12.1.1 The scheme of departmentalisation of Union Government accounts provides for setting up of an efficient internal audit organisation to ensure both accuracy in accounts and efficiency in the operation of the accounts set up. Accordingly, internal audit organisations have been set up in most of the Ministries/Departments. The scope and function of the internal audit, organisation will depend on the, nature of work, the. number of subordinate offices, the strength of the establishment, nature of quantum of expenditure etc. Each Ministry/Department will, therefore, draw up a Manual of Internal Audit, specifying the duties and functions of the organisation with particular reference to the conditions prevailing in the Ministry/Department. The guidelines contained in the ensuing paragraphs will regulate the working of these organisations, but these are of a very broad nature and have to be supplemented by detailed instructions to be issued by each Ministry/Department.
12.2.1. The Internal Audit Unit will work directly under the CCA/CA, with the overall responsibility for internal audit remaining, with the Financial Adviser of the Ministry/ Department concerned. The Principal Accounts Office, the Pay & Accounts Offices as well as the offices of DDOs in Ministries/Departments, Indian Missions and other Government of India offices abroad, shall be within the jurisdiction of internal audit. Internal audit shall also check initial accounts maintained in the executive offices to ascertain how far the rules and regulations, systems and procedures in accounting and financial matters are being followed. The scrutiny would inter-atia cover the checking of all accounts records including those relating to fund accounts, loans and advances, disposal of confiscated stores (CBEC), review of the installation and operating efficiency of expensive equipment and machinery and examination of the records of the physical verification of stores, equipments tools and plants. Examination of the accounts of autonomous bodies substantially financed by Government, but which are not subject to Statutory Audit, (institutions which get less than Rs. 25 lakhs by way of grant but, which, at present, do not come within the purview of audit by Statutory Audit) fall within the ambit of Internal Audit.
[Refer Correction Slip 153]
12.3.1 The ditties of the internal audit Organisation will inter-alia include the following:-
(i) study of accounting procedures prescribed for the department with a view to ensuring that they are correct, adequate and free from any defects or lacunae;
(ii) watch over the implementation of the prescribed procedures and the riders issued from time to time;
(ill) scrutiny and check of payments and accounting work of the accounting units;
(iv) investigation of important arrears in accounting and other connected records;
(v) coordination with other Ministries and C.G.A. regarding internal audit procedures;
(vi) periodical review of all accounts records;
(vii) pursuance/settlement of objections taken in test audit notes issued by statutory audit offices and other matters relating to statutory audit;
(viii) to examine and report on points or irregularities brought to its notice by the Principal Accounts Office/P.A.Os.
12.4.1 The work relating to internal audit should normally be conducted by locally inspecting various units and offices and by 'on-the-spot' verification of accounts records. The work of the local inspection parties may be coordinated by a headquarters cell, depending upon the nature, number and size of the internal audit parties.
12.5.1 An internal audit party should conduct a general review of all the accounts records maintained by an office since the last inspection or in case of new units, since the formation of the office. Apart from the general review, it should also conduct a detailed check of accounts records of one month in a year to be selected by the Controller/Deputy Controller incharge of internal audit. The percentage of bills/vouchers/cases etc. other than those pertaining to the accounts records of the selected month to be checked in detail by internal audit as part of the general review of the accounts of an office, will be left to the discretion of the head of the internal audit unit. The extent and nature of checks will include the following:
(a) detailed scrutiny of accounts records required to be maintained in Pay and Accounts Offices/in the offices of DDOs;
(b) verification of payment and accounting procedures in the departmentalised system of accounts including procedures to be followed by cheque drawing DDOs, to see in particular that the scope and extent of pre-check and post-check by PAOs are adequate and that the procedures for maintenance of provident fund accounts, finalisation of pension cases etc. are being duly observed;
(c) verification of the extent and frequency of control and checks exercised by the head of office, in order to locate any lacunae in procedures whereby frauds or defalcations may be possible either individually or in collusion. Where necessary, steps to remove such lacunae will be suggested;
(d) scrutiny of sanctioning and purchase procedures in the office, inspected, so as to ensure that they are free from any defect or lacunae;
(e) checking of procedures in regard to disposal of assets to ensure that there exist adequate scrapping/condemning procedures;
(f) scrutiny of general office management procedures adopted by the heads of offices locally where these have financial and accounting implications so as to suggest tightening up administrative and financial control, savings in expenditure or streamlining of accounting.
12.6.1 Internal audit parties will inter-alia exercise the following checks during inspection of accounts records of various offices:
(A) Pay and Accounts Offices
(a) All accounts records required to be maintained are maintained in the prescribed forms, and the accounts are compiled accurately and in correct manner;
(b) Payments are made in accordance with the rules and orders governing them and the arithmetical calculations are correct;
(c) Last claims of government servants are correctly paid and over payments if any, brought to the notice of concerned DDO for appropriate action:
(d) Recoveries/deductions made from the bills are in order;
(e) Pay fixations are correct;
(f) All payments and receipts ere duly accounted for ;
(g) All transactions are accounted for under the correct heads of account and the classification is checked by the JAO/AO to the extent prescribed. No unauthorised head of account is operated in the Classified Abstract/Consolidated Abstract;
(h) Various broadsheets, objection books and calendar of returns are maintained properly; the broadsheets are closed regularly every month, and the differences between broadsheets and ledger figures analysed and steps taken to clear them expeditiously;
(i) The balances outstanding under various debt, deposit, suspense and remittance heads are reviewed at periodical intervals and steps taken to clear the same as expeditiously' as possible;
(j) Interest wherever required has been correctly calculated and accounted for;
(k) GPF/CPF accounts are maintained properly and agreed by maintaining the prescribed broadsheets; no missing debits/credits and unposted items are kept outstanding for unduly long periods and the annual accounts are closed and statement of accounts issued by the due dates;
(l) Foreign service contributions, wherever necessary are recovered correctly;
(m) Loans and advances and grants-in-aid are correctly paid and overpayments, if any, brought to the notice of concerned DDO for appropriate action;
(n) Receipt scrolls/payment scrolls with challans and paid cheques are received in time from the primary bank branches, checked property as per instructions and the discrepancies, if any, pointed out promptly;
(o) ln the case of payments made by cheque-drawing DDOs, the lists of payments accompanied by paid vouchers are received every week by the prescribed dates from them, checked and properly accounted for;
(p) The weekly accounts of receipts realised and remitted by the departmental officers with duplicate copies of challans, are received from them and checked property with the bank scrolls;
(q) The instructions regarding reconciliation of figures under the heads Public Sector Bank Suspense and RB Deposits are duly followed;
(r) The instructions regarding reconciliation of expenditure and revenue receipt figures are followed;
(s) There is no undue delay in the finalisation of pension cases.
(B) Cheque drawing/non-cheque drawing DDOs
(a) All accounts records required to be maintained are maintained in the prescribed forms;
(b) Payments made by the cheque drawing DDOs are in accordance with the rules and orders governing them, their arithmetical calculation are correct and the recoveries/deductions made from bills are in order; the lists of payments accompanied by paid vouchers are sect every week by them as per instructions to the concerned PAO by the prescribed dates;
(c) The instructions for the maintenance of cash book, contingent register, stock, and stores accounts, log books and other accounts records are duly observed;
(d) 'Account Payee' cheques (in favour of government servants and third parties being payable only to the concerned payees) issued by PAOs after pre-check of relevant bills, to DDOs are not being entered in the cash book maintained by them and that the delivery and acknowledgement of such cheques is being watched through a separate register required to be maintained for the purpose;
(e) Pay fixations are correct;
(f) The weekly accounts of receipts with duplicate copies of challans are being sent to the concerned PAO;
(g) Purchases are made as per rules and orders governing them, where lowest quotations are not accepted, the reasons therefor are recorded;
(h) All sub-vouchers pertaining to contingent charges not sent to the PAO along with contingent bills are available in office, are otherwise in, order and have been properly cancelled;
(i) G.P.F./C.P.F. accounts of Group 'D' employees are maintained properly;
(j) The instructions for processing/submission of pension cases to the-concerned PAO are observed.
The Internal Audit Party will also take an extract from the Register of P.P.Os maintained in the Principal Accounts Office in respect of the P.P.Os routed through it as well as those sent directly by the P.A.O. (vide para 7.1.4). A test check of these cases as well as those where pension is being paid by the originating Pay & Accounts Office itself should be conducted in the Pay & Accounts Office, with reference to the pension papers received from the concerned Head of Office.
[Refer Correction Slip 100]
12.7.1 While the Departmental authorities are primarily responsible to see that all revenue or other debts due to Government are correctly and properly assessed, realised and credited to Government account, it would be necessary for Internal Audit to see that adequate regulations and procedures have been prescribed in a Department to secure an effective check on collection and accountal of all revenue receipts and refunds and that such regulations and procedures are being followed correctly. It would also be necessary to ascertain the nature of checks exercised by the Departmental authorities to ensure prompt detection and investigation of irregularities, leakage of loss of revenue due to double refunds, refunds with reference to fraudulent and forged vouchers/challans or other types of omissions or commissions in the process of levy/collection of taxes or in ordering refunds.
12.7.2 In the Internal audit of revenue receipts the Internal Audit Party should inter alia ensure the following by such test checks as may be considered necessary:-
(a) That the demands are raised promptly in the manner required by the Law or Act of Parliament and that no amount due to Government is left outstanding in its books without sufficient reasons;
(b) that the collections and refunds are accounted for regularly and properly under the appropriate heads of accounts and that no sums are credited to Government by debit to a suspense head; credit must follow and not precede realisation;
(c) that proper safeguards exist to ensure that there is no willful omission or negligence to levy or collect taxes or to arrange for refunds, wherever due;
(d) that double refunds, fraudulent or forged refund orders or other losses of revenue through fraud, default or mistake are promptly brought to light and investigated; and
(e) that all revenue receipts collected by departmental officers are promptly remitted to the bank or the P.A.O.. as the case may be, and that the receipts as per their records are reconciled with those booked in Government accounts on the basis of receipted challans, in accordance with the procedure laid down in Chapter I of this Manual.
12.8.1 The programme for internal inspection for each of the parties will be chalked out by the internal audit organisation and got approved by the Controller/Deputy Controller incharge of the internal audit. Timely intimation Of the proposed visit of the inspection party will be sent to all the officers concerned. A copy of the programme will also be forwarded to the PAO concerned.
12.9.1 The head of the office to be inspected will be advised of the dates of inspection well in advance. A list of records to be examined during internal audit shall also be prepared and sent to him, alongwith the notice of inspection so that these are kept ready by him before the arrival of the party.
12.9.2 The accounts records maintained by the offices visited will be made available promptly to the internal audit parties.
Note 1The payments made by a cheque drawing DDO during the selected month (s) will be verified by the internal audit party with reference to the counterfoils of cheques, copies of the bank scrolls, pay bill register or office copies of the paid vouchers available with the D.D.O. It will, therefore, not be necessary for the party to obtain original paid vouchers etc. from the PAO. However, in the case of payments of long-term loans/advances etc. for which the bills are presented by him to the P.A.O. for pre-check and payment, the internal audit party shall obtain from the P.A.O., a list of all such payments made by him during month (s) selected for audit for the purpose of checking that the cheques/bank drafts marked 'Account Payee' had been made over to the correct payees and their acknowledgements obtained; and that the cheques/bank drafts issued in favour of the cheque-drawing DDO for arranging payment in cash had been entered in the cash book maintained by him.
Note 2—In the case of DDOs without cheque-drawing powers, the original paid vouchers for the month (s) selected for local audit would be required by the internal audit parties. These should, therefore, be obtained by them from the PAOs. However, the lists of payments and cheques issued by the PAOs/cheque-drawing DDOs in the case of payments pertaining to such D.D.Os will not be required by internal audit parties and these need be called for from the P.A.O.
Note 3The lists of payments and paid vouchers will be furnished by the PAO to the parties promptly on receipt of necessary requisitions. A list showing particulars of discrepancies/defects or other irregularities, if any, noticed during the course of scrutiny of bank spoils with reference to the related paid vouchers and cheques, remaining unsettled or any other important point requiring investigation may also be furnished by the P.A.O. to the internal audit parties for 'on the spot' examination and report.
Note 4In the case of Divisional Offices working on the public works system, the paid vouchers and other original records pertaining to the month(s) selected for audit shall similarly be sent by the PAO to the internal audit party. A record of paid vouchers furnished to/received back from internal audit will be maintained by the PAO in a register in the form in the Annexure 'A'. This register will be reviewed monthly and necessary action taken where the paid vouchers have not been received back. It will be the Inspecting Officer's responsibility to return the vouchers immediately after internal audit of the concerned office is completed.
Note 5The above instructions will also be followed mutatis mutandis in the case of audit of DDOs' offices to be conducted by statutory audit parties.
12.10.1 The frequency of internal audit will obviously depend upon the staff strength sanctioned for Internal Audit Organisation as well as the number of units falling under its purview. The number of days for inspection, as also the frequency would depend on the amount of expenditure, the nature of transactions, the state of arrears and the general health of accounts of each unit. It would however be desirable to aim for internal audit of all important offices once a year."
[Refer Correction Slip 154]
12.11.1 The inspection report should be couched in polite language. Offensive or strong words, sarcastic language etc. should on no account figure in the report. 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; it is for the administrative authorities to take action in the matter. The inspection report should be in two parts, Part-1 containing outstanding objections from the previous inspection report and Part-11 irregularities noticed during the current audit.
12.11.2 Routine errors of omissions or commissions noticed during the course of inspection may be got rectified on the spot. Inspection reports should invariably be discussed with the heads of offices inspected and their comments, if any, suitably incorporated in the reports. Inspection reports should be issued after being vetted at the headquarters. One copy of the inspection report will be issued to the head of office inspected and one copy will be sent to the Principal Accounts Officer i.e. Chief Controller/Controller of Accounts. Important points should also be brought to the notice of FA/CAA by the head of the Internal Audit Organisation. The progress of settlement of the points raised in the report should be watched by the Controller of Accounts/Deputy Controller of Accounts incharge of Internal Audit Organisation and all points outstanding should be reviewed at the time of the next inspection by the internal audit party.
12.12.1 In order to keep a watch over the settlement of audit objections included in the Test Audit Notes issued by Statutory Audit offices, the Internal Audit Organisation ill maintain a register in the form in Annexure 'B', setting apart separate folios for each D.D.O. The progress made towards the settlement of outstanding objections should be reviewed quarterly and appropriate further action taken to ensure their speedy settlement. The compliance with the objections reported to have been made by D.D.Os should be verified during next internal audit of the concerned office. The register will be produced to Statutory Audit Parties whenever asked for, for verification of settlement of the objections raised.
[Referred to in Note 4 below para 12.9.2)
REGISTER SHOWING PARTICULARS OF PAID VOUCHERS FURNISHED TO INTERNAL/STATUTORY AUDIT PARTIES
|S.No||Particulars of office to be audited||No.& date of requisition||No. & date of letter with which sent||Particulars of inspecting officer to whom sent||Month(s) to which the vouchers required pertain||No. of vouchers furnished||No. & date of letters with which vouchers received back||No. of vouchers received back||No. & date of reminders, if any, issued||Remarks|
Note: Separate register will be maintained for recording particulars of voucher supplied to the internal and statutory audit parties.
(Referred to in para 12.12)
Name of the office................................................
Particulars of Audit Officer....................................
|Sl. No||Letter No. & Date with which Test Audit Note received||Period of accounts covered by Audit||No. of Objections raised||No. of objection settled (quote S. No. of paras settled)||Paras outstanding||Action taken||Remarks|