READING MATERIAL ON

Defence Audit Code

SAS Part I (Paper II)
Prepared by: Shri Saroj Kumar Mohanty, AAO

CHAPTER I (Introductory)

• What Audit Code deals with?

o The broad and general principles on which audit by the Defence Accounts
Department is conducted over Defence Services receipts and expenditure.
o The special points to be observed in the audit of particular item of such receipts
and expenditure.
• Statutory Audit:
o Conducted by Director General of Audit Defence Services and Its staff on behalf of
C&AG.
o Audits all sanctions of the Government of India in the Ministry of Defence and the
Ministry of Defence (Finance).
o Scrutinize all Codes and Regulations issued for the use and guidance of the
Defence Accounts Department.
o Prepares annually, a Report on the Appropriation Accounts of the Defence
Services.
• Internal Audit:
o Conducted by Defence Accounts Department (CGDA) on behalf of Secretary
(Defence/Finance) / Financial Adviser, Defence Services (FADS).
o
• Dual Functions/capacity of Secretary (Defence/Finance) / Financial Adviser, Defence
Services (FADS):
o Principal representative of the Ministry of Finance in the field of Defence
expenditure.
o The Chief Accounting Officer for Defence services.
• Audit of Cantonment Fund Accounts:
o Conducted by the Defence Accounts Department.
o Not subject to Test Audit by the Director General of Audit (Defence Services).
o Cantonment Boards pay audit fees to the Defence Accounts Department.
• Question on doubt over Interpretation of Rules:
 o PCsDA/CsDA should not address Services Headquarters or the Ministry of
Defence (Finance) directly on questions of interpretation of rules, procedure,
higher audit and financial advice.
o Such questions should always be referred to the Controller General of Defence
Accounts.
• Performance Audit as a part of Internal Audit is conducted by:
o Performance Audit Team (PAT) constituted in every PCDA/CDA office.
o Performance Audit is undertaken/carried out of Service provider units such as
Ordnance depot, Supply depot, EME workshops, Military Farms, Sanik Schools
etc.

CHAPTER 2 (General Principles and Rules of Audit)

• Primary function of Audit:

o To verify the accuracy and completeness of accounts.
• Receipt Audit:
o To ensure that all receipts are brought to account under the proper head.
• Expenditure Audit:
o To ensure that all expenditure and disbursements are authorized, vouched and
correctly classified.
• Audit of Sanction:
o Govt. of India Sanctions – Audited by Director General of Audit Defence Services
(DGADS). These sanctions are not further audited by PCDA/CDA.
o Sanctions issued by authorities lower than Govt. of India – Audited by
PCsDA/CsDA.
o If sanction is accorded with the concurrence of Ministry of Defence (Finance) –
Must contain the U. O. No. and Date
o U.O. number is centrally controlled by HQs office.
o All sanctions must be issued in the form of Govt. letter / Army Instructions/Air
Force Instructions/Navy Instructions
o Sanction by Competent Authority
o Sanction is definite and needs no reference either to the sanctioning authority itself
or to any higher authority for clarification.
o Sanctions should be Ink Signed
o No splitting of sanction
 o Mentions the Head of Accounts / Code Head to which expenditure is to be booked.
o Must contain exact amount of expenditure
o Specimen signature of sanctioning authority to avoid fraudulent payment.
• Sanctions & Orders affecting financial transactions are of three categories:
o Rules and General orders
o Grants & Appropriations
o Sanctions to Expenditure
• Specimen Signature:
o Authorities empowered to sign Govt. sanctions involving Defence Expenditure-
▪ Desk Officers, Under Secretaries, Deputy Secretaries, Directors and Joint
Secretary.
o It is the responsibility of ‘Nodal Officer’ to send the specimen signature to PCDA,
New Delhi and other PCDA/CDA.
• Standards of Financial Propriety:
o Every officer is expected to exercise the same vigilance in respect of expenditure
incurred from public money as a person of ordinary prudence would exercise in
respect of expenditure of his own money.
o The expenditure should not be prima facie more than the occasion demands.
o No authority should exercise its powers of sanctioning expenditure to pass an order
which will be directly or indirectly to its own advantage.
o Expenditure from public money should not be incurred for the benefit of a
particular person or section of the people
o The amount of allowances, granted to meet expenditure of a particular type, should
be so regulated that the allowances are not on the whole a source of profit to the
recipients.
o The responsibility and accountability of every authority delegated with financial
powers to procure any item or services on Government account is total and
indivisible.
o Whenever called for, the concerned authority must place on record in precise
terms, the considerations which weighed with it while taking the procurement
decision.
• Increase of Quantum of Audit:
o Under the personal orders of PCDA/CDA
• Temporary Relaxation / decrease of quantum of Audit:
o Prior concurrence of CGDA is required.
• Pay Accounts of Air Force Civilians:
o Industrial Civilian Employees:
▪ Maintained by Administrative Authorities on ILAs
▪ Post Audited by Defence Accounts Department
o Non-Industrial Civilian Employees:
▪ Paid out of the Public Fund Accounts, on Acquaintance Rolls-cum-pay bills
▪ Post audited by PCDA(AF)
• Pay Accounts of Army Civilians:
o Industrial Personnel of OD, EME, MF, MES:
▪ Paid by Administrative Authorities on Check Rolls/Industrial personnel
bills.
▪ Post Audited by LAO/RAO
o Non-Industrial Personnel:
▪ Drawn by the Head of the office
▪ Pre Audited by PCDA/CDA
• Pay Accounts of Civilians of Navy:
o Industrial Personnel:
▪ Maintained by the Wages section of PCDA(Navy) for those under the
administrative control of the Admiral Superintendent, Naval Dockyard,
Mumbai.
▪ Prepared by Officer Commanding concerned for personnel of Indian Navy
Establishments in Mumbai (other than mentioned above) and INS ‘Shivaji’
& Pre Audited by PCDA(Navy).
▪ Pay bills / Muster Rolls are Prepared by the Heads of Establishments and
payment made from the cash assignment in r/o personnel of I.N.
Establishments located outside Mumbai. Subject to Post Audited by
PCDA(Navy).
• Audit of Establishment bills of PCDA/CDA office:
o Establishment bills of the office of all PCDAs/CDAs are audited by PCDA
(Pensions)
o Establishment bills of PCDA (Pensions) are post-audited by CDA, Patna.
• Audit of Expenditure – Points to check:
o Provision of funds
o Expenditure is as per the sanction accorded by Competent Authority
o The claim is in proper format.
 o Expenditure is made within the validity of sanction.
o Payment made to proper person and acknowledgment received.
o Stores have been taken into charge – in case of procurement of stores
o As per the terms of the Contract in case of MES bills
o No breach of standards of financial propriety.

• Provisional Payment:
o Made in exceptional circumstances
o In anticipation of receipt of sanction of appropriate authority or of additional
allotment of funds to cover the expenditure.
o Payment made pending documentation or verification of documents due to lack of
time.
o Provisional payments will be made only under the personal order and discretion of
the PCDA/CDA.
o The PCDA/CDA may at his discretion, delegates the powers to make provisional
payments to Additional Controller/Joint Controller and/or IDAS Officers
functioning as Group Officers
o However, the ultimate responsibility lies with the PCDA/CDA concerned.
o No provisional payment where there is no authority
o In no circumstances will a provisional payment be made on an undertaking by the
individual concerned, that he will refund the amount if required to do so.
o Exception – Payment of Pay & Allowance pending receipt of LPC on transfer from
one establishment to another.
o The finalization of all provisional payments will be watched through the medium
of a register – to be reviewed by PCDA/CDA/Addl. CDA/Jt. CDA.
• Audit of Bills & Vouchers:
o No voucher or order should be signed by the subordinate ‘for' an officer
o Affixing of Revenue Stamp – above Rs 5000/-
o claims preferred after 24 months are not proceeded with or without the sanction of
the competent authority as prescribed in Financial Regulations
• Financial Advice:
o The Regional Principal Controllers/Controllers are ex officio financial advisers to
the General Officers Commanding in Chief of Commands as well as to the area
and Independent Sub Area Commanders in their respective audit areas in respect of
the expenditure sanctioned by them.
 o PCDA (Air Force) acts as Financial Adviser to the Air Officer Commanding
Western/Eastern/Central/South West Air Commands I.A.F. and
Maintenance/Training Command IAF
o PCDA (Navy) acts as Financial Adviser to the Flag Officers Commanding in Chief
Western Naval Command, Mumbai; Eastern Naval Command Vishakhapatnam;
Commodore Commanding Southern Naval Area, Cochin and Admiral
Superintendent Naval Dockyard, Mumbai.

• Most Important:
o Go through the Annexure after the chapter 2 regarding Extent of Audit of
Expenditure. Try to memorize the percentage of Audit mentioned in the Annexure.

CHAPTER 3 (Audit Against Provision of Funds)

• No money can be withdrawn from the Consolidated Fund until the Appropriation Bill is
passed and assented to by the President.
• Appropriation bill when passed and assented to by the President becomes Appropriation
Act.
• Appropriation Audit:
o Conducted in two stages
o Sanction Audit – Audit of orders of allotment of funds and re-appropriations
o Expenditure Audit – Audit of expenditure against allotment.
• The Principal Controllers/Controllers of Defence Accounts are responsible for watching
that the expenditure does not exceed the allotments.

CHAPTER 4 (Audit of Receipts & Recoveries)

• Important Major Heads and their nomenclature:

o Major Head 0049-Interest Receipts (Credit of Interests)
o Major Head 7610-Loans to Government Servants (Interest bearing Advances)
o Major Head 7615-Miscellaneous Loans (Advances not bearing interest)
• Adjustment of Outstanding Advances:
o Through Defence Exchange Accounts
▪ Between offices of Defence Accounts Department
o Through Settlement Accounts
 ▪ Between Defence and P&T, Railways, Dept. of Supply in the Ministry of
Supplies and Rehabilitation.
o Payment by Cheque or Draft
▪ Between Defence and Departments/Officers of other Central Ministries and
the Departments/officers of State Governments and Centrally Controlled
Union Territories.
• Advance to Service Personnel attached to or serving on the staff of the High
Commissioner for India on UK:
o Pay accounts are maintained by High Commissioner
o Accounting in India done by PCDA, New Delhi
o The advances on account of purchase of motor cars and other debt head advances
are debited to India through Inward London Account Current of Defence Services
and the monetary settlement of these transactions is got effected centrally by the
PCDA, New Delhi through the Principal Controller of Accounts, Ministry of
External Affairs, New Delhi.
o Transactions pertaining to other Principal Controllers/Controllers are passed on by
the PCDA New Delhi to the PCDA/CDA concerned through Defence Exchange
Account.
• Advance to Service officers and men proceeding to the U.K. on courses of instruction and
temporary duty:
o The Pay Accounts continue to be maintained in India.
o The method of accounting is same as mentioned above.
• Advance to Service Personnel attached to or serving in Countries other than the UK:
o The Pay Accounts continue to be maintained in India.
o The advance made to them by the Indian High Commissioners/ Ambassador are
adjusted by the latter in their accounts with Controller General of Accounts who
passes on debits to the PCDA/CDA concerned.
• Recoveries of Income Tax:
o An annual statement showing figures on account of income tax and super tax
compiled in Defence Services Accounts by end of March (Final) will be rendered
by the CDA (Funds) Meerut to the Central Board of Direct Taxes before the close
of July.
 CHAPTER 5 (Pay Accounts of Army Officers)

• Pay Accounts of Army officers maintained by PCDA(O), Pune.

• Authorisation Slips – CDA(O) 243
• Salary Bills – IAF(CDA) 653
• Statement of Accounts – IAFF 1015 revised
• Scale Audit:
o Conducted by PCDA(O)
o Conducted on the basis of the total number of officers in the ranks of Lieutenant to
Major
o Lieutenant to Lt Colonel in case of AMC
• Audit of Armed Force List:
o Conducted by PCDA(O)
• Pay Accounts of Indian Army Officers Serving on the establishment of High
Commissioner for India in the UK :
o Maintained by High Commissioner for India in the UK
o LPC is issued by PCDA(O)
• Pay Accounts of Indian Army Officers Serving on the establishment of Indian Embassies,
High Commissioner other than UK :
o IRLAs maintained by PCDA(O)
o Payment made by respective Embassies / High Commissioner w.r.t Pay Slips
issued by PCDA(O).
• The pay accounts of Officers proceeding abroad on Courses of Instructions, study leave
and temporary duty are maintained by the PCDA(O).

CHAPTER 6 (Pay Accounts of JCOs, ORs and Non Combatants (Enrolled))

• Maintained by PAOs attached to Regimental or Corps Centres.

• Scale Audit of Civilians employed in lieu of Combatants in AMC
o Conducted by PCDA(CC), Lucknow

CHAPTER 7 (Pay & Allowances of Civilian Govt. Servants)

• Pay bills of civilian Government servant are pre audited by the Principal
Controllers/Controllers.
• Pay bills of Industrial personnel of Ordnance Depots, EME Workshops, Farms etc., are
post audited by Local/Regional Audit Officers
• Service Books:
o Civilian Gazetted officers of Defence Services – Maintained by the Head of the
office / formations
o Group 'A' and 'B' civilian officers of MES - Maintained centrally by the Central
Record Office (Officers) Delhi under the supervision and administrative control of
E-in-C Branch, Army Headquarters, New Delhi
• Scale Audit:
o Conducted by PCDA(O), PUNE
o The scale audit check on the substantive cadre in the case of CGOs of the AMC
employed on an all India/corps basis under DGAFMS/DMS (Army) will be carried
out by the PCDA(CC) Lucknow

CHAPTER 8 (Travelling Allowance and Other Conveyance Charges)

• Air passages to/from outside Indian limits:

o Claims relating to air passage of Army personnel Defence Civilian ex India are
dealt with centrally by the PCDA New Delhi.
o Claims relating to air passage of Navy personnel Defence Civilian ex India are
dealt with centrally by the PCDA(Navy), Mumbai.
o Claims relating to air passage of Air Force personnel Defence Civilian ex India are
dealt with centrally by the PCDA(AF), Dehradun.
• Air Freight within Indian Limits:
o All movement of stores by Air within Indian Limits require the prior sanction of
Govt. of India.
o Exception: Medical ground or Operational reasons
• Dispatch of Stores ex-India
o Requires prior sanction of Govt. of India
o Claims are dealt centrally by the PCDA, New Delhi
o Claims in respect of Navy and Air Force are dealt with by the PCDA (Navy) and
PCDA (Air Force) respectively.
• Imported Stores:
o Transportation of stores from abroad to India by air requires special sanction of the
Government of India
 o The stores are received at Mumbai/Kolkata/Chennai on 'freight collect basis'.
o Payments made by Embarkation Commandants Mumbai/Kolkata/Chennai from the
permanent Advance Imprest.
o Re-imbursement is subsequently claimed from the PCDA/CDA concerned.
• Railway Warrants/Credit Notes/Concession Vouchers/:
o The special train warrants are audited with reference to “MILRAIL” orders.
o The claims for under or over charges between Railways and Defence Accounts
Officers concerned are required to be preferred within 6 months.
Sl. Warrant/CV/Form D Form No. Audit Controller
No.
1 Individual Warrant IAFT 1752 PCA(Fys), Kolkata
2 Party Warrants IAFT 1707 -do-
3 Warrants against Military IAFT 1707 A -do-
Special Train
4 Military Credit (MC) Notes IAFT 1711 . PCDA(BR), Delhi
5 Warrants issued to Service -- PCDA(O) for Army officers,
officers PCDA(Navy) for Navy officers &
PCDA(AF) for Air Force officers
6 Concession Vouchers (CV) IAFT 1720A PCA(Fys), Kolkata
7 Form D (only for officers) IAFT 1709A PCDA(O) for Army officers,
PCDA(Navy) for Navy officers &
PCDA(AF) for Air Force officers
8 Form D for MNS/Civilian IAFT 1732 PCDA(O) for MNS officers &
Sisters Regional CDA for Civilian Sisters.
9 CV for Cadets of IAFT 1719 Concerned Regional CDA for
Army/Navy/AF Army Cadets, PCDA(Navy) for
Navy cadets & PCDA(AF) for Air
Force cadets

CHAPTER 9 (Unit Allowances, Contingent & Miscellaneous Expenditure)

• Unit Allowance Claim:

o Prepared by Officer Commanding Units/Formations & Head of Establishments
o Pre-Audited by PCDA/CDA concerned.
o Exceptions:
Type of Claim Paid by / from Pre/Post Audit
Condiment Allowance Paid out of Imprest Post audited by PCDA/CDA
Condiment Allowance - Pre-Audited by PCDA/CDA
in r/o patients in
hospital
Annual Training Grant Received by allotment Post audited by PCDA/CDA
Account
Unit Allowance claim Paid out of Imprest Post audited by PCDA(AF).
 in r/o AF
Units/Formations
Claims in r/o DSC Paid out of Imprest Pre-audited by PCDA(AF).
platoons serving with Account
AF Units
Claims on a/c of LP of Paid by PCDA(AF) Pre Audited by PCDA(AF)
stationery/rubber stamp direct to the parties

• Non-recurring payments sanctioned by the Chief of Staff:

o Amount (Maximum Limit):
Service Chief Maximum Limit Paying Controller
The Chief of the Army Staff Rs. 100 lakh per Financial PCDA New Delhi
Year
The Chief of the Naval Staff Rs. 50 lakh per Financial PCDA (Navy)
Year
The Chief of the Air Staff Rs. 50 lakh per Financial PCDA(AF) at the
Year beginning of the year.

o Purpose:
▪ Donations when visiting training establishments, boys’ training units etc;
▪ Provision of trophies, flags, etc. for presentation to training establishments;
▪ Provision of amenity articles when visiting hospitals, welfare centers etc;
▪ Expenditure for which no specific provision exists in the regulations eg.
Gratuities to servants, coolies hired etc.
o This expenditure should not exceed 10% of the amount allocated to the Chief of
the Army Staff/the Chief of the Naval Staff/the Chief of the Air Staff.
• Contingent and Miscellaneous Expenditure of Military Attaches/ Advisers to Indian
Embassies Abroad:
o PCDA(CC), Lucknow is centrally responsible for auditing and adjusting the
expenditure.

CHAPTER 10 (Contracts, Expenditure on Supplies and Hired Land Transport)

• Contracts:
o When a contract is likely to endure for a period of more than 5 years, it should,
wherever feasible, include a provision for an unconditional power of revocation or
cancellation by Government at any time, after the expiry of six months notice to
that effect.
o Sanction of the Government of India will be necessary to conclude a contract for a
period beyond 3 years.
 o Long term contracts (contracts for more than one year) should also be sent to
Director of Audit Defence Services.
• The tender above Rs 10 lakh (Ten lakh) are compulsorily processed through e-
procurement.
• Short Term Agreement:
o In an emergency when conclusion of a regular contract is not feasible
o When uneconomical rates are tendered for regular contracts and there are prima
facie reasons to believe that this is due to formation of a 'ring' by contractors
o As an interim arrangement when for some reason, sufficient time is not available to
conclude a regular contract.

CHAPTER 11 (Military Engineer Services Expenditure)

• Functions of AO(GE) / AAO(GE):

o Three fold functions
▪ As an Accountant
▪ As Primary Auditor
▪ As Financial Assistant and Adviser
• MES work in PCDA/CDA office is manly dealt in two sections:
o Internal Audit (IA) Section
▪ Deals with works connected with Local Audit
o Engineer Section (E-Sn)
▪ Deals with works relating to audit of MES expenditure

CHAPTER 12 (Miscellaneous Accounts and Payments)

• Field Cashier:
o Fund to Field Cashiers is supplied by PCDA(O) by means of Cash Assignment
o The cash Accounts prepared by Field Cashiers is rendered to PCDA(O)
o The Field Cashiers are required to render daily to PCDA (Officers) a cash account,
in IAFF 987 duly supported by vouchers.
o A record of specimen signatures of all Field Cashiers will be maintained by PCDA
(Officers).
• Recruiting Officers’ Accounts:
 o Payments for advances of pay, subsistence allowance and railway fares of recruits
and rewards and railway fares of recruiters are made by Recruiting Officers from
the permanent advances granted to them for this purpose.
o Monthly cash assignment is placed by the PCDA (CC), Lucknow at the disposal of
the Indian Army Gorkha Recruiting Depot and Record Office, Kunraghat, for
disbursements to or on behalf of Gorkha personnel.
o Cash Assignments are placed by the CDA Patna at the disposal of the Indian Army
Gorkha Recruiting Depot and Record Offices, Laheria Sarai and Ghoom.
• National Pension System (NPS):
o The National Pension System came into operation w.e.f. 01.01.2004
o In tier-1, Govt. servant has to make a contribution of 10% of the total of his Basic
pay and DA
o A contribution equal to 14% of the total of his Basic pay and DA is made by the
Govt.
o During EOL, including on medical ground, no contribution either from
Government servants or from Government.
o During HPL, the subscription is calculated on the base of leave salary

CHAPTER 13 (PENSIONS)
• Pension Claims:
o The claims for the grant of pension are dealt with by the PCDA (P) Allahabad.
o The Pr. Controller of Defence Accounts (Navy), Mumbai and Jt. Controller of
Defence Accounts (AF), New Delhi are the competent authorities to sanction the
pension claims/ gratuity in respect of Navy and Air force respectively who
retire/die while in service on after 1st November, 1985.
• The liability for pension including gratuity will be borne in full by the Central/State
Government to which the Government servant permanently belongs at the time of
retirement.
• The payment of pensions is arranged in communication with Pension Disbursing
Authorities by the PCDA (Pensions), for all categories of pensioners.
• The reasonability for the audit of pensions also devolves on PCDA (Pensions) Allahabad.

CHAPTER 14 (Imported Stores)

NIL
 CHAPTER 15 (Air Force Accounts)

• Public Fund Accounts:

o Maintained by an officer of Accounts branch of Air Force
o If the officer posted is from other than Accounts branch, he is called the ‘Imprest
Holder’.
o PCDA(AF) supply funds to Command HQs for distribution to the Units.
o Format – IAFF(F) 1501
• Dispatch of Air Force Stores by Air by Civil Airlines:
o Prior sanction of Competent Authority (Chief of Air Staff or AOC-in-C) is
required.
o Air Craft on Ground (AOG) equipments may be dispatched by Civil Airlines
within Indian Limit and also to and from abroad.
• Pay Accounts of Air Force Personnel:
o Maintained on IRLAs by Air Force Central Accounts Office (AFCAO), New Delhi
o AFCAO is under the administrative control of IHQ of MoD(Air)
o Audit of these accounts is carried out by the Principal Controller of Defence
Accounts (Air Force) New Delhi.
• Air Force List:
o Conducted in the office of the Jt.CDA (AF) New Delhi
• Scale Audit of AF officers and Civilians in AF:
o Conducted in the office of the Jt.CDA (AF) New Delhi
• Hindustan Aeronautics Limited (HAL):
o Defence Public Sector Undertaking (DPSU)
o Under the administrative control of Ministry of Defence, Department of Defence
Production.
o Corporate office is in Bengaluru.
o Has 21 Production & repair/overhaul units and 10 R&D centres across India.
o Audit & Payment of claims rests with DCDA (DAD) HAL under the
administrative control of PCDA Bengaluru.

CHAPTER 16 (Navy Accounts)

• The funds for shore establishment are arranged by the PCDA (Navy) Mumbai by means of
Cash Assignments
 • The payments made from Cash Accounts are subject to Post Audit by the PCDA (Navy),
• Pay Accounts of Navy Personnel:
o Maintained on IRLAs by Naval Pay Office, Mumbai
o Naval Pay office is under the administrative control of IHQ of MoD(Navy)
o Audit of these accounts is carried out by the Principal Controller of Defence
Accounts (Navy) Mumbai.
• Scale Audit:
o Carried out by PCDA(Navy) Mumbai
• Navy List:
o Audit of Navy List is carried out by PCDA(Navy) Mumbai

CHAPTER 17 (Results of Audit and Financial Irregularities)

Major Financial And Accounting Irregularities (MFAI):

• Periodicity:
o Quarterly – Quarter ending June, September, December & March
• Prepared By:
o Controller/Pr.Controller
• Jurisdiction:
o Command Wise
• Due Date:
o By 20th of the month following the quarter. For example the report for the quarter
ending June should be 20th July.
• Financial Limit:
o 5 Lakh and above
• Submitted to:
o Army- GOC-In-C Command by Name
o Navy- Command Headquarter
o Air Force- Command Headquarter
o DGOF
o Administrative Heads of Departments/Organisation.
• Signed By:
o Controller /Pr. Controller or by Jt. CDA in the absence of PCDA/CDA
 • The MFAI Report is being rendered in two parts:
o Part-I is for indicating Fresh Irregularities
o Part-II for irregularities reported previously but still remaining outstanding.
o Both the parts have two sections each.
o Section ‘A’ is for indicating Cash Irregularities
o Section ‘B’ for Stores Irregularities.

Internal Audit Report (IAR):

• Came into Force:
o Introduced w.e.f. Financial Year 1994-95.
• Aim:
o To highlights deficiencies in Armed Forces and to enhance 3 Es.
• Internal Audit Report is required to be prepared by PCDAs/CDAs/PCA(Fys.) Kolkata
issue-wise/theme-wise.
• Classified under three broad headings/themes:
o (i) Pay, Pension & Personal entitlements;
o (ii) Stores/Procurement; and
o (iii) Works with financial value/implication of each case of at least Rs. 7 lakh.
• Compiled By:
o The CGDA’s Internal Audit Report in turn be consolidated/prepared for
o (i) Services (Army, Navy, Air Force), R&D, CSD, Military Farm, Border Roads,
Pension etc,
o (ii) Ordnance Factories.
• Rendered By:
o HQs office to Defence Secretary through Secretary (Defence /Finance) / Financial
Adviser Defence Services (FA DS)
• Periodicity:
o Half Yearly ending March and September.

Annual Audit Certificate (AAC)

• The Annual Audit Certificate is rendered to HQrs Office by PCDA/CDA every financial
year
• It consists of 4 Annexures & 16 statements with sub-parts
• It is a consolidation of reports received from LAOs/RAOs/AOs/Sections in M.O.
• Demands/cases outstanding as on 31st March and its position as on 30th June is furnished
through this report to HQrs office by 31st July.
• Centrally monitored by IA section of Main Office in respect of non-MES transactions.
• Annual Review of MES expenditure in respect of MES transactions are rendered by
Engineer section of Main Office.
• CGDA furnishes a draft certificate to the Secretary (Defence/Finance) and Financial
Advisor Ministry of Defence (Finance) not later than 1st September each year, that to the
best of his knowledge and belief no part of the expenditure contained in the Appropriation
Accounts for the year has been incurred without the Sanction of Government of India
where required by Regulations or other orders with the exception of such items exceeding
Rs. 50000/- in each case where sanction is awaited.

CHAPTER 18 (Appropriation Accounts of the Defence Services)

Annual Accounts of Govt.

Appropriation Accounts Finance Accounts

Civil

Min Of Railway

Dept of Post

Def. Services

• Prepared By:
o Secretary (Defence Finance)/Financial Adviser Min. of Defence (Finance)
o The Appropriation Accounts of the Defence (Civil) and Defence Pensions are
prepared by the CGDA office and signed by the CGDA.
• Submitted to:
o The Comptroller and Auditor General of India and the Director General of Audit,
Defence Services
• Due Date:
o 15th January of the year following that to which they relate.
• Appropriation Accounts – CIVIL is prepared by Controller General of Accounts (CGA)
• Appropriation Accounts – Railways is prepared by Chairman, Railway Board.
• Appropriation Accounts – Dept. of Post is prepared by Secretary to the Govt. of India,
Dept. of Post.

CHAPTER 19 (Report of the C&AG)

• Report of the C&AG (Defnce Services)of India for a particular Year:

o Prepared by DGADS
o Based on the outcome of Test Audit conducted by DGADS and their staff and the
result of Internal Audit conducted by DAD.
• Purpose of the Report:
o Serves double purpose.
o To the Government of India, the report will show the extent to which the Defence
Services are complying with its rules and orders and will often suggest direction, in
which these rules and orders can with advantage be amplified or modified or
improved.
o To the Parliament through its Public Accounts Committee, it will reveal in general
how far the Government has complied with its expressed views in matters of
importance, and in particular how far money placed at the disposal of Government
were regularly and properly spent.
• Draft Paragraph:
o The draft paragraphs proposed for inclusion in the Report of the comptroller and
Auditor General of India are sent by the Principal Director /Director /Joint/Deputy
/Assistant Director, AO Defence Services to the Principal Controllers/Controllers
concerned for verification of facts.
o The Principal Controller/Controller should return the draft para within six weeks of
its receipt as far as possible.
 o On receipt of the remarks of the Principal Controller/Controller, the former will
amend the draft paragraph, if necessary, and send it to the DGADS for further
action.
o After the Director General of Audit, Defence Services has accepted the draft
paragraph, he/she will send three copies thereof (six copies in case of paragraphs
pertaining to the Department of Defence Production) to the Ministry of Defence
and one copy of the draft paragraph to the branch concerned of the Services
Headquarters
o The CGDA will also be consulted in cases involving accounting matters of
Defence Accounts Department.
o The DGADS will be informed of the acceptance of the Para by Ministry of
Defence through a self contained note and the file passed to DFA (B) for record.
o Principal Controllers/Controllers may allow the Command Headquarters a period
of 30 days for furnishing the final replies thereto.
o Finally, Draft Paragraph will be presented before Public Accounts Committee.
o The report of the Public Accounts Committee is submitted to the Government of
India, who consider its recommendations arising out of the report of the
Comptroller and Auditor General of India. The orders passed by the government on
the recommendations of the Public Accounts committee affecting the Defence
Services, will be communicated to Principal Controllers/Controllers, in due course,
by the CGDA with any supplementary instructions considered necessary.

CHAPTER 20 (Government e-Market Place)

• What is GeM?
o Government e-Market Place (GeM) is the national public procurement portal for
providing procurement of goods and services required by Central and State
Government organisations.
• Rule position in GFR 2017:
o Rule 149 (GeM)
o Up to Rs.25.000 through any of the available Suppliers on the GeM
o Above Rs.25,000 and up to Rs.5,00,000 through the GeM seller having lowest
price amongst the available sellers of at least three different manufacturers, on
GeM,
 o Above Rs, 5,00,000 through the Supplier having lowest price after mandatorily
obtaining bids, using online bidding or reverse auction tool provided on GeM
o For Automobiles the limit is Rs 30 lakh.
• Some important terminology in GeM:
o OEM – Original Equipment Manufacturers
o SLA – Service Level Agreement
o CRAC - Consignees Receipt cum Acceptance Certificate
o PRC – Provisional Receipt Certificate
• Performance Security / Performance Bank Guarantee (PBG):
o No PBG for contracts placed under direct purchase option on GeM.
o @ 2% of Contract Value- For procurement through reverse auction / e-bidding in
respect of contracts valuing above Rs 25 lakh.
o To be submitted by the seller within 15 days of award of contract.
o No PBG for contracts placed against the seller Energy Efficiency Services Limited
(EESL)
• Liquidated Damage (LD):
o @ 0.5% per week or part of the week of the delayed period
o Not exceeding 5% of the contract value
• Mandatory Minimum discount on MRP:
o 10% over the MRP
• GeM is hoisted by Ministry of Commerce & Industry on 9th August 2016

CHAPTER 21 (Goods & Service Tax (GST))

• GST implemented from 1st July 2017

• Tax Slabs – 0%, 0.25%, 5%, 12%, 18%, and 28%.
• Types of GST:
o Three types
o CGST – Central Goods & Service Tax
o SGST/UTGST – State Goods & Service Tax / Union Territory Goods & Service
Tax
o IGST – Integrated Goods & Service Tax
• Tax Deducted at Source (TDS):
o TDS provision has been made operative with effect from 01.10.2018
 o If the total value of supply under a contract in respect of supply of taxable goods or
services or both, exceeds Rs. 2,50,000/-(Rupees two lakh and fifty thousand)
o @ 1% each for CGST % SGST
o TDS shall be paid within 10 days from the end of the month in which tax is
deducted.
o The filing the TDS Return in FORM GSTR-7can be done both through the online
mode in the GST portal as well as by using the offline tool.
o Late Fee, Interest and Penalty:
▪ If the deductor fails to furnish the return in FORM GSTR-7 within 10 days
of the month succeeding the month in which deduction was made, he shall
pay a late fee of Rs. 100/-per day subject to maximum Rs 5000/- each under
CGST & SGST.
▪ If any deductor fails to furnish the certificate of TDS deduction to the
deductee [i.e. the supplier] within 5 days of crediting the amount so
deducted to the Government , the deductor shall pay a late fee of Rs. 100/-
per day subject to maximum Rs 5000/- each under CGST & SGST.

IMPORTANT – MCQs on Defence Audit Code will follow.

*****