CHAPTER 14

Audit of Expenditure

249. Essential Conditions governing Expenditure. Every payment of money on Government account involves three principal processes:-

(a) the submission of a claim;

(b) the disbursement of the money claimed; and

(c) the incorporation of the transaction in the accounts.

It is clear, however, that a disbursing officer must have some criterion whereby he can judge the equity of a claim made, and can justify his action in making a payment in satisfaction of it. We have therefore to consider what conditions regulate public expenditure.

250. The incurring of expenditure from the Consolidated Fund of India or the Consolidated Fund of a State is governed by the following essential con- ditions:-

(i) that there should exist sanction, either special or general, accorded by competent authority authorising the expenditure;

(ii) that there should be provision of funds authorised by competent authority fixing the limits within which the expenditure can be incurred;

(iii) that the expenditure incurred should confrom to the relevant pro- visions of the Constitution and of the laws made thereunder and should also be in accordance with the financial rules and regulations framed by competent authority;

(iv) that the expenditure should be incurred with due regard to broad and general principles of financial propriety.

251. Duty of Audit. In conducting the audit of expenditure the Indian Audit and Accounts Department has to see that the administrative authorities comply with the essential conditions mentioned in the preceding paragraph. Therefore the audit of expenditure follows the lines of these conditions.

252. In conducting the audit in respect of the first three conditions men- tioned in paragraph 250 the auditor performs quasi-judicial functions, in that he has to apply the rules and orders as they stand, irrespective of the position of the person against whom they are enforced. He may not relax or waive the rules, except where he is specifically empowered to do so.

253. In conducting the audit in respect of propriety the Audit Officer has to scrutinise the expenditure from the point of view of an administrative authority. He is required to see that the broad principles of orthodox finance are borne in mind both by disbursing officers and by sanctioning authorities.This class of audit is, therefore, not a matter of application of rules and regula- tions. Its object is to support a reasonably high standard of public financial morality, of sound financial administration and of devotion to the financial interests of Government. The proper discharge of duties by an Audit Officer in this field is a very delicate matter and requires much discretion and tact.

254. No precise rules have been laid down for regulating the course of audit against propriety. The general principles which have for long been recog- nised as standards of financial propriety are stated in paragraph 26.

255. The check of the rates paid for work done and supplies made is one of the important aspects of audit against propriety. The Controlling Officer with his intimate knowledge on the details of the work in question is doubtless in a far better position than the Audit Officer to determine fair rates. At the same time, the Audit Officer cannot wholly absolve himself from responsibility in this important branch of audit. The scrutiny of rates usually presents con- siderable difficulty and therefore demands the exercise of great intelligence and care. Individual abnormalities in rates should of course be watched, but the institution from time to time of a comparative examination through the vouchers and accounts received for audit of the rates paid by various officers in the same or neighbouring localities may indicate cases in which, the rates being abnormal, further enquiry may be desirable. Cases involving considerable sums should generally be selected. The assistance of the Finance Ministry or Department be invoked in obtaining reliable schedules of rates and other neces- sary information. In the case of Public Works offices, useful work in the direc- tion of making a comparative examination of rates can be done also at the periodical inspections of these offices.

255-A. In the context of the outlay on various development schemes “Efficiency Audit’ of expenditure with a view to ascertain (a) whether the various schemes are being run economically, and (b) whether they are actually yielding the results expected of them has assumed great importance. As regards (a), the examination includes such aspects as failure to adhere to estimate due to inefficient handling or to lack of foresight etc., expensive delays, wasteful expenditure through lack of co-ordination, infructuous expenditure, losses etc. As regards (b), it has to be ascertained how far the physical targets, returns or final objects of the schemes have been achieved.

256. It will be apparent that, however courteously and carefully an auditor may conduct his work, his task is delicate and his duty, if carried out conscientiously is liable to misrepresentation and attack. At the same time, the responsibility laid upon him is great, both to the Legislature as repre- senting the tax-payers and to the Executive and other authorities to whom is entrusted the immediate financial control of expenditure.