Audit against Provision of Funds

268. Introductory. One of the main conditions governing expenditure mentioned in Paragraph 250, is that there is provision of funds, made by com- petent authority, fixing the limits within which the expenditure may be incurred. The procedure relating to the provisions of funds and the duty and responsibility of Audit in regard to audit of expenditure with reference to such provision are described in this chapter.

269. Annual Financial Statement. A statement of its estimated annual receipts and expenditure is prepared by each Government and presented to its Legislature. This “annual financial statement” is popularly known as “the Budget”. In this statement the sums required to meet expenditure “charged upon” the Consolidated Fund of India or the Consolidated Fund of the State and the sums required to meet other expenditure it is proposed to make frem the Fund are shown separately, the expenditure on revenue account being distinguished from other expenditure (See Ariticles 112 and 202 of the Consti- tution).

269-A. So much of the estimates as relates to expenditure “charged upon” any of these Funds is not submitted to the vote of the Legislature, though any of those estimates are open to discussion in the Legislature. So much of the estimates as relates to other expenditure is submitted to the Legislature concerned in the form of “Demands for Grants” on the recom- mendation of the President or the Governor of the State, as the case may be. When the demands for grants are presented, the Legislature may act in any of the following ways:-

(a) it may assent to the demands;

(b) it may refuse to assent to any of the demands;

(c) it may assent to a demand subject to a reduction of the amount specified therein.

(See Articles 113 and 203 of the Constitution).

269-B. It is for each Government to settle the form in which the demand should be presented, but ordinarily a separate demand is proposed for each Ministry. Each demand contains, first, a statement of the total amount requir- ed, then, a statement of the detailed estimate under each demand divided into items.

270. Appropriation Act. After the grants have been made by the Legis- lature, a bill is introduced to provide for the appropriation out of the Con- solidated Fund of India or of the State, for all moneys required to meet-

(a) the ‘Grants’ made by the Legislature;

(b) the expenditure charged on the Consolidated Fund, but not ex- ceeding in any case the amount shown in the statement previouslylaid before the Legislature. This charged expenditure is referred to as “Appropriation” in the following paragraphs.

No money can be withdrawn from the consolidated Fund, until this bill is passed by the Legislature. The bill, when passed by the Legislature, becomes the Appropriation Act. (See Articles 114 and 204 of the Constitution).

270-A. The sums authorised in the Appropriation Act are intended to cover all the charges including the liability of past years, to be paid during a financial year or to be adjusted in the accounts of that year. Any unspent balance lapses and is not available for utilisation in the following year.

270-B. Supplementary, additional or excess grants. If the amount autho- rised by the Appropriation Act in accordance with the provisions of para. 270 to be expended for a particular service for the current financial year is found to be insufficient for the purposes of that year or when a need arises during the current financial year for supplementary or additional expenditure upon some new service not contemplated in the annual financial statement for that year, a supplementary statement showing the estimated amount of that expenditure is laid before the Legislature. Similarly, if any money has been spent on any service during a financial year in excess of the amount granted for that service. a demand for such excess is presented to the Legislaure. The supplementary Statement and the demand for the excess is then dealt with in the same way as the Annual Financial Statement, (See Articles 115 and 205 of the Cons- titution).

271. Supplementary Estimates arise, in spite of every care taken to include in the budget all probable payments which will have to be made during the financial year, owing to one or more of the following causes-

(i) Preparation of annual estimates some months before the commence- ment of the financial year,

(ii) Fluctuating nature of the Services,

(iii) Changes of policy or programmes that may occur during the year,

(iv) Under estimating or insufficient allowance for factors leading to the growth of expenditure, and

(v) Other unforeseen causes.

They are, however, generally regarded as objectionable in principle in as much as the effect of these estimates is to upset the financial proposals plac- ed before the Legislature in the budget and thereby to modify the provision which the Legislature has made for the year and to diminish its primary control over public expenditure. Supplementary estimates for large sums really amount to a breach of contract between the Government and the Legislature.

272. The need for excess grants arise when a department fails to take a supplementary estimate before the close of the financial year, either through misapprehension or because it ascertains the fact of a deficit too late to do so. The only alternative in that case is to obtain a grant for such excess in the following year, and at the earliest practicable moment after the excess is estab- lished.

8-2 Comp. A. G./62273. Votes on account, Votes of credit, and exceptional grants. While the procedure indicated in the foregoing paragraphs relates to the provision of funds to meet the expenditure and liabilities of Government for the entire finan- cial year, the Constitution provides also for-

(a) the grant of funds in advance by the Legislature for part of a finan- cial year, pending completion of the procedure indicated in the fore- going paragraphs. Such grants are called “Votes on account”.

(b) the grant of funds for meeting an unexpected demand when on ac- count of the magnitude or the indefinite character of the Service the demand cannot be stated with the details ordinarily given in an annual financial statement. The grants so made are termed ‘Votes of credit’.

(c) an exceptional grant to cover expenditure on services of an impor- tant nature which are not directly connected with the current service of any financial year.

The withdrawal of moneys from the Consolidated Fund of India or of the State for the purposes or which these grants are made will be authorised by an Act of the appropriate Legislature. In respect of these grants, the pro- cedure in Parliament/Legislature with respect to estimates and Appropriation Bills will be followed. (See Articles 116 and 206 of the Constitution).

273-A. In granting a ‘vote on account’, the Legislature makes no appro- priation beyond the specification of the vote of service to which money is to be applied. The procedure provides for the supply of funds as a temporary ex- pedient to enable Government to carry on the public services from 1st April of a financial year upto the date of passing of the Appropriation Bill. Such funds are subject to the eventual detailed appropriation when the normal vote itself is granted.

273-B. The grant of a vote of credit is made in general terms. It is a finai vote so far as the Legislature is concerned and no further detailed appropriation is made than is specified in the general terms of the vote. But though the terms of the grant exclude any detailed appropriation, the withdrawals for the grant are still subject to the normal rules of Government expenditure.

274. Sub-heads of Grants and Appropriations. For purposes of financial control each Grant or Appropriation is divided into a number of units called “Sub-heads”, each of which may be subdivided into smaller units of appropria- tion corresponding to sub-heads or detailed heads of account.

275. Allotments and Re-appropriations. Within the amount of each Grant or Appropriation as shown in the Schedule to the Appropriation Act all allot- ments to, and re-appropriations within, sub-heads and sub-division of sub- heads may be sanctioned by Government or by such subordinate authorities as are duly authorised to do so. This is, however, subject to the limitation that any expenditure not falling within the scope or intention of a Grant maynot be authorised from funds provided under that Grant. Any allotment or re- appropriation within a Grant or Appropriation may be authorised at any time before, but not after the expiry of the financial year to which such Grant or Appropriation relates.

276. Re-appropriations from one Grant or Appropriation to another Grant or Appropriation are not permissible.

277. Nature of Audit against Provision of Funds. Audit against provision of funds is directed primarily to ascertaining that the money expended has been applied to the purpose or purposes for which the Grants and Appropria- tions specified in the Schedule to the Appropriation Act were intended to pro- vide and that the amount of expenditure against each Grant or Appropriation does not exceed the amount included in that Schedule.

278. Each Grant or Appropriation specified in the Schedule to the Appro- priation Act is a single total sum appropriated to the purposes set out in it. The particulars of a Grant or Appropriation in that Schedule are, however, based on the detailed estimates drawn up for the information of the Legislature. The distribution in these estimates between the various sub-heads and items may therefore be taken as general evidence of the purposes for which the Grant or Appropriation is made and the expenditure is recorded against the Grant or Appropriation and the sub-head of the Grant or Appropriation under which provision is made for the service.

279. The Audit Officer has to satisfy himself that the expenditure falls within the ambit of a Grant or an Appropriation specified in the Schedule to the Apropriation Act. Expenditure in excess of the amount of a Grant or Appropriation as well as expenditure not falling within the scope or intention of any Grant or Appropriation as specified in the Schedule to the Appropriation Act, unless regularised by an Appropriation Act embodying the Supplementary Grant or an Appropriation, will be treated as unauthorised expenditure.

280. Appropriation Audit. As stated in paragraph 277 Audit is responsible for watching that the total expenditure under a Grant or Appropriation does not exceed the amount of that Grant or Appropriation as specified in the Schedule to the Appropriation Act. It has also to see that the total expenditure on each of the sub-heads fixed as units of appropriation under a Grant or Appropriation does not exceed the allotment thereunder as modified by orders of re-appropriation passed by competent authority from time to time.

281. In the case of a single Grant or Appropriation which is divided into an English and an Indian portion, Audit Officers in India are responsible for watching expenditure not only against the Indian portion but also against the grant or Appropriation as a whole. The appropriation audit conducted by the Director of Audit Indian Accounts in the United Kingdom is confined in such a case to seeing that the expenditure in the United Kingdom does not exceed the several sums allotted for such expenditure by competent authority.282. Unless it is otherwise desired by Government as a special case, or where there is a division of superintending control between departmental autho- rities over a sub-head, appropriation audit will not be exercised beyond sub- heads of a Grant or Appropriation fixed as units of appropriation for the pur- poses of Appropriation Accounts. In the case of Public Works Department ex- penditures, however, appropriation audit may be conducted in respect of all works or items of expenditure, the allotments for which, whether individually or by group, are provided separately for each division.

283. Detailed appropriation audit is conducted in two stages-

(i) the audit of orders of allotment of funds and reappropriations which are to be enforced in audit, and

(ii) the audit of expenditure against allotments.

284. Subject to the limitations mentioned in paragraph 275, the audit of orders of allotments and re-appropriations consists in seeing-

(a) that an authority making allotments under a Grant or Appropriation does not allot amounts in excess of those available under the Grant or Appropriation,

(b) that the amount appropriated is available under the unit from which it is allotted, and

(c) that the order is issued by competent authority.

285. The Audit Officer may be required to see on behalf of the Executive Government that-

(a) if under the financial rule of that Government a particular object of expenditure requires a specific allotment, all expenditure on it is audited against such allotment, and

(b) if a lump sum allotment is made for a group of items of expenditure of an office, the total expenditure thereon is audited against the lump sum placed at the disposal of the disbursing officer for the purpose.

When, however, several officers are authorised to incur charges relating to a unit of appropriation, against a lump sum allotment placed for the purpose at the disposal of a single higher authority, it devolves upon this authority to watch the progress of expenditure in all the offices and to keep the aggregate charges within the allotment. If the Audit Officer is requested by Governmen’ to audit the charges against the allotment, he will comply with the request.

286. Watch of Progress of Expenditure. Concurrently with the conduct of appropriation audit, the Indian Audit and Accounts Department watches the progress of expenditure against (1) the Grant or Appropriation as a whole and (2) allotments for sub-heads, and, where necessary, against subordinate units of appropriation; and issues warnings to dishursing officers, and, if neces sary, to controlling authorities also, when excesses appear to be likely. But actually, the responsibility for watching the progress of expenditure againsta Grant or Appropriation rests with the Executive, and the Executive is ulti- mately responsible for keeping the expenditure within the Grant or Appropria- tion. Audit renders all legitimate assistance to the Executive in this matter and sees that suitable and adequate arrangements exist in all departments of Government for the control of expenditure.

287. Responsibility for Appropriation Audit. The responsibility of audit authorities in regard to appropriation audit, as stated in this chapter, is the responsibility of those Audit Officers under the Comptroller and Auditor General who are also responsible for compilation of accounts. In the case of departments whose accounts are kept by a separate organisation not subordi- nate to the Comptroller and Auditor General the responsiblity in respect of appropriation audit of the audit authorities is described in their Audit Manuals.