CHAPTER 10

The Original Records. The Basis of Accounts and Audit

200. Accuracy. It is the duty of Audit to take all possible steps to ensure that the account represent the actual state of affairs. The accounts of the Civil, Public Works and Forest Departments are compiled in the combined Audit and Account offices, and so also are those of the Posts and Telegraphs Depart- ment; and it is, therefore, possible for Audit to certify that, throughout the whole system, these accounts are, to its satisfaction, accurately built up from the records submitted by the treasury or departmental officer. In the case of accounts which are not kept in Audit offices the compilation made by the Account Office is checked by the Audit staff, and in these cases also Audit is able to certify to the correctness of the compilation from the records submitted to the Account office by other officers and from those which were already in its possession.

201. Vouchers. It has been shown in Chapters 8 and 9 that the accounts submitted to the Account office by the treasury or departmental officers are copies of the initial accounts supported by the necessary vouchers. Thus, the major portion of the original records, namely, the initial accounts and other books or papers on which these accounts are based, are retained in the offices where they originate. Except therefore, the vouchers received with the monthly accounts, the position in regard to which is explained in the following two paragraphs, the original records are not available either for accounting or for audit at the time of the compilation at a central office. It is obvious, however, that, unless the original records represent facts, the accuracy of the subsequent work performed on the basis of these records is of no avail. It is most impor- tant, then, to see how far Audit is able to ascertain the accuracy of the original records.

202. As has already been stated, every Government payment is made on a document called a voucher (or an acquittance) which gives the amount, nature, and period of the payment and all other details necessary for its com- plete identification; and contains a receipt of acknowledgement or acquittance by the person to whom the payment is due. This system, whereby the payer obtains documentary evidence from the payee in proof of the payment made by him, is universal in both Government and commercial accounts. From the point of view of the payer the document is called a voucher or acquittance, from that of the payee a receipt. Where payment on a bill is made by cheque the paid cheque forms an additional voucher in support of the actual payment made in cash. It is the duty of Audit to enforce this system, that is, to see that for every payment there is a voucher in proper form, properly drawn up, arithmetically correct, and receipted by the proper person. In the case of payments made on bills, whether departmentally or at the treasury, the pre- liminiary check in this direction is made at the departmental office or at the treasury, and the vouchers (except those for petty payments) are then submitted with the monthly accounts and are checked finally by the Audit staff.203. The Public Works Engineer counts coolies and records their numbers in a Muster Roll; he measures construction works and enters the measurements. in a Measurement Book; the Civil or Military Officer musters and enumerates the establishments, corps, etc. he has under him, and prepares and signs a pay bill for them; he signs or countersigns a travelling allowance bill for himself and others founded on special or general knowledge that the journeys for which travelling allowance is claimed have actually been performed; he submits a claim for contingencies or supplies after seeing personally (or through others) that the articles charged for are required for the public service and have actually been purchased and brought into public use; the Collector counts cash, stamps, etc., in his treasury and thus proves his accounts for the month, etc. etc. At these points the accounts spring direct from the facts; at these points they obtain whatever vitality and reality they possess; their accordance with the facts, through all their subsequent changes of form, depends on their truth at these points. Generally speaking, in India Audit does not come in here at all; the executive and administrative disbursing officers alone verify the initial record with fact; the accordance of the initial record with fact is accepted by Audit on their statement and responsibility, except where there is collateral evidence of error.

204. Receipts and Certificates. What Audit does in all these cases is to require receipts of the payees, certificates of the disbursing officers and the countersignature of controlling officers. Thus for construction, it requires re- ceipts of the contractors and others to whom large payments are made (not receipts given by individual labourers); certificates given by the disbursing officers of measurements of work done, of the counting of labourers and of receipt of supplies and of completion of work; and, in the case of works for which contracts are executed, certificates of the rates having been approved by the authorities sanctioning the contracts. For contingencies, receipts given by payee (except those for petty amounts) are obtained, and certificates from the disbursing officers that the payments were necessary for the public service and have actually been made; also, in some cases, the disburser’s certificates are reinforced by countersignature of the bills by superior officers. For pay, receipts are obtained from gazetted Government servants, and in respect of non-gazetted Government servants certificates (from heads of offices) that they have actually been present on duty, and that previous pay has been paid to them and their receipts recorded. For leave and pension payments, receipts only are necessary; for travelling allowances, receipts (not from non-gazetted Government servants), technical certificates and countersignature etc., etc.

205. The contact of the Audit office with the facts is, therefore, through receipts and certificates, re-inforced in some cases by countersignature. It has no opportunity of seeing the facts with its own eyes and comparing the bills. with them. The question therefore arises how far receipts and certificates guarantee the facts. It may be said at once that while they are much better than nothing, they cannot guarantee the facts with absolute accuracy.206. Impossibility of Verification by Audit Office. It must be admitted, however, that it would be impossible for Audit to verify the initial facts unless a representative of the Audit Department were present at every act vouched by the certificates enumerated in paragraph 204 above. Those acts include the payment of the pay and allowances of, and the journeys performed by, every Government servant, the measurement of all work done by and for the Public Works Department, and the verification of Government stores of all descrip- tion including coin, stamps and other valuables. It is obvious, then, that the Audit Department could not verify the actual facts without a very much large establishment, and the extra expenditure thereby involved would undoubtedly he disproportionate to the advantages obtained.

207. Part played by Countersigning and Controlling Officers. The recogni- tion of this fact has led to the check exercised by Audit being supplemented to a large extent by executive check. Work done and paid for in the Public Works Department is inspected by superior officers of that Department, travel- ling allowance bills are checked by countersigning authorities who are in a position to have knowledge of journeys performed, bills for important con- tingent expenditure are countersigned by controlling officers who can verify and judge the necessity for such expenditure and the proper rates of payment and can satisfy themselves at inspection that the materials billed for have been purchased.

208. As regards the verification of original records relating to the receipt of money, where such receipts are required to be audited by the Indian Audit and Accounts Department, the position is explained in chapter 13.

209. Because this work is not done in the Indian Audit and Accounts De- partment, there is a tendency in the executive departments to overlook its im- portance and to consider that it would be better done if it were undertaken by the officers of the Indian Audit and Accounts Department. But, although the latter have the technical training in checking accounts, executive officers have an intimate knowledge of the details of the work done and are in a better position to verify the facts and to check the economy of the expenditure passed by them than outside officials would be. Audit has, therefore, to depend largely upon the Executive in this respect. It is, however, the duty of Audit Officers to scrutinise, with reference to the records submitted for audit, the manner in which the executive officers discharge their financial responsibilities; and, in order to supplement this scrutiny, a local inspection, including a test- audit of the original records of the treasuries, Public Works divisions, and (where possible and desirable) other important account units, is conducted periodically by the Audit Office. (See Chapter 36).

210. Audit is, however, not entitled to make independent enquiries among the tax-payers or the general public, as such action is held to be an encroach- ment on the functions of the Executive. Audit should confine itself to calling upon the Executive to obtain and furnish the necessary information; and, in cases of difficulty, it should confer with the Executive as to the best means of obtaining the evidence which it requires.211. Detection of fraud. It has already been pointed out that commercial audit regards the detection of fraud as one of its main duties. But such detec- tion is almost impossible except at the verification of the original records, and so the detection of fraud in an Audit office in India is rare. And yet it must not be hastily assumed that this indicates a defect in the system of Govern- ment audit in India. The detection of fraud by an executive officer is frequent- ly due to the letter issued by the Audit office plainly indicating that something is wrong. Thus in one case the Audit Officer pointed out that in a certain office there were frequent violations of the important rule that money should not be drawn in advance of requirements. This led the head of the office to examine his account carefully with the result that he detected frauds amount- ing to over Rs. 3,000. Numerous similar cases can be quoted showing that action taken by the Audit office has led to the detection of fraud. Frauds are also detected at the local inspections mentioned in paragraph 209, which give the expert eye of the trained auditor an opportunity to detect in the original records suspicious factors which could not come to notice in the Audit office.

212. It is essential to investigate frauds carefully because valuable lessons can almost always be learnt from them. There is a tendency to suggest the framing of new rules to prevent each particular fraud. This tendency should be resisted; there are quite enough rules already, and, if the preventive machi- nery is made too elaborate, the chances are that it will not work efficiently. The main point in every fraud investigation must be to ascertain whether the exercise of ordinary common sense, such as one ought to expect from every Government official, and the application of existing rules, would not have rendered the fraud impossible. The importance of this line of investigation should always be borne in mind, because fraud is prevented far more by punishing the person guilty of the defalcation and the official whose negligence rendered the fraud possible than by adding to the enormous number of rules already in existence. But fraud investigation may sometimes indicate a defec- ‘ive system of check and then the revision of the system is essential.

213. Records submitted to the Account office. The main monthly records submitted to the Account office by each treasury are, as already stated, the Cash Account and the List of Payments with supporting schedules and vouchers.

214. The important feature of the Cash Account is the abstract which starts with the opening balance, shows the total receipts and payments, and thus works up to the closing balance. The Cash Account is supported by a certificate that the cash balance shown in the account has been verified ac- cording to prescribed rules and agrees with the balance reported in the Cash Balance reports of the treasury for the last day of the month. The List of Payments together with the schedules appertaining to it shows the vouchers required, the vouchers forwarded and those still to be submitted. It is also to be seen that the details in each work up to the totals and that the details agree with the supporting documents.215. Similar accounts are also submitted to the Account office direct by officers who draw money from the treasury by cheques and keep the detailed accounts of the payments made, and similar checks are applied in those cases also.

216. In checking the vouchers furnished in support of the accounts the more important points to which the auditor devotes his attention are-

(a) that the vouchers are in the prescribed form, that they are duly receipted by the payees, that they are in original, that a brief abstract is given in the official language authorised for the pur- pose under the signature of the drawing officer on all vouchers written in any other language and that signatures in other than the authorised script are transliterated, also that sub-vouchers contain notes of dates of payment;

(b) that they are numbered with reference to the number in the List of Payments, schedule, schedule docket or other account, as the case may be;

(c) that the deails work up to the totals and that the totals are in words as well as in figures;

(d) that they bear a Pay Order, signed by the Treasury Officer in the case of vouchers cashed at treasuries or by the responsible disburs- ing officer in the case of other vouchers;

(e) that they are stamped “Paid” in the authorised official language;

(f) that there are no erasures, and that any alterations in the totals are attested by the officer concerned as many times as they are made;

(g) that receipt stamps are affixed to vouchers, where necessary, and that they are punched;

(h) that, except in cases in which it is specifically authorised no payment is made on a voucher or order signed by a subordinate instead of the head of the office himself, or on a voucher or order signed with a stamp; and that copies of sanctions are certified by the sanction- ing officer or by a gazetted officer authorised to sign for him;

(i) that, in all cases in which it is prescribed that agreement should be effected between two different documents, the fact of the agree- ment is noted on both the documents and initialled by the accounts clerk who makes the agreement;

(j) that if a treasury voucher be paid by transfer, it is stamped as hav- ing been so paid, that the head of which the amount is credited is noted on it, and that the credit is traced in the Cash Account when possible;

(k) that fund and income-tax deductions have been made in strict conformity with the rules; and

(1) that, except in certain specified cases, no claim against Government not preferred within the time limit prescribed by Government has been paid without the sanction of the Audit Officer.