may be so fixed by A.G. which will enable him to manage Central Audit Work with available staff. If even by keeping the percentage of audit at the maximum desirable level, there is a surplus of staff in the Central Audit group, the surplus may be redeployed for local audit in Civil, Commercial and Receipt Audit Groups. Suitable objection books and office copies of the objection memos sent to Government Departments may be kept in the Headquarters Section of the Civil Inspection as other local audit Reports are kept and perused. Suitable number of staff in Central Section for such recording and pursuing of the objections may be provided for in civil inspection in his Audit Plans. With a view to watch audit planning being conducted in proper manner, audit plan in the prescribed format should be sent to Headquarters office so as to reach by 15th April each year. An appreciation note indicating the priorities adopted,

relaxation in percentage of audit, if any, applied viz-a-viz those prescribed should invariably accompany the audit plan. Appropriation of Departmental receipts for meeting Departmental expenditure 8.63 Rule 7 of CTRs Volume. I and para 2.10 of PFR, Vol.I prescribe that all

moneys received by or tendered to Government offices on account of the revenues of the Union or State should be paid in full without delay into the Treasury or Bank. Except to the extent provided therein, departmental recoveries should not be appropriated for departmental expenditure. The appropriation of departmental receipts for meeting departmental expenditure contrary to the provisions of rules mentioned above is a serious irregularity. Cases of such irregularity that may come to light in the course of audit should be brought prominently to the notice of all the heads of office and departmental Disbursing Officer. Audit of Personal Ledger Account Checks on Personal Ledger Account 8.64 As per provisions of the Punjab Treasury Rules Vol. I special banking account

shall be kept for certain classes of deposit transactions of public or quasi-public 225

nature. The account kept for these transactions in the Treasury shall be of the nature of banking account called Personal Deposit Accounts. Ordinarily the opening of a banking deposit account or of a Personal Ledger Account (PLA) is sanctioned by Government after consultation with the A.G. (A&E). It is generally recognized that Government should not agree to the opening of such an account unless it is satisfied that the initial accounts of moneys in the Personal Ledger Account are properly maintained and are subject to audit. it will rest with the Pr. Accountant General (Audit) to determine whether or not audit of initial accounts should be conducted. Suc h audit will be conducted locally in the office in which the detailed accounts are maintained or centrally in the office of the Accountant General (A&E) where detailed monthly accounts with challans/vouchers in support of lump sum deposits/withdrawls made during the months are received in that office. If the Pr. Accountant General (Audit) decides that this audit need not be undertaken by him on the ground that the money involved belongs to a Local Fund or a Private Fund not administered by a Government servant or for any reasons, it will be for Government to entrust audit of initial accounts to another recognized authority like the Examiner, Local Fund Accounts or a qualified auditor. Besides instructions of Punjab Government of October, 1961, Personal Ledger Accounts in respect of Government schemes, could also be operated by debit to the Consolidated fund. Such accounts are required to be closed to 'Nil' balance at the end of the financial year by minus debit of the balance to the relevant service heads in the Consolidated fund and may, if necessary, be reopened in the next year after following the prescribed procedure. The departments operating Personal Ledger Accounts in the treasuries and nature of transactions are as under:Sr. Name of department No. 1 2 Rural Development Food & Supply Purpose of opening PLA For receipts and expenditure relating to Cattle Fair Fund (i) For making payments to rice millers for procurement of levy rice for Central pool after arranging funds from F.C.I. (ii) Deposit/repayment of tender money 3 Transport Cash transactions relating to passenger bus services 226

4 5 6 7

Police

Transactions relating to police clothing and equipment

Soil Conservation & Lining of water courses Agriculture Educational Institutions Sheriff Petty Courts Fees & funds from students etc. Diet money and witness's commission money etc.

Following audit checks are required to be exercised during local audit in the process of opening, operating and handling of Personal Ledger Accounts by the departmental officers other institutions:1. Audit should see that the PLA is opened in the treasury with the sanction of

the competent authority which is issued with the consent of the Accountant General (A&E). 2. That PLAs opened by debit to the Consolidated Fund are closed to 'Nil'

balance at the end of the financial year and reopened only after following the prescribed procedure. 3. That the deposits withdrawls from PLAs relates to the purpose for which the

same was opened. 4. That the expenditure incurred out of PLA is in accordance with the financial

rules of the Government. 5. That there is no diversion of funds from the PLA into any other head of

account and vice versa. 6. Details of the transaction in PLAs shall be worked out and agreed with the

balances maintained in the PLA as well as record of the Treasury Officer. Instructions regarding audit of transactions of PLA and incorporating their results in the LARs on the following checks. i) ii) iii) iv) v) vi) No. of PLAs in a year, any increase/decrease Date of Opening of PLA. Whether opened in consultatio n with Accountant General (A&E). Opening balance on 1st April of the year. Amount deposited with/without approval of competent authority. Number of vouchers, test checked in Audit (Not less than 25% of

transactions). vii) Purpose of expenditure. 227

viii) ix) x) xi) xii) xiii)

Diversion of funds. Whether amount deposited un- necessarily? Frequency/periodicity of drawals. Whether drawals authorized by competent authority? Whether utilized immediately after drawal? Whether scheme-wise register maintained by the Drawing and Disbursing

Officer? xiv) xv) xvi) Whether transferred from Central/State Plan Funds? Impact on schemes/projects, due to unutilized funds remaining parked in PLA; Timely closure of PLAs.

228

ANNEXURE I (Referred to in Para 8.37) Copy of letter No. 14/130-28/61B/425, dated 29th December 1978, from Finance Commissioner, Industries & Secretary to Government, Punjab Industries & Industrial Training Departments, to all Heads of Departments in the State of Punjab etc. Subject:Sir, I am directed to refer to the subject noted above and to say that the matter regarding decentralisation of work regarding purchase of stores and enhancement of purchase powers has been under consideration of the Government for sometime. In order to remove bottlenecks in the existing purchase procedure and to make it more practical Government had decided to decentralise the store purchase procedure as under:i) All the Heads of Departments will be declared direct demanding Officers for Decentralisation of work relating to Store Purchases.

the operation of DGS&D rate contracts. However, if the Controller of stores of Punjab has arranged the rate contract for any of these items, it will be incumbent upon the purchasing departments to make purchases against that rate contract. ii) Standing purchase committee may be set up in all the departments with the

approval of the Finance Department. These Committees will function independently of the Store purchase Organisation and the functions of Servicing these Committees will stand transferred from Store purchase Organization to these Departments. In case of major departments at the time of approving constitution of the Committee Finance Departments. The convenor will put a representative of the Store Purchase

Organisation as one of the member of the purchase Committee. The convenor of these Committees will be the Head of the concerned Executive Department. iii) There will be no ceiling on the financial powers of these purchase committees

except that where the purchase of single item consisting more than Rs. 1 lac is involved, the approval of the Government in the concerned Administrative Department will be obtained.

229

iv)

The financial powers regarding purchase of stores from the local market as

enumerated in Sr. No. 20 of rule 19.6 of Punjab Financial Rules Volume I, be enhanced as indicated in Annexure A to this letter. v) While indicating specifications of the stores required to be purchased as

required under rule 4 of the Store Purchase Rules, first preference be given to stores which have I.S.I. Markings, and in the absence of I.S.I. Markings, I.S.I. Specifications or the Punjab Quality Markings shall be adopted. In order to ensure uniform practice in respect of specifications, general guidelines will be issued every year by the Department of Industries (Store Purchase Organisation) which should be adopted by the Purchase Committee of the Departments. vi) The condition requiring invitation of tenders through DGS & D in respect of

machinery of Stores of imported origin of value exceeding Rs. Two lacs as given in Rule 2 of the Store purchase Rules, be deleted and the purchase of such machinery or stores should be made through the Store Purchase Organisation of the State. vii) The Present procedure whereby arrangements for the inspection of Stores are

made by the Store Purchase Organisation be discontinued and Inspection be carried out by the department making the purchase. However, in order to make the inspection of stores stringent, at least two officers having sufficient technical knowledge of stores should inspect the stores before accepting them. viii) The limits for making purchases without quotations as laid down in Rule 7 of

the Store Purchase Rules, be raised from Rs. 50 to 500 per item subject to the condition that the total value of such purchase does not exceed Rs. 10000 in a year. It has also been decided that the Stores Purchase Organisation should try and bring the maximum number of items which are of common use in different departments and are of repetitive nature under the rate contract of the State Government. The review of this new procedure will be conducted after one year to assess the success of this new policy. 2. You are, therefore, requested to initiate action for constituting the Purchase

Committees etc. Steps to amend the rules from the date of issue of this letter will be taken in due course. 230

3.

This has concurrence of the Finance Department received vide their U.O. No.

6121-4FDII-78, dated 28th December, 1978. Endst. No. 14/139/78-BL-61-3(2)/426, dated Chandigarh the 29th December, 1978. A copy is forwarded to the Controller of Stores, Punjab, Chandigarh for information and necessary action. He should try to bring maximum number of

articles on rate contract of the State Government which are of common use and of repetitive nature and a list of such articles be circulated to all Heads of Departments immediately and thereafter from time to time. Action may also be taken to declare all Heads of Deptts. as direct demanding officers against DGS & D rate contracts and it should be ensured that the list of such rate contracts are received by the Departments in time. He is also requested to issue general guide lines in respect of specifications every year so that uniform specifications are adopted by the various Purchase Committees. As this procedure is to be reviewed after one year, he is requested to ascertain the views of the departments in this matter at the appropriate time and then send his comments to Government. Endst. No. 14/39/78-61-B(2)/127, dated 29th December, 1978. A copy is forwarded to the Secretary to Government, Punjab, Finance Department, for information and necessary action. Endst. No. 14/139/78-61-B(2)/428 dated 29th December, 1978. A copy is forwarded to the A.G. Punjab, Chandigarh. MOST IMMEDIATE; Office of the Inspector General of Prisons, Punjab, Chandigarh. Endst. No. 4645-55/GI/1-1/F-21 Factory, dated 30th January, 1979. Copy alongwith copy of Annexure I forwarded to the Superintendents of all Central and District Jails including Borstal Jail, Faridkot for information and necessary action. 2. Necessary action regarding the Constitution of Departmental Purchase

Committee for the purchase of stores from Jail Factories is being taken by this office separately. 3. Please acknowledge receipt and ensure strict compliance. 231

Sd/Inspector General of Prisons, Punjab Endst. No. 4656-GI/1-1, dated 30th January, 1979. Copy alongwith Annexure-I, is forwarded to the Head Assistant, Accounts Branch in Head Office, for information and necessary action in respect of Maintenance side, at his end. 2. Copy forwarded to 1-5 in Head Office, for information and necessary action.

232

Annexure-A
Sr. No. 1 20 Name of Power 2. Designation of the Officer 3. Extent of power delegated 4. Rs. 40,000 in each case.

Sanction direct purchase of (1)Deptt. Of stores from the local market after exhausting all approved sources o f supply mentioned Volume. II and the rate contract if available Controlling Officer Disbursing Officer arranged by Controller of Stores, Punjab, Government except Engineering Officers of P.W.D.

in Appendix 17 of P.F.R. and Irrigation Heads of Deptts. Rs. 20,000 for any one item in a financial year or one disbursing Officer under him.

Rs.4000 for any one item in a financial year. Rs.2000 for one item total value of which in a financial year should not exceed Rs.8000.

2)Chief Engineer in Rs. 50000 per item without any P.W.D., B&R P.H. limit. & Irrigation. Superintending Engineer (Engs) Rs. 20000 per item subject to a ceiling for Rs. One lac per annum per division under the circle in addition to the power of Executive Engineer. Rs. 5000 per item subject to a ceiling of Rs. 50000 per annum. Rs. 250 per item subject to a ceiling of Rs. 5000 per annum.

Executive Engineer Sub-Divisional officer/SubDivisional Engineer

Note : The Financial powers of departments of Government, Heads of Departments, Controlling Officers and Disbursing officers have been enhanced vide Punjab Government notification No. 2/2/88/2FCD/4802 dated 19-5-1988

233

ANNEXURE-II (Referred to in para 8 43(A) Remittances to and withdrawal from treasury Procedure regarding the remittance to treasury and withdrawal therefrom The question of adopting a suitable procedure regarding the reconciliation of departmental figures of remittances to the Treasury and withdrawals there from has been engaging the attention of Government for some time past, The main defect in the present procedure contained in rule 2.2 of the Punjab Financial Rules, Volume I, is that it does not provide for the system of monthly reconciliation of departmental figures with the Treasury Figures. The absence of the system of monthly

reconciliation is likely to result in certain discrepancies remaining unreconciled for an indefinite period and frauds remaining undetected. In order to obviate these defects it has been decided as under:Remittances to Treasury. (a) A Remittances Book should be maintained in Form STR 6 as laid down in

subparagraph 3 below rule 2.8 of the Subsidiary treasury Rules. (Specimen appended). (b) Rule 2.2(v) of the Punjab Financial Rules, Volume I, further lays down that

the Head of Office is required to compare the Treasury Officers or Banks` receipts on the Challan of his Pass-Book with the entry in the Cash Book before attesting it and satisfy himself that the amount has actually been credited into the Treasury or the Bank. With a view to facilitating this comparison, the challans duly receipted by Treasury should either be pasted in the Remittance Book against the relevant entries or filed in separate files every month, in case their number is very large. (c) At the end of every month the Head of Offices should prepare a consolidated

receipt in the prescribed form, as per specimen appended and forward the same to the Treasury Officer for signatures so as to reach the latter by the 22nd of the following month.

234

(d)

Immediately on receipt of the consolidated receipt, it would be the duty of the

Treasury Officer to compare the entries made therein with those of the Register of Receipts in Form T.A.-2 maintained by him in respect of that particular office under Article 35 of the Account Code, Volume II. The Treasury Officer will then send back by the 5th, the Consolidated Receipt to the Head of the Office concerned after affixing his signatures thereon, in token of acceptance or pointing out the discrepancies, if any. (e) The Consolidated Receipt when received back from the Treasury should be

filed under the orders of the Head of Office after the discrepancies, if any, have been reconciled. Withdrawals from the Treasury It has been noticed that the present procedure regarding the withdrawals from the Treasury as outlined in rule 12.3(3) of the Punjab Budget Manual (4th Edition) is defective in following respects:(i) It does not prescribe the maintenance of a Register by a Head of Office for

record and reference, at any particular time of the number and the amount of the bills sent to the Treasury for encashment. (ii) The absence of such a register renders it difficult to watch the receipt book of

such bills from the Treasury. (iii) It cannot also be ascertained at any particular time whether the amounts

received from the Treasury have actually been disbursed or not. In order to improve upon the present procedure it has been decided as follows:(a) A Bill Register in the form as per specimen appended should be maintained by

all Heads of Offices who are authorised to draw money from the Treasury on bills signed by them. The register should be reviewed monthly by the gazetted officer in charge of the Cash Branch, if any, or by the Head of Office himself. This register will enable the Head of the Office to keep a complete watch over the bills from the time they are sent to the Treasury for encashment to the time the amounts received from the Treasury are finally disbursed. (b) At the end of the month, a certificate in the following form should be prepared

by the head of the Office and sent to the Treasury Officer for his signatures so as to reach the latter by the 22nd of the following month.

235

I hereby certify that the total withdrawals from the T reasury on bills drawn by Shri .Officer incharge Dated: Treasury Officer Note:- It has been brought to the notice of Government that it had not been possible for the Treasury Officers to verify the certificates independently in the absence of details of drawals by the Drawing Officers and that the procedure, detailed in the above- mentioned letter is not being complied by most of the Departments. In order to enable the Treasury Officers to issue the certificate it has been decided that the details of the bills drawn by the Drawing Officers during a month should be furnished by them along with the certificate to the Treasury Officer. The said clause may be considered to have been modified to this extent. It is further emphasized that the procedure laid down in the reference quoted above should be followed strictly as there are possibilities of certain withdrawals not finding place in the Cash-Book if such a certificate is no t obtained by Drawing Officers. (No. 1628-FRI-60/5336, dated 15th June, 1960). (c) Immediately on receipt of the certificate referred to above, it will be the duty during amount Rs (in words) .

of the Treasury Officer to compare the entries made therein with those of the Register of Expenditure in Form T.A. -3, maintained by him in respect of that particular office under Article 35 of the Account Code, Volume - II. The Treasury Officer will then send back the certificate to the Head of the Office concerned duly signed pointing out the discrepancies, if any, so as to reach the latter by the 5th of the month. d) The certificate on receipt from the Treasury will be filed under the orders of

the Head of the office after the discrepancies pointed out therein have been reconciled. (No. 2731-FR-56/753, dated 23rd August, 1956.) Note:- The bill register should be preserved for a period of five years. (No. 11050-6-FRI-65/719, dated 27th/28th January, 1965).

236

Treasury Remittance Book Office of the _____________________________________ date of Remittance __________________________________ Rupees Paise _______________________________________________________________ Signature of the Treasurer or other person designated to attach second signatures for sums under Rs 500 received by transfer in account. _______________________________________________________________ Signature of Treasury Accountant _________________________________________ Signature of the Treasury Officer for sums not less than Rs 500 _______________________________________________________________ No. And date of the Treasury Challan ______________________________________________________________ Remarks consolidated Treasury Receipt ________________________ _________________________________ Treasury __________________________ _____________________________________________________________________ the sum of rupees* ____________________________________________________ Received from the Officer- incharge _______________________________________ for credit to Government account during ___________________________________ ____________________________19 ______________________________________ rupees** Dated the ____________________ Treasury Officer _____________________________________________________________ *In words ** In figures Bill Register of the office of ________________________________________ Amount disbursed in 1. Bill number and date. 237 Amount in words

2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19.

Particulars of the bill. Pay of Establishment. Compensatory allowance. House-rent and other allowances. Travelling allowance. Gross amount. Deductions. Net amount. Dated initials of the gazetted officer signing the bill Date of presentation at the Treasury. Amount assessed by the Treasury, Amount of the bill detailed heads of account etc. Date of signing acknowledgment with initials of the officer signing the bill Date of receipt form the treasury. Date of entry in the cash-book. Initials of Gazetted officer incharge of the cash. Month of encashment. 2nd Month 3rd month. Reference to bill NO. ____________ and date in which balance has been

short drawn. Remarks. Discontinuance of the issue of Reserve Bank of India Government DraftsPayment of Government Cheques 17.2 Rule 11.8 of Punjab Financial Rules, Volume I, provides for the issue of a special kind of draft by the Reserve bank and its agencies (including Treasury agencies) for remittance on Government accounts. These drafts on Government

accounts are as provided in Rules 4.121 of Subsidiary Treasury Rules, Punjab, Volume I, not transferable are only payable to, or on the receipt of, the person name therein as the payee or to his lawful agent. This absolute ban on the transferability of 238

such drafts on Government account, it has been observed, causes serious hardships to the payees in the matter of obtaining payment. Besides although from the point of view of the issuing and encashing offices the transactions relating to Reserve Bank drafts and drafts on Government Account are in no way different yet the offices of the Reserve Bank and its agencies are required to maintain separate records for the two types of remittances, in view of the differential character of the instruments. 2. In the circumstances and with a view to facilitating expeditious disposal of the

growing volume of work in connection with the issue and encashment of remittances at the Office of the Reserve Bank and its agencies, it has been decided on the analogy of Government of India that the existing practice of issuing a special kind of drafts for remittances on Government account be discontinued and that all remittances whether on behalf of Banks and Public or Government Departments, shall be made by means of Bank drafts with immediate effect. 3. Further, in obtaining such drafts for remittance of moneys on Government

accounts and also issuing cheques on Government account, the following instructions should be observed by all officers of the Government:(a) Payment on account of inter-departmental or inter-governmental dues. The issuing office should be requested to cross all such drafts, if drawn on an office of the Reserve Bank or any of its agencies other than a treasury agency, with the words account payee between the crossing and, if drawn on a treasury agency, to superscribe the drafts with the words account Government- not payable in cash" without any crossing. For cheques also, the same procedure should be observed:(b) When the amounts of the drafts are required by Officers of the Government to

enable them to make disbursement, in cash on behalf of Government, e.g, pay and allowances of non gazetted staff, contingent expenditure, permanent advance, etc. Cheques and drafts, the amount of which are payable to Officers of the Government to enable them to make disbursement of pay and allowance of non gazetted staff, contingent expenditure, etc., on behalf of Government shall not be crossed but shall in, either case, bear the superscription not transferable and shall be issued in favour of the Government Officer concerned, by designation, the word only being added after the designation of the Payee Officer on the cheque or draft. For this purpose, every Government Officer, when applying for a draft, must add the word `only` after the name of the Payee in the application for the drafts, so that the 239

issuing office may prepare the draft accordingly. It shall not, however, be permissible for any Government Officer himself to add the word `Only` after the name of Payee of the draft in case in which the Issuing Office for any reason fails to add the word themselves:(c) Payments of Personal claims of an individual (Whether a Government

employee or not), a firm, or a company, a statutory body, etc. All cheques and drafts in payment of such claim shall be issued invariably with the addition of words `or order` after the name of the payee on the cheque or draft. Such cheques or drafts, if drawn on an office of the Reserve Bank of India or any of its agencies other than a treasury agency, shall be crossed with the words &Co. Between the crossing unless the Payee specifically asked for an open cheque/draft, in which case they need not be crossed. 4. In connection with the payment of Government cheques, the offices of the

Reserve Bank of India and its agencies are required to maintain the specimen signatures of a good number of Government employees, viz., Payee disbursing officers as well as the Officers authorised to act on their behalf and their messengers. The specimen signatures of Government employees are maintained by the Bank with a view to ensure proper identification of the payee concerned for smooth functioning at the counters of the Bank. It is necessary that the Bank should not be burdened with the maintenance of the specimen signature of an unnecessarily large number of persons. It has accordingly been decided that the specimen signatures of the payee disbursing officers or such other officers, as may be authorized to act on their behalf in terms of the provisions of Note (I) below rule 4.7 of Subsidiary Treasury Rules, Punjab, Volume I, will only be kept on record by the Bank and its agencies and those of the messengers sent for the collection of cheques would not be maintained by them. For this purpose when a disbursing Officer authorises a Subordinate Officer to endorse cheques for and on his behalf, a copy of the authority issued in favour of the subordinate officer, duly authenticated by the payee-disbursing officer, may be sent to the Bank on which the cheque is drawn for its record. The practice of transmitting the specimen signatures of messenger to them should, however, be discontinued. 5. Further, for purpose of encashing these cheques, the payee officer should

either himself give the discharge Received contents by endorsement on the back of the cheques or the officer duly authorized by him should do so, and in the latter case the officer concerned should sign for and on behalf of the payee-officer (by 240

designation). Since these cheques might not be collected by the officer endorsing the cheques in person and the services of a messenger or representative might be availed of for obtaining the payment, the messenger or representative should be specially and separately authorised to receive payment by a letter signed by him indicating the full particulars of the cheques and furnishing in that letter the specimen signature of the messenger or representative as the case may be, duly attested by him. (NO.50(4)FR-66/768, dated the 19th November, 1966.)

241

ANNEXURE-III (Referred to in para 8 52(A) A list of instructions contained in Government of India, Ministry of Finance Circular F.52(a)-EV/60 dated 27th June, 1960 and other orders. 1. i.) Accounting system The detailed Provident Fund Ledger Accounts of Class IV should be

maintained in bound ledgers of Form ATM-75 (Form-I) which should be machine numbered. ii.) The Head of the Office or any gazetted Officer nominated by him should

initial the Provident Fund Accounts monthly in order to ensure that the amount of subscription deducted, refund of advance and temporary and final withdrawals are posted correctly. The entries for withdrawal should be signed by the gazetted officer at the time of signing the bills for withdrawals. iii.) A schedule of G.P. Fund deduction should be compiled each month by the

Drawing Officers for posting the ledger accounts and signed by the drawing officer after ensuring that the total of the deduction as per schedule agrees with the deduction made in the bills. In respect of payment a consolidated record should be maintained for arriving at the monthly total. iv.) Each Head of Office, should maintain a broad-sheet in Form No. II prescribed

in Government of India circular referred to above in which entries should be posted direct from the ledgers and not from schedules or vouchers. The broadsheet should be closed and submitted to Head of Office by 5th of the following month and reviewed by the Head of Office on the following day with a view to verify that the amount as booked in the broad-sheet agree with that of the total of the certificates of deduction attached with pay bills, and payments during the month. The totals of the debits and credits as worked out in the broad-sheet should be communicated to the Head of the Department by the Head of Office. 2. i.) ADMISSION NOMINATION All Permanent employees and temporary employees other than re-employed

pensioners, in continuous service for more than one year alone are to be admitted to the Fund. 242

ii.)

Each person admitted to the Fund should be assigned an account number with

a prefix indicating distinctly the office to which the subscriber belongs. iii.) The nominations received, should be checked with a view to ensure that in the

case of persons having a family the nomination is made only in favour of members of his family as defined in the G.P.F Rules, and nominations should be in one of the prescribed forms appropriate to the subscriber. iv.) The member who has no family at the time of the first nomination is made

should make another nomination as soon as he acquires family. v.) The specification of death as a contingency in the penultimate column of the

form of nomination is not proper contingencies such as insanity, divorce etc., only can be specified by the subscriber. vi.) If at the time of making nomination the subscriber has only one member of

the family and the alternate nominee is a person other than a member of his family, the nomination should provide that the right conferred upon the alternative nominee shall become invalid in the event of subsequent acquiring by other member of family. vii.) Appropriate arrangements should be made for safe custody of nominations in

the personal custody of Head of Office under lock and key. 2. TEMPORARY ADVANCES AND PART WITHDRAWALS All applications for temporary withdrawals and advances as well for subscription to the insurance premia should be scrutinised with a view to see that the permissions granted are according to the rules and sanction was accorded by the competent authority. In respect of withdrawals for subscription of insurance premium, the Head of the Office should satisfy himself by verification with the receipts that the withdrawals were utilised for the purpose for which they were made. 3. INTEREST Interest should be calculated with the help of authorised ready reckoners by the Heads of Offices and entered in the ledger accounts and broadsheet. 4 i.) FINAL PAYMENT The final withdrawal is permissible on the provisions of Rule 20.30.31 of

G.P.F. Rules. 243

ii.)

An application should be obtained in Form VIII-A of B appended to the

Government of India circular as soon as the event has occurred necessitating final payment of G.P.F. credits. iii.) Final payments should be made after thorough scrutiny of accounts of the

subscriber with particular reference to any temporary advance or withdrawals already made with extra care over transactions within last 3 years before the year in which the withdrawal is made. iv.) After scrutiny, account should be closed after allowing interest upto the end

of the month proceeding that in which the payment is made or up to the end of the sixth month after the month in which such amounts becomes payable, whichever of these period be less under the G.P.F. Rules. v.) The money should be paid to the subscriber, if he is alive. If the subscriber is

not alive, and a valid nomination subsists the payment should be made to the nominee or nominees where the subscriber is not alive and no valid nomination subsists the payment should be made to the claimant eligible under Rule 31(1) (b) or 31 (ii) of the G.P.F. Rules. vi.) In case the insurance policy was subscribed from G.P. Fund steps should be

made to re-assign simultaneously the policy and return it to subscriber. 5. i) MISCELLANEOUS A general index register should be kept by the Head of Office in Form III

(ATM-65) and stock account of policies financed from G.P.F. should be kept in From No. V. ii) Where a subscriber is transferred from one office to another, his account is

also required to be transferred alongwith the L.P.C. to the new head of office, supported by a statement showing opening balance at the beginning of the year, deductions and withdrawals during various months and the closing balance on the date of transfer. A copy of the accounts should also be sent simultaneously to the Head of the Department. iii) A monthly return should be submitted by the Head of Offices/Heads of

departments concerned in Form IV.

244

iv)

At the end of the year, the Head of Office should prepare a statement in Form

VIII (ATM-80) showing the balance at the credit of the subscriber and forward the same to the subscriber and get their acceptance. The Government of India, Ministry of Finance, vide their memo No.24011/2/75/75-EV(B) dated 24th February, 1975 introduced the system of Passbooks in respect of Group 'D' employees in all the Central Government Offices with effect from the financial year 1974-75. The Scheme will be operated as follows: a) The Passbook will be got printed locally be each Ministry/Department in exercise of the powers delegated to it. b) c) Initially the Passbook will be supplied free of cost. Every Class IV employee, who is already subscribing to GPF will be provided with the Pass-book which at the time of its supply will indicate the balance at the credit, as on 31st March of the proceeding financial year. d) Every new Class IV employees will be provided with the Passbook at the end of the financial year, during which he commences contribution to the G.P.F. e) In case a subscriber loses his Passbook and asks for a copy thereof, he may be charged an amount equivalent to twice the cost of Passbook. f) At the end of each year, the Head of the office will obtain the Passbooks of the employees for completion and return. g) When an employee is transferred to another Ministry/Department, the Head of Office will obtain the Passbook, from the employee, complete it and record the following endorsement therein and thereafter return the Passbook to him. The G.P.F. account has been transferred to Ministry/Department of

______________________________________vide his Ministry/Department letter No. ______________ dated ____________. h) Every subscriber is expected to satisfy himself as to the correctness of the entries made in the Passbook and bring to the notice of errors, if any, within three months. The ledger folio of the subscriber, if desired by him, will be made available for inspection.

245

During local inspection it should be seen, besides the above mentioned points, that(a) (b) the Passbooks have been supplied to all the subscribers. that adequate safeguards are enforced to record the authenticity of the entries

in Passbooks. (c) that the Passbooks are being sent for by the accounts Office to help in tracing

missing credits/debits in the Provident Fund Account. d) that the entries in the Passbooks tally with the Provident Fund Accounts

maintained by the Department. e) that there is a systematic or periodical reconciliation of the entries in the

Passbook with the Provident Fund Accounts maintained.

246

ANNEXURE-IV (Refereed to in Para 8.52)(a) No.64-OSD(F)-78/17507 From The Commissioner for Finance and Secretary to Government, Punjab Finance department. To All Heads of Departments, Registrar, Punjab and Haryana High Court, Commissioners of Divisio n District and Sessions judges, Deputy Commissioners in the Punjab, All treasury Officers including Treasury Officer Chandigarh (Punjab) and Assistant Treasury Officers, Punjab. Dated Chandigarh, the 19th May, 1978. Subject:Taking over of G.P. Fund Account of Class IV Employees of Punjab Government. Sir, I am directed to address you on this subject and to state that under the existing arrangements the General Provident Fund Accounts of Class lV employees of the Punjab Government are maintained by the Accountant General, Punjab. As a measure of Administrative Reforms, the Governor of Punjab is pleased to decide that with effect from Ist April, 1978 (i.e subscription deducted from the pay for the month of March, 1978) the work connected with the maintenance of accounts of all Class IV employees of the Punjab Government (including existing subscribers) shall be transferred to the Heads of the offices concerned (Drawing and Disbursing Officers) who will thereafter be responsible for their correct maintenance. The accounts of the subscribers alongwith the connected documents will be transferred to them by the A.G. Punjab, completed up to the month of 31st March 1978. A copy of the scheme is enclosed. The procedure to be observed at various stages and 247

instructions to be followed by the Drawing and Disbursing Officers and Heads of Department is explained therein. It may be studied thoroughly so that no doubt is left in its enforcement. 2. i) In this connection, it should be clearly understood that:The term `Accounts Officer` has been used in various paragraphs of the Scheme Since, for the present the work of only Class IV employees is being transferred, this term will continue to have been same meaning as heretofore viz, the term Accounts Officer wherever it occurs in the scheme connotes the Accounts Officer of the Office of Accountant General, Punjab, ii) Similarly, the term `Audit Officer` has also been used in para 3 and sub-para 2,3, 4 of para 18 of the scheme. This term means Accounts Officer of the Office of the Accountant General, Punjab, who is entrusted with the function of audit Drawing and Disbursing Officers, Heads of Offices of the State Government will only be maintaining the detailed accounts of G.P. Fund, Class-IV employees and the Accounts Officer of the A.G. Punjab will continue to conduct the audit. iii) For the introduction of this scheme, a new sub-head under the minor head GPF below the major/sub- major head 8005 State Provident Fund-A-Civil indicating separate detailed head for each department may be opened as explained in Para 14 of the scheme. This Head of Account should read as under:8005-State Provident Fund-A. Civil (a)-General Provident Fund-I-GPF Class IV employees (Name of the Department would be indicated such as Education, Agriculture, etc. iv) In the new Scheme various ledgers and forms have been prescribed.

Accordingly, the Controller of the Printing and Stationery Department is being requested separately to make them available for use in your office so that they become available to the Drawing and Disbursing Officers for the purpose of implementing this Scheme. v) On taking over of this work, a complete and consolidated list of all Class IV

employees working in the offices under your control showing (the old and new) G.P.Fund Accounts numbers including symbolic letters, may be supplied to the 248

Accountant General, Punjab, to enable him to close their accounts and forward them to the Heads of Offices (Drawing and Disbursing Officers) through their Head of Department. This will facilitate the transfer of this work from the A.G.`s office to the Departmental Authorities. vi) Para 3 of the scheme provides, inter alia, that on the transfer of this work the

Head of Departments will allot fresh numbers to the old subscribers in accordance with the procedure laid down. Assigning of accounts numbers is an important work and as such it should be entrusted to a responsible officer under the Head of the Department; either it should be given to the Accounts Officer of his office wherever he is available or to the Administrative Officer or to any other responsible officer who may be dealing with the Establishment work. In any case, the work of numbering the accounts should remain centralised in the office of the Head of Department and in no case should this responsibility be passed on to the lower level, namely head of office etc. The accounts number of the accounts received from the office of the Accountant General, Punjab, should be assigned new account number, with a prefix class IV indicating distinctly the office to which the subscribers belongs. Similarly the new subscribers may also be allotted a new G.P. Fund account number with symbolic letter. All such numbers allotted will also be prefixed with the word and figure Class IV as in the case of old subscribers. e.g. Class-Sect.-(Pb) (Sr. No. Such as 737, 738, etc). Class IV-FCR-(Pb) (Sr. No. Such as 363, etc.) Class IV-Edu-(Pb) (Sr. No. Such as 177 etc) Class IV-D.C. Gurdaspur (Pb) (Sr. No. Such as 868, etc.) vii) Nomination papers in respect of G.P. Fund accounts are important documents.

As such, they should be kept in safe custody of responsible officers. As in clause (v) above, wherever the Accounts Officers under the Heads of Departments are available, this responsibility may be give n to the Establishment Officers/Administrative Officers failing all this a responsible officer of the Head of Department may be entrusted with the task of keeping the nomination papers in the safe custody. These papers may be included in the list of documents to be handed and taken over at the time of transfer of the incumbent from one place to the other: 3. As, after the introduction of the new system, the A.G. Punjab will not accept

any responsibility for any loss which may accrue to the subscribers due to any possible missing entries or to the State Government due to wrong entries made in the 249

accounts-whether deliberately or owing to inadvertence. You are requested to ensure strict compliance of these instructions. 4. It is requested that Class IV Government employees working under you

should be apprised of the new scheme and they may be advised to apply to you for the assignment of a new G.P. Fund number along with the symbolic letter and also transfer of their accounts from the office of the Accountant General, Punjab, to their own department. On the basis of this data, the list mentioned in para 2(v) may be prepared meticulously and supplied to the Accountant General, Punjab. 5. Spare printed copies of the Scheme are available in the Finance Department

(O.S.D.) (F)s Section and may be collected according to your needs, by deputing special messenger and sending a written requisition indicating the total number of copies required and supplying a list of the D.D.Os to whom these copies are to be sent. 6. This receipt of this communication may please be acknowledged Yours faithfully, Sd/Deputy Secretary (F) Finance for Commissioner for Finance and Secretary to Government, Punjab, Finance Department. No. 64-OSD(F)-78/17508, dated Chandigarh, the 19th May, 1978. A copy with a copy of its enclosures, is forwarded to the Accountant-General, Punjab, for information and necessary action with reference to his letter No. Fds I/A.S. 55/V Volume. IV/77-78/283, dated the 6th May, 1978. Sd/Officer on special duty (F) for Commissioner for Finance and Secretary to Government, Punjab, Finance Department.

250

No. 64-OSD(F)-78/17509, dated Chandigarh, the 19th May, 1978. A copy with two copies of the scheme is forwarded to:Ministry of Finance, Department of Expenditure (Special)(i) The Deputy Director (Special Section), Government of India (Section), New Delhi in continuation of Punjab Government , Finance Department letter No. 62-OSD(F)-78/10779, dated 24th April, 1978. ii) The Comptroller and Auditor General of India, Bahadur Shah Road, Zafar Punjab Government Finance Department

Marg, New Delhi in continuance of

Endorsement No. 62-OSD(F)-78-10780, dated 24th April, 1978. iii) The Controller-General of Civil Accounts, Government of India, Ministry of

Finance, New Delhi, with reference to his letter No. S-14019/1/78/T(A/cs)851, dated the 27th April, 1978 for information and necessary action.

Sd/Officer on Special Duty(F), for Commissioner for Finance and Secretary to Government , Punjab, Finance Department. A copy, alongwith a copy of the scheme is forwarded to all the financial Commissioners and Administrative Secretaries to the Government of Punjab for information and necessary action. Sd/Officer on Special Duty(F), for Commissioner for Finance and Secretary to Government , Punjab, Finance Department.

251

To All the Financial Commissioners and Administrative Secretaries to the Government of Punjab. U.O. No. 64-OSD(F)78, dated Chandigarh the 19th May, 1978. Maintenance of General Provident Fund Accounts of Class IV Employees of Punjab Government by Heads of Offices (Drawing and Disbursing Officers). The detailed P.F. Ledger Accounts should be maintained by the Heads of Offices (Drawing Officers) in Form P.F. 9 (enclosed). The Accounts should be kept in bound ledgers which will be machine-numbered. The particulars of policies financed from the General Provident fund and the sanctions for the withdrawals etc. should also be noted in this ledger. The Head of the Office or a Gazetted Officer nominated by him should initial the Provident Fund Accounts monthly in order to ensure that the amount of subscription deducted, refund of advance and temporary and final withdrawals are posted correctly. He should also initial the entries in the ledger accounts when signing bills for withdrawals from the Provident Fund. 2.(I) Each month the Drawing Officer will prepare a schedule of General Provident

Fund deductions for posting the ledger accounts maintained by them. They will sign the schedule at the time of signing the Establishment Bills after comparing each item with the amount deducted and also the total in Schedule with the total deduction shown in the Pay Bills. The schedule of G.P.F. deductions will not be enclosed to the Pay Bills, but instead a certificate will be attached to the Pay Bills, indicating total amount deducted as General Provident Fund subscriptions and refund of withdrawals. In respect of payments a consolidated record should be maintained for arriving at the monthly total. 2. A broadsheet in Form P.F. 10 (enclosed) should be maintained by each Head

of Office. All deposits and withdrawals posted in a ledger should also be posted in the broadsheet. The broadsheet should be posted direct from the ledgers and not from the schedules or vouchers. Each broadsheet in respect of deposits and withdrawals during a month should be closed on or before the 5th of the following month, i.e broadsheet for April, should be closed on or before the 5th of May and submitted to the Head of Office for review on the following day. The Head of Office shall verify that the amount as booked in the broadsheet, agrees with that of the total of the certificate of deductions attached to the pay bills and the payments made during the 252

month. The totals of the debits and credits, as worked out in the broadsheet, should be communicated to the Head of Department (Para 8). 3. In order to ensure that uniformity is maintained all round and no difference

occurs at the time of reconciliation of Departmental figures with those of Accounts Officers, it is clarified that the broadsheet for April means (i) the recoveries from pay bills cashed in April irrespective of the month to which the pay may pertain and (ii) payments on account of General Provident Fund made in April. Consequently, the broadsheet, for the month of April is required to be closed on or before the 5th of May, and should be sent by the Drawing Officer to the Head of Department in the same month. 3(1) On receipt of an application in the prescribed form for admission to the Fund,

the Head of the office will test the eligibility of the new subscriber under the G.P. Fund Rules, and assign the Account No. to him, with a prefix indicating distinctly the office to which the subscriber belongs. All permane nt employees and temporary employees other than, re-employed pensioners in continuous service for more than one year may alone be admitted to the Fund. The nomination will be kept by the Head of office instead of by the Audit Officer. The nomination, whe n received must be scrutinised carefully with reference to the provisions of the G.P. Fund Rules and should be in one of the prescribed forms appropriate to the subscriber. It should be primarily seen that if at the time of making a nomination, the subscriber has a family, the nomination shall not be in favour of any person or persons other than members of his family as defined in the G.P. Fund Rules. Particular care should also be given to the following points, while scrutinising the nomination forms:a) The examination of each form should be carried out in detail with reference to each entry made therein. b) The specification of death as a contingency in the penultimate column of the forms of nomination is not proper, Only contingencies, such as insanity, divorce, etc. Can be filled in. c) The additional remarks in the forms of nomination providing for guardianship of a minor nominee are invalid and should not be accepted. d) If at the time of making the nomination on the subscriber has only one member of the family and, therefore, the alternate nominee (last column of the 253

nomination form) is a person other than a member of his family, the nomination should provide that the right conferred upon the alternate nominee shall become invalid in the event of his subsequently acquiring other members of family. (2) Appropriate arrangements should be made for the safe custody of the nominations, and these should be kept under lock and key in the personal custody of the Head of the Office or a Gazetted Officer nominated by him after making entries in the ledger as well as the General Index Register Form P.F. 11 which should be attested by the Head of the Office (Drawing Officer). An acknowledgment in Form P.F. 12 (enclosed) should be given to the subscriber as soon as the nomination is accepted. (3) All Government employees may be advised that it should be in the interest of their nominees if they would preserve copies to the nominations made by them and of the related notices and acknowledgments either in their personal custody or in a safe deposit along with their other important personal documents, etc. Where they may be expected to come in to possession of the beneficiaries in the event of their death. (4) As regards the nomination forms already lying in the A.G.`s office, these will be transferred by the A.G., Punjab to the Heads of Offices/Drawing and Disbursing officers, through the Head of Department concerned who will be responsible for their proper maintenance. They will allot fresh numbers to old subscribers in accordance with the procedure laid down. If the audit office requires a list of such old subscribers having been assigned fresh numbers, it will be supplied to him by the said authorities. All applications for temporary advance and part withdrawals from the G.P. fund as well as for payments of insurance premia will, as at present, be scrutinised by the Heads of the Offices and sanctions, accorded in so far as they are competent to so; otherwise the sanction will be accorded by the Heads of Departments themselves. The Heads of the Departments will also scrutinise and sanction the advances for special reasons. Actual payment will be made by the Heads of offices, where the Class IV employees are actually serving on the sanctions issued by themselves or by the Heads of Departments as the case may be. 254

5.

Where Life Insurance policies are financed from General Provident Fund, the

Head of the Office should require the subscriber to produce receipts in order to satisfy himself that the amount withdrawn from General Provident Fund for payment of premia had been utilised for that purpose. The Head of Office should scrutinise the receipts and make necessary endorsements on them to the effect that no abatement of Income Tax will be admissible. A policy will be reassigned on its maturity or earlier on the death of the subscriber or otherwise as provided in rule 13.21 and 13.22 of (the Punjab General Provident Fund Rules) Punjab C.S.R Vol.II and handed over to the subscriber or the claimant entitle to receive it. The Life Insurance Policies at present financed out of G.P. Fund shall be transferred to Head of Department who will pass on these documents to Drawing and Disbursing Officers/heads of Offices for safe custody. 6. The Heads of offices will also maintain the General Index register of General

Provident Fund Accounts in Form P.F. 11 (enclosed). The stock register of Policies Financed from G.P. Fund will also be maintained by them in Form P.F. 13 (enclosed). In future fresh life insurance policies. If any, shall/also be kept in safe custody of the Heads of Offices. 7. If any Class IV employee is transferred from one office to another, his account

will be transferred along with the last pay certificate to the new Head of office with a statement showing the opening balance at the beginning of the year, deductions and withdrawals during the various months and the closing balance on the date of transfer. A copy of the statement in duplicate should also be furnished by him to the Head of the Department for noting and onward transmission of one copy to the Accounts Officer concerned. A copy of the subscriber Ledger Account together with his

nomination form in original and the insurance policy or policies (if any) should also be forwarded to the new Head of Office. Any sum withdrawn under the fund rules and which remains to be recovered should also be communicated to the new Head of Office. 8. Each drawing officer should send every month to his Head of Department, the

total of debits and credits under the following column in form P.F. 14 l(enclosed): (i) (ii) Credit on account of subscription; Credit on account of refund of advance; 255

(iii) (iv)

Total Credit; Debits on account of withdrawals. From the information received from the Heads of Offices under him, the Head

of the Department should maintain a register in Form P.F. 18 (enclosed) for collecting the totals in respect of each month for communication to the Accounts Officer quarterly. 9. Each Head of Department should intimate quarterly in Form P.F. 19

(enclosed) the total credits and debits for each month to the Accounts Officer showing the figures for each Head of Office under him Major Headwise and Treasurywise to enable the figures appear in respect of credits and debits in the broadsheet maintained in the Accounts Office to be agreed with the corresponding figures intimated by the Heads of Departments. The Heads of Departments should also furnish to the

Accounts Officer an annual statement in Form P.F. 20 (enclosed) showing the total credits and debits during the year Major Headwise and the total balance at the close of the year and get these confirmed by the Accounts Officer. 10(1) Interest for each year will be calculated with the help of ready-reckoners by the Heads of Offices and entered in the Ledger Accounts as well as in the Broadsheet. The statement of interest thus consolidate the statements received from all Drawing Officers under his control will then be forwarded to the Head of Department who will control and send the consolidated statement to the Accounts Office where the necessary transfer entry will be prepared for incorporation in the accounts. (2) At the time of sending the annual statement to the Accounts officer, a

certificate should be furnished by the Head of Department to the effect that the balance shown in the annual statement agrees with the aggregate of balances arrived at after squaring of broadsheets maintained by various disbursing officers and that the balance in individual account have been communicated to the subscribers and accepted by them. (3) The statement of interest which is required to be furnished by the Head of

Department to the Accounts Officer should also show the figures `Head of Officewise. (4) A Head of Department may also have offices in more than one audit circle. It

is, therefore, necessary that the register and statements to be maintained by him 256

should be according to audit circles. All the Heads of Departments should furnish the statements to the Accounts Officers concerned as soon as possible after interest f or each year has been credited in the Provident Fund Accounts of Class IV employees but not later than 31st May. 11.(1) At the end of each year the Head of Office will prepare statements in Form P.F. 15 (enclosed) showing the balance at the credit of the subscribers and forward the same to the individual subscribers for acceptance of their balances. (2) Missing credits/debits-while reconciling the figures with the Treasury Officers

each month, the Drawing &Disbursing Officer may also reconcile the figures of credits and debits of G.P. Fund, However, if there is any such missing credit/debit, the discrepancy shall be removed by following the undermentioned procedure, namely: (a) The department will supply the details of missing credits, viz., the name of

drawing and disbursing officer, head of account, name of the treasury, voucher no. and date, amount of deductions and that total amount of the schedule in which it is included. (b) The Accountant Generals office will verify and make necessary pairing after

adjustment in accounts. (c) On hearing from Accountant Generals office, the department will post the

credits in the ledger cards. (d) From the date of take over, the responsibility for the missing credits will be

that of the Department. 12. Final Payme nts -- The Provident Fund money at the credit of the subscriber

becomes payable on the fulfillment of the provision of the Punjab G.P.F. Rules 13.28 and 13.29 of Punjab. C.S.R., Vol.II The amounts become payable, when a

Government employee retires or, on his application, when he proceeds on leave preparatory to retirement or when he dies. As soon as such an event occurs the Head of the Office should proceed to obtain an application containing the requisite information in form P.F. 16 or 17 (enclosed). The account of the subscriber should be thoroughly checked; particular care being taken of any temporary advances and any other final withdrawals etc. taken during the last one year. Care should be taken to 257

ensure that no objection is raised by audit during local inspection in respect of the subscriber remains unsettled. The account should be scrutinised by the Heads of Offices generally as a whole and in particular all the entries of debits/ credits and interest made in the last 3 years before the year in which the payment is to be made should be carefully checked. After verification in the manner indicated above the account should be brought up-to-date allowing interest upto the end of the month proceeding that in which the payment is made or up to the end of sixth month after the month in which such amount become payable whichever of these periods be less under the Punjab General Provident Fund rules and instructions and the amount should be paid to the subscriber, if alive. Where the subscriber is not alive and a valid nomination exists, the payment should be made to the nominee or nominees. Where the subscriber is not alive and no valid nomination also exists, the payment should be made to the family members/other claimants who may be eligible to receive payment under the Punjab G.P.F. rules. In case the subscriber was financing an insurance policy from his G.P. Fund, steps should simultaneously be taken under rules to reassign it and return it to the subscriber. 13. When a Class IV employee is promo ted to a post in Class III and the Head of

the Office is in a position to certify that there are reasonable prospects of the employee continuing in the Class III for at least one year the balance in the G.P. Fund Account of the subscriber should be transfe rred to the Accounts Officer concerned immediately who will then commence maintaining these accounts in his office. 14(I) In cases where it is not possible to certify to the above effect (para13) the

G.P.F. account of such persons during the period of one year will have to be treated as if it relates to Class IV Government employees and maintained by the Head of Office, and should be transferred to the Accounts Officer after the employees has rendered one years continuous service in Class III post. Consequently, during this period, whether the pay of the subscriber is drawn on a separate bill or is drawn alongwith other Class III employees, the G.P.F deductions of such subscribers may be classified as adjustable under Head 8005-State Provident Fund-A-Civil--(a)General Provident Fund-I-GPF-Class IV employee * (Name of Department).

258

(2)

In both the cases (paras 13 and 14) only a certificate of deductions as per form

P.F. 21 (enclosed) should be attached with the pay bill and the schedule retained by the Head of Office for posting the ledger accounts in his office. 15. The following procedure shall be followed in the matter of recovery and

adjustment of G.P.F. subscriptions paid by Class IV employees while on foreign service or on deputation to other State Go vernment. (a) Employees on Foreign Service: The foreign employer shall remit the amount of G.P.F. subscriptions recovered from a Class IV employee to the Head of his parent office by cheque or by demand draft in his favour together with a schedule of G.P. Fund deduction in Form S.T.R. 17. Separate cheques or demand draft shall be sent in respect of each head of office. The Head of Office shall continue to maintain the G.P.F. accounts of the employees in his capacity as an Account Officer. He shall keep the G.P.F. Schedule received from the foreign employer for record in his office and send the draft or cheque together with a certificate of G.P.F. deduction as in the case of other Class IV employees to the Treasury Officer for adjustment. He should thereafter follow the procedure

prescribed heretofore.

The Drawing and Disbursing Officer will observe all the

instructions contained in F.D`s letter No. 2731-FR-56/753, dated 23rd August, 1956 read with letter No. 11050-6LFR-I-65/719, dated 27/28th January, 1966 (contained in Chapter XVII of F.D. Manual 1977 Edition-copy enclosed), in regard to the maintenance of Remittance Register. As soon as the entries recorded therein are authenticated by the Treasury Officers the Drawing and Disbursing Officer will make an entry of the receipt of subscription. (b) Employees on deputation to other State Governments: The drawing and disbursing Officer concerned will remit the amount of General Provident Fund deducted through crossed Payee A/lC Bank Draft in favour of the lending Department who will pass on the credit to the Drawing and Disbursing Officer concerned for being credited in the account of the subscriber concerned under the appropriate head through Treasury Challan and complete the subscribers account in accordance with the preceding paragraph. 259

16.

The G.P. Fund accounts should in all cases of deputation or temporary transfer

be transferred to the new office irrespective of whether or not the transfer is from one Department to another Department and whether or not it involves a change of Account Circle. Accordingly, the accounts will be maintained at the place where the deductions are made, and their correctness ensured, In all cases of transfer the procedure land down in para 7 should be followed with the followings modifications:(a) Cases of transfer not involving change of Account Circle-If the transfer is

from one Department to another, the copy of the statement of accounts should be sent to both the Heads of Departments (old and new). Transferring Department will make a deduct-entry for the amount transferred in its accounts whereas the transferee Head of Department will make in addition to that effect in its consolidated statement. (b) Cases of transfer involving change of Account Circle-The transfer of account

should be effected in the same manner as in cases mentioned at (a) above. On receipt of the copy of the Accounts Statement from the Head of the Department, the Accounts Officer will after making necessary entries in the Broadsheet of Provident Fund accounts of Class IV employees pass on the credit/debit to the other Accounts Officer concerned through the Major Head M-Remittances-(b) Inter Governmental Adjustments-893-Inter State Suspense Account. The subscribers new head of

Department should also send a copy of the Accounts Statement to the new Accounts Officer to enable him to watch the receipt of credit. 17. No authority from the Accountant General for withdrawal of moneys for

payments to subscribers from their respective G.P.F. account will be necessary (as the G.P.F accounts of Class IV employees will no longer be maintained by the A.G.). 18(1) Under the provisions of Rule 13.3(2) of Punjab C.S.R., Vol.II (Punjab General Provident Fund Rules), the accumulations in the Fund, of which payment have not been taken within six months, after they become payable, are required to be transferred to Deposits at the end of the year and treated under the ordinary rules relating to deposits. (2) It has been decided that the Departmental Offices, who h ave been entrusted

with the work of the maintenance of the General Provident Fund accounts of Class IV employees should furnish to the Audit Officer a list giving full particulars of the 260

subscribers and the amount to be transferred to Deposits, including interest payable under the rules by the 15th of April each year, to enable the Audit Officer concerned to effect the necessary adjustment in March Final accounts However, in the case of Class IV employees the accumulations in the fund of which payment has not been taken within three years after they become payable, are in modification of rule 13.3(2) ibid, allowed to be transferred to `Deposits` and treated under the ordinary rules relating to deposits. (3) In cases where no amount is required to be transferred in a particular year, the

Departmental Officers should send a nil statement to the Audit Officers. (4) Payments on account of refund of unclaimed deposits will be authorised by the

Audit Officer concerned after ascertaining that the amount was originally received and credited to deposits and that the claimants identity and title to the money have been certified by Departmental Officer who maintained the G.P.F. account of the Class IV employee concerned. 19. These instructions should not be treated as exhaustive and drawing officers

should make themselves familiar with the G.P.F. Rules for the correct maintenance of the accounts. 20. The Provident Fund Accounts maintained by Heads of Offices will be checked

cent per cent by Audit during the local inspections of the offices. 21. If some clarification is required in respect of any point of doubt, or any

difficulties arise in the course of maintenance of accounts by the Heads of Offices, they should contact the Accounts Officer concerned for guidance. (Copy of Chapter 17th of F.D. Manual 1977 Edition).

261

CHAPTER IX AUDIT OF GRANTS/LOANS UNDER SECTION 14, 15 & 20OF CAGS (D.P. & C.S.) ACT, 1971 G.I.A. SECTION 9.1 A special section viz. Grants- in-aid has been created for the implementation of

the provision of the C.A.G.` D.P.&C.S) Act, 1971, consisting of one Audit Officer/Senior Audit Officer and two Section Officers./Asstt.Audit Officers. The section coordinates all work and activities arising in connection with the implementation of the provision of the said Act. 9.2 Soon after the close of each financial year, the Accountant General should ask

various Departments of the State Government to furnish a list of the bodies or authorities to which grants or loans were paid by them including grants or loans paid by offices subordinates to them, during the preceding financial year. Information should be extracted about loans and grants sanctioned by Government/Departments to bodies or authorities situated in the audit jurisdiction of other Accountants General and statement containing particulars of sanctions to bodies or authorities within the audit jurisdiction of other Accountants General should be sent half yearly by the end of June and December to the Accountant General within whose jurisdiction the body or authority is situated. 9.3 An institution-wise Register should be kept centrally containing all

information about grants or loans sanctioned and paid by the Central Government or the State Government or any Union Territory having a Legislative Assembly to all authorities or bodies. The register should also contain information regarding the unspent balance, if any, of loans and grants in previous years together with the grants and loans paid during the year and the expenditure for that year. 9.4 In all cases in which the grant and/or loan given to the body or authority in a

financial year, including unutilised balances carried forward from previous year is not less than Rs 25 lakh and the amount of such grant or loan is not less than 75 per cent of the total expenditure of that body or authority. The Department of the State Government should be asked to send to this Office the annual accounts of the concerned body or authority for the relevant year. On receipt of necessary extracts from the Principal Director, Central Revenue/Principal Director of Audit, Economic and Service Ministries, in respect of grants/loans paid by the Central Government to bodies or authorities situated within the audit jurisdiction of his office the concerned 262

Ministry/Department of the Central Government should directly be asked to send to this office the annual accounts of the body or authority for the relevant year. 9.5 (a) On the basis of information collected, a review should be conducted

and a list should be drawn up of the bodies or authorities the audit of the accounts of which are required to be undertaken under Section 14 of the Act. Simultaneously, the concerned Departments of the State Government as well as the concerned Ministry/Department of the Central Government in regard to the grants or loans given by the Central Government should be asked to notify the bodies or authorities that their accounts would be audited by this office under Section 14 and for this purpose books of accounts should be made available and necessary facilities provided for audit. (Para 15 and Annexure to C.A.G.s letter No. 149/TA.1/50.60-Volume-II, dated 2nd March 1974). Audit under Section 14 of the C.A.G.s (D.P.&C.S) Act, 1971. 9.6 The criteria that should be followed for deciding whether audit of a body or

authority should be undertaken under Section 14 of the C.A.G.s Act, 1971, is laid down in the following paragraph:1) Where any body or authority is substantially financed by grants or loans from the consolidated Fund of India or of any State or of any Union Territory having a legislative Assembly, the C.A.G. of India, subject to the provisions of any law for the time being in force applicable to the body or authority, as the case may be, audit all receipts and expenditure of that body or authority and to report on the receipts and expenditure audited by him. Note: Where the grant or loan to a body or authority from the Consolidated Fund of India, or any State or of Union Territory having a Legislative Assembly in a financial year is not less than rupees twenty five lakh and the amount of such grant or loan is not less than seventy five per cent of the total expenditure of that body, such body or authority shall be deemed to be substantially financed by such grants or loans. 2) Notwithstanding anything contained in Sub Section (1), the C.A.G. may with the previous approval of the President or the Governor of a State or the Administrator of a Union Territory having a Legislative Assembly, audit all receipts and expenditure of any body or authority where the grants or loans in a financial year is not less than rupees one crore. 263

3)

Where the receipts and expenditure of any body or authority are by virtue of the fulfillment of the conditions specified in (1) & (2) above, he shall

continue to aud it the receipts & expenditure of that body or authority for a further period of 2 years notwithstanding that the conditions specified in (1) &(2) above are not fulfilled during any of the two subsequent years. Scope of Audit 9.7 (a) Comptroller and Auditor General has discretion to determine the scope

and extent of audit under Section 14 of C.A.G.s (D.P.&C.S) Act, 1971. In audit the accounts of the authorities or bodies under Section 14, the principle and instructions for audit of Government transactions should generally be applied, having regard to the nature of the transactions of the authority or body, its objectives and other relevant factors. The normal procedure for raising and pursuance of objections raised in local audit should be followed. After completing the audit of the body or authority,

Inspection Report should be sent to the Government in the concerned Department endorsing a copy simultaneously to the body or authority whose accounts are audited under Section 14. (Para 11 of C.A.G.s letter No. 149-TA-1/50-60/Vol-II, dated 2nd March, 1974) (b) The usual quantum of test check applied to other items like the checking of the

Service Books, Balance sheets, Profit and Loss Accounts etc. should also be applied in these cases. Besides a test check of pay fixation cases of officers to the extent of 50 per cent may also be conducted. Any particular point arising in the course of audit may be settled at Headquarters or referred to the G.I.A. Section for further examination. (G.I.A. Special Section letter No. 233-35, dated 9th July, 1974). (c) Any audit arrangement, extent envisaged for the Body or Authority under the

appropriate law governing that Body or Authority will co-exist with the C.A.G.s Audit under Section 14. (Para 4 of C.A.Gs letter No. 149-TA-1/50-60/Vol-II, dated 2nd March, 1974) Note: Audit of Punjab Agricultural University is being conducted under Section 14 of the C.A.G.s (D.P. & C.S.) Act, 1971 and not as sole auditors like World Bank aided projects and therefore, the accounts are not to be certified. Arrangement of Audit under Section 14 before certification of Accounts. 9.8 In respect of Local Bodies, namely, Zila Parishads, Panchayat Samities,

Municipal Corporations, Municipalities, etc coming under the purview of Section 14 264

of Act 1971, the Accountant General can undertake the audit of accounts of some of the local Bodies the audit of which has been completed by Examiner, Local Fund Accounts. In case of other Local Bodies in respect of which the audit by the

Examiner Local Fund Accounts is in arrears, Accountant General may undertake the audit under Section 14, if the same is considered necessary and expedient. (Para 5 of C.A.G.s letter No. 762-TA/37-74, Vol-II, dated 5th September, 1974) 9.9 The Accountant General has been pleased to decide that as a matter of

prudence, we may defer our audit of the accounts of a body/authority selected under Section 14 till the audit by the usual auditor is completed but it should not cross the limits of necessity and expediency. In other wo rds, it may not be postponed beyond a period when the due date of its completion and incorporation of its results in the audit report in which it is due to be incorporated cannot be adhered to. In the latter case, we may go ahead with our audit under Section 14 without waiting for the audit by the usual auditors of the concerned body/authority. If felt necessary, suitable comments about the delay in audit by the usual auditors can be included in the Inspection Reports. (GIA Special Sections letter No. GIA-Spl-Section/Policy/75-76/IV/380, Dated 12th August, 1975) 9.10 (a) It is normally desirable to await the audit of any body or authority

being completed and the accounts, duly certified by the Auditors of the body or authority are available, before audit under Section 14 is undertaken by the Accountant General as the accounts so certified can form a better basis for examination, of applicability of Section 14 rather than an uncertified account. If however, there are specific reasons in any case where it is considered essential that audit under Section 14 should be conducted before the accounts are certified, the specific reasons therefor should be recorded with Accountant Generals approval before audit is undertaken. Mere delay in certification of accounts by the Auditors appointed for the purpose, cannot be the only reason for taking up audit under Section 14. (b) In all such cases, it is necessary to ensure that audit so conducted is sufficient

to certify the accounts, if called upon to do so, though it is not necessary that accounts should actually be certified by the Department. Further the report issued should specifically indicate whether the Auditors appointed have not completed the audit or no Auditors have been appointed as the case may be. (C.A.G.s circular letter No. 967-TA-1(RGL)142-78, dated 30th September, 1978) 265

(c)

It has been decided that audit under Section 14 should not be delayed merely

because of the fact that the audit by its regular Auditors is in arrears. The institutions attracting Section 14 come under scrutiny of Audit Department only once in 3 to 4 years. During this period, the Examiner or the regular Auditor is likely to have completed his audit for at least one year and his results of audit would be available. In any event, if it is seen that audit of any institution is in arrears for a long period, say 3 to 4 years or even more, the matter may be taken up demi-officially with the Finance Secretary about the delay in the audit of the accounts of the institution by its regular Auditor/Examiner, Local Funds Accounts. The Accountant General should however, carry out the audit under Section 14 and mention the delay in the Audit Report also. Further, if in any State, audit by the Examiner of any class of institutions which are i n receipt of substantial assistance from Government is found to be in arrears, the Accountant General may consider suggesting a Draft Para for the Audit Report. (C.A.G.s circular letter No. 438-TA-I(RGL)/142-76, dated 19th May, 1980) Audit of the Accounts of Small Farmers Development Agencies/Marginal Farmers and Agricultural Labourers Agencies situated in various States under Section 14 9.11 (a) It has been decided that the audit of the accounts of small Farmers

Development Agencies, Marginal Farmers and Agricultural Labourers Agencies situated in West Bengal, Orissa, Assam, Meghalaya, Arunachal Pradesh, Nagaland, Manupur, Tripura, Sikkim, Gujrat, Maharashtra and Delhi will be conducted by the Principal Director of Audit, Economic and Service Ministries and the audit of these Agencies in other places will be conducted by the concerned State Accountant General. (b) Since the grants to these agencies are released by Government of India, the

Principal Director of Audit, Economic and Service Ministries will act as the co-ordinating authority for audit of all these institutions and may issue such general and specific instructions for conducting audit of these institutions to the various Accountants General, as may be necessary. 9.12 (a) Since these Agencies are in receipt of considerable financial assistance

from the Government it is necessary that the audit is organised effectively. The results of audit may be communicated to the Government of India and the 266

Organisation concerned and a copy of the report sent to the Principal Director of Audit, Economic and Service Ministries as well. If the material as a result of audit is considered such that it can figure in the Audit Report, suitable draft paragraphs may be proposed and sent to Government, C.A.G. and the Principal Director of Audit, Economic and Service Ministries. The Principal Director of Audit, Economic and Service Ministries will collect the material received from the several State Accountants General and his own office and propose a comprehensive paragraph for inclusion in the Audit Report. (C.A.G.s letter No. 894-TA-I(RGL)81-76, dated 15th September, 1978 received with GIA special Section letter No. GIA-Spl-Section/Pal-XI/78-79/928 dated 3rd October, 1978) (b) Government of India, Ministry of Rural Reconstruction have intimated that from the year 1979-80, the Central Sector Schemes for small Farmers Development Agencies and Integrated Rural Development Programme are being financed jointly by the Central Government and the State Government concerned on 50:50 basis. It is therefore, desirable that the State Government should also get a copy of Inspection Report simultaneously so as to enable them to keep a watch on the performance of the Agency Report. As such it should be ensured that besides sending copies of the Inspection Report to the Ministry of Rural Reconstruction and S.F.D.A./I.R.D.P. concerned, one copy of the Inspection Report of these units is also simultaneously sent to the Agricultural Production Commissioners/ Secretary Incharge of Agriculture of the State Government/Union Territories concerned so that the State

Government/Union Territory is also kept in the picture. (C.A.G.s circular letter No. 630-TA-I/81-76, dated 5th July, 1980). 9.13 The Principal Director of Audit, Economic & Service Ministries has supplied

the following information to this office for taking up audit of the accounts of Small Farmers Development Agencies and marginal Farmers and Agricultural Agencies located in Punjab. 1. 2. Time Allotment for each Unit 5/6 days per Agency per year. under Audit. Periodicity of Audit Yearly

267

3.

Year from which audit is to be taken and number of Agencies to be audited which are under Audit control of this office.

(1) SFDA, Amritsar from 1975-76 onwards. (2) MFAL, Ropar from 1975-76 onwards. (3) SFDA, Patiala from 1975-76 onwards. (4) MFAL, Hoshiarpur from 1975-76 onwards (5) MFAL, Jalandhar from 1975-76 onwards

Audit is to be conducted under Section 14 of the C.A.G. of India (DP & CS) Act, 1971. (A.G.C.W.M., New Delhi letter No. OAD(C)/II/21/2/Vol III/77-78/1041 dated 16th November, 1978) Guide lines for conducting Audit under section 14. 9.14 Audit under section 14 is of all receipts and expenditure i.e. a total audit that

would cover not merely accounting or other deficiencies and irregularities, but would go into the efficiency of implementation of programme and activities, raising of resources, the financial position, the impact of the organisation or lack of it, etc. some of the points to be kept in view while conducting audit under section 14 are given below:(i) Whether the organisation has a plan of action drawn up to meet its objectives.

Whether plans are drawn out in adequate detail for the objectives to be achieved, whether the execution had been as per plan, if not, how and where the planning or execution has gone astray thereby delaying or even nullifying the objectives to be achieved for increasing the costs of such achievement. (ii) Whether the body/authority has adequate financial control over budgeting.

Are financial powers wisely exercised? Has it tapped its own sources of income adequately and has it taken steps to demand and realise its dues and to pursue cases through proper channels. (iii) whether the schemes entrusted to or taken up by the body/authority for

executio n with or without government aid are planned properly with an assured source of finance to back them up, that execution proceeds on prescribed lines with due regard to changes necessitated by practical consideration from time to time, that a periodical assessment of the progress is conducted to locate draw-backs and to remedy the same. (iv) Whether the objective of the scheme has always been kept in view, that benefit

as planned has been accruing and the intended beneficiaries take due advantage of the benefits conferred by the scheme.

268

(v)

Whether the body/authority has carried out its activities and has been fulfilling

the objectives for which it exists and is substantially financed by Government. (vi) Whether the body/ authority carries out its activities with due regard to

economy in expenditure and accepted norms of financial propriety. (vii) Whether the revenue yielding schemes executed in past do yield the expected

return and that they are not neglected and are properly maintained to produce the required results. (viii) Whether schemes of research nature are duly planned and executed as per

plan, they have adequate personnel of required caliber to man for the required period without interruption or frequent change of personnel, whether period of research is extended with due regard to progress made and whether there is consequential waste of public fund. Whether a stage or goal is set for closure of research schemes and research is directed to the object in view. (ix) Whether training schemes have a specific purpose and are directed to that

purpose and whether achievement of the objective is watched and reviewed from time to time. (x) Whether the results of research are examined, considered and decision

taken/implemented. (xi) Whether the accounting and stores records are properly maintained and the

financial and other rules and procedures are observed in letter and spirit. (Para 2 of CAGs confidential D.O. letter No. 520-Rep-(c)/136-76, dated15th/18th June,1976) Keeping on Record copies of Accounts of Bodies/Authorities Audited 9 15 Since the audit under Section 14 of any Body/authority is with reference to its

accounts, it is needless to say that the auditor shall keep as a part of his records, a copy of the accounts audited by him. If in any case, the institution concerned does not possess a spare copy, it is necessary to have one prepared at the time of audit and attach the same to the records of the audit done. In addition, since the application of Section 14 depends on extent of Government grant/loan, a statement of such grants/loans including unutilised grants/loans carried over from past periods may be obtained and kept on records so that the application of Section 14 would be clear with reference to such statements and the audited accounts. 269

Suitable instructions in this regard may be issued to all audit parties and before approving the Inspection Reports, compliance of these instructions watched by the Main Office. (CAGs letter No. 694-TA-1/74/76, dated 7th August, 1976). Audit under Section 15 of CAGs Act, 1971. GENERAL 9.16 Section 15 of the C.A.G.s (D.P.&C.S.) Act, 1971 refers to the duties and

powers of the Comptroller and Auditor General in respect of grants or loans given for any specific purpose to any authority or body not falling within the ambit of Section 14. Audit of Grants and Loans has necessarily to start from the sanctioning authorities and the Principles of audit and expenditure will generally apply to this audit. 9.17 (a) Section 15(1) has two parts. The first part imposes statutory

responsibility on the Audit Department to scrutinise the procedures by which the authority sanctioning a grant or loan for any specific purpose to any authority or body from the Consolidated Fund of India or any of State or of any U.T. having a Legislative Assembly satisfied itself as to the fulfillment of the conditions subject to which grants or loans are given. (Para 2of the CAGs letter No. 214-TA/36-74,dated 25th March 1974). (b) The second part of section 15(1)subject to the proviso there under and subject

to what is stated in section 15(2)gives the C.A.G. the right of access to the books and account of the authority or body in receipt of such grants or loans where the CAG has this right in terms of section 15, it can be exercised by him at his discretion in other words, it is not obligatory that the books of authorities or bodies, the books and accounts of which are open to audit by the Audit Department, must necessarily be scrutinised. (Para 4of CAGs letter No.215-TA/36-74,dated 25th March 1974). 9.18 The Inspecting officers of the local audit parties auditing authorities or bodies

which sanction grants/loans, shall after examining the accounts of the authorities/ bodies where available in the office of the grant/ loan sanctioning authority send separate reports to Inspection Civil wing Headquarters giving their recommendations regarding selection of recipient bodies and authorities whose local audit may be taken up under the provisions of Section 15(1) of the C.A.G.s Act, 1971. The inspection civil Wing will forward the Report to G.I.A. Section. The GIA Section will examine 270

all such reports recommending access to the books of bodies or authorities and make a judicious selection taking into account inter alia the magnitude of the grant or loan and any peculiar or unusual condition attaching to such grants/and or loan and subject to the proviso under Section 15(1). (Para 4 of CAGs letter no. 214-TA-I/357-74, dated 25th March, 1974). 9.19 (a) In CAGs letter No. 214-TA-I/35-74, dated 25th March 1974, detailed

instructions were given on the scope of audit under Section 15 of CAGs (DP&CS) Act, 1971 and, inter alia, the instructions were that:(1) It is the statutory duty of the C.A.G. to scrutinise the procedure whereby the

sanctio ning authorities satisfy themselves as to the fulfillment of the conditions subject to which the grants or loans are given; (2) As it is not obligatory to scrutinise the books of all authorities/bodies the

books of which are open for such inspection with regard to Section 15(2), the Accountant General may select a few institutions to begin with; and (3) Important points arising out of examination conducted under Section 15(1) of

the books and accounts of selected bodies or authorities may be reported to the Headquarters. The reports received from the Accountant General in this regard have been examined and it is noticed that generally selection of bodies/authorities has been confined to a small number and certain Accountants General have not conducted examination of accounts of any unit at all. While some Accountants General have prescribed certain monetary limits, no such limit seems to have been prescribed by others. With due regard to the information furnished by the Accountants General and the material so far reported in the Audit Reports, the question of issue of further guidelines for audit under Section 15 and the necessity or otherwise for fixing monetary limits for examination of records of recipient institutions of grants/loans have been examined. (b) It has been decided that no monetary limit criteria need be prescribed for

selecting the institutions for check up of records in terms of section 15. Depending on the points noticed during the scrutiny of the records of the sanctioning authorities, the decision has to be taken whether the records of recipient body or authority are to be 271

gone into. For this purpose the Accountants General may issue suitable guidelines to their field parties. (c) (I) While scrutinising the records of sanctioning authorities in terms of section 15,the Accountant General may besides any other point they may deem fit to check, have in mind inter alia the points mentioned below:Has the sanctioning authority prescribed clear cut procedure for satisfying itself that the grants and loans sanctioned are being utilised for the purpose for which they have been given and whether all the conditions of such grants and loans are being fulfilled. (II) (i) (ii) (iii) (iv) (v) Such procedures may provide for:submission of periodical progress reports. submission of audited statement of accounts. Inspection of the Grantee institutions. If so, are these reports being received/inspection done. Are the reports reviewed when received and by whom and what action is taken thereon? (vi) Has any irregularity been noticed during inspection ?what action is taken on such irregularities? (vii) A register of grants- in-aid is to be maintained to watch the receipt of utilisation certificates. Is the register being maintained correctly and is it being reviewed and at what level? (viii) Is a register of assets created out of grants (equipment and buildings) being maintained? How is it ensured that these assets are being put to intended use? Are there any instances of diversion or sale of assets ?If so, what action has been taken in such cases? (ix) What action, if any, is being taken in regard to obtaining utilisation certificates where not received, being in cash or by adjustment from other grants. (x) Has any legal action been taken against the defaulting grantees? Are subsequent grants also being paid despite such defaults? 272

(xi)

In regard to loans what is the position regarding repayment? Is there any arrangement by which it could be ensured that even after repayment of the loans the asset is utilised for the purpose for which it is given?

(xii)

Are all conditions stipulated in the sanction to grant- in-aid, fulfilled? How is it being ascertained that the general objective of a scheme of grant- in-aid is being fulfilled? For instance a scheme of grant- in aid may be intended to promote adult literacy or Sanskrit. Is there any report or assessment by which the authorities review from time to time the actual achievements? Is such an achievement reasonably proportionate to the effort and expenditure involved?

(xiii)

Such a review could be usefully made over a period of years. For instance, if a scheme of grants- in-aid for promotion of sports has operated for 10 years at the end of which there has been very little achievement, this could be commented upon though it may not exclusively be related to procedure.

(xiv)

There may also be defects in the sanction or in the scheme itself which may militate against an effective procedure to check the purpose for which the grant is utilised. Such deficiencies in the sanction or the scheme should also be examined.

(CAGs letter No. 1090-TA.I (BGL)-76-75-II, dated 22nd December, 1976) SCOPE OF AUDIT 9.20 (a) The audit of grants or loans for specific purposes should begin with a

scrutiny of sanctions issued by the competent authorities. It should be seen that:(i) (ii) (b) They are competent to sanction the loans or grants, and While doing so, the financial rules governing them have been followed. The second step will be to see whether the grant or loan has been utilised by

the recipient body or authority for the purpose for which it is sanctioned. The financial rules of the central, state and union Territory Governments make the sanctioning authorities or disbursing authorities responsible for satisfying themselves about the fulfillment of conditions attaching to the grant or loan and furnishing to the Audit Officer certificates of utilisation within a prescribed period. To make the audit of grants or loans for specific purpose effective ,the first part of section 15(1)of CAGs (D.P.&C.S) Act, 1971, provides for scrutiny by audit of the procedure 273

followed by the sanctioning authorities in regard to proper utilisation of grants or loans and fulfillment of conditions attached to them. In exercising this part of check it will be necessary for audit to study the procedure prescribed for the sanctioning authorities to satisfy themselves regarding proper utilisation of loans/grants and to check up whether they are following the prescribed procedure and whether the procedures themselves are not deficient in any respect. Factors like the amount of grants /loans sanctioned, existence of prescribed procedural instructions, existence of efficient internal audit and administrative inspection systems in the departments for an effective control over the proper utilisation of grants and loans are to be looked into in this connection. In the light of this examination, decision to undertake the actual scrutiny of the books and accounts of parties or authorities receiving grants/loans for specific purpose may be taken. During the scrutiny of the procedures followed by the sanctioning authorities, the accounts and audit arrangements existing in the recipient body or authority should be ascertained. (c) Unless proper arrangements in these respects exist and the accounts of the said

body or authority stand audited by its usual auditors for the period in question; local scrutiny of its books and accounts may have to be deferred as a matter of prudence till such audit is got completed by the recipient body or authority. The absence of or deficiency in such arrangements and the consequent delay in Audit scrutiny by this office of the books and accounts should be mentioned in a separate paragraph in the chapters on Grants and Loans of the annual Audit Report. (Para 1 of Annexure to C.A.Gs letter No 214-TA/36-74, dated 25 the March 1974) 9.21 In certain states, besides Government, subordinate authorities are also

empowered to sanction grants or loans to different bodies or authorities, copies of sanction of which are not received in audit although the sanction of grant or loan implies an outgo from the consolidated Fund. In many cases there may not be any formal sanction but mere counter-signature on bills signifying such sanction. There may be cases where sanctions accorded by subordinate authorities are not sent in advance to audit, but copies of the sanctions are attached to the bills of small amounts, in such cases it may perhaps be impracticable to keep a complete record in the register of grants and loans.

274

In regard to such cases, when local audit is undertaken of the offices of the sanctioning authorities, the Inspecting Officer should scrutinise the records relating to sanctions issued by them and report the amount of grants or loans sanctioned together with relevant particulars regarding the recipient bodies or authorities to the G.I.A. Section to determine whether the books and accounts of a particular recipient body or authority be scrutinised locally. (Para 2 of Annexure to C.A.G.s letter No. 214-TA-36-74, dated 25th March, 1974) 9.22 The question whether a body or authority established by a State or Union

Territory Government would constitute a corporation within the meaning of section 19(3) and whether the audit of such a corporation could be undertaken under section 14 of C.A.G.s (D.P.&C.S.) Act, 1971 has been considered in consultation with the Ministry of Law and Justice. It has been held that a body corporate established by a State or Union Territory Legislature, having perpetual succession with a common seal, with the power to acquire and dispose of property, contracting obligations and of suing and being sued in its corporate name would be treated as a corporation. It should be noted in this connections that corporations established by law by the Legislature of the State or the Union Territory, as the case may be, which come within the purview of section 19(3) of the Act, but those established under the law will not come within the purview of that Section. Section 15(2) of C.A.G.s (D.P.&C.S.) Act, 1971 however, refers to corporations established by or under the law. Accordingly, all corporations

established by or under the law of Parliament or the Legislature of the State or of Union Territory with a Legislative Assemly will come within the purview of Section 15(2) of the Act. (Para 3 of C.A.G.s letter No. 762-TA-I/37-74, Vol-II, dated 5th September, 1974) 9.23 The Ministry of Law and Justice have further clarified that a body or authority

referred to in Section 14 or 15(1) of C.A.G.s (D.P.&C.S.) Act, 1971 can include a corporation established by law made by the Legislature of a State or Union Territory with Legislative Assembly. It follows that it will be in order to take up audit under section 14 of the Act, of corporations established by the Legislature of the State or the Union Territory with Legislative Assembly, as the case may be, which come within

275

the purview of Section 19(3) of the Act, if the conditions stipulated in Section 14 are satisfied. (Para 4 of C.A.G.s letter No. 762-TA-I/37-74, Vol-II dated 5th September, 1974) 9.24 In the case of Corporation if the law by or under which such corporation has

been established provides for the audit of its accounts by an agency other than the Comptroller and Auditor General, the right of access to its books and accounts is not available to him unless specifically authorised by the President or the Governor of a State or the Administrator of a relevant Union Territory under Section 15(2). (Para 10 of C.A.G.s letter No. 214-TA.1/359-74, dated 25th March, 1974) 9.25 Specific purpose grant or loan will include grant to cover deficit but not

general purpose grant or loan without any condition. If any doubt arises from a reading of the sanction letter as to whether a grant or loan is for a specific purpose, Government Departments file leading to the issue of the relevant sanction should be consulted. (Para 11 of C.A.G.s letter No. 214-TA.1/359-74, dated 25th March, 1974) 9.26 The scrutiny of the procedure by which the sanctioning authority satisfies

itself as to the fulfillment of the conditions, subject to which the grants or loans for specified purposes were given to Municipalities, Municipal Corporation, District Boards, Universities, Co-operative Societies and Panchayati Raj Institutions, may be conducted in respect of these corporations in the office of the sanctioning authority. The books and accounts of the corporation will not however, be open for local audit by the Accountant General, if the law by or under which such corporations have been established provides for the audit of their accounts by an agency other than the Comptroller and Auditor General. In other words, in regard to corporations

established by or under law made by Parliament or State Legislature, the scrutiny will have to be confined to the records available in the office of the sanc tioning authority subject to proviso below section 15(1) of C.A.G.s (D.P.&C.S.) Act, 1971 unless the audit of the accounts of the corporations vests in Comptroller and Auditor General under section 14 or section 19(3) of C.A.G.s Act, 1971 or any other law made by Parliament in which case local audit of the books and accounts of the corporations can be undertaken by the Accountant General. (C.A.G.s letter No. 908-TA.I/87-74, dated Ist November, 1974) 276

Grants-in-aid pertains to the year of its drawal 9.27 As per Accountant Generals orders a grant sanctioned and drawn in a

particular year is to be taken as pertaining to the year in which it is drawn by the state Government. The small time- lag in the remittance of the grant to the recipient body is to be ignored, since government itself treats the grant as pertaining to the year of its drawal. These guidelines may be kept in view by the Audit parties, while conducting audits under section 15 of the C.A.G.s (D.P.&C.S) Act, 1971(G.I.A special Section letter No. GIA-Section/IR and Secretariat 15/IV/533 dated 12th August, 1978) Specific purpose grants /loans to Government Companies and other organisations under audit of the commercial wing 9.28 Section 15(1)of C.A.G.s (D.P.&C.S) Act, 1971 imposes a statutory responsibility on the Audit Department to scrutiniise the procedures by which the authority sanctioning a grant or loan for any specific purpose to any authority or body from the consolidated Fund satisfies as to the fulfillment of the conditions and for this purpose the C.A.G. has been given right to access to the books and accounts of the authority or body, subject to provisions in section 15 (2) ibid. In this regard, the question relating to examination of records of Government companies and other corporations for which C.A.G .is the auditor for purposes of scrutiny under section 15(1) has been examined. It has been decided that for the purpose of audit of such grants/loans, the Audit Officer of the Ministry/Department sanctioning the grants may keep the Audit Officer of the

Government/company/corporation concerned informed of the results of his scrutiny in sanctioning authoritys office. The examination of the records of the Government Company/Corporation will be conducted by the Audit Officers conducting the normal audit of that body. The results of audit will be communicated by the Audit Officer of the Government Company/Corporation to the Audit Officer of the

Ministry/Department for incorporation in the Civil Audit Report and pursuance of the objections, if any, noticed with the sanctioning authority concerned. (C.A.G.s letter No. 349-TA, 1/160-75, dated 24th April, 1976) 9.29 (a) As at present, if in the course of audit of sanctions of grants/loans in

the offices of sanctioning authorities, some points concerning assistance paid to Government Companies/Corporations under Statutory audit of other audit offices are 277

noticed by G.I.A. Section, the wing conducting this audit, these may please be brought to the notice of the concerned audit officer and the receipt of results of audit watched. (b) In case where the statutory audit of Government Companies/corporations is

conducted by the Commercial Wing, any points noticed by Inspection Civil Wing in the course of sanction audit which need to be investigated further in the course of audit of books and accounts of companies/corporations may be brought to the notice of the Commercial Wing by the Civil Inspection Wing. It is, however, not necessary that the Commercial Wing should communicate the important audit points to Inspection Civil Wing for incorporation in the Audit Report. Rather, in accordance with the existing procedure, the Commercial Wing may process such important points noticed during the course of audit of books and accounts of these

companies/corporations direct for the Civil Audit Report, the material in regard to scrutiny of sanctions being continued to be processed by the Civil Wing. (c) Another effect of these instructions will be that the Commercial Wing would

have to prepare two sets of observations, one pertaining to grants/loans paid to companies/corporations made under section 15(1) for incorporation in the Civil Audit Report and the other set of observations in respect of the usual audit conducted under section 19 of the new Audit Act for the Commercial Audit Report. For allocating observations relating to Section 15, Commercial Wing may follow the instructions relating to scope of audit of accounts of bodies/authorities under section 15(1) given in C.A.G.s circular letter of 25th March, 1974 and allied instructions brought to their notice from time to time. (d) Commercial Wing may also ensure that the above instructions in regard to

audit of books and accounts of recipient bodies are complied with in local audit. Accountant General has desired that there should be close co-operation between Inspection Civil Wing and Commercial Wing in this matter. (G.I.A. Special Cell letter No. GIA-Spl-Cell Policy and /76-77/VI/373-78, dated 29th June, 1976) Audit of Accounts of Co-operative Societies 9.30 The Co-operative Societies represent corporations established under law made

by the Legislature of the State or the Union Territory, as the case may be, and as such 278

they would attract the provisions of Section 15(2) of C.A.G.s (D.P.&C.S.) Act, 1971. Accordingly, local audit of co-operative societies established under law made by the Legislature of a state or of a union Territory cannot be undertaken by the Indian Audit and Account Department except where Comptroller and Auditor General is authorised to undertake the audit of these societies by the Governor of a state or the Administrator of a union Territory, having a Legislative Assembly under the provisions of section 15(2) of the Act, as provision exists in the state Laws for audit of accounts of the co-operative societies, by the Registrar of Co-operative Societies, or an Audit officer authorised by him in this behalf by general or special orders. In the circumstances, the present practice of superimposed audit of co-operative societies may be discont inued. In cases, however, in which the co-operative society comes under the purview of section 14 of C.A.G.s (D.P.&C.S)Act,1971the audit of the accounts may be undertaken in accordance with the instructions in this regard. (C.A.Gs letter No. 528-TA. 1/25-74, dated 24th June, 1975) 9.31 As only the instructions for super- imposed audit have now been withdrawn, it

may be noted that the instructions given for review of accounts of co-operative societies, wherein Government have made substantial investments in the form of share capital, loan, grant etc. either in central audit or in the offices of the Registrar of co-operative societies and allied offices are still operative and the review may be continued to be conducted. It is also brought to notice that the Accountants General are not precluded from proposing appropriate comments in the Audit Report as a result of scrutiny of these records in the office of the sanctioning authorities. Necessary action for such examination may be undertaken and the feasibility of reporting results of such examination given due consideration. The relevant material in this regard (including the statistical information on such investments in cooperative societies)may be proposed for inclusion in the chapter on Financial Assistance to Local Bodies (C.A.G.s letter No. 1245-TA. 1/25-74.Vol-I,dated 29th December, 1975). Audit of the Punjab State Co-operative Supply and Marketing Federation 9.32 Audit in respect of the Punjab State Co-operative Supply and Marketing

Federation may be confined to the records of the sanctioning authorities under Section

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13 and 15, including scrutiny of the audited accounts of the Society and the reports of the Auditors thereon. In case any point relating to the assistance paid to Markfed comes to notice in audit of sanction in the office of sanctioning authorities, these may be particularly brought to the notice of Commercial Wing and G.I.A. Section. (C.A.G. letter No. 400-TA.1/25-74-1, dated 11th May, 1976 and G.I.A. Special Cell endorsement No. GIA-Spl. Cell/74-77/20(2)/300-303, dated 7th June, 1976). Audit under Section 20 of C.A.G.s (D.P.&C.S.) Act, 1971) 9.33 With the promulgation of the C.A.G.s (D.P.&C.S.) Act, 1971 the practice of

undertaking audit on consent basis ceases and audit to be undertaken by the C.A.G. has to be under one or the other section of this Act or any other parliamentary enactment. (Para 12 of CAGs letter No. 149-TA.1/50-69 Vol-II, dated 2nd March, 1974) Quantum of Audit 9.34 (a) The quantum of audit under section 20 generally depends on the

efficacy of the internal check available in any organisation. The minimum check should be exercised to ensure that the accounts represent a true and fair picture of the Organisation. The quantum of audit to be applied to different accounts/records has been prescribed by the Comptroller and Auditor General of India in his secret letter No. 1076-TA.1(RGL) 26-78, dated 7th November, 1978. In respect of

records/documents for which no quantum is prescribed the same may be determined locally. (b) However, where it is necessary to decrease/increase the quantum, suitable

justification therefore should be available on record for the increase allowed. In cases where audit of selected periods/records reveals serious irregularities, there will be no objection to increase the quantum on the spot and to have it approved later. Since audit of Organisation is conducted locally by the Section Officers/ Assistant Audit Officers under adequate supervision, it is not necessary to prescribe separate, quantum for Auditors, Sr. Auditors and Inspecting Officers. The work has to be organised in such a way that the team as a whole is responsible for the audit and certification of accounts. In respect of each record a general scrutiny is required to ensure tha t it does not reveal any abnormal feature. 280

Audit of Accounts of Central School Organisation (Kendriya Vidyalaya Sanghathan) under Section 20 9.35 The audit of all receipts and expenditure of the Kendriya Vidyalaya Sanghathan and the schools controlled and administered by it, including those whose expenditure is reimbursed by different public undertakings will be conducted by the Audit Department. The audit will cover besides receipts and expenditure, the pupils Fund of the School as well. (A.G.C.R.s letter No. OAD.1/12-8/74-75/275 dated 26th May, 1975) Recovery of the cost of audit of bodies and authorities under C.A.G.s(D.P.&C.S)Act, 1971 9.36 The rules regulating the incidence of expenditure involved in audit of the accounts of bodies and authorities conducted by the I.A. and A.D. have been laid down in section VIII of Appendix 3 of Account code, Volume I. The question whether these rules of incidence require any modification consequent upon promulgation of C.A.G.s (D.P.&C.S) Act, 1971 has been under consideration for some time. It has been decided that the present rules of incidence should be continued to be followed in regard to audit of the accounts of bodies and authorities, including Corporation, in so far as audit under Section 14,15 and 19 of C.A.G.s (D.P.&C.S) Act, 1971,is concerned. Accordingly, the cost of audit of bodies and authorities including corporations, will be recoverable in all cases in which audit is undertaken by the Comptroller and Auditor General, or any officer under him as the sole auditor. In cases in which the audit of the accounts of the body or authority is conducted by another agency and audit by Comptroller and Auditor General or an officer under him represents second or superimposed audit undertaken under Section 14,15 and 19,as the case may be, the cost of such second or superimposed audit need not be recovered from the body or authority concerned. As regard audit under Section 20, the same is required to be undertaken on such terms and conditions as may be agreed upon between Comptroller and Auditor General and the concerned Government. One of the terms to be settled in this regard would relate to the recovery of the cost of audit of the body or authority to be entrusted under Section 20 of 1971 Act. The recovery of cost of audit in these cases will, therefore, be regulated by the agreement that will be arrived at in each case. These cases should, therefore, be referred to the Headquarters for finalisation of the terms and conditions under which the audit of the body or 281

authority concerned may be undertaken including the question whether the cost of audit should be recovered or not. All pending cases may be dealt with accordingly. (C.A.G.s letter No. 13-TA-I/28-73, dated 9 th January, 1975) Issuing of Inspection Reports 9.37 (a) The normal procedure for raising and pursuance of objections raised in

local audit should be followed. After completing the audit of the body or authority under Section 14, a copy of the inspection Report should be sent to the Government in the concerned Department, endorsing a copy simultaneously to the body or authority whose accounts are audited under Section 14 of C.A.G.s (D.P.&C.S) Act, 1971. (b) It should be borne in mind that though the Accountant Generals scrutiny

under Section 15, is of the accounts books and records of selected bodies or authorities, any question arising from such examination, had better be directed to the sanctioning authorities for elucidation or comments. Moreover, the relevant

Inspection Report should be issued to the sanctioning authorities and not to the recipient institutions. However, care should be taken to ensure that facts and

assumptions on which comments are based are correct and for this purpose facts should be confirmed by the sanctioning authorities or the recipient institutions concerned, depending on the circumstances of each case. (Para 6 of C.A.G.s letter No. 214-TA-1/357-74, dated 25th March, 1974) (c) Where audit of a body or authority is undertaken under Section 20(1) of the

C.A.G.s (D.P.&C.S.) Act, 1971, the results of audit should be communicated to the Governing Body of Council, who shall submit a copy of the Inspection Report alongwith its observations to the Ministry/ Department of Government of India and to the Council. A copy of the Inspection Report should also be forwarded direct to the concerned Ministry/ Department of the Government of India. Drafting of Inspection Report 9.38 (a) The following instructions should be observed by the local audit

parties for drafting of Audit and Inspection Reports:(i) The Audit and Inspection Reports on the accounts of Bodies/Authorities receiving Grants/Loans are to be issued to the State Government. As such these should be well drafted and written in clear and concise manner. 282

(ii)

For processing the material for the Audit Report, the objections should be properly documented and got confirmed from the Department by issuing audit memos.

(iii)

The words seen, discussed and facts verified should be written by the Head of Office before putting his signature and not by the Section Officer/ Assistant Audit Officer/ Inspecting Officer.

(iv)

The audit Note should be so drafted that it should clearly indicate the years audited, the important items of Receipts and Expenditure and also how Section 14 is attracted. Where annual accounts are certified by the Chartered

Accountants or Examiner, Local Fund Accounts, this should be indicated. As audit under Section 14 is an audit of all Receipts and Expenditure, the para should generally cover all major items of receipts and expenditure commenting on the State of accounts, budget and internal control, stock accounts and verification, etc. Also wherever feasible the programme of the organisation should be assessed for efficiency and economy, highlighting lapses in procedure and systems, lack of impact etc. The above information is necessary for commenting the results of audit in the Audit Report. (C.A.G.s letter No. 13-TA-1/28-73, dated 9th January, 1975) (b) Audit parties conducting the audit of Bodies/Authorities may suitably include

the following information in the Inspection Reports:(i) Figures of Grants/Loans received by the Body/Authority from the State/Central/U.T. having Legislature during the financial year. (ii) (iii) Unspent balance of the previous years Grants/Loans. Total expenditure of the year from all sources. The details of the in-

admissible items of the expenditure like deposit in the bank accounts, etc., may be distinctly given. (iv) Details of Grants/Loans given, if any, by the Body/Authority (under audit) to other bodies/authorities comments whether such Grants/Loans were given in pursuance of the instructions of the original sanctioning authority and how proper utilisation of such Grants/Loans was ensured by the direct recipient Body/Authority. 283

(v)

Any discrepancy(ies) noticed by the audit parties in figures of Grants/Loans and total expenditure received from Headquarters may be explained in the Memos forwarding the Inspection Reports.

(GIA Special Cell letter No. GIA-Spl-Cell Policy/75-76/1/27-32, dated 23rd April, 1975) (c) The following documents should be furnished with the Audit and Inspection Report:(i) (ii) (iii) Forwarding letter with which Audit and Inspection Report is issued. Title sheet of audit and Inspection Report. A statement showing the following information. It should also suitably be commented upon in the Audit and Inspection Report:Sr. No. Sanctioning Authority No. & date of sanction Amount of Grant/ Loan Amount drawn Previous balance, if any Total Amount utilized within the stipulated period 8 Balance Amount refunded Amount for which UCs sent Amount for which UCs awaited Remarks, if any

10

11

12

13

(d) (i)

Internal control system in Autonomous Bodies evaluation thereof. Internal control is a management tool use to provide reasonable assurance that management's objectives viz. Reliability of financial reporting, Effectiveness and efficiency of operations, Compliance with applicable laws and regulations etc. are being achieved. While conducting the audit, the auditor should

appraise the internal control in force before he plans out the detailed audit programme. C&AG has desired that as a part of our audit of Autonomous Bodies, we are required to make an assessment of the effectiveness of the internal control arrangements in the Autonomous Bodies. Tho ugh the

responsibility for the adequacy and effectiveness of the internal control structure rests with management of respective Autonomous Bodies, the responsibility of reviewing the internal control system including internal audit lies on us as we are the sole auditors. Appraisal of internal controls enables the auditor to restrict his detailed examination in areas where internal control is satisfactory and extends it in areas where internal control is weak. With weak internal controls and limited audit coverage, many things could go wrong. 284

(ii)

Evaluation of internal control can be made in a number of ways but the most effective and common method is through internal control questionnaire. In general the control areas can be :

Policies and procedures Scope and independence of internal audit Receipt and disbursement of cash Mixing of funds (Plan/Non-plan) Purchase/custody of investments/securities Accounting and receipt of interest on investments/Securities Fixed assets/Vulnerable assets Receipt and receivables Disbursements/Payables Payrolls/Loans and advances to the individuals Bank balances/Bank Reconciliation Man power analysis (iii) For the purpose of evaluation of internal control detailed guidelines for internal control standards issued by INTOSAI and an internal control questionnaire issued by the Institute of Chartered Accountants of India may be kept in view. The purpose of these documents is to provide an illustration of the questionnaire method of evaluating internal control. A standard form of questions may not be suitable to all Autonomous Bodies. Individual variations may have to be made to suit specific circumstances and activity of Autonomous Bodies. (iv) All Heads of the Departments must ensure that internal controls of Autonomous Bodies are evaluated and a brief note on this matter shall be invariably sent along with the draft SAR to Headquarters. Serious

shortcomings in the internal control system must also find place in the SAR. CAG letter No. 77-Rep(AB)/63-2004 dated 05-04-2004 (e) It is essential that annual accounts are approved by the authority competent to

do so as per provisions of Rules/Bye Laws applicable to the organization before the audit is taken up. It may be ensured that:(i) in every case of sole audit under Section 19 (2)/ 19 (3)/ 20 (1) of the CAG's

(DPC) Act, 1971 matter of approval of accounts is examined by the field audit offices 285

with reference to Rules/Bye-Laws applicable to the organisation and need there of is brought to the notice of the management. (ii) field offices do not entertain/take up audit before the accounts are approved by

the competent authority of the autonomous body and annual accounts duly approved by the competent authority of the Autonomous Bodies are only accepted before the audit is commenced. (iii) copy of Resolution/Minutes of the authority approving the accounts are

invariably obtained along with the annual accounts at the commencement of audit. A copy of the minutes approving the accounts may also be sent to Headquarters along with SAR. (iv) in cases where accounts are revised during/after audit, the revised account

should again be approved by authority which had earlier approved the annual accounts before these are submitted to audit. CAG letter No. 44-Rep(AB)/150-2000 dated 08-03-2002 Certificates to be furnished with Audit and Inspection Reports under Sections 14 and 15 of C.A.G.s Act, 1971 9.39 The following certificates may be furnished with the Audit and Inspection Reports under Section 14 and 15:(i) Certified that no case of grants- in-aid for specific purpose to an individual or a firm came to notice during the course of audit. (ii) Certified that no case of Grants/Loans for non-specific purpose came to notice during audit. (iii) Certified that statement showing scope and extent applied to audit under Sections 14 and 15 has been attached. (iv) Certified that figures of Grants/Loans and expenditure there against has suitably been depicted in the Inspection Report as per G.I.A. Cell letter No. GIA Spl. Cell/Policy 75-76/27-32, dated 23rd April, 1975. (v) Certified that the statement in Annexure A has been prepared and suitably commented in the Audit and Inspection Report. (vi) Certified that the time allotment is adequate/inadequate, in case the time allotment was inadequate detailed reasons in this regard may be given.

286

(vii)

Certified that the audit of the accounts of the Body/Authority was completed by its usual auditors before taking up audit under Sections 14 and 15.

(viii)

Certified that a certified copy of the annual accounts of the body has been obtained and placed in the Audit and Inspection Report. Pursuance of Inspection Reports

9.40

A case has come to notice in which draft paragraph proposed for the Audit

Report had been deleted by Headquarters as the comment thereon was not based on a valid premise. The connected paragraph(s) in the Inspection Report continued to be pursued by the field office concerned with the administrative authority concerned. Pursuance of paragraphs in Inspection Reports in such cases could lead to embarrassment at times. It is, therefore, requested that all cases of draft paragraph deleted by Headquarters should be reviewed by the Accountant General in the light of the remarks of the Headquarters with a view to considering whether the connected paragraphs in the original Inspection Reports should be pursued or not. (CAGs letter No. 516-Rep/126-77, dated 25 th June, 1977received with Appropriation Section D.O. No. Appn. (R) 1/-1-5/Inst-IV/200-01, dated 8 th July, 1977). Reporting of results of Audit under Sections 14 and 15 9.41 (a) Though section 15 does not specifically provide for reporting in the

C.A.G.s Reports, on the result of audit of loans/ grants for specific purpose, since expenditure out of the consolidated Funds is involved, reporting thereon will be within the purview of Section 13 of the Act. (b) Important irregularities noticed during the scrutiny of procedures in the office

of the sanctioning authorities and/ or scrutiny of records of the recipient bodies or authorities may also come to be featured in the Audit Report distinctly and separately in a chapter on G rants/Loans given by Government. In this chapter, the important points arising out of the audit under Section 14 and those arising out of the scrutiny under Section 15(1) should be distinctly brought out in separate paragraphs. (c) In regard to grants/loans to bodies or authorities, not coming under the scope

of Section 14 and also not coming under Section 15(1) due to non-mention of any specific purpose in the sanctions, such items should be listed out and mentioned distinctly in separate paragraph of this chapter, so as to bring to the notice of the 287

Legislature the number of such cases and quantum of money involved that remain unaudited by the Indian Audit Department, though it constitutes expenditure out of Government Funds. (Para 12 of C.A.G.s letter No. 214-TA/36-74, dated 25th March, 1974) 9.42 The paras under Section 14 should clearly indicate the years audited, the

important items of receipts and expenditure, and also how Section 14 is attracted. Where annual accounts are certified by Chartered Accountants or Examiner local fund Accounts, this should be indicated. As audit under Section 14 is an audit of all receipts and expenditure, the para should generally cover all major items of receipts and expenditure besides commenting on the state of accounts, budget and internal control, stock accounts and verification, etc. Also wherever feasible the programme of the organisation should be assessed for efficiency and economy, highlighting lapses in procedures and systems, lack of impact, etc. (Para 3 of C.A.G.s confidential D.O. letter No. 883-Rep/141-76, dated 9th September, 1976) 9.43 The Chapter on Financial Assistance should also include a review of the results of examination of the accounts of co-operative societies conducted in the offices of sanctioning authorities (Registrars of co operative Societies). Such a review could reveal inadequacies in existing procedure, non-observance of prescribed procedure, slow progress in certain schemes etc. The extent of achievements in cooperative sector on certain schemes entrusted to them for implementation could also be critically studied. The material to be presented in the Audit Report in this regard can be preceded by brief outlines of the number of co-operative societies, funds employed, membership, profitability of the movement, information on dormant societies, extent of arrears in audit etc. (Para 5 of C.A.G.s confidential D.O. letter No. 883-Rep/141-76, dated 9 th September, 1976) 9.44 There may also be some other significant point worth including in the State Audit Report in respect of institutions which do not attract Sections 14 or 15, but which are under our audit under erstwhile Consent arrangement. Only significant points should be mentioned in regard to such organisation. The question of including paras pertaining to these organisations will have to be considered in the light of the

288

significances of the issues involved as, in any case, a separate Audit Reports is being issued in respect of most of these institutions. (Para 6 of C.A.G.s confidential D.O. letter No.883-Rep/141-76, dated 9 th September, 1976) 9.45 (i) The two points indicated below are to be dealt with as follows: Where more than one Government are rendering financial assistance to a

body, in whose report will the material be included? (ii) In respect of bodies financed by the Central Government and audit conducted

by the State Accountants General will the State Accountant General directly process the material with the Central Government or will it be done by the Principal Director of Audit, Central Revenue/Principal Director of Audit, Economic & Service Ministries. The general principle guiding us for reporting is that those who vote the money should know how the money that was voted has been spent. Accordingly, our comment, should appear in the reports of the Government that finance a body. However, the Accountant General auditing the body should exercise his best judgment to decide, with due regard to the magnitude of grants, loans given by various Governments, objects of such assistance, control exercised by the respective Governments, nature of objections raised in relation to the assistance given by various Governments etc., the reports in which the material should appear and process the case further by sending copies of reports to the concerned Accountants General for further processing in their respective reports. If the body is ,however, located in one State and is financed both by the State and Central Government, normally the para will appear in the State Report. If however, the Accountant General feels that the matter is worth mentioning in the Central Report also, there is no objection for State Accountant General finalizing the para in consultation with the Government (State and Central ) and forwarding the same to the Principal Director of Audit, Central Revenue/Principal Director of Audit, Economic & Service Ministries for inclusion in the Audit Report. (C.A.G.s letter No. 1102-TA-1/I49-73dated 25 th November, 1975) 9.46 (a) Since audit of autonomous bodies is entrusted to the C.A.G. in public

interest, it is necessary that the audit of their accounts is directed to see that the objective of the organisation is achieved, that the expenditure incurred to achieve the 289

objective is reasonable, that there has not been wastage of funds placed at their disposal etc. For this purpose, an efficiency cum performance audit should be conducted periodically and material incorporated in the Separate Audit Report. Where the points are considered significant enough to be specifically brought out in the conventional Audit Report as well there is no objection for suitable mention being made in the Audit Report. The accounts should be certified as representing a true and fair picture of the affairs in the form mentioned below as communicated vide CAG letter No. 89 Rep(AB)/91-2003 dated 27-04-2004: AUDIT CERTIFICATE I have examined the Manufacturing & Trading Account, Profit and Loss Account for the year ending 31st March ______ and Balance Sheet as on 31st March ______ of the ______________________________________. I have obtained all the information and explanations that I have required, except record of commercial units as mentioned in the para ______of the appended Audit Report which inter-alia contains the following major audit observations. Non-maintenance of its accounts in the prescribe format (para ____ ) Non-maintenance of ledger accounts and compilation of annual accounts on the basis of the figures available in Store ledgers and Cash book. (para ____ ) Cash shortage of Rs __________ (para ____ ) In correct depiction of liabilities Rs __________ (para ____ ) In correct depiction of assets Rs __________ (para ____ ) Less depiction of receipts (Rs __________) from _____________ (para ____ ) Difference in rebate (Rs __________) receivable from ____________ (para ____ ) Non-furnishing of utilisation certificates in respect of grants released during _________ to _________ (Rs _________) (para _________) Preparation of accounts of single entry system. (para _________)

I certify, as a result of my audit, that in my opinion these accounts are not properly drawn up so as to exhibit a true and fair view of the state of affairs of the Board

290

according to the best of information and explanations given to me and as shown by the books of the organization. AUDIT CERTIFICATE I have examined the Revenue Accounts for the year ended 31 March _____ and the Balance Sheet as at 31 March _______ of the ______________ including Receipt and Payment Account and Income and Expenditure Account for the year ended 31 March ____ and the Balance Sheet as at 31 March ______ of _____________. I have obtained all the information and explanations that I have required, except Supporting documents for figures included in the accounts for Rs _______ as mentioned in paragraph _____ of the appended Audit Report and subject to the appended Audit Report which inter alia contains the following major audit observations, i. ii. Rs ______ sales tax liability not disclosed (para ____ ) Rs ______ demand for Electricity charges, raised by State Electricity Board, not disclosed (para ______ ) iii. Rs ______ revenue expenditure capitalized, thereby increasing the surplus in the Revenue Account (para ______ ) iv. Rs ______ normal interest on defaulted principal of Government of India loan not provided (para ______ ) v. The difference of Rs ______ in the cash balance had not been reconciled (para ______) vi. The block assets remained in excess by Rs ______ due to additional of notional interest (para ______) vii. Rs ______ was appropriated to Pension Fund instead of charging it to revenue account, to show a higher net surplus, (para ______ ) I certify, as a result of my audit, that in my opinion these accounts and Balance Sheet are properly drawn up so as to exhibit a true and fair view of the state of affairs of _____________________ according to the best of information and explanations given to me and as shown by the books of the organization. CONFIDENTIAL AUDIT CERTIFICATE I have examined the Receipts and Payments account, the Income and Expenditure Account for the year ending 31st March _____ and the Balance Sheet as 291

on 31st March _____ of _________________________. I have obtained all the information and explanations that I have required and subject to the clarifications furnished in note to and forming part of accounts and observations in the appended Audit Report which inter-alia contains the following major audit observations. 1. Cash Balances of Rs _____ in the three set of accounts Nazul Account I & II and General Development Accounts remained un-identified and non-verifiable due to maintenance of only one cash book. (para _____) 2. Appearing of minus Cash & bank balances of Rs _____ (para _____). 3. Closing value of property amounting to Rs _____ and Rs _____ could not be verified due to non-availability of details and connected records. (para _____). 4. Value of built up and under construction flats/shops of Rs _____ could not be verified for want of proper records. (para _____) 5. Stock of general development accounts depicted a minus balance of Rs _____. (para _____). 6. Value of land and works amounting to Rs _____ could not be verified since the value of each land was not exhibited in the register. (para _____). 7. Income and Expenditure accounts and Balance Sheet in respect of Nazul-II account not prepared. (para _____). 8. Details of a l nd acquired scheme wise with year wise break up under Nazul-II account not maintained. (para _____). I am of the opinion that these accounts and Balance Sheet cannot be said to exhibit a true and fair view of the state of affairs of ______________ as shown by the books of the organization. AUDIT CERTIFICATE I have examined the Receipts and Payments Account only for the year ending 31 March _____ of the ____________________ based on the information and explanations furnished to me and records produced for verification and observations in the appended Audit Report which inter-alia contains the following major audit observations: 1. Non-preparation of Income and Expenditure Accounts and Balance Sheet (Para _____) 2. 3. Non-assessment of Assets and liabilities of the State Government (Para _____) Minus balances of Stock Rs _____ (Para _____ ). 292

4.

Non-deposit/Non remittance of GPF/CPF/Income Tax recoveries made from employees Rs _____ (Para _____ ).

5. 6. 7.

Non-accountal/short exhibition of revenue collected (Para _____ ). Non-reconciliation of bank account with its cash book (Para _____ ). Non-refund/not obtaining of sanction for carry forward of unspent grants Rs _____ (Para _____ ).

8.

Non-furnishing/submission of utilisation certificate to audit (Para _____ ). I certify, as a result of my audit, that these accounts are not properly drawn up

so as to exhibit a true and fair view of the state of affairs of the ____________________ as shown by the books of the organization. b) In every case, the certificate of audit must be signed by the Accountant

General and a separate Audit Report compiled and issued. The separate Audit Reports in cases where they are to be placed before Parliament/State Legislature, should be sent to C.A.G.s office for prior approval before issue. There is, however, no objection to issue a draft report to the organisation/Govt., in the first instance giving reasonable time for reply and to finalise the report based on replies of the organisation/Govt. In such cases it is necessary to ensure that any delay in reply does not adversely affect timely certification of accounts and as such, for this purpose, a working arrangement can be brought about in consultation with the

organisation/Govt. concerned. c) In respect of every audit, it is not the case, that point of objection is worthy of

mention in the separate Audit Report and there are quite a good number of minor objections which have to be pursued by other means. In respect of such cases the objection can be incorporated in an inspection report and compliance watched during the next inspection. In respect of all such cases where objections are pending for a long time, an omnibus para may be included in the separate Audit Report indicating number of reports and paragraphs pending and money value of objections involved. It is necessary for the Audit office to compile and maintain an upto date record relating to various organisations under audit. These may include:(i) (ii) (iii) The constitution of the autonomous body. The rules and regulations framed by Government and the autonomous body. Orders connected with administrative and financial powers at various levels. 293

(iv)

Copies of annual reports of the body as compiled/presented to Government/ Legislature etc.

(v)

Copies of reports of various committees relating to the functioning of the body.

(vi)

Copies

of

the

final

audit

report

and

accounts

as

presented

to

Government/Governing Body, minutes of adoption of the accounts and reports, etc. A complete set of record relating to (i), (ii), (iii) and (iv) should also be made available to Comptroller and Auditor Generals office in respect of all cases, where reports are sent to C.AGs office for approval. (C.A.G.s letter No. 1076-TA I (RGL)/26-78 dated. 7.11.1978 read with letter No. 2093-TAI (RGL)/26-78 dated 30.11.79) In all cases where, the accounts are received by the autonomous bodies, as a result of audit comments, there should be indication to this effect either in the Audit Report or in the accounts by way of a Note by the organisation concerned. Further if the impact of the revision is substantial, a suitable mention thereof should be made in the Audit Report accompanying the Audit certificate. (C.A.G.s letter No. 66-106-Rep (AB)/26-92 dated 21.2.1992) 9.47 (a) On receipt of replies of the autonomous bodies to the separate Audit

reports and observations of C.A.G.s office on the draft report, the finalised separate Audit Report is required to be issued to Govt. and autonomous bodies with a copy of the Accounts duly certified. Though most of the audited Accounts and Audit Reports are being placed as such before Parliament/State Legislatures by the Government, cases have come to the notice wherein the autonomous body prepares a reply for the finalised Audit Report also and the documents placed before Parliament consist of not only the Audit Report, but also the replies of the autonomous body to the points raised in the Audit Report. The matter as to whether the procedure of supply of the replies to the separate Audit Report which are not vetted by the Accountant General/ Director of Audit concerned can be continued has come up for consideration in this contest. It has been decided that in case the autonomous body wants to inform the Parliament/State Legislature, the action which has been taken on the Audit Report, there should be no objection for supply of replies to the separate Audit Reports, as part of the documents 294

to be placed before Parliament/State Legislature. If on the other hand the autonomous body, in its reply disputes the facts recorded in the separate Audit Report or gives certain additional facts not earlier brought to the notice of audit it is necessary for the autonomous body to have the reply duly vetted by audit before it is incorporated in the documents to be placed before Parliament. In view of above decision every case where the document placed before Parliament in respect of the autonomous body includes the reply to the audit report it may be duly scrutinised by audit office and in case it is felt that the reply should have been vetted by audit office, the requirement may be brought to the notice of the Govt. /Organisation under intimation to C.A.G.s office. b) The replies of the organisation are to be duly incorporated in the separate

Audit Report. If the reply is not relevant to the point of objection raised, there should be no objection, if they are not duly incorporated but the autonomous body should be duly kept informed of the position. In all other cases, it is necessary that the finalised Audit Report incorporates replies of the body adequately and then issues the report to Government, and the autonomous body. If such replies as furnished to audit are subsequently brought to the notice of Parliament/ State Legislature it can give rise to a piquant situation and such a contingency will have to be avoided. (C.A.G.s letter No. 575-Rep (c)/ 316-81 dated 2.4.1982) Certificate of accounts of autonomous Bodies and State Legislature and laying of certified Accounts on the table of Parliament/State Legislature 9.48 Though the responsibility for placing the certified accounts with Audit Report on the table of Parliament vest in the concerned Ministry/Department of Government, still it seems proper for Audit to satisfy that the audited accounts, Audit Certificate and the Audit Report as placed before Parliament are complete in all respects and are the same as issued to government by Audit. The Principal Audit officer concerned in each case should, therefore, examine as soon as a copy of the report as placed before Parliament, is received from the Ministry concerned, whether the aud ited accounts as presented is complete in all respects, including the Audit Certificate and the Report appended thereto. Discrepancies, if any, should be specifically brought to notice of the concerned Department in Government of India under intimation to C.A.G.

295

Further, at the time of despatch of Audit Report with certified accounts of an autonomous body for any year to Government, if a Principal Audit officer has not received information on the placing of the certified accounts with the Audit Report for the previous year before Parliament, he should specifically call for the information in the forwarding letter of the Audit Report. (C.A.G.s circular letter No. 625-Rep (c)300-77.dated 18 th April, 1979) Laying of audited accounts and separate audit reports of Central/State Autonomous Bodies before Parliament/State Legislature(s) 9.49 As per instructions issued in this office circular letter No. 173-Rep (AB)2784(I) dated 10-9-1999 a proforma showing progress of audit, etc. is required to be sent along with the draft/final separate audit report. It has, however, been observed that generally all the columns are not dully filled in and, in particular, information about dates of presentation of previous audit reports before Parliament/State Legislature is not always indicated in the proforma sent along with the draft/final separate audit report. As such, in the absence of this information it is not possible to ascertain if the audited accounts/separate audit reports on autonomous body concerned have been placed before the Parliament/Legislature. It may please be ensured that while forwarding draft/final separate audit report to this office, requisite information is invariably indicated in the proforma. In cases, where information about presentation of audited accounts/separate audit reports before Parliament/State Legislature is not readily available with the autonomous body concerned, this matter should be pursued with the administrative ministry concerned at regular intervals. (CAG letter No. 42-Rep (AB)/23-2003 dated 3-2-2003) Improvement in quality and contents of Separate Audit Reports (SARs) and Certification of annual accounts of Central/State autonomous bodies whose audited accounts are placed before the Parliament/Legislatures. 9.50 (a) Instructions have been issued in this office circulars No. 1471-Rep (C)/58-82 dated 25-10-1982, D.O. No. 364-Audit. II/72-90 dated 17-3-1992, 52Rep(AB)/20-86 dated 25-2-1993, and 2-Rep(AB)/293-97 dated 16-1-98 on various matters relating to preparations of SARs. It has, however been observed that the instructions issued earlier are not being properly followed by some of the field offices and the draft SARs sent by field audit offices warrant substantial

improvement/modification.

The instructions contained in these orders and the 296

provisions of Manual of Instructions for Audit of Autonomous Bodies may please be followed carefully. In future, following aspects may be specifically kept in view at the time of preparation of draft SARs on the annual accounts of Central/State autonomous bodies. (1) Accounting policies : Organisations may be advised to append to annual

accounts 'Significant Accounting Policies' and 'Notes to Accounts'. The former can indicate 'significant accounting policies' e.g. items if any accounted for on cash basis, fixed assets and inventory valuation, etc. In the notes to Accounts non-applicability of Income Tax on the surplus of the organisation, exemption from statutory enactments, treatment of contingent liabilities etc. may have to be indicated. Such disclosures by the Autonomous Bodies will introduce transparency in accounts. The Accounts are read and certified only on the basis and parameters of such disclosures and they form part of the accounts certified by us. Therefore, any shortcoming in these aspects may however be commented in the SAR. (2) Transactions under Plan and Non-Plan: Transactions need to be examined to

ensure that there is no mixing up of 'Plan' and 'Non-Plan' in any inflow or outflow and if there be, suitable comments should be made in SAR. If 'Plan' and 'Non-Plan' are not separately depicted in the accounts, a separate schedule for the bifurcation for revenue and capital and 'plan' and 'non-plan' items may be insisted upon. If the organisation is not able to exhibit such important data distinctly under major activities/heads, it should be commented upon in the SAR. (3) Minus balances shown in the accounts require careful probe in audit. They

sometimes foretell serious irregularities. Reasons for each minus balance should be examined and commented upon. (4) Suspense heads : The extent of amount in suspense heads and their relevance to

the accuracy in accounts in as mush as Suspense Accounts dilute the accuracy may be examined and commented in the SARs. (5) Fund Accounts: If fund accounts for different purposes are found in the

autonomous body, then the relevant transactions of each fund being accounted for in the respective fund should be checked in audit. Mixing up of funds should be

commented upon in the SAR and audit of each fund account should be done specifically to assess the accuracy of each fund account. (6) Depreciation on capital assets: Even though in autonomous bodies there is no

concept of 'profit', it is the duty of audit while certifying the accounts, which includes 297

the balance sheet, to me ntion the status of the assets in the context of depreciation due to usage, obsolescence etc. Depreciation is not necessarily a charge on profits. They can be provided for either actually out of surplus generated by the autonomous bodies, as in the case of revenue earning Port Trusts, or be deducted from the value of assets of non-revenue earning organisations so as to provide a true and fair view of the assets of the autonomous bodies. Continued exhibition of assets at book value despite obsolescence, reduced value with corresponding capital entry gives a totally wrong picture about the assets of the organisation. It is, therefore, essential and desirable that in supersession of instructions issued in 1982, in all such cases where the accounts indicate value on original cost, suitable comments should be made in the SAR wherever applicable on the following lines: "The asset accounts depict book value of acquisition and do not exclude obsolescent, unusable, irreparable and condemned assets and also do not take into account depreciation with corresponding reduction of capital account. Therefore, the capital and asset accounts are overstated accordingly thereby not giving the correct picture." If, however, the organisation indicates in the "Notes to Accounts" that the depreciation for the assets has not been provided for and quantified the amount no comment need be made by Audit on this point. It may, however, be ensured that the condition of the assets vis--vis the valuation is verified and a specific certificate from the organisations should be obtained that they are not holding any obsolete or unusable assets which should be cross checked with reference to corroborating records during the audit and comments included where necessary. (7) Accountal of transactions on accrual/cash basis and exhibition in Balance

sheet : The system of accounting is required to be on accrual basis so that Income and Expenditure Account and Balance Sheet make a meaningful depiction of the true and fair view of financial position of the organisation. If any deviation is made from this basic principle, unless it is properly spelt out in the "Accounting Policies" or "Notes to Accounts", SAR should always have clear comment of this aspect in respect of all such items. The Autonomous Bodies should be advised to adhere to accrual principle for all transactions with only rare justified exceptions clearly revealed. (8) Cross checking of accounts with schedules : It has to be ensured in audit that

all the schedules referred to in the accounts are correctly drawn up and figures shown 298

there in tally with the accounts figures, as the schedules form part of the accounts certified by Audit. (9) Bank reconciliation : As also required in this office circular No. 52 Rep

(AB)/20-86 dated 25-2-1993, it has to be ensured that comments about arrears in bank reconciliation highlighting possibilities of misappropriation and frauds and the risks involved due to non-reconciliation/delays in reconciliation and the procedural deficiencies and lapses are highlighted in the SARs. Wherever warranted SAR should contain a clear comment that the bank/cash balances as revealed in the books of account could not be verified in Audit due to such non-reconciliation. (10) Revision of accounts: In all cases where accounts are revised at the instance of

audit, suitable comments about the impact of such revision may be made in the SARs as required in this office circular dated 16-1-1998 provided the substantial revision was effected due to our audit scrutiny. (11) Register of assets: These should be carefully checked in the context of earlier

comments on this subject and certification on physical verification of assets insisted upon so that non-availability of such certificates is commented upon in SAR. (12) Concise and brief comments: As the SARs are required to contain only

"Comments on Accounts", it should be ensured that the comments to be included in the SARs are concise and brief with a clear statement about impact on account of each comment as a result of deficient procedure/accounting followed. The SAR should convey only final comment and should not read like as an Inspection Report or draft para. The SAR should always say the resultant under/over statement of head

concerned and the impact on surplus/deficit/assets/liabilities in exact amounts. (13) Unspent Grants: It is necessary that the organisations draw a distinction

between annual maintenance/revenue grants and grants for specific/capital purposes. The unspent grants refundable/repayable to Government/other agencies, as may be required under the conditions stipulated in the grants, are in fact distinctly shown as "returnable" in the liability side of the Balance Sheet of the Autonomous Bodies. Non-depiction of such unspent balances in the Balance Sheet should be commented in the SAR. (14) Realisation of income due to the organisation : It is necessary that income

realised by an organization is accounted for as income in the Receipt and Payment Account/Income and Expenditure Account and is not allowed to be kept in a separate fund/account. 299

(15)

Completeness in accounts: It should be ensured in audit that the accounts to be

certified are complete in every respect and in cases where the accounts are voluminous, the organsiations should be asked to suitably consolidate and index the annual accounts so that possibility of any accounts remaining out of the purview of audit is avoided. In order to ensure completeness and meaningful exhibition, all the three accounts, namely 'Receipts & Payment Account', 'Income and Expenditure Account' and 'Balance Sheet' with supporting schedules, 'Significant Accounting Policies' and 'Notes to Accounts'' should come as a set to the audit to enable the auditor to check and certify these accounts. Incidentally figures should be reduced to a maximum of 5 digits for easy comprehens ion. (16) One of the main shortfalls in ensuring utilization of grants/loans for such

purposes for which the grants/loans are given to Autonomous Bodies is non production of such certificates to the Ministry/Department/Government. While on one hand the accounts are purported to have accommodated such expenditure on revenue and capital heads and are certified by audit on the other hand. Audit also list out that such certificates are yet to be received. This is like absence of physical verification certificate for assets exhibited in Accounts certified. Therefore in future a distinct comment should be made in SARs that the assets/expenditure as exhibited in the current and previous year(s) accounts are not supported by utilisation certificates for the specific amounts for which certificates are yet to be furnished to the Government. It may please be ensured that these aspects are kept in view during the certification of accounts of Autonomous Bodies. Revision of the provisions of the AB Manual for the above wherever necessary would be issued in due course and these instructions may please be followed properly with immediate effect. (CAG letter No. 111-Rep (AB)/49-99 dated 31-5-1999) (b) It has been observed that comments are not arranged in the order of annual

accounts (Balance Sheet, Income and Expenditure Account and Receipt and Payments Accounts, Notes on Accounts etc.). Comments are also not linkable with the

respective heads of accounts under objection. It is essential that the above mentioned instructions issued are strictly complied with and SARs are prepared in a uniform manner. Further, it is essential that SARs should not contain any value for money/transaction audit issues. 300

A format of SAR and a few sample "Comments" are enclosed for information and guidance. It should be ensured that comments included in SARs are linkable with the respective accounting heads shown in the annual accounts/schedules. Comments framed should be specific and pointed and impact of such comments on the account should be clearly indicated alongwith a key-working. (CAG letter No. 40-Rep (AB)/91-2003 dated 25-2-2004) Format of Separate Audit Report Introduction (Setting up of Autonomous Body, audit mandate and Grants/Loans received during the year). Comments to be included need not be comparative statements but should be concise and brief with a clear statement about impact on accounts of each comment as a result of deficient procedure/accounting practice followed. Comments should be pointed and indicate in exact amounts the resultant under/overstatement of head concerned and the impact on income/expenditure/Excess of Income/Expenditure over Expenditure/ Income as well as on assets/liabilities. Audit comments on accounts can be included as sub-paras at one place under this para depending upon defects noticed and the sub-paras may be arranged suitably one after another in the order of Form of Annual Accounts being certified under the heads Balance Sheet (Liabilities and Assets), Income and Expenditure Account, Receipt and Payments Account as illustrated below. COMMENTS ON ACCOUNTS 2. Balance Sheet

2.1 LIABILTIES: Deficiencies noticed against various heads may be commented in short sub-paras. 2.2 ASSETS: Deficiencies noticed against various heads may be commented in short sub-paras. 3. INCOME & EXPENDITURE ACCOUNT

3.1 EXPENDITURE: Deficiencies noticed against various heads may be commented in short sub-paras. 3.2 INCOME: Deficiencies noticed against various heads may be commented in short sub-paras. 3.3 Excess of Income/Expenditure over Expenditure/Income:

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4.

RECEIPT & PAYMENT ACCOUNT

4.1 RECEIPTS 4.2 PAYMENTS 5. GENERAL

ACCOUNTING POLICIES & NOTES TO ACCOUNTS. Brief comments about deficiencies noticed in accounting policies, notes on accounts, suitable disclosures not given on matters concerning accounts may be included. 6. EFFECT OF AUDIT COMMENTS ON ACCOUNTS

The net impact of the comments given in preceding paras is that assets as on _______ were understated/overstated by Rs _____________ lakh, liabilities understated/overstated by Rs ___________ lakh, and Excess of Income/Expenditure over Expenditure/Income for the year was understated/overstated by Rs __________ lakh. 7. Lack of response (If replies to draft SAR are not received within the stipulated period.)

Pr. AG/AG/PDA/DGA Place: Dated:

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CHAPTER X EFFICIENCY-CUM PERFORMANCE AUDIT Introduction 10.1 Efficiency-cum-performance Audit is a technique of audit adopted to assess

and evaluate the economy, efficiency and effectiveness of developmental schemes/projects/ organisatio ns. Economy means operation at the lowest possible cost (2) Efficiency is effective out-put without unnecessary waste of resources including adherence to time schedule and (3) Effectiveness is achieving programmed objectives and goals and ensuring that intended benefits arise in real terms. The Auditor has to review the working of the project/ Schemes/ organizations entirely in terms of their goals, objectives etc., to see how far the expected results have been achieved from the use of available resources of money men and material. The Audit embraces both financial and social aspects. The financial aspects would be to see that (1) the agency maintains an effective control over its income, expenditure, assets and obligation (2) the agency is responsible for its resources, obligations and operation and (3) that the agency reports include specific, true and useful data. The social aspects to be seen are how far (1) the goals/targets set have been achieved and (2) the intended benefits to the community/area have accrued. In view of its all embracing nature this type of audit is also known as Economy, Efficiency and Effective audit (Three E`s). However, detailed guidelines have been separately published by the Comptroller and Auditor General on 14-5-2004 under the heading "Performance Auditing Guidelines" which may be kept in view while conducting efficiency cum performance audit. Nature of Audit 10.2 The audit envisages a comprehensive review of the project/scheme/activity to

ascertain: (i) How far the physical and financial targets have been achieved; (ii) How far the social and economic objectives have been realized; (iii)Whether the operations are conducted economically; (iv) Whether there are any case of overpayment, loss, extravagance, avoidable excess or infructuous expenditure due to improper planning, delay in completion of Projects, over staffing, over capitalisation, unsound pricing policy etc.;

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(v) Whether the utilisation of resources is in accordance with the projected outlays and if not, the reasons therefor. 10.3 Selection of the Scheme: 10.3 (a) The selection of the selected Project/Scheme is to be planned well and

carried on in an effective manner. b) Active co-operation of the concerned departments and their proper

appreciation of the task taken up by audit is essential for meaningful review. As such a pre-review discussion is held with the departmental authorities soliciting suggestion regarding areas/aspects to be taken up for study and assistance in making available the records and data. c) A study of the Sectt. and Directorate

Office files, supplemented by a test check in a few selected offices may give an idea whether any significant matters are likely to emerge from the review of a programme or a scheme. It would be advisable to involve the supervisory officers concerned in the process of selection (CAG's D.O. No.413-Rep 67-73 dated 13-2-75) Process of Review 10.4 under: (i) Preliminary study of the selected Projects/Schemes. (ii) Development of Audit Plan. (iii)Review Proper (iv) Drafting of the Review Report. 10.5 While making selection of programme/schemes for conducting review, certain The various phases of the scheme/reviews can be broadly categorised as

significant programmes undertaken by the State Government should be selected sufficiently in advance. Our scrutiny should go deep into the heart of the matter and discover what is there on the ground. Analysis should be penetrating and

comprehensive and coverage of a programme should be extensive enough so that dependable conclusion can be drawn. Background material should be given and supporting facilitates required for the success of a programme should be borne in mind. If there are any important organisational weakness, they may also deserve to be mentioned. (C.A.G.s D.O. letter No. 488-Rep/61-73, dated 13th March, 1973). 304

Preliminary study 10.6 Preliminary study of the selected schemes is an essential part of the review.

The objective is to have a comprehensive insight into the broad picture obtained at the time of initial selection to locate areas/aspects requiring in-depth examination of Acts, Rules and Regulations, budget and Plan documents. Performance budget of the department, Progress reports, administrative reports, periodical appraisals, report of the departmental officers and external nominated agencies, if any, like working/study groups of Planning Commission, Public Accounts Committee, Estimates Committee, Bureau of Public Enterprises etc. would provide the necessary background material about the scheme, its aims and objectives, financial targets and actual expenditure, the agencies executing the scheme, etc. While conducting review of a project, it is necessary to understand the nature of the Project right from the stage it is conceived. During the preliminary study, it should be seen: i) ii) iii) Whether adequate survey have been made before launching the Project; Whether Proper feasibility reports were prepared; Whether there is a detailed Project report and if there are any deviations why they have taken place; iv) Whether the specifications/performance of the various items of equipments are properly matched avoiding large idle capacity in any one of them; v) Whether there are proper procedures for inventory control and material management; vi) vii) viii) What contracting systems have been laid down What are the operational problems and how they are got over; Whether the Project is functioning as it should be. Report to Headquarters Office based on preliminary study 10.7 On the basis of preliminary studies conducted, a report should be prepared by

ECPA section on each scheme in the performa prescribed by the Comptroller and Auditor General of India as indicated below: 1. 2. 3. Name of the programme/scheme. Objective (s) of the programme/scheme. Brief description. 305

4.

How long in operation and whether the period is considered sufficient to attempt audit evaluation.

5. 6.

Where operated (name of districts, number of units etc.) Expenditure till date (revenue and capital expenditure to be indicated separately).

7.

Year wise (for the last 4-5 years). (i) Receipts (ii) Plan Outlay (iii)Budget provision (iv) Expenditure (in lakhs of rupees)

8. Nature of accounts maintained at the units. 9. Whether declared commercial? 10. Agency/Agencies through which the programme/scheme handled and whether records of such agencies are auditable under Comptroller and Auditor Generals (DP&CS) Act, 1971. 11. Number of districts/units proposed to be covered in test cheek; 12. Preliminary audit findings; 13. Points likely to be covered by Review; 14. Whether the subject was covered in any earlier draft/printed audit report, and if so, PACs recommendations and action taken thereon. This report together with any other scheme considered useful should be forwarded to the Headquarters office in January every year for their approval of the schemes and the general approach and perspectives suggested for examination. (CAGs letter No. 510-Rep/141-76 dated 22.6.77). (b) In order to improve the quality of the Audit Report, it has been decided

that proposals for the State Level review for comments in the Audit Reports of individual states may be sent to Comptroller and Auditor General of India, for approval. However, it is not necessary to send any background material as being sent in the proforma prescribed vide CAGs D.O. letter No. 510-Rep/141-76 dated 22.6.77. (AGs General Circular No. 03-R(S)/1998 No. 253-Rep (s)/183-86 dated 7.3.1988).

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Development of Audit Plan 10.8 After the preliminary review is conducted and its results are received, a

specific plan of audit is chalked out in advance for investigation, marking out the offices/field units to be visited and overall strategy for collecting relevant data, and the time allotment for completing the review. Necessary format and questionnaire are also prepared for collection of important data relating to the various aspects of the scheme not only from offices or units proposed to be visited but also from other units for being made use of for consolidation and processing while framing the review. Manpower Planning for carrying out the detailed review is equally important. Review 10.9 The approach of audit should be systematic, methodical, logical and rational.

The review always commences with an in-depth study of the files in the offices of the concerned Administrative Department and other Heads of Departments. While scrutinizing the records, it has to be seen whether:(i) Objectives of the Project/Scheme/Organization have been clearly defined and are in conformity with the policies and decision of Government. (ii) Programmes have been drawn up in accordance with these objectives and are being implemented by specific and well defined procedures. (iii) A good monitoring/management information system exists for collecting reliable data and progress reports on implementation of the policies and programmes and whether the data is effectively utilised to improve organisation or remedy deficiencies with utmost speed. (iv) Proper in built control mechanisms in the prescribed system exist to have an effective control over various areas of implementation to check leakages, losses, avoidable and wasteful expenditure etc. (v) Specified performance indicators exist; if not, the procedure followed or

yardstick/norm prescribed to assess the performance of the Project/scheme have to be ascertained and their validity determined. 10.10 The approach which in fact is a system audit, will give necessary idea and guidance for further studies, probes in the field units. The formats and questionnaires prepared for collection of detailed information from base level offices sho uld be reviewed on the basis of studies conducted and modified, if necessary. The next stage is carrying out the studies and collecting information from the selected field units. The examination and audit scrutiny of selected samples of transactions and study 307

should be thorough and complete without the need for a second visit to the same office. In order to have reasonable audit findings, it is necessary that sample size taken up for detailed check in audit is adequate and is fairly representative of the whole. Also, it is useful to discuss details of the project/scheme with the officers of the institutions visited, for eliciting maximum information. Besides instructions issued by the CAG from time to time as reproduced below may also be kept in view while selection of topic preparation of pilot study/guidelines etc. Step-1 Scrutinize the Plan documents and find out which are the schemes which have been allotted maximum priority in terms of (a) targeting (b) funding (c) impact. This would identify for you not only the schemes which are merely bulky financially but which are, in terms of policy and implication, more important. In other words, the selection has to be based on the application of the criteria of targetting, funding and impact so that audit effort is directed more meaningfully at an area of concern. For carrying out the above scrutiny, please follow a 3 stage approach: (a) locate sectors where maximum plan fund allocations are made; (b) locate within that schemes/programmes which have been i n operation for more than 3 years and in particular which have not been reviewed during the last 5 years; (c) relate the located area to the pre-budget survey, the Finance Minister's Budget Speech and issues of particular significance arising out of the debates in the Legislative Assembly and the Reports of the Public Accounts Committees. If you feel the links are not obvious, do not discard the process. For instance, if you look at the proceedings of the legislative Assembly or for that matter read the proceeding of the Public Accounts Committee, there would be a large number of irregularities relating to schemes and programmes which have been articulated but which have been lost sight of by both planners and executives. Do not get upset that you have to do a kind of work you generally do not do or assume that you already know. It is worthwhile to go through the drill. Please also remember that you to keep a record of all that you did. Remember that at the end of scrutiny at each stage, you are to categorically record your findings either supporting or rejecting your initial selection. The idea basically is that your ideas should be tested for their strength and discarded for their weakness. A well

administered project is a weak subject, while a poorly administered project is a strong subject for Audit Review. 308

Step-2 Two or three topics that emerge as the likely topics for review would now be before you for selecting the one or two which you consider feasible within the resources available to you. In judging their relative importance, the following criteria may be adopted: (a) Is the scheme or the programme addressing an important development issue involving large number of people or is it only expenditure oriented in terms of acquisition of assets. If the expenditure is large because of acquisition of assets then that would deserve separate treatment and may not exactly be a subject fit for a performance review. (b) The factor of vulnerability of a programme or of a scheme is high if it is spread over a large area, with a widespread delivery network and without a focal point for monitoring. That would deserve better

attention than a scheme or a programme which is concentrated or in project based and is systematically monitored. analysis. (c) The auditee entities in a programme or scheme must have been audited in the normal course of audit. It would be worthwhile to obtain the Inspection Reports relating to the audit units to see what kind of irregularities have been persistent in addition to those which either remain in reserve or have been passed into the Audit Report without the action having been taken. In fact, that would be a risk indicator in relation to the operation of a scheme or programme. (d) Look at the internal control system of the schemes projected for review. The scheme or the programme with the poorer internal control system would deserve stronger audit attention. (e) Output projection has been adopted as one of the ways for justifying the undertaking of the projects. We can also apply this for selection of a topic. By output projection we mean anticipating in advance what system of audit would be capable of bringing out audit comments. An area where the audit need is more is evidently a better subject for scrutiny. 309 That is basic risk

Step-3 You have now in hand either one or two topics selected by adopting the criteria outlined above. How do you know that you can undertake this review? It is not enough to select a good topic. It is even more essential to assess the feasibility of the review in terms of man-power, expertise and quality of inputs at your disposal and cost you can afford. In a way step-3 is the most critical step and invariably we overlook this step in our anxiety to deliver as per target. Step-3 involves many short steps as detailed below:(i) Arriving at a comprehensive idea of the nature of the subject and the processes it involves. For instance if it is a building project, it is expertise in public works that we need. If it is health project or health scheme good understanding of the health policy and the delivery system would be needed or for that matter if it is a modernization project involving high degree of technical expertise, then perhaps technical inputs would be needed for which external technical support would be essential. (ii) Once you know what is the nature of the subject, you have to look at the manpower at your disposal and see if suitable personnel do exist for undertaking this work or whether they would need to pass through a short duration training to be able to carry out the audit review. (iii) Estimate the time at your disposal and decide if conventional deployment would be enough to keep to a time frame. (iv) Estimate the cost in terms of man-power parameters and see how best the cost would be justified in terms of the area of scrutiny. Step-4 Once you have found that one or two topics can be handled with the resources at your disposal then the stage comes for consolidating the inputs and taking a fresh look at the topics selected. The following elements are required to be consulted; (1) Previous Audit Reports/Inspection Reports; (ii) Government views, policy articulations, budget speeches, etc., (iii) Annual Reports of the agencies involved; (iv) Evaluation reports, expert audit findings, if any, reports of the Legislature including the Committees; and (v) Priorities of the Government in terms of policy. By reexamining the initial assumptions in the light of additional information gained, you complete the cycle of theoretical understanding here. 310

Step-5 After the inputs are consolidated, and the theoretical assumptions are established, a small pilot study may be run. The pilot study must necessarily be directed at locating the performance indicators because that would be the basis on which the entire review eventually would be judged. It is not unusual to find,

particularly in the social sector programmes and schemes which have multiple performance perceptions, that indicators are dovetailed into each other. Your task would be to isolate critical strands that go to establish performance levels. It would be interesting if by way of preparing yourself for the future ahead, you organize a small workshop in 'Finding Performance Indicators' with your officers. I assure you that the exercise would be worthwhile. As you know, Performance Indicators are not a set of universal standards. These change with the nature and objective of the scheme or programme. These are tools in the hands of evaluator and must be arrived at by careful application of a set of testing measures which would translate into specific approaches, depending on the subject under review. These testing measures are : (a) the element that makes the most critical difference, for instance 'access' in the case of education and 'reach' in the case of health care (b) the element that impacts the most on outcome, for instance 'delivery' in social sector programmes, and 'operational efficiency in projects. The pilot exercise should be at best for 20 days. The unit for Pilot Study should be pre selected on the basis of proximity, availability of records and criticality. The pilot audit party should get clear direction in regard to its mandate. Pilot audit by definition is a test sample which is intended to discover the key parameters. So it is always advisable to fit a pilot study with controlled measures. For controlled

measures the quality of personnel would have to be reliable. The audit should commence after a prior discussion with responsible authorities and macro-dimensions should always be kept in view while looking into details. The idea is not to conduct a complete routine audit but to test the possibilities for larger projections that exist. Findings of the pilot party should be structured on a different format from the conventional Inspection Report. It should outline the elements of preponderance and the elements of risk inherent in the scheme or programme so that a reasonable guess could be made as to the feasibility of a longer and more definite study.

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Step-6 Now you have the selected topic in your hand and you have to move into strategy planning for launching the review. That is a separate subject and I would be writing to you about that later. (CAG letter D.O. No.1208-Rep(S)/270-2003 dated 15-9-2003) How to do a Pilot Study? A pilot study has been recommended for the selection of a suitable topic but this deserves separate treatment. Elsewhere the expression exploratory case study is used in place of pilot study. Pilot audit can be defined as a brief examination of a clutch of decisions, events, transactions or items of work in order to identify the key questions for a fuller and subsequent review of a programme or activity. The overall approach in the pilot audit is one of theory building rather than theory testing. This means that the exploration is left completely open to allow a free flow of information but it should be remembered that the pilot study or exploratory audit which would eventually lead to the selection of an activity or programme for review, should be handled by comparatively more efficient officers with demonstrated ability of wider cognitive abilities. The steps are as follows: Step-1 Locate the manpower base from which the pilot auditors would be taken. Do not look for lateral support. Step-2 Invite the teams for a general discussion and identify special interests, aptitudes, backgrounds and handicaps. Step-3 Call the team for an intensive discussion on the activity profile or programme details as available on record. Step-4 On the basis of available record select a unit or two for pilot audit. Give the pilot team a list of key players, major decisions of the recorded output of the activity. Also clarify that if the subject is inter-departmental, then

occasionally cross referencing with supporting department may be required. Step-5 Before pilot audit is taken up arrange for a preliminary discussion with the programme manager and take his advice, if any, for looking into specific areas. Step-6 Pilot audit should begin with a list of outputs first. The idea is to go down from product to processes, from processes to decisions and decisions to policy. This is a moving in the reverse of the way the programme or activity was carried out. This can be demonstrated, as below: 312

Normal movement of activity

Pilot audit

Policy Decision Process Product

Product Process Decision Policy

Step-7 During Pilot audit do not ask the auditee to furnish information in a predesigned proforma. Read the text and to avoid bias, relate key data to support data, eliminate misleading data, highlight inconsistencies and provide a list of documents consulted while retaining copies. The method of triangulation i.e. collecting evidence from at least two different sources to converge at a conclusion is the standard method by the National Audit Office in the West for minimizing risk. Step-8 At the end of the pilot audit give an analysis of the procedure, analysis of data in time series, if possible, and give a cause effect analysis, which is often called paradigm model or programme logic model. This should show what action led to what consequences. There is no need to get into a complex modeling of any kind; simple statement relating Government decisions, processes and products for a few major areas would be just about adequate. Step-9 Pilot audit report is not an inspection report. It should be drafted differently keeping in view of the fact that the findings of the pilot audit would eventually go to establish or discard the subject for review. In other words it is a suitability test for which the theoretical, and if possible, a logical sequential framework for investigation is being explored through pilot audit. The pilot audit report should at least contain the following three information: (i) Nature of administrative arrangement for carrying out the activity and programme and observable mismatches therein; 313

(ii)

A statement of vulnerable areas and how these can influence work practice, delivery channels and output;

(iii)

A short analysis of the gaps perceived between policy goals and implementation arrangements.

How to prepare guidelines for the review? There is no fixed format for preparing guidelines for reviews as each subject would in a way dictate its own guidelines but guideline must necessarily, irrespective of the subject, contain the following elements: (a) Policy background showing the source document, government's own estimation of the outcomes and perceived failures; (b) Volume, method and techniques of funding, in time series, if possible. This may include in certain cases lateral funding support arrangements and funds sharing principles; (c) (d) Criteria for selection of samples; A list of laws, rules and regulations, if relevant, showing the critical provisions which have a bearing on the implementation of the programme or enforcement of some of the provisions; (e) A list of performance indicators by which the programme or the activity would be evaluated. The broad performance indicators

visualized at the time of selection of topic might have undergone a change on the basis of results of pilot audit; (f) A list of vulnerable arrears estimates on the basis of concrete evidence produced by pilot audit and overall impulses gathered from outside; (g) (h) A set of clear instructions on the quality of evidencing; An outline of the reporting format.

(CAG letter D.O. No.1336-Rep(S)/270-2003 dated 15-10-2003) How to build audit strategy for field audit? Strategy is a plan designed to achieve a particular long-term aim. In the case of audit review the long-term aim is to get a text of audit funding that provides an assessment of the entity review. In simpler terms a strategy would mean (a) How to approach the review subject and the auditee unit given the constraints of access, sensitivity, if any, and perceived risk factors. (b) How to deploy and disperse skill available effectively, efficiently and economically (c) How to guide the process to satisfactory conclusion. 314

There are many ways of devising strategies, some very complex models have also been constructed for strategic plan but no single model can anticipate the features of a programme or the level of skill available. Ultimately, the strategy would have to be devised on a judgmental matrix supported by a set of concrete indicators derived from experience. So a strategic plan for review would at least involve the following steps: Determine the size and number of audit party and identify the audit personnel with a clear understanding of the quality of skill available. Determine the timing of and stage of mobilization including the number of days of deployment. Expose the party personnel thoroughly to the guidelines. Develop a

questionnaire of critical queries to be made during audit, in consultation with party personnel. Outline the supervisory arrangement making space for two critical interventions one midterm, other prior to conclusion of audit. Outline the monitoring procedure. While the entire procedure could be

explained to the party personnel, the programme and the principal stockholder (AG/PD) can always keep a few monitoring parameters to themselves for random control. Clearly indicate the outputs expected and what link these would bear to the outcomes. How to look for evidence? When a review party commences work, it is before it the auditee unit with an array of records maintained by it. It would be essential for an audit party to first of all know what records are maintained in which form. A list of records be got prepared on the first day itself, thereafter, records can be classified into 3 categories. The first category would be all scheme related papers, documents reports and returns. In the second category would remain communications addressed by and to the programme implementers including grievances. In the third category the records of

establishment, which can throw out some information relating deployment, supervision and logistics. While looking at the 1st category documents, keep it in mind with internal minutes and file noting constitute what the NAO of UK calls the D-structure. Minutes of meeting are often subject to post rationalization. A result of this is that what apparently appears to be the case may not be so. 315 This often signalled by

disproportionate attention given to the views of some individuals and seemingly a high degree of conscientious. It may be worthwhile in this situation to look for corroborating documentary evidence by adopting triangulating process. Triangulating process incidentally means nothing more than to separate streams of evidence converging and leading to the same conclusion. Evidence may be found in official letters of attempts to shift responsibility from one area of an organisation to the other. Further explorations of the motives for doing this can go to a greater depth to the textual information gathered and provide insight into the incentives and disincentives at place. Use of silence of hidden versions of internal memos conveys messages not only about the statistics of such documents but also about the reporting structure of the organisation and informal means that are used to disseminate the information. The use of dense, opaque and tentative language should prompt the auditor to look for the connections underneath. There are two main forms for text where evidence can be sought. Historical texts containing secondary data and real time texts. Secondary data are compilations of information received from programme managers or outside agents. Real time texts are replies furnished to the audit memoranda or texts produced by third parties for the purpose of investigation. All these provide evidence both directly and indirectly. Direct evidence is when these are available in useable form. Indirect evidence is where auditor must establish a connection by relating different data for arriving at a conclusion. Sometimes a photograph or a joint inspection memo signed by the auditor and the auditee can also constitute a valuable evidence. In more developed countries they have developed system of interpretation of language, moods, gestures of the auditee employees to find a way for locating access to evidence. Even

observation notes are kept. They carry out postal interviews, telephone interviews, group interviews, interviews with expert panel and brain storming sessions as techniques for finding evidence itself or at least an access to evidence. Adoption of these methods call for high degree of skill and sophistication in the management of public space. Further this is a highly contested space and it would not be advisable to go head long into these practices. But the essential lesson is that audit is not merely confined to records, valuable access into the mind of an agency or organisation can be found by closely watching the behaviour, language, movement and style of the principal actors in an auditee organisation. Perhaps many of our better auditors are 316

already doing this without theorizing it. What is needed is a general awareness of the environment where the review is being conducted. All evidences can be categorized into 4 types: physical, oral, documentary and analytical. The following risks may be kept in mind while evaluating evidence of these categories. v Evidence based on single source, this may impact on liability, validity and sufficiency. v Oral evidence not supportable by documentation or observation, this can impede reliability. v Evidence is outdated and does not reflect change and hence not relevant. v Source of evidence has a vested interest as outcome would reduce reliability. v Samples collected are not representative; this can affect relevance, validity and sufficiency. v Evidence may be related to an isolated occurrence, this may affect validity and sufficiency. v Evidence is incomplete to the extent it does not demonstrate either the cause or the effect, this should affect reliability and sufficiency. v Evidence is conflicting, this would affect reliability. In summary, the evidential process should include (a) An Examination of characteristics of data required, (b) Collection of data relevant to the achievement of audit objective, (c) Collection of data based on the audit criteria outline in the work plan, (d) Collection of data which is not only sufficient but persuasive enough to logical support the analysis, observations, conclusions and recommendations. How to analyse data? A mass of data without a context or without a frame of reference could be of no consequence. But the complex methods of the data analysis demand statistical expertise of an order which may not be available to review managers. While the review managers and auditors are encouraged to acquire statistical techniques for analysing data, it should be possible to keep in mind the following parameters for basic data analysis. v Once data are collected, convert data queries on the basis of which data were collected into data opportunities. This can be done by simply reformulating the questions. For instance, if data were obtained, to give quantum of benefits given to 5 categories of beneficiaries during a period of 3 years then analysis 317

could extend to (a) comparison between years in terms of volume and category of beneficiaries, (b) inter-category comparison, (c) volume-category link, (d) trend deviations. v Tabulating data is an easy option but providing a speaking table of data is difficult. Converting a mass of information into a data table means only

organising data in a form. It is important to decide the form on the basis of critical questions sought to be answered by the review. It should be clearly recognised that in audit reviews the range of data is neither as numerous nor as proliferating as in the case of a survey. So if the principal data elements are in order it should be possible to construct fairly indicative tables. No table

should be left alone. The tabulated information would have to be commented upon. These comments can cover the following areas: (a) quality,

completeness, and reliability (b) inferences. A problem general faced is that once data are found to be incomplete the inferences no longer remain reliable and exercise becomes useless. To cope with this problem, data source should be checked carefully and preferably a trial check be carried out to establish authenticity. In regard to missing data, values can be instituted if a reliable indication is available. Inference is again a complex subject. A theoretical result of fundamental principles for statistical inference is the central limit theorem. We would not apply that kind of sophistication unless there is a large sample to be handled but it would be worthwhile if you prepare yourself with techniques of its application. The simple formula for measuring evidence is to be able to collect data in line with the requirement and interpret this not selectively but comprehensively with reference to the objectives of the activity or programme. How to select a sample? There are many methods of selection of a sample and all methods are not applicable to all cases. Find below a table of 9 most common methods with definition uses and limitations:

318

Method Cluster sampling

Definition Units in the population can often be found in geographical groups or clusters e.g. Schools, households, etc.

Uses Quicker, easier and cheaper than other forms of random sampling. Does not require complete population information. Useful for face-to-face interviews. Works best when each cluster can be regarded as a microcosm of the population. Readily available The larger the group, the more information is gathered.

Convenience sampling

Using those who are willing to volunteer or cases which are presented to you as a sample Based on deliberate choice and excludes any random process.

Judgement sampling

Multi-stage sampling

Probability proportional to size

Quota sampling

The sample is drawn in two or more stages (e.g. A selection of offices at the first stage and a selection of claimants at the second stages). Samples are drawn in proportion to their size giving a higher chance of selection to the larger items (e.g. The more claimants at an office the higher the office's chance of selection). The aim is to obtain a sample that is representative of the population. The population is stratified by important variables and the required quota is obtained from each stratum.

Normal application is for small samples from a population that is well understood and there is a clear method for picking the samp le. Is used to provide illustrative examples or case studies Usually the most efficient and practical way to carry out large surveys of the public.

limitations Larger sampling error than other forms of random sampling. If cluster are not small it can become expensive A larger sample size may be needed to compensate for greater sampling error. Sample results cannot be extrapolated to give population results. May be prone to volunteer bias. It is prone to bias. The sample is small and can lead to credibility problems. Sample results cannot be extrapolated to give population results. complex calculations of the estimates and associated precision.

Where you want each element (e.g. Claimants at an office to have a equal chance of selection rather than each Selection rather than each sampling unit (e.g. Offices).

Can be expensive to get the information to draw the sample Only appropriate if you are interested in the elements.

It is quick way of obtaining a sample. It can be fairly cheap. If there is no sampling frame it may be the lonely way forward. Additional information may improve the credibility of the results.

Not random so stronger possibility of bias. Good knowledge of population characteristics is essential. Estimates of the sampling error and confidence limits probably can't be calculated.

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Method Simple random sampling

Definition Ensures every member of the population has an equal chance of selection.

Uses Produces defensible estimates of the population and sampling error. Simple sample design and interpretation.

Stratified sampling

The population is subdivided into homogeneous groups, for example regions, size or type of establishment.

Ensures units from each main group are included and may therefore be more reliably representative. Should reduce the error due to sampling. Easier to extract the sample than simple random. Ensures cases are spread across the population.

Systematic sampling

After randomly selecting a starting point in the population between 1 and n, every n th unit is selected, where n equals the population size divided by the sample size.

limitations Need complete and accurate population listing. May not be practicable if a country wide sample would involve lots of audit visits. Selecting the sample is more complex and requires good population information. The estimates involve complex calculations. Can be costly and timely consuming if the sample is not conveniently located. Can't be sued where there is periodicity in the population.

Each method has certain limitations. Conventionally, we have been using judgement sampling and our conclusions have over the years suffered from the limitations, which flow from the use of that method. The Headquarters office of the CAG is in the process of developing appropriate sampling methods for different kinds of studies but before that comes through it would not be impossible to use some of the methods in combination to arrest the limitations of the judgement method. We have in some recent reviews adopted some combinations and these have helped. For instance, in the review of disease control programme we used cluster and judgement sampling in combination. Elsewhere, we adopted added the probability method. In some social sector reviews involving direct delivery of benefits we used the combination of quota, random and systematic sampling methods without explicitly saying so. We have not used systematic sampling or multi- stage sampling generally. It is true that sampling methods are statistically loaded but the complexity of statistical methods arise mostly out of our unfamiliarity with the models or constructs used by statisticians for capturing a wide range of variables in a single matrix. In due course, our officers too would acquire statistical modeling skills but as we wait for that to happen, we could perhaps use a large quantity of statistical information available with the Government to select our samples by using 2, 3 or 4 methods in 320

combination. The most essential requirements for deciding the sampling method would be the following: Profile of bene ficiaries Geographical distribution with class or community strata Concentration, preponderance or endemicity features Area wise allocative priorities For instance if we know that the beneficiaries of a programme are mainly distributed in four districts or a deficiency is preponderant in six districts or a particular area is endemic or a particular class of people inhabit specific location then it would not be difficult to select the samples inline with the delivery of programme objectives. Where however, a scheme addresses all citizens, equally distributed along all delivery points, then search would have to be made for other indicators along the lines of resource application, institutional arrangement and local failures. The idea is to go through a detailed exercise justifying the basis of selection of units of study that would be capable of leading to specific conclusions and recommendations. The risks of extrapolation can be substantially reduced by providing the justification for selection. (CAG letter D.O. No.1357-Rep(S)/270-2003 dated 21-10-2003) How to examine outputs and outcomes? Output outcome binary is critical to the comprehension of the ultimate impact of a scheme or programme. we have conventionally concentrated on output analysis by way of analyzing the performance of a scheme or programme in terms of fulfillment of physical and financial targets. There are any number of cases where the physical and financial targets have been substantially met, thereby pre-empting the audit conclusion excepting that the programme has been a success. As a matter of fact, an analysis of the reasons of failures of a number of reviews planned would show that sufficient material was not available for critical audit comment. But could it not be that physical targets have been achieved only on paper presented as desirable outputs but the real benefits in terms of outcome have not accrued to the beneficiaries? Could it not be that only some intermediate outcomes have

materialized but the end outcomes are nowhere in sight? These questions bring us to the subtle distinction between outputs and outcomes. Simply defined, outputs are 321

goods and services produced or works completed or expenses made and outcomes are the consequences these goods, services or works produced. You can yourself list out a set of outputs and a set of outcomes in respect of each performance audit you undertake. For any programme there will be a range of factors, which influence the outputs and outcomes. Many will be intangible and unmeasureable but for any audit review, which attempts to examine outputs and outcomes, you ought to be at least aware of them to be able to investigate them, if necessary. One NAO document identifies these factors as both external and internal. Details of these would give you an idea of the range of possibilities for examination that exists even in our own case. Internal factors Economic: Inputs, Staffing, Finance, Buildings Organisational: Management structure, Skill base, Procedures Behavioural: Motivation of staff, Incentives, Moral Technological: IT Support, Telecommunications Legal: Statutory framework, Regulations External factors Economic: Macro, Micro and Industrial Economics Infrastructure Technology Nature of beneficiaries: Media, Consumer Interest and Pressure Groups Legislature: Public Opinion, Devolution of resources and powers It would be seen from these factors that the range of analysis of outputs and outcomes is by no means a play of figures. It should be possible to analyse the outputs and outcomes by first locating the factors and then by analysing them. Attempt a factorization of any scheme in hand and you would find there are evidences which can, if not wholly, at least substantially, influence the outputs and outcomes. For measuring the outputs and outcomes the first requirement is that the key information relating to outputs and outcomes are reliable. Often consistent and clear reports of performance, results or progress are not available. Should that be the end of the matter? Should we not in such a situation attempt a verification of the reporting process itself to show how exactly the information have been compiled? How exactly the compiled information has been rendered unreliable? Assuming for a moment that the reliability of the reported output is questionable, the question would arise as to 322 and Environment: Transport, Communication, Wider

whether it would in any way be useful to proceed to measure the outcomes. There is an interesting possibility here. It is possible to question the output on the basis of outcomes. For instance, an electrification project which was designed to bring

electricity to all homes has been declared completed on paper and 5 10 Electrical Sub divisions in different areas of the state, picked up for scrut iny, showed that there has been increase in the consumption of electricity as power have not been drawn due to lack of no domestic connection. Here the outcome itself has shown that the outputs had no impact. Could it be that the output compiled was unreliable or could it be that the design of the project itself is a faulty in as much as it did not take into account connectivity to the end users? Similar analysis can be done in respect of all schemes seeking to deliver services or benefits to an end user. There would be of course areas where there would be a host of interdependencies due to which a straight movement from output to outcome and outcome to output would not be possible. These are situations where the external factors would have to be considered for a fairer view. For instance a bridge has been constructed while the road work is incomplete or a family welfare centre has been established but the local people do not attend because of a social taboo or because the location is disadvantageous. Some key indicators for successful outputs and outcomes can be adopted by audit for scrutiny: (i) How clearly have the outputs and outcomes been defined? It is common knowledge that in most projects, programme or scheme documents are either non-existent, very nebulously articulated or only output centred with a broad policy declaration in regard to outcomes. This should be taken as a deficiency in documentation and highlighted. (ii) Is there adequate planning for the outputs and outcomes? Inadequate planning invariably leads to poor use of resources, missed deadlines and wasted expenditure. We do highlight instances of this nature.

Comment on inadequate planning that could have led to these consequences. Departmental planning rarely concerns itself with threats and opportunities in the programme. In other words inadequate planning is the result of insufficient vision and indifference to risks and opportunities.

323

(iii)

Are the resources allocated adequate and have these flown in a manner helpful for the desired outputs and outcomes? We have been generally doing this analysis quite well but our efforts are often

not completely in line with Resource Accounting Techniques which some of the developed countries use. What they do is take a single matrix of the resources

including financial resources linking the various objectives in a single focus. We have been commenting on manpower, finances, skill levels and investment in infrastructure separately and only linking them occasionally. This could perhaps change by focusing on resources in a single accounting matrix showing how flow of resources or inadequacy of resources could have led to lesser deployment, lower skill, greater non-accountability, lesser visibility and poorer delivery. (iv) Is there a coordinated approach involving all the players? No scheme, project or programme in a study could be the exclusive play ground of the department concerned. There are other players too. In the schemes and projects worked out, such interfaces or interpenetrations are rarely worked out. No department is prepared to give away the privilege of exclusivity for taking credit. This would be evident from the reading of any poorly prepared scheme documents. It would be worthwhile to identify, even if this is not done in the scheme document, the other players who could influence the output and outcome of a scheme or project and a worthwhile audit comment would emerge if we can show that there was a flaw in the project designed in not taking into account of the existing potential or available infrastructure controlled by another department. In the reviews of all Poverty

Alleviation Programmes comments on quality of interdependencies, interpenetrations and interfaces would provide valuable indicators on failure of coordination. (v) Have the beneficiaries been clearly identified? It is surprising but true that many schemes in social sector have failed because the beneficiaries have been very broadly identified without the necessary significations which could establish beneficiaries status. There is also another

scenario in which the beneficiary status is not mapped clearly for utilisation of a benefit intended to be delivered. An instance is energy efficiency projects aimed specially at low income group household who are unable to afford many energy efficiency measures. Audit scrutiny could bring out the mismatches, the opacities and normative failures in the identifications of the end users or the beneficiaries.

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(vi)

Has the project considered the unintended effects? This is one area where most of our projects are deficient. In developed

countries a project for industrialisation for instance would invariably cover its impact on ecology and environment. We too have the mandatory requirement of But despite the theoretical

environmental clearance for setting up industries.

underpinnings being in place, the grass root level implementations manifested in terms of destabilisation are not clearly addressed in the projects implemented. How does audit address these issues? Appears difficult but a few indicators like increasing health risks unintended economic inequities, social imbalances resulting from the implementation of a project could be kept in view if case studies are available. We are yet to develop counter factual studies to measure the impact and outcome of a project, nor can auditors do it by themselves but available studies can be used in making some observations supported by evidence. (vii) Are the outputs and outcomes measurable? There is a management saying that a thing that cannot be measured cannot be managed. Audit could see if firstly the quantitative targets are set on a reliable basis and secondly if these are relatable to specific time- frames and thirdly if reporting measures for communicating progress are in place. (viii) Are the outputs and outcomes sustainable? Sustainable outputs imply not only the continuity of the measures delivered, but also their natural link formation with other coordinates and their automatic replicability. In a way, the social product is more than a product, it is more often seen as capacity. Similarly, sustainable outcomes imply that the long term impacts of programme measures are kept in place for as long as needed by productively linking these to the systems. Sometimes outputs degenerate or dwindle due to weak links with supporting structures or coordinates. The outcome similarly could suffer due to qualitative changes in the environment, need-redefinition or inherent weaknesses in need perception. Simple instances of a crumbling building due to lack of maintenance or an unusable road due to lack of repair represent outcomes or outputs that could not be sustained. While doing performance audit, you may therefore book into the following: Link with coordinates & supporting structures Changes in needs 325

Risks to outcomes and outputs

(Dy. CAG letter D.O. No.1361-Rep(S)/270-2003 dated 23-10-2003) Drafting of Report 10.11 Drafting of the Review Report is the final stage of the review. The data collected or obtained from departmental offices and unit offices are consolidated and collected for interpretation and detailed analysis. The Review Report should be

drafted after careful, detailed and analytical discussion of the findings of investigations made during the review. Taking into account, the consolidated data, the results of preliminary study and mid-course study of the programmes and remedial measures taken, if any, the review is drafted for approval. All verifications of facts in draft audit paragraphs and reviews, including verification by reference to by documents should be done by the Group Officers on whom will rest the responsibility for verification of facts. (Conclusions No. 10 of the Conference of the Accountants General (Audit) - July 1993). While achievements of the Project, authorities should be given due place in the review reports, the shortcomings like non-observance of time schedule and cost estimates, over capitalisation, large over-head expenditure, over staffing, idle personnel, work loading, delay in construction of Projects resulting in increase in expenditure, absence of trained man-power, plants operating below rated capacity, excessive inventories, absence of sound pricing policy, unauthorized occupation of government lands, idle plant and equipment, leakage of revenue, over payments, losses due to pilferages or non-observance of proper procedures, improper avoidable or infructuous expenditure etc. are to be highlighted in the review. 10.12 In attempting the reviews, the emphasis should be on quality rather than on lengthy narration. More stress should be on analysis of strength and weaknesses of the organisation. The report should be so balanced that among other things, points from financial audit as well as achievements of social objectives aspects of the scheme are highlighted. In order to bring about uniformity in the style of reporting Style Guide for Audit Reports has been issued by the CAG of India vide No. 138Audit (AP)/6-2003 dated 29-9-2003 for adoption which seek to encourage the use of plain simple English -, short words, short sentences and short paragraphs. After the review report is written up, it is to be forwarded to the Head of the Department and on receipt of reply, their comments replies are embodied in the 326

review or the review is revised wherever found necessary in the light of the reply. To expedite replies it is desirable that self contained parts of the review are issued immediately after drafting and the material discussed with the departmental authorities at appropriate level. 10.13 i) ii) iii) iv) v) vi) vii) viii) ix) x) xi) xii) xiii) xiv) xv) 10.14 a) The lay-out for a review may be: Introduction giving description of the scheme/project. Scope of audit. Organisational set up. Highlights.. Finance resources and expenditure. Targets-Physical and financial. Use of financial assistance/resources. Utilisation of materials/equipments. Utilisation of man power. Components of the scheme goals, achievements, shortfalls. Inventory. Operational costs-variable, fixed. Assets and their use. Social objectives-achievements and shortfalls. Monitoring and Evaluation. The review Section and Review Parties sanctioned in Inspection Civil

Wing for on the spot study of the records, reports etc. will act in close liaison and where necessary, an exchange of staff may be made for short intervals. Such coordinated action will facilitate collectio n of information and conduct of investigation locally. b) Review Section will prepare detailed questionnaires indicating the broad

outlines of examination of various schemes selected for Efficiency-cum-performance Audit and submit the same to Efficiency-cum-Performance Audit Section for approval by the Pr. Accountant-General. On receipt of approval, Review Section, shall arrange detailed review of the schemes by deputing Review Parties. Review Parties 10.15 A register showing the progress towards collection of information and

conduct of investigation of schemes locally shall be maintained by Review Section in Inspection Civil Wing showing the following particulars:327

i) ii) iii) iv) v)

Serial no. of Scheme. Particulars of the Scheme reviewed by the ECPA Section. Date of receipt of questionnaire in Inspection Civil Wing. Section/Party to which questionnaire made over for action Date on which scheme/questionnaire sent to the Section Officer/Asstt. Audit Officer of Review Party for local audit.

vi) vii) viii) ix) x) xi) xii)

Date of taking up the audit of the scheme by the Review Party. Date of completion of audit by the Review party. Date of receipt of review note from the Review party. Date of submission of the Review to the Group Officer (Inspection Civil). Date of approval by the Group Officer (I-C). Date of submission of Draft Para/Critical Review by the Review party. Date of approval of the Draft Para/critical Review by the Group Officer (Inspection Civil).

10.16

This progress report will be submitted to the Pr. Accountant General

through E.C.P.A. Section on the last day of each month for review. For keeping a proper watch over the questionnaires received from the E.C.P.A. Section all such questionnaires after they are seen by the Group Officer (Inspection Civil) will be received by the Review Section, who after keeping a note in the progress Register will pass on the same immediately to the Review Party concerned for suitable action. The Draft Paras/Critical Reviews for inclusion in the Audit Report(s) will also be prepared by the Party and sent to the Group Officer (Inspection Civil) as soon as particular audit is over. The Review Party will submit a statement in the following form to Review Section on the 5th of each month for incorporating the progress of audit of schemes in the Progress Register. FORM OF STATEMENT TO BE FURNISHED BY THE REVIEW PARTY (on the 5th of each month) A-Statement in respect of schemes the Audit of which has been completed during the month.
Sr. No. Name of the party Particulars of the schemes Date of audit Whether Dra ft para or not When inspection report/Draft para sent to Review Section Remark

1.

2.

3.

4.

5.

6.

7.

328

B- Statement in respect of schemes under audit Sr. No. Name of party Particulars of the scheme 3. When audit was taken up 4. When Audit is likely to be concluded 5. Remarks

1.

2.

6.

C-Statement in respect of schemes the Audit of which is still to be taken up

Sr. No. 1. Name of the party 2. Particulars of the schemes 3. When received by the party from the head quarters office. 4. When Audit is likely to be taken up 5. Remarks

6.

Abstract 1. Progressive total no. of Schemes audit of which has been completed with particulars of the scheme. 2. Total number of schemes under Audit as per (B) above. 3. Total no. of schemes the audit of which is still to be taken up as per (C) above. 4. Total no. of schemes received by Review Section (Inspection Civil Wing) during the month with full particulars of the schemes. (CAGs letter No. 265-BRS/NGE.II/109-61, dated 12th July, 1962) Collection of the material 10.17 (a) Local audit, of Programmes/schemes selected for review by the

Pr. Accountant-General, is conducted by the Review party of the Inspection Civil Wing. Local audit of Programmes/schemes should include an intelligent scrutiny of departmental files, etc. and should be directed so as to detect and keep a collective record of serious and unjustified/excesses over estimates, extensive delays, infructuous expenditure and losses, etc. due to insufficiency as well as of any shortfalls noticed in the achievement of the physical targets, returns, or final objects envisaged by the scheme. It is essential that expenditure incurred on different

schemes should be examined in Audit to ascertain whether (a) Such schemes are being executed and the ir operations conducted economically and (b) they are producing results expected of them. 329

(b)

In regard to (a) above some of the broad lines of examination will be to

ascertain:i) Whether technical estimates or detailed programme and cost schedules are being framed and that the same are adhered to, if not, whether there are adequate reasons for excesses, delays etc. or whether these are occasioned by insufficient handling, wastes, etc. or due to indifferent preparation of original estimates. ii) Whether there have been any serious avoidable delays (due to inefficient handling, planning and co-ordination of the work) in the progress of works or schemes resulting in increase in the total cost of the scheme or any loss of revenue due to delayed execution or holding up of other connected schemes. iii) Whether there has been any wasteful expenditure including that resulting from lack of co-ordination amongst the several aspects of the scheme, such as staff having been engaged a long time before the procurement of machinery required for running a centre or vice versa. iv) Whether there has been any waste due to some of the facilitates (e.g. buildings, equipment, staff etc. on which expenditure has been incurred under the scheme proving unnecessary or going unutilised. v) Whether there have been any serious or recurring losses.

vi) Whether the performance/cost compares well with the results obtained in respect of similar scheme in other fields in the public sector. vii) Whether the expenditure incurred conforms to the relevant provisions of the Act, Constitution and Laws made thereunder. viii) To what extent the broad and general principles of financial propriety and high standard of public finance morality are kept in view in incurring expenditure on such schemes. 10.18 In order to examine in audit as to how far a particular activity is producing results expected of it, it would be necessary inter alia to ascertain: i) how far physical targets e.g. completion of certain construction works, setting up of certain organisations, centres, etc. have been achieved within the estimated time. ii) iii) How far any returns, which were anticipated are actually accruing. How far the final purpose or objects of the expenditure have been achieved e.g. in the case of irrigation projects it should be ascertained if the estimated 330

supply of water for irrigation purposes and power has actually become available as a result of the completion of the projects and whether their actual utilisation is to the extent anticipated. Similarly, whether the

anticipated number of persons are being trained up every year in a technical centre and getting absorbed in the trade concerned to the extent anticipated. 10.19 To supplement the results of local audit, the administrative authorities may be asked to furnish annually, till the completio n of the scheme, a review of the actual working of the scheme during each year mentioning inter-alia any major excesses over estimates and any serious delays along with justification therefor, as well as the extent to which the physical targets, returns and final objects visualized were achieved. Some other sources which may prove to be helpful in conducting the Efficiency Audit would be the Programme Evaluation Reports of the administrative departments of Government or any reports of a Committee appointed by the Legislature. 10.20 In examining the information collected on the above lines, attention should be directed to cases where the interest of the tax payers was adversely affected due to inefficient planning and execution of a scheme or project. Audit Officers should

however, be careful to avoid offering even implied criticism in cases where although the original anticipations have not been realised, there are no plausible indications of inefficiency or waste on the part of the administrative authorities as for example, where excesses over original estimates of expenditure were occasioned by unanticipated rise in cost of materials new or unforeseen items of work discovered as the work progressed or delays and lesser yield of revenue were caused by circumstances which could not have been reasonably anticipated. 10.21 The emphasis in regard to the material proposed to be included in the Audit Report should be on quality rather than on quantity and on analysis rather than mere narration. The thrust of the paragraphs and reviews should come out clearly and whatever is stated in the Audit Report should be in impersonal language and supported by facts and figures Performance reviews of schemes and project should receive greater emphasis. All reviews would require supervision at the level of the Group Officer. (A.Gs d.o. letter No. App/R/I/1-5/Inst. /IV/570 dated 22 September 1976. 10.22 Some of the draft paragraphs, more particularly reviews, might be understood better if supporting maps, charts, sketches, etc. having proper authenticity are given at 331

appropriate places. This may be kept in view while submitting draft paragraphs. It would of course be necessary to keep in view the point that if maps, etc. are to be printed it would need clearance from the concerned authorities. (C.A.G.s letter No. 720-Rep.202-77, dated 2nd September, 1977). 10.23 Reviews and paragraphs should be more concise unnecessary descriptive material should be cut out and the facts stated should be brought out in sharp focus with adequate thrust. There seems to be a mistaken impression that the audit report is a record of achievement by audit. It is not necessary or desirable to highlight all the achievements of audit in the Audit Report. Only matters of Public importance should be incorporated in the Audit Reports. (C.A.G.s d.o. NO. 621-Rep/125-79, dated 4th May, 1979) 10.24 The following steps should be taken for improving the quality of reviews to be incorporated in the Audit Reports:(a) Before setting out to review a scheme or programme, opportunity should be taken to discuss the various aspects of the scheme/programme with the Head of the Department concerned so as to decide on the audit approach to the review. (b) Group Officer entrusted with the supervision of the audit teams conducting the review should personally visit the places where the schemes/programmes are being executed. Apart from providing first hand knowledge and information such visits would facilitate clearer understanding of the scope of the scheme and better appreciation of the methods of execution. (c) There is absence of comments in the audit Reports on the social aspects in implementation of scheme and programme. There is often no indication in the appraisals about the social and other objective s/benefits anticipated and achieved. It is, n o doubt, difficult to quantify social benefits but attempts may be made to ascertain to what extent this has been achieved at least in schemes/projects which specifically mention such social benefits as one of the aims to be realised. (C.A.G.s d.o. No. 734-Rep/k73-78-III, dated 28th May, 1979). Data Bank 10.25 Portfolio in respect of each scheme which is susceptible of performance appraisal, is required to be built up to contain complete details of the programme its objectives, financial and physical targets, performance stated etc. by Portfolio section 332

in particular should be fed to Efficiency-cum-Performance Audit when the audit of the scheme is taken up.

333

Audit of World Bank and other Externally Assisted Projects Audit objectives and scope 10.26 Audit is responsible for reporting to the funding agency whether the implementing agencies have carried out expenditure on the scheme in accordance with the pattern specified in the staff appraisal report relating to the schemes and terms of such assistance and Government of India instructions and to identify matters relating to inadequacies in systems and control, cases of fraud or presumptive fraud, wasteful expenditure, failure of administration to take corrective action on recommendations contained in earlier report. Source documents 10.27 Staff appraisal reports, loan agreement, monthly account or financial statements and supporting vouchers, contracts relating to work, methods adopted for procurement, transfer entries, estimates of a work to identify any inadmissible items from the rate analysis of a particular work, quality control reports, comments of World Bank. Documents essential for Audit Certification 10.28 Following documents are essential for scrutiny and issue of audit certificate. (i) (ii) (iii) (iv) (v) (vi) Loan/Development Credit Agreement. Staff appraisal report. Statement of expenditure (SOE) Supporting vouchers Reconciliation statement Inspection report of local/central audit for inclusion of any serious financial irregularities pointed out in audit. Audit approach 10.29 Local audit is to look into eligibility of contractor, investment decision and implementations, methods adopted in selecting contractors, review of viability of the project, review of the project management system to ensure that the work is properly and effectively supervised and executed and that there is accountability throughout the various stages of the project. For some payments of miscellaneous nature, e.g. remittance vouchers, cheques, discount vouchers etc. nothing more than a minimum audit can be prescribed generally, this minimum consists in verifying that there is a sufficient voucher for the payment and that there is sufficient authority for making it. 334

Issue of Audit Certificate 10.30 While issuing audit certificate, it should be ensured that the expenditure is incurred for the purpose it is meant and conforms to the procedure and terms and conditions of agreement and Government of India's instructions. All objections raised during local audit should also be mentioned in the Audit Certificate (Proforma as per Annexure) duly signed by Group Officer. As per existing instructions issued by Ministry of Finance (Department of Economic Affairs), SOE should reach the Accountant General (Audit) by 31st July following the close of financial year. Implementing agency is to obtain, reconciled and verified SOE from Accountant General (A&E) so that Audit Certificate could be issued in time. There should be proper interaction between the Audit and Accounts and Entitlement office to avoid unnecessary delay. The irregularities noticed during audit should be indicated in brief with Audit Certificate. Audit Certificate should be issued in printed revised proforma and on printed letter head appended as Annexure to this section. After the closure of every financial year, the audit certificate shall be issued within 9 months or earlier as required under the Project/Loans Agreement i.e. certificate should be issued any time after receipt of SOE. The issue of the Audit Certificates is delayed mainly due to non-receipt of SOE's from the project implementing authorities and there is a general tendency to shift the responsibility for delay on Audit. To overcome this problem, timely and prompt action by taking up the matter with the Finance Secretary of the state should be initiated. Audit certificate should be issued to project implementing authority under intimation to Ministry of Finance (Department of Economic Affairs). Main points to be checked in Different Audit Areas 10.31 The agreements for loan/development credit entered into by the International Bank for Reconstruction and Development and International Development Association with the Government of India for financing development projects to be implemented by departments of the Central Government, States Governments, Public Sector Undertakings and Autonomous Bodies, etc. include specific covenants for Accounts and Audit. These covenants inter alia provide that the Government of the Project entity shall, (a) maintain records and accounts adequate to reflect, in accordance with sound accounting practices, the operations, resources and expenditures in respect of the Project, (b) have the records and accounts of the project 335

for each fiscal year audited in accordance with appropriate auditing principles consistently applied by independent auditors acceptable to the Bank, (c) furnish to the bank within 9 months or earlier of the close of the financial year a certified copy of the report of audit referred to in the paragraph at (b) by said auditors, of such scope and in such detail as the Bank shall have reasonably requested, and (d) for all expenditures in respect of withdrawals made on the basis of Statement of Expenditure (without documentation), furnish the report of audit referred to in this paragraph as containing a separate opinion by the independent auditors as to whether the Statements of Expenditure together with the procedures and internal controls involved in their preparation, can be relied upon in support of such withdrawals. The World Bank has accepted, after going through the accounting and auditing arrangements in India, that the system ensured a satisfactory degree of financial discipline and, accordingly, accepted the Comptroller and Auditor General of India to be an independent auditor for the purposes of certification of accounts issue of audit certificates in respect of projects being executed in India with World Bank financial assistance. The standard audit covenant in the loan agreements, in respect of projects executed by Government Departments and Corporations, the audit of which vests with the Comptroller and Auditor General, is met by the Accountants General (Audit) by furnishing to the project authorities for onward transmission to the Bank, an integrated audit certificate within 9 months or earlier of the close of the financial year in the prescribed form (Annexure) based on irregularities noticed in Central Audit as well as Local audit in relation to the accounts of these projects. The annual accounts to be certified are the annual expenditure statements in respect of projects executed by Government Departments and the Accounts that are certified by Comptroller and Auditor General as sole auditors in respect of projects executed by other bodies and authorities. If any further details are required by the World Bank, these are to be furnished by the project authorities. The integrated Audit Certificate is considered adequate for the purposes of the World Bank and it would not be necessary for the Bank to await the all- inclusive Audit Report of the Comptroller and Auditor General submitted to the respective legislatures. As the Audit Certificate is not to be published and is in the nature of a document exchanged between the clients and the Bank, the Certificate should indicate, in brief, the amounts held under objection in relation to wanting vouchers, D.C. bills, sanctions etc. and misclassification, defalcation, over payments etc. that come to notice. 336

The Audit Certificates in respect of projects executed by Government Companies are issued by Chartered Accountants who are statutory auditors of the companies and not by Comptroller and Auditor General who conducts only a supplementary audit in such cases under the Companies Act, 1956. The World Bank gives aid in two ways : (i) (ii) Sanctioning and releasing an amount of expenditure in advance. Reimbursement of claim.

In India, reimbursement of claim system is adopted. The interest rate on the Bank loans ranges between 3 to 5 % and compensation for risk services is between 1 to 1.5 %. Loans are repayable over 15 to 20 years with grace period of 3 to 5 years. Project decision and implementation 10.32 The responsibility of identification, determination of feasibility of projects, its execution and administration rests with the borrower. However, an appraisal is carried out by the Bank with the assistance of the borrower to examine the economic, financial and technical requirement of the project which provides a basis for decision to support with a loan. The staff Appraisal Report (SAR) includes a detailed

explanation and assessment of the financial management system and any additional requirements for the particular project. It addresses the design of the project accounts, procedures required for consolidating reporting from various sub projects, the use of SOEs, and any other activities required to assure accountability. This will be

especially important when the project involves several agencies and the methodology for consolidating total project expenses is not clear. The SAR also outlines the format for project reporting, including the audited and unaudited financial statements required, and their frequency. An agreement is drawn between borrower and Bank defining project, specifying programme to be followed to achieve its objective and schedule of items to be financed by Bank, the arrangement for disbursement of the proceeds of the loans are made after its approval by the Board of Directors. The lending agency requires that the proceeds of any loan are used only for the purpose for which loan was granted with due attention to consideration of economy, efficiency and effectiveness without any political or non-economic influences. Audit of implementing agencies 10.33 Funds from Bank loan may be disbursed only on account of expenditure for goods and services provided by nationals of, and produced in or supplied from, Bank member countries. Under this policy, nationals of other countries or bidder offering 337

goods and services from other countries should be disqualified from bidding from contracts intended to be financed wholly or in part from Bank loans. The expenditure should be incurred as per terms and conditions of the World Bank which inter-alia requires : (i) (ii) Utilisation of loan for the purpose projected and sanctioned for Consideration of economy and efficiency, extra avoidable expenditure may therefore be objectionable for reimbursement from World Bank Loan. Cost over run due to non-completion of work in stipulated time may also be disputable claim for reimbursement from the Bank. (iii) Non denial of pre-qualification to a firm for reasons unrelated to its capacity to supply the goods/services in question except if the borrower country commercial relation with that country to which that firm relates provided the bank is satisfied that such exclusion does not preclude effective competition. (iv) Award of any contract is required to be strictly in accordance with loan agreement or guidelines. (v) Implementing agency not agreeing to any material modification or waiver of the terms and conditions of contract or extension of the stipulated time of performance which would effect the contract inconsistent with the provision of loan agreement. (vi) Procurement of goods and services inconsistent with agreed procedure.

Observance of all the above conditions can be scrutinized and suitably commented upon by the local audit party, and the amount objected on any of the above conditions can be objected by Accountant General (Audit) for certification of Statement of Expenditure (SOE) for the sake of reimbursement. The items, which qualify or do not qualify for reimbursement are as follows : (i) Amount recovered towards security deposit (SD) is not eligible. However, release of SD to the agencies is claimable. (ii) (iii) (iv) Secured advance paid on material is not reimbursable. Mobilization advance paid to the agency is reimbursable. Income taxes/sales tax recovered from contractor is claimable for civil work but not for supplies. (v) (vi) Foreign exchange freight charges are eligible for reimbursement. Local transportation charges are not reimbursable. 338

(vii)

Insurance premiums paid in foreign exchange are eligible for Bank financing; self insurance and premium paid in local currency are ineligible unless explicitly provided in the loan agreement.

(viii)

The Bank does not finance custom duties and other taxes imposed by borrowing country.

(ix)

All payment to consultants are made in accordance with contract provisions which normally specify currencies and mode of payment.

(x)

Income tax and other duties paid to the consultant are not reimbursable unless specifically provided in the contract.

The above points are to be kept in mind for audit certification for reimbursement and are to be pointed out during Central and Local audit. In civil offices the expenditure is met by drawing funds on AC bills. The admissible expenditure will be the expenditure supported by DC bills. The SOE therefore, needs to be scrutinized with a reference to the report of AC/DC bills received in Accounts and Entitlement office. Audit Certificate 10.34 Where SOE procedure is used for loan disbursement, the SOE should be integrated to become a part of project financial statement. Under the SOE, procedure, the borrower periodically requests withdrawal of loan proceeds through submission of a statement indicating expenditures for certain items referred to in the loan agreements. The SOE procedure simplifies and

accelerates the Bank's loan disbursement process by eliminating the requirement for bank staff to review supporting documentation for many a small expenditures prior to authorising disbursements. The SOEs are not accompanies by supporting

documentation. Implicit in the SOE submission by the borrower is the adequacy and veracity of documentation, maintained by the borrower, which supports the disbursements. During local audit, it is necessary to obtain a listing of all SOEs submitted during the period under review and for each expenditure perform the following (i) Evaluate the adequacy of the supporting documentation which should normally include one or more of the following : (a) procurement documents (Bid documents, invitation, evaluation, award) (b) purchase contract 339

(c) purchase order (d) letter of credit (e) supplier's invoice and certification of origin (f) shipping or import documents and inspection certificates (g) contractor's invoices or certificates (h) other evidence of receipt of goods or services (i) force account records (j) recurrent cost records (k) authorization for payment (l) evidence of payment/bank statements (m) accounting records of approvals, disbursements, and balances available (n) evidence that refunds have been made by suppliers and corresponding adjustments made in subsequent applications in instances where goods have been returned. (ii) (iii) Ascertain the expenditure was properly authorised and approved. Verify that the expenditure is eligible for bank disbursement under the loan agreements. Ineligible expenditures would include; (a) duplicate invoices; (b) payments made in advance of receipt of good or delivery of services, unless these payments are consistent with contract provisions and are established commercial practice; (c) payments that should have been made under normal disbursement procedures with full documentation (e.g. payments against contracts subject to the Bank's prior review, or payments against contracts with values exceeding defined SOE limits); and (d) payments for items that are not procured in accordance with the legal agreements, such as payments for items from countries that are not eligible under the Bank's Procurement Guidelines; payments for items not specified in the procurement; payments made prior to loan signing or before the eligible date specified for retroactive financing; 340

 payments for items on the negative list or not on the positive list (for adjustment operation lending). (iv) (v) Verify the mathematical accuracy of the SOE. Agree the percentage used to determine the Bank's share of the total disbursement to the loan agreements. Verify that the proper amount was requested for reimbursement. (vi) (vii) Summarise the results of the work performed on a summary form. Notify borrower of all instances of negative findings.

It is advisable to draft Audit Inspection Report paras identifying specifically that the project/work/scheme is aided by World Bank/External Agency where the implementing agency is executing other work besides World Bank aided works.

341

Systems Audit Introduction 10.35 A system is an orderly arrangement of separate but interdependent and interacting activities and related procedures which implements and facilitates the performance of the functions of an organisation. The concept of System Audit is that if an in-depth analysis of the mechanics of a system reveals that it is designed with appropriate controls, checks and balances to safeguard against errors, frauds, etc. Audit can reasonably assume, without the

necessity of undertaking a detailed examination of the individual events or transactions, that the results produced by the system would be fairly accurate. Evaluation of the efficiency and effectiveness of any system will, however, require sample testing of its actual working. Systems Audit thus serves also as an effective aid to management. General principles 10.36 The general principles governing Systems Audit are as follows : (i) In order to locate the deficiencies in any system, it is necessary to check the chain of movements in each procedure forming part of the operational or financial activity. Since a long chain of movements causes delay, the necessity for each link in a chain should be analysed and unnecessary links identified. (ii) Similarly, procedures that have in built delays should be examined with a view to ascertaining how best they can be streamlined. Causes of departures from or special relaxations of the prescribed procedures should be analysed. The analysis will indicate where the system and its linkages are getting extended or overloaded and h ow the resultant strains may be eliminated. (iii) It has also to be examined whether action on important points has been initiated at sufficiently high levels of the hierarchy so as to produce meaningful results. (iv) In addition, procedures and/or records which appear to be redundant or superfluous should be identified for elimination. Source documents 10.37 The important source documents that will form the basis of audit scrutiny to evaluate the adequacy of systems are the following: 342

(i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x)

Organisational Chart Procedural Manuals. Delegation of Powers Rules. Departmental Accounts Manual. Accounting Policies and procedures. Budgeting Policies and Procedures. Performance Budget. Work Plans. Technical manual relating to quality specifications. Internal Audit Reports. Main stages of systems audit

10.38 The main stages of Systems Audit are (i) organizational analysis; (ii) analysis of system of authorisation and recording; (iii) analysis of system of accounting; (iv) examination of the system of internal control; (v) evaluation of the standards of quality and performance; (vi) examination of the adequacy of internal audit; and (vii) review and evaluation of the system as a whole. The manner in which these processes are applied in the context of a government entity is indicated in the following paragraphs. Organisational analysis 10.39 The first step will be to find out the basic objective or activity of the entity. Thereafter, the organizational pattern of the entity as indicated in its organisational chart and procedural manuals should be studied to make sure that a clear and logical plan of organizational functions that establishes clear lines of authority and responsibility for financial and operational activities keeping in view the entity's basic objective or activity is available. A flow chart could be prepared in order to examine whether: (i) the units are functionally segregated to ensure professional, functional and/or technical specialization and to achieve functional independence for purposes of internal management control; (ii) proper distribution and clear demarcation of functional responsibilities exist among the personnel working in the entity; (iii) the entity's staffing pattern conform to norms or standards prescribed for the purpose and has the approval of the competent authority; 343

(iv)

the financial functions are separated from other administrative functions;

(v)

the employees within the financial unit responsible for the custody of financial or material resources are separate from those who record transactions, maintain accounting records and prepare financial reports;

(vi)

the financial powers of each authority of the unit and its responsibilities have been clearly defined and are updated to depict the correct position at any given point in time;

(vii)

checks and balances have been integrated into transactions in such a manner as to ensure added reliability without increasing costs or creating new positions or new operating units;

(viii)

there is an effective system of follow-up to determine whether assignments are properly carried out;

(ix)

the organizational units are designed to obtain maximum effectiveness at the minimum cost;

(x)

staff requirements are reviewed from time to time keeping in view changes in the entity's functions and relevant factors;

(xi)

posts remain vacant for long periods affecting adversely the entity's functioning; and

(xii)

there is any overstaffing with reference to the entity's functional responsibilities. Analysis of system of authorization and recording

10.40 This involves examination of the system of authorisation of transactions and operations and the related procedures and records prescribed for the purpose. It has to be verified whether the powers for initiation of operations and transactions and their approval and execution are clearly delegated in writing by the competent authority and whether an adequate system with necessary checks and balances exists to ensure that the delegated powers are exercised satisfactorily. It should be ensured that the forms and procedures provide for the authorization and review of transactions prior to their being entered in the accounts and that the forms and procedures are so designed as to include provision for proper authorization of all operations and transactions with the record of the authorization serving to establish accountability for the action taken. It has also to be seen that the system provides for procedures to ensure that: 344

(i)

all approved transaction documents serve as source documents for accounting entries; and

(ii)

all cash and materials received in the entity are immediately accounted for. Analysis of system of accounting

10.41 This requires a study of the departmental accounts manual, relevant orders, circulars, etc. including the prevailing policies and procedures. A flow chart may be prepared to depict various stages in the process. It may be examined to see whether: (i) the accounts records provide for compilation of transactions according to the budgetary classification; (ii) an effective method of budgetary control, including a machinery for the prompt reporting and analysis of variations between the budgetary allotments and expenditure, is available; (iii) the accounting system provides for well designed documents and forms for control purposes as well as for conducting operations; (iv) the accounting records maintained for resources and operations are informative, clear and generally adequate; (v) controls exist to safeguard against errors and irregularities in operational and financial data; and (vi) the accounting system is adequate, conforms to the generally accepted accounting principles and includes such forms and records as are absolutely necessary to ensure sound accounting and financial reporting. Examination of system of internal control 10.42 It should be examined whether each organizational unit in the entity is adopting sound practices so as to ensure proper internal control. These include the provision of locked store rooms with access restricted only to authorized persons, arrangements for surprise physical verification of cash, bank reconciliation by independent personnel, pre-check of payments, institution of checks to see that transactions are properly authorised, dual custody of valuable negotiable assets, independent periodical verification of the existence of recorded material resources, etc. It should also be seen whether the system provides for departmental enquiry into all cases of shortage, loss, theft and embezzlement. 345

Evaluation of standards of quality and performance 10.43 It should be examined whether a proper system exists for evaluating the quality and performance with reference to the standards prescribed for the purpose. Performance budgets, work plans, technical manuals, etc. should also be studied to ascertain the standards prescribed. The standards of quality and performance

achieved by the management should then be listed out and compared with those prescribed and the results evaluated. Examination of the system of internal audit 10.44 It should be ascertained whether an internal audit system has been introduced in the entity and, if so, whether the unit responsible is completely independent of the operating unit. The prevalent system of internal audit should also be examined to verify whether it provides for an objective, timely, systematic and professional examination of financial, administrative and other operations subsequent to their execution for the purpose of their evaluation and verification and whether the system is geared to ensure prompt and adequate follow- up corrective action on the internal audit reports. Review and evaluation 10.45 The review and evaluation should not be based entirely on the replies to audit observations, procedural manuals or flow charts prepared by the entity. The Auditor should independently determine how the operations and transactions are actually processed by testing, through actual observation, a few selected representative transactions or operations. He should evaluate tentatively the effectiveness of the procedures and controls in operation and identify the strengths and weaknesses in key control points. The tentative evaluation in areas of weakness should be confirmed by testing additional operations and transactions. Procedural manuals relating to areas confirmed as being weak should be reviewed to determine whether the procedures are inadequate or whether, though adequate, were not being properly applied.

346

Manpower Audit Introduction 10.46 The concept and main stages of systems audit have been discussed in the preceding chapter. As indicated therein, the probe during organizational analysis should extend to examining whether proper distribution and clear demarcation of functional responsibilities exist among the personnel working in the entity and whether its staffing pattern conforms to the norms and standards prescribed for the purpose and has the competent authority's approval. During this probe, it may also be necessary to examine how far the norms adopted for assessing manpower requirements are realistic and how far the available manpower is utilized efficiently and effectively without any overlap of duties and responsibilities. The scope of a system-based manpower audit and the nature of examination that can be undertaken are discussed in the subsequent paragraphs. The guidelines contained therein are aimed at streamlining the systems and procedures regulating control of manpower resources and to bring out suitable reforms where necessary. These are, however, not to be taken as comprehensive and must be adapted to suit local conditions. The spirit behind the systems audit of manpower is to suggest positive measures for the optimum utilisation of the available human resources and to bring about organizational efficiency. Audit approach 10.47 Human resource management processes and practices vary considerably across departments, depending upon their size and mandate, the nature of their programmes, their strategic and operational planning processes, the management philosophy, the work environment, their stability, the degree of centralization, and so on. Accordingly, auditors should tailor their audit approach after gaining an

understanding of the entity, its operations and its human resource management systems and practices. The approach varies considerably from entity to entity and may involve examination of all aspects of human resource management within a department or within a branch or programme of the department. The system-based manpower audit in the office of each cadre controlling authority will have to be supplemented by test check in its subordinate offices to evaluate the efficiency and effectiveness of the actual functioning of the system. Apart from assessing the availability of proper safeguards to ensure avoidance of overlap of functions and close coordination and their adequacy, this test check will 347

also include nominal audit and other prescribed checks of establishment expenditure. All the audit findings should be studied and integrated to make an overall assessment of the operational efficiency and effectiveness of the systems. The responsibility for devising and following sound systems for determination of manpower requirements, their regulation and their efficient and effective utilisation rests primarily with the cadre controlling authorities. Audit should ascertain whether the existing systems are adequate and whether they function effectively, and not only indicate the deficiencies in the system but also, as far as possible, the directions of improvement based on well-considered suggestions. Systems audit of manpower controls will involve examination of a number of aspects but mainly the following: (i) the job analysis, job description and job specification for various categories of posts; (ii) methods and principles adopted for assessment of manpower requirements; (iii) (iv) (v) norms/standards adopted for computation of requirements; allocation and actual deployment of manpower resources; control systems available for monitoring the efficient and effective utilisation of human resources; and (vi) training and development of human resources.

System-based manpower audit will ordinarily be undertaken once in three years in each cadre controlling office. Source documents 10.48 The documents to be examined in the course of audit will include, inter alia: (i) Government instructions on procedures for computing manpower requirements, recruitment of personnel to different posts and the pay scales and other terms and conditions relating to the posts; (ii) (iii) (iv) (v) (vi) (vii) (viii) files relating to assessment of manpower requirements; registers of sanctioned strength; statements of actual men-in-position; duty allocation registers; office manuals describing duties and responsibilities of various posts; delegation of powers; registers and bills relating to establishment expenditure, etc. 348

The computerized data base prepared by the A&E office from the payrolls of State Government employees can also be used effectively for manpower audit. This will provide comprehensive and integrated information about the manpower profile of the department as a whole and its cost. Issues for audit scrutiny Job analysis, description and specification 10.49 Job analysis is an analytical examination of a work assignment. It is the process of collecting information about, and analysing, duties, responsibilities and the conditions of work involved in the job, its inter-relationship with other work assignments and the qualifications necessary for its performance. Ba sed on the job analysis, a written statement is prepared outlining the specific duties, responsibilities and organizational relationship that constitute a given job and the conditions of work involved in, and the qualification necessary for, performing the job. This statement is called job description. The job specification is prepared thereafter and is primarily intended for emphasizing and detailing the personal characteristics required for satisfactory performance of the job. Efficient personnel manage ment requires that an organisation's current and future manpower needs should be determined in terms of both quantity and quality. While the qualitative requirements are assessed through various methods of work measurement in the context of perspective organizational planning, the performance requirements and personal qualifications are assessed through job analysis and recorded in job descriptions and job specifications. Job analysis and job description are the essential prerequisites for job evaluation and for comparing the relative worth of the factors of a job with those of other jobs in the same organisation and similar jobs in other organisations. A job description can provide a good and reliable check list for performance appraisal. In its absence, the tendency will be to substitute subjective judgement for verifiable observation of facts. Job description can also be used to stimulate and direct self-appraisal and self-development. The techniques of job analysis, job description and job specification are extensively used in manpower planning and development for specifying the nature and requirements of a job or a group of jobs, selection and placement of personnel and for job evaluation. These techniques are also very useful in identifying and assessing the training needs of different categories of personnel and in formulating the 349

objectives and design of a training programme. They are helpful in setting standards of performance and orienting and motivating employees towards achievement of such standards. It is thus imperative that proper systems should exist for maintenance of job descriptions and job specifications for various categories of posts in each department based on an analytical examination of each category. It should be examined during audit that: (i) arrangements for applying these techniques are sound and effectively managed; (ii) job descriptions and job specifications are maintained up to date and correspond accurately to current job requirements, and all jobs are periodically reviewed with a view to revising their descriptions and specifications in conformity with the changes in organizational objectives, job content and job context; (iii) job descriptions and job specifications are precise and clear so as not to give room for any ambiguity or misconstruction; and (iv) there is no overlapping of duties and responsibilities assigned to different jobs. Assessment of manpower requirements 10.50 Manpower requirements are forecast on the basis of : (i) opinions of different supervisory or controlling officers within the department; or (ii) projection of past trends using statistical techniques like extrapolation, regression, correlation, etc.; or (iii) standard formulae devised with reference to the results of work study, job descriptions, specifications, etc.; or (iv) measures of productivity.

The last method is, in many circumstances, the most difficult to apply. In conditions peculiar to Government, the third alternative is generally followed. Where there is no standard formula, the past experience and trends as well as othe r ad hoc principles form the basis for estimating manpower requirements. The manpower

estimates take into account not only the current needs of the department but also its expansion programmes, the demands for which are fully supported by substantive evidence of need. One other important factor in assessing manpower requirements is 350

the translation of the numerical estimates into financial (cash) estimates bringing out the cost implications. Procedures for this purpose are generally prescribed for the guidance of estimating authorities. Individual controlling officers within the

department who prepare the estimates in this manner forward them to the cadre controlling authorities concerned. The latter closely scrutinize them so as to be satisfied about their correctness before according approval. These estimates form the basis for issue of formal sanctions and for regulation and control of manpower. The following should be examined in auditing the systems for forecasting manpower requirements: (i) The extent to which the projections of manpower requirements correspond to the numbers, levels and skills of personnel required for the objectives set forth and the work load based on those objectives. (ii) The continued relevance and appropriateness for the department of the objectives in question. In case these have ceased to be so, and, if there be any changes in the organisational structure of the department or in its policies, it should be examined whether the manpower forecasts and estimates reflect suitable reductions after taking into account the changes. (iii) The evidence, such as workload at current levels, additional posts for future expansion programmes, etc., available to support the forecasts and their reliability. (iv) Extent to which the standard formulae prescribed for different processes of work have been applied in the computation of manpower requirements; and, in case standard formulae have not been evolved, the reasonableness and fairness of the principles adopted for computation. (v) Adequacy of the departmental procedures and formulae for manpower forecasts. (vi) Arrangements, if any, for periodical review by an independent agency like the Staff Inspection Unit of the accuracy and adequacy of the standard formulae devised for computation of manpower needs like Staff Inspection Unit and timeliness and adequacy of the follow-up action taken for revision of the formulae where necessary. 351

(vii)

Extent to which introduction of computers, electronic data processing, photocopying machines, and similar technological improvements have made a difference to the standards and forecasting of manpower requirements.

(viii)

Soundness of the procedures prescribed for translating manpower estimates into cash estimates.

(ix)

Role of specified officers assigned the responsibility of approving estimates of manpower requirements and the extent to which this responsibility was actually discharged. Allocation and regulation of manpower resources

10.51 Two aspects are important in the allocation and regulation of manpower resources. These are supply forecasting and financial constraints. In calculating the actual availability against the demand, the manpower available in the beginning of the year, losses on account of various types of wastages attributable to normal retirement, natural attrition, discharge from service, resignation, transfers and promotions, etc and recruitment during the year are taken into account. The broad principles followed for calculating different wastage elements are as follows: (i) Normal retirement: This depends on the government policies in force from time to time and can be estimated for the forecast period from the personnel records and by an analysis of the age profile of the employees. (ii) Natural attrition: Wastage due to natural causes represents loss of personnel resulting from death, disability or illness. This can be

computed based on past experience and the age profile and general health of the employees. (iii) Discharge from service: This refers to loss of personnel as a result of discharge or dismissal from service. Only previous experience can provide a guideline for estimating this type of wastage. (iv) Voluntary wastage: Another type of wastage is the loss of personnel as a result of their resigning or retiring voluntarily. The reasons, such as conditions of work, morale, job satisfaction, opportunities in the department and elsewhere, will vary widely from department to department. Here again, past experience and future trends, as far as these can be foreseen, will form the basis of determination. 352

(v)

Transfers and promotions: These are taken into account in arriving at the overall estimate of wastage and reflect the extent to which particular occupational and hierarchy groups are lost to other occupations as a result of lateral or vertical movement in the hierarchy. By careful use of technique s like succession system analysis, transfer analysis, etc., it will be possible to predict the proportion of employees in different categories who are likely to be promoted or transferred in the future.

A comparison of the final figure of availability computed in the manner described above with the demand as found justified will indicate the shortfall, if any, in manpower supply. Sometimes, due to financial constraints, it may not be possible to provide manpower to the extent of the demand found justified. In such cases, the cadre controlling authority may have to apply appropriate cuts before formally issuing sanctions allocating manpower to different units. In certain other cases, retention of a reserve to meet possible unforeseen requirements may be considered necessary and cuts may have to be imposed for that purpose. In analyzing the system of allocation and regulation of manpower resources, it should be examined whether; (i) changes in work load that have taken place since the preparation of the initial estimates have been taken into account while allocating the manpower resources; (ii) the demand and supply aspects are properly integrated in distributing the available resources; (iii) the system of supply forecasting is non-existent or deficient, or proper policies relating to means of supply like recruitment and promotion are lacking with all the attendant adverse consequences in cases where the allocation of manpower resources is insufficient in relation to the demand; (iv) the cuts imposed in allocations have a proper basis and take care of the priorities laid down for regulation of manpower resources; (v) the reductions made in the manpower estimates have been correspondingly reflected in the cash estimates and vice versa; and (vi) sound procedures have been prescribed for engaging substitutes on a casual basis or for payment of additional remuneration like overtime 353

allowance or honorarium to tide over shortfalls in availability of manpower resources. Besides, the manner in which (a) the actual deployment of the manpower resources compares with the allocations made; and (b) the reserves, if any, retained while distributing are ultimately utilized should also be examined. Norms/standards adopted for computation of requirements 10.52 Work measurement is a vital necessity for the efficient functioning of any department or organisation. It forms the basis for comparison or control of the organisation's capacity, efficiency, economy or relative accomplishment, and involves the following broad steps. (i) (ii) selection of a specific work for study; compilation of relevant information in regard to nature of personnel and of their duties and responsibilities, working conditions, the sequence of actual performance of various items in the total range of work and individual elements in each component, etc.; (iii) critical examination of the recorded work breakdown, after separating unnecessary, avoidable and non productive elements, to ascertain the best method of doing the work; (iv) assessment of the time involved in each necessary element with reference to the most appropriate technique for the situation; (v) determination of time allowances to cater to the requirement of relaxation, personal needs, contingencies, etc., and (vi) computation of the standard time required for each operation which will include the measured time and permissible time allowances. Time estimates or work norms are devised for various elements, operations or jobs in a department or organisations by applying the techniques of time study, synthetic data, analytical estimating, activity or work sampling, etc. Timely study involves the cataloguing of various steps involved in a job together with the different elements in each of them and measuring the time required for performing each such element of the job. The effective speed of operation of the worker is assessed in relation to the concept of the rate corresponding to the standard pace of working or in other words the normal speed of working that one develops through long practice. Generally, each element is rated during its performance before the time is recorded without regard to the preceding or succeeding elements. The 354

observed times are then converted into 'basic times. Allowances for relaxation, personal needs and contingencies are then added as a percentage of the basic times, since precise measurement thereof would be uneconomical owing to their infrequent or irregular occurrence, to arrive at the standard times for different elements. The technique of synthesis of elemental standard times is applied to jobs or parts thereof, comprising elements which frequently recur in other jobs and have been correctly measured under identical conditions from direct time studies. The technique of analytical estimating is used for measurement of work comprising wholly or partly of nonrepetitive eleme nts. The job is broken down in detail into its different elements and each element is assigned a time value based on standard performance, this time value in the case of repetitive elements may be derived from fresh time study data or available synthetic data in the absence of such data, estimated time values may be developed on the basis of accepted practices. Activity or work sampling is the process of drawing inferences and establishing frames of reference from a random sample of the total activity of machines or men observed during a period of time. It is a process of drawing

inferences or general conclusions about a mass or aggregate of similar items based upon the careful study of a smaller number of items drawn from the mass called the sample. The inferences or conclusions are based on the assumption that what is true of the sample is true of the whole. Individual departments or organizations have to select appropriate work measurement techniques and prescribe time estimates or work norms for different types of jobs. An independent agency called the Staff Inspection Unit is generally constituted not only to prescribe norms but also in periodically review the actual functioning of offices to ensure that: (i) manpower sanctioned for a particular purpose is utilized for that very purpose; (ii) (iii) redundant and profitless activities are eliminated; and work methods are simplified so as to effect economies in manpower without sacrificing efficiency. In auditing the system relating to work norms and the working of the Staff Inspection Unit, the following questions would be of relevance:

355

(i)

Are the techniques followed for formulating the time estimates appropriate having regard to the work environment and conditions obtaining in the particular department?

(ii)

Have there been any material variations in the job content or job context since the formulation of the estimates as a consequence of which the estimates have become outdated necessitating their revision and, if so, was timely action taken in this regard?

(iii)

Are there, in actual fact, functions or jobs that cannot be subjected to work measurement necessitating the adoption of ad hoc methods?

(iv)

Is the Staff Inspection Unit independent of the control of the time management?

(v)

Are the staff inspector selected from a wide enough field so that there is a mix of both executive and technical officers?

(vi)

Have the staff inspection programmes taken into account views expressed by the manpower branch, O&M branch and other review bodies?

(vii)

Is a cyclical pattern of inspections followed so as to cove r all important units within a specified period?

(viii) (ix)

Has the planned cycle of inspection been achieved? Are the omissions, if any, to inspect certain sections, branches or grades of staff in order?

(x)

Are all individual offices of departments having a large number of local offices in the field inspected? On the other hand, if the inspection is confined to a sample of offices, can this sample be justified statistically?

(xi)

Are

adequate

arrangements

available

for

monitoring

the

implementation of the recommendations of the staff Inspection Unit? (xii) Has a reasonable schedule of implementation been agreed to in consultation with the management? (xiii) Are instances of failure to implement the schedule reported to the senior management? (xiv) Are conflicts, if any, between the Staff Inspection Unit and the management referred to a senior level for objective decisions? 356

Control of manpower 10.53 The systems enumerated above require to be properly coordinated and controlled to achieve maximum efficiency and effectiveness in the working of the department or organisation. With this end in view, there should be a separate branch or section under each cadre controlling authority for coordinating and controlling departmental manpower. The role and duties of this branch should be clearly defined and it should, as far as possible, be independent from the line management with a direct reporting responsibility to the cadre controlling authority itself. Functions of control and coordination can be exercised in different ways. One method is through the introduction of a management information system for which appropriate returns have to be prescribed. Another method is by means of

administrative inspection of different offices under the jurisdiction of the cadre controlling authority. In certain situations a combination of both these systems may have to be adopted. In auditing manpower control systems, it should be examined whether: (i) there exists a separate branch or section for coordinating and controlling departmental manpower with a clear demarcation of its role and responsibilities; (ii) the returns prescribed for obtaining information on various aspects concerning manpower are adequate to the needs and they are properly made use of; (iii) the manpower branch critically examines all demands for manpower taking into account the work norms, the recommendations of the O&M Unit, the Staff Inspection Unit, etc.; (iv) there is a sound system of evaluating requests for additional manpower after the original demands have been approved; (v) (vi) the utilisation of manpower resources is monitored; work procedures are examined by the O&M unit with a view to streamlining and bringing them in tune with the changing circumstances; (vii) (viii) there are adequate arrangements for monitoring performance; steps have been taken to provide training so as to impart to the staff the latest information and techniques relevant for their job requirements; and 357

(ix)

arrangements exist to correlate the utilisation of manpower resources with achievements of targets and goals. Training of manpower

10.54 In evaluating an organisation's performance, it may be determined whether: (i) short-term and long-term training plans were formulated and training courses designed only after assessing the needs; (ii) programmes developed for training of personnel are job and development oriented; (iii) (iv) the training function is balanced and cost effective; an inventory of personnel trained in various disciplines is maintained so as to ensure the optimum use of the training imparted to them; and (v) the organisation has a system for a periodical review and revision of training courses through classroom evaluation, evaluation by participants and post-training evaluation. Use of computerized data base 10.55 As mentioned earlier, the computerized data base prepared by the A&E office from the payrolls of State Government employees can be used effectively for manpower audit. For instance, comparison of the data relating to the sanctioned strength in various cadres in a department with that relating to the men- in-position will facilitate the scale audit of the department in its entirety. It will also be possible to examine whether the approved staffing pattern for different cadres has been adhered to and whether the staffing pattern itself is commensurate with the department's mandate, objectives and programmes. This would lead to an

examination of the adequacy, appropriateness and relevance of the control mechanisms in place to ensure that the prescribed staffing pattern and other human resources management policies are followed. Based on an examination of the data base, at least twenty five per cent of the major and medium drawing and disbursing officers should be selected for voucher audit and the scrutiny of service records during local audit according to the instructions in this regard contained in this Manual. The results of central audit of vouchers may also be suitably used for scrutiny of the service records in the field.

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Audit of Computerised Systems Introduction 10.56 Following the significant advances in the field of information technology (IT), Government organisations have become increasingly dependent on computerized information systems to conduct their operations and to process, maintain, and report essential information. As a consequence, the reliability of the computerized data and of the systems that process, maintain and report these data is a major concern to audit. IT Auditors evaluate the reliability of computer-generated data supporting financial statements and analyse specific programmes and their outcome. In addition, they examine the adequacy of controls in information systems and related operations to ensure system effectiveness. IT Audit is the process of collection and evaluation of evidence to determine whether a computer system has been designed to maintain data integrity, safeguard assets, allow the effective realization of organizational goals, and ensure efficient utilization of resources. Data integrity relates to the accuracy and completeness of information as well as to its validity in accordance with the norms. An effective information system leads the organization to achieve its objectives and an efficient information system uses minimum resources for this purpose. While evaluating the effectiveness of any system, the IT Auditor must be aware of the characteristics of the users of the information system and the decision- making environment in the auditee organisation. Use of computer facilities has brought about radically different methods of processing, recording and controlling information and has resulted in many previously separated functions being combined. Consequently, the potential for material systems errors has greatly increased at a considerable cost to the organisation for instance, the highly repetitive nature of many computer applications implies that even small errors remaining undetected may lead to large losses. An error in the calculation of income tax to be deducted from employees remuneration will not recur in each case in a manual system, but once this error is introduced in a computerized system, it will affect each case. A bank may suffer huge losses on account of an error in rounding off to the next rupee instead of to the nearest rupee. The financial implications of such recurring or repetitive errors could, in the final analysis, be very substantial. This makes it imperative for the auditor to test the invisible processes, and to identify the vulnerabilities in a computer information system. 359

Controls in a Computer System 10.57 Controls in a computer information system reflect the policies, procedures, practices and organizational structures designed to provide reasonable assurance that the intended objectives will be achieved. They ensure effectiveness and efficiency of operations, reliability of financial reporting and compliance with the rules and regulations. However, computer systems are efficient and achieve results accurately and at great speed only if they function in the manner they are designed to and such controls as are provided are effective. It is, therefore, important for the Auditor to verify that not only adequate controls exist, but that they also function effectively. Such controls should also be commensurate with the risk assessed so as to reduce the impact of identified risks to acceptable levels. Information system controls are broadly classified into two categories, namely General Controls and Application Controls. General controls include controls over data centre operations, system software acquisition and maintenance, access security, and application system development and maintenance. They create the environment in which the application systems and application controls operate. Example include IT policies, standards, and guidelines pertaining to IT security and information protection, application software development and change controls, segregation of duties, service continuity planning, IT project management, etc. Application controls pertain to specific computer applications. They include controls that help to ensure the proper authorization, completeness, accuracy, and validity of transactions, maintenance, and other types of data input. Examples include system edit checks of the format of entered data to help prevent possible invalid inputs, system enforced transaction controls that prevent users from performing transactions that are not part of their normal duties, and the creation of detailed reports and transaction control totals that can be balanced by various units to the source data to ensure that all transactions have been posted completely and accurately. Significance of controls 10.58 Presence of controls in a computerized system is significant from the audit point of view because the system may allow, in their absence, duplication of inputs or processing, or conceal or make invisible some of the processes. Controls also provide safeguards against data loss attributable to damage to or corruption of files, manipulation of data, power failures or fluctuations, viruses, computer abuses, etc. Absence of audit trails would also make it difficult to ensure the efficient and 360

effective functioning of a computerized system for an auditor.

Besides, in

organizations where computer systems are operated, on contract, by outside agencies that employ their own standards and controls, absence of controls will also make the system vulnerable to remote and unauthorised access. Objectives of Computer Controls 10.59 The objectives of controls do not change with the introduction of computers. Instead, it is the control techniques that change with many of the manual controls being computerized and new technical computer controls being added to achieve the same objectives. Typical control objectives within a government data processing function aim to ensure: (i) the provision of effective organisational control over functions related to data processing by clearly defining organisational objectives; (ii) effective management control over development of data processing resources in conformity with organisational objectives; (iii) adoption of practices related to data processing activities in accordance with statutory requirements and prescribed administrative procedures; (iv) adherence to policies, standards and procedures in respect of all data processing functions; and (v) efficiency and effectiveness of the data processing systems geared towards achievement of the desired objectives. Audit objectives and scope 10.60 The basic objectives of the audit of computerized systems include an evaluation of: (i) (ii) (iii) (iv) (v) the acquisition and installation of the computer and computer systems; system effectiveness; system economy and efficiency and data integrity; system security; and compliance of system related activities with applicable laws, regulations and guidelines. The above objectives can be achieved by reviewing: (i) (ii) the acquisition of the computer facilities; whether the computer-based systems incorporate adequate procedural controls that are not invalidated by subsequent amendments; 361

(iii)

the adequacy of controls governing development and maintenance of computerized systems;

(iv)

the adequacy of administrative and organizational controls to ensure safe and expedient day-to-day operations; and

(v)

the use of resources to appraise and report on waste, extravagance and inconvenient administration or poor value of money.

An auditor has to always bear in mind that he has to exercise an independent judgement on the capability of the system to cater to the intended objectives-efficient and adequate disposal. Preliminary evaluation 10.61 The first step in audit should be a preliminary evaluation of the computer systems covering: (i) (ii) (iii) the manner in which the computer function is organized; the use of computer hardware and software; the applications processed by the computer and their relative significance to the organisation; and (iv) the methods and procedures prescribed for implementation of new applications or revision of existing applications. In the course of the preliminary evaluation, the auditor should ascertain the level of control awareness in the auditee organisation and existence (or non-existence) of control standards. The preliminary evaluation should identify inter alia potential key controls and any serious weaknesses in these controls. The auditor should

examine whether each control objective has been achieved and; if not, he should assess the significance of and risk involved in the deficiencies observed. Audit methodology 10.62 After completing the preliminary evaluation of the computer systems, the auditor has to decide whether it would be more appropriate to adopt the system-based audit approach or the direct substantive testing approach. The aspects to be borne in mind in arriving at the decision are the following: (i) (ii) results of the preliminary evaluation; extent to which reliance can be placed on any work carried out by the internal audit wing of the auditee organisations; (iii) nature of any constraints, such as the absence of any audit trail, and the practicability of testing; 362

It has also to be borne in mind that effective compliance testing of key computer controls may be difficult necessitating the use of large samples to test each control. A. Direct Substantive Testing If the direct substantive testing approach is chosen, a sample of transactions should be selected and tested. The results of the preliminary evaluation will be particularly of assistance in this context because it would have: i) enabled an overall assessment of the control environment and identified any serious weaknesses that should be raised with the auditee; ii) afforded sufficient familiarity with the system to facilitate selection of appropriate transactions for testing and their efficient substantiation; and iii) provided sufficient information to determine the initial requirement for any Computer Assisted Audit Techniques (CAATs). B. Systems -based Audit In adopting the system-based audit approach, it will be necessary to examine aspects relating to the regularity, economy, efficiency and effectiveness of the system besides evaluating data integrity, and data security. These are explained below: i) System effectiveness is measured by determining whether the system performs the intended functions and whether the users are able to obtain the requisite information in the right form and at the right time. ii) A system is economical and efficient if it uses the minimum number of information resources to achieve the output required by the users. This will involve optimization of the use of system resources- hardware, software, personnel and money. iii) System activities can be considered to be regular if they comply with all applicable laws, rules, policies, guidelines, etc. iv) Achievement of data integrity implies that the internal controls must be adequate to ensure that errors are not introduced when entering, communicating, processing, storing or reporting data. v) In order to ensure data security, the data system resources, like other assets, must be sufficiently protected against theft, waste, frauds, unauthorized use and natural disasters. 363

The key controls for ensuring the above will have to be identified, recorded, evaluated and compliance tested. The results of the preliminary evaluation would be of assistance in this context as well because the evaluation would have brought to light system deficiencies, major weaknesses and areas requiring greater, in-depth study. Identification of key controls would also depend on the experience gained by the auditor in the course of audit of similar installations. Compliance testing of controls in computer systems and programmes is difficult and complicated as their operation is automatic, invisible and not fully evidenced since the exceptions alone are normally evidenced. Detailed manual

testing of these controls is rarely cost effective, however, a possible alternative approach would be to resort to CAATs. For example, either test data or audit software may be used to test a control designed to ensure that payments exceeding a certain value are not made. Audit software can be used in this context to interrogate the entire payments file to identify payments in excess of the specified value. If no such cases are revealed, the auditor has some assurance that no such payment was made. This is a negative assurance since it is possible that no invalid data was in fact presented to the system and, therefore, the control in question was never invoked. However, if the interrogation is applied to the entire year's transactions, it achieves the main audit objective in that no excess payments will have been made in the period. Even when test packs or interrogation techniques are used, the auditor should examine the procedures for dealing with exception or error reports in order to ensure that invalid transactions are corrected and re-input for processing. Audit techniques 10.63 IT audit techniques refer to the use of computers, including software, as a tool to independently test computer data of interest to Audit. The following are some of the well established techniques: i) Collection and processing of a set of test data that reflect all variants of the data and errors which can arise in an application system at different times. ii) Use of integrated test facilities, built into the system by the auditee, to assist the auditor in his requirements, as one of the users of the system. iii) Simulation of the auditee's application programs using audit software to verify the results of processing. 364

iv)

Periodical review of programme listings in order t o verify that the programmes have not been altered unauthorizedly.

v)

Use of either commercial software or programmes developed in house to interrogate and retrieve data applying selection criteria and to perform calculations.

vi)

Extraction of data samples from the database/files of the auditee, using sampling techniques, for post analysis and review. The sampling

technique to be employed is determined by the nature of data and type of analysis required. Computer audit techniques are employed for: i) ii) independent ve rification of ledger balances and control totals; re-calculation of critical computerized calculations to verify their correctness; iii) range checks to verify the efficient functioning of computer based controls and test for exception conditions; iv) v) vi) testing the validity of data stored in the master file; detection of data abuse/frauds; and substantive testing with large volumes of data which is difficult, if not impossible, in a manual audit process. The employment of a particular computer audit technique employed depends on: i) ii) iii) the type of application system under review; the extent of testing required; the availability of resources in terms of computer facilities and the level of EDP skills among the audit staff; and iv) volume of data and availability of printed information.

Where the volume of data is small and adequate printed information is available to carry out a meaningful clerical audit, it will not be necessary to employ computer techniques, which are costly and time consuming. To elaborate further, the auditor should break up his project of application system audit into three stages. In the first stage, he will carry out the examination of audit trails, intermediate printouts as required, system logs and operational controls. If the auditor feels, as a result of audit in the first stage, that the adequacy of controls requires further verification he can resort to compliance testing in the second stage using the test deck method and 365

integrated test facilities with resident audit programs.

If the compliance testing

exposes some control weaknesses, substantive testing may be resorted to in the third and final stage using retrieval software packages that are available commercially or simulation techniques with audit software. At present, many data-based management systems also have built- in query and report writer facilities. Unstructured queries on the data files are also possible in some advanced systems. purposes. These utilities could be profitably employed for audit

The auditor will be able to obtain the relevant information from the

auditee's computer centre. The distinct advantages of retrieval packages over other methods are that these enable cent percent review of data, and ensure accuracy of processing and effective use of the auditor's time in analysing the results of interrogation. Use of retrieval software will, however, always remain a problem area primarily because of the multitude of hardware and software systems in use in various departments, requiring expertise in several programming languages. Issues for audit scrutiny Audit of Acquisition 10.64 Generally the acquisition of computer facilities involves the following stages: i) Definition of computer policy and strategy based on an evaluation of organizational requirements and the ways and means of satisfying them. ii) iii) Establishment of the need. A through examination and evaluation of the alternative courses of action available. iv) Precise specification of the requirements and delineation of existing and future applications, hardware, software, modes of operations, conditions of supply, etc. v) Evaluation of alternative sources of supply and selection of the most appropriate source(s). vi) Physical acquisition of the facilities and the systems.

Often these stages tend to overlap or merge imperceptibly into one another. Acquisitions of computer facilities may include: i) acquisition of hardware involving (a) the setting- up of a completely new installation; 366

(b) (c) (d) (e) ii)

enhancement of the central processor; enhancement of peripherals; addition/replacement of a specific equipment; and introduction of several small computers.

acquisition of software involving (a) general software associated with changes in hardware, including the introduction of a new operating system; (b) (c) specific purpose software; and 'off the shelf' application software.

The aud itor has to review the adequacy of the administrative procedures and controls used by the auditee organisation when considering and deciding upon the acquisition of computer facilities. For this purpose, he has to ascertain whether: i) a sound administrative structure is available to enable a proper analysis of the requirements of computer facilities. ii) the acquisition procedures are effective in facilitating the formulation of a viable computing policy and strategy; and iii) the processes of evaluation and selection ensure that the requirements of the organisation are met in the most effective and efficient manner. The auditor should direct his attention to an examination of the following: i) ii) iii) EDP policy and strategic plan; administrative structure; feasibility study/project report containing proposals, costs and benefits; equipment selection; iv) v) vi) justification for hardware and software; installation of equipment and adequacy of testing; and post-implementation review and costs.

The Feasibility Report should include a clear statement of the objectives, details of the existing arrangements, alternative solutions considered and the proposed solutions, financial implications and schedule of implementation. points should be borne in mind in respect of equipment selection; i) The requirements for acquisition, enhancement or replacement of computing facilities and the specifications should be stated concisely and precisely as they form the basis for potential suppliers. 367 The following

ii)

The technical as well as commercial aspects of the proposal should be evaluated according to standard contracting procedures.

iii)

Procurement action should be initiated only after ensuring that the suppliers offer conforms to the required specifications. This should be done by taking into account inter alia the following: (a) (b) (c) technology options available at the time of procurement; useful life of the asset; incidental costs which could eventually be of sufficient magnitude, besides the hardware and software costs; and (d) future development plans of the potential suppliers in terms of expendability, upgrading, etc. Audit of Systems Development

10.65 Since the underlying purpose of acquisition and development (designing, building or modifying) is the same, the audit concerns relating to acquisition, viz., planning, requirements definition, analysis of alternatives and justification for the selected approach, are equally important in the review of systems development. Broadly, stated the audit objective of system development controls is to ascertain that procedures are adequate to ensure that the development results in well-documented computer systems incorporating adequate controls and meeting the defined user requirements in an efficient manner. It will also be necessary to examine the system testing and data transfer procedures in view of the following: i) Inadequate testing of the system prior to commencement of line operations may result in the operation of a system not capable of correctly processing and recording transactions. ii) Adoption of inappropriate or inadequate data transfer procedures may result in the relevant records being transferred inaccurately and incompletely from an existing system to a new one. Where systems development is entrusted to contractors, the contract and its management become important audit concerns. It should be ensured that the vendor provides complete documentation along with the source code. Further, the terms and conditions, such as rights over the source code, provisions for modifications/updating in future, etc. should be examined. The penal provisions may also be examined in cases of non-delivery of the agreed upon services or non-adherence to the stipulated 368

time schedules. It may also be ascertained whether any of the objectives envisaged could not be realised because of belated delivery of the software. Categories of Systems Development Audit 10.66 Systems development audit can be categorized into the following three general classes: i) Monitoring Audit: The auditor evaluates the project throughout the process to determine whether the development is proceeding effectively and ascertains whether milestones are being met, expenditure rates are as predicted, high quality documentation is being written, the software conforms to established technical standards and tests are being conducted as scheduled or evaluated as planned. ii) Design review audit: Its objective is to determine whether the preliminary and detailed designs accurately reflect the functional data and systems specifications, and incorporate adequate internal controls. iii) Post-implementation audit: This is performed three to six months after the system becomes operational and serves to evaluate whether the system meets requirements, is cost-effective and generally provides benefits predicted in the project planning documents. Association of audit in systems development 10.67 The ultimate responsibility for incorporating internal controls and an adequate trail into computer-based systems must rest with the auditee organisation. It is, therefore, not necessary for the auditor to provide, as a matter of policy, any consultancy advice on developing systems. Nonetheless, audit should be aware of all developments that are likely to have a significant impact on the audit processes. At an early stage in the design process of a new system, the auditor should consider providing the auditee organisation specific comments on: i) internal controls in the light of weaknesses identified in the existing system; ii) audit needs such as data retention or retrieval facilities and audit trail requirements; and iii) any other requirement to facilitate his audit, or improve its efficiency and effectiveness.

369

Main points to be checked by audit 10.68 While the auditor should be cautious enough not to be drawn into unproductive involvement in systems development, he should nevertheless examine whether: i) a published standard methodology is being used for designing and developing systems; ii) there is a common understanding by all parties-users, systems analysts, management and auditors of the basic structure of both manual and computer processing activities, as well as of the concepts and needs for control and of the applicable control techniques; iii) the IT applications development is authorized by the user, the steering committee or the management; iv) the systems development work was preceded by a feasibility study to determine the most appropriate solutions to standard problems; v) there is adequate cross referencing between (a) content and format of preliminary studies; (b) feasibility studies; (c) system specifications; and (d) programme coding; vi) project management techniques, such as the stipulation of project decision milestones, time and cost estimates, etc., are applied in

systems development work to facilitate monitoring of the against estimates; vii) programming standards using modular structured methodology are being adhered to in coding and viii) existing in- house or externally available application packages were considered development. Audit of Operation and Maintenance General Controls 10.69 The auditor has to review the internal controls which are essential for proper operation and maintenance. Some of the operation and maintenance controls fall in the category of general controls (also referred to as environmental controls) relating to the entire gamut of computer facilities. The overall audit objective in reviewing the general controls is to ensure that the controls and procedures are adequate to provide secure, effective and efficient day-to-day operation of the computer facilities. The 370 before deciding upon new in- house application

controls and procedures that together constitute the general controls are discussed in the succeeding paragraphs. Organizational controls 10.70 These controls ensure that (i) there is judicious separation of duties to reduce the risk of employee fraud or sabotage by limiting the scope of authority of any individual; (ii) there are comprehensive written standards; and (iii) access to and use of computer terminals is properly authorized. These high level controls are important as they influence the effectiveness of any lower level controls which operate within accounting applications. Unless the management follows appropriate IT policies and standards, it is unlikely that other controls will be sufficiently strong to support a controls-reliant audit approach. An assessment of the high level IT policies, strategies and procedures will provide the auditor with a reasonably reliable indication as to the existence and effectiveness of any lower level detailed controls. Segregation of duties 10.71 The auditor sho uld verify whether duties amongst the staff operating the computer system are adequately and effectively segregated so as to substantially reduce the risk of error and fraud. Poor segregation could lead to any one person, with control over a computer function, making an error or committing a fraud without it being detected and to the adoption of inappropriate working practices. Evidence of separation of duties can be gained by obtaining copies of job descriptions, organization charts and observing the activities of IT staff. Where computer systems use security profiles to enforce separation of duties, the auditor should review on screen displays or printouts of employees security profiles in relation to their functional responsibilities. In any major IT System, the following duties should be adequately segregated: System design and programming. System support. Routine IT operations and administration. System security. Database administration. Physical Access Control 10.72 Physical access controls include the environmental controls which operate across the entire IT environment and affect all underlying computer applications. These controls are designed to protect the computer hardware and software from 371

damage, theft and unauthorized access. Access controls can operate at various levels, for example, from restricting access to the client's site to installing key locks on individual personal computers. Restricting physical access to the IT systems reduces the risk of unauthorised persons altering the financ ial information. The auditor should make a quick assessment of the physical access controls and their adequacy. Authorisation Control 10.73 This helps verify the identify and authority of the person desiring to attempt a procedure or an operation. This control is exercised through the use of passwords, signatures, smart cards, cryptographic systems, etc. Such controls ensure that only authorized persons have access to the system for the purpose of entering and/or altering transactions, obtaining information, etc. Logical Access control 10.74 Logical access controls are provided to protect the financial applications and underlying data files from unauthorized access, amendment or deletion. Logical

access controls can exist at the installation as well as application levels. Controls within the general IT environment restrict access to the operating system, system resources and applications, whilst the application level controls restrict user activities within individual applications. These controls can also be used to restrict the use of powerful systems utilities, such as file editors. Logical access controls are often used with physical access controls to reduce the risk of the program and data files being amended unauthorisedly. The importance of logical access controls is increased where physical access controls are less effective, as for instance, when computer systems make use of communication networks such as Local Area and Wide Area Networks (LANs and WANs). The existence of adequate logical access security is particularly important where a client makes use of wide area networks and global facilities such as the Internet. The most common form of logical access control is login identifiers (ids) followed by password authentication. For passwords to be effective there must be appropriate password policies and procedures, which are known to all staff and are adhered to. Menu restrictions can be effective in controlling access to applications and system utilities. Systems may be able to control access by identifying each

individual user through their unique login ids and then having a pre-defined profile of authorised menus for each. The IT Auditor should consider how easy it would be for 372

users to 'break out' of the menu system and gain unauthorised access to the operating system or other applications. Some computer systems may be able to control user access to applications and data files by using file permissions. These ensure that only those users with the appropriate access rights can read, write, delete or execute files. Operation and File Controls 10.75 These controls are meant to ensure that the computer and computer files are safeguarded from unauthorized access, loss or theft. Controls relating to reception, conversion and processing of data and distribution of the final output promote the completeness and reliability of these operations and safeguard against the unauthorised processing of data or programmes. File controls and procedures

adequately safeguard files and software against loss, misuse, theft, damage, unauthorized disclosure and accidental or deliberate corruption. As the computer provides a means of holding, assessing and amending information, it is imperative that its use is controlled. There should be a definite schedule of work that is

authorised to run on it and restrictions should be placed on the number and type of staff allowed access to it. Computer files are also records of an organisation that require to be properly safeguarded. Change Management Controls 10.76 Change management controls are used to ensure that amendments to a computer system are properly authorised, tested, accepted and documented. Poor change controls could result in accidental or malicious changes to the software and data. Poorly designed changes could alter financial information and remove audit trails. Audit should ensure that a new or amended computer system is thoroughly tested by its end users before live use. Financial systems rarely remain static and are frequently changed, amended or updated. These regular changes may be necessary to improve efficiency, functionality or remove programming faults ('bugs'). Audit should emphasise that auditee organisations which update their computer systems should have appropriate change management and configuration management controls. Configuration management procedures relate to the control of IT assets (i.e. hardware, software, documentation and communications) and the subsequent update of records, while change management relates to the authorisation, impact assessment, asset update, testing and implementation of changes. Risks can be reduced by appropriate change management controls. These controls should ensure that all system and program amendments are satisfactorily justified, authorised, 373

documented and tested and that an adequate audit trial of the changes is maintained. All change procedures should be documented. These controls should ensure that program and file amendments are authorised, logged and monitored. The ability to introduce new programs should be limited to authorised change control staff who are independent of computer programmers and staff who input transactions or maintain standing data. Network Communication Security Controls 10.77 Network communication security controls are important where LANs/WANs or web-enabled systems are in use. Some important aspects to be covered by these controls are as follows: (i) Appropriate techniques should be used to protect all sensitive information in the network. (ii) Critical network devices such as routers, switches and modems should be protected from physical damage. (iii) The network configuration and inventories should be documented and maintained. (iv) Prior authorization of the Network Administrator should be obtained for making any changes to the network configuration. (v) The changes made in the network configuration should be documented. The threat and risk assessment of the network after changes in the network configuration should be reviewed. (vi) The network operation should be monitored for any security irregularity. A formal procedure should be in place for identifying and resolving security problems. (vii) Physical access to communications and network sites should be controlled and restricted. (viii) Communication and network systems should be controlled and restricted to authorised individuals. (ix) Network diagnostic tools, e.g., spectrum analyser, protocol analyser, etc. should be used on a need basis. (x) Intelligent devices known generally as 'Firewalls' should be used to isolate an organisation's data network from any externa l network. Firewall devices should also be used to limit network connectivity from unauthorized use. Networks that operate at varying security 374

levels should be isolated from each other by appropriate firewalls. The internal network of the organisation should be physically and logically isolated from the internet and any other external connection by a firewall. All firewalls should be subjected to thorough test for vulnerability prior to being put to use and at least half- yearly thereafter. All web servers for access by Internet users should be isolated from other data and host servers. (xi) Organisations should establish procedures for allowing connectivity of their computer network or computer system to any outside computer system or networks. The permission to connect to other networks and computer systems should be approved by the Network Administrator and documented. All unused connections and network segments The computer accessing an

should be disconnected from active networks. system/personal computer or outside terminal

organisation's host system must adhere to the general system security and access control guidelines. The suitability of new

hardware/software, particularly the protocol compatibility, should be assessed before connecting them to the organisation's network. As far as possible, no internet access should be allowed to the database and file servers or to servers hosting sensitive data. The level of protection for communication and network resources should be commensurate with the criticality and sensitivity of the data transmitted. (xii) Each organisation should designate a properly trained 'Network Administrator' who will be responsible for the operation, monitoring security and functioning of the network. Appropriate follow-up of any unusua l activity or pattern of access on the computer network should be investigated promptly by the Network Administrator. The system must include a mechanism for altering him of possible breaches in security, such as unauthorized access, virus infection and hacking. Secure Network Management Systems should be implemented to monitor functioning of the computer network. Broadcast of network traffic should be minimized. should be used on the network. 375 Only authorised and legal software

Service Continuity Planning 10.78 The auditor should ensure that there are adequate plans and arrangements to resume processing in the event of failure of computer operations. The degree of continuity planning will depend on the size of the IT department and the dependence on computer processing. A significant and prolonged loss of IT capability in a mission critical system may increase the risk of the financial statements being unavailable or materially misstated. Disaster recovery planning for IT facilities

should be treated a s one element of an organisation's overall service or business continuity plan. The extent of disaster recovery planning and the detailed measures required will vary considerably. Organisations with large IT departments, with mainframe computers and complex communication networks may require comprehensive, up-todate recovery plans which incorporate standby facilities at alternative sites. Disaster recovery plans should be documented, periodically tested and updated as necessary. Untested plans may be satisfactory on paper but may fail when put into practice. Testing will reveal deficiencies and allow amendments to be made. The importance of adequate documentation is increased where significant reliance is placed only on a few key members of the IT department. The loss of key personnel, perhaps due to the same reasons the computers were disrupted, may adversely affect an organisation's ability to resume operations within a reasonable timeframe. Back-up copies of systems software, financial applications and underlying data files should be taken regularly. Back-ups should be cycled through a number of generations by, for example, using daily, weekly, monthly and quarterly tapes. They should be stored, together with a copy of the disaster recovery plan and systems documentation, in an off-site fire-safe. Where micro-computers are used, in addition to mini or mainframe computers, the auditor should ensure that there are also procedures for the backing-up of financial data stored on local hard disks. Important points to be checked in audit 10.79 In reviewing general controls, the following aspects points should be covered: (i) Availability of all hardware equipment, including computer, ancillary and terminal equipment in use should be verified with reference to a list of hardware obtained from the auditee organisation indicating the model, performance details, etc. 376

(ii)

An up-to-date organisational chart should be obtained and examined to determine the manner in which the computer fits into the overall organization.

(iii)

An up-to-date chart indicating the deployment of personnel of the computer department and their relative responsibilities and authorities should be reviewed to note any changes.

(iv)

Similarly changes, if any, in the job specifications (role definition) for senior computer personnel and supervisors of the ancillary section should be noted.

(v)

Details of standards and norms fixed for each of the functions, such as data control, data preparation, system operation, etc. should be obtained and adherence thereto verified with reference to the following: (a) computer utilisation per shift in terms of the Central Processing Unit (CPU) and peripheral use; (b) key depressions per shift per data entry operator and error allowance; (c) document standards and controls-batching, balancing and sequencing; and (d) run-to-run controls maintained by system operators.

(vi)

It should be verified, through a test check, whether manuals are maintained and kept up-to-date specifying the control procedures and whether they are enforced in practice.

(vii)

Availability of the following terminal controls to protect data and system integrity should be verified: (a) (b) physical access controls to terminal rooms; software controls through password protection and user directories; (c) logging of terminal activities by all users.

(viii)

Details of security measures, both physical and system, should be obtained for examining the following: (a) adequacy of protection of hardware and software against risk of fire (fire prevention measures and fire fighting arrangements); 377

(b)

arrangements for maintenance of hardware and system software;

(c)

provision of air conditioning and protective measures against possible radiation, vibrations, etc.;

(d)

availability of measures to ensure system security in the event of possible industrial action or malicious action by

programmers, operators and input-output staff attributable to discontent among the operating staff, (e) adequacy of security awareness and training provided to all employees; (f) adequacy of emergency shut-down procedures in case of power failures; (g) deficiencies, if any, in the arrangements for safe custody of software and data files and type library; (h) (i) adequacy of back-up files, including offsite storage; adequacy of control over operator access to program files and data; (j) availability of procedures and contingency plans for

reconstructing files in the event of loss or disk/tape errors; (k) availability of computer equipment back- up through the use of compatible equipment at other dispersed sites; (l) restriction of access to the computer room by personnel other than system operators and hardware engineers; and (m) insurance of the installation to cover possible risks. Application Controls 10.80 Application controls are particular to an application and may have a direct impact on the processing of individual transactions. These controls are used to

provide assurance, primarily to the management, that all transactions are valid, authorized and recorded. Since application controls are closely related to individual transactions, it is easier to appreciate why testing the controls will provide the auditor with audit assurance in regard to the accuracy of a particular account balance. For example, testing the controls in a payroll application would provide assurance about the correctness of the payroll figure in a client's accounts. 378

Before attempting an evaluation of application controls, it will be necessary for an auditor to secure a reasonable understanding of the system. For this purpose, a brief description of the application should be prepared indicating (i) the major transactions; (ii) the transaction flow and main output; (iii) the major files maintained; and (iv) approximate figures for transaction volumes. Application Control requirements may be divided into the following: (i) (ii) (iii) (iv) (v) (vi) Documentation standards Input controls Processing controls Output controls Master/Standing Data File controls Audit requirements Documentation Standards 10.81 Documentation standards ensure that adequate and up-to-date system documentation is maintained. Careful updating of documentation is also important. The auditor will find documentation helpful as an aid to understanding the system but he must be careful to ensure that it is up-to-date before using it. There should be appropriate standards in the auditee organization to ensure that: (i) (ii) (iii) system documentation is sufficiently comprehensive; documentation is updated to reflect system amendments; and a back-up copy of the documentation is available.

Without good documentation, it will be difficult to assure that controls will operate on a continuous basis and there will also be a greater likelihood of errors. Good application documentation reduces the risk of users making mistakes or exceeding their authorities. Review of a comprehensive, up-to-date documentation should aid the auditor in gaining an understanding of how each application operates, and may also help in identifying particular audit risks. Documentation should include the following: i) ii) iii) iv) v) vi) a system overview; user requirements specification; program descriptions and listings; input/output descriptions; file contents descriptions; user manuals; and 379

vii)

desk instructions. Input Controls

10.82 The objective of input controls is to ensure that the procedures and controls reasonably guarantee that (i) the data received for processing are genuine, complete, not previously processed, accurate and properly authorized; and (ii) the data have been entered accurately and without duplication. Input control is extremely important because the most important source of error or fraud in computerized systems is incorrect or fraudulent input. Controls over input are vital to the integrity of the system. In evaluating input controls, the auditor should ensure that: i) all prime inputs, including changes to standing data, have been appropriately authorised; ii) the ability to enter data from a terminal is adequately restricted and controlled in respect of on- line systems; iii) there are methods to prevent and detect duplicate processing of a source document; iv) all authorised inputs have been submitted or, in an on- line system, transmitted; and v) there are procedures for ensuring correction and resubmission of rejected data. The controls outlines above may be invalidated if it is possible to by-pass them by entering or altering data from outside the application. There should be

automatic application integrity checks that would detect and report on any external changes to data, such as unauthorised changes made by personnel in computer operations on the underlying transaction database. The results of the installation

review should be reexamined to ensure that the use of system amendment facilities, such as editors, is properly controlled. Data Transmission Controls 10.83 These controls are built into IT Applications to ensure that data transmitted over local or wide area networks are valid, accurate and comple te. Organizations using networks should ensure that there are adequate controls to reduce, to an acceptable level, the risk of data loss, addition of unauthorized transactions and data corruption. Some computer systems are connected to either local or wide area

networks (LANs or WANs), which permit them to receive and send data from remote 380

locations.

The more common data transmission media include telephone wires,

coaxial cables, infrared beams, optical fibres and radio waves. Applications which transmit information across networks may be subject to the following risks: i) Data may be intercepted and altered either during transmission or during storage at intermediate sites. ii) Unauthorised data may be introduced into the transaction stream using the communication connections. iii) The Data may be corrupted during transmission. integrity of transmitted data may be compromised through

communication faults. The auditor should ensure that there are adequate controls in place, either within the network system, or the financial applications, to detect corrupted data. The network's communication protocol, i.e. the predetermined rules that determine the format and meaning of transmitted data, may incorporate automatic error detection and correction facilities. It is fairly easy to intercept transmitted data on most local and wide area networks. Inadequate network protection increases the risk of unauthorized data amendment, deletion and duplication. There are a number of controls that may be used to address these problems. For instance, digital

signatures may be used to verify that the transaction originated from an authorized user and that its contents are intact. Similarly, data encryption techniques may be used to prevent the interception and alteration of transactions. Processing Controls 10.84 Processing controls ensure complete and accurate processing of input and generated data. This objective is achieved by providing controls for: i) ii) iii) adequately validating input and generated data; processing correct files; detecting and rejecting errors during processing and referring them back to the originators for re-processing; iv) v) proper transfer of data from one processing stage to another; and verifying, during or after processing, the control totals established prior to processing. The objectives of processing controls are to ensure that (i) the processing of transactions is accurate and complete; (ii) the transactions are unique without any 381

duplication; (iii) all transactions are valid; (iv) the computer processes are susceptible to audit. Processing controls within a computer application should ensure that only valid data and program files are used, that processing is complete and accurate and that processed data has been written to the correct files. Assurance that processing has been accurate and complete may be gained from performing a reconciliation of totals derived from input transactions to changes in data files maintained by the process. The auditor should ensure that there are controls to detect the incomplete or inaccurate processing of input data. Application processes may perform further validation of transactions by checking data for duplication and consistency with other information held by other parts of the system. The process should check the integrity of data which it maintains by using, for instance, check sums derived from the data. The aim of such controls is to detect external amendments to data due to system failure or use of system amendment facilities such as editors. Computerized financial systems should maintain a log of the transactions processed. The transaction log, which may be referred to as the audit trail file, should contain sufficient information to identify the source of each transaction. In batch processing environments, errors detected during processing should be brought to the attention of users. Rejected batches should be logged and referred back to the

originator. On- line systems should incorporate controls to monitor and report on unprocessed or uncleared transactions, such as part paid invoices. There should be procedures that permit identification and review of all uncleared transactions of a certain specified vintage. Output controls 10.85 These controls are incorporated to ensure that the computer output is complete, accurate and correctly distributed. It may be noted that weakness in

processing may sometimes be compensated by strong controls over output. A well controlled system for input and processing is likely to be completely undermined if the output is uncontrolled. Reconciliation carried out at the end of the output stage can provide considerable assurance over the completeness and accuracy of earlier stages in the complete cycle. Output controls ensure that all output is: i) produced and distributed on time; 382

ii) iii)

fully reconciled with pre- input control parameters; physically controlled at all times, depending on the confidentiality of the document; and

iv)

errors and exceptions are properly investigated and acted upon.

The completeness and integrity of output reports depends on restricting the ability to amend outputs and incorporating completeness checks such as page numbers and check sums. Computer output should be regular and scheduled. Users are more likely to detect missing output if they expect to receive it on a regular basis. This can still be achieved where the subject of computer reports is erratic, such as exception reporting, by the production of all reports. Output files should be protected to reduce the risk of unauthorised amendment. Possible motivations for amending compute output include covering up unauthorized processing or manipulating undesirable financial results. Unprotected output files within a bill paying system could be exploited by altering the cheque or pay order amounts and payee details. A combination of physical and logical controls may be used to protect the integrity of the computer output. Output from one IT system may form the input to another system, before finally being reflected in the financial systems. For example, the output from a feeder system such as payroll could be transferred, as input, to the general ledger. Where this is the case, the auditor should look for controls to ensure that the outputs are accurately transferred from one processing stage to the next. A further example would be where the output from a trial balance is used as the input for a word processing or spreadsheet package, which then reformats the data to produce the financial statements. Master/Standing Data File Controls 10.86 Master/Standing Data File controls are meant for ensuring the integrity and accuracy of the master files and standing data. Accuracy of data contained in master and standing files is of vital importance to the auditor. Information stored in master and standing data files is usually critical to the processing and reporting of financial data. Information on master files can affect many related financial transactions and so must be adequately protected. These controls have to ensure that: (i) amendments to standing data are properly authorised and controlled; 383

(ii)

integrity of master and standing files is verified by checking control totals and periodic reconciliation with independently held records;

(iii)

special amendment facilities are properly recorded and their use controlled by management authorization and subsequent review; and

(iv)

physical and logical access to application data files are restricted and controlled. Audit requirements

10.87 Audit requirements have to be provided to ensure that the system can be audited in an effective and efficient manner. Audit trail has to be maintained to enable tracing of an item from the input stage through to its final destination and the break up of a result into its constituent parts. Auditors may have to use audit software or test data for the efficient execution of their audit. They have, therefore, to make reasonable requests for the access to copies of system data files, report generators and processing time. Before considering the audit requirements for a system being developed, the auditor should have a knowledge of the currently existing system and should keep in mind the following: (i) (ii) weakness in the current system affecting the audit approach; features in the existing system, which are relied on to provide an effective audit, that should be retained in the new system; and (iii) additional facilities, not currently provided, which would assist the audit of the new system. Important points to be checked 10.88 Audit of an operational application system involves verification of the input/output controls, processing controls and the audit trail. Testimonial evidence may be obtained in the course of audit by means of the following questionnaire to arrive at a reasonable conclusion in regard to the availability of controls and their adequacy: (i) Are the data processed genuine, complete and accurate and not provisional? (ii) (iii) (iv) Is the expected out put is produced and distributed on time? Do the application programs process data as intended and accurately? Is a complete audit trail available for tracing back a transaction from the final result to the initial input? 384

(v)

Are the data and changes thereto authorised by appropriate authorities both in the user and computer departments?

(vi)

Are schedules for receipt of input data maintained and what is the extent of compliance?

(vii) (viii)

Is there a preliminary check on input data to ensure completeness? Are output records test-checked prior to their distribution to the user department and is the output produced in accordance with a prescribed schedule?

Further, it should also be examined, whether the application system provides for the following programme controls: (a) Controls to check for missing/duplicate transactions. Examples are (i) checks for ensuring continuity of goods invoice numbers issued by a station and locating missing numbers; and (ii) checks to ensure that more than one subscription is not accounted for in the same month in respect of a Provident Fund subscriber. (b) Controls on rejected items to be retained under computer suspense. For instance, the monthly treasury transactions should be rejected if they do not have valid heads of account as given in the budget master and such rejected items kept under suspense. Similarly, in the absence of balances, issue notes in a stores accounting system should be rejected. (c) Input validation for data purification. These are alpha-numeric checks to ensure conformity with data types. For instance, the personal

identity number should always be numeric or, depending upon system requirements, the station name field could be represented only by alphabets. (d) Limit/range checks. Some examples are checks to ensure that the transaction type in a financial accounting system (expressed in terms of rupees) does not have values less than 1 or greater than 6; or the maximum basic pay does not exceed Rs 9,000 per month or the code for treasury alone for any State does not have values in excess of two digits. (e) Overflow checks. To illustrate, if the field length for withdrawal/

advances in a computerized Provident Fund system is only five digits 385

and there is a valid debit transaction with six digits, the high order digit would get truncated and only five digits of the debit will be recorded. This mistake will remain undetected in the absence of overflow checks. Similarly, if the filed length is inadequate, transactions

involving arithmetical calculations could be incorrectly recorded. (f) Controls should be available to ensure that certain mandatory fields, such as the leave type code in a leave accounting system, or the field representing the nature of expenditure in a treasury transaction, are not left blank. (g) Check digits. In a pay roll system, the account number, which is a control field to identify an employee, has a built- in check digit. The program works out the check digit on the basis of the account number input and verifies the correctness of the check digit given. If the check digits do not tally, it can be concluded that the account number has been wrongly entered. Similarly, the station code in the freight

accounting system in the Railways has a check digit to detect entry of an incorrect code. (h) Compatibility checks. For example, if the transaction in a financial accounting system relates to official receipts, the amount cannot normally have a negative value. (i) Exception condition checks. If the amount column in a treasury

transaction for a month has a value greater than the budget for a quarter, this would apparently represent and exceptional situation on that could be detected by these checks. (j) Total for a batch/lot. For example, the batch total for a major head under a treasur y is worked out on the computer and tallied with the total given in the schedule of payments/receipts for that batch in order to ensure complete accounting of transactions in a batch. (k) Record totals and summaries for reconciliation. When a goods basic tape is created in a freight accounting system, it gives the total number of records, which should tally with the total number of invoices input. Audit Trail 10.89 The objective of the audit trail is to obtain sufficient evidence in regard to the reliability and integrity of the application system. To achieve this, the audit trial 386

should contain enough information to allow the management, the auditor and the user to (i) recreate processing action; (ii) verify summary totals; and (iii) trace the sources of intentional and unintentional errors. The audit trail should include the following information: (i) System information including start up time, stop time, restarts, recovery etc. (ii) Transaction information in respect of database applications, including input items which change the database, control totals and rejected items. (iii) Communication information, including terminal log-on/off, password use, security violations, network changes and transmission statistics, which would be of relevance to transaction processing or TP applications. In a computer system, the audit trail may not always be apparent as in a manual system since data are often retained in magnetic media and output is limited to a small number of total items processed, with reports produced only on exception basis. The general procedure is to first investigate control totals and run-to-run totals within the whole system and then to check and substantiate the audit trail by limited checking through records and files or by taking intermediate printouts of audit interest. If the design of the computer system does not provide for adequate audit trail, this should be brought out in the audit review, highlighting control weaknesses or lack of controls in the system. Apart from errors that might creep into the sys tem, there is possibility of frauds, which might occur due to undetected control weaknesses.

387

Internal Audit Introduction 10.90 It is a matter of great importance to verify whether the various processes of audit are being correctly followed by different sections of the Audit Office. This responsibility should ordinarily be entrusted to an independent Internal Test Audit (ITA) Section. The main objectives of internal audit is to check the work done by various branches and sections of the office with a view to ascertaining the extent to which they are (i) following the prescribed procedural rules and regulations; (ii) maintaining various registers that have been prescribed; (iii) submitting various returns on the due date, and (iv) generally functioning as efficient units of the office. The Internal Audit Section should also check the quality of audit conducted and comment specifically on this aspect in its reports so that suitable measures may be initiated to improve the quality of work where necessary. The ITA Section is not intended to do original work and should not be saddled with such work. Its functions are analogous to those of the Principal Director of Inspection. It can usefully supplement the work of the Principal Director of

Inspection and also serve as a liaison between him and the Audit Office in pursuing the objections raised by him till their final settlement and issuing instructions to ensure that the irregularities pointed out by him do no recur. Arrangements for Internal Audit 10.91 The ITA Section should be a small one consisting of carefully hand-picked personnel who, by their knowledge and experience, will be competent to scrutinize intelligently the work done in various sections of the office and can detect not only defects and irregularities but also suggest improvements in procedure and measures that should be taken to improve the quality of audit. The Section should be under the direct charge of the Accountant General or one of his deputies. It should not,

however, function as a substitute for the Branch Officers and Group Officers through whom the Accountant General normally exercises control over his office. While test check of the work of other sections will be the main duty of the Section, special problems, such as clearance of accumulated objections, may be referred to the Section by the Head of the office, if he considers this necessary. This section should get the deficiencies noticed during test check rectified on the spot by providing suitable guidance to the staff and ensur e that its size and staff strength are not allowed to increase. As far as practicable, inspection reports prepared 388

by the Section containing the results of test check should be submitted to the Accountant General for his information so that he may have an expert's appreciation of the technical efficiency of various units of his office, though disposal of the reports may be watched by a Deputy Accountant General. Important points on which orders of the Accountant General are necessary should be submitted t o him. Common

defects noticed in a group of sections should be circulated periodically through appropriate office orders so that they may be guarded against in future. It is the duty of the Internal Audit Section to see that the defects noticed are remedied by the sections concerned and that these do not recur. The following items of work may be entrusted to the ITA Section of Audit offices: (i) Scrutiny of audit and review conducted by the Central Audit Parties and Central Audit Support Sections. (ii) (iii) Checking of maintenance of portfolio files. Scrutiny of the adequacy or otherwise of the existing arrangements for audit and review. (iv) Verification of correctness of audit fees computed by different section for audit of accounts of certain authorities or bodies under Section 20 of the Act. (v) Test check of records of receipt, approval, issue and pursuance of Inspection Reports with a view to ascertaining whether there was any laxity at any stage. (vi) (vii) Test check of Sections, Resident Audit Offices and Branch Offices. Monitoring of the implementation of important office orders issued from time to time. (viii) (ix) (x) (xi) Investigation of important arrears. Half- yearly review of cash book. Test checks of service books of personnel. Scrutiny of the list of personnel staff who would be completing 30 years of service or attaining 55 years of age. (xii) Independent scrutiny of details in support of Budget Proposals of different Wings. (xiii) Check of statistics of regular, temporary and casual temporary staff. 389

(xiv)

Check of rosters maintained for reservation of vacancies for candidates belonging to scheduled Castes and Tribes.

(xv)

Check of list of candidates appearing in SOG Examination in terms of paragraph 9.2.3 of the Manual of Standing Orders (Administrative), Volume I.

(xvi)

Check of Honorarium and Overtime claims.

(xvii) Check of Gradation list. (xviii) Review of complaints addressed to the Comptroller and Auditor General. (xix) (xx) Review of Calendar of Returns. Liaison between the Principal Director of Inspection and the Sections during the former's inspection of the office. (xxi) Investigation of procedural omissions, irregularities and audit lapses brought to notice by the Principal Director of Inspection. (xxii) Submission of half- yearly appraisal report of the work done by the ITA Section to the Principal Director of Inspection. The list is only illustrative and, subject to the principles enunciated in paragraphs supra, does not in any way fetter the discretion of the Accountant General to allot to the Section any other special work that he may consider necessary.

390

Use of VLC data in Audit Audit with VLC 10.92 The activities in the audit offices can broadly be categorized as : Central audit audit of accounts audit of vouchers audit of entitlements audit of sanctions

Field audit Audit planning Local audit and scheme reviews

Certification audit certification of projects and schemes certification of Finance and Appropriation accounts

In the VLC system, data from vouchers are being captured to facilitate compilation. The software also provides for generation of various reports. In respect of Forest and Public Works Departments, as compiled accounts are received, the VLC system does not provide for capture of data from individual vouchers. A study of the data inputs from VLC and output reports provided for in VLC reveal that the audit checks could be categorized as follows : a) Part I Audit checks which could be done directly with the data captured and reports generated as already provided for in the VLC system b) Part II Audit checks which could be exercised with the data captured but with provisions to be incorporated for additional reports generation. c) Part III Audit checks which could be done through the VLC system if additional data are captured and reports, generated. Part I & II have been prepared wherever provisions exist for data capture in A&E offices. Audit checks are required to be carried out on a percentage basis. However, in respect of (a) & (b) above, checks could be exercised in respect of all vouchers. Exception reports, listing vouchers, which do not fulfill the audit requirements, can be generated and subjected to detailed scrutiny. The percentages fixed in the Manual for Central audit (MICA) will become largely redundant. If all the vouchers conform to the prescribed requirements, there would be no necessity for further scrutiny. If a large number of vouchers do not conform, the quantum of vouchers to be taken for 391

detailed audit check can be limited to the prescribed percentages in MICA. The selection of vouchers can be done using sampling techniques through computer. For (c), however, checks would have to be done on selected vouchers only, as there is no provision for data capture in the VLC exercise. While it should be possible to incorporate some of these in the VLC exercise, most of the additional data will have to be captured in the central audit wing of the audit offices, after provision is made in the software for capturing them. In those cases, where checks could be carried out only on selected vouchers, preparation of standards screens for audit on the computer is suggested. Such an audit on the computer screens would then provide a permanent record of the audit checks exercised and the results of audit. In some cases, certain audit checks could be dispensed with after audit with VLC is introduced, as such checks would be in built in the VLC system and procedures. All these checks would, however, have to be done manually in the first year of implementation to ensure that there will be no problem if these checks are dispensed with altogether. The entire exercise in this paper has been done keeping in view the provisions in MSO (Audit), MICA, MSO (A&E) and various instructions issued by headquarters office. The VLC procedures would, thus, necessitate modification of audit procedures in some areas. In some other areas, VLC would facilitate the audit process by enabling checks through the computer. In many areas, VLC would provide additional inputs for the audit checks and procedures carried out in the audit offices. Audit in VLC environment will, thus, necessitate modifications in the manuals. The use of VLC in each of the areas of audit mentioned in the first paragraph is discussed below. Use of VLC in Central Audit Audit of accounts 10.93 The checks conducted by audit offices include classification check, head of account check, check of Departmental Adjusting Accounts (DAA), Transfer Entries (TE) etc., along with scrutiny and review of various broad sheets. The audit of accounts comprises check of the following sections in the accounts office : a) Compilation sections b) Account current section c) Loans and Deposit sections 392

d) Book section In accordance with the instructions of headquarters, the accounts check is conducted by CASS section on a monthly basis. The annual Finance and Appropriation

Accounts are subject to additional checks by the Reports section. The VLC modules relevant to these areas are treasury compilation public works and forest book, budget and appropriation, loan and deposits, account current and reconciliation. Audit of vouchers 10.94 The CAP sections attend to this work. Some standard checks have to be exercised on all vouchers selected for audit, such as that they are in prescribed form, are in original, have the same number as in list of payment, they bear a pay order etc. Some of these checks are exercised while conducting accounts check also. The vouchers received in the accounts office broadly fall into the categories viz. establishment vouchers, TA and medical bills, advances, contingencies, contractors and supplies bills, running account bill and grant- in-aid vouchers. Within these

categories, there are refund vouchers, arrears payment vouchers, AC/DC bills and nil payment vouchers. If the VLC system ensures arithmetical check, that the DDO's signature is there on the voucher, etc., such checks could be exercised on all the vouchers and an error report, indicating deviations from the requirement, generated. In other cases, only the vouchers selected for audit could be subjected to the required checks. Further, when selected vouchers have to be subjected to audit checks, computer screens could be used for audit. These screens would, in a standardized format, indicate all checks to be carried out on different types of vouchers (pay, TA, etc.). This exercise would aid in the foreign travel audit. The TA bills, which support foreign travel, can be flagged separately. Once a voucher is audited in such a manner, a record of audit done and the results of audit would be available for all test checked vouchers. In the case of works and forest vouchers, data would have to be captured from the vouchers selected for audit in the audit office. Wherever it is desirable to capture information on a particular parameter from all vouchers, the same would also have to be done in the audit offices. 393

Audit of entitlement work 10.95 The CAP sections attend to this work. The VLC work does not have any impact on the check of entitlement work. However, the check of related vouchers would be facilitated wherever and to the extent entitlement work is done on the computer. Maintenance of PF accounts and pension authorization work is computerized in most A&E offices. Check of pension and PF vouchers (also PF contribution) could be done by linking them to the corresponding cases through simple identification parameters, which would facilitate speedy check through the computer itself, of such vouchers. Audit of sanctions 10.96 This work is attended to in CASS sections. Information in VLC does not directly affect this audit. however, linking up of vouchers related to a sanction with the sanction concerned would be facilitated through VLC and follow up of transactions flowing out of a sanction would be made easier. For this purpose, maintenance of database for sanctions already prescribed in existing instructions, would be essential. All parameters fo r audit of sanctions viz. budget provision,

authority for the sanction, rate, quantity etc. or any other relevant field should be provided for in the database. Further, sanctions received in CASS sections could be compared with sanctions received with the vouchers and all variations followed up. Similar exercise for creation of databases would have to be done for all Government orders, contracts, agreements, rate contracts, DGSD rates etc. In addition, database on schedule of rates in PWD would be essentia l. Identification of DDOs who purchase on a centralized rate contract as also of those who receive supplies through centralized purchasing arrangements and creating databases for the same would be essential. This would facilitate comparison of

purchases and rates of similar items over time and across DDOs. CASS sections are also required to maintain portfolio files on central, Centrally Sponsored and State Plan Schemes. VLC would facilitate maintenance of information of expenditure, releases amounts spent and purpose of the expenditure, unspent amounts etc. for these schemes. In addition, databases for pay scales, sanction to establishment, sanctioned strength of establishment etc. should be maintained so that audit of establishment vouchers is facilitated. This would also a help in manpower audit. 394

Use of VLC in field audit Audit planning 10.97 The details of audit requirements, inputs, additional inputs and reports suggested in respect of field audit are available in the VLC system. This work is attended to in OAD headquarters section in the audit office. Audit planning would be of two categories for annual audit and for reviews. DDO wise information on various parameters like monthly expenditure pattern, expenditure on contingencies, AC bills pending, position of PD accounts etc. would help in selection of DDOs for audit. reports could be generated to give information on erratic expenditure, rush of expenditure, erratic purchases, heavy purchases, quality and quantity of purchases, rates paid, supplier information, etc. Auditee wise information on sanctions, contracts etc. would also be an important input for audit planning. This information would, in addition to assisting audit planning, also be an important input for developing thrust and focal areas for audit prior to commencement of audit. Similarly for audit planning of reviews, DDO-wise, scheme wise data on expenditure, unspent balance, etc. from VLC would be useful. Information relevant for

determining departments for vertical review could also be extracted from VLC. This would include DDO-wise expenditure, excess or savings at DDO level, etc. Data from vouchers on transfer of money from the consolidated fund of the state to Autonomous Bodies, substantially financed by Government in the form of loans and grants, will help the audit offices in deciding the institutions for audit under section 14 and 15 of the CAG's (DPC) Act. The specific purpose loan or grant can be identified in conjunction with the databases on GOs/sanctions. Local audit and scheme reviews 10.98 Information from the VLC system like expenditure profile of the DDOs, details of purchases, the staff position in the DDO, amounts transferred to PD accounts, etc. can be sent to the audit parties which could serve as directions for further audit scrutiny. The VLC data can be used to generate scheme wise details. A provision for mapping schemes across major heads is to be made in the VLC system in order to draw expenditure details for various schemes. DDO wise, scheme wise expenditure can be generated, which will be useful in selection of sample DDOs for detailed study in scheme reviews. 395

It will also be useful to capture the prescribed pattern of releases of the central and state Governments in respect of central, shared and state schemes. This, when studied with the actual releases, will highlight delays, if any, and the quantum of unused balances. A master file of the salient features of the plan schemes can be created and a link established between the plan schemes and the budget of each year. Use of VLC in Certification Audit 10.99 The details of Audit requirement, inputs, additional inputs and reports suggested in respect of Certification Audit are available in the VLC system. 1. Certification of Finance and Appropriation Accounts

The Report section in the audit office attends to this work. Most of the audit checks envisaged in MSO (Audit) in respect of Finance and Appropriation Accounts can be dispensed with, as these checks are in-built in the VLC system. The information on Finance and Appropriation Accounts from VLC system can be used for the preparation of Chapters I & II of the Civil Audit Report. This also requires materials on a number of different macro parameters for the state's finances. A number of financial indicators are now required to be commented upon in these chapters and these indicators can be derived from information available in the VLC system. Similarly, various ratios which are required to be worked out and incorporated in Chapter I and II of the Audit Report, can also be generated from the information already available in the VLC system. In addition various tables like 1. Summarized Financial Position of Government 2. Abstracts of Receipts and Disbursement for the year 3. Source and Application of funds 4. The tables on Consolidate Fund Revenue Receipts Tax Revenue Non-Tax Revenue State's share of Union taxes and duties and Grants- in-aid from Central Government. Revenue Expenditure Sectoral Expenditure Interest Payments Financial assistance to Local bodies and others 396

Loans and advances by the State Government Capital expenditure Sectoral Capital Expenditure Investments and returns Fiscal Deficit Public Debt Internal Debt Loans and Advances from Central Government Other Liabilities Ways and Means Advances and overdrafts that are required to be included in these chapters can be prescribed as report formats and generated straight away. Comments on reconciliation, AC/DC bills, nil payment vouchers, transfer to public account, transfer to PDA etc. can be made with case based on the information extracted from VLC system. 2. Certification of Externally aided projects as well as Central and Centrally Sponsored Schemes Audit certificates are issued for externally aided projects as well as for Centrally Sponsored Schemes by CASS section in the audit offices. This would also be facilitated by the VLC section as scheme wise expenditure figures would be available. These could be linked with the SOEs (Statement of Expenditure), the related local audit reports and the accounts comments of A.G. (A&E) for issue of audit certificates. Implementation of VLC in Audit Offices In the first stage, as Headquarters have earmarked 5 terminals for Audit Offices, 5 officials can be trained thoroughly on the VLC system. These 5 officials would initially generate output reports for further audit by the members of CAP/CASS sections, other Headquarters sections and field audit parties. Output reports, which would aid in audit checks, would be generated with the data already captured in VLC. In the second stage, over a period of 6 months, the Audit Offices can train the entire CAP/CASS sections in order to equip them with the expertise to access screens on the terminals and audit through computers. This would entail additional input capture and auditing through computer screens, in addition to generation of output

397

reports which would aid Central and Local Audit. Headquarters, in the meantime, have to plan for creating the necessary infrastructure. In respect of public works and forest departments, Central Audit is done 100% for monthly accounts and the schedules received along with the accounts. Central Audit is done on a percentage basis in respect of vouchers. As the data in respect of public works and forest departments have to be captured in Audit Offices, implementation is possible only in the second stage. Transmission of Data It is suggested that the terminals given for Audit Offices can be connected to the server in the Accounts offices so that data can be accessed directly, output generated and audited. Data already captured in VLC will, therefore be readily

available and additional inputs can be captured in the audit offices for audit purposes. Only those vouchers which need to be physically audited as a result of initial audit through the computer and are selected for audit using sampling techniques on the computer, would have to be moved from the Accounts office to Audit office. The present practice of sending all the vouchers and accounts to the central audit group of the Audit office from the A&E office would undergo change to this extent. Training requirements In the first stage, the officials of CAP/CASS section, Headquarters sections of Civil and Works Audit wings and Report sections would have to be trained on 'basic computer awareness'. As suggested in the above para, a group of 5 identified officials can be trained intensively on the VLC package, ORACLE and UNIX in the first stage itself. In the second stage, all the officials of CAP/CASS group, Report Sections and Headquarter sections of the Civil and Works Audit wings would have to be trained on the VLC package also. Besides annexures to the paper titled "Audit Requirements existing facilities in the VLC software received with CAG letter dated 17-7-02 may be kept in view. (CAG letter No. 1367-EDP/78-99 dated 17-7-02)

398

APPENDIX-I List of registers and forms etc., used in the Inspection Civil............................... . A-Resisters Sr. No. 1 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. Description of Register 2 Audit Fee Register Check Re gister of weekly Diaries of Auditors Register of amounts under objection waived or written off under Para 7.1.16 of M.S.O. (Audit) Register of undisposed (pending)cases Diary or Register of official and Un-official Receipts Transit Registers for letters transferred to other Sections Diary of official and un-official issues (for letters and audit notes) Register of cases Diary of Travelling Allowance Bills Register of Travelling Allowance Bills Calendar of Returns (a separate register for returns relating to administration) Casual Leave Register Dictionary of References Register of Defalcations Six- monthly Register Half Margin Register Register of books in Head Office Register of correction slips to the Office Manual Register of events necessitating arrangements in the various orders of the office. Register of Form Register of serious financial irregularities Objection Book SY-338 SY-325 SY-265 SY-22 SY-318-A SY-314 SY-318 SY-225 SY-318-A SY-329-A SY-264 SY-257-B SY-256 SY-17 SY-286 SY-308 Manuscript -do-doRemarks 3

23 24. 25. 26 27.

-doForm 286-A M.S.O. (Audit)10, M.S.O. (Audit) 12, M.S.O. (Audit) 13 Register for watching the Receipts and Issue of Inspection Form OAI Reports Progress Register of settlement of Inspection Reports OA2. Register of Service Stamps (Custodian) Manuscript Appropriation Material Register -doMemorandum Book of special points to be brought to the -donotice of the D.A.G. (Inspection) at the time of Inspection

399

28.

Note Book for watching important points

29. 30. 31.

Manuscript (Separate Books kept by the Section officer/AAO of each Assistant) Register showing touring done by officers OA-3 Register showing offices on the local Audit Programme OA-4 Register regarding supply of Comptroller and Auditor Manuscript. General Memo regarding extent of audit to field parties and correction slips thereto.

400

B-FORMS Serial No. 1 1. 2. 3. 4. Description of Register Remarks 2 3 Draft Letter Forms SY-5 Weekly Diary abstract of auditors SY-325 Half Margin requisition of auditors SY 332-A Statement showing irregularities, omissions in accounts SY-325 and registers (other than the payment and adjustment vouchers) with instructions and suggestions for future guidance Objection statement SY-327 List of unsettled objections SY-348 Circle Tour Programme SY-332 Audit intimation to the offices proposed to be audited SY-330 Intimation to higher authorities regarding audit of an SY-341 institution Departure and arrival report of Auditors SY-342 Reminder to Auditors regarding Draft Audit Notes SY-323 Reminder regarding annotated copies SY-337 Intimation of commencement of Audit OA-5 Forwarding Memorandum of Draft audit notes OA-6 Forwarding Memorandum of Test Audit Notes OA-7 Title Sheet OA-8 Certificates of State of work existing on the last day OA-9 (Headquarters) Monthly progress Report in respect of Audit Notes, letter OA-10 and Memoranda of Circles

5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18.

401

FORM NO. O.A.-1 Register for watching the Receipt and Issue or Inspection Reports Sr. No. Name of Office inspected Names of Inspecting Officers and staff Date upto which the a/c is now audited Date of Audit Date of receipt Date of submission to A.O./Sr.A.O./ Group Officer Date of approval

From

To

Draft Inspection Report 6

Test Audit Notes 7 8

402

FORM NO.O.A.-4 Statement showing offices on the Local Audit Serial No. 1 Partiuclars of Audit 2 Periodicity Time Allotment in terms of single Auditor 4 Last audited upto 5 Authority under which audit is included in the Programme 6 Remarks

403

Form No. O.A. 3 Statement showing Units Inspected and No. Of days on Tour Name of Officer 1 April, 19 May, 19 Up to May, 19 June, 19 Upto June, 19 July, 19

Units 2

Days 3

Units 4

Days 5

Units 6

Days 7

Units 8

Days 9

Units 10

Days 11

Units 12

Days 13

404

Date on which sent for type 9

Date of return type

Date of issue Inspection Report 11 Test Audit Note

Reference to progress Register 12

Remarks

10

13

405

FORM NO.OA-2 Progress Register of Settlement of Inspection Reports Sr. No. Name of the Unit inspected 2 Item No. of the Register of inspection Reports 3 Date of completion of Audit 4 No. and date under which report was issued 5 Due date of receipt of reply 6 No. and date of reminders etc. 7 Date of receipt of Ist reply. 8

406

FORM NO. -O.A.3(Contd.) Statement showing Units inspected and No. Of days on Tour Up to July, 19 Units 14 Days 15 Units 16 August, 19 Days 17 Upto August 19 Units Days 18 19

407

Date of issue of further Audit remarks

Further correspondence Date of receipt of further replies Date of issue of further remarks or reminders

Date of closure of Inspection Report

Remarks Herein individual No. of the paras outstanding after six months of the issue of report should be given and circled as and when finally settled 12

10

11

408

FORM NO. O.A.3 (Contd.) September 19 Units days 20 21 December 19 Units days 32 33 March 19 Units days 44 45 Upto September 19 Units days 22 23 Upto December 19 Units days 34 35 Upto March 19 Units days 46 47 October, 19 Units days 24 25 January 19 Units days 36 37 Remarks 48 Up to October, 19 Units days 26 27 Up to January 19 Units days 38 39 November, 19 Units days 28 29 February, 19 Units days 40 41 Upto November, 19 Units days 30 31 Upto February, 19 Units days 42 43

409

FORM No. O.A. 5 Intimation of Commencement of Audit The Audit of _________________________ for the period has been commenced by me on Please Note. Month Remarks, if any. Section Officer/A.A.O FORM No. O.A. 6
OFFICE OF THE PRINCIPAL ACCOUNTANT-GENERAL (AUDIT) PUNJAB,CHANDIGARH

for the Test Audit

No. Insp, Civil/ To The Sir,

Dated the

I am to enclose an inspection report relating to the audit of the accounts of your office for the period from to and to request

that an annotated copy of the same showing action taken against each para may kindly be sent to this office within four weeks of the receipt of the same. Yours faithfully,

Audit Officer/Sr. Audit Officer. Enclosure:Audit Note dated the

No. Insp. Civil/

Copy, alongwith a spare signed copy, of the Inspection Report forwarded to : (1) (2) (3) 410

(4) (5) for information and necessary action

Audit Officer/Sr. Audit Officer

411

FORM No. O.A. 7 OFFICE OF THE PRINCIPAL ACCOUNTANT GENERAL (AUDIT) PUNJAB, CHANDIGARH No. Inspection Civil/ Chandigarh To ____________________ ____________________ Sir, I am to forward herewith a Test Audit Note in connection with the recent audit of the ___________________ accounts in advance of the Audit Note for action in the manner prescribed in Punjab Government Finance Department letter No. 22828 (Fin. General), dated 8th July 1931, read with Punjab Government Finance Department letter No.28298 (Fin. General) dated 16th September, 1931 and to request the favour of your signing and returning the attached acknowledgement. Yours faithfully, Sr. Audit Officer/ Audit Officer (IC-I) ACKNOWLEDGEMENT From ________________________ ________________________ To The Pr. Accountant General (Audit) Punjab Inspection Civil Wing Chandigarh Sir, I am to acknowledge the receipt of test audit note in connection with recent audit of the ______________ accounts. Forwarded with your memorandum No. Number of objections _______ Number of sheets _________ Yours faithfully,

412

FORM NO. O.A.-8 INSPECTION CIVIL WING TITLE SHEET OF AUDIT AND INSPECTION NOTE Name of Circle _____________________ 1. 2. Name of Account Name and designation of the officer incharge of the accounts and period for which he held the charge. 3. 4. 5. 6. 7. Period of last audit and by whom audited. Period of present audit. Date of commencement of audit Date of completion of audit Whether preliminary observation slips was issued? If so, the date of issue of last batch of slips. 8. 9. 10. 11. 12. 13. 14. Date of receipt of replies to above. Time allowed _______________ days Time taken ______________ days Reference to orders sanctioning extension, if any Name of months selected for detailed audit. Whether all the documents required for audit were produced by the head of office. Whether the system of accounts and the prescribed codes or rules and the periodic al administration reports and any other Government publications containing the accounts of income and expenditure, store account, balance sheet etc. of the institution were studied by the staff. 15. 16. Whether the prescribed checks were exercised and to the prescribed percentage. Whether documents (extract treasury list of payments, list of unsettled Central audit objections etc.) and special points requiring local scrutiny required from the Central office were called for and were also received in time and due replies have been sent to the Audit Units concerned direct. 17. 18. 19. Place at which report is drafted. Whether a list of unsettled objections is being sent Due Date of the submission of audit note. 413

20. 21. 22.

Actual date of submission of audit note. Paragraphs fit for inclusion in the Register of Serious Irregularities. Paras fit for inclusion in the dictionary of references and Register of important and interesting cases.

23. 24.

Paragraphs earmarked/un-remarked for keeping in the objection book. Audit fee, if any, recoverable or to be taken into account in proforma in the accounts.

25. 26.

Suggestions, if any, for the Amendment of Manual of Inspection Civil Wing. Suggestions, if any, for the Amendment of any account rule or the prescribed audit procedure.

27. 28. 29. 30.

Name of the Auditors. Name of the Inspecting Officer who supervised the inspection. Additional remarks, if any. Certified that the audit and inspection note has been seen and discussed by the Departmental Authorities concerned and a certificate to this effect has been recorded on the Inspection Note.

31.

Certified that the credits for the receipts pertaining to the months of __________ in the cash book have been verified direct from the books of the treasury.

32.

Certified that the bills paid by the Treasury for the month of __________ have been traced into the cash book and other relevant registers by reference to the treasury schedule of payments. Camp :

No. __________ Date __________ Section Officer/Asstt. Audit Officer

414

Statement/Showing the Disposal of Old Objections Period Opening Balance Item of Paragraph of Note Disposed of Item of Paragraph of Note Closing Balance Item of Paragraph of Audit

objection statement

Audit objection statement

Audit objection statement

Note.

Details of time taken in Audit Dates 1. Party of Auditors 2. No. Of days. 3.

FOR USE IN THE HEAD OFFICE 1. Entered in the programme Register on page ________ Item No. ________. 2. Entered in the Progress Register on page ________ Item No. ________ 3. Certified that I have verified the time taken with reference to the weekly diaries and the orders of the Gazetted Officers sanctioning extension of times, if any. 4. Report submitted in time/delay by ________ days. 5. Remarks, if any _________________________________________________ Signature of the Sr. Auditor Signature of the Section Officer/Asstt. Audit Officer Orders of the Audit Officer/Sr. Audit Officer (Authority D.A.G. (OAD) orders, dated 13th October, 1958, in file No. OA/I/Misc./58-59).

415

FORM No. O.A.-9 Name of the Section Officer/AAO ______________________ Certificate of State of work existing on the last day of ______________________ to be sent by Inspection Civil Headquarters Section by the evening 3rd of every month.
Sr. No.

Work

Progress

Remarks

1.

Correspondence

2.

3.

4.

5.

6.

Have all the letters received in the section up to the 15th of the last month been disposed of? If not, how many are outstanding. The No. and dates of letters outstanding be separately shown and the reasons for the delay in their disposal clearly set-forth. The outstanding letters from the Government of India, Punjab Government and the Comptroller and AuditorGeneral should be distinctly specified. Disposal of Have the replies to audit notes received up to the 15th replies to audit of the last month been disposed of. notes Un-official Have all un-official references received in office more correspondence than a week ago been disposed of? If not, how many are outstanding. Reminders of Have all reminders to letters, unofficials etc., due outstanding during month is sued? letters Audit Total audit work during __________________ to _________________ No. of Accounts _______________________ No. _______________________ Days Total done up to_________________ A/cs _______________________ days In addition to this _________ days work has been completed out of the accounts in addition, on but not accounted for in this month pending the final completion of the audit. Besides this _________ days work has been put. Issue of Audit Have the audit notes for account audited a month ago Notes been issued? 1.No. of audit notes awaited from the Section Officers/A.A.O. 2.No. of audit notes pending with the(Sr. Auditor) 3.No. of audit notes pending with the Audit Officer 4.No. of Audit Notes pending with the typist. 5.No. of Inspection Reports not issued within one month of date of completion of audit with explanation 416

7.

Returns

thereto. 6.No. of paras outstanding on _____________ 7.No. of paras settled during the month of ________ . 8.No. of Audit Note copies outstanding. Have all the returns due for the month been submitted on due dates? If not, the delay in each case may be explained.

8.

9. 10. 11. 12.

13. 14.

15.

16.

Inspection reports outstanding for more than 6 months No. of paras of the Inspection Reports outstanding for more than 6 months. Money value of six months old objection book items. Sectional Were all the sectional returns besides these special Returns mentioned above submitted on due date? Drafter letters Were drafts issued, received, from routine within one week of their entry in the despatch register? Destruction of Have the records due for destruction been destroyed records this year? Sectional books Have all the correction slips received up to the 15th and books been posted by all concerned including the auditors supplied at employed at moffasil in relevant books? concession rates Filling Work Is the filling papers which have been disposed of upto 15th of the last month completed? Examination of Have the various registers in the section been Registers in the examined periodically and whether they are section maintained properly? Audit notes, Were the audit notes, diaries and monthly reports diaries and received from the auditors on due dates? If not, was monthly reports the delay explained to the satisfaction of the G.O.? from the auditors? Inward Has all the memoranda received in the section upto the Memoranda 15th been replied to? If not, how many are still outstanding? 417

17.

18. 19. 20.

Receipts of annotated copies of audit notes which were issued one month ago Other arrears External Arrears Internal Arrears.

(i)Have all such annotated copies of audit notes been received? If not, the number of annotated copies still awaited may be entered below? (ii)Have necessary reminders been issued in the case of such copies as are awaited? Whether there are other arrears in the section? If so, the particulars should be stated.

The reports should be in handwriting of the Section Officer/Assistant Audit Officer incharge and the certificate below should be given by him after satisfying himself that the reports given above are correct. It is certified to the best of my knowledge and belief, that with the exception of the arrears detailed and explained in the statement the work is upto date. I have satisfied myself that this report is complete and accurate in respect of all items for which the section is responsible. I have scrutinized the explanatory and other remarks in particular and have no comments to offer. Audit Officer/Sr. Audit Officer Inspection Civil Wing

418

FORM NO. O.A.10 Monthly Progress Report in respect of Audit Notes Letters, Memoranda for the month of ______________________ I(a) (B) Total number of accounts done up to the last report. Total No. of accounts done during the month up to

(c) Total No. of Audit notes sent to the Head Office upto the end of last month. (d) Audit Notes sent during the month. (e) Number of Audit Notes of Accounts under audit before the 23rd of the month, still due for submission with detail and reference to D.A.G. (Inspection Civil) orders extending the time allowed. II.(a) Total number of letters, memoranda, etc., received from Head Office up to the

end of month. (b) Total number returned with reply. (c) Balance in hand with detail. (d) Number of objection statements fair copies of which have not been despatched. (I) It is certified to the best of my knowledge and belief that work is upto date. (2) Certified also that the correction slips received from the Head Office have been duly pasted in the respective books both by myself and my assistants. Dated _______________ No. ______________ (Section Officer/AAO) (Inspection Civil Wing)

419

NAME OF SECTION OFFICER/ASSISTANT AUDIT OFFICER Progress of work done upto ____________ Sr. No. Name of Circle Total No. of accounts at the end of last month No. of accounts added during the month No. of accounts the audit of which is given up during the month 5 Total no. of accounts No. of days allotted as per last report Increase in the No. of days i.e. extension etc.

Total

421

Decrease in the No. of days i.e savings etc.

Total No. of days

Done upto

Balance

No. of A/C No. of No. of completed accounts in accounts hand

No. of days For the For the audit completed in hand accounts

No. of accounts

No. of accounts in hand .

No. of days.

Remarks

10

11

12

13

Name of Accounts done during the month

Time taken during the month

1.Total work done upto ________ out of day programme as per Col. No. II 2. Total work done for the special audit of total. Deduct Work done as per last report of work done during the month Working days during the month. Loss Explanation for the loss (i)Due to transit (ii)Other reasons

Available working days upto 31 st March days Available working days upto 10th April, If the Auditor expects to finish or what assistance is required. Camp ________ Dated _________

Section Officer/Asstt. Audit Officer Inspection Civil Wing (HQ)

422

INSPECTION CIVIL WING TITLE SHEET OF AUDIT AND INSPECTION NOTE 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. Name of Audit Period of Audit Date of commencement of audit Date of completion of audit Date of last batch of objection statement Date of receipt of replies to the above Time allowed ____________ days.. Time taken ____________ days. Reference to orders sanctioning extension of time if any. Selected month. Place at which report is drafted Whether a list of unsettled objections enclosed. Paragraphs fit for inclusion in the register of serious irregularities. Paragraphs earmarked for keeping in O.Book. Name of the Sr. Auditor. Whether a list of objections pertaining to central audit was called for Due date of submission of the audit note Actual date of submission Remarks, if any Name of audit officer who supervised the inspection

Certified that the audit and inspection note has been seen and discussed by the departmental authorities concerned and a certificate to this effect has been recorded on the audit and inspection note, itself. Asstt. Audit Officer A/Note page Rough Sheet Page No. Inspection (C)Audit Party Dated:

Forwarded in original to Shri.____________________________________ Audit Officer(Vetting Section), O/O the Pr. A.G. (Audit)Punjab, Chandigarh.

Asstt. Audit Officer.

423

ANNEXURE A 1. Certified that totals of cash book selected month (Payment side and receipt side)

have been checked by Sh._________________ a member of the Party to the extent of 100% under my supervision. Signature of the person who checked the totals of cash books. Asstt. Audit Officer

2.

Certified that receipt side of cash book for the selected month have been checked

with counter foil and receipt book to the extent of 100%. Signature of the person in token of check Asstt. Audit Officer 3. Certified that NTC with S/Books and pay bills have been conducted by

Sh.____________ for the selected month.

Signature 4.

Asst. Audit Officer.

Certified that the service books and leave A/Cs to the extent prescribed & have

been checked in accordance with instructions contained in l etter No._________ and an audit information in prescribed form recorded in S.Book under full details. The results of check have been incorporated in the Audit Note. 5. Certified that total No. of pensionable personnel whose service books are required

to be checked in the O/O the _______________________ are out of _________ service books. Signature of Sr. Auditor Asstt. Audit Officer. 6. Certified that withdrawals in r/o selected months was checked with reference to

the treasury/ATO Schedule/records. Asstt.Audit Officer. 7. Certificate to be attached with the audit note: Certified that the amount deposited into treasury/banks as shown in the books of the o/o the ______________________ for the selected months and such other items as 424

came to the notice during the general review of accounts for the period from _____to ________ as a result of disposed off old and current audit objections were duly certified by member of audit party with reference to the records of treasury or sub/treasury/bank concerned and kept which have been commented upon the relevant inspection records.

Asstt. Audit Officer. Certified that the time allotment for this unit was adequate or inadequate. Notes:- Incase the time allotment is considered in adequate it may be justified supported by facts and figures. III: Certificate to check up records. Certified that the records were checked and re-checked in accordance with the rules instructions issued from time to time and the irregularities noticed have been brought out in the Audit and Inspection report or test audit got settled at spot.

Asstt. Audit Officer 10, Certified that records of G.I.S. have been checked by Sh. __________ Sr. Auditor

under my supervision.

Asstt. Audit Officer Signature of Sr. Auditor 11. Certified that records of G.P.F. accounts have been checked under my supervision

by Sh. _______________ Asstt. Audit Officer. Sr. Auditor 12. Certified that store/stock register have been checked under my supervision by

Sh _____________. Asstt. Audit Officer Sr. Auditor 13. Certified that records of CDS scheme are checked and no balance are lying un/disbursed in the O/O the ___________________________. Asstt. Audit Officer. Sr. Auditor

425

ANNEXURE TO PART I INTRODUCION TO THE AUDIT INSPECTION NOTE. 1. Whether Vrs, & other documents for the selected months have been received from

the Headquarters and duly checked. 2. Details for each cadres of Estt. in the office sanctioned strength and men in

position and reasons for variation. 3. deptt. 4. Whether all the relevant records were produced to audit, if not whether the matter Name and designation of the cadre controlling authority. Head of the office and

was brought to the notice of the head of office/department. 5. Whether replies to the old inspection reports were attended to by the Deptt.

Authority and discussed. If not, whether the matter was brought to the notice of the head of office/Department. 6. (a) Whether stores and stock account have been checked as required. (b) Whether annual physical verification is being conducted. (c) Nos. of para(s) of audit and Inspection report containing detailed comments on the subject.

ASSTT. AUDIT OFFICER CAMP AT Regarding other certificates:1. 2. 3. 4. 5. 6. Expenditure at page Sanctioned strength at page Closing balance at page Auditable record at page duty list at page List of settled paras at page

426

OFFICE OF THE PRINCIPAL ACCOUNTANT GENERAL (AUDIT) PUNJAB CHANDIGARH No. To ____________________________ ____________________________ ____________________________ Sir, I enclose a local audit and inspection report relating to the audit of your office under the head __________________ for the period __________ to ______ and to request that an annotated reply showing action taken against each para may please be sent to this office within one month from the date of issue. Yours faithfully, Insp(C)/AU/29/ Dated

Audit Officer. Encl:- Audit and Inspection Report. A copy alongwith spare signed copy of this audit and inspection report forwarded to :1. 2. 3. 4. for information and necessary action.

Audit Officer

427

APPENDIX-II Destruction of records The records of the Inspection Civil Wing are prescribed for the period shown below:1. 2. 3. Spare copies of Government orders Un-official reference Correspondence with the Permanently. -dooffices 5 years

inspected on audit report 4. Auditors Objections statements 3 years, provided all the objection contained therein have been settled. 5. 6. 7. Spare copies of audit reports Weekly diary of auditors Manuscript copies of audit reports 3 years 3 years To be destroyed on the issue of the next report. 8. File of miscellaneous papers 3 years.

Note:- A clerk is specially deputed every year for weeding out the old records. The list of all such records as are weeded out is approved by the Group Officer (I-C) before these are destroyed.

428

Appendix-III Calendar of Returns Part A-For Inspection Civil Sr. No. 1. 1. Name of Return Whom due Due Date 4. 15/1 Rule 5. Comptroller and Auditor General letter No. 571Admn.I/5859-II dated. 14.3.58. Remarks 6. The units will submit this report to Headquarters on Ist. January. Each year.

2.

3.

2. 3. Section-I Initial Annual Finance Programme for the Department next year to be drawn up for supply to FD and Admn. Deptts/Ministry concerned for suggestions etc. Final Annual Finance Deptt. Programme for the next year (after incorporating the suggestions of the FD or other deptts./Ministries if any). Information regarding staff requirement for the next year programme: (i)Regular Admn/CAG

1/4

CAGs letter -doNo. 9753A/41-64 dated. 21.7.69

June every year

AOs orders dated. 24/3/69 File Pb/l/6970

C.A.G. (ii) On adhoc basis

May each year

Each unit will submit the staff requirement on the basis of work load on 31/5 of CAGs letter each year. No. -Do- on 31/3 1766/B/18378 of each year. dated. 24.6.78

429

Section-II Weekly 1. C.O.R. B.O. 5th 12th 18th 25th 2. Ordinary Diary B.O Every Tuesday 3. Urgent/CAGs Diary 4. 5. Report of Type AGs B.O -doto Every Friday -do -doB.O. -do-doPara 3.10 of OAD Manual Accountant dated. 26.1.68 Generals orders

Diary Secy

letters one week Pr. A.G. due 6. Transit Register B.O. Every Tuesday 7. Movement Register B.O Every Monday TM/11/70-71/1290 10.6.61 Admn/71/DT. 17.5.88 dated.

430

FORTHNIGHTLY 1. Urgent Diary Deputy Accountant General 2. 3. Ordinary Diary Half Margin -doBO -do 1st , 15th each month MONTHLY 1. Report regarding B.O. vouchers/documents requisitioned by the outside agencies. Register correction slips of Deputy Accountant General 15th of each month. TM/9-8/69-70/2084 dated. 4.4.69 -doItem 5 of Appendix IV of OAD Manual 2nd, Tuesday 4th 3.19 of OAD Manual

2.

10th of each month 10th of each month 10th of each month

Para 3.25 of OAD Manual DAGs order No. OA/C/MC/2670 dated. 21/3/65 4.15 OAD Manual Two months preceding to the month related for audit

3.

Statement of Audit Pr. Accountant Note not issued by General the end of month. Memo of selection 1 Audit Units of month during 2 CASS local audit.

4.

5. 6. 7.

SOs/AAOs Book

Note B.O.

5th of each month 5th of each T.M.II/IC/7/309 month dated. 25.9.61 5th of each -month

Register of copies B.O. called for Auditors Note Book B.O. to watch special points (each Auditor) Monthly Statement Control of Arrear Section Register of cases B.O.

8. 9.

10th of each month 20th of each month

A.G.s order dated. 8.3.61 A.G.s order dated. 8.3.61

431

10. 11.

Copy despatch

B.O.

5th of each Para 3.6. of OAD month Manual 2nd of each Para 5.31of month Manual 10th of each month OAD

Report of B.O. overhauling of seats of auditors Cases for inclusion B.O. in dictionary of reference. Development of Control cases previously Section referred to C.&A.G. Inventory Register B.O.

12.

OA/MTM/11/1-Insp/ 1077 dated. 7.7.54

13.

5th of each Para 3.6 of OAD month (M) 7th of each TM/1-25/1690 dated month 17.7.58 3rd of each month Last Tuesday TM/9-27/61-67/591 dated 21/6/82

14. 15.

Attendance Register B.O. with certificate of closing of leave a/cs. Report of Control outstanding diary Section letters (ordinary, urgent, Comptroller and Auditor General complaint & Bill Diary) Report on the return Secretary due to Comptroller A.G. and Auditor General in the previous month and submitted (to be prepared in the following proforma) 1.Sr.No. 2.Name of return 3.particulars return 4.Due date. 5.Remarks/reasons for delay 432 of

16.

17.

to 5th of each D.O. No.AG/PR/383 month dated 17.9.63

18. 19.

C.O.R.

D.A.G.

25th of each month

TM.I/71-72/111/285 dated 1/72

Incumbency Admn. I Register of AAO/ SO/Adr/Clerk Disciplinary cases -dounder CCS/CCA Rules Implementation of -doposting and transfer orders. Movement Register Sr.DAG

5th of each Admn. I/75-76/4693 month dated. 6/12/75. 5th of each Admn.I/Discy month cases/5694-5700 dated 22.9.79 10th of each month Admn. I/411 dated 7.1.80 dated

20.

21.

22.

Last Admn I/71 working day 17.5.80 of month 10th of each month TM-I/lI-1/38/ 49/Inspection dated 10.3.60

23.

Register of keeping B.O. watch over defects pointed out by Director of Inspection. Progress Report on B.O the printing of revised manual (C) Lists of cases have transferred OAD(C) but not returned brief cases Headquarters. who Welfare been from have the to

5960

24.

10th of each month 15th of each month

Sr. DAG(I.C) No. OA/6/80-81/109-13 dated 30/5/81 Sr. Deputy Accountant General (Admn) orders dated 14.5.82

25.

QUARTERLY 1. Review of correction slips for posting A.G 15/4, 15/7, 15/10, 15/1 TM-II/60-57/256 dated 2.3.56

433

2.

3.

4.

5. 6.

7.

8.

9.

10

11.

Consolidated certificate of possession of secret memorandum of instructions Report regarding quarterly audit bulletins. Report regarding vouchers/documents requisitioned by outside agencies. Quarterly arrear report Quarterly progress report in the use of Hindi for official work Material for quarterly DO from Accountant General to Comptroller and Auditor General giving a critical personal appreciation of the state of work in the office Register for keeping watch on defects pointed out by the Director of Inspection Quarterly Report for completion of Audit preparation of forecast of local audit Quarterly progress report of each para of Inspection report conducted by the Director of Audit. Progress Report on printing/Revision of manuals

A.O. Admn. III

10/4,10/7, 10/10,10/1

OAl/1-53/MemoI/5064/ 21.3.60

Admn /Control A.G.

10/4,10/7 10/10,10/1 20/1,20/4, 20/7,20/10

AdmnII/686/6701/ 5.4.68 TM/II/71-72/367 dated 5.6.71

AG/ Control 5/4,5/7, 5/10,5/1 Hindi cell 10/4,10/7, 10/10,10/1

TMI/70-71/Vol.11/1714 dated 9.9.70 TM-I/9-32/75-76/10-15 dated 1.4.76

Secy to 10/1,10/4, Accountant 10/7,10/10 General

Accountant General D.O. No. AG/PA/134 dated 8.1.79

Deputy Accountant General Deputy Accountant General Control Section

15/4, 15/7, 15/10, 15/1

TM I/11-1/Inspection/ 59-60/3134 dated 10-3-60 AGs order dated. 18/10/82 on file 82-83.

15/4,15/7, 15/10,15/1

15/10,15/1, 15/4,15/7

D.O.No.ITA-1/13/II/Ins 83-84/369-76 dated. 5.9.83

-do-

15/4 15/7 15/10 15/1

DAG(I.C)order vide CS No. 15 dated. 22.5.85.

434

Monthly 1. 2. Register of cases D.A.G. 1/6, 1/2 30/6, 30/12 Para 3.6 of OAD Manual OO No. A 55 dated. 3.5.58

Progress of Hindi Teaching Hindi Cell Scheme

Annual Returns 1. Consolidated statements of Control omissions in the section maintenance of Register of objections by Admn. Deptt. (Received from AAO/SO(F) 15/4 TM-I/12-1/1300 25.9.61 dated

2.

Sectional inventory.

furniture Admn. III

15/4

3.

Stock verification report

Admn. III

15/6

OO 3/56 dated 3.7.46

4.

Report on completion of Admn. I C.Rolls

25/4

O/O B/213 16.8.51

dated.

Statistics to serve as fair Control index to the volume of Section work in I.C. Wing.

31/7

O/O 159 dated 7.11.68

6.

Information regarding App(A) number of civil offices/institutions Test Audited during the course of year and comments on the results of such audit.

1/7

7.

Preparation of budget Admn I estimates/revised estimate for the year.

5/6

0/0 A/9 March 1971

435

8.

Information regarding Control expost facto sanction Section accorded other than of normal rules and cases in which Government have refused to accord ex post facto sanction.

5/7

EPA/286/1-179 22.5.70

dated.

9.

Report regarding Deputy maintenance of records of Accountant good/bad work done by General employees, issue of merit certificates etc. In recognition of outstanding work done.

1/4

10.

Preparation of Annual A.G. forecast for local audit inspection on the basis of MPRs

10/1

Accountant Generals orders dated. 15.10.82 (File No. OA/C/I/CAG/82-83

11.

System Audit

CAG

30/6

CAG No.692/OM/7/81 dated. 5.8.82

12.

Lists of officials who have Admn.I completed three years and five years on one seat and section

Sept.

Admn3/list/49/6467-71 dated. 10.12.76

13.

Cases of doubtful new App(R) services.

20/7

O/O10 dated. 10.5.60

14.

Cases of budgeting

incorrect App(R)

20/7

-do-

436

Section-III All returns of a permanent or recurring nature due either from outside Authority or from other sections of the office. Quarterly 1. Certificate of possession From all 1/4 1/7 1/10 1/1 all 1/4/ 1/7 1/10 1/1 1/4 1/7 1/10 1/1 Item No. 1 of OAD(C) Manual

of secret memorandum of audit units instructions extent of audit. 2. Report of letters to the From Chief 1st replies. 3. Report of letter to the -doChief Secy. regarding Secretary. units regarding

regarding non receipt of

non compliance of old outstanding audit

objections (more than six months old) by various departments. HALF YEARLY 1. Report regarding sending statement of -doaudit objections for the period 30 March to 30 Sept. next in addition to the types of paras indicating serious irregularities or otherwise important, mentioning special notice of the Government with brief synopsis of irregularities & implications) of their non settlement. 15/6/ 15/12

437

PART B C.O.R. for Audit Units Section-I (External) MONTHLY 1. D.O. letters to all Heads the heads of Deptt/Admn. of 5th of each A.G.s orders This month dated. 3.10.81 return should be sent direct by AOs to the Deptts. concerned by 5th of each month.

Deptt. with copy Secretary. endorsed Secretary. Government Punjab in the to Finance/ to Department OAD (HQ)

Admn. Deptt. by name the indicating detail of

inspection reports for which initial reply has not been received. QUARTERLY 1. Details regarding Chief Secy. non submission of OAD(C) Hq first replies to the Inspection report which have not been received even within six months of their issue. 1/4 1/7 1/10 1/1 CAGs letter No. 733 Rep/53-80 dated. 23.4.80 This return should be sent to OAD(C) Headquarters on 1/4, 1/7, 1/10, 1/1 for onward submission of the same to Comptroller and Auditor General when required.

2.

Details regarding Chief non compliance of Secy/OAD old outstanding audit (C) Hq objections (more than 6 months old) by various deptts.

1/4 1/7 1/10 1/1

CAGs Letter no. 733 Rep/5380 dated. 23.4.80

-do-

438

Six monthly 1. Statements of outstanding items of Inspection reports in respect of various Central Government offices under the Ministries including banks. Statement of outstanding paras to Admn Deptt. Ministries D.O. under the signature of Deputy Accountant General with a copy to AG/Control Statement of Audit objections for the period 30th March to 30th September next in the light of paras indicating serious irregularities or otherwise deptt. Meriting special notice of Government with brief synopsis of irregularities. Implementation of their non settlement. Admn Deptt/ Ministry 31/7 CAGs letter The units dealing No. 333/36363- with controlling 68 dated 1.3.71 deptt. may send this return to deptts. concerned.

31/l

2.

Admn Secy

31/7 31/l

-do-

-do-

3.

Admn. 5/6 Secretary. 5/12 With copy to OAD(HQ)

All units will send the report to Admn. Secys direct with a copy to Headquarters for consolidation and submission to FD and A.G. control section.

439

Yearly 1. Initial Annual programmes for the next year to be drawn up for supply to F.D. and Administrative Deptt./Ministries concerned for suggestions etc. Final Annual Programme for the next year (After incorporating the suggestions of the FD or other Deptts/ Ministry, if any.) List of new Government offices to be called for from the deptt. Particularly education department Information regarding staff requirement for the next year Programme Admn. Deptt/ 1st Ministry with January copy to OAD (HQ) CAGs letter No. 571AdmnI/ 58-59II dated. 14.3.58 The report should be sent to concerned Admn. Deptts. A copy be sent to Headquarters for consolidation and onward transmission to FD each year. CAG letter 975- -do111A/41-64 dated. 21.7.69

2.

-do-

15/3

3.

Deptt. concerned

30th April

O/O No. OA/NC/QR/l66/118/29 dated. 12.2.64

4.

The concerned unit will call for this information from the deptt. Concerned for entering in MPRs. The units will supply the requirement of staff to OAD(HQ) on 31/5 each year for consolidation and submission to CAG.

(i)Regular

OAD(HQ)

(ii)On adhoc basis

5.

Lists of departments who prepared store accounts where the value of storage exceeds 5 lakhs. Reply to be called from Admn deptt. for getting the same audited and incorporation of suitable comments in all state and report (c)

AOs order dated. 24.3.69 file P 4/I/69-70 -do3/3 CAGs orders 1766/B/18378 dated. 24/6/78 31st July Sr. The replies is to be each year Deputy submitted to A.O. Accountant Incharge of the Unit. General order dated. 18.3.74.

31/5

440

SECTION-III WEEKLY RETURNS 1. 2. 3. 4. C.O.R. Ordinary Report B.O. B.O. 5th,12th 18th,25th Every Tuesday -do-doAGs orders dt. 26 1.88 Para 3.19 of OAD Manual -doSr. DAGs order dated. 28.11.80 Para 3.19 of OAD Manual -do-

Urgent/CAG Diary B.O Audit Note Diary -doReport Bill Diary -do-

5. 6.

-do-do-

7. 8.

Weekly Diary -doReport of field parties. AGs letter; over OAD(HQ) one week Transit Register B.O.

Every Tuesday -do-

9.

Movement Register

B.O

-doFORTHNIGHTLY

Para (3.19) of OAD Manual TM-11/7071/1290 dated. 10/6/61 AdmnI/71 dated. 17.5.80

1.

Urgent Diary

DAG

2. 3.

Ordinary Diary Half Margin

-do-do-

Second fourth Tuesday -doIst, 15th of each month.

Para (3.19) of OAD Manual -do-

MONTHLY RETURNS 1. Report regarding Audit Notes not issued by the end of month. Register of special points to be brought to the notice of inspection officer. AAO/SOs Note Book Register of copies called for OAD(HQ) 5th of each DAGs letter No. month OAD/C/NC/2-670 dated 21/3/65 5th of each Para 3.2 of OAD month Manual 5th of each month 5th of each TM-II/IC/7/30 month dated. 25.9.61 441

2.

DAG

3. 4.

B.O. B.O.

5. 6. 7.

8.

9. 10. 11. 12. 13. 14. 15.

Progress Register of Auditors Programme Register of Auditors Special Note Book to watch special points (each Adr.) Register of important and interesting cases. Register of items waived off Register of serious irregularities. Register of Draft Paras Monthly statement of arrear Register of cases. Copy despatch Register Report Report of over hauling of seats of auditors. Suggestion for improvement on Audit OB/Six Monthly Register Inventory Register

B.O B.O. B.O.

15th of each C.S.2 month 1st of each C.S.2 month 5th of each month 10th of each OE Ist/18.10.80 month 5th of month 5th of month 5th of month 5th of month 20th of month 5th of month 2nd of month each Para 4.40 of OAD Manual each AGs orders dated. 8.3.61 each -doeach -doeach -doeach Para 3.6 of OAD Manual each Para 5.3 of OAD Manual

DAG(IC)

DAG(IC) B.O. B.O OAD(HQ) B.O. B.O. B.O.

16.

B.O.

10th of each month 24th of month 7th of month 1st of month 7th of month each Para 3.6 of OAD (PI) each TM/1-25/1990 dated. 17.7.58 each O/O No. CW/1/6 dated 16.9.58 each Sr. DAGs orders dated. 23.6.60

17. 18. 19. 20.

B.O B.O.

21.

Review of progress/ B.O. programme Register Tour Programme of Deputy officers in OAD(C) Accountant General Register of cases of Control failure of audit section

5th of each TM I/217/58-59 month dated. 17.5.58

442

22.

23.

24.

Attendance register B.O. with certificate of closing of Leave Account. Monthly Reports to B.O. be received from AAO/SOs in the field Reports of OAD(HQ) outstanding letters (Ordinary, Urgent, Comptroller and Auditor General, Bill Diary

3rd of each month 2nd of each Para 4.10 of OAD month Manual

Last Tuesday

TM/9-27/6167/591 dt. 21.6.62

The units will send the report to Headquar ters for consolida tion and submissi on to Pr. Accounta nt General control sections.

25. 26.

Register of B.O. suspended audit Defects noticed in DAG(IC) drafting of A/Notes

22nd 5th

-doSr. Deputy Accountant General orders dated. 25/5/62 TM-II/10-71/1290 dated. 23/8/61 O.O.No. 19 dated. 15/11/84

27. 28. 29.

Transit Register

30. 31.

Control Section C.O.R. DAG(IC) Register of calling B.O. of vouchers etc. From AG(A/cs) for supply to field parties. Incumbency B.O. Register Regarding DAG/AG suggestions of method of organising the local audit of long duration/important audit to be reviewed.

Last Tuesday 25th 5th

5th 10th

Admn/75-76/4693 dated 6/12/75 CAGs D.O No. 673TA/IID/TA/75 5.8.76

443

32. 33.

34.

35.

EL certificates of Admn.III parties Movement Registers Deputy Accountant General TA Bill Register Deputy Accountant General Report regarding OAD(HQ) vouchers/documents requisitioned by the outside agencies

5th Last working day of month 5th

O.O. Admn 12/94 dated. 16.9.89 Admn/I-71 dated. 17.5.80 -

10th

TM/9-8/69-70 2084 dated. 4.11.69.

Outstanding Returns 1. 2. Personal claim of DAG(IC) staff bill diary Review of -doprogramme register (MPR) Consolidated OAD (HQ) report on review of Registers of DP/Financial irregularities. 15/4, 15/7, 15/10, 15/1 1/4, 1/7, 1/10, 1/1 Sr. DAGs order 12/10/57 NCW 1/156 dated. 19.9.58

3.

4.

Closing of OB/Six DAG(IC) monthly

5.

Register of serious -doirregularities Quarterly Report Arrear OAD(HQ)

6.

7.

Quarterly Report Control of vouchers not Section supplied by AG(A/Cs) to field parties.

15/4, 15/7, TM 15/Misc/ This units will 15/10, 15/1 5455/2947 send this report dated 29.10.59 to Headquarters for consolidation & submission to Accountant General Control (Report) 20/4, 20/7, Deputy 20/10, 20/1 Accountant General order dated 12/2/57 10/4, 10/7, DA/MW/T/29/l/ 10/10, 10/1 52 dated. 29.4.65 1/4, 1/7, TM/1/70-71 1/10, 1/1 1714 dated 9/9/70 5/4, 5/7, OA/PU/I/Misc/ 5/10, 5/1 258 dated. 9/71

444

8.

9.

10.

Quarterly report regarding complaint of delay in settlement of personal claims. Quarterly progress OAD/report in use of Hindi for official work Quarterly review after completion of Audit preparation of forecast of local audit.

Control Section

20/1, 20/4, O/O TM/Misc./ 20/7, 20/10 74-75/965 dated. 20.7.74

OAD/HQ

5/4, 5/7, TM-I-32/755/10, 5/1 76/10-15 dated. 5.4.76 10/7, 10/10, 10/1, 10/4 AG Circular The unit will dated. 18.10.82 send this report to Headquarters for consolidation and submission to A.G. 1/10, 1/1, OO No. ITA1/4, 1/7 I/I-3/VII/Insp./ 83-84/369-76 dated. 5.9.83

do

11.

12.

Quarterly progress report of each para of the inspection report conducted by the Director of Inspection Register of History Sheet of staff in each Unit (Field)

OAD (HQ)

13.

14.

Deputy Accountant General (IC) Register of Try. do Month for local audit Progress Register do of Auditors

5/4, 5/7, DAGs order 5/10, 5/1 dated. 4/6/65

10/4, 10/7, O.O. No. 19 10/10, 10/1 dated. 15/11/84 do CS No. 14 dated. 31/1/85

MONTHLY 1. Register of cases Sr. Deputy 1/6 Accountant 1/12 General Submission of OAD (HQ) 10/7 statement (half 10/1 yearly of leave other than casual leave availed of Para 3.6 of OAD (Headquarters) Admn IV/ Leave/7576/762

2.

445

Annual Returns 1. Statement of omission in the maintenance of register of objections (Headquarter) by Admn. Department (Received from AAO/SO (F)) Review of time allotment of various Audits Sectional Inventory of furniture Stock verification of furniture Proposal for change in periodicity and quantum of Audit in respect of any account Statistics to serve as fair index to the volume of work in Inspection Civil Wing Audit of NCC Campus to be arranged Cases of doubtful new services Informatio n regarding number of civil offices and institutions test audited during the course of year and comments on the result of such audit. . Local audit of Central & State Schemes to be provided to Audit parties OAD(HQ) 10/4 TM/I-12-I/1360 dated. 25.9.61

2.

-do-

3. 4.

-do-do-

5.

DAG (IC)

After 3 years onwards 15th April O/O B-56 dated. 3.7.46 15/12

6.

OAD (HQ) 15/7

O/O No. 159 dated. 7/11/68

7. 8. 9.

APPR (R)

20/7

OAD (HQ) 10/7 -do15/7

O.O/3-36 16.6.92 O.O. D/10 10/5/60 -

dated. dated.

10.

DAG(IC)

15/7

Deputy Accountant General orders dated. 1/9/67 (file 1-12)

446

11.

12.

13.

14.

15. 16.

Information regarding expost facto sanction accorded in other than of normal rules and cases on which Government have refused to accord ex post facto sanction. Information regarding the preparation of synopsis/statement of store accounts for inclusion in Central Audit report (Central Department) (IC) Report regarding maintenance of record of good/bad work done by the employees. Issue of merit certificates in recognition of outstanding work done. Preparation of (Annual) forecast for local audit/inspection on the basis of MPRS System Audit

OAD(HQ)

30/6

EPA/286/1-179 dated 22.5.70 (file 1-70)

Sr. DAG 30/6 (IC)

DAGS order 30/12/70 OA./Pb/0-4

dated File

-do-

1/4

OAD(HQ)

31/12

OAD(HQ)

15.6 30.9

List of officials who -dohave completed three years and five years on one seat and section

AGs order dated. 15/10/82 File OAD/IC/1-4/CAG 8293 CAGs letter No. 692/OM/7-81 dt. 5.8.82 AdmnIII/49/6467-7 dt. 10.12.76

447

Additional item of COR grant - in -Aid Section I Annual 1. Material for consolidated Audit Report of the Central Schools Organisation. Statement of Audit fee recoverable from Central Sections. Audit of PICs in the State (Project implementation Committee) (I) Audit of NIS Patiala to be conducted. (II) Submission of Separate Audit and Inspection report in respect of NIS Patiala Audit of state Social Welfare Board Submission of Report regarding review of Walkf Board Pb, at Ambala Cantt. Pepsu Transport Township Development Board, Rajpura. DACR 31st August Letter DO OA/C/I149/77-78/1267-69 dated. 24.2.78

2.

DACR

31/5

DAGs orders dated Nil

3.

DACR

31/12

DA/I-37/75-78 dated. 22/12/78 (File GIA) AGs orders dated. 9.4.81 -do-

4.

Comptroller 1/8 and Auditor General Comptroller 1/11 and Auditor General

5.

DACR

31/l2

6.

As and when review is done during local audit -do-

7.

DO No. DA/l37/75-78/708-10 dated. 22.12.78 GOI MO No. 11(29)-B(AC)/83 CAGs U.O. No. 64TA-I(R)/l73 dated. 6/83 CAG No. TA I/RGI/131-75 dated. 6.9.79

Annual 1. Completion report AAO/SO regarding local audit of grants in aid. 1/3 OO CA/NCW-I 3012/3726 dated. 18/l1/57

448

Six- monthly-Returns 1. Register of A.O. selection of Books Admn. III. to be checked by S.O./AAO Progress made in C.A.G. relation to audit under section 14.15 separately Central and State Grant requisite material furnished to GIA Section for compilation and submission to C.A.G. 1/6 1/12 O/lO 12 dated 21.10.76

2.

15/4, 15/7

GIA Section/POL XI/78-79/1944 dated. 16.10.78.

Sectio n II Quarterly 1. Register of Books B.O. (Library) Progress Register B.O. of GIA Register of Audit BO/DAG fee 5th of each TM-11/107/ month 35-90 dated. 25.9.79 10th Sr. DAGs orders dated. 12/3/77 5th -

2.

3.

Six Monthly - Returns 1. Physical DAG (IC) verification notes issued under section 14,15 Review of daily rates for audit fee of non Government funds rates to be got approved within 2 months of revision of pay etc. Necessary revision of rates to be got approved. Sr. Deputy Accountant General orders dated. 2/77 Comptroller As and when Comptroller and Auditor rates are and Auditor General revised. General letter No. 2338/ Admn/ 13786 dated. 5/9/82 15/4

2.

449

Half Yearly 1. Programme AAO/SO made in respect of audit of GIA. 1/10, 1/4 OO CA/NCWI/ 30-12/3726 dated. 18.11.59.

450

APPENDIX-IV Instructions issued by the Comptroller and Auditor-General of India for the calculations of the daily rates of fees for the recovery of cost of audit of accounts of Non-Government funds. -----------------1. Copy of Comptroller and Auditor-General of Indias letter No. 2338-Admn. 1/378-61, dated 5th September, 1962. Simplification of the method of calculation of working out daily rates of audit fees for the recovery of cost of audit of accounts of non-Government funds.

Subject:

I am to invite a reference to this office circular letter No. T. 47-Admn. I/48-37, dated 28th April, 1937, laying down the present method of calculating daily rates of audit fees. This method involves elaborate calculations entailing much labour and time and the rates sanctioned after such complicated calculations remain in force only for a period of two years after which the whole process has to be repeated. As the rate arrived at is on the basis of emoluments drawn by staff actually employed in O.A.D. on a particular day, the daily rate thus calculated not also represent the actual cost during the entire period of two years for which it remains current.. 2. The question of evolving a similar and more realistic and practicable

method of calculation has accordingly been under consideration and it has now been decided with the concurrence of the Government of India that the calculation of daily rates of audit fees for recovery of the cost of audit of accounts of non-Government funds should in future be done on the following lines:i) Direct Charges may be calculated on the basis of average cost of particular post or posts involved plus the appropriate allowances instead of pay and allowances of the staff actually engaged on the work of a particular day. ii) Indirect Charges may be taken as constituting 125 per cent of the direct charges calculated according to the above method. iii) The figure relating to number of days in a year which is to be adopted for working out the daily rate will continue to be determined by the Accountant-General, as is being done at present. 451

3.

The application of the simplified method of calculation indicated above has been

illustrated in the statement enclosed. It should, however, be understood that the figures appearing in this statement are merely illustrative. 4. The statements of calculation of daily rates of audit fees should be sent to this office by the 31st January, so that the daily rates of audit fees to be effective with effect from 1st April, onwards may be approved sufficiently in advance. The necessary

approval will be given by this office, and the sanction of the Government of India will not be necessary. The rates so approved will remain forces until further orders or until there is a revision of any scale of pay or compensatory allowance or the method of calculating average cost is changed, in which case revised rates should be got approved by this office. II. Letter No. 2497-Admn. 1/378-61 from the Comptroller and Auditor-General of India, New Delhi, dated the 20th September, 1962. To. All Civil Accountant-General, The Director of Commercial Audit and the Director of Audit, Food, Rehabilitation, Supply Commerce, Steel and Mines, New Delhi. Subject: Simplification of the method of calculation for working out daily rates of audit fees for the recovery of cost of audit of accounts of non-Government funds.

Sir, In continuation of this office circular letter No. 2338-Admn. 1-378-61, dated 5th September 1962 on the subject indicated above, I am to forward herewith a revised statement illustrating the calculation of daily rates of audit fees which may please be substituted for the statement enclosed therewith. Statement illustrating the calculation of daily rate of audit fees for the audit of accounts of non-Government funds. Monthly cost of (i) Senior Auditor Average cost Comp. Allowances 452 Rupees 392 10

H. Rent Allowances Total (ii) Junior Auditor Average cost Dearness Allowances Comp. Allowances H. Rent Allowances Total (iii) Class-IV Servant Average cost Dearness Allowances Comp. Allowances H. Rent Allowances Total Annual cost of : 1 2. 3. (A) (B)

15 417 Rupees 225 20 10 15 270 Rupees 80 10 5 10 105

Senior Auditor Junior Auditor Class IV Servant

= Rs. 417x12=Rs.5,004 = Rs. 270x12=Rs.3,240 = Rs. 105x12=Rs.1,260 Auditor and 1 Class IV servants =

A party of 1 Sr. Auditor , 1 Junior Rs. 792 x 12 = Rs 9504

A party of I Sr. Adrs 2 Junior Adrs. and one class IV servant = Rs 792 + Rs 270 = Rs 1062 x 12=Rs 12744

Part-II, Indirect Charges according to composition of the party. Add 125 per cent of Rs. 9504 as shown at A above = Rs 11,880 Add 125 per cent of Rs. 12,744 as shown at (B) above = Rs 15,930 Part-III. Total of Direct and Indirect Charges party-wise. A party of 1 Senior Auditor, 1 Junior Auditor and 1 Class IV Servant. Direct cost Indirect cost Total Direct charges Indirect charges Total Part-IV Daily rates of Audit Fee on party basis = 9,504 = 11,880 21,384 = 12,744 = 15,930 28,674

A party of 1 Senior Auditor, 2 Junior Auditors and I class IV Servant.

453

For party of 1 Senior Auditor, 1 Junior Auditor and 1 Class IV Servant = 21384 @226 = (Rs.77.48 or Rs 77) * Indicate total amount of direct and Indirect charges. @ Indicates number of working days in a year. For a party of 1 Senior Auditor, 2 Junior Auditors and 1 Class IV Servant. Rs. 28,674 276 For a party of : Senior Auditor, Junior Auditor, Class IV Servant Senior Auditor, Junior Auditor, Class IV Servant Rupees 75 105 =(Rs. 103.89 or Rs. 104)

Daily rates after rounding off to nearest multiple of Rs. 5.

Note:- Daily rates of audit fee in respect of each post where required may also be worked out on a similar basis. The daily rates in respect of the post of Senior Auditor is worked out below by way of illustration:Rupees Monthly cost of I Senior Auditor = 417 Annual cost of I Senior Auditor = 417x12=5,004 Direct Charges = 5,004 Add interest charges i.e. 125 per cent of direct charges = 6,255 Total of Direct and Indirect Charges = 11,259 Daily rate of audit fee for one Senior Auditor = 11,259 = 276 Rs. 40.79 or Rs. 41 Daily rate after rounding off to the nearest multiple of Rs. 5 = Rs 40 The allowance for casual leave, holidays and transit day is already made in assuming at the number of working days in a year and thus in the rate of audit fees recoverable for the audit of non-Government funds. The audit fee will, therefore have to be recovered only for personnel of the party on duty. No recovery should be made for a person on casual leave and for holidays, etc. (Authority-CAGs U.O. No. 3164-Tech. Admn. I/96-64, dated 7th November, 1964). III. Copy of Comptroller and Auditor-General of India office memorandum No. 65/Tech. I(A)/33-65-Vo..II, dated 4th January, 1969. Delegation of powers to Heads of Department in the Indian Audit and Accounts Department-Sanction of daily rates of audit fee for the recovery of cost of audit of non-Government funds. 454

Subject:-

In exercise of the powers vested in him, vide item No. VII of the Annexure attached to the Government of India, Ministry of Finance (Department of Expenditure) letter No. F.3(4)/ESI/67, dated 6th June, 1967, the Comptroller an Auditor-General of India is pleased to re-delegate the powers of sanction of daily rates of audit fee for the recovery of cost of audit of non-Government funds, delegated to him in the Ministry of Finance, Department of Economics Affairs, letter No.1-(27)-2/62, dated 28th May, 1965, the Heads of Departments in the Indian Audit and Accounts Department with effect from the revision of daily rates of Audit fees due on 1st September, 1968 subject to the following conditions: i) ii) 2. The direct charges should be calculated on the basis of average cost of the posts involved, and The indirect charges should be computed at 125 per cent of the direct charges. Detailed instructions for the calculation of audit fees are being issued separately

in letter No. 64-TA. I(A)/33-65 Vol.-II, dated 4th January, 1969 for the guidance of the Heads of Departments. Copy of letter No. 64-Tech.Admn.1(A)/32-65-Vol. II, dated 4th January, 1969 from office of the Comptroller and Auditor-General of India, New Delhi addressed to All the Accountants General and others. Subject: Instructions for the calculation of the daily rates of audit fees. Sir, I am to invite a reference to this office memo No. 65-TA-I(A)/33-65-Vo.II dated 4th January, 1969 delegating the powers of sanction of daily rates of audit fee to Heads of Department in the I.A.&A.D. with affect from the revision of rates due from 1st September, 1968. As mentioned in para 2, thereof, the following instructions are laid down in regards to the calculation of daily rates of audit fee:i) The daily rates of audit fees should be calculated in accordance with the

instructions contained in this office circular letter No. 2338-Admn.1/278-61, dated 5th September, 1962 read with letter No. 2497-Admn.1/278-61, dated 20th September, 1968. The Direct Cost should be calculated in respect of only non- gazetted posts of the peripatetic audit parties and the daily rates of audit fees should be rounded of in multiple of Rs. 5 as illustrated in the statement of calculation attached with the above mentioned letters. 455

ii)

The average cost of the posts should be worked out from time to time with the

revision of scales etc. In accordance with the formula laid down in the Government of India orders below F.R. 9(31). At present, the correct average cost of the various posts is as under:Rupees S.A.S. S.G.A. U.D.C. Class-IV iii) .. .. .. .. 435.02 299.68 220.44 80.08

The daily rates of audit fees should be worked out and approved by the Heads of

the Departments concerned within two months of the revision of the rates of pay and allowances necessitating the revision of the rates. Immediately after the rates are revised and approved, a copy thereof should be sent to this office to see that there are no wide disparities in the rates approved in different offices. A note to this affect should be kept in the calendar of Returns of the Section entrusted with the work of revision of these rates. iv) The accuracy of the daily rates of audit fees so calculated should be checked

independently by the internal Test Audit Section of the concerned office before, the rates are approved by the Heads of the Department. An indication to this effect may be given in the letter communicating rates to this office. v) The accuracy of the daily rates of audit fees approved in each office should be got

checked by the Director of Inspection at the time of inspection of that office and a report to this effect sent to this office after the inspection is over. vi) The cost of Gazetted supervision is included in 125 per cent Indirect Charges

calculated on Direct Charges of the non gazetted posts and no separate audit fees in respect of gazetted supervision of the audit party should be recovered. Copy of letter No. 13-TA, I/28-73, dated 9th January 1975 from the Comptroller and Auditor-General of India, New Delhi to All Civil Accountants General and offices subordinate to them. Subject: Recovery of the cost of audit of bodies and authorities under C.A.Gs (DP&C) Act, 1971. 456

The rules regulating the incidence of expenditure involved in audit of the accounts of bodies and authorities conducted by the I.A&A.D have been laid down in the Section VIII of Appendix 3 of Account code volume I. The question whether these rules of incidence require any modification consequent upon promulgation of CAGs (DP&C). Act, 1971 has been under consideration for some time. It has been decided that the present rules of incidence should be continued to be followed in regard to audit of the accounts of bodies and authorities including corporations, in so far as audit under Sections 14,15 and 19 of the C.A.Gs (D.P.&C.) Act, 1971 is concerned. Accordingly the cost of audit of bodies and authorities, including corporations, will be recoverable in all cases in which audit is undertaken by the Comptroller and Auditor General or any office under him as the sole Auditor. In cases in which the audit of the accounts of the body or authority is conducted by another agency and audit by Comptroller and AuditorGeneral or an officer under him represents second or superimposed audit undertaken under Section 14, 15 and 19 as the case may be, the cost of such second or superimposed audit need not be recovered from the body or authority concerned, As regards audit under Section 20 the same is required to be undertaken on such terms and conditions as may be agreed upon between Comptroller and Auditor-General and the concerned Government. One of the terms to be settled in this regard would relate to the recovery of the cost of audit of the body or authority to be entrusted under Section 20 of 1971 Act. The recovery of the cost of audit in theses cases, will, therefore, be regulated by the agreement that will be arrived at in each case. These cases should, therefore, be referred to this office for finalisation of the terms and conditions under which the audit of the body or authority concerned may be undertaken, including the question whether the cost of audit should be recovered or not. 2. The receipt of this letter may kindly be acknowledged. All pending cases may be dealt with accordingly.

Sr. Audit officer

457