PART – II

STORE MANAGEMENT

CHAPTER – 14
STORE ACCOUNTING & FUNCTION OF STORES
UTILIZATION OF STORE ACCOUNTING DOCUMENT
The transactions are accounted & regularized as under—

Sl. PARTICULARS DOCUMENTS USED

No.
1. Receipt from outside the Fy. Material Inward Slip (MISlip).
2. Receipt within the Fy. a) Receipt Voucher
b) Return note
3. Issue within the Fy. Demand Note.
4. Issue outside the Fy. a) Issue voucher for stock items.
b) P/O issue voucher for production
item.
c) Sale release order.
5. Regularization by loss statement. 1) Receipt issue & expense
voucher.
2) Discrepancy Deficiency)
voucher followed.
3) Surplus work order.

COLOUR CODIFICATION OF PRIMARY STORE ACCOUNTING

DOCUMENT :- In Ord. Fys. ABC&XYZ techniques have been introduced

for inventory control : In order to give importance to the primary documents
per raining to A/X category items colour code has been introduced for them
as given below-

Sl CAT. B&C
DOCUMENTS CAT. ‘A’ ITEMS
No. ITEMS
1. Receipt Voucher Green White
2. Issue Voucher Blue White
3. Demand Note Blue White
4. Return Note Green Red
5. Material Inward Slip Green White
6. Discrepancy (Deficiency
White White
Voucher) & Loss statement.

Ensures speedy clearance of store transaction documents & their posting in

In maintaining the around

ACCOUNTING OF STORES (MATLS)

On receipt of Stores in the factory, Material Inword slip is prepared
by the factory indicating details of stores received. Materials so received on
inspection by the quality Control/ SQAE of the foctory, and receipt vouchers
are prepared for taking the material in stock charge. Store Holder allot the
receipt voucher serial No. etc.
The following primary documents are used in connection with
accounting of Stores.
RECEIPT VOUCHERS: Receipt vouchers are prepared for all receipts
materials in a factory they are priced at actual cost of purchase or at Invoice
rate.

ISSUE VOUCHER : Material issued to out side consignors are supported

by Issue Vouchers quoting are references to the demand against which issues
are made.

KIND OF ISSUE VOUCHERS :

a)‘O’ Voucher Out turn/Dispatch

b)‘N’ Vouc0her Nominal (Inspection incomplete)
c)‘P’ Voucher Production Voucher
d)‘S’ Voucher Stock charge
e)‘CS’ Voucher Component for use.
Issue Vouchers are priced are Issue price fixed by OFB/Estimated
Cost/ Average Ledger Cost.

MATERIAL WARRANT :

It is an authority to draw the material from stores of a particular

specification against a manufacture. Material is drawn on demand note and
entries of drawl viz qty, Folio No, Warrant No., work order no, are made on
the material warrant.
 It also gives the entries regarding the recoveries against a particular folio &
material is return through Return Notes.

OPEN WARRANTS :
Cost of utilities including distribution, maintenance, repairs,
etc. (The part of utilities costs which can not be charged direct.
An open warrant is issued for maint secns on quarterly basis
(Ref. incloused annexure).

DEMAND NOTES : It is a financial document on which material on

demand from shop is issued on the basis of material warrant. They are issued
in triplicate as 1 copy of store, 2 copies of L.A.O.

RETURN NOTE : It is also a financial document submitted by the shop to

store for returning un use excess / scrap material . These are first submitted
to QC for sentencing the material in a particular grade through Return Notes.
Return notes are priced at the average ledger rate.

How to calculate Av. Ledger Rate through ‘PSL’

Nomen clatine : Folio No.

Qly: Value:
Nos Value (Rs)
VR.NO DATE OB RT ISSU CB ALR OB RT ISSU
E E
1-4-92 500 - - - 3.00 1500 - -
12.5 3-4-92 - 300 - 800 - - 1000 -
(R+Vr)
806- 5-4-92 800 - 200 600 - 2500 - 600
S(D/N)
46- 7-4-92 600 - 100 500 - 1900 - 300
S(I/Vr)
13-S 10-4-92 500 400 - 900 - 1600 1400 -
(R+/Vr)
1236-S 25-4-92 900 - 500 400 - 3000 - 1500
(d/Note)
Average Leader Rate work out at the end of the month
 V1+V2 = 1500+2400 = 3900 =Rs. 3.25
Q1+Q2 500+700 1200
The above ledger rate will be applicable for Pricing of Issues Vrs and
D/Note for the next month.
Posting of Demand / Return notes on matl., wts.

Materials are drawn on the basis and to the limits on warrant. After receipt
of matl, warrants from costing section, it will be sent to material ledger for
posting of Demand/Return Notes there into control the use of material. It
checks the Wastage’s/Losses/manipulation/theft/ fraud and to reduce the
unavoidably rejections. Excess drawl if materials beyond authorized
provisions is subject to investigation and regularision.

MATERIAL ABSTRACT : It is printed/prepared monthly from the

primary documents called Demand/Return Notes and adjustment vouchers
passed on by Account office on account of under/over pricing of
Demand/Return Notes. This forms the actual material consumption charges.
It is subject to review to ensure that all the documents which
have generated by the Factory management and accounted for has been
correctly compiled in that will be corrected and posted in the concerned cost
Cards.
Total of material Abstract value will be divided into Direct
Materials / Indirect Materials and posted in the control register.

TRANSFER VOUCHER (TV) : When any expenditure booked to one

warrant is required to be transferred to other warrants or any operation or
No. of operation are transferred to other warrant (In case of short closing
etc) these are transferred through a TV. Which shows particular of
Labour a material, W.O.No. and warrant for debit a credit warrants. They
are submitted by Mfg. Sec. P&P for onward action.

ACCOUNTING OF RECEIPTS & ISSUES OF STORES

M.I.S is prepared for almost all receipts in the factory. The MIS is converted in to a
receipt voucher by allotting a No. of the respective Series to which the Store
pertains.
Issue from the factory go down or Stores to Shop/Sections are done through
Demand Notes. Any return of such stores to godown are done through return notes.
Issues to any other concern are done through Issue Vouchers.
 All the primary documents i.e. Receipt Vouchers Issue Vouchers. Demand
Note, Return Note etc. are sent to Accounts Office through E.D.P. duly allotted Sl.
Nos. On receipt of these primary documents in the documents (viz Shedule of
Receipt Voucher, Schedule of Issue Voucher etc.)

These documents are then priced in the Accounts Office as follows :-

(i) MIS/CRV (Local Purchase) Price quoted on Supply order.
(ii) Department other than Defence, Price quoted on the Issue Vr.
of the Receipt from other Ord. Fys. supplying deptt.
(iii) Other branches of Defence Stock Book or priced vocabulary
rates.
(iv) Own Fy. Manufacture At actual cost of production.

PRICING OF ISSUE DOCUMENTS

(i) D/Notes and R/Notes Monthly Average Ledger Rate.

(ii) Sale Voucher
(iii) Loss Statement
(other than transit)
(iv) Loss of Stores-in-transit
(v) Payment Issue
At Sale rate.
Average Ledger Rate.
Rate at which connected receipt
voucher is priced.
(i) Average Ledger Rate (ii) Plus 5%
Addl. Charges plus 5% addl. Charges
on (i) + (ii).

The receipt and issue vouchers after pricing are entered in to the monthly
Priced Store Account (PSA) under different Codes for different sources of receipts
and issues.
Similarly, the value of Demand and Return Notes is entered in the PSA to
arrive at the net receipt and net issue. There after, these are added with the closing
balance of the previous month to arrive at the total raw-material inventory at the
end of the month.
Receipt and Issue Vouchers are thereafter sent to Material Ledger Section for
posting in the Priced Store Ledger (PSL) maintained and operated jointly by the
Provision Section of the Factory and Material Ledger Section of the Accounts
Office. Demand and Return Notes are received by Material Ledger Section directly
from Factory and after pricing on the basis of Average Ledger Rate are posted in
the PSL. The Receipt Vouchers are required to be posted in the PSL first and then
the Demand and Return Notes.

Every month control total of the PSL (Volume wise) is required to be reconciled
with the closing balance of the PSA. At the end of the financial year, the extracted
balance of each item of the PSL must agree with the closing balance of the
consolidated PSA for the year.

RECEIPT VOUCHER & ISSUE VOUCHER

Receipt Vouchers (IAFZZ-2096) is prepared by Factory for store to be brought in

charge of Factory Stock. For Stores received from outside Factory, a material
inward slip is prepared to show full particulars of stores and the result of their
examination by the Inspection section. Accordingly no separate receipt voucher is
prepared for the same where MIS is prepared. Receipt Voucher No. is given on the
MIS. Receipt Voucher or MIS is received in M Sec. Of AO and watched through
Priced Store Schedule for continuity. At the end of the month after checking all
Receipt Vouchers are received in AO as per skeleton list same are handed over to
EDP Section for Data entry. Similarly IFD receipt vouchers are also sent to EDP
section for same purpose.
Likewise , Issue Vouchers received from the Factory are also entered in the
schedule of vouchers to watch continuity and sent to EDP section at the end of the
month.. Receipt Adjustment Vrs. (if any) is also forwarded to EDP section.

DEMAND NOTES & RETURN NOTES

Demand and Return Notes received from Factory are entered in serial nos. in the
register of schedule of demand and return notes [IAF(Fac-37)]to watch the receipt
of all Demand and Return Notes issued by the factory. All DN/RN received by M
section thus scheduled are dispatched to EDP section by 5th of the Following
month.

PRICING OF RECEIPT VOUCHERS

For pricing of Rt. Vrs. Other than IFD Rt. Vr. Pricing (So) bar of Update menu is
selected. In case of any error, re-pricing may also be done in the system after
revising the necessary entry.
Similarly for IFD Rt. Vrs. We select interactive receipt voucher Pricing (IFD)
option of Update menu pad of main menu.
Before pricing of Rt. Vrs. New folios for new items of materials are to be
appended in item master file.

Pricing of Demand & Return Note and Issue Vouchers are made through
system w.r.t. Average Ledger Rate (ALR i.e. V1+V2/Q1+Q2).

For any Rt. Vr. Adjustment data entry is made in a file called RTAJ file giving
previous value, Original Value, Difference of Value, Previous voucher No. etc,
After running a program PSL check the system automatically creates a file for
Issue Adjustment of concern DN/RN.

FUNCTION OF STORE SECTION

Main Function of stores section is: -

(1) To receive the material correctly.

(2) Arrange proper outrage.
(3) Arrange proper issue to consuming.

There are three sub-section of the stores section viz.: -

(1) Stores Receipt.
(2) Stores stock.
(3) Stores issue.
FUNCTION OF THE RECEIPT GROUP

Receipt section is grouped in the following branch for smooth working: -

(1) Local purchase group (L.P.)

(2) Central purchase group (C.P.)
(3) Foreign purchase group (F.P.)
(4) Non-military department/Military department (N.D./M.D.)
(5) Railway group
(6) Inter factory demand (I.F.D.)
FUNCTION OF EACH GROUP

L.P.: - Deals with the collection of stores from local firms, tenders, etc. against
supply orders planed by the factory. This group also deals with each purchase
made by the factory to meet the requirements of essential nature. The financial
power of the General Manager of Ordnance factory, Kanpur to make Cash
purchase is Rs.2000/- per trisection.
(Import account being Rs.5000/-)
C.P.: - Deals with the collection of stores through entered to make by
the Director General supplies & disposal. (D.G.S. & D.)

F.P.: - Deals with the collection of stores through received from foreign
(overseas countries) through Embarkation Head Quarter.
I.F.D.: - Deals with the stores received from sister organisation. If the stores are
received from local sister oraganisation the materials is received by of stock
transfer note (S.T.N.). For bulk supply from local factories I.F.D. in placed.
N.M.D./M.D.: - Deals with the collection of stores from Non-military/Military
departments.
Railway group: - Deals with the supplies received through Rails or Road
transport. Maintains position of R.R./P.W.B., collection from O.P.C./C.N.B.,
Railway claims, demurrage/wharfage etc.

DRILL ON RECEIPT OF THE STORE IN RESPECT OF EACH GROUP

(1) Inward gate pass is prepared at the main gate at the time of entry. All stores
are weighed, counted, measured at the time of receipt in presence of firm’s
representative/Fy. Representative and discrepancy. If any is noted on the
challan.
(2) Central Register is maintained in the receipt bond and every receipt is
entered in it and C.R. No. is given on the consignment. Wagons are entered
in the register.
(3) Papers after receipt are chocked and location with full particulars are
forward to the concerned group i.e. L.P., C.P., F.I., IMD/MD or I.F.D. as the
case may be.
(4) Six copies of material inward slip (W.I.S. IAF (FAC)-151) is prepared for
general stores and seven copies for service stores are prepared by the
concerned group submitted to the inspection authority for inspection of the
 material after duly signed by the incharge of the receipt branch of the stores
section.
(5) After inspection and being sentenced as accepted and rejected, four/five
copies are forward to the concerned group of the receipt branch who
numbers them as receipt vouchers. The W.I.S. itself becomes the receipt
voucher.
(6) Three receipt vouchers are then forward to the concerned godown where the
material is to be stocked for posting. The assistant store keeper (godwan)
will collect the material pertaining the receipt vouchers from the receipt
bond and bring the material on stock charge. The receipt signed by
representative of stores stock (not below the rank of assistant store holder)
who will certify that the material receipt by the inspection authority has been
brought on his ledger charge/bin card. The receipt vouchers are then
returned to the concerned group of the receipt branch of the stores section.
(7) The concerned group then distributes the receipt voucher as under: -
• Two copies to the provision section for preparation of bills.
• One copy to accounts office attached to the factory through data
processing cell (D.P.C.).
• One copy retained as office copy.

NOTE: - (1) One copy of the material inward slip as soon as it is prepared is
pasted in the guard File.
(2) After inspection of the material the M.I.S. are numbered by
the concerned group as receipt voucher number in the following
series depending on the nomenclature of the stores.

• ‘S’ series for serviceable items.

• ‘M’ series for machinery items.
• ‘R’ series for reserve stock.
• ‘D’ series for deposit stock.
• ‘N’ series for nominal transaction.

(3) The receipt voucher bearing nominal series number are

signed by the divisional officer who will certify that the material
has been brought on stock charge.

The following registers are maintained in the stores receipt: -

 • R.R./PWB Register.
• Wagon Register.
• Central Register.
• Discrepancy Register.
• Railway Register.
• Guard claim Register.
• Receipt voucher Register.
• M.I.S. Register.
• Dak book.

NOTE: - (1) Only one material is entered in a material inward slip (IAF
(FAC)-151) when several Stores are received from firms against a supply.

(2) The date enclosed on the M.I.S. shows the date when the
store is actually received in the factory.

The stores receipt branch also deals with collection of materials from C.P.C./CNB,
local collection from trades, collection of stores from ASC depots, collection of
material against spot payment etc.
In case of spot payment, the material is inspected by the representative of
inspection authority of the factory in the firms promises itself before the payment
through cheque is made to the firm is made.

There are two types of discrepancies: -

(1) Qualitative
(2) Quantitative
Qualitative discrepancies are settled by planning section but the
Quantitative discrepancies are settled by stores section i.e. receiving
authority.
SETTLEMENT/RAINING OF DISCREPANCY IN CASE OF INTER
FACTORY TRANSACTION

Discrepancy report should be raised on the consigner factory in form No. IAFZ-
3045 within one month from the date of receipt. It is receipt in six copies and are
distributed as follows: -
• One office copy.
• Two consigners FY. /depot.
• One consigners accounting office.
• One local accounting office.
• One planning office.
Material in dispute will only be returned at the consigner request or agreement. In
absence of this agreement it will be retained by the consigner under the description
against which it may be brought on charge. It will be used if useable, otherwise, or
if the nature of scrap or waste material, it will be reported for disposal in the
normal manner.
At any time after a month from issue of discrepancy report if a reply has not been
received, the consignee, under advice to the consigner, may proceed as though a
reply had not for accepting any part of the discrepancy. The consignee is not
required to act authourtieally in this manner, but it responsible that stops to dispose
discrepancy finally are taken without delay.
The discrepancy report will be completed to the extent necessary by the consignee
factory and relied to and returned by the consigner factory. The reply on the
discrepancy report will be made also to deal with the question whether return of
store in dispute is required by the consignee. If the reply on the discrepancy report
is silent on this print it will always be taken as that the consignment is not
agreeable to the return to him of stores or material in dispute. One copy of
discrepancy report and reply thereon in original together with such other copies to
be sent will accompany any statement submitted to DGOF.

ADJUSTMENT OF DAMAGED/LOST STORE AS PER

STORE/ACCOUNTING

In case of partly damaged /unserviceable lost stores, full quantity (an invoiced) will
be taken on charge for ledger posting numbering as stock receipt voucher.
Subsequently D (D) voucher for the rejection/deficient quantity will be prepared to
charge off the stores from ledger numbering as stock issue voucher. Stock bin card
will be posted for accepted quantity only.

The power portion of D (D) voucher interred for loss statement will be submitted
for writing off the value of damaged/lost store to account off 100/CDA duly filled
up and signed by the General Manager.

Financial power for General Manager does not exceed Rs.5000/- as per
department of defense production letter No. 1(82)/78/D(F) dated 31-12-79.

If the values of lose becomes above Rs.5000/- that should be written off by
Ordnance Factory Board.

As per DGCF instruction the following procedure are followed in the case of
consiment.

DEPARTMENTAL FUNCTION TO THE ABOVE ASPECTS

• If any package/case/draw is found damaged and broken or

in doubtful condition at the time of collection of the
consignment, consignee should issue a memo to the station
master for open and assistant delivery and SM/CI is bound
to issue a short certificate to the consignee if the quantity if
found short on joint survey.
• On the basis of the above document, consignee factory
should submit an informal notice of claim and after receipt of
the assessment on the Rly. .

Consequent on the …………….. of claim of some extent by the Rly. . The balance
amount (i.e. non-accepted amount) is to be written off departmentally under
following financial power: -
General Manager Financial Power: - Rs.5000/-
If the balance amount extent the above the case should be referred to Ordnance
Factory Board or M of, for sanction.

NOTE: - If the seals of the wagons are found in broken/ at the time of
talking over from Rly. Guard, necessary remarks are to be endorsed on the
cut of memo and the said wagons are to be opened and the contents are to
be counted/weighed in presence of RPF/Rly. & delivery clerk.

FUNCTION OF STORES (STOCK)

Where the stores are passed and accepted by M.I. , the remarks of which are
endorsed on the M.I. slips are brought on stock charge and it is the responsibility of
ASKs in stores (stock) that these stores which are taken n stock charge are properly
kept, well preserved so that the stores can be in good and serviceable condition on
receipt of demand notes from the consuming section.
Besides this, stores (stock) deals with reconciliation bin cards with as counts
ledger, stock verification of all items hold under stock charge.

FUNCTION OF ISSUE GROUP

The main function of stores issue group are: -

• Dispatches by Rail.
• Dispatches by Road.
• Dispatches by Air.
• The dispatches of factory manufactured goods to different
factories/units.
• Dispatches against I.F.D.S. to sister factories.
• Dispatches of rejected goods.
FUNCTION OF PACKING GROUP

• Deals with packing of stores received from manufacturing section

from godowns against I.F.D.S. are rejected stores to be dispatched
to firms along with issue vouchers etc.
• Packing to be completed in presence of responsible staff & security
staff.
• Packing note to be prepared in 2 copies. 1 copies of issue. Voucher
one copy of packing note to be put in the side of the packing box.
• Full particulars along with weight, correct address and Rly. Station
to be written on the top of packing …………. and it should be should
be ………and wired.
• Correct packing cases to be used indenting nature of stores i.e.
fragile items etc.
• Necessary M.C. notes if required to be prepared for booking by
small.

SERIES OF ISSUE VOUCHERS

‘P’ – series for production.

‘D’- series for deposit.

‘N’- series for nominal.

‘M’ – series for machinery.

‘I’ – series for inventory.

‘S’ – series for stock.

‘R’- series for reserve stock.

REGISTERED MAINTAINED IN ISSUE GROUP

• Issue voucher ‘P’ & ‘S’ and ‘N’ series numbering register.
• Register.
 • Returnable register.
• Bak book.
• Convey note register.
• Record of dispatches of various manufactured items.

DISPATCHES OF STORES TO DIFFERENT UNITS

1. By Rail: - All factory manufactured items dispatched by wagonload.

Preparation of forwarding note, M.C. note, material gate pass. Loading to be
supervised by concerned in presence of security staff D.S.C. after loading is
complete, wagons are sealed, riveted and labeled properly with full and correct
address.
2.By Road: -

• Broken to be indented.
• Loading to be done in presence of supervisor and D.S.C.
• Forwarding letter.
• Covering letter.
• Road exemption/…………. exemption certificate to be given to
transports.
3. By Air: -

• Forwarding note to prepared.

• Sizes of the packing boxes is noted.
• Weight of the packing case is endorsed together with the value of
the consignment.

After dispatches are over issue voucher, inspection note together with all relevant
document i.e. should be dispatched to the consignee by post.

DISTRIBUTION OF ISSUE VOUCHER

1.‘P’ and ‘S’ series issue voucher are prepared in 7 copies. Three
to consignee two to accounts office, two for office record.
 2.For other series issue vouchers are prepared in 5 copies. Two to
consignee, two to accounts office and one for office record.

3.Issue vouchers for packing cases are prepared in 7 copies.

INDENTING OF WAGON

For loading of factory manufactured stores wagons are indented from railways or
obtained from back loading. Wagons are cheeked as regard suitability before
loading.

DISPOSALS OF SURPLUS STORES

1. Surplus stores: - The stores which cannot be utilized for present or

anticipated requirements and may also deteriorate by the time it may be
issued for any use in normal events.

2. Types of surpluses

• Declared surplus: - The stores, which are declared as surplus to

DGS&D for disposal in the best interest of the state.
• Undeclared surplus: - The store, which has not been declared as
surplus to DGS&D but are awaiting for such declaration.
A list of all such surplus stores is to be circulated through. Mutual aid scheme to all
factories and other defense installations for their requirement. It is not required by
any one then the list of these with the orders. On receiving intimation from
Ordnance Factory Board, Factory will proceed with disposal action in normal way.
The disposal of surplus is effected through auction with the concurrence of
DGS&D.

Disposal of surplus stores is made in two ways: -

• Disposal through DGS&D.
• Disposal through auction.
DISPOSAL THROUGH DGS&D
After submission of surplus list to Ordnance Factory Board, tenders are offered
with the concurrence of DGS& D by publishing the list in the newspapers. When
tenders are received the highest bid is acceptable. 50% of the bid value of stores
the firm has to be with the State Bank of India or any other authorized bank. 10%
of the tendered valued to be deposited as security deposit.

DISPOSAL THROUGH AUCTION

The auction is conducted by Government auctioneer on, as is where is basis. The
Government auctioneer in to be intimated with the list of surplus stores, which are
to be auctioned. All auctioneer are to be given chance one after another and it is
also to be seen that every auctioneer receives same amount of commission/sale
precede. The reserve price of the items to be auctioned is to be fixed.
For this purpose last selling price are generally treated, as reserved price and it
must be vetted by local account office. The superintendent of central excise &
commercial officer is to be informed for fixation of central excise duty. The
General Manager deputes on supervising officer for conducting the auction and
local accounts officer also on representative in auction yard. The buyer will have to
deposit 25% of the total also value on the fall of ham our. When the auction is over
25% of the total value of store will be collected by auctioneer for depositing the
same in Reserve Bank of India. Balance amount of sale value is to be deposited by
the bidder within six working days from the date of auction. On default extension
is allowed on paying penalty of 10% of 1% of sale value per day of default. The
purchase goods should be shifted within 27 days by buyer. If he fails to lift the
material he will have to pay 2% rent charge. All documents in connection with the
auction (disposal) will be forwarded to C.D.A. (Fys.) through local accounts office.
PREPARATION OF LOSS STATEMENT

Losses: - 1) Store loss –

• On stock.
• During transit.
2) Cash loan.

3) Production loss.
Losses arises whenever as a result of –
1) Departmental stock verification by the Ordnance Factory Board.
Board stock verification group.
2) Internal stock verification by factory staff.
3) Damage/ Deficiencies in transit of certain class of receipts, the
full involve quantity will be brought on charge in ledger.
4) Finding the unorthodox balance in stock ledger to the extent
that such unorthodox balance proves to be readily or
immediately explainable and after verification of stock in the
cases where any portion of the unorthodox balance is not
immediately explainable.
5) In any other instances

Under the above conditions ledger balance and actual stock are
out of agreement and some adjustment is required. The following
procedure will be adopted in all cases immediately.

The discrepancies found will be dealt out by making out the

discrepancy Voucher portion of IAF(FAC)-144 or IAF(FAC)-145.
Normally only one item will be entered on each form.
The particular of the discrepancy will be entered on the
Discrepancy Voucher or IAF(FAC)-145 or IAF(FAC)-144 and
following steps will be taken with these documents.

Note: - IAF(FAC)-144 is Discrepancy (Deficiency) Voucher .

IAF(FAC)-145 is Discrepancy (Excess) Voucher.

This chapter deals with the preparation of loss statement

as such the following is regarding IAF(FAC)-144.

The document will be numbered as regular issue voucher.

The document as a regular stock voucher will be signed

in authentication by Gazetted Officer. The signature is not
purporting to sanction the document as Loss Statement
 The document will be sent to Accounts Branch for pricing
and posting the issue voucher in ordinary way in the priced ledger.

All the discrepancy Vouchers will be kept until “cleared”

on a register by the Accounts Officer in view of these being
document relating to suspense transaction.

The final adjusting action may take various forms to the circumstances
such as: -

1) Submission of a sanction loss-statement for an established loss

in stock or loss or damage in transit, which Government must
beat.
2) Finding of all documents for transaction which ought to have
been posted in the ledger previously.
3) Forwarding of supplementary material to replace deficiency
material by a supplier.
4) Recovery from individual who have been ordered to make
payments for losses for which they are responsible.

The loss –statement portion of the combined form will be completed immediately.
The discrepancy is established after proper investigation/repudiation or past
acceptance of claim and sanction of competent financial authority will be obtained
to regularise the transaction.

The loss-statement prepared will be numbered and forwarded to accounts office

who will return the same after pricing for sanction/recommendation of the
competent financial authority/General Manager.

If the competent financial authority is General Manager /DGM/Manager, one copy

of the sanction loss-statement will be forwarded after recommendation to the local
accounts office for onward transmission to the competent financial authority
through CDA(Fys.), Calcutta.

All discrepancy detected on stock will be regularised within the same financial
year in which they are discovered, failing which specific sanction suspense
beyond. The end of the financial year.
All losses relating to contracts placed by the DGS&D on behalf of the factories,
irrespective of the amount involved will be written off, after necessary
investigation is carried out by the Ministry of works, housing & supply, who will
endorse a copy of the sanction together with a statement of case to the M of D
(Ordnance Factory Board) and Ministry of finance (Defence Budget), CDA (Fys.),
audit officers.

STATEMENT OF CASE
(As per office order No. 25 of Ministry of defence)

The following question should be prepared: -

1. How did it happen?
2. When did it happen?
3. Why did it happen?
4. When and how was it detected –whether by internal audit or
statutory audit?
5. Could it have been avoided?
6. Could it happen again, and if so, what remedial measures have
been taken/are proposed to be taken?
7. Was a could of inquiry held? If not,…. why not?
8. Was there any time lag, between-
(a) The detection of irregularity and holding of the court of
inquiry.

(b) Between the holding of the court of inquiry and

regularization.

If so, what are the reasons for delay?

9.Was/were any individual held responsible, if not, why not?

CASH LOSS-
IAFA-498 will be prepared when the discrepancy is due to change in
condition or where there is no question of posting in a stock ledger or to
make the balance show the facts.
STORES RECEIVED FROM OVERSEAS COUNTRIES
In respect of stores received from abroad losses are likely to arise as
below: -

1. Losses occurring during transit up the port of

disembarkation in India.
2. Losses occurring during transit from port of
disembarkation in India.
The ultimate consignee factory.
3. Losses founded on account of discrepancy (deficiency) by
the consignee factory taking on charge to stock as per
marking on the package before opening them but actually
found at the time of actual issue.
Losses occurring as result of (1) and (2) above i.e. before accounting of
store by the consignee factory will be treated as ‘CASHA LOSS’.

Losses occurring as a result of (3) mentioned above will be treated in the

same way as ‘LOSSES IN STOCK’.

Corr. Discrepancy report in case of inter factory transfer will be

forwarded to the consigner factory in IAFZ-3045.six copies of the same will
be prepared for distribution.

1.One as office copy.

2.Two copies to the consigner factory.

3.One to the consigner’s accounts office.

4.One copy to the consignee accounts office.

5.One copy to the planning office.

A register should be maintained to keep a watch on the preparation of the loss-

statement, its movement and expedite early sanction of the loss-statement.
A certificate to the effect that the loss incurred is due to theft, fraud or
neglect or not due to theft, fraud or neglect should be endorsed on the face
of the loss-statement prepared.

A copy of the court of inquiry proceedings, if hold and if any a copy of the
remedial measure taken or proposed to be taken should be also enclosed
when the loss-statement are forwarded to the accounts office.
 CHAPTER 15

Test Audit:
Local Test Audit is being carried out by the Local Test Audit Parties headed by
Assistant Audit Officer/ Section Officer in two phases on behalf of C & AG of
India (Defence services) in following phase & Subjects.
Different Phases & Subjects of Test Audit
A. Initial Account of the year…………..to………..
(1) Subject a. Labour
b. Material
c. Cash
d. Plant & Machinery
(2) Period during which - March, April, May
this is conducted.
B. Annual Account costing for the year……….to………
(1) Subject - This is mainly the audit on Accounts
Office on the preparation of annual
account of factory.
(2) Period during which this - September, October.
Is conducted.
(3) Scope/Field of Audit - Any matter, any topic no
limitation. (including a, b, c &d of
Initial Accounts).
A. Projects:
(1) Subjects - Review of Projects/any new
factories.
 (2) Period during which this is
undertaken
(3) Scope/Field of Audit
Audit done by Test Audit Parties
Comptroller and Auditor General of India
- No fixed period. Any time in the
year.
- Any thing about the project. This
is done on the advice of D of A
(Fys) Calcutta.

1 2 3 4 5 6
AG’s in state Director Director Director Director Director
D of Audit of of of of of
(commercial) Audit Audit Audit Audit Audit
Carry –out Audit (Railway) (P& T) (Defence (Air Force (O.F. Board)
In Banks services) Army
And Govt.Undertakings Navy)

Dy./Jt. Director Dy./Jt. Director Dy./Jt. Director Dy./Jt. Director Dy./Jt. Director
of Audit of Audit of Audit of Audit of Audit
Zone Central Zone West Zone South Zone East Zone
Kanpur jabalpur Kirkee Avadi Calcutta

During course of Audit whatever is considered in voilation of the

prescribed Govt. Orders published from time to time of O.L. 9Observation
List). These observations ar scrutinised at factory level and management’s
comments are forwarded to Lta party concerned and also dicsussed with
them under the chaitmabship of GM to satisfy audits further queries and get
the obserations settled to the extent possible .
The observations which are not settled during discussions stand
converted as LTAR (Local test Audit Report)/LTAN (Local Test Audit
Note) item by the Audit’s Zonal Officeres located at differernt stations as
Kanpur, Jabalpur, Madras etc. This report is alwayus addressed to C of A
and Comments are forwareded to Audits concerned Zonal Office for their
persual and settlement pf the items. Priodically the outstanding LTAR are
also discussed with concerned Zonal offier (Dy. Director of Audit (Ofs)/
Joint Directore of Audit (Ofs) for early settlement.
Zonal officers prepare a FSc (Factual Statement of Case) in respect of
ther items which are considered to serious nature. These FSCs are replied by
O.F. Board on the basis of comments received from the concerned through
O.F. Board.
If a Draft para is nor treated as settled by the Audit Authorities, it is
converted into Audit Para by the C & AG’s a office on Delhi and relied by
the Ministry on the basis of the comments received from OF Board.
These Audit paras, if not settled, are heard in person by the Public
Accounts Committee appointed by the Parliament, PAC’s report is
subsequentlyu puut up before the Parlisment in due course of time.

1st Stage of Audit Test

After studying various files and correspondences, papers obtained from

Factory and LaO:-
Observation lists (Ols) are raised
a) On Management
b) On Accounts
c) On Both

Replies given by Factory and LAO are reveiwed by Audit Officers.

OLS are discussed in a meeting of Factory Management, LAO, Audit
Officer. Settlement Authority- Audit Officer.

2nd Stage of Audit Test

The Ols which are not settled by Audit Officer putup to DDA review.
Locall Test Audit Reports (LTARs)are raised and forwarded to C of A
(Fys), Secretary/OFB, GM, LAO. These LTARs are pursued till final
settlement. Settlement Authority – DDA/Regional Officer.
3rd Stage of Audit Test
Where LTAR items not settled on mutual discussions in the liaison meeting or
clarification given by C of A, Gm/OFB Factual Statement of Case (FSC) are
raised.
Sometimes major observations such as
a) Loss of public money
b) Fraud
c) Embezzlement
d) Extra expenditure in procurement of material, P & M etc.
e) Unnecessary purchase of material, P& M not utilized in reasonable time.
f) Under utilization of Project Capacity etc.
These points are reported to OFB in the form of “FSCs”.
These FSCs may be raised during the period when LTAR items are under
correspondence seeing the prima-facie of the case even at the initial stage.
Settlement Authority- Principal Director of Audit, Calcutta.

4th Stage of Audit Test

If convincing reply is not received from OFB wihtin 42 days.

DRAFT PARA is issued by D of A, Calcutta.
To the C & AG of India.
If C & AG is not convinced by the reply given by OFB.
C & AG includes in his audit report to be submitted to the Presidebnt of India.

President of India cast these to lay before both Houses of Parliament &
Public Accounts Committee headed by an opposition M.P.

Thus it will be seen that Audit’s role in the Ord. Fys. is vry much in the
interest of the organization on the whole as well as they keep a close watch on
the expenditure made out of public money and ensure that no such lapes is
allowed to remain undetected.

PRECAUTION TO BE TAKEN IN DEALING WITH AUDIT

1) We should not feed any information to audit which are our internal matter.
2) While giving files or any document to audit the file should be checked
thoroughly and try to ensure that all internal noting / memos. are removed
from the file and kept separately.
3) Internal noting/memos. Relating to dispute between sections, any
controversial point related to bad material, poor performance of any m/Cs,
breakdown of any new machine etc. should be filed in a separate file,
annexures to the main file so that these are out of reach to audit people.
4) Many objections are raised by audit for passenger vehicle KM running. We
should be careful in filling the car diaries properly.
5) In the shop level staff to educated to keep all record correctly
6) While replying to audit care should be taken to reply promptly and after
careful study of whole case. Foreman & Divisional Officer make out replies
and should not be left to lower staff.

Time Table & Action Plan given by Chairman /OFB for strict
Adherence.

For Draft Paras:

The Draft Paras will, henceforward, come to you by courier or speed post
to avoid postal delay. After its receipt, please prepare your comments within 7
days & send the comments one copy to your operating divisions DDG &
another copy to Controller of Finance, OFB by courier.

Answering queries on Draft Para comments:

Any query on the comments forwarded by you on Draft Paras will be

referred to you by Telex / Fax or Speed Post or by Courier.

Please see that such queries are answered within 3 days and send the
answer by courier / Fax /Telex or TPM or speed post again one copy to DDG of
your operating Division & another copy to Controller of Finance.

It is hoped that you will strictly adhere to above action giving date of
receipt of the commination by you & data of reply at the top of your
communication. Any delay or deviation from above will attract adverse
administrative action.