Download - Presentation on Pre-Audit of Payment
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PRESENTATION
ON
PRE-AUDIT OF PAYMENT
AREAS OF CONCERN
DIRECTED BY: CGDA
PRODUCED BY : SAVITUR PRASAD
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WHY AUDIT IS REQUIRED?
Whenever the advance of civilizationbrought about the necessity of oneman being entrusted to some extentwith the property of another, the
advisability of some kind of checkupon the fidelity of the former wouldbecome apparent.
Richard Brown, The History o f Account ing andAccountants, 1905
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WHAT IS AUDIT?
Audit is the independent objective
assessment by the Governance on the
assessment of Governmentssystemsand practices, against criteria.
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?
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CAG ACT 1971
In pursuance of Section 23 of the Comptrollerand Auditor Generals (Duties, Powers andConditions of Service) Act, 1971, the CAG ofIndia, has defined
Audit means examination of accounts,transactions of records in performance of dutiesand exercise of powers of the CAG asprescribed in the Constitution of India andincludes performance audit or any other type of
audit determined by the CAG of India.
When used as a noun, it refers to AuditDepartment as a whole or any part thereof asper context.
.continued
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CONSTITUTIONAL PROVISION
Audit report of the ComptrollerGeneral of India means a report of
the CAG of India underArticle 151ofthe Constitution of India.
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As per the CAG Act 1971, the broad
objective of the audit are to ensure
legality, regularity, economy, efficiency
and effectiveness of financial
management and public administration
mainly through assessment as to:
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1. Whether the financial statementsare properly prepared, arecomplete in all respects and are
presented with adequatedisclosures(financial audit);
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2. Whether the provisions of the
Constitution, the applicable laws,
rules and regulations made
thereunder and various orders and
instructions issued by competent
authority are being complied with
(compliance audit); and
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3. The extent to which an activity,programme or organizationoperates economically, efficiently
and effectively (performance audit).
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As per the CAG Actallaudits undertaken
by the CAG, or on his behalf, shall be as
per the Constitution of India and the Act.
These regulations, standing orders,guidelines and practice notes issued by
the CAG shall guide the conduct of such
audits.
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WHAT IS PRE-AUDIT?
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WHAT IS PRE-AUDIT?
Pre-audit is an upfront auditing
procedure and the examination of
documents supporting a transactionor series of transactions before
these are paid for and recorded.
.Continued
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WHAT IS PRE-AUDIT?
Pre-audit operates to:-
- determine that the proposed expenditure
is in compliance with appropriation lawand other specific statutory authority andregulations
- assure that sufficient funds are available
.. continued
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WHAT IS PRE-AUDIT?
- initially determine that the transaction is
not illegal, irregular, extravagant,
excessive, unconscionable or
unnecessary
- determine that the transaction is approved
by proper authority and supported byauthentic underlying evidences.
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PROCEDURES PRESCRIPTION
FOR PRE-AUDIT :
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PROCEDURES PRESCRIPTION
FOR PRE-AUDIT :
As per CAG Act, 1971, Audit of expenditureincurred from the Consolidated fund examinesand verifies whether adequate, proper and
sound systems and procedures are in place andare being complied with, both in letter and spirit.
Whether the Authority is competent to authorize
the payment.
continued
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PROCEDURES PRESCRIPTION
FOR PRE-AUDIT :
Compliance with the requirement of the applicablelaws, rules, regulations, orders and instructions inactual disbursement;
Evidence by way of vouchers, payeesacknowledgement etc;
Accounting in the books of the Government ; and
Monitoring, control and reporting as prescribed inGovernment rules.
. continued
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PROCEDURES PRESCRIPTION
FOR PRE-AUDIT :
As per CAG Act, Audit shall bring to light not
only significant cases of irregularity and breach
of rules, regulations and orders but also every
matter which,
in the judgement of audit officer, appears to
involve significant unnecessary, excessive,
extravagant or wasteful expenditure of publicmoney and resources despite compliance with
the rules, regulations and orders.
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PROCEDURES PRESCRIPTION
FOR PRE-AUDIT :
Copies of all orders sanctioning
expenditure issued by the SanctioningAuthority shall be endorsed to audit officeas soon as these are issued.
The orders shall cite reference to theauthority by way of rules, regulations etc.
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CONFUSION GALORE
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CONFUSION GALORE - ISSUES
All revenue expenditure are incurred after
concurrence by the IFAs.
Audit of Sanction still a weak area.
Absence of periodicity / validity of IFAs
concurrence Period for placement of
order not binding on executive.
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PRE-AUDIT OF PAYMENTS
AREAS OF CONCERN
Before making a payment the audit has to satisfyitself about the admissibility of the paymentunder reference.
The rule 18 of Defence Audit Code allows theaudit to call for any documents in relation thepayment and ask the authorities necessary
explanation as it may consider necessary.
..continued
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PRE-AUDIT OF PAYMENTS
AREAS OF CONCERN
However since the introduction of IFA system at
command/unit level and Defence Purchase
Manual the method of incurring expenditure and
concurrence of sanction has undergone achange.
Under IFA system the IFA is concurrently
associated with purchase procedures from RFPonwards till issue of sanction and placing of
Supply Order...continued
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PRE-AUDIT OF PAYMENTS
AREAS OF CONCERN
The DPM vide Para No. 7.8.4(b) has given thedocuments to be submitted for payment.
This suggest that if expenditure / sanction isconcurred by IFA and documents as per abovePara is submitted, the PCDA is bound to releasethe payment.
The question here is whether a sanctionconcurred by IFA can be objected in audit byPCDA
..continued
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PRE-AUDIT OF PAYMENTS
AREAS OF CONCERN
The contractual obligations are statutory. The
question here is whether Audit can reject a bill of
payment which has created liability for the
Government through sanction order issued by
an Authority, who is not competent to do so.
Whether any mechanism exist to redress thegrievance of third party, who is put to financial
loss, though no irregularity can be ascribed to
him.
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AREAS OF CONCERN-CONTD
Broadly, payments can be categorised as
under:
- Payment related to personal claims.
- Payment related to stores etc.
- Payment related to imprest accounts.
Further, payments can be from revenue
head or capital head
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AREAS OF CONCERN-CONTD
Some Case References
INMARAST Bills.
Communication system provided to ships,submarines during sailing.
INMARAST leased line facility provided byTATA TELE Services for 77 terminals for24 X 7 usage on global beam 64 E.
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AREAS OF CONCERN-CONTD
Facility provided for IN Ships for
communication between command
headquarters and ships on sailing through
satellite.
The rate charged by the service provider is
on higher side compared with normallandline and mobiles ( Pulse rate for each
second is Rs.5.10)
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AREAS OF CONCERN-CONTD
It is observed from the bills that majority ofcalls (90%) are on account of private callsto mobiles, residential phones etc.
It is also observed that calls are also beingmade to foreign countries to private
numbers. The monthly expenditure forsome of the months is as under:
.
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AREAS OF CONCERN-CONTDMar 2012 ---------- Rs. 36.67 cr.
Apr 2012 ---------- Rs. 22.20 cr.May 2012 ---------- Rs. 32.60 cr.
June 2012 ----------- Rs. 34.32 cr.
July 2012 ---------- Rs. 28.84 cr.Aug. 2012 ---------- Rs. 17.16 cr.
Sep. 2012 ----------- Rs. 16.59 cr.
Oct. 2012 ----------- Rs. 11.56 cr.Nov 2012 ----------- Rs. 9.57 cr.
Dec. 2012 ----------- Rs. 11.02 cr.
Total ----------- Rs. 220 cr.
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AREAS OF CONCERN-CONTD
Payment of Overtime to industrial employees
The practice of paying unlimited overtime toindustrial employees of Naval Dockyard and otherestablishment has been successfully stopped byinsisting on observance of allowance inaccordance with Factories Act, 1948.
Matter was raised up to Secretary (Ministry ofDefense) but the stand taken by PCDA, Navy wasaccepted ultimately, resulting in saving of crores ofRupees.
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AREAS OF CONCERN-CONTD
Payment of Overtime to industrial employees
The anomalous situation of wrongly interpreting therule for years has been corrected but it is a matterof concern that such wrong practices continue intotal violation of laid down provisions despite theDraft Para raised by Test Audit Authorities.
Open violation of rules and regulations shall not beallowed under any pretext. Either the rule bemodified or practice should not be allowed tocontinue.
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AREAS OF CONCERN-CONTD
Payment recommended for PSU like HSL/GRSEwhere case of extension for delivery periodpending with MoD
Repair and Refit bills received from PSUs forpayment and recommended by units without validdelivery period extension for the contractconcluded by the Ministry creates confusingsituation where payments are insisted though casefor approval of extension pending with Ministriesfor months/years.
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AREAS OF CONCERN-CONTD
Various critical components including main engineof interceptor boat differ from the Maker namementioned in the Contract. 4 Boats since havebeen supplied. Whether to agree for release offurther payment as and then next 4 boats aredelivered in another few months time.
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AREAS OF CONCERN-CONTD
Main Engine of Interceptor Boat
Contract for construction of 36 Interceptor Boats ata cost of Rs.976.95 crores was concluded betweenGovt. of India (Ministry of Defence) and M/s Larsen& Toubro Ltd., Mumbai.
The build specifications were laid down for
important and critical equipments and the Makersname and Module number are specified inAppendix III of the Contract.
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AREAS OF CONCERN-CONTD
Procurement of 4 KA 31 Helicopter Engine for22.61 crores
Views of the participants are solicited on course of
action to be adopted for 4 Helicopter Engines forKA 31 have been received by Navy.
The copy of the Government of Sanction dated 25th
of March 2011 is in next slide.
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CONTD
Sanction appears to be in order.
Yet the payment has not been released so
far.
Reason: Procurement has been through
Highseas Sales. Under which Clause of
DPM, the payment can be released.
CBI has asked for the papers and details.
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DHARTI DREDGING
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AREAS OF CONCERN-CONTD
Innumerable examples of irregularities of
nature brought out above.
Another case, in which sovriegn function ofcarrying out inspection test of submarine has
been outsourced to private vendor by
submarine overseas team (SOT) in
prestigious P-75 Project (Scorpion
Submarine).
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AREAS OF CONCERN-CONTD
Outsourced vendor is also supplier of stores
item to MDL, who is constructing the
submarine. Conflict of Interest.
Case Concurred by IFA.
Whether payment can be released ?
NON LINKED FOREIGN STORES
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NON LINKED FOREIGN STORES
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RESTRAINT AND AFFLUENCE
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RESTRAINT AND AFFLUENCE
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WAY FORWARD
Defense Audit Tribunal
- To cater to the matters involving litigation
pertaining to payments of all types which are
objected in Audit.
Whistleblower programmes on the lines of
Practice Followed in the Department of
Defence (US)
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DESPITE TURBULENCE
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DESPITE TURBULENCE,
PCDA (NAVY) ENSURES
DISCIPLINED PAYMENT