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INTERNAL AUDIT MANUAL

TEHRI HYDRO DEVELOPMENT CORPORATION LIMITED

FOREWORD
I am happy that the Corporation has taken initiative in the establishment of manuals & procedures, and the Internal Audit Manual is published for implementation. The laying down of proper system and procedures and their implementation for sound Financial Administration is of paramount importance in any Organization The preparation of the Internal Audit Manual will prove to be a milestone towards streamlining the systems, rules and procedures of THDC. I am confident that with the implementation of the Internal Audit System, which incorporates the objectives of Internal Audit and also outlines the process of checks to be exercised during Internal Audit of the different Units/Wings of the Corporation, would contribute towards establishing a sound Internal Control Mechanism. I wish for its effective implementation in true spirit.

R.K. SHARMA CHAIRMAN & MANAGING DIRECTOR

PREFACE
Tehri Hydro Development Corporation Ltd. after it was set up in July, 1988, initiated number of accounting procedures and policies like Works, Purchase. Delegation of Powers, Accounting Manual and procedures etc. Internal Audit Manual is latest one in this series. Internal Audit is not only a requirement under the Companies Act but also a necessity to run the organisation effectively and efficiently. Unless there are proper systems. procedures, manuals and overall systems of checks & balances the implementation in the Project can go hay wire Internal Audit ensures that the policies, systems and procedures are followed and the deviations pointed out. This becomes difficult without a proper Internal Audit Manual. This Manual is a step towards better control. The head of Internal Audit will report to the Director (F) of the Corporation. He also be responsible for getting the Manual updated and inform improvements considered necessary so that the same can incorporated. This Manual is for use only by the Finance Department. the will the be

R.S.T. SAI DIRECTOR (FINANCE)

CONTENTS CHAPTERS 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. Introduction Set-up of the Internal Audit Department Scope of Internal Audit General Principles and Rules .of Auditing Systems Audit & Management Audit Finance & Accounts Departments Personnel, Administration, Public Relations, Company Sectt. Law and Vigilance Departments Contracts and Procurement Departments Rehabilitation Departments (Rural & Urban) Civil Works Departments Mechnical and Electrical Departments Compilation of Results of Internal Audit Loans, Advances and Deposits Disposal of Internal Audit Notes, Inspection Reports, Draft Paras, Audit Reviews and Matters Brought out in the C.A.G.'s Reports on Public Sector Undertakings Review of Progress of the main Project ComponentsFinancial and Physical Stock-taking Data Processing for the Computerization of Accounts, etc. Forms for the Department PAGE NO. 1 4 10 13 24 27 34 42 48 52 61 66 69

75 77 78 79-88

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INTRODUCTION
1.1 Audit in the simplest sense means examination and 'Internal' means work carried out by self deployment of persons i.e. by the management. The Internal Auditor is. therefore, appointed by the Management and the responsibility of the Internal Auditor is to the Management; he conducts audit at the behest of the Management and reports back to the Management. The Internal Auditing has been defined by the Institute of Internal Auditors Incorporated, (USA), as An independent appraisal activity within an organisation for the review of operations as a service to Management. It is managerial control which functions by measuring and evaluating the effectiveness of other controls". The Internal Audit is, therefore, one of the items of internal controls, which reviews and checks the efficacy and sufficiency of other controls. It will not confine to accounting and financial activities of an organisation but will coverall operational activities. The end result or objective is service to the Management. The internal Audit is the primary audit conducted on behalf of the Management on which the Statutory Auditors and the Government Audit agencies also rely and base their observations. It is a supporting activity to both the Statutory and external Audit agencies. Adequacy of the Internal Audit is essential to meet the provisions of the Companies Act to ensure a consistent review of the operations and records, including internal checks; and other forms of control. With the changed economic scenario of expansion, diversification, decentralization, mergers and take-over, the corporate entities have become more' complex and as a result, the intimate and personal management concept practiced earlier, possible in a small firm, has disappeared. These developments have led to a greater awareness of the most effective use of corporate resources-physical, financial and human and the organisations look for some objective system of appraisal of controls and operations to attain maximum economy in the utilization of their resources. Internal Audit is appropriately poised to provide the answer. As the eyes and ears of the management Internal Audit is concerned with ensuring prompt compliance with various instructions issued by the Management from time to time and assist the different departments in their implementation. A proper system of Internal Audit also helps in ie examination of the existing systems with a view to seeking suitable improvements. In the past, the Managements have been getting their accounts checked internally, by deputing a team from within their cadres as a measure of control mechanism for quite some time so that the inherent weaknesses are brought to their notice before they are detected by Statutory Auditors. However, the types, extent, periodicity and scope, and whether to have it or not, was totally discretionary earlier. The importance of having a regular Internal Audit system within an organization came to be formally recognized by the Government

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of India in 1975 when it promulgated the Manufacturing and the Other Companies (Auditors' Report) Order 1975 (popularly called the (MAOCRO) and made a statutory requirement for Statutory Audit of all companies with a paid-up capital of Rs. 25 lakhs or more to report on the Internal Audit system within the Company. The Statutory Auditors are required to report, under section 227 (4A) of the Companies Act, on the adequacy, scope and sufficiency of Internal Audit system and whether the same is commensurate with the size and nature of business of the company. The coverage of the Internal Audit was further enlarged, with the amendment of the MAOCARO in 1988. The statement on MAOCARO issued by the Institute of Chartered Accountants of India indicates the scope of Internal Audit to cover a large number of areas including operational auditing, organization and methods studies, special investigations and the like. The statement gives a number of parameters like the size of the Internal Audit department, the qualifications of the persons who undertake the Internal Audit work, areas covered by Internal Audit, the quality of reports, the action taken for follow-up, the existence of other forms of internal control etc. to evaluate the adequacy of the Internal Audit system in the company. 1.5 The Comptroller and Auditor General of India (C&AG) has also stressed the role of Internal Audit system for effective functioning of PSUs by including matters related to Internal Audit in their directive to the Statutory Auditors under Section 619(3) (a) of the Companies Act. The directive requires the Statutory Auditors to specifically answer whether the managements have considered important points thrown up by Internal Audit and, if not, what the important points are on which consideration/action is pending. The Department of Public Enterprises (DPE) has also emphasized the importance of Internal Audit in a PSU by circulating the recommendations of Parliamentary Committee on Public Undertakings (COPU) which stated that the Internal Audit organization of individual Undertakings shall be charged with the task of pointing out deviations in the normal course and the Finance Director should report the position to the Board and the Government. DPE has further advised that the Chief Executives as well as the Government representatives on the Boards of Public Undertakings, viz. those drawn from the Administrative Ministries and the Finance Ministry, should also bring such cases to the notice of the competent authority whenever they consider it necessary . Tehri Hydro Development Corporation Ltd. was set up in 1988 for the construction of the Tehri Hydro Electric Project and other connected Projects, which had been started in the early seventies by UP Irrigation Department (UPID). The basic system of record keeping for the development and infrastructural works handled by UPID was essentially based on Public Works Department Accounts system. After the take over of the project by the Corporation in June 89 the corporation has been the commercial system of accounting as required by the Companies Act, 1956.

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1.8.1 In order to meet the statutory requirement of introducing the Internal Audit system, as required under the Companies Act, 1956, the Corporation had

entrusted the Internal Audit to independent firms of Chartered Accountants in the earlier years. However the Corporation has since set up the Internal Audit Department of its own. 1.9. The next step in this direction was the preparation of the Internal Audit Manual. This has been tailor-made to suit the working requirement of the specialized field of execution of a huge Hydro Electric Project. In the preparation of this Manual, every effort has been made to cover the entire gambit of activities of the Corporation as a whole, to meet the statutory requirements of the Companies Act, 1956. Selection of suitable personal team building under expert guidance and expose to training would go a long way in the establishment of the internal Audit system in the right direction. The present internal Audit set-up has been designed to work under the direction and overall control of the Director (Finance) and under the direct supervision of the Chief internal Audit Officer of the level of Dy. General Manager or Sr. Manager. The working strength and functional set-up of internal Audit would require review from time to time and strengthening it for carrying out its functions all the year round. The Audit teams are expected to make suggestions for improvement in the Manual. They may be sent to the Chief Internal Audit Officer who has also been assigned the responsibility for keeping Manual uptodate. The Manual shall be treated as a confidential document. It is designed specifically for exclusive used by Tehri Hydro Development Ltd.

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ORGANISATlONAL SET -UP OF THE INTERNAL AUDIT DEPARTMENT


2.1. Internal Audit Department has been set up to take up the duties and responsibilities envisaged in the Companies Act, .1956. The functional set-up, the Man-power requirement and the duties and responsibilities of the Department, keeping in view the Departments functioning at different locations and the set-up of the Head Office, shall be as detailed below. The Department shall function centrally and-Internal Audit Inspections of the Head Office and the Departments located at Tehri Project Complex and other offices located elsewhere shall be conducted by deputing inspection Parties. As more and more Departments start functioning with the increased construction activity, the set up of the Internal Audit Department shall be reviewed and strengthened and setting branch Offices would be considered. For the present, the set-up shall be as under: Deputy General Manager/Sr. Manager (as Chief Internal Audit Officer) (CIAO} Deputy Manager (H.Q.) Sr. Accounts Officer/Accounts Officer (as Inspecting Officer (IO) .of the Party) Engineer (Civil) H.Q. Asstt. Accounts Officers (H.Q.-1. Field-2} Sr. Accountants/Assistants (H.Q.-2. Field-2) Stenographer (H.O.) Typist (H.Q.) Attendant .(H.Q.) 2.3. 1 1 1 1 3 4 1 1 1

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The functional set-up shall be as under: The Director (Finance} will be the Reporting Authority for .the Department. Under whose direction and control, the Internal Audit functions shall be carried out. All-important matters requiring consideration and action at the level of the Board and Heads of the Departments shall be issued with his approval. He will be the authority for taking action in these matters. The Chief Internal Audit Officer will report to Director (Finance) for al' matters requiring attention of the top management. The CIAO will submit to Director (Finance) a summary of the important points brought out in the Internal Inspection Reports issued during the quarter in Form IA 2.4 or in such form and/or manner as may be prescribed by him. The points as are considered important shall be brought to the notice of the Board of Directors through the Chairman & Managing Director in the format desired by the Board. Any follow-up action desired by the Board shall be taken by the I.A. Department.

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Selection of Internal Audit Personnel Besides possessing a theoretical and practical knowledge of accounting and auditing the Internal Audit personnel should have adequate knowledge of industrial engineering, management, organization and personnel including a working knowledge of commercial taxation, computers, statistics etc. They must also possess, in addition, the ability to get along with people. The persons included in the Internal Audit Team should have the personal qualities of following the principles of integrity, objectivity, independence and confidentiality .They should be capable of giving innovating and considered service to the management for making judicious decisions.

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Funtions of the Internal Audit (HQ) Office. The Internal Audit (HQ) shall function under the direct control and supervision of the Chief Internal Audit Officer, who shall assign duties, jobs and responsibility to the Officers and staff working under him. The functions to be performed and records to be maintained shall be such as to meet all the functional requirements of the Department as per the provisions of the Manual and generate data and information to satisfy the Statutory Audit with regard to the provisions of the Companies Act.

. Among the important functions to be performed shall be as under: (a) Vetting of the draft Inspection Reports with regard to the format, supporting documents, their being complete and free from all ambiguities and deficiencies. (b) Maintenance of Control Register of Inspection Reports in form IA 2.6(b), recording the data before issue of the Inspection Report approved by the CIAO. (c) Issuing the Inspection Report with the forwarding letter form IA 2.6(9}. watching receipt of replies within the prescribed period, reviewing the replies, submission of further remarks on the replies and watching the final settlement of the points brought out in the Inspection Reports. (d) Issuing of special Notes containing matters not forming part of the Inspection Reports, watching their replies and final settlement. A Register in suitable form shall be maintained to keep record of all the special Notes and matters for proper pursual . (e) Maintenance of Control Register of Departments and Offices under the Internal Audit control of the CIAO in form IA 2.6(e). All particulars regarding Head of the Department/Office, its location, time allotment, periodicity of audit, actual dates of audit, special features and instructions, if any, for future audit Inspections and periodical review shall be provided for therein. (f) Maintenance of complete record of Audit observations from the Statutory Auditors on the Accounts of the Corporation incorporated in its Annual Report. their pursual for settlement and obtaining the Action Taken Reports from the concerned Departments. Also, complete record of Draft Audit Paras. E.C. P.A. Reviews and Special Audit Reports from Government Audit shall be kept in form IA 2.6(f) and their settlement watched. The matters that appear in the C.A.G.'s Audit

(g)

Reports on Commercial Undertakings shall also be handled for proper pursual with the Departments concerned to help the concerned authorities to get them settled. Matters on which Reports of the Committee, on Public Under1akings (COPU) giving their recommendations are received, submission of the Action Taken Repor1s within the stipulated time to the Lok Sabha Secretariat shall be watched. Handling any other matter or assignment given by the superior officers of the Depar1ment from time to time.

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Duties and Responsibilities of the Chief Internal Audit Officer The Chief Internal Audit Officer will be the overall incharge of the Internal Audit , Department and shall be responsible for the planning and proper functioning of the Department in accordance with the directions of the Board of Directors/Chairman and Managing Director, provisions of the Companies Act, 1956 and of the Internal Audit Manual. CIAO will have full and free (without any restriction) access to all the records, property and personnel of the Corporation so as to accomplish the task entrusted to him. The duties and responsibilities to be discharged shall include the following: (i) To review the Departmental Manuals, Executive orders issued by the top Management and Heads .of Depar1ments and the systems and procedures being followed by different Departments. Their adequacy, as regards. the requirements and consistency with the overall functioning of the Corporation, shall be seen and deficiencies, if any, pointed out. In case, there are areas where the rules,' systems and procedures have not been laid down, and if laid down, are not being followed properly, It shall be impressed upon the concerned authorities and to follow them properly. (ii) To bring out inaccuracies in the maintenance of accounts, impor1ant records and non-observance of the prescribed procedures, rules and instructions and repor1ing the important results promptly to the Management. (iii) To make constructive suggestions to the Management for improvement in different fields of activities of the Corporation, keeping in view the economy and efficiency and for the achievement of objectives of the Corporation in speedy execution of the important components of the Project. During the course of Internal Inspections, certain important matters may come to notice which may require consideration by the Board of Directors. Suitable Notes. based on the' Audit observations. may be 'submitted to Director (Finance) for apprising the CMD/Board of Directors and follow-up action, if any, to be taken. (iv) To constitute Inspection Par1ies to conduct Internal Inspections in accordance with the approved programme and as per the particular matters or months selected for detailed check. (v) To approve the Inspection Repor1s prepared by the Inspection Par1ies under the supervision of the Inspecting Officer, submitted to him by the ay. Manager (HO) duly vetted and finalised for issue to the concerned

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(vi)

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Depar1mental Heads for necessary action and for submission of replies. It is the responsibility of the CIAO to keep the Internal Audit Manual effectively functional suggest additions and improvements for incorporation after approval by the competent authority and keep it uptodate. All suggestions for improvement received from the members of the Internal Audit Department and others shall be taken into account and suitably incorporated in case they are found to be useful. The CIAO shall exercise all the powers entrusted to him and devolving upon him as per the provisions of this Manual and discharge all the duties and responsibilities entrusted to him in relation to the efficient functioning of the Department. To conduct special audit at the behest of the Management.

Duties and Responsibilities of the Deputy Manager (HQ) The duties and responsibilities of the Deputy Manager (HO) shall include the following: (i) Deputy Manager (HQ) will be assisted by a Technical Officer of the rank of Engineer (or from another technical discipline) and an AAO and two Sr. Accountants/Sr. Assistants. All draft Inspection Reports shall be received and examined with reference to the provisions of the Manual, vetted, and if found acceptable from the technical and other angles, submit it to the CIAO for approval. The Report, after approval shall be got typed and issued in the manner prescribed in the manual. Receipt of replies to the points brought out shall be watched the authorities concerned reminded in case of delay. On receipt of the replies these shall be examined in his Office and further remarks. if any or the fact of settlement, shall be conveyed to the concerned Departments by him after getting approval of CIAO. (ii) Any important controversial matters or points to which attention of higher authorities is considered desirable, the same shall be brought by him to the notice of the CIAO. Advice of the CIAO shall be freely sought on all important matters coming to his notice through the handling of Inspection Reports or otherwise. (iii) The programme for the conduct of Internal Audit Inspections shall be drawn up according to the prescribed procedure with a view to ensuring that all Departments and Offices having independent functional entity are covered in a yearly cycle (be it in one or two,phases). The programme shall be drawn up quarterly and approved by the CIAO. In case any change is considered desirable in the periodicity. Extent of checks to be exercised or time allotment. suitable suggestions shall be submitted for the consideration of the CIAO and changes effected with his approval. The Departmental heads shall be informed (vide form No. IA 2.8) about the approximate date on which the Internal Audit Inspection is to be taken up. (iv) Upkeep of the Internal Audit (HQ) Office and maintenance of all relevant records in the prescribed form, generation of data for submission of Reports of Management Information System shall be the responsibility of the Dy. Manager. He shall supervise all the functions of his office, including clarification of technical matters.

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(v)

The Technical Officer attached to the IA (HO) or any other member of the staff may be deputed with the approval of the competent authority to assist the Internal Audit Inspection Party or to undertake any independent work-assignment of review of record or vetting any information, as may be considered desirable. It will be the responsibility of the Dy. Manager (HO) to ensure smooth functioning of the field Inspection Parties.

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Duties' & Responsibilities of Inspecting Officers The Inspecting Officer (Sr, Accounts Officer or Accounts Officer) will be the head of the Party comprising one or two AAOs, and one Sr. Accountant Assistant. The duties and responsibilities of the Inspecting officer shall include the following . (I) The work of the Party shall be fully supervised and conducted is under his directions. The duty list will be drawn up, keeping in view the seniority and expertise of each of the members of the party. (ii) All policy matters and the most important items of work will be handled Inspecting Officer directly. He will provide leadership, guidance and technical support to the members of the party. , (iii) All points detected during Audit Inspection and considered fit for inclusion in the Inspection Report shall be submitted to the Inspecting Officer along with the supporting records. These will be rearviewed by him and considered for inclusion in the Inspection Report. As far as possible the drafting shall be done personally. as per guidelines brought .out in the Manual, All points which are considered very important or those affecting the systems, etc. and/or more than one Deptt. shall be brought to the notice of the DM(IA) for further processing and action. (iv) Other important functions of Inspecting Officer shall be: (a) Conduct of general review of the Cash Book and scrutiny of transactions involving heavy expenditure and receipts of peculiar nature. (b) Disposal of previous Inspection Reports and getting settlement of points raised by the Statutory Auditors. (c) Examination of system of accountal of stores, purchases, and general review of purchases made. (d) Review of tenders and Contract Agreements of major works as per the scope of Audit in Chapter 3. (e) Cases of issue of major items of Machinery and Equipment and accuracy of recovery of hire charges from the contractors. (f) Test-check of records, of which detailed check has been assigned to the members of the party, in the nature of "sampling" to ensure that the duties assigned to the members have been duly performed as per provisions of the I.A. Manual.

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Duties and Responsibilities of the Technical Officer. The Technical Officer at the Internal Audit H.O, shall assist the Department in the technical vetting of the draft Internal Inspection Reports before they are submitted to the Deputy Manager for his examination and submission to the CIAO. At times, the departmental officers, in order to cover up the financial irregularity or non-acceptance of the lowest tender or quoted rates, may try to justify their actions under the cover of technical considerations. Even the technical specification of a particular item may be modified in order to allow higher rates of execution than those provided for in the Contract Agreement, necessitating fresh analysis of rates. These are sometimes resorted to on technical grounds, which may be justified to some extent. In cases of this type, technical vetting is called for to verify the bonafides of such assertions. There shall receive the expert attention of the Technical Officer Advice from other Technical Department may also be obtained for proper appraisal of the matter. The Inspecting Officer are expected to refer cases of this type encounted during the course of internal Audit inspections to the Internal Audit (HQ) for technical advice before rejecting or accepting any assertions of the Technical Officers of the Department . All technical matters, therefore arising out of check of records shall receive the personal attention of the Technical Officer (IA) before any final views in the matter are conveyed to the department authorities.

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3 SCOPE OF INTERNAL AUDIT


3.1 The Internal Audit Inspection of the Corporate Office and of the field Departments at Rishikesh, Tehri Complex and other stations shall be conducted locally accordance with the provisions of this Manual. The periodicity and time allotment for each of the Offices and Departments shall be as decided by CIAO from time to time. The guidelines for the extent to which various documents, classes of bills and accounts will be subjected to audit is given in the Annexure to chapter 4. Before proceeding to take up Internal Audit Inspection of a particular Department or Office, orders of the Chief Internal Audit Officer of the Corporation shall be obtained by the Inspection Party as to month's or months' accounts, major/minor Works or Purchase Orders are to be selected for detailed checking. The audit checks prescribed shall, however, be suitably increased where the state of Accounts is unsatisfactory and warrants a more detailed check. This shall more particularly be done incases where, in respect of Major Works, Purchases and other activities, Govt. Audit has adversely commented. A Financial Review has been undertaken, or Draft Paras have been attempted, by the office of the Member, Audit Board of the Comptroller & Auditor General of India. Accounts records, Registers and documents, not specifically mentioned in the Annexure will also be subjected to audit to the extent of one month's transactions in a period of six months/one year, according as the audit is conducted on half yearly/yearly basis and it will be ensured that no accounts records are omitted to be checked on the pretext that they are not included in the list. During the course of Internal Inspection whenever it is found that certain records being maintained have not been included in the Annexure, a suitable note for additions and alterations shall invariably be appended to the Inspection Report. The nature of records to be maintained in an organization depends upon the nature of its business. The Tehri Hydro Development Corporation Ltd. presently is mainly entrusted with the execution of the Tehri Hydro Electric Project and the related works. The works involved are gigantic civil works (Coffer Dams, Diversion Tunnels, Tunnel Head Race Tunnels, Rock-fill Dam, Tail Race Tunnels, Power House) apart from infrastructure works. Roads. Rehabilitation Works, development of new township (and works connected therewith), Hydro-mechanical and Electrical Works. After commissioning. the main activity would be to run and maintain the Generating Units and evacuation of power. For undertaking the construction works, preliminary steps to be taken include the acquisition of land, to rehabilitate and resettle the oustees by providing them with alternative dwelling units agricultural land, development of township, etc. All these works are essentially Public Works and the record-keeping closely and mainly is linked with the Public Works Accounts System.

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Powers (Technical, Administrative and Financial) for the execution of the Project vested in the Board of Directors, have been further delegated to the CMD who has further subdelegated powers to various lower functionaries related to scope and competency. The Board of Directors of the Corporation has approved the following policies which form the basiss of the main activities of the Project 1. Works Policy 2. Puchase Policy

These Policies lay down the broad outlines for these activities. All activities relating to the execution of works. be it the call of tenders, their processing upto the final award stage and execution and those relating to procurement of machinery .equipment and stores, are to be carried out in accordance with the Policies approved by the Board of Directors, and executive, instructions issued under them. Departmental Manuals as and when issued on these subjects have also to be followed. Actions of the Departmental authorities not covered by these Policies and orders shall be. commented upon and all important and serious cases brought to the notice of higher authorities. 3.6 The work on different components of the project. acquisition of land and Rehabilitation schemes for the oustees, was started by the U.P. Irrigation Department. The system of Accounts followed and the initial and basic records were all based on the Public Works Accounts System. After the transfer of the Project along with th9 Assets and Liabilities and the accounts records to the Corporation. the final figures of expenditure have been allocated to the new heads of accounts classification with other essential adjustments being effected to bring the accounts to Mercantile Book-Keeping system The Internal Audit Department is charged with the responsibility of reviewing the entire system of accounting, from the basic and initial records to the laying down of the overall system. The existing procedure and system being followed and accounts records being maintained have also to be reviewed to see how far they serve the needs and purposes of the Corporation for a sound financial management. It will be seen during Internal Inspections whether all the basic records essentially required to handle the Works have been adopted on the lines of Public Works, or have been suitably modified. and whether there is proper authorization for their adoption. All cases of discontinuance of maintenance of records which are necessary for proper financial control shall be pointed out, either for re-starting them, or to maintain modified ones which serve the desired purpose. In case in any particular field of activity, no approved system or procedure has been adopted, the desirability of making or adopting them shall be stressed. During Internal Audit Inspections it shall be seen that the Manuals, Rules, systems and procedures are framed by the Departmental authorities under the broad Policies approved by the Management, they are not ultra vires and are in consonance with the policies of Board of Directors. the general policies and guidelines of the Govt. of India. During the course of audit of the records

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of the Departments and the Corporate Office. if any inconsistencies or shortcomings are noticed, the same shall be brought to the notice of Management for such action as is considered necessary .

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The adoption of the system$ and procedure by the Departmental functionaries and maintenance of records and books of accounts is to be seen during Internal Audit Inspection on the following lines. Irregularities and lapses in following the rules and regulations and deviations in the approved procedure and systems are to be pointed out for rectification and for avoidance in their recurrence. (i) Reviewing and appraising the soundness, ~adequacy and application of accounting , financial and other operating controls and promoting effective control at reasonable cost. (ii) Ascertaining the extent of compliance with established policies, plans and procedures. , (iii) Ascertaining the extent to which company's assets are accounted for, for being safeguarded from loss of all kinds. (iv) Ascertaining the reliability of management data developed within the organization. (v) Appraising the quality of performance in carrying out assigned responsibilities. (vi) Recommending operating improvements. Internal Audit shall also be responsible for identifying the areas of risk where theft or fraud are likely to occur. Emphasis should be more on prevention of fraud or theft than on their detection. Fraud prevention is only one aspect of the work of Internal Auditor. The Internal Audit role in detection and prevention of fraud and dishonesty is to find the cases and the facts which lead to the theft, etc. and to enunciate policies and procedures for the future.

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4 GENERAL PRINCIPLES AND RULES OF AUDITING


To achieve the aims and objectives of Internal Audit, the following general principles and rules of auditing shall be followed while conducting the Internal Audit of he Corporation. 4.1 STATUS Internal Audit is a statutory function and a tool of the Management to check the , regularity of actions of the executive. No official record or jnformation shall be denied to be shown and supplied to Internal Audit 011 the plea that executive orders in this behalf had not been received. It is the duty of the head of the Department. Office or Unit of the Corporation being audited. to ensure that the Inspection Party is extended all cooperation to enable it to discharge its functions as best and as expeditiously as possible. If a certain document or information is considered to be secret, the head of the Office shall arrange to produce the document to the Inspecting Officer and confer with him as to the best ways to maintain its secrecy during the course of Audit Inspection. 4.2 JURISDICTION The Internal Audit Department is responsible to the Board of Directors of the Corporation through the Director (Finance) for the Audit. Without the sanction of the Director (Finance). audit of accounts of any independent Unit or Fund (e.g. Welfare Funds, etc. created locally in the Projects) hot forming part of accounts of T.H.D.C shall not be taken up. The Agenda Papers and the Minutes of the Board of Directors meetings shall be studied intelligently with a view to seeing that the rules framed and orders issued and notified by different functional Departments are fully in conformity with the decisions of the Board. This work shall be attended to at the Head Quarter of the Internal Audit or du1ing the course of Internal Audit Inspection of the Company Secretariat. at the level of the Inspecting Officer. Observations. if any. in this regard shall be issued under the signatures of the CIAO. The Director (Finance) shall invariably the kept fully informed about these matters before they are taken up with the Departmental authorities. During the course of audit of the Corporate Office and of the Departments and Project Offices. it is to be seen that the decisions of the Board of Directors have been fully and faithfully implemented and reports submitted t'! them to the Board are correct and based on the records of the Department. 4.3 AUDIT AGAINST REGULARITY: (i) In the discharge of Audit duties, the clear distinction between auditoria and administrative functions shall always be borne in mind. It is a function of the Executive (duly authorized by the Management) to make financial rules. Issue orders. lay down systems and procedures for the proper functioning of the Corporation and its Departments and Offices 17

(ii)

(iii)

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for the execution of the Projects entrusted to it. It is for the officers of the organisation to apply these rules, systems and procedures. It is the function of Audit to verify, that these rules and procedures made cover all important functions and activities and they are applied properly. It is not the function of Audit to prescribe what such rules and procedures shall be. or to interfere with their administrative application. Audit by the Internal Audit Department is to be conducted with reference to the rules and procedures laid down in this Manual, and with reference to the rules and procedures framed as per the policies of the Management and the Manuals made thereunder. The Management has approved the Works, Purchase and other policies. It is to be seen that actions by the concerned departmental officers in the field of award of Works Contracts and placement of Purchase Orders are in consonance with these policies, both in letter and spirit, and within the powers delegated to them. Besides, standards of Financial Propriety, as brought out in para 5 of this Chapter are-also1o be applied during audit of expenditure. In the course of/scrutiny of accounts and transactions, Audit is entitled to make such queries and observations and to call for such vouchers, statements, records, returns and explanations in relation to them, as it may consider necessary, in the proper discharge of its duties and functions. Air queries and observations shall be couched in language which is courteous and impersonal. In the discharge of its functions, Audit shall not make independent enquiries from the personnel of the Corporation or from general public, as such action is tantamount to encroachment on the functions of the executive authority. Audit shall confine itself to calling upon the concerned executive authority to furnish' any information and produce any document that may be required. In case of difficulty. it shall confer with the higher administrative authority, as to the best means of obtaining information or evidence which is required.

4.4

AUDIT AGAINST PROPRIETY. (a) It is an essential function of Audit to bring to light, not only cases of clear irregularity but every matter which, in its judgment. Appears to involve improper expenditure or waste of Corporation money, assets or stores, even though the accounts themselves may be in order and no obvious irregularity has occured. It is thus not sufficient to see that sundry rules or orders of competent authority have been observed. It is of equal importance to see that the broad principles of orthodox finance are borne in mind, not only by disbursing officers, but, also by the sanctioning authorities. No precise rules can be laid down for regulating the course of audit against propriety. Its objective is to support a reasonably high standard of public financial morality. of sound financial administration and devotion to the financial interests of the Corporation. Audit Officers. in the performance (If their duties shall. In any case, apply the following general principles which have for long been recognized as standards (or canons) of financial propriety:

(b)

18

(i)

(ii) (iii)

(iv)

(c)

(d)

The expenditure is. prima facie, not more than the occasion demands. Every officer is expected to exercise the same vigilance in respect of expenditure incurred from Corporation funds as a person of ordinary prudence would normally exercise in respect of expenditure of his own money No authority shall exercise its powers of sanctioning expenditure or to pass an order, which will be, directly or Indirectly to its own advantage. Public money shall not be utilized for the benefit of a particular person or class of persons unless: 1. The amount of expenditure involved is insignificant; or 2. A claim for the amount could be enforced in a court of law; or 3. The expenditure is in pursuance of a recognized policy of the Corporation or of the Government of India. The amount of allowances, such as traveling allowances granted to meet expenditure of a particular type of journey or the re-imbursement of Medical expenses, shall be so regulated that the allowances are not on the whole a source of profit to the recipients. The proper discharge of duties by an inspecting Officer in this field is a very delicate matter and requires such discretion and tact. A challenge against expenditure shall not be expressed as based on Canons of financial property but transgressing a universally accepted standard of official conduct of financial administration. When the Inspecting Officer considers that any rule or order has infringed any one of the standards of financial property, he has shall report his opinion to the administrative authority concord for such action as that authority may think fit to take and request it to intimate, in due course, the action taken by it. Thereafter if he considers it necessary, he may report it to the next higher authority for appropriate action.

4.5 (1)

AUDIT OF EXPENDITURE The main objectives of audit of expenditure are to ensure: (a) That there is provision of funds for the expenditure duly Authority by competent authority. (b) That the expenditure is in accordance with a sanction properly accorded and is incurred by the officer competent to incur it as per provision of Delegation of powers. (c) That the claims are made in accordance with rules and are in proper form. (d) That all prescribed preliminaries to expenditure are observed, such as proper estimates are framed and approved by competent authority for works expenditure there is a Budget provision for the item of expenditure, it is whining the overall provision of the detailed Project Report. There is proper requisition by competent authority before procurement action is initiated and the prescribed procedure is followed to procure material at the most economical and competitive rates. (e) That the expenditure sanctioned for a limited period is not admitted beyond that period without further sanction. (f) That payment is made to the proper person.

19

(g)

(h)

(i) (j)

(k)

That the charge is correctly classified. and that if a charge is debitable to the personal account of a Contractor employee or any other individual, or is recoverable from him under any rule or order. that is recorded as such on the prescribed accounts record. In cases of purchase of stores. the stores have been accounted for in. the prescribed stores accounts and that the rates are the same as contracted for and are certified as correct by proper authority. In respect of bills of contractors the terms of the contract or agreement have been adhered to. That rates entered in the bills for transport for the movement of stores, when such transport is not provided for by the Department. agree with the contract or tariff rate and that the credit notes have been signed by the Officer authorized to sign them and that they have been properly issued under the rules, and That the expenditure does not involve a breach of any of the standards of Financial Propriety.

(2)

Recurring charges which are payable on the fulfillment of certain conditions or up-tiII the occurrence of a certain event. shall be admitted in audit on receipt of a certificate from the officer concerned to the effect that necessary conditions have been duly fulfilled or the event has not yet occurred. as the case may be. Whilst it is desirable that auditors and others employed on audit duties shall not be at liberty to make any relaxations in audit on their own volition. it is of considerable importance that the prescribed checks are applied and that the principles of Regularity and Propriety are observed in spirit and not in letter. as opposed to the spirit. AUDIT OF EXPENDITURE (BILLS AND VOUCHERS) Before commencing the Internal Audit Inspection of expenditure. the Budget estimates and the actual expenditure incurred by the office under various heads of accounts shall be examined to know the nature and extent of expenditure under each head of account. It shall be seen that the financial rules delegation of financial powers for regulation of expenditure are themselves intra vires and that the audit is effectively conducted against them. In addition. it shall be seen that: (i) For every payment made, there is a voucher. complete in all respects or a certificate of payment. where it is not possible or expedient to support a payment by a voucher; Every voucher bears a pay order signed or initialed by the disbursing officer specifying the amount payable. both in words and figures. and that all pay orders are signed by hand and in ink; All vouchers bear. dated acknowledgments of the payment made: Where acknowledgements of payments are received in advance and the actual payments are made subsequently. (e.g. pre-receipted bills), separate acknowledgment of payees are obtained at the time of payment. Such subsequent acknowledgements had been stamped.

4.6

(ii)

(iii) (iv)

20

(v) (vi)

(vii)

(viii)

(ix)

(x)

(xi)

(xii)

(xiii)

(xiv) (xv)

Receipts for all net payments exceeding Rs. 500/- are stamped unless they are exempted' from stamp duty: Where a single stamped receipt is obtain-ed from a payee in acknowledgement of payments against more than one voucher at a time. a reference is given on all concerned vouchers and it is ensured that the total amount of such vouchers agrees with the amount for which acquaintance is obtained. The sub-vouchers and acquaintances are on record and are cancelled or so defaced that they cannot be used again. and are not destroyed before the expiry of the prescribed period of preservation; as per the Companies Act. 1956. Cash memoranda from tradesmen are not taken as sub-vouchers unless they contain an acknowledgement or receipt of money from the person named therein. Incases where acknowledgements cannot be obtained the cash memoranda shall be stamped paid and initialed by drawing and disbursing officer. All vouchers for purchase of stores bear a certificate by the competent authority regarding entry of stores in the stock accounts indicating relevant page number of the Ledger. Such vouchers 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 There are no erasures, overwriting or alterations; in the total amount of the bill written in figures or in words. Corrections, if any, are property attested by the disbursing officer and the amount of bills tallies with the actual payees receipts. Suitable notes regarding payments having been made on various subvouchers are also kept on the relevant original indents and invoices/bills to prevent double payments; The details given in the vouchers agree with the connected records, if any, maintained by the departments. (Note : In the case of articles received by value payable post (VPP) the value payable cover together with the invoice or bill showing the details of the items paid for may be accepted as a voucher provided the disbursing officer endorses a note on the cover to the effect that the payment was made through the post office. Where Sales Tax has been paid, it shall be seen that it was actually payable on the stores purchased under the provisions of the relevant Sales Tax Act and the amount paid is correct. The rates paid agree with those shown in the contract or agreement made or as per quotations approved for the supply of stores. The rates paid for work done or supplies made are in accordance with any scale or schedule prescribed by the competent authority. The expenditure is so recorded that all information of vital importance to the working of office/institution concerned is available.

(xvi)

That payment have been correctly brought to account in the initial cash counting records. (xvii) Rule regulating the method of payment have been fully observed by the disbursing officer.

21

(xviii) The expenditure has not been incurred to prevent the lapse of budget allotment or that the charges incurred during the year have been met from the budget allotment of the next year.

4.7

Percentage of checks to the exercised on different records and documents maintained or required to be maintained in various department & office shall be as contained in the Annexure to this chapter.

22

ANNEXURE TO CHAPTER 4 Referred to in Para 4.7) Statement showing items of work, nature of payments and particulars of Records indicating the percentage of checks to be exercised during Internal Audit Inspections. A. 1. Finance & Accounts Department Payments (Estt.) Items of work/Nature of payments/ Particulars of records. Bills: Pay bills-Exec./non-exec. T.A./LTC bills-Exec/non-exec. L.T.C. Bills-Exec./non-exec. Encashment Bills, L TC/Leave Miscellaneous Bills-gross amount Rs. 1000/- & above Other Establishment charges, Misc. charges. (Rent. Electric & Water, Maintenance, Repairs of Vehicles, Purchase of POL, R&M of A.Cs.. Coolers, Office Eqpt P .Cs., Photostat Machines, Phones, Electronic Typewriters, etc. Recoupment of Permanent Imprest/ Adjustment of Temp. Imprest Temporary Advances. Medical attendance and treatment. Bills on account of overtime allowance/conveyance charges: Children's Education Allowance, hostel subsidy, Tuition Fees Remittances on account of Income Tax, Sales Tax, Returns of T.D.S. Remittance on account of LS/ Pension Contribution GPF/CPFI HBA/Conveyance Advance recovery to the parent departments of Deputationists and PF to PF Trust. Recoveries of long term/short term Advances to Staff, e.g. HBA/Conveyance Adv. Festival/ Medical Advance, T.A. Advance.

Quantum of checks to be exercised: One month's bills in each phase 25% bills in each month and general review. -do-do-doOne month's bills in detail in each phase. Full check of unusually heavy payments and special repairs and replacements. i

ii) iii) iv) v) vi)

vii)

At least two recoupments/ adjustments in each phase.

v) vi)

25% bills in a month in detail otherwise general review. 25% bills in a month and general review 25% bills in a month and general review One month's check in detail in each phase. -do-

vii) viii)

ix)

x)

One month's check in detail in each phase and general review.

23

II. i) ii)

Payments to Contractors and. Suppliers Check of payments to foreign Cent percent check of all payments. collaborators. . Check of Contractor's bills 25% of the Running Account Bills against measurement books and paid during the selected month to be against standard measurement checked in detail with ref. to M.Bs. books, as the case may be and other connected record. Release of EMD/Security Deposit to Contractors/Suppliers. Muster Rolls: a) Check and audit of M. Rolls (excluding checking of arithmetical calculations} b) Checking of arithmetical. calculations. Payments for Extra/Deviated/ Substituted items and Gen. review system adopted for fixation of item rates in such cases. month. Payments to Suppliers a) Check of Bills with ref. to Purchase Order. -do-

iii) iv)

One month's bills in each phase.

One month's bills in each phase. Cent percent check for payments during the selected month and of general review with of reference to payments made during selected 25% of the Purchase Orders against Which payments are released during the selected month to be checked in detail. General review and random check of P .Os. of heavy amounts. Cent percent check of all transactions. General review of all transactions Cent percent check. One month's detailed check in each phase, general review of other months.

v)

vi)

b) Review of the Register of POs. III a) b) c) d) Banking Transactions Letters of Credit Register of Bank Guarantees/ Performance Bonds Interest credited by Bank on. Deposits. Bank Cash Book/Reconciliation Statement Store Accounts: Priced Stores Ledger i Check of entries in the PSL with ref. to S.R. Vs.. S.I. Vs. & S.T.Vs Reconciliation of the balances as per bin cards/stock registers of Stores Deptt. with P .S.L. balances (i) Action taken to reconcile the balance as per Store Accounts with the balance as per P.S.L.

IV a)

b)

Test check in first phase. One month's detailed . .check of selected month in second phase. Check in respect of items selected on random basis. General review.

c)

24

(ii)

d)

Reconciliation of value as per P .S.L. with the value of stocks as per Central Accounts. Claims recoverable from Suppliers/Transpor1ers/Railways/ Insurance Companies Insurance claims against open Transit Policy Cases of Demurrage/wharfage Charges Fixation of Stores Issue Rate Valuation of SRVs/SIVs/STVs Register of Assets of less than Rs. 5000/- value with ref. to Relevant payment vouchers.

One month's check in detail and review of other months. Verification of actual receipts during selected month, general review of progress and time period of outstanding items. General review of progress and cent percent check of claims rejected or partially admitted. Cent percent check. Cent percent check at each fixation. 25% check of all transaction. General review and 25% check of Transactions in selected months

e)

f) g) h) I)

V a)

b) c) d)

e) f)

g) h)

Cash records and Compilation of Account Cash Book and day Book. One months detailed vouching for each phase and general review of other months. Schedule forming part of the General review and detailed check of Annual Accounts. 50% of the Schedules. Journal Vouchers One months JVs in each phase March Jvs to be generally reviewed. Debits/Credit advices issued/ General review in second phasereceived and the records outstanding item, if any to be maintained to watch Inter-unit pursued till settlement reconciliation Register of Valuables One months transactions in each phase. Check of Journal/ Trial Balance General review in second phase. Annual Accounts Balance sheet Schedule connected with Outstanding bills & Depreciation Confirmation of balances from Debtors/Creditors General Review of Subsidiary General review in the second phase, Ledgers (all like of those detailed Items outstanding for more than one below) and their reconciliation with year to be reviewed cent percent. The balances brought out in the General Ledger. (Illustrative list of Subsidiary Ledgers) Sundry Creditors Advances to Employees like T.A. Medical, Festival L.T.C. etc. Advances to the employees, like House Building, Departmental

25

Permanent & Temporary Imprest. Contractors' Ledger, Advances to Government Agencies for Deposit Works, Claims recoverable from Suppliers, Contractors, Railways and Transporters etc. Security Deposits and Earnest Money Deposits. B. a) Contracts and Procurement Departments: Major/Minor Contracts & Work Orders: Selection of items for general review: Upto Rs. 2.5 lakhs 10% ) Above 2.5 lakhs & upto 20 lakhs 25% ) Of the contracts awarded during the Above 20 lakhs & upto 50 lakhs 50% ) period of Audit. Above 50 lakhs 100% ) Purchase Orders: Less than Rs. 2 lakhs 10% ) Above 2 lakhs & upto 10 lakhs 20% ) Of the Purchase Orders placed Above 10 lakhs & upto 25 lakhs 50% ) during the period of Audit. Above 25 lakhs 100%) Mechanical Department: Fixation of Hire Charges of Machinery & Equipment. General review of the procedure, cent per cent check of rates for all major items, 25% check of minor items on each fixation. Complete check every year. General Review, 25% check of the total items 100% check of outstanding items.

b)

C. a)

b) c)

R&M Estimates of Equipment. Record relating to raising claims for hire charges, their recoveries and Arears. Materials Management Department: Posting of S.R. Vs., S.I. Vs and S.T,Vs. Adjustment of Debits/Credits against Contractors/Suppliers. Follow-up action of the Physical Verification.

D. a)

b)

c)

d)

Discrepancy Register of non/short receipt of stores. Transit Losses-pursual of claims

e)

Cent Percent check for the selected month and general review of other months. Cent Percent check for the selected Month and general review of other months. Check of adjustment of items found short/surplus costing Rs. 1,000/- or more in full, test-check of item costing less than Rs. 1,000/- 25% General review for the current year, cent per cent check for the previous years. General review of all the outstanding

26

f) g)

with Railways. Transporters. Settled claims of lasses/shortages. Fixation of Issue Rate of Stores.

h)

Review of Stores Ledgers.

items. Suppliers and Contractors. General review of all items handled during the period of audit Inspection. Random check of at least 25% of the items at the time of each fixation or revision. Test-check of arithmetical accuracy and action taken on non-moving or slow-moving items.

27

5 SYSTEMS AUDIT & MANAGEMENT AUDIT


I. SYSTEMS AUDIT 5.1 The role of Internal Audit shall not, be confined merely to routine checks of various accounts and financial statements. Its role shall extend over vast fields which include recommending new systems and conducting review of existing systems and check up their adequacy & suitability. Hence the importance of Systems Audit in the T.H.D.C. cannot be over-emphasised. The following are the checks to be exercised broadly while reviewing the systems and procedures: (i) The sequence of staff who examine the documents, the reasons why they examine them and the extent of responsibility which devolves upon them. The authority who should authorize the transactions; how the transactions will appear in the records of the Company and whose control they will be under . It should be satisfied that adequate control mechanism, Administrative and Ac-counting, exist and that they are being applied properly. It should be remembered that the provision .in the systems laid down in theory represent the ideal. Often, due to reasons like shor1age of staff or the type of streamlined accounting system (slip method) the practice falls short of the ideal standards.

5.2

(ii)

(iii)

5.4

For a sample check of the system in vouge in a branch, a questionnaire may be drawn up to see how far the system or procedure laid down is adequate in detecting frauds or irregularities and to what extent the system is being followed. It is always better to have a sound system of Organization for the prevention of frauds or serious lapses rather than subsequent dramatic discovery of serious acts of omission and commission and then going about taking drastic action. If a fraud is discovered, what is equally impor1ant is the examination as to how it became possible. It has .to be made sure that it did not occur through an undisclosed or an inherent weakness in the system of internal checks (i.e. whether it was due to the calculated risk that failed), because, if such is the case, it reflects upon the ability of the authority to lay down and procedures making provisions for internal checks and controls. following are the broader aspects of checks in this regard : (a) (b) Observation and investigation of the actual working of the system during the course of detailed audit. Comparing the schedules of operation which come under its scrutiny when finally prepared. i.e. not only checking accuracy of. the statements but also making a critical comparative appraisal of the budgeted figures and results obtained in comparing matters which influence various procedures but do not form part of budgeted estimates. 28

(c)

(d)

(e)

Probing from time to time the system of internal checks to see not only whether it is still working effectively but whether is still the best system available. Examination of the Corporation's contracts including all those of a continuing nature, having at the same time a look at the legal & Arbitration cases brought about against the Corporation, analyzing causes therefor . By the instigation of special enquiries at the request of the Management. Such work will range over the organisations whole field of operations and may extend beyond the more obvious factors to such matters as the checking of accuracy of financial statments, checking of primary functions, e.g. the examination of procedures involved in purchasing and ordering of material, examining stores procedures and ensuring the maintenance of standards laid down in various Manuals.

5.5

It is the duty of Internal Audit to review compliance of norms and report major and pertinent deviations to the concerned authorities. Such cases shold be brought, to the notice of Director (Finance) for reporting the important cases of shortcomings and irregularities in the working of the Corporation to the Board of Directors, through Agenda notes. (Authority : Ministry of Finance. Bureau of Public Enterprises O.M. No. BPE / GL-014/MAN/3 (ii) 79-GM-1, date the 12th June, 1979.)

II. MANAGEMENT AUDIT 5.6 It is now well recognized allover the world that in this era of rapid technological advancement Management is confronted with a great challenge in making sound, logical and timely decisions. Not only does Management need help in making proper decisions but it also requires assistance in determining that such decisions are being acted upon promptly and properly with the desired impact.

Definition 5.7 Management audit has been defined in many ways. Essentially the description of the purposes and processes of Management audit form the core of the definitions. Management audit is basically concerned with identifying improvement opportunities and deficiencies in Management inputs arising from the appraisal of the quality of Management of an organisation or an organisation unit and the evaluation of the performance of a system or procedure within the organisation.

The focus is on : a) b) c) Systematic identification of deficiencies and improvement opportunities In the Management process for continuous correction. objective, Independent and forward looking analysis; and . manager -auditor collaboration effort, manager having responsibility and authority for performance results and the auditor being an adviser. educator and service support.

29

Scope and Purpose 5.8 Management audit can be audit of Management or audit for Management. Whether audit is of Management or for Management, the nature of audit remains the same, but the scope and purpose may differ.

The essential features of these audits are as under: Audit of Management (1) It is carried out usually by an external agency. an independent auditor. Audit for Management' It is internal and may be carried out by the Finance department. Accounts department, Internal Audit or by line management of the Organization itself. Some times an outside expert may be engaged but then he functions on behalf of the management . It is meant for self-correction.

(2)

(3)

The result of audit is addressed to a body or authority external to the Management and meant for control by an external authority . The Management to be on the, defensive

(4)

(5)

There is no need to hide anything and there is everything to gain by exposure. Audit by the Controller and Auditor Audit for the Management whether General of India (C&A.G.) of the by the internal team or by an external P .S.Us. and of the Govt. Departments expert is meant for the Management like the E.C.P .A. is a type and no outside agency is involved or of Management audit. Its reports concerned. are submitted to the Parliament. It is scheme or programme oriented It is office oriented and all aspects of rather than office oriented. If a its handling by the office shall be scheme or programme is being looked into and result brought out. implemented by more than one office and from more than one site, the scheme as a whole is audited and the result, cumulative or of each unit, is brought out with its overall impact.

5.9

5.10

The basic pre-requisite for any kind of audit is that it should be independent. The auditor should have an open receptive mind and do his work without fear or favour malice or illwill. He would have broad perspective and his attitude should be positive and constructive, not merely critical and carving; otherwise he may be more of a hindrance than anything else. Effectiveness of audit, par1icularly Management audit, depends arso to a large extent on the receptivity of Management. Indeed Management audit should be responsive to Management.

30

6 FINANCE & ACCOUNTS DEPARTMENTS


6.1 GENERAL (i) As far as feasible, the Internal Audit of the Finance and Accounts Departments at the Project as well as at the Corporate Office shall be carried out in two phases. The Internal. Inspections shall be so arranged that they d0 not interfere with the schedule of Statutory Audit or Government Audit. The first phase shall be carried out sometime after September and the second sometime in may or June taking due care that the programme of finalization of Annual Accounts is not disturbed. It should be a source of help and assistance to the Executives of the F & A Department in proper discharge of their duties and responsibilities. After all, the aim of Internal Audit is to ensure smooth functioning of the Corporation, as a whole, including the Finance and Accounts Department. It shall render all help towards this end. The Internal Audit is to see, apart from exercising routine checks over the day to day activity of cash handing, classification of expenditure, maintenance of cash and accounts records in proper form, their completeness. Bank reconciliation and follow up action, etc., the handling of Corporate funds. their investment in accordance with policies and .9uideliness issued by the Government of India, keep watch over the Inter-Unit transfers, check compilation of final accounts before they are audited by the Statutory Auditors ~nd the C.A.G. of India and help in the settlement of Audit Observations. Help in the effective enforcement of the rules, orders and decisions of theBoard of Directors in the matter of efficient financial management by different Departments of the Corporation. Shall be rendered wherever required. Broadly the Internal Inspection of Finance and Accounts Departments shall be carried out on the following lines. to see that : (a) There is adequate manpower (qualitatively and quantitatively) to handle all the important functions of Financial concurrence. representation of appropriate level on the Tender Committees, Purchase Committees, fixation Of rates for hire charges of machinery, fixation of issue rates of stores, maintenance of cash and banking records on proper lines, handling claims. both of contractors and of the staff and Officers and for timely payments. to perform their duties on proper lines, and generation of data for the timely submission of MIRs. . The systems and procedure laid down are followed in all activities. Proper control is exercised over the functions entrusted to the F & A Department.

(ii)

(iii)

(b)

31

(iv)

(v)

(vi) (vii)

(viii)

(ix)

(x} (xi}

handling all claims, guarding against irregularities and double Claims. maintenance of Cash and Bank transactions records, classification of expenditure, enforcement of regular procedure in all the activities and exercise of Delegation of Powers properly by all concerned. It shall also review the working of the Management Information Reporting System. verify its effectiveness in the day to day functions of the Finance & Accounts Department. There exists adequate and systematic check over exercise of all Internal Control envisaged for different activities of the Finance & Accounts Department and of other Departments. In case there is lack of provision for Internal Controls in any activity or in any Department, the matter is duly taken up at the appropriate level. Investment of Corporation Funds are regulated as per the guidelines and policies framed by the Government of India for Public Sector Undertakings. Records required to be maintained for efficient handling of the resources of the Corporation and timely recovery of interest due and renewal or reinvestment if funds in the best interest of the Corporation, are maintained and reviewed periodically. All statutory obligations for deduction, remittance and submission of returns in respect of Income Tax, Sales Tax, etc. are duly complied with. There is proper system of Inventory Control and reconciliation of quantity accounts between the Stores records and those of the F & A Daptt. and of the value accounts between the Priced Stores Ledges and the General Ledger and the Annual Accounts. Fixed Assets Registers are being maintained indicating the location of ea,ch item and charging .Depreciation as per the rules, in .respect of all-items procured or transferred from the UP Irrigation Department, in proper working condition. There is adequate control mechanism in operation to regulate the release, recovery and adjustment of Advances, Deposits and Loans, maintenance of records and confirmation of balance at the end of the year. The detailed checks to be exercised over the sanctioning, payment, regulation, recovery and accountal of Loans and Advances are brought out In Chapter 12. Adequate checks are exercised over generation of data for EOP, ensuring its correctness, completeness and confidentiality . All the required precautions are taken to handle the record relating to receipt, issue and return of important documents like Measurement Books, Receipt Books, Cheque Book., Stores Receipt Voucher Books, Stores Issue Vouchers and Stores Transfer Voucher Books (SRVs, SIVs and STVs). SCRUTINY OF THE RECORDS: The maintenance of records of the Finance & Accounts Department shall be checked with reference to the Departmental Manuals, eg. Accounts Manual. Stores Accounts manual and other manuals which are in operation and use in the Department. In case any of these Manuals have not yet been formulated or are in the process of being formulated the records to be maintained shall depend on the Rules, Systems, Procedure and Executive Orders or on accepted Mercantile principles. The important items of record to be checked are:

6.2

32

(a) (i)

Cash Records (Cash and Bank Books) Apart from the detailed check to be exercised as per the provisions of the Manual, these books shall be generally reviewed to ensure that they are maintained properly, completely and regularly and all receipts and payments are brought to account on the Cash Section and they are duly closed for the day There are no erasures or over writings, but incorrect entries are scored and fresh correct entries made under proper attestation, totals are got checked from an official other than the official writing the Book, the same is closed at the end of the month and cash in hand is verified physically and certificate thereof recorded under proper attestation. . All precautions against miss-handling of cash, mixing up private cash with official cash, keeping large cash in hand, keeping unaccounted cash in the cash chest and for safe custody of cash are always taken. All withdrawals from the Bank and all remittances into the Bank Account are promptly accounted for and verified with reference to the entries in the Register of Valuables, Register of Remittances-and counterfoils of cheques issued. Monthly Trial Balance is drawn up and reconciled with the balance brought out in the Bank statement, the variation being tallied with the outstanding items in the Bank Cash Book. The vouchers for payment are in proper form, payment duly authorized by the competent authority , details of the Head of Account to which the payment relates are correctly recorded, all supporting documents and acknowledgement of the recipient are available and the sub-vouchers are duly cancelled under proper attestation. Receipt vouchers are made on proper form, the person from whom the amount has been received and the head of Account to which the receipt relates and acceptance of payment by the competent authority shall be checked generally and any receipt appearing to be of doubtful nature shall be checked with reference to the basic record to which the receipt entry relates. AII cheques it.sued are from the cheque books duly issued to the Banking Section and shall be checked, with reference to the passed voucher and other supporting documents. The monthly Trial Balance may indicate non-encashment of cheques within their validity period. Apart from reviewing the reasons for nonencashment, the total amount of all stale cheques should be credited to the head of account meant for such tansitory transactions. In case of remittances to the Bank, it shall be verified with reference to Bank's acknowledgement whether the money stated to have been remitted had actually been credited to the account of the Corporation. , In fact, a careful scrutiny of the Cash Books and close scrutiny of some of the entries made therein may lead to detection of serious irregularities which may appear to be of a very trivial nature on the face of it, but when delved deep, may reveal major lapses, leading to frauds and embezzlements. Attesting entries in the Cash Books without the supporting documents, delegating powers for the issuance of cash

(ii)

(iii)

(iv)

(v)

(vi)

(vii)

(viii)

(ix)

(x)

33

receipts to junior members of staff, leaving large variations in the balances between the Cash Book and Bank Statement are but a few such examples. A very careful and intelligent scrutiny of ,the Cash Book is, therefore, essential. (b) Day Book

It records all the transactions relating to the Works and Procurement bills passed during the .day and all the columns are to be completed correctly and all transactions are attested. Some of the figures brought out shall be checked with those recorded in the Contractors' Ledger. The entries shall be checked with reference to Memorandum of Payment of each Bill for the month selected for detailed check. (c) Register of Permanent Imprest:

Officers entrusted with the execution of Works require Permanent or Temporary Imprest to meet unforeseen emergent expenditure. Imprests sanctioned are entered in the Imprest Register. Normally the Imprest is sanctioned in the name of the Officer Incharge of a Works Division and the accounts are rendered for recoupment once or twice a month. It is to be seen that all Imprests are dulf sanctioned by competent authority, they are not multiplied, but Imprest sanctioned to officer is sufficient to meet the expenditure required to be recouped at least once a month. No expenditure is met out of Imprest for which sarlction of higher authority is required, for purchase of the material that is normally available in the Project Stores and requirement of major items of material are met by issue from the Stores. The accounts for the Imprests held are rendered and closed at least once every year in March, and fresh sanctions are issued in the beginning of the financial year, depending upon the requirement for the next year. (d) Register of Temporary Imprest Advances:

Temporary Advance is sanctioned by competent authority in favour of an Executive entrusted with the execution of works, for making emergent purchase of material or to meet temporary emergent requirement in the course of execution of works or for payments to daily rated workers. It is to be seen that advances are sanctioned only to meet genuine emergent requirements, the adjustment accounts are rendered soon after the payments have been made, the amount sanctioned is not in excess of the requirement and unutilized cash, if any, is refunded forthwith.and the adjustment accounts are received without delay. If there is a tendency to sanction Temporary Advances too often to different Executives of a Department, the necessity, urgency and actual requirement may be reviewed and the sanctioning authority approved of the Irregularities observed. If there are a number of cases of Temporary Advances drawn during a year, some of the items may be checked in detail with regard to the amount, period of retention of the advance and the unspent balance, expenditure incurred, justification for the drawal and time taken to render accounts, may be subjected to check for ensuring the regularity and adequacy of checks exercised by the sanctioning authority and observation of codal norms by the Executives entrusted with the utilization of Corporation funds.

34

(e)

Register of Valuables:

All entries of Instruments of Credit (Valuables) received by the Department are made therein. All columns are to be fitted In p~9Perly and attested. All remittances into the bank, or otherwise disposed of, are properly cross-linked with the Bank Cash Book or other records and the Register is reviewed regularly and closed at the end of the month and yearly with no item remaining undisposed of. It is to be ensured that the system of recording entries in respect of the incoming instruments of credits is such that in no case any valuable remains unaccounted for. If the system of preparing Receipt Voucher and/or issue of Receipts for the Cheques/Drafts. etc. is being followed, it is to be ensured that reference to the Voucher or Receipt issued is Invariably given and the entries cross-linked. Further. the review shall be made in accordance with the provisions of the Banking Manual. (f) Contractors Ledger: The Ledger is maintained in the prescribed form, entries are made from the Memorandum of Payments of the Running Account Bills of the Contractors and all recoveries. deductions etc. are correctly made. The Ledger is reviewed regularly and closed at periodical intervals or on the completion of the Work when final payment is authorized, all recoveries and advances outstanding are adjusted and the Ledger closed to 'NIL' balance, all entries are duly attested simultaneously at the time of authorization of the payment and recording of entries in the Day Book and Cash Book, the balances outstanding at the end of the year are reconciled with General Ledger, old outstanding items are reviewed and reasons for nonadjustments analysed for early remedial action. (g) Register of Blank Receipt Books, Cheque Books & Measurement Books:

A stock account of blank Receipt Books, Cheque Books, Measurement Books and other important documents, the control of which is entrusted to the Finance & Accounts Department. is maintained under proper supervision so that these documents are issued to only the authorized functionaries and their use and accountal after use is controlled. It is to be seen that the concerned Officers exercise proper control over issue and utilization of only those books which have been issued and authorized for use. No deviation shall be allowed from the prescribed procedure. Loss of any book, while under use, shall be investigated and steps taken to ensure that the lost books or documents are not misused. Assets Register: The Register is maintained to record all assets which form part of the Gross Block in the Balance Sheet. Their value along with the depreciation charged each year and the location of each item is indicated. It is to be seen that the Register is maintained as per the provisions of the Companies Act, 1956 and kept uptodate. A test-check of the depreciation charged and the value shown in the Assets Statement shall be verified to see that they are correctly shown. (i) Register of Interest Bering Securities: (h)

35

(i)

(ii) (iii)

(iv)

(v)

(vi)

(vii)

(viii)

It is to be seen that all instruments bearing Interest, for whatever purpose they are received, are recorded in the Register and proper watch is kept over the receipt of interest and the principal amount on maturity. The Register is to be reviewed at periodical intervals to ensure that action required to be taken towards renewals. encashments and interest payments is taken. They are physically verified at least once in a year and result thereof recorded over the fly leaf of the Register . Security in the acceptable form, as laid down by the Corporations furnished by officials handling Cash, Stores, etc. Other Security Deposits are covered by a proper agreement setting forth the .conditions under which the security is held and that reference to such agreement is given in the Register . The securities certified in the last Annual Accounts being in hand, and those received subsequently. actually exist. In respect of securities, not available for inspection in original, either the original acknowledgements of the depositors bearing dates subsequent to the dates of last closing of Accounts. or the acknowledgement of the authorized custodians. as the case may be. should be forthcoming. Security Deposits of contractors and employees received in cash, have been paid into the Savings Bank Account or converted into interest bearing securities at the cost of the depositors, when the depositors have expressly desired this in writing. Government paper tendered as security is taken at its face value, or market value, whichever is less, at the time of deposit and in the event of the subsequent appreciation or depreciation in value, a re-adjustment is made and the security is returned or retransferred only after the lapse of the stipulated period in the bond or agreement. Scrutiny of Bank Guarantees furnished by Contractors against lump-sum advances shall be done to see whether they are current and valid and whether action has been taken, adequately in advance, to get them revalidated from time to time. Hypothecation of Machinery or Stores against which advances are paid should be scrutinised to see that the concerned Departments have standing arrangements for the purpose and the same is adequate and the implementation is in order .

(j)

Register of Insurance Policies:

It may be seen that all items of Machinery , Generating and Field Equipment, all components of the Project have been insured against damage during errection, operation or due to natural calamities like flood, storm, storage losses, etc. during construction in accordance with the policy laid down by the Corporation. The register shall be scrutinised with particular reference to the approved policy, terms and conditions attached to each policy, their validity period, timely renewals. and payment of premium at appropriate rates. A close liaison has to be maintained by F

36

& A Departmental authorities with the Officers in whose charge the insured items of Equipment, etc. are held for taking up the matter with the Insurance Company in the event of any loss or damage covered by the Insurance Policy coming to notice. It is to be ensured that there is timely lodging at claims, furnishing of relevent documents by the F & A Department directly or through the concerned Departmental authority , and the claims are pursued till final settlement. Should any lacunae come to notice in the terms and conditions of the Policy or towards timely settlement of the claims lodged, the matter is immediately reported to the Corporate office for taking up the matter with higher authorities of the Insurance Company for urgent settlement. The facts shall also be notified for the general information of all concerned for future action while concluding new Policies or renewal of the old ones. (k) Register of Deposits: It shall be seen that The Register is maintained in the prescribed form and the transactions are posted upto date under the respective prescribed detailed heads. (ii) It is closed every month and the balances are struck against each Item and totaling completed page-wise. , (iii) The abstract of credits, debits and balance under-the different classes of deposits have been prepared at the end of act, month and signed by the Officer Incharge. (iv) There is no undue delay in the clearance of items outstanding in the register. (v) In the event of any Cash Security' being converted into Interest Bearing Security, it shall be verified that proper entry exists against such item as is converted and the two transactions in the respective registers are cross-linked. Register of Advances to Outside Parties for Deposit Works: , (i) (i) The Register maintained to watch the adjustment of advances paid to outside bodies towards execution of certain Works as per terms and conditions stipulated in the Contract Agreement entered into with them, shall be reviewed to see that it is complete in all respects. Running accounts submitted towards adjustment, in part or in full, are checked and the progress of amount admitted is noted against each terms. There is a time stipulation for completion of each item of Work contracted for .During review of the Register it is to be seen that in all those cases, in which time stipulated has expired but the adjustment accounts have not been received, are duly brought to the notice of the higher authorities end follow up action is invariably initiated. Action to verify the correctness of the outstanding balances at the end of the financial year is regularly taken and the confirmation obtained from the parties concerned. All the final adjustment accounts and some Running Accounts shall be reviewed completely with reference to the terms & conditions of Contract Agreements. Deviations if any, shall be pointed out for immediate action. In case any escalation in cost is adjusted. it shall be checked up if the delay is attributable to the Executing Agency and whether escalation charged is justified.

(I)

(ii)

37

(m)

It may be seen in the cases of long delays in completion, in rendition of adjustment accounts or in refund of unspent balances. that penal provisions of the contract are invoked and pursued to final settlement. Register of Bank Guarantees The Register of Bank Guarantees/Performance Bonds is required to be maintained by the Finance & Accounts Department at the Corporate office and each of the Project offices, in the prescribed form in accordance with the provisions of the Banking Manual. It shall be seen that the Register is duly and properly maintained, the Bank Guarantees/Performance Bonds are kept in safe custody by the officer entrusted with the responsibility and the same is duly reviewed at prescribed intervals, action is initiated for their extension, where necessary invoking their provisions in cases of default in execution of Works or Supply orders or in extending the same. It shall also be seen that physical verification of all documents held is carried out at periodical intervals and result there of kept on record.

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7 PERSONNEL, ADMINISTRATION, PUBLIC RELATIONS, COMPANY SECTT., LAW AND VIGILANCE DEPARTMENTS
7.1 Personnel Department The Internal Audit Inspection of the Personnel and Administration Department once in a year at the head office level and at the project shall be conducted. The test-checks to be exercised shall be with reference to schemes and functions carried out with regard to Recruitment, service conditions, formation of selection panels, sources of recruitment, Manpower planning, Statistical data generated, placement review and Management Information Reporting System. Checks by the Internal Audit are to be carried out with reference to the general principles and guidelines issued by the Govt. of India and the rules and orders issued by the Corporation from time to time. Most of the rules and orders approved by the Board of Directors are reported to have been incorporated in the Personnel Manual issued by the P & A Department in 1992. The executive instructions and orders issued by the competent authority, and as amended from time to time, in respect of subjects not covered by the Manual also form the guidelines for this purpose. The following checks are to be exercised over the records of Personnel Department: It shall be seen generally, that all important working requirements of the Department have been incorporated in the Manual. Deficiencies if any noted during test-check of records shall be pointed out for necessary action. The implementation of the Government of India's policy of reservation for different castes and classes shall be seen particularly as also the provision of employment to the members of ousteest families as per the approved package of Rehabilitation within the overall approved Manpower Budget. The test-check of different records is shall be carried out with reference to the rules and procedures and the provisions of the Personnel Manual with regard to the personal records of the employees and Officers. It shall be seen that rules and orders are generally applied uniformly in all cases. Relaxations are made with the sanction of the competent authorities in a way that they are made only in exceptional cases and not generally. It shall be seen that the provision of various Acts like Industrial Disputes Act, Minimum Wages Act. Workmen's Compensation Act, Employees Provident Fund and Misc Provisions Act, Factories Act, etc as applicable have not been violated by the Corporation. The particular areas 10 be covered in personal records shall be as under: (a) Pay fixation cases shall be checked cent percent, on first appointment on revision of pay-scales and any general enhancement granted as a result of Gov. of India's Policy or on account of wage-settlement between the Management and the Staff. It is to be checked with reference to general guidelines and rules and orders issued from time to time. It is to be ensured that Finance and Accounts Department is invariably associated not only in framing guidelines but in fixation of

(i)

(ii)

.(iii)

(iv)

(v)

39

(b)

(c)

(d)

(e)

(f)

pay also. Special attention is required to be paid to cases of fixation of pay of Officers and staff coming from Central Dearness Allowance pattern to Industrial D.A. pattern, as the P&A Manual is silent about the formula to be adopted in this behalf. All cases of irregular and incorrect fixation of pay. with the extent of excess payment involved upto the date of Internal Audit, shall be brought out. The P & A Manual is silent about the duties and responsibilities of the Controlling Officers with regard to regulation of Traveling Allowance, and Daily Allowance, Conveyance payment, Medical Reimbursement, and grant of different kinds of leave, Advances for House Building, Conveyance, Medical Treatment etc. It shall seen, in the absence of orders and instructions issued how far the Controlling Officers are regulating these allowances and payments on a uniform basis and as per rules and orders. All cases of laxity of rules and resulting in irregular payments shall be pointed out with emphasis on the competent authority for framing rules and procedure and issuing instructions in this behalf for uniform regulation of the claims & Advances by all the Departments and Units of the Corporation. Release of pay and Allowance to the Officers and members of staff based on actual attendance availing of leave of different kinds, and entitlement of Subsistence Allowance during period of suspension etc. shall be checked to see that there area adequate safe guards to regulate the pay and allowances based on receipt of Absentee Statement or change Statement (containing events on account of leave, suspension dismissal, resignation etc.) regulating leave salary on full, half or without pay in the month in which it is granted or the month following the month of event in case it takes place late in the month. For the grant of Motor Car/Motor Cycle or other Conveyance Advances and House Bldg. Advance proper procedure is followed and all terms and conditions are satisfied before the payment of the advance is released. Recoveries of Advances are to be regulated properly. In case of Officers and members of staff resigning their jobs, or leaving service on retirement or otherwise, it shall be ensured that full recovery of the outstanding Advances together with Interest due upto date was made either from the Officers or employee concerned, or from the sureties, without any delay or relaxation. General checks shall also be applied on cases of grant of Encashment of leave, LTC and its encashment, re-imbursement of Conveyance Expenditure and similar other benefits with reference to the rules and orders on the subject and the delegation of powers exercised by different authorities. The Corporation has framed its Recruitment Policy. It shall be seen by Internal Audit that recruitment of employees is being done according to such Policy. Manpower budget approved by the Competent Authority Eligibility criteria for each post has to be followed. Source of recruitment would be checked to be as defined in the Recruitment Policy. Any relaxation should be approved by the Competent Authority. Any deviation noticed would be pointed out by the Internal Audit in its Report.

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(g)

(h) (I)

Implementation of promotion policy cases of employees who were overlooked shall be reviewed to see that proper appraisal procedure is in operation and that it is duly followed; proper procedure was followed and order of the competent authority were obtained before the penal action was made operative. TA payments to candidates called for interview would be test checked for reporting violation if any. Other cases relating to services of employees like probation, regularization, training, medical examination, etc. would be test checked and discrepancies reported. Cases of extension of probation would be checked to have been made with the approval of the Competent Authority.

7.2

ADMINISTRATION DEPARTMENT (a) General

The control of Administration Department extends over a vast field of common services like running and maintenance of general services and upkeep of Offices, Guest Houses, Hostels, allotment of residential accommodation, conveyance and transport, maintenance of Office Equipment etc. It appears that so far Administration Manual of Office Procedure governing these services has not been issued. The Internal Audit Inspection of the Administration Department shall, therefore, be carried out on the basis of rules and orders issued, if any. If no such rules or orders exist for any particular service or class of services, only generally accepted guidelines will be applied to check that the services are generally run efficiently and economically and that there have been no cases of serious irregularities resulting in avoidable expenditure or loss. The checks to be exercised on the records would include the following: (i) For purchase of items of Assets, non-consumable and consumable stores, stationery articles, etc. handled. by the Administration Department directly all checks to be applied to the procurement of material by the Materials Management Department shall be applied to the purchases by the Administration Department. It shall be seen that proper .stock ledgers are being kept for receipts and issues of stationery and other Assets and that the issues are being made as per norms. (ii) It shall be seen that approved scales for the supply of. items in the Office chambers and at Residences (where applicable} for the top management,. middle level and other Officers are adhered to. The contracts for running and maintenance of items like Personal Computers, Photostat machines, Air-conditioners and other office and general equipment and furniture and fixtures shall be generally reviewed from economy and efficiency points of view and deficiencies and irregularities, if any noticed pointed out. It shall also be seen that scale of entitlement for the items of stationery, computer peripherals and items of common use have been laid down

41

(iii)

(iv)

(v)

(vi)

and that they are adhered to in all cases except in cases. of special relaxation. Lease agreements of the rented office premises and residential accommodation for different categories of top and other officers shall be generally reviewed to see that they are executed on approved formats signed by competent authority and the payments are released strictly as per terms and conditions. Renewals and extensions of loase deeds are made within the terms and conditions approved by the competent authority. Payments for running and maintenance of common services, if any, are to be regulated with reference to the terms of Lease Agreements. It shall be seen that hiring of accommodation is at economical and competitive rates, proper procedure of inviting bids, etc. was followed and the scale of rent is generally within the annual ratable value of such premises. by the Municipal or Local Bodies of the area. For the renting of accommodation for guest houses, their location, convenience of approach from the office, facilities for parking vehicles etc shall also be kept in view. The terms and conditions are properly scrutinized and approved by competent authority and the rent and other charges (Municipal Taxes. Electric, Water and general Maintenance Charges) are as applicable in other buildings in the area and commensurate with the provision of services. The additions and alterations are carried out at economical and approved rates. Provision of Office Equipment, Personal Computers, Air conditioners, Telephones, fittings, furnishings and newspapers and periodicals are as per approved norms, both in the office premises and at residences. The upkeep and maintenance of these Equipment and services is economical and as per terms and conditions of maintenance contracts entered into. It shall also be seen that proper records/ registers are kept. Proper and uptodate record is being maintained in respect of residential accommodation. Guest Houses, Field Hostels and Transit Camps owned by the Corporation under the charge of Administration Department for allotment, upkeep and maintenance. Proper Inventory is maintained for the fittings and fixtures, Equipment (Office and Kitchen) and crockery and cutlery, furniture and linen, etc. Proper rules are framed for allotment of residences for different levels of Officers and employees the Standard Rent (license Fees) or Room rent for Hostels, Guest Houses recoverable are fixed as per rules, (including revision at periodical intervals) and relevant records are maintained for recovery of rent from officials & parties. That rules have been framed for entertainment of official guests, recovery of Room rent from officials and non-officials, handling cash and remittance of the. same to the Cash and Banking Section of the F & A. Department and they are properly applied. Any lapse irregularity noticed during Inspection, be it in the framing and laying down of rules and procedure, maintenance of records or handling of these services and official property and cash, or in their application, the same shall be brought out in the Inspection Notes for immediate action at appropriate level.

42

Dispatch arrangement would be checked for its speed and efficiency. Franking .machine readings would be test checked to see that there is no scope for use of the same for private purposes. Imprest. cash, stamps and franking-machine balance would be checked on the day of audit. (b) Running of Transportation Services: .The provision of staff cars, jeeps and other modes of transport handled by the Administration Department shall be governed by the rules and procedure approved by the competent authority and regulated accordingly. Whenever the use of vehicles is allowed to officials not normally Entitled to, orders of competent authority shall invariably be obtained, logging of the journeys recorded and got authenticated by the authorized Officers taking full responsibility for the journeys undertaken. In all cases Log Books in the approved form shall be maintained and all columns filled in properly, avoiding the general pattern of showing all journeys as "official" without mentioning the purpose in brief. As far as possible, details of the places visited shall be mentioned. The Log Books are to be signed by the authorized Officers, closed regularly, average running per liter worked out, wide variations in the running per litre investigated and data regarding conservation of energy (POL consumption) properly worked out. All cases of miss-use, non-maintenance of Log Books on proper lines. defective and non-working of Milo-meters and cases of heavy repairs and maintenance and continued running of vehicles declared Beyond Economical Running shall be pointed out for suitable action. Private use of the vehicle would be seen to have been made with the approval of the Competent Authority and recoveries thereof would be checked. It shall be seen that road taxes are being paid in time and the insurance of the vehicles kept valid all the time. In respect of hiring of Taxis, it shall be seen that the hiring is done under proper orders. at economical rates and proper administrative control is exercised over their use, payment of hire charges, and recoveries, if any to be made. (c) Data In support of MISRs and Statutory Returns:

(vii)

Authentic and reliable data is required to be maintained in support of the Management 1Iiformation System Reports and various returns required to be submitted to the Government of India Departments as per provisions of the Companies Act and Executive orders issued by different authorities like : (i) Industrial Relations position (ii) Proper utilization of Manpower, (iii) Labour turn-over and its related effects on the Company. (iv) Conversation of Energy (POL. etc.) Some of the Reports submitted shall be checked with reference to basic data and their authenticity verified . 7.3 PUBLIC RELATIONS DEPARTMENT

The Public Relations Department has an important role to play in the field of developing proper understanding between the Corporation and the Media, be it Press, Television network or other media. Continuous efforts are made to remove

43

impediments to good understanding between the two sides and help in the continuous growth and development of healthy relationship. Timely and accurate dissemination of information about the Corporation's Objectives, Policies. Plans and activities to the public at large. and State agencies through different wings of the Media should be a regular feature of its activities. It has also to help \he Management to counter the misleading news items and disinformation circulating among the members of the public. in and around the Project area and elsewhere, which may adversely affect the image of the Project and Corporation and ultimately result in avoidable stoppage and delay in the execution of the Project. The items on which expenditure is incurred may be reviewed with reference to the aims and objects of the Department and see how far the efforts made towards their achievement and improving the image of the Corporation have been successful. It is not the objective of Internal Audit to sit over judgment about the achievements of the Department. If the Management is kept well informed about the news items circulating in the Media and directed to dispel wrong impressions, and the Management is satisfied with the action taken, it can be safely presumed that the Department has discharged its duties timely and properly. With regard to its responsibilities to release Advertisement for employment, tender, notices, purchase of machinery, equipment and material, etc. it shall be seen that proper procedure is followed for inviting offers from the Advertising Agencies, Indicating the volume of business involved and the jobs required to be handled. Selection should follow the proper evaluation of the offers received, their consideration by a duly appointed Tender Committee and approval by the competent authority. Similar procedure should be followed with regard to selection of quality printing presses for printing of House-Journal 'Gangavtarnam' and other printing jobs like Annual Reports and other specialized items as also for the procurement of paper, moments & gift items, Internal Audit Inspection of the Department shall be conducted once a year. It will be seen that adequate control checks are exercised for ensuring that all jobs are got executed and purchases are mace at competitive and economical rates. 7.4 COMPANY SECRETARIAT (a) The working of the Company Secretariat will be reviewed generally to see that all the provisions of the Companies Act, 1956, applicable to the Corporation are duly followed and all Returns and documents required to be field with different authorities were duly tiled without delay and without attracting the penal provisions of the Act. In case any instances of delay and/or default come to notice. the same shall be brought to the notice of the Management. Remedial measures taken for avoidance of the same shall be reviewed. . The Inspecting Officer of the Internal Audit Party shall go through the Agenda and Minutes of the meeting of Board of Directors personally and note down all important directions and orders concerning systems. procedures and rules etc. with a view to verifying the extent to which these have been followed and put into practice by the Departmental authorities. He may bring out cases of violation of the rules and

(b)

44

procedures and non-implementation of the decisions the Board. Should the CIAO desire to acquaint himself with the decisions and directions of the Board. copies of the Agenda papers and Minutes may be made available to him by the Company Secretariat. The Inspecting Officer shall however. send a brief of his notes to him with the draft Inspection Report of the Company Secretariat. 7.5 DEPARTMENT OF LAW The records relating to the Department. of Law shall be reviewed with reference to the following points: (a) There is proper delegation of powers to institute legal proceedings or to defend the Corporation against the legal cases brought about against it. There is a duty constituted and approved panel of Advocates and Counsels at different stations. The legal fees and other charges to be paid are duly approved. all payments are made in accordance with the approved schedule at the Head Office and at each of the stations by the Departments authorized to handle legal cases. There is an approved panel of Arbitrators and the approved schedule of fees and other charges payable to them as also to the Counsels and Consultants appointed by the Corporation in this behalf. The cases are handled as per the approved procedure and are properly followed up at each stage. In case the Arbitration cases are on the increase, the matter may be reviewed as to the reasons for the high incidence of cases being referred to Arbitration. It shall be seen that there is no let up or mishandling of the matters to encourage the Contractors to opt for legal remedial measures. It may also be seen whether all avenues for amicable settlement of disputes are made use of for the avoidance of legal and Arbitration cases and the consequential saving of legal expenses. It shall be seen whether, generally, proper follow-up action is taken to go in for appeal against any Awards or Judgment going the other way, after proper legal opinion has been brought about on record. Any matters going in default due to delay in handling or by inaction shall be duly brought out for necessary action and for taking remedial steps. Whether there is a regular MIR system in approved formats and all decided or important events of on-going legal and Arbitration cases are duly reported and follow-up action, if any, taken or proposed in cases in which any weakness in the procedure for award of Works Contracts or placing of Purchase Orders is evident. Internal Audit Inspection at the Head Office and in the Offices and Departments at the Project, in case independent Legal Cells are functioning at the Project, shall be conducted once a year. In case legal 'functions are performed by some of the Departments mainly handling other functions, the legal cases may be reviewed on these lines along with the Inspection of these Departments..

(b)

(c)

(d)

(e)

45

7.6

VIGILANCE DEPARTMENT The Internal Audit Inspection of the Vigilance Department shall be done once in a year. The records of the Department shall be reviewed on the following lines: (a) By test-check of some of the cases handled it shall be seen that the provisions of the Conduct, Discipline and Appeal Rules are followed in all cases and by the appropriate authority. (b) There is timely action in all cases at different stages and there is no avoidable delay in starting the disciplinary proceedings, follow-up. action and expeditious final action is taken in advising the appropriate authority for awarding punishment or exonerating the officials. as the case may be. (c) Adequate set-up has been created. and if necessary strengthened depending upon the quantum of work-load, for proper consideration of cases and complaints received for Initiation of disciplinary proceedings. Any specific cases of inordinate delay in putting up the cases to the appropriate authority for its decision may-be brought out giving reasons and the observations of the Department. (d) The time-Iag, if any, in taking the follow-up action in cases in which penal action has been completed for restoration proceedings as per provision of the rules, shall be brought out with appropriate suggestions for avoidance of delay in initiation of action . (e) An analysis may be attempted for the pending cases, for over one, two or more years to see that the delay in taking the final action is not attributable to the matters falling within the functional jurisdiction of the Department. It may also be seen whether MIA system has been laid down and the same was being followed and the top Management kept fully aware of the delay in finalizing the cases remaining pending for long periods and remedial action taken if any.

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8 CONTRACTS AND PROCUREMENT DEPARTMENTS


8.1 CONTRACTS DEPARTMENT . The work relating to the preparation and floating of tenders, processing of tenders and recommendations for award of works contracts within the delegated powers of General Managers/Additional General Managers and Deputy General Managers and whose of authorities higher than these, i.e. by the Chairman & Managing Director and the Board of Directors is handled by the Contracts Department centrally from Rishikesh. The work of the Department shall be reviewed generally with reference to the Works Policy approved by the Board and with Delegation of Powers. The following general checks shall be exercised during Internal Audit Inspection of the Department. it shall be seen that : (a) The preliminary checks to be exercised before the tenders are floated, like the according of Administrative Approval and Technical Sanction, coverage of the item of work within the Detailed Project Report and backed by the Budget Provision, have actually been exercised and are evident from record. There are standard formats for tender documents, and no deviations are made there from. There is a standardized list of Newspapers for publication of the tenders, or in case of limited tenders, they are issued to the firms duly qualified to participate in the tendering process. Adequate control mechanism exists for the receipt, processing and consideration of the tenders; their confidentiality being maintained at all stages. There is timely submission of the award proposals by duly constituted Tenders Committees and that the unwarranted extensions and reentering process is avoided as far as possible. Standard Terms and Conditions (General & Special) forming part of the Contracts documents duly approved by the competent authority, are adopted and that no deviations are made therefrom without the prior approval of the competent authority. If any dispute arises with any Contractor at any stage of execution, and any material amendment is agreed to, whether the same is circulated among other functionaries vested with the powers of award of works contract so as to ensure uniformity of terms and conditions and in the formats of the agreement in all the Departments of the Corporation. There is uniformity of procedure adopted for processing and approving deviations analysis of rates for Extra Items and additional quantities, within the delegated powers of the authorities approving them. The records required to keep track of the progress of execution of the works. authorizing amendments and approval of Extra Items and additional quantities etc. are maintained on the appropriate-formats and kept upto date

(b)

(c)

(d)

(e)

(f)

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8.2

PROCUREMENT DEPARTMENT The Materials Management Department is charged with the important responsibility of arranging procurement of materials, its accountal. transportation. issues and verification, etc. The process of procurement is carried out on the basis of the Purchase Policy approved by the Board of Directors, and issue for utilization at the Project sites and disposal, etc. is mostly being done without any Manual or executive instructions governing the functions including procurement. There are certain areas which have not been covered in the Purchase Policy and require issue of executive instructions and guidelines. It is understood that there are certain Systems Circulars and instructions issued at the Level of the Senior Manager (Materials Management) from time to time which are generally being followed. The main function, of procurement of almost all the materials required for the construction activity, electrical and mechanical equipment and storage and accountal of bulk of the material initially is done at Rishikesh Office. Thereafter the quantity required by other Departments and that required for storage is transferred to Project site at Tehri in the respective Stores Deptt. handling Civil. Electrical and Mechanical Stores & Spares. The general review of the Department will be carried out on the following lines: All action for procurement of material is governed by the provisions of the approved Purchase Policy. It is to be seen that: (a) These provisions are followed in the total process of procurement and that all returns and details provided for therein are duly prepared and submitted. The procedure adopted and formats used are uniform and no deviations are made without proper authorization. . All procurement requisitions are made on approved formats by competent authority, complete specifications are given, indicating approximate time of requirement. Standard formats for processing the proposals, obtaining approval of competent authority. floating of tenders, their receipt and evaluation is carried out as per approved procedure. Purchase Orders. are placed on standard formats. Standardized terms and Conditions only form part of the Purchase Order and no deviation there from is made without proper authorisation. Inspection and Quality Assurance Department is closely associated with the procurement plans and provision of Inspection by the IQA Deptt. is duly provided for . Adequate control mechanism is in operation on handling material on receipt to ensure quality and quantity checks and initial accountal of stores through Receipt Vouchers. on proper form and onward transmission to interim or final destination. Proper documentation is done to handle discrepancies. shortages and material of inferior quality. The cases requiring preference and pursual of claims for damages, shortages. etc till final settlement are properly handled.

(b) (c)

(d)

(e)

(f)

48

(g)

(h) (i) (j) (k) (I) (m) (n)

The system of accountal of material in the Stores Accounting Section is adequate and prompt and the procedure adopted is working satisfactorily. The stores are verified physically at periodical intervals as per approved procedure and follow-up action is taken. ABC and arrear access or analysis is disposal. Stock-holding is within the permissible limits fixed by the Management and periodical Returns are furnished to the concerned authorities. Wherever the stores are held, be it for holding or for utilisation, the accounting procedure adopted is uniform throughout. Procedure of issue of stores is as per approved procedure and SIVs are duly made and sent to all the concerned authorities. Timely action is taken for weeding out obsolete and surplus stores and their disposal arranged as per approved procedure. The checks prescribed for Civil Works Depts. (chaper-10) as applicable to M.M. Department shall be exercised.

(a)

Procurement of Material: The procurement process is centrally being handled from Rishikesh Office under the charge of Senior Manager (MM). It is to be seen whether the guidelines and procedure laid down in the Purchase Policy have been followed properly and the records required to be maintained have been maintained and whether they serve the purpose. The Systems circulars issued from time to time also need to be reviewed whether they cover all the functions of procurement, inventory handling and control, analysis of material held for timely utilization and/or disposal and for exercising necessary checks connected with efficient Inventory Control Mechanism. Deficiencies found in the whole process need to be pointed out with emphasis over the issue of Manuals for Procurement and Inventory Control System.

(b)

The checks to be exercised on the important records are as under: (i) Purchase against Open Tenders: It shall be seen whether instructions contained in para 3 of the Purchase Policy have been followed for Registration of Suppliers as per prescribed procedure and the list updated every two years. The number of Tenders invited from among these Suppliers, their response, rates quoted by them, Orders placed with them on the basis of their quoted rates and whether the rates were found to be competitive may be checked up lncase the response has been poor and placement of orders scanty, it may be presumed that the exercise of finding dependable sources of supply have not borne fruit. In case the procedure outlined in the Policy had not been followed or the Registration of Suppliers was not done or having been done, was not updated. it may be worth while to see on what basis were the suppliers selected.

49

(ii)

Register of Indents: It may be seen whether the Indents placed by different Departmental authorities find quick response in converting them into -Enquiries, procurement is done within reasonable time and the material made available to the Indenting Deptts. expeditiously. Any delay in the process may cause avoidable loss of time and escalation in cost of material and ultimately delayed execution of the Works due to nonavailability of essential material in time.

(iii)

(b)

Register of Purchase Requisitions: The Register may be reviewed to see whether the process of placing Requisitions by different authorities is done, giving sufficient time to the M.M. Department to follow the normal process of procurement or it has to resort to emergent purchases or Committee Purchases (i.e. local purchases by deputing specially appointed committees). The completion of all formalities within the stipulated time and recording of all events and information being regularly done shall be reviewed and shortcomings pointed out. Committee Purchases: Local purchase of material may be resorted to by deputing a Purchase Committee specially formed for the purpose. It may be seen whether this procedure is followed only in rare and emergent cases, or as a matter of routine, thwarting the normal procurement procedure. It will be worthwhile reviewing the cases on the following lines: (1) (2) Whether this process is resorted to quite often. and what is the quantum of total purchase through the Committees during the year. Time normally taken to complete the process, i.e. from the date of receipt of requisition or Indent to the final availability of the material to the end-user. In case there is inordinate delay in the whole process and the lead time taken for marking the material available to the enduser is the same or almost equal or more. which takes the normal process of procurement. through open or limited tender. the purpose of making local purchase would not be served. The cases of Temporary Advances sanctioned for local procurement of stores may be reviewed to see whether the amount sanctioned is justified with reference to the actual requirement or is much in excess, whether the accounts for the Advances are rendered soon after the process has been completed and unspent balance refunded promptly. Cases of excess drawal of advance, retention of the advance, or of the unspent balance for long periods, and delay in rendition of adjustment accounts. May be commented upon and the authorities concerned advised to streamline the process to minimise such cases. The material generally procured through local purchase may be checked whether any material generally purchased In bulk & stored for use by other Departments was purchased through this process. Any

(3)

(4)

50

(c)

cases of non or delayed utilisation of material may be brought out and justification for committee purchase sought. Receipt, Accountal, Transfer and Issue of Stores: The entire procedure of Receipt of store centrally at Rishiikesh check of quality and quantity against Purchase order issue of stores Receipt Vouchers (SRVs) their accountal in the Stores Ledgers communication of relevant copies of SRVs to the Finance & Accounts Department receipt and processing of Stores issue vouchers (SRIVs) transportation to final destinatin (Stores at Tehri or site of work) and the acknowledgement thereof by the indentors may be reviewed to see that the whole system and procedure is foolfroof,efficient and smooth. Cases of discrepancies non/delayed receipt, preference of claims against defective supplies shortage damages during transit and other losses may be reviewed to see whether they are promptly attend to and pursued till settlement. The result of review and cases of serious nature, delays in pursual and settlement etc. may be brought to the notice of higher authorities for remedial measures and streamlining the procedure as may be considered necessary.

(d)

Fixation of Issue Rates of Stores For all stores items procured for the Project issue Rate is to be fixed in accordance with the approved procedure and notified in the beginning of the financial year for the valuation of all the material for the maintenance of the priced stores ledgers and valuation of all issues whether for utilization directly on the works under execution for debit to the estimate concerned or to the account of the Contractors for recovery. The recoveries from the contractors shall be regulated for stipulated items at the prescribed rates and for the non-stipulated items at the issue Rate or at Market Rate whichever is higher. Whenever there is material variation in the procurement rates subsequent the fixation of the issue Rates action to revise the issue Rates as per the prescribed shall be taken and revised issue Rates made effective immediately. Some cases of important material handled in bulk may be reviewed to see that the whole process is in accordance with the prescribed procedure and based on the approved pricing formula, Any deficiency or delay in the process for fixing the rates and notifying them may be brought out for necessary remedial action.

(e)

Physical Verification of Stores It is to be seen that proper procedure is followed for periodical physical verification of Stores by a team comprising suitable Technical Executive and a member drawn from the F&A cardres. The report of verification i8s to be submitted to the appropriate authority and follow up action taken to account for the excess item and quantities and write off action for shortage to be

51

initiated after following the prescribed procedure. The physical Verification (Quantity Account) is to be followed up by reconciliation of value Account as per priced stores ledgers maintained in F&A Department which are ultimately reconciled with the inventory value brought out in the General Ledger and the Balance Sheet. It is to be seen that his procedure is followed very carefully and in time before the finalization of Annual Accounts and the Statutory Audit. A suitable comment is required to be made about the adequacy of action taken and system followed in the Audit Report by the Statuary Auditors and incorporated in the Annual Report of the Corporation. Any let-up in this regard shall be brought to the notice of the management for effective action at the earliest. In fact the process of Physical Verification is -now considered as a continuous process throughout the year as the stores are usually scattered at far flung sites in very huge volumes which make the verification very difficult in one go. This process is finally concluded with the submission of the Physical Verification Report. (f) Analysis of Stock-holding Inventory holding is a highly capital-intensive activity requiring huge investment and advance planning to enable timely availability of essential material for construction activity at economical rates. The long lead time required for procurement in quantities, sufficient to meet the continuous demand, makes it imperative to build up stocks to meet any eventuality .At the same time it is essential that efficiency and economy in handling should not be lost sight of. It is, therefore. necessary that the inventory holding should get the best attention at every level. For this, different types of checks are often applied. ABC and other types of Analysis have been devised to ensure that the stores procured and held are made efficient use of and do not result in heavy holding at high cost for long periods without being used. It is also helpful in future planning and procurement action in time. It shall be seen by a review of the quantity stores and Priced Stores Ledgers that appropriate action has been initiated for proper movement and utilization of stocks and heavy unused balances are not accumulated at any given time of any important items of stores. Attention of the departmental authorities, both of the Materials Management Department and of the Finance & Accounts Department shall be drawn to this important function for continuous and critical review of the holding for proper action at all times. Optimization of resource-utilization is the main underlying idea of efficient Inventory control system with periodical analysis followed by required action. The review of the Stores Department shall be carried out on the basis of the points brought out above and any deficiency in the whole process brought out for urgent attention of the Management.

52

9 REHABILITATION DEPARTMENTS (RURAL & URBAN)


9.1 GENERAL One of the important schemes, as a part of the execution of the Tehri Hydro Project is the rehabilitation of the oustees from the land taken over by the Project. The Scheme has mainly two wings, i.e. (1) The Rural Rehabilitation Scheme dealinig with outstees who were mainly dependent on Agriculture and actively connected therewith and (2) Urban Rehabilitation Scheme of oustees from the urban areas. A complete census of the population to be ousted and the details of the land. and built up property like buildings. dwelling units, shops, was carried out and completed in June. 1985. While this survey carried out by the UPID forms the basis for allotment of alternative land and grant of other benefits to the oustees as a continuing process of Rehabilitation. THDC under the direction of the Board of Directors framed the two Rehabilitation Policies and improved the same from time to time. The implementation of these Schemes of Rehabilitation of the Rural and Urban oustees is being carried out through Departments of Rural & Urban Rehabilitation set up at different locations of the Project. i.e. Project site at Tehri Office Complex at Rishikesh and at DehraDun. The works are in progress at different sites where land acquisition. development of infrastructures for rural and urban oustees. construction of Administrative Offices, New Tehri Township, Hospitals, Schools. College. Training Institutes, etc. and development of plots of land and dwelling units and houses for allotment. All important records connected with the activities of Rehabilitation Department are required to be maintained so as to take into account the land taken over along with the structures, trees and crops, names of the oustees and their dependents. total expenditure incurred, record of assets taken over. expenditure incurred on creation of infrastructure development, development of land. expenditure on construction works, records for payment of compensation, allotment of alternative sites. plots and package for construction. etc. The activities of the Department cover records for Land Revenue, distribution of land, Civil Works for Township," distribution of land and sites, etc. During the course of Internal Audit Inspection. it shall be checked that : (a) Proper records have been maintained to records the legal & physical take over of land. infrastructures. trees. crops. etc. paid for .

53

(b)

Proper procedure has been followed for the valuation of immovable and moveable property. its take over and payment made to the bonafide beneficiaries. The procedure, being following by the UPID prior to the transfer of scheme to the THDC, is being followed and all records envisaged therein are being kept. Till such time as the THDC lays down its own 'procedure in this regard the procedure being followed prior to its transfer is being continued fully, unless there are any orders to the contrary . Physical progress of scheme is matched with the progress of expenditure from time to time. Procedure required to be followed with regard to award of construction works and exercise of Delegation of Powers in accordance with the approved Policy of the Corporation is being followed. Proper accounts records are being maintained and procedure for payments as applicable to other Departments of the Corporation is being followed. There is proper accountal of moveable & immoveable property, structures, trees, and crops and there is proper disposal & accountal of sale proceeds thereof . There is timely completion of different schemes of development of infrastructures, buildings, etc. whether undertaken by the Department itself or being got executed through outside bodies as Deposit Works and the land and buildings are properly taken on record as soon as completed. The plots of land for construction of houses or dwelling units, or for agriculture. are promptly allotted to the eligible oustees under proper identification and orders so as to avoid escalation of costs and quantum of compensation due to delay, Cases of delay and extent thereof in handling different components of schemes, be it transfer of assets or distribution and allotment, may be brought out with stress on expenditure action.

(c)

(d) (e)

(f)

(g)

(h)

(i)

The expenditure on the Rehabilitation Scheme (Rural as well as Urban) is being booked under separate heads of account and even a separate Bank Account has been opened for this purpose. The importance accored to the scheme is in keeping with the policy of the Government to accelerate the pace of Rehabilitation so as to minimize the social economic and cultural hardship to the outees on the one hand and to take over the vacated land for speeding up the implementation of the Project components as per targets and schedule of commissioning of the Project on other hand. It is from this twin-purpose angle that importance of these schedule has to be seen. Their timely completion can hardly be overemphasized. It is therefore imperative that due importance is given to provide for Internal Audit Inspection with adequate manpower and adequate time allotment for different Rehabilitation Deptts. Functioning at different sites. A complete list of records being maintained at each of the sites be drawn up and deficiency if any in the maintenance or non-maintenance of the

54

important records should be brought out and immediate action suggested to get the records maintained properly. 9.2 RECORDS OF THE DEPARTMENTS: Rehabilitation Scheme of the outees from the land earmarked for various components of the project and their resettlement and rehabilitation at alternative sites by allotment of plots for residential purposes, land for agricultural operations and development of township with all infrastructures is the first major step towards the construction of the Project. This scheme of acquisition of land payment of compensation for land building structures trees horticulture etc. which was transferred to the Tehri Hydro Development Corporation in February 1990 is In effect a continuation of the work done by the UP PWD since 1976. The records being maintained (or even those though envisaged in the scheme drawn up initially but not , being maintained) have to be maintained completely and the procedure and systems being followed prior to the transfer of the scheme, are to be continued, unless orders of the competent authority to the contrary exist. It is. therefore, to be seen that all the important records to account for the transactions carried out. compensation paid. property and assets taken over, are not only being maintained but are being improved upon wherever required. Additional records required to cater to the needs of the Corporation and for generation of data for the important records which require constant review during Internal Inspection should also be maintained. However, the schemes in operation prior to Feb. 1990 and those approved by the Corporation subsequently shall be studied for check of record provided therein in addition to the following records. (a) Register of Compensation for Land. Building & Property: The Register shall be reviewed to see that all relevant information regarding plots, pieces of land, buildings and other property taken over is duly recorded, reference to the item in the Survey Register correlated and duly marked to prevent double payment for the, same item. Full particulars of the payees. complete details of the title-holders and their address and relevant reference to the award of the concerned Revenue authority .forming the basis for rate and payment should be duly recorded. The entries are duly authenticated and there are no cases of interpolation. cutting or overwriting. except where authorized and authenticated by the competent authority. The record should be complete & uptodate in all respects at all times. It is to be seen that there is no undue delay in the matter of acquisition, payment of compensation at the approved rate and take-over of the land and property paid for. Any case of revision of rate for land, etc. after initial payment shall be fully investigated and result thereof brought out. Normally no such case should arise as the payments are made on the basis of

55

assessment made by the competent authority in full & final settlement. (b) Register of Advance Payments to Land Acquisition Deptt. In the event of advance payments to the Land Acquisition Department of the UP Govt. for payment of compensation for land etc. it shall be seen that normally there are no cases of delay in the matter of release of payments for land acquired and rendition of accounts to the Corporation duly supported by documents of land and property acquired and taken over. The records of the Corporation should be completed without any delay and follow-up action taken. The departmental authority concerned is required is review the position of payments and progress of acquisition and transfer of property to the Corporation at periodical intervals. If this review shows heavy outstanding and arrears, suitable comments shall be made lncase review has. not been done, the desirability for doing the same and follow-up action required to be taken is duly stressed and followed up. (c) Record for Compensation package: The Compensation package approved and made applicable provides for the following items: A. RURALSCHEME (1) Allotment of land (Minimum of 2 acres of developed irrigated land. or half acre of developed irrigated land within or adjoining Municipal limits of the City) or Reimbursement of cost of land within certain ceiling and minimum limit. (2) Compensation of house property as per evaluation norms approved. (3) Compensation for land as per land acquisition and solatium charge at approved graded rates for irrigated or unirrigated land. (4) A house plot of certain size at nominal cost. (5) Rehabilitation grant for shifting and for fertilizers. URBAN SCHEME (6) (7) (8) Allotment of residential plot of different sizes. depending upon the size of house property held in the old Tehri Town. Recovery of nominal cost of land at graded scale depending upon the size of the plot. Payment of cost of property as per approved evaluation (the cost being depreciated depending upon the life of the property) and depreciation being paid as ex-gratia. Cost of construction of house to be paid at the minimum approved rate linked with the period of construction. Grants for transportation of personal effects (household belongings) and business effects. Besides. the package provides fqJ loan facilities.

B.

(9) (10)

56

(11)

(12)

(13)

(14)

reimbursement of cost of construction of flats allotment of kiosks for carrying on small scale road-side business etc. Since the scheme envisages a number of items like the allotment of land. house .house plots. compensation for property. etc. as briefly stated above. it is the duty of the concerned Department (Rural and Urban) to maintain all records essential to record every item of compensation and payment to the eligible oustees. duly linked with the Survey Census carried out and completed in June, 1985.ln accordance with the scheme handled by the UPID. prior to its transfer to THDC in 1990. a Survey File (or Survey Sheet) was prepared to work out the eligibility of each oustee and the release of compensation. allotment of land, house and payment of other dues. according to the entitlement of the individual oustee. It appears that the Corporation has not issued any instructions. or laid down any procedure. for handling these schemes in addition to or in lieu of the procedure already being followed prior to the transfer of the schemes. It is, therefore. Necessary to review the records being maintained at present, compare them with those being maintained by the UPID prior to transfer in 1990 to see that complete details of the compensation due as per entitlement are recorded, actual payment and allotments, etc. made are shown against each item under proper attestation in a way as to prevent payments. etc. to non-entitled persons and prevent any additional or double payments. If as a result of test-check, as per the provisions of the Internal Audit annual any short-comings or lacunae come to notice. the same are brought to notice and suitable suggestions are made for strengthening the procedure and maintenance of any additional records or addition of any column in the existing record, is called for. If any record is not being maintained after the transfer of Scheme in Feb 1990, or has been discontinued partially. it shall be seen that orders of competent authority have been obtained to that effect. Also. the effect of the stoppage of maintenance of record had on the efficient handling of the scheme. the same may be pointed out with supporting details and cases. Checks to be exercised on other records, like award of works contracts. Accountal of Assets taken over, disposal of dismantled material & similar other records which are commonly maintained by other Departments would be the same as prescribed for check of the record of those Departments.

57

10 CIVIL WORKS DEPARTMENTS


10.1 GENERAL The main points to be covered in the internal inspection of these Departments are as under: (a) That all works are executed in accordance with the broad principles and provisions of the Works Policy approved by the Board of Directors. (b) That there is proper exercise of Delegation of Powers by different functionaries in the matter of grant of Administrative Approval. Technical Sanction approval of estimates, execution of work preparation and processing of Contractors' running .account and final Bills. All the records required to be maintained as per the departmental Manual, in case it has been formulated, or as per the P .W .Department Accounts system or any other system adopted with the approval of competent authority , are being maintained. (c) That adequate control mechanism exists to check the quality of different items of works, accountal and utilization of material by Contractors and prescribed checks over recording of measurements and percentage checks by superior authorities, as per rules. (d) That there is proper planning for execution of works, sequence of construction. Budgetary control, cash management and Management Information Reporting system of progress of works. (e) The Manpower to handle all-important activities of the Department has been provided in accordance with the rules and procedure and Delegation of Powers. Instances of responsibilities being handed down to lower functionaries for want of adequate manpower of requisite status may be brought out. Excessive manpower whose services remain unutilized for want of sufficient work-load shall also be brought out. (f) Relevant information and data required for incorporation in the Annual Accounts of the Corporation, e.g. value of works in progress at the end of the year, value of material at site and outstanding liability for works done but not measured or paid for, is correctly prepared and sent to the F & A Department. (g) The overall working of the Department may be reviewed and inadequacies and deficiencies noticed pointed out. For this the cases of disputes, Arbitration cases .and legal cases being handled may be seen to field out the reasons for such disputes: and whether they are on the rise or are coming down. Action being taken to handle them to watch the Interest of the Corporation, steps being taken for their avoidance in future, or to minimise them, may be reviewed. The total expenditure Incurred on these activities yearrwise, may he brought out. DETAILED SCRUTINY OF RECORDS: The records in the Civil Works Department, entrusted with the execution of the major works Like the Dams, Spillways, Diversion, Head Race and Tail 58

10.2

Race Tunnels, Power House and other connected works are maintained as per the provisions of the Manual for the Department. Attempts are on at present to lay down the procedure and formulate systems for these Departments, even though there may be no formal compendium. Based on the important basic requirements, Audit Drill for different records of the Department is as under: (a) Register of Works:

All the major and minor works under execution in the Department are recorded in it. Complete information about the particular work like particulars of Administrative Approval , Technical Sanction, Estimated cost, tendered cost, date of start, time period for completion, name of the contracting agency, etc. is all mentioned on top. Columns are provided as per requirements, to record the details of expenditure in each bill progressive expenditure, expenditure on Extra Items additional quantitative and the sanctions accorded. etc. (i) It is to be seen that all the columns are filled in as and when the bills are prepared and passed for payment by the F & A deptt. The progressive totals are struck and they are brough1 uptodate on the basis of record of actual payments made in the Measurement Book for the Work concerned. These details should tally with those in the Contractor's Ledger as regards recoveries and dues outstanding. The progressive expenditure totals should tally with those of the F & A Deptt. accounts records. (ii) The accounts of the Works are closed, all liabilities are settled, excess over the estimate, if any, is covered by the sanction of the competent authority and note of completion recorded thereafter under proper attestation. No item of expenditure is admitted after closing of accounts of Works. Register of Sanctioned Estimates: The Register records all the sanctioned estimates, for the construction of all works of the Project taken up for execution. No estimate Is sanctioned without the accord of Administrative Approval and expenditure sanction. A reference to the latter IS to be recorded against each sanctioned estimate. The entries of sanction of detailed estimate in the Register of Works shall be checked in the case of all works on which expenditure has been incurred without or in excess of the sanctioned estimate/allotment of funds, etc. The Register shall be generally reviewed and the figures qt sanctioned cost compared with the provisions in the Detailed Project Report and the Budget Estimates for the year to see that they are withi!1 the overall sanctioned estimate of the Project. (c) Schedule of Rates: A schedule of rates 01 each major item of work, commonly executed, is required to be prepared for different localities and sites and got approved by the competent authority. All estimates prepared by the Department are based on the approved Schedule of Rates. The enders received for different works

(b)

59

in the Department are checked with the Schedule of Rates and excessive variations duly considered and accepted. when found reasonable. In case the accepted tendered rates are generally higher than those of the Schedule, the desirability of revising the Schedule of Rates is considered and undertaken under sanction of competent authority, It may be seen that these provisions are followed invariably without exception. -. (d) Registers of Sale of Tender Forms and Opening of Tenders: These Registers are treated as subsdiary Cash Books and all routine checks for receipt and accountal as well as refund of Earnest Money are properly applied. In case there is a system of handling activities like Sale of Tender Forms and acceptance of Earnest Money Deposits directly by the Finance and Accounts Department, then reference to relevant documents for the receipt and refund of Earnest Money is to be recorded against each item and other checks are invariably applied. (e) Imprest Account and Temporary Advances The Officers, who have been sanctioned Permanent Imprest and are allowed Temporary Advance for making emergent purchases during the course of construction works or for other purposes, are required to maintain subsidiary Cash Book in which the amount of Permanent Temporary Imprest as well as expenditure Incurred day-to-day is entered. The account is closed when almost 50% of the amount has been spent, totals are struck and the account is rendered in the appropriate form for recoupment. Similarly the amount of Temporary Advance drawn is entered in the subsidiary Cash Book and expenditure incurred out of it is recorded till the account is closed and rendered to the F & A Deptt. along with the unspent balance, if any Checks required to be exercised in the Audit of Cash Book are applied in respect of these books also. (f) Register of Contract Agreements: The Register of Contract Agreements shall be scrutinized so as to ensure that: (i) All accepted tenders have been properly entered In the register of agreements, according to the serial order and a number allotted to each agreement, (ii) All the columns are filled in and the date of actual completion of the works noted in the respective columns on completion of each contracted work. (iii) All the agreements entered in the register are physically available in the safe custody of the Officer entrusted with their custody. (iv) Copies of all the agreements accepted by the Officers are sent to the Finance & Accounts Department and all other authorities emitted to receive them.

60

(g)

Tenders and Comparative Statements: All the Tenders received, including those rejected ones, shall be checked to see that: Wide publicity is generally given for calling tenders and due period of notice allowed, consistent with the -magnitude and cost of the work put to tender . The provision of the Works Policy approved by the Board of Directors and guidelines therein are duly followed in all cases. All tenders bear the dated initials of the Officer opening the tenders. The rates quoted by the tenderness have not been over-written or changed without attestation by the tenderness. The tender documents are, as per approved NIT and there are no .deviations therefrom. No tender documents are sold after the expiry of the date upto which they are notified for sale. The conditions regarding Earnest Money Deposits as given in the form have been followed strictly. The comparative statements have been correctly prepared. got checked and certified to have been correctly made by the officer authorized to certify. In the case of Contracts, accepted after negotiations, the negotiations have been conducted by duly authorized team of Officers, formulated in accordance with the prescribed procedure, and the prescribed procedure followed for acceptance thereof. Measurement Books-Maintenance and upkeep Payments for all work done otherwise than by daily labour, and for all supplies required for specific works. are made on the basis of measurements recorded in the Measurement Books in the prescribed form. All Measurement Books got printed are numbered serially and entered in a Register. They are issued to the officers authorized to take measurements of works as per procedure. Since this is the primary and most important record on which are based all payments to be made for the work done, utmost importance is attached to their handling and use. The register of Measurement Books is checked to see that it is maintained properly, entries are correctly made and generally there is no delay in recording of completed Measurement Books. Special attention is to be paid to chock exercised in respect of the recorded measurements to ensure that all precautions are taken by the Departmental authorities against faulty recording and against over or double payments. For this the following checks are exercised in Internal Inspection: (1) The entries in the Measurement Books are made in accordance with the instructions printed on the flyleaves and entries are not made by an officer other than the one authorized to make them. Test-checks. prescribed for the superior officers. have been exercised and initialed in token thereof .

(i)

(ii) (iii) (iv) (v) (vi) (vii) (viii)

(ix)

(h) (i)

(ii)

(2)

61

(3)

(iii)

The works of excavation foundation I etc. which can not be testchecked subsequently. owing to their being covered up. are testchecked by the superior officers in time and entries regarding items carrying high unit rates, etc. are made by superior authority than that entrusted with the initial recording of the measurements. The fact of having fulfilled these requirements should be borne out by relevant record. (4) There is generally no delay in making payment of the bills after the measurements have been recorded. (5) Instances of delay in payment may be checked by comparing the date of measurement with the date of actual payment. The tendency to postpone the release of payments to the fag end of the financial year with a view to avoid excess over the budgetary provision and excess over appropriation may be brought out for necessary remedial measures. In respect of bills paid during the selected month of detailed check. some cases' may be selected for detailed check of the contents of the measurement books and compared with the bills. the items to be checked are: (a) The contents column of the measurement books to verify the arithmetical accuracy. (b) Total quantities carried over to the Abstract of measurements and the, rates shown. (c) Grand totals. . (d) The quantities and the amounts worked out and entered in the bills from the measurement books.

It is important to note that an intelligent scrutiny of the measurements can lead to detection of record of wrong measurements by a junior officer or supervisor or a perfunctory test-check of measurements by a superior officer. For this purpose, the detailed sanctioned estimates should be compared with the actual recorded measurements. It may happen sometimes that some of the measurements recorded by the junior officer might have been test-checked after a lapse of considerable time and any corrections in the measurements, as a result of local checking might escape notice at the time of preparing bills for subsequent payments. This aspect should be properly checked. It may also be seen that the quantities from one page to another and from the initial recording to Abstract are correctly carried over and whenever deductions are shown, the quantities are duty reduced to the extent from the carried over quantities. In the case of construction of roads and horticulture works, it is to be seen that necessary deductions for voids at the prescribed percentages have been made from the gross quantities of measurements in respect of collection of boulders, stone metal, sludge. manure. etc. and also for settlement of earth in the case of filling, etc. (i) Review of Measurement Books: All measurement books in use are required to be reviewed at least once a year by the Accountant, in case one is posted there, or by the Finance and Accounts Department, so that any irregularities or deficiencies in their maintenance is brought to notice and rectified. The completed measurement books are also, as a rule,

62

reviewed by the .F & A Department before they are recorded. Result of the reviews carried out is to be recorded in a Register and submitted to the head of the F & A Department at least once a year .

(j)

Contract Agreements: (a) The payments to contractors and suppliers are made on the basis of the rates accepted and entered in the contract agreements, supply orders, etc. The accepted agreement, work orders and supply orders should, therefore, be examined carefully on the following lines. The agreements entered into by the Departmental authorities since the last Internal Inspection to date of Inspection may be scrutinised to see that. the rules and procedures laid down are not infringed but scrupulously followed. Wherever competitive rates have not been sought or high rated tenders have been accepted. or other irregularities in procedure have come to light, the same are to be brought to. The notice of the appropriate authority. As a result of general review of the contract agreements, if it is revealed that there has been a tendency to subvert the provisions of the Works Policy, or the rules and procedure, (say the Delegation of Powers) to split up the works so as to bring them within the delegated powers of the concerned officers or to award works to the local contractors on the plot of political and social pressures. and as apart of the package for Rehabilitation of locally uprooted people registered as contractors by overlooking the normal procedure all instances of these types shall be brought to the notice of higher authorities for immediate appropriate action. Register of Land, Buildings and other Assets: Land Records to account for land acquired for various components of the Project, like Reservoir. Dams. Tunnels. Power House. Roads. Township, dwelling units and office buildings, etc. are to be maintained by the concerned officers. it is to be seen that land acquired and paid for is accounted for properly, giving locations and reference to land records. Khasra no. etc., compensation paid, status of legal formalities for transfer and mutation in the Revenue records of the State Government, exact measurements of various plots and pieces. to make sure that all properties have actually been taken over and accounted for. Any deficiencies in this regard may be pointed out and reviewed from time to time. so as to ensure that all properties are well secured. For this. a reference to the Survey Register prepared at the start of acquisition proceedings is necessary to see that all land, buildings and other assets for which compensation has been paid for are properly noted and have actually been taken over and any attempts for extra and/or second payment is prevented.

(b)

(k) (I)

63

The total value of the land as per the Register should tally with figures in the Annual Accounts. (ii) Buildings All structures and buildings constructed or taken over are entered in the Register showing the cost, additions and alterations carried out. depreciation charged year after year, and the net cost or value at the end of the financial year. These figures should tally with those brought out in the Annual Accounts and Balance Sheet of the Corporation. Other Assets (Machinery, Equipment, etc.) All assets acquired by the Corporation are required to be accounted for in the register of Assets in the prescribed form. showing the cost of acquisition or landed cost, their accessories and spares. forming part of the original equipment, cost of carriage. Insurance, freight and cost of installation (for items like Generating Equipment, Switchyard equipment. etc.) cost of additions and major repairs and maintenance, and depreciation charged, from year to year .In the case of moveable equipment. the location of each item shall be shown against it. The value shown in the Register should tally with that brought out in the Annual Accounts of the Corporation for that particular year. The particulars shown therein should be checked for some items at the time of each Internal Inspection so as to cover the entire record in two or three inspections. Deficiencies noticed being brought to the notice of the higher authorities and the Director (Finance) for Immediate remedial action. It may be particularly seen that advance payments made for acquisition of land, buildings etc. are duly linked with the take-over and entry in the relevant record. Cases remaining pending for long periods need special investigation by the Departmental authorities and remedial action taken at the earliest. Final payments to contractors for the works executed by them and final adjustment of Advances for Deposit Works to outside agencies shall also be linked with the relevant entries in the Register of land. buildings. etc. for simultaneous completion of the important record of Assets. (I) Registers of Rent of Buildings: The Registers of buildings meant for residential purposes are to be maintained for all residential quarters, dwelling units, Field Hostels, Transit camps and 'Guest Houses by the Departments concerned under whose administrative control they are placed. The rent (license fees) hire charges or occupancy charges. are to be fixed by competent authority in accordance with the approved procedure. The following points are to be seen in this regard during Interlaid Inspection: (1) That all the buildings, etc, handed over are duly entered in the Register of Rents, Standard rent etc. is fixed promptly and necessary notification issued.

(iii)

64

(2)

(3) (4)

(5)

(6)

(7)

(8) (9)

The prescribed rent, occupancy charges, etc. are recovered regularly in all cases (including in cases it is let out at reduced rates under special orders of competent authority) excepting when accommodation is allowed rent-free. No building or site is removed from the register on the plea that it is intended to be occupied rent-free. All additions to the listed rentable buildings are made as and when new units are acquired. Action to fix the rent of these unitl and revision of Standard rent shall be taken promptly as and when additions and Improvements in existing units are made. For ensuring that action on these lines is taken promptly. a comparison shall be made with the Register of Land and Buildings. Revision of rents is made at prescribed Intervals, even when there are no additions and alterations necessitating revisions, and this should be checked at regular intervals. In case Land is given on lease, it shall be seen that the plots. or pieces of land, leased have been entered in the Register ,lease deeds are properly executed and recorded , tease-money is fixed by competent authority on a fair basis and collected regularly as and when it falls due. The Register of Rents etc. is maintained in the prescribed form, rent recoverable is correctly recorded, the recoveries are shown therea9ainst, cases .of outstanding recoveries are suitably followed up, recoveries actually made are abstracted correctly and remittances of cash tallied with recoveries actually made and receipt in the F & A Deptt. correlated with Cash Receipts issued by the latter. Complete Inventory of fixtures and fittings is maintained and the same verified physically at regular intervals to ensure their availability. A suitable note shall be kept in the Register :hat annual check has been made by a responsible officer with a view to verifying that adequate measures have been taken for maintenance and that no encroachments have taken place.

(m)

Muster Rolls: .

Muster Rolls are issued centrally from the office of the Head of the Department to different officers entrusted with the job of execution by engaging dailywage labour for small items of specific jobs. A Register is maintained in approved form indicating S.No., particulars of the job. no. of hands to be engaged, approximate time of engagement. total amount involved. etc. Their receipt back duly completed for the job or part of the job completed in the calendar month, measurements of the work done (in case it is susceptible of measurement). The M. Roll is passed for payment, incase it is found to be in order and sent to the F & A Department for arranging payment, either directly or through the Departmenta1 Officers concerned as per the approved policy. A few Muster Rolls which have id e the following checks are applied: (1) (2) It is drawn on the approved form, ha bee u it is arithmetically correct. It is drawn for payment to casual daily labour and not to any of members of the permanent or temporary regular establishment

65

(3) (4)

(5) (6)

(7)

(8)

(9)

The payment through Muster Roll is no d h a Contractor. There is no unusual delay in payment and a systematic record is maintained of the unpaid items and of the payment. All cases of wages remaining unpaid for three months are regularly reported to the head of the Department and thereafter they are not paid without his orders. The Muster Roll is prepared only in original and no duplicate copy is prepared and separate Rolls exist for each period of payment. There is evidence of check of attendance at intervals by an Officer of the Department and that there is no interpolation in the record of attendance. The cost of labour is not much in excess of the value of work done, so as to indicate either a loss to the Corporation or need for closer financial control. Cases may arise when a certain item of work is got done on behalf of Contractor Incase this is done, the cost of work done is debited to the contractors account and the same recoverd. All cases of delay in release of Muster Roll payment need to be investigation by the Department and result brought on record for necessary action. It shall be seen that delays in release of payment are duly taken.

(n)

Material-at-Site Account: Material, generally and commonly required for the execution of Works is issued from the Stores and brought to the site. It is treated as a sub-stor and as and when issued is the cost is charged to the Estimate of the work, If it is to be used on the work or charged to the contractors account, in case it issued to him and the cost thereof is recoverable from him. In the alternative, the stores material brought to site may be charged directly to the estimate of the work or to the Contractor's account. as the case may be In case it is treated as a sub-store, the following points are seen during Internal Inspection: (a) (b) (c) The value of material-at-site of each major as shown in the Register of of work agrees with the balance shown in the form. The value of the store issued to work is correctly classified to the Estimate of the work or to the Contractor's account, if issued to the Contractor. Proper numerical account of the receipt issue and balance of surplus material at the site of the completed Works or dismantled material is maintained properly. Verification of unused balances has been done by a responsible officer and report of verification submitted to the Head of the Department. Demolition, Restoration etc. Work

(d)

(o)

All cases of expenditure on demolition, restoration or re-building work in connection with building structures or other works (Road, Protection work etc.) irrespective of the amount involved or the date of original construction, shall be investigated with reference to the reports on estimates, etc. to see that:

66

(1) (2)

(3) (4)

The original expenditure has not proved to be unnecessary or fruitless. The expenditure incurred on restoration, etc. is not due to lack of foresight or neglect either in the arrangements for original construction or in those of maintenance after construction. There is proper justification for the original as well as the new expenditure. A proper account of useful material obtained on dismantling is maintained in the prescribed form and properly accounted for.

(p)

Budgetary Control (1) All officers entrusted with the execution of Works are expected to exercise proper check over the expenditure on all items under their control. making requisition for material, both long term, short term and emergent, so as to reduce locking up of funds on inventory, regulate expenditure on current works as per the Budgetary allotments, and exercise effective check over anticipated and unanticipated items of receipts. It shall be seen during Inspection that adequate checks and effective control mechanism have been devised to ensure proper watch over the progress of expenditure and control over its progress to contain the same within the Budgetary allocation. In addition it shall be ensured that control over expenditure. not provided for in the Budget Estimates, also exists. Unanticipated credits/recoveries, that is, credits and recoveries in excess of they amounts anticipated and taken into account while framing Budget Estimates for Works are not utilized for spending on other Works and such unanticipated credits are surrendered. For the purpose of seeing that the Budgetary mechanism is at work, the Budget Estimates of the Department shall be carefully scrutinised and then compared with the final allotment and total expenditure incurred during the year against various items of Works. Wide variations, excessive expenditure and savings shall be suitably brought to the notice of the concerned authorities of the Department and the top Management for remedial measures to contain the expenditure within the Budgetary allocation.

(2)

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11 MECHANICAL AND ELECTRICAL DEPARTMENTS


11.1 (a) MECHANICAL DEPARTMENT General The Department is entrusted with the following important activities: (i) Upkeep and maintenance of all Equipment and Machinery (ii) Fixation of hire charges as per approved procedure (iii) Processing the transfer of Machinery & Equipments to the Departments entrusted with the execution of the works departmentally or through the contractors, (iv) Preparation of bills for recovery of hire charges, and their adjustment on recovery. (v) Running and maintenance of Workshops and proper maintenance of all light and heavy vehicles, and major & minor repairs of Machinery & Equipment to keep It in usable condition. The following are the main items of review during the Internal Inspection of the Department, besides the routine checks. (i) Standard norms are adopted, based on CWC guidelines with the appr0val of competent authority .for working out hire charges for each item of Equipment and Machinery, in the beginning of the year and proper records are maintained for the preparation of bills for items given for use on the works. Proper procedure is adopted and records are maintained for letting out the items of Machinery through the Departmental authorities to contractors and authentic recording of time of utilisation is done to facilitate preference of accurate claims against their use. History Sheets are maintained in respect of each item of Machinery to record all major repairs overhauls and replacement of costly parts, their cost is updated for calculation of authentic hire charges rates and depreciation as per rules. The Workshops are run efficiently and economically and proper procedure for maintenance of Job Cards is followed, to help the Departmental authorities to, work out the economics for the running of the Workshops and allocate the expenditure to the estimates of Equipment and Machinery repaired during the year. The Departmental authorities are required to keep a close watch over the out-turn of the Equipment and Machinery, be it an item for use within the Workshop or in the field so that the cost of its running and maintenance covers the out-turn. In the event of any item becoming spare to its use or reaching a stage when its operation is Beyond Economical Repair, prompt action is to be taken for its disposal in accordance with the approved policy and procedure. In order to advise the Departmental authorities to initiate action, in respect of Plant, Machinery and Equipment which has become Beyond Economical Repair a test-check of the inventory of Equipment & Machinery may be made with reference to the expenditure incurred on repairs and maintenance. For the routine check of records maintained in the Mechanical Department, details are given hereunder. 68

(ii)

(iii)

(iv)

(v)

(b) 1.

Scrutiny of Records For speedy and economical execution of different components of the Project items of heavy Machinery and Equipment, of different types suitable to the geology and terrain of the Project sites, have been procured. Certain items of heavy machinery have also been taken over from the Uttar Pradesh Irrigation Department along with the Project. These items of Machinery and Equipment are made use of on Departmental Works, as and when Corporation undertakes to execute. or are given to Contractors at the usage rate to be fixed by the Corporation either as a stipulated item as per terms of the Contract Agreements or as an unstipulated item. as the case may be. For each item of Machinery and Equipment meant for usage on the construction works hourly usage rates are fixed in accordance with the rules and formulae prescribed by the Government of India Department-the Central Water Commission, based on depreciation on the Book Value. and the Running and Maintenance Estimates of each item. A Log Book is maintained in respect of each item together with a History Sheet to record its working. cost of heavy repair, overhauling and spare parts and tyres etc. used during operation. The total recovery for use, based on the number of hours worked for any particular work, Departmental or by the Contractor. is debited to the work or to Contractors. account and the Maintenance Estimate of the Machine is credited. This process continues till such time as the .Equipment, under normal conditions of working gives satisfactory service during its life span and remain cost effective. When they become old and Beyond Economical Repair action is taken to scrap them or declare them spare and surplus to be disposed of in accordance with the policy of the Corporation. The Book value of the Equipment after providing for depreciation in accordance with the rules and orders, the disposal value is adjusted in the books in accordance with the Accounting Policy of the Corporation. The Corporation has vide Technical Circular No. 1-EQPT/94, laid down the Policy/Procedure for declaration of Equipment/Vehicles beyond Economical Repair (B.E.R.) It is an important function of the Internal Audit to see that: (i) The Project authorities are maintaining proper Asset accounts for such items of machinery and equipment as are placed under their charge their value is shown correctly and additions and alterations and depreciation in their value is properly accounted for. (ii) Procurement of new items of machinery vehicles is made in accordance with the requirements and as provided in the Detailed Project (DPR) and the Budget Provision made for the purpose in accordance with the reules and procedure of the Corporation. (iii) Hourly usage rates have been correctly computed and notified for the guidance of all concerned. While checking the fixation of hourly usage rates, it shall be seen whether the same have been worked out on the basis. of the latest approved formula and whether they have been approved by the competent authority. It should. further . be seen that enhancement In the rates of spares. P.O.L. and other consumable stores and direct labour. etc. are fully taken into account while fixing the rates from year to year. Shortcomings in the fixation of hire charges on realistic basis or delay in levying them shall be promptly brought to the notice of the project authorities and the Corporate Office.

2.

3.

69

4.

5.

Log Books are maintained, on prescribe form to account for the use of these items of machinery for the works or by the contractors in accordance with the prescribed procedure. The Log Books along with History Sheets of the machine are maintained and record full particulars like giving the total stipulated working hours, spares and accessories, expenditure on all major repairs and overhauling, rate of hire per hour besides recording the actual usage by each Division/Unit or by Contractors under attestation 'of an authorized officer (v) The procedure for recording the usage in the Log Books shall be reviewed to ensure that the same is done properly. It shall also be seen that there are adequate checks to ensure adjustment of hire charges against the Contractors, or usage charges against the works concerned, accurately. In no case this item is allowed to fall into arrears. At the end of the year total recoveries and / or adjustments on account of usage of these items are credited to the head 'Machinery and Equipment' so as to reduce the capital expenditure under this head. to the extent of use as also to clear the transitory head, 'Running and Maintenance Account. of these items to 'NIL'. Any short fall in the adjustment of Running and Maintenance Estimate should be looked into and any heavy shortfall shall be investigated to see that there was no serious lapse on the part of the authorities which resulted in the shortfall in recovery. The usage rates once fixed. if they are based on the existing rules formulae and orders for different items of machinery, stipulated or non-stipulated as per terms and conditions of the contract Agreement. shall not be reduced or changed, except on the basis of a bonafide mistake. They have to be recovered and credited to the appropriate head of account. The recoveries once made on the basis of the approved usage rates shall not be refunded or adjusted on the pretext that an item of machinery of lower Horse -power or capacity than that stipulated was made available to the Contractor. Reduction in the rate on any account and refund or non-recovery of usage charges amounts to 'Remission of Revenue' and can be done only by an authority specifically empowered In this behalf. Any case of remission. non-recovery, short-recovery or refund of the dues already recovered, shall immediately be looked into and the facts of the case brought to the notice of the Head of the Department. the Corporate Office and the Director (Finance) for immediate remedial action. It shall be ensured that this work is not allowed to tall into arrears on any pretext, whatsoever. In respect of the previous years it shall be seen that adjustments had been made on the basis of the approved formula. proper records had been maintained to account for the usage by different beneficiaries and the adjustment of these charges was not left in arrears. In case in any financial year, the recovery had not been made in full and had fallen into arrears special steps are necessary for the clearance of arrears. Adequacy of steps and their effectiveness should be given due attention. If it is seen that the steps taken are inadequate and the pace of recovery is slow. The same shall be pointed out in a suitable manner so as to attract the attention of the higher authorities for urgent remedial action, .

(iv)

70

11.2

ELECTRICAL DEPARTMENT

The Electrical Department is entrusted with the responsibility for the laying of power supply lines for construction power. electrification of colonies, residential areas, roads and communications system. For emergent alternative source of power. generation by Diesel generating sets is undertaken. The Department has also to maintain electrical stores for running and maintenance of the power and communication lines. Apart from applying checks to the records which are commonly maintained by other Departments on the same lines. following checks shall be applied to the records of the Electrical Department : (a) There is proper system of check exercised over the veri1ication 01 the bulk power supplied to the Department by the UPSEB or National Grid Corporation before payment is made. Supply of construction power for the Departmental Works and to the Contractors is duly authorized and metered and the bills for supplies made are correctly made duly verified and recovery effected without any delay. Recovery of power for domestic use in the colony or residential quarters. Guest Houses, etc. is metered and duly verified for correctness. A check-sheet is prepared to account for the total bulk power received and its distribution and recovery of dues from the beneficiaries to ensure that there is no leakage theft or unmetered supply consumption, the variation in the payment and recovery being looked into and steps taken to minimize it. Running and maintenance of standby generators requires review and the consumption of diesel with reference to output (generation) of power should be matched.

(b)

(c)

(d)

(e)

Electrical Stores: The records required to be maintained to account for the supplies. issues. transfers and consumption of stores (consumable) and Tools and Plant are duly maintained. All the checks prescribed for the general stores of the Materials Management Department shall be applied and .deficiencies noticed pointed out. Similarly, checks prescribed for CIVIL WORKS Deptt. (Chapter 10) as applicable to Mechanical and Electrical Deptts shall be exercised. 11.3 DEPARTMENT OF TRANSPORT, TOWNSHIP & ELECTRICAL The Department is mainly entrusted with running the essential services like the Transport vehicles. repair and maintenance of buildings township. electrical and mechanical services. The routine checks to be exercised over the records of the Department shall be the same as are applicable to the record. of the Departments handling these services. Some of the Important items of review and check are listed below. (a) Transport vehicles kept at its disposal are maintained properly so as to make

71

(b)

(c)

(d)

them available for use by all those entitled to use. Their running is regulated in a way that the journeys performed are economical and wast2ge and empty haulage is avoided as far as possible. For this, system of requisition, allotment and return after the assigned duty is properly regulated for effective control. Log Books are maintained properly on approved formats. They are to be reviewed regularly to avoid miss-use, excessive consumption of POL. and frequent heavy repairs. All cases of heavy and/or frequent repairs from private workshops shall be checked thoroughly and irregularities noticed brought out for necessary action. Proper records of allotment, retention and vacation of the residential units and recovery of rent (license fees), electric end water charges are maintained and recoveries made in time. Annual Repairs and Maintenance is properly regulated. Any cases of damages and heavy repairs, sub-standard works, etc. coming to notice shall be reviewed thoroughly & irregularities noticed pointed out.

72

12 COMPILATION OF RESULTS OF INTERNAL AUDIT


12.1 GENERAL 1) The Corporation is called upon to grant Loans and Advances of different types to its employees, like House Building Advance, Conveyance Advance, Advance for Medical Treatment, Leave Travel Concession Advance etc. as per terms and conditions of employment. They are governed by rules for release, recovery and adjustment. 2) Advances are also sanctioned in connection with execution of Major Works (like Mobilisation Advance, Advance against Machinery and equipment, Secured Advance against material, and Ad-hoc Advances for other miscellaneous purposes), as per terms and conditions of Contract Agreements. Advance payments are made for supply of material as per terms and conditions of Purchase Orders. For execution of works as Deposit Works, Deposits are sanctioned in favour of Government Agencies as per terms and conditions of Contract Agreements.

3)

4) During Internal Audit Inspection it shall be seen that there are rules, regulations and procedures governing the Loans, Advances and Deposits and they are invariably applied and all terms and conditions are made applicable to them. All authorities act within the powers delegated to them and legally valid documents are available in support of each item. Complete records in support of each case are maintained. Any deviations or deficiencies noticed during the review of records and the documents are brought out for immediate remedial action. 12.2 LOAN AND ADVANCES TO CONTRACTORS In the normal course, the following records are to be examined, in addition to any specific record, on the approved formats : (a) (b) (c) (d) (e) Application on the prescribed form. Complete in all respects. Sanction by competent authority. Payment Voucher, acknowledgement of the receipienct. Copy of terms and conditions of reference thereto and the relevant Contract Agreement. Surety Bond or Performance Guarantee Bond or a reference thereto, in case the same are kept with some authority other than the one keeping record of payment and making recovery of adjustment. Ledgers and Subsidiary Ledgers to review the regular/timely recovery/adjustment of the advances to Contractors.

(f)

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12.3

LOANS AND ADVANCES TO EMPLOYEES, OUTSIDE PARTIES The records and documents shall be examined to see that : (i) The applications are made on proper form and contain all the details and documents essential for the sanction of Loan/Advance. Adequate Security has been obtained in all cases the Loan/Advance is sanctioned and paid to a private party; value of property offered as Security is properly assessed/evaluated and is more than the amount of loan and interest recoverable, if any, and the properly is free from all encumberances. Sanction for each Loan/Advance exists and has been accorded by the competent authority against the Budget provision. Surety Bonds are obtained and are kept with a responsible authority. In the case of House Building or Motor Car/Cycle Advance, legally and hypothecation documents of Insurance Policies in favour of the Corporation are taken and necessary renewals at periodical intervals are made. The fact of payment is clearly recorded and the acknowledgment of the recipient is placed on record. In case the Loan/Advance is to be disbursed in installments on completion of certain portion of work, etc., it is to be ensured that the conditions stipulated are invariably satisfied before the release of each installment. Proper utilisation of of the Loan/Advance is ensured by the sectioning authority as per terms & conditions stipulated. The recovery of principal and interest is made in accordance with the schedule laid down in the sanction. In case of default, action is taken promptly to recover the installment due with penal rate of interest fixed by the authority sanctioning the loan. The Ledgers and the subsidiary records are properly maintained in the prescribed form and kept upto-date. At the end of the financial year, all outstanding Loans/Advances are reviewed and the closing balances are got confirmed from the concerned recipients. Surety Bonds/Mortgage Deeds, etc. are duly cancelled and returned on full recovery of the Loan/Advance and interest due. Terms and conditions applicable specifically to certain Advances, are adhered to e.g. Festival Advance to employees, regarding nonsanction of the Advance till earlier Advance is recovered fully, a second

(ii)

(iii)

(iv)

(v)

(vi)

(vii)

(viii)

(ix)

(x)

(xi)

74

advance is not paid for the same Festival, in case it falls within the same calendar year. (xii) Any other condition applicable specifically to Advance/Loan is fully satisfied and complied with. any particular

Records maintained in this behalf shall be renewed as per the scope prescribed in this Manual and cases not supported fully by the documents or with ambiguous terms and conditions, or not processed in accordance with the prescribed procedure. Shall be brought out. Cases on non-recoveries or irregular recoveries shall be fully looked into and adequacy of follow-up action, to ensure recoveries or execution of Bank Guarantees or Security Bonds, checked up. Cases requiring action at higher level or legal action shall be promptly brought to notice of the competent authority. 12.4 ADVANCES FOR DEPOSIT WORKS (i) All the terms and conditions governing the Advances for Deposit works are properly observed. Adjustment of Advances is made on receipt of adjustment accounts duly supported by required documents and duly certified by the authorities indicated in the terms and conditions. There is no undue delay in adjustment due to delay in the execution of works beyond the time-schedule agreed to between the Corporation and the Agency concerned. Cases of delay shall be reviewed to see whether any escalation is claimed and proposed to be adjusted against Advance due to delay in execution wholly attributable to the executing agency. There is no infringement of any of the terms and conditions stipulated in the Contract Agreement.

(ii)

(iii)

(iv)

12.5

ADVANCES TO SUPPLIERS (i) The terms and conditions governing the Purchase orders under which advances are paid to the Suppliers shall be reviewed to ensure that they are fully satisfied and timely adjustment is carried out. All cases of delayed adjustment and non-adjustment shall be reviewed fully and the reasons analysed. Adequacy of steps taken to safe-guard the interest of the Corporation shall be checked up. Checks required to be exercised over the record of Loans & Advances paid to Contractors (Sub-para 12.2) shall be applied to Advances paid to Suppliers as well.

(ii)

75

13 LOANS, ADVANCES AND DEPOSITS


13.1 The result of Internal Audit Inspections Audit Inspections of each Department shall be compiled and sent to the Chief Internal Audit Officer in the form of a Draft Inspection Report, (as per the format given below, alongwith the title sheet in the prescribed proforma (Form IA 13.1) and other documents mentioned in this chapter. The Inspection Report shall have three parts, brief details of which are as under : Part I (a) General information about the Department/office, total expenditure during the period of audit, main activities, and the major heads of expenditure, Revenue receipts and any salient features distinguishing it from other Departments shall be brought out in Section A. (b) Outstanding objections from the previous Internal Inspection Reports shall be given in Section B in brief, giving the reasons of their non-settlement and action required to be taken. Irregularities, which are persisting inspite of assurances given that action would be taken to settle them, shall be stated in brief in Section C.

(c)

Part II Section A : Any major and serious irregularities detected during the current inspection, requiring immediate attention of the Head of Department shall be included in it. Section B : All other irregularities, which, though not serious yet requiring the attention of the Department or Divisional as also the higher authorities, shall be included in it. Part III Irregularities which require action by the department, but no formal replies are required, shall be included in this part and issued on the conclusion of the Internal Inspection as Test Audit Note. The compliance of the points included in it shall be seen during the next Inspection of the Department. 13.2 DRAFTING OF INSPECTION REPORT The following important points are to be kept in view while drafting the Inspection Report. (a) It should be brief and to the point. Brevity shall be achieved by economy of words and avoidance of repetition, arranging instances of

76

(b)

similar nature. Being grouped in the form of a table, by giving a suitable and clear observation at the top. The irregularities with small monetary value and of a routine nature requiring attention for avoidance in future being included in Part III (Test Audit Note). Mention of any names of officials handling the matters on which observations are made shall be avoided, except in the case of personal claims. The Report shall be couched in polite and impersonal language. Offensive or strong words and sarcastic remarks, etc shall on no account be incorporated in the Report. No observations shall be based on suppositions, assumptions or allegations. They should be based on facts taken from the official records and inevitable conclusions drawn. There shall be no reference to fixing of responsibility for any irregularity ; It is for the concerned administrative authority to take suitable action in this regard. Paras included in the draft Inspection Report shall be self-contained and written in simple language so as to make them easily intelligible to even those not familiar with the details of the working of the office inspected, nor fully conversant with audit language. It helps in understanding the observations and initiating action without seeking clarification, saving time and effort. Subject to the broad division of observations into Parts I, II and III mentioned in para 1 above, the paras in the Inspection Reports shall be arranged in accordance with the importance and seriousness of the objection. In the case of Finance & Accounts Department, for example, the paras shall be arranged normally in the following order : The opening para shall contain comments on the Annual Accounts, Balance Sheet, Trial Balance, followed by paras on Cash and Accounts records, outstanding advances and revenue receipts, observations relating to Works Contracts, Purchase Orders, important packages and schemes, like Rehabilitation, accountal of Assets, Land, Buildings, Plant Machinery and transfer of Assets from other Departments, reconciliation of value of transferred Assets, etc. and followed by observations relating to personal claims, like observations on payfixation. Leave encashment, non-recovery of Advances from employees and other matters related thereto.

(c)

(d)

(e)

(f)

(g)

In respect of each paragraph, first of all the transaction objected to shall be explained, narrating the facts in the order of occurrence. Next, the rules of orders infringed and the nature of irregularity with its likely results and implications shall be brought out. Lastly, the action suggested/required to be taken to settle the objection shall be stated. The Internal Audit is based on test-check or sample check, subjecting transactions in one or two months to detailed scrutiny. But this fact is

(h)

77

not required to be divulged in the Inspection Report. This is done by indicating the particular month checked in detail in the Title Sheet submitted alongwith the Inspection Report. 13.3 SETTLEMENT OF OLD OBJECTIONS (a) The Departmental officers whose accounts are checked in Internal Audit are expected to take corrective action on the points brought out in the Audit Inspection Reports and the Test Audit Note soon after their receipt and also to initiate action to routine day-to-day working of their respective Department, so as to ensure that the irregularities and defects pointed out are corrected and are not repeated. Thereby ensuring that the working is streamlined and regularity and propriety is put into operation in the system. In all those cases in which action is suggested. On taking necessary steps, the compliance of rules and procedure should invariably be reported to the Chief Internal Audit Officer at the earliest. In case on some point, the Departmental Officer has any point of doubt, or difference of opinion, not being a matter of factual inaccuracy, the officer is at liberty to put forth his point of view or the factors on which he feels that, even through the audit observation is factually correct, action cannot be taken, the matter calls for review by the Inspecting Officer at the time of next audit Inspection. At the time of next local Inspection of the Department, the Inspecting Officer shall take up the review of outstanding paras of the previous Inspection Reports with the head of the Office and other concerned authorities in the Department soon after the commencement of Inspection and follow up the discussion with actual settlement of the objections on the spot. This aspect of the Inspecting Officers work is important and considerable portion of his time and attention shall be devoted to this work. The purpose of Internal Audit is better served when, after the points are raised, the Head of the office is given full opportunity to review the position and put forth his point of view as to how the Corporations interests can be served best and how the working can be streamlined and irregularities avoided. These views should be considered and weighed properly before it is decided to pursue the matter further or attention of the higher authorities is invited to the non-compliance with the audit observation. All cases of lack of cooperation of the administrative authorities in furnishing replies to the audit observation or holding discussions towards settlement of audit observations from the previous Inspection Reports or observations from the current Inspection, should be promptly brought to the notice of higher authorities. For impressing upon the Head of the office, the desirability of extending cooperation in achieving settlement of all outstanding points brought out by Internal Audit for a defect-free working. Objections of a procedural nature, such as non-maintenance of records, non-obtaining of a certificate relating to a personal claim or

(b)

(c )

(d)

78

non-furnishing of any document in support of proper utilisation of a loan or advance, which remain outstanding in the previous Inspection Reports, and the irregularity has continued during current audit, the outstanding objection from the previous Reports may be dropped and a fresh para included in the current Report, mentioning the fact against the previous Inspection Report and also giving a clear indication in the fresh para that the irregularity has continued through previous year(s). Where, on furnishing of satisfactory reply by the Head of the Department to objections pointing out overpayments, short/non-receipt of stores, equipment and machinery, irregular purchase and other serious irregularities. these are treated as settled by the IA Chiefs Office subject to verification at the time of next Inspection. All these cases are abstracted on a separate sheet for verification of compliance by the Inspecting Officer. He shall verify the compliance and record his remarks against each item in that sheet. In case compliance to the objections stated to have been made. Is not in order, or the compliance has not been made, the point shall be included in the current Inspection Report. The Inspecting Officer, before treating objections in previous Inspection Reports as settled, shall ensure that the officer 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 shall also record brief justification for dropping the objection from the original Inspection Reports. In no case the outstanding objection shall be treated as settled merely by recording the words discussed and dropped. Time at the disposal of the Inspecting Officers during Inspections is limited and all Departmental Officers are expected to take effective steps to make available all records desired and summoned during Inspection promptly. If, due to any unavoidable circumstances, some records are not made available and there are cogent reasons therefore, a suitable para is included in the Inspection Report. The non-production of records during the next Inspection or subsequent Inspections results in the point being included in Part I of the Inspection Report. In case the practice is continued. The fact of nonproduction, and the items of record so with-held, shall be brought out prominently in a para to be included in the current Inspection Report and the attention of higher authorities drawn to it particularly. Similarly non-compliance of points brought out in the Test Audit Note(s) shall also be brought out in the current Inspection Report giving details of matters remaining outstanding. 13.4 FINALISATION OF INSPECTION REPORT (a) It is a matter of utmost importance that the facts and figures brought out in the paras of the Inspection Report are correct, based on the departmental records and their correctness is accepted by the departmental authorities. They should also be given opportunity to examine the observations at draft stage itself. Therefore, during the

79

course of audit inspection, irregularities coming to notice shall be spelt out in the form of a half margin/audit memorandum and issued to the officer incharge of the particular item with a copy to the head of the office/Department concerned to solicit comments on the observations and to check the accuracy of facts and figures brought out therein. A minimum of 3 days shall normally be given for their comments, etc. In case no reply in received within 3 days, reminder shall be given to the concerned officers for furnishing a reply immediately, stating that the point raised shall be finalised and incorporated in the Inspection Report in case no reply is received forthwith. (b) After verification of facts and figures and after taking into account the comments received, and if, in the opinion of the Inspecting Officer, the point raised deserves to be included in the Inspection Report, the same shall be finalized and suitable paragraph drafted and included in the Inspection Report. In the event of non-furnishing of comments on the half margin/audit memorandum the point shall be finalized, taking the facts, etc. in the memorandum as correct and that the departmental officers have no comments to offer. However, reference to the document, file or records on which the para is based, shall invariably be indicated in the para itself or as a foot-note to the para.

13.5

DISCUSSION OF THE INSPECTION REPORT (a) The draft Inspection Report shall be finalized as per the procedure detailed above. A copy of the same shall be made available to the head of the office inspected before the conclusion of Internal Inspection and invited to discuss the contents of the Report. It is immaterial whether or not there has been proper response to the audit half margins or memorandum during the course of Inspection. As far as possible, the Report shall be discussed on the last working day; or in case it is not found convenient to the officer concerned or his immediate next junior officer, then discussion may be held on a subsequent working day or the next one or two days. In no case the discussion shall be delayed indefinitely. After discussion the following remark may be got recorded on the body of the Report : Seen and Discussed. The facts and figures brought out in the draft Inspection Report have been verified and found to be correct. (b) The result of discussion shall invariably be included in the Report, and on any point of difference of opinion about the Audit Observations (but not on the facts and figures), the views may be expressed against the relevant audit observation and the same considered by the Inspecting Officer, Modification in the draft para. If any, shall be carried out in the form of amendment, in case the para is not considered for dropping or exclusion from the Report. Suitable remarks shall be recorded against the officers comments on the para and the reasons for not accepting the position stated and for inclusion of the para in the Inspection Report.

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13.6

DOCUMENTS TO BE APPENDED TO THE INSPECTION REPORT The following documents shall invariably be appended to the Inspection Report : (i) Title Sheet in the approved Performa (Form IA 13.1) duly completed and signed by the Inspecting Officer. Duty list of work distributed and completed by the members of the Audit Party. Statement of losses or a certificate to the effect that there was no loss reported or detected, duly signed by the Head of the Department/office, during the period covered by the Inspection. A list of personal files service record checked in respect of members of staff due to retire during the next four years. A Statement showing items involving recoveries of sums due to the Corporation and remaining outstanding in the books of office for more than Six months. The statement in the form given below duly authenticated by the head of the office inspected shall be appended to the Title Sheet. Period to which related 2 Reference to Vr. Or record Amount due Reasons for Initials of Non-recovery Insp. Officer 5 6

(ii)

(iii)

(iv)

(v)

Name of the Deptt./Party From whom recoverable 1

13.7

SUBMISSION OF DRAFT INSPECTION REPORT TO IA CHIEFS OFFICE The draft Inspection Report duly completed along with all enclosures and the title Sheet shall be submitted to the Chief Internal Audit Officer soon after the completion of Inspection and discussion of the report with the concerned Officer. In case there is unavoidable delay for any reasons in the submission of the draft Inspection Report the Completion memo, forming part of the Title Sheet shall be sent to the I.A. Chiefs Office and the draft Inspection Report sent as soon as possible therafter.

81

14 DISPOSAL OF INTERNAL AUDIT NOTES, INSPECTION REPORTS, DRAFT PARAS, AUDIT REVIEWS AND MATTERS BROUGHT OUT IN THE C.A.G.'S REPORTS ON PUBLIC SECTOR UNDERTAKINGS.
14.1 GENERAL It is a matter of paramount importance that immediate attention is paid by the Departmental Heads, other concerned Officers and the Internal Audit Department to the disposal of Internal Audit Notes, inspection Reports, queries received from the External Statutory Auditors and from the Govt. of India (Comptroller & Auditor General's Organisation Departments. It is primarily the duty of the concerned Departmental Officers to formulate suitable replies to all Audit queries, observations, paras and Inspection Reports. Insofar as the observations are concerned, expert advice and help in their disposat shall be made available. The management may entrust the entire responsibility of handling the Statutory Auditors' working and disposal of their observations and coordination work to the Internal Audit Department. In case this job is entrusted to the Internal Audit Department, suitable records shall be maintained to enter all queries, Audit Observations received for disposal and watch their disposal and settlement as early as possible. On receipt of relevant data and/or draft replies to the Audit Observations from the Departmental office, these will examined with reference to the basic records and to see whether they are in order and would satisfy the Audit authorities and help settle them. Replies which are not factual, nor based on record, and not to the point shall not be entertained. In case the replies received are not found to be relevant suitable replies shall be redrafted based on the facts supplied and relevant record and approval of the top management taken before they are sent to the concerned authorities. 14.2 DRAFT REVIEWS AND ECPA AUDIT REPORTS The result of Audit Reviews and Reports of the Efficiency-cum-Performance Audit conducted specifically in selected Public Sector Undertaking require immediate attention and accorded importance for formulating cogent and convincing replies. For this, the Internal Audit Department shall develop expertise and render all possible help to the departmental authorities for the formulation of replies and help secure settlement at the earliest. Any let up in submission of suitable replies and securing settlement may result in the Reviews and points brought out in the ECPA Reports being included in the C.A.G.'s Audit Reports. The inclusion in the C.A.G.'s Reports entails lot of. work and time :of the Management in facing the quintiles from the Parliamentary Committees (like the Committee on Public Undertakings, COPU) and submission of Action Taken Reports before the points are finally settled. Hence the importance of handling these matters very carefully in the

82

first instance. The Internal Audit shall also help in handling the COPU's Observations for final disposal. 14.3 SETTLEMENT OF INTERNAL INSPECTION REPORTS AND AUDIT NOTES The Internal Audit is done on behalf of the Management and its results are submitted to the Management through the Director (Finance) at periodical intervals (say quarterly or at such intervals as may be directed by the Management). The final decision to pursue a certain point and the extent to which it's suggestions shall be accepted for implementation rests with the Management. The observations of Internal Audit are not meant for the Shareholders of the Company, as are the Statutory Auditors. Since the Internal Audit supplements the Statutory Audit and the latter is required to review the working of the Internal Audit, the Statutory Auditors are within their rights to include some of the observations of Internal Audit in their Report to the Share-holders indicating that these points have been taken from the Internal Audit Reports. It is, therefore, in the interest of the Corporation and the Departments concerned to make strenuous efforts to settle the Internal Audit observations speedily and thereby streamlining the financial management of the Corporation. The Chief Internal Audit Officer shall endeavour to impress upon the Departmental Officers to understand the implications of the Internal Audit Observations and shall advise them to take effective steps to implement its suggestions at the earliest.

83

15 REVIEW OF PROGRESS OF THE MAIN PROJECT COMPONENTS-FINANCIAL AND PHYSICAL STOCK- TAKING
15.1 As a special aid to the Management, the Internal Audit Department shall place special emphasis on the review of the main components of the project with regard to the Cost over-runs and the Time over-runs quarterly, with a view to apprising the progress made, and the short-fall in the overall completion and targets. For analyzing the cost over-runs. factors like progress of expenditure. Comparison with the sanctioned estimates, physical progress and delay in completion of the targeted items of work shall be compiled in form IA 15.2 for each component of the Project Works and then examined critically to arrive at the reasons for delay and the quantum of delay for each one of the reasons. As is well known, the Project has been under execution for many years, first by the U.P. Government Departments of Public Works and Irrigation and later from 1989 by the Corporation. It is also a well known fact that the project has been faced with many technical and political controversies and agitations from environmentalists from time to time. Even to this day these factors continue to affect the execution of the project and causing heavy cost and time over-runs. These are all external factors over which the project authorities. and even the State and Central Governments have little control.

15.2

15.3

15.4 Notwithstanding the fact that external factors have largely contributed their share of delay and cost over-runs, some delays due to internal factors cannot altogether be ruled out. Execution of the Projects, of the magnitude of the Tehri Hydro Project, require total harmonious efforts of all the essential inputs like Men. Material and Machinery optimizing their contribution at all times. It is in this context that this review shall attempt to supplement the Management Information Reporting System for devising .ways and means for minimizing the time and cost over-runs as an on-going process.

84

16 DATA PROCESSING FOR THE COMPUTERISATION OF ACCOUNTS, ETC.


Programme of computerization of some of the important activities like the Compilation of Accounts, Stores Accounting, maintenance of Priced Stores Ledger, to mention but a few of them, is being proceeded with. For switch over and the adoption of the EDP system, a number of problems are faced by the Departments i.n the initial stages and later on, a constant watch is, therefore, to be kept over the entire spectrum of activities to guard against unauthorized interpolations in the data to ensure proper preservation of processed data. as also to prevent misuse and manipulation. In this connection, it will be seen in Internal Audit Inspection of different Departments. Which have gone in for partial or complete computerization of their activities, that: (i) In the initial stages. both the computerized records and manually kept records shall be maintained and the two sets of records compared and tallied to find out any variations or mistakes. There is adequate check over the data processed for feeding into the EDP as regards its correctness and authenticity before being handed over to the EDP Department. There is proper secrecy and control over the 'Password' to prevent it from falling into unauthorized hands for possible manipulation and misuse. Access to the Computer Terminals is restricted to only those officials who are fully authorized to operate upon them and handle the data. There shall be a system of accountability for any unauthorized handling and misuse of the system at any stage. There is a system of test-check of the processed data on receipt from the 'EDP Department with reference to the basic records of the Department to verify its correctness from time to time. It shall invariably be seen that the Departmental authorities and the EDP Department are fully conscious of their responsibilities towards protecting the processed and stored data against any attempts of interpolation destruction or unauthorized replacements.

(ii)

(iii)

(iv)

(v)

85

Form No. IA 2.4

TEHRI HYDRO DEVELOPMENT CORPORATION L TD. INTERNAL AUDIT DEPARTMENT (HQ)


SUMMARY OF INSPECTION REPORTS FOR THE QUARTER_________ (Submitted quarterly by the Chief Internal Audit Officer to Director (Finance) 1. Total number of Internal Audit Inspections conducted. No. of Inspections conducted during the previous quarter summary not submitted but carried forward. Period of Audit covered in (1 and 2) Names of Departments covered. Important observations included in Inspection Reports. Nature of Observation 6. Observations of serious nature requiring urgent attention of the Management : Deficiencies observed in Systems, Procedures and executive orders requiring attention. General Remarks. Concerned Department

2.

3. 4. 5.

7.

8.

Chief Internal Audit Officer

86

Form No. IA 2.6 (b)

TEHRI HYDRO DEVELOPMENT CORPORATION LTD. INTERNAL AUDIT DEPARTMENT (HQ)


CONTROL REGISTER OF INSPECTION REPORTS ISSUED S.No. Department/ Date of Office 2 Location Period of Audit 3 Audit 4 Dates of Completion 5 Date of Receipt of IR 6

Name of the S.No. and total S.No. and total Date of Date of Insptg. Officer No. of paras in No. of paras Issue of Reminders he current Insp. From the Prev. I/R Issued Insp. Rep. (yearwise) O.S. 7 8 9 10 11

Initials of the Officer

12

Remarks, if any 13

(Note: The Register shall be kept current for a period of five years. Sufficient space shall be left in between two items to accmodate all the entries.)

87

Form No. IA 2.6 (b)

TEHRI HYDRO DEVELOPMENT CORPORATION LTD. INTERNAL AUDIT DEPARTMENT (HQ)


FORWARDING LETTER OF INTERNAL INSPECTION REPORT Officer Complex Rishikesh (U.P.) Date No. The_______________________ _______________________ _______________________

Sbject : Internal Inspection Report for the Period Dear Sir, Please find enclosed Internal Inspection Report of your Department /Office/Unit for the period to based on the Internal Audit Inspection of your Office Complete recently. You are requested to examine the points brought out in the Inspection Report and issue necessary instructions to various functionaries to make action on the points concerning each of them so as to enable settlement and furnish replies accordingly. Reply to the paras included in the Inspection Report with the approval of the Head of the Department, may kindly be furnished within six weeks of the receipt of the Inspection Report. Specific matters, which concern more than one Department or are a general nature requiring consideration at higher level before action can be taken to settle them, may kindly be taken up at the level of the Head the Department with the CIAO. This fact may however, please be mentioned against the relevant para in the reply furnished to this office. Please acknowledge receipt of the document.

Yours faithfully

(Deputy Manager) Internal Audit

88

Form No. IA 2.6 (f)

TEHRI HYDRO DEVELOPMENT CORPORATION LTD. INTERNAL AUDIT DEPARTMENT (HQ)


REGISTER OF DRAFT PARAS, DRAFT REVIEWS, AND SPECIAL POINTS RECEIVED FROM THE GOVERNMENT AND STATUTORY AUDITORS.

S.No.

Authority from Whom received 2

Brief particulars Departmental Officer Date of Receipt of each para/point mainly concerned. 3 4 5

Latest date by reference No. & Due date Actual date Ref. under which Which reply is due date through for reply of receipt final reply sent To be sent which forwarded of reply 6 7 8 9 10

(Note : The Register shall be maintained and kept uptodate all time. It shall be reviewed at least once a week before the due date of submission of the reply and therafter on a day-day basis and shall be personally seen by Dy. Manager (HQ) as and when it is put up and at least every week by the CIAO or at other intervals as per his instructions.) Form No. IA 2.8

89

TEHRI HYDRO DEVELOPMENT CORPORATION LTD. INTERNAL AUDIT DEPARTMENT (HQ)


INTIMATION REGARDING TAKING UP OF INTERNAL AUDIT INSPECTION

Office Complex Dated No. The_____________________ _____________________ _____________________

Subject : Internal Audit Inspection of Deptt./Office for the period Dear Sir, As per the Internal Audit Inspection programme approved by the Chief Internal Audit Office of the Corporation, the Internal Audit Inspection of accounts of your Department/OfficeUnit shall be taken up on or about..and succeeding days. It is requested that necessary arrangements for the conduct of the Audit Inspection may please be made. It may also please be ensured that co-operation is extended to the party for prompt production of record/documents and for necessary typing facilities. The replies to the outstanding Internal Audit objections may be kept ready together with the supporting records so that the party can discharge its functions smoothly and efficiently and complete the inspection according to schedule. Opportunity may be taken to settle as many points of outstanding Records (and those arising out of the present Inspection) as possible, by discussions and by making available relevant records during the currency of Audit Inspection. Since the party is required of follow a strict time schedule, steps may please be taken to produce the records in time so as to avoid any disturbance in its programme. Please acknowledge receipt of this letter. Thanking you Yours faithfully

( ) Internal Audit Department

90

Form No. IA 13.1

TEHRI HYDRO DEVELOPMENT CORPORATION LTD. INTERNAL AUDIT DEPARTMENT


TITLE SHEET INSPECTION REPORT

Enclosed is the Draft Inspection Report of Section A 1. 2. 3. 4. 5. 6. 7. 8.

Department for the period

9. 10.

The Department was set up on and this is first/second/subsequent Internal Inspection. Date of commencement of Internal Inspection. Date of completion of Internal Inspection. Time allotment availed of: Time allotment recommended for future Inspection. Total number of Audit Memos/Notes issued. Total number of Audit Memos/Notes to which replies rcd. Name of the Head of the Department: Name of Officer handling Administrative & other important functions with whom most of inspection was done. Name of the Non-executive handling Fin./Accounts etc. functions. Date of submission of Draft Inspection Report to the HQ. In case the Draft Inspection Report is delayed for more than 7 working days from .

Section B 1. 2. 3. Pragraphs, if any, in which embezzlement or defalcation has been brought out Pragraphs fit for bringing to the notice of the Management. Total wasteful expenditure (and reference to paragraphs brought out) avoided at the instance of Internal Audit.

91

Form No. IA 3.1 Section C Review of outstanding objections pertaining to previous year done and discussed with the Departmental authorities and the objections settled ware as under: S.No. Ref. of para No. of the Inspection Report Brief Particulars Explanation reply, if any furnished. How settled

Section D Details of record, documents checked (numbers and percentage) during the Internal in spection : Month 1. 2. 3. 4. 5. 6. 7. Paybills for each month: T.A. Bills for each month: Contractors Bill checked: Suppliers Bills checked: Final Bills of different kind checked: Personal files/Service Records checked: Case of Tax deductions & payments checked: Income Tax Sales Tax Customs duty Excise duty Difficulties experienced during Inspection: No. % Checked

8.

Inspection Officer

92

Form No. IA 13.1 Section E DUTY ALLOCATION SHEET Details of the items of work allotted and completed by each member of the Audit Party

S.No.

Name (Block Letters)

Work allotted and completed

Full Signature

Initials

Special items of work attended to by the Inspecting Officer: Inspecting Officer

Section F General State of Accounts and other Basic, primary and secondary records: Special Remarks (General and Specific to The Department) if any: Areas requiring special attention in future Inspection, if any Inspecting Officer

93

Form No. IA 13.1

TEHRI HYDRO DEVELOPMENT CORPORATION LTD. INTERNAL AUDIT DEPARTMENT (HQ)


COMPLETION MEMO (to be appended to Inspection Report) 1. 2. 3. 4. 5. 6. 7. 8. Name of the Department and its location. Period covered in Audit: Dates of commencement and completion of Audit: No. of working days availed of. Time extension, if any taken No. of days suggested for future Audit and reasons therafter. Names of other members of the Party Name of the Inspecting Officer.

Inspecting Officer.

94

Form No. IA 15.2

TEHRI HYDRO DEVELOPMENT CORPORATION LTD. INTERNAL AUDIT DEPARTMENT (HQ)


CHECK LIST OF TIME AND COST OVER-RUN OF ESTIMATE 1. 2. 3. 4 5 6 7 8 9 Nomenclature of the Work Estimate : Estimated time for completion Estimated expenditure : Sanctioned vide letter No. & Date Date of start of execution: Revision if any in estimated expenditure: Expenditure incurred upto the previous financial year: Expenditure upto the previous month of the current year: Short-fall in expenditure: Reasons for short-fall and quantum : (i) Delay in receipt of drawings : (ii) Delay in sanction of Estimate : (iii) Delay in the award of contract (iv) Delay in execution : (v) Other reasons : (vi) Other special features: 10 Steps proposed/taken by the Depar1mental authorities for timely completion by accelerating the progress to make up the shortfall. 11 Estimated time for completion . 12. Shortfall recorded so far : 13. Reasons for shortfall: 14. Physical progress made upto previous year : 15. Physical progress upto the previous month of the current year. . 16 Shortfall in progress:

Total Short-fall In terms of expenditure: : In terms of Time : . Inspecting Officer/ Chief Internal Audit Officer

95

Filename: Internal Audit Report Final-new.doc Directory: H:\INTRANET\manual\Internal_Audit Template: C:\Documents and Settings\Administrator\Application Data\Microsoft\Templates\Normal.dot Title: INTERNAL Subject: Author: Raj Keywords: Comments: Creation Date: 08/12/2005 11:33 Change Number: 23 Last Saved On: 08/12/2005 15:02 Last Saved By: IT Total Editing Time: 74 Minutes Last Printed On: 09/12/2005 16:01 As of Last Complete Printing Number of Pages: 95 Number of Words: 34,810 (approx.) Number of Characters: 181,014 (approx.)