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For use in Spices Board offices only

SPICES BOARD

MINISTRY OF COMMERCE

GOVERNMENT OF INDIA

INTERNAL AUDIT MANUAL

ISSUED BY

THE CHAIRMAN SPICES BOARD

KOCHI

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Preface Internal auditing is an independent and objective assurance and consulting

activity designed to add value and improve an organization’s operations. It helps an

organisation to accomplish its objectives by bringing a systematic, disciplined

approach to evaluate and improve the effectiveness of risk management, control and

governance process.

Internal audit is expected to be useful in two ways, namely

(i) Protective and

(ii) Creative.

It is protective in as much as it detects irregularities, omissions/ commissions

and frauds through its concurrent or post audit, checking of accounting and other

records and of actual operation at site, and creative because it constantly reviews

internal controls, policies, plans and procedures and has to make suggestions for

improvements and bring out useful information as an aid to the management decisions.

The overall objective of internal audit is to assist the management in the effective

discharge of the responsibilities by furnishing them with objective analysis, appraisals

and pertinent comments concerning the activities reviewed. It is to play a positive,

forward looking and constructive role in assisting the management to achieve

maximum efficiency, economy and effectiveness. As a matter of fact, the internal audit

can be described as the eyes and ears of the management.

The Comptroller and Auditor General of India has expressed the view that an

efficient and effective internal audit system in public sector undertakings will help in

reducing the quantum of checks by the Statutory Auditors/Government Auditors and

that if a matter has already been reported by Internal Audit to the Management or the

Board of a PSU, and adequate action taken, the Govt. Audit will not ordinarily seek to

agitate the issue.

The need for strengthening the Internal Audit System and preparation of an

Internal Audit Manual were under the consideration of the Board for the last few

years. Hence it was decided to entrust the work of preparation of the Internal Audit

Manual to the Institute of Public Auditors of India. I am sure that the Manual of

Internal Audit as prepared by the Institute will be of use to all concerned in the

organization.

Suggestions for improvement of the system of internal audit and for updating

the Manual based on changes in the system of operation and activities of the Board

from all concerned are welcome.

KOCHI. V.J. KURIAN

April 2010 CHAIRMAN

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TABLE OF CONTENTS

Para No. Subject Page No.

Chapter-1 Introduction 1.1 Organisation 8

1.2 Objective and scope of Internal Audit 10

1.2.1 Scope of Internal Audit 10

1.2.2 Standards of Internal Audit 11

1.2.3 Independence of Internal Auditors 11

1.3 Internal Controls 13

1.4 Usefulness of Internal Audit 13

1.5 Monitoring 14

1.6 Internal audit reports 15

1.7 Coverage of audit and periodicity 16

1.8 Ethics of Internal auditors 17

1.9 Organising an Internal Audit Department 18

1.9.1 Management of Internal Audit Department 18

1.9.2 Professional proficiency of Internal Audit Department 18

1.10 Role of risk in Internal Audit 19

1.11 Role of risk in planning 19

Chapter 2 - Audit Evidence and Techniques 2.1 Audit evidence 21

2.1.1 Concept of evidence 21

2.1.2 Sources of evidence 21

2.1.3 Reliable evidence 22

2.1.4 Relevant Evidence 22

2.1.5 Reasonable Evidence 22

2.2 Audit Techniques 23

2.3 Testing of Internal Controls 23

2.4 Testing Strategy 24

2.4.1 Standards 25

2.4.2 Period of testing 25

2.4.3 Level 25

2.4.4 Sequence 26

2.5 Inter related controls 26

2.6 Appraising the results 26

2.7 Techniques of examination 27

2.8 Re performance 28

2.9 Delegation of powers 28

Chapter 3 - Sampling in Internal Audit

3.1 General 29

3.2 Fundamental principles of sample selection 30

3.2.1 Procedure for sampling 30

3.2.2 Simple Random Sampling 31

3.2.3 Stratified Random Sampling 31

3.3 Sampling methods 31

Chapter 4 –Detection and Prevention of Fraud

4.1 General 32

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4.2 What is fraud 32

4.3 Overall control for fraud prevention 32

4.4 Internal Auditors’ role in detecting fraud 33

4.5 Investigation of fraud 33

4.6 Reporting fraud 34

Chapter 5 - Internal Audit–Planning and Procedure

5.10 Items of work to be seen by supervisory officers 37

5.11 Items of work to be seen by Dy. Director (IA) 37

5.12 Discretion of Chairman 38

5.13 Horizontal check 38

Chapter 6 - Internal Audit - Administration Department

6.1 General 41

6.2 Administration Division 41

6.2.3 Illustrative checks 44

(a) Staffing 44

(b) Administration set up and other matters 46

(c) Service books 47

(d) Employees Group Insurance Scheme 48

(e) Staff cars (Board vehicles) 49

(f) Log books 49

(g) Grants-in-aid 50

(h) Pensionary benefits 51

(i) Stock registers 52

(j) Asset register 53

(k) Old records management 54

(l) System of receipt and issue of letters 55

(m) General maintenance 55

(n) Expenditure 56

(o) Telephone & trunk call charges register 57

(p) Liveries Account 57

(q) Consumption of electricity 58

(r) (A) Office building (B) Residential buildings

58

(s) complaint cases 61

6.3 Official Language Division 61

6.4 Publicity Division 62

6.5 Engineering Division 63

6.6 Library and documentation division 67

Chapter 7 – Internal audit - Finance & Accounts Department

7.1 Functions 68

7.2 Checks to be exercised by Internal Audit 68

7.2.1 Cash, valuables and related records 68

7.2.2 Register of Valuables 70

7.2.3 Register of Bank Drafts 71

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7.3 Establishment 71

7.3.1 Categories of employees 71

7.3.2 Pay bill 71

7.3.3 Overtime allowance 73

7.3.4 Traveling Expenses 73

7.3.5 LTC claims 74

7.3.6 Medical facilities 74

7.3.7 Advances for Medical Treatment 75

7.3.8 Other expenditure 75

7.3.8.1 General 75

7.3.8.2 The points to be seen specifically in the case of certain

expenses

76

1) Rent, Rates & Taxes 76

2) Children’s Education Allowance and tuition fees 76

3) News paper subsidy 76

4) Reimbursement of cost to departmental canteen 76

5) Drawal and settlement of foreign exchange 77

6) Repairs and maintenance 77

7) Contingent bills 77

8) Advances 78

9) Pension 78

10) Gratuity 79

11) Provident Fund 79

12) New Pension Fund 79

7.4 Budget Estimation, Sanctioning of Budget, Drawal of Funds,

Distribution/ release of Funds and Utilisation

79

7.5 Financial Accounting System 80

Chapter 8 – Internal Audit - Development Department

8.1 Functions 81

8.2 Frame work of Development Department 82

8.3 Records maintained and returns submitted 83

8.4 Internal Audit guidelines 85

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8.4.1 Financial assistance under schemes 85

8.4.2 Establishment and Administration 86

8.4.3 Financial records 87

Chapter 9 – Internal Audit - Research Department

9.1 Functions 88

9.2 Thrust areas of research and development 88

9.2.1 Crop Improvement Division 88

9.2.2 Agronomy and Soil Science Division 88

9.2.3 Plant Pathology Division 89

9.2.4 Entomology Division 89

9.2.5 Biotechnology Division 90

9.2.6 Library 90

9.2.7 Administration 90

9.3 Services offered 91

9.4 List of records maintained 91

9.5 Returns furnished 92

9.6 Internal Audit checks: 92

Chapter 10 – Internal Audit - Marketing Department

10.1 Functions of the Department 95

10.2 Records maintained 97

10.3 Internal Audit checks:

1. Registration of Exporters and renewal of registration:

2. Cardamom Auctioneers licence

3. Mandatory sampling

98

10.4 XI Plan Schemes 100

10.5 Trade Information Service & Market Research 104

10.6 Internal Audit of financial and accounting records 105

Chapter 11 – Internal Audit - Quality Evaluation Department

11.1 Functions 106

11.2 Analytical Services and fees there for 106

11. Internal Audit Checks 108

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Chapter 12 – Internal Audit - Divisions under the direct control of

the Chairman

12.1 Vigilance Division 109

12.1.1 Functions 109

12.1.2 Internal Audit Checks 110

12.2 Planning & Coordination Division 110

12.2.1 Functions 110

12.2.2 Internal Audit Checks 111

12.3 EDP Division 111

12.3.1 Functions 111

12.3.2 Software packages developed 112

12.3.3 Internal Audit checks 113

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CHAPTER-1

INTRODUCTION

1.1 ORGANISATION

1. The Spices Board Act, 1986 (No.10 of 1986) was enacted by Parliament in the

Thirty-seventh year of the Republic of India and it came into effect from 26th February

1987. Prior to the establishment of the Spices Board, the Cardamom Board was

regulating the development of cardamom industry in terms of the provisions of the

Cardamom Act, 1965 and the matters connected with the export of spices were being

looked after by the Spices Export Promotion Council established by the Government

of India. By the Spices Board Act, the Cardamom Board Act was repealed. The

Cardamom Board and the Spices Export Promotion Council were dissolved during

1987 and the Spices Board took over the assets and liabilities of the erst-while

Cardamom Board and the Spices Export Promotion Council. The mandate given by

the Act is development of Cardamom industry and promotion of export of all spices

listed in the Act.

2. The functions of the Board as defined under the Spices Board Act are:

The Board may:-

(i) develop, promote and regulate export of spices;

(ii) grant certificate for export of spices and register brokers therefore;

(iii) undertake programmes and projects for promotion of export of spices;

(iv) assist and encourage studies and research for improvement of processing,

quality, techniques of grading and packaging of spices;

(v) strive towards stabilisation of prices of spices for export;

(vi) evolve suitable quality standards and introduce certification of quality through

“Quality Marking” for spices for export;

(vii) control quality of spices for export;

(viii) give licences, subject to such terms and conditions as may be prescribed, to the

manufacturers of spices for export;

(ix) market any spice, if it considers necessary, in the interest of promotion of

export;

(x) provide warehousing facilities abroad for spices;

(xi) collect statistics with regard to spices for compilation and publication;

(xii) import, with the previous approval of the Central Government, any spice for

sale, and

(xiii) advise the Central Government on matters relating to import and export of

spices.

The Board may also:-

(i) promote co-operative efforts among growers of cardamom;

(ii) ensure remunerative returns to growers of cardamom;

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(iii) provide financial or other assistance for improved methods of cultivation and

processing of cardamom, for replanting cardamom and for extension of

cardamom growing areas;

(iv) regulate the sale of cardamom and stabilisation of prices of cardamom;

(v) provide training in cardamom testing and fixing grade standards of cardamom;

(vi) increase the consumption of cardamom and carry on propaganda for that

purpose;

(vii) register and licence brokers (including auctioneers) of cardamom and persons

engaged in the business of cardamom;

(viii) improve the marketing of cardamom;

(ix) collect statistics from growers, dealers and such other persons as may be

prescribed on any matter relating to the cardamom industry; publish statistics

so collected or portions thereof or extracts there from;

(x) secure better working conditions and the provision and improvement of

amenities and incentives for workers; and

(xi) undertake, assist or encourage scientific, technological and economic research.

3. The Board is implementing the above functions through the following

six Departments:

1.Administration Department

2. Finance & Accounts Department

3. Development Department

4. Marketing Department

5. Research Department

6. Quality Evaluation Department

In addition to the above, four Divisions viz. Internal Audit, Vigilance, Planning

& Coordination and EDP are functioning directly under the Chairman.

A Department/Division is responsible for formulation of policies of the Board

in relation to the activities allocated to it and also for the execution and review of those

policies. A department is headed by Secretary/Director who acts as the Administrative

Head and the principal advisor to the Chairman on all matters of policy and

administration within the department. For the efficient disposal of the activities allotted

to it, the department is divided in to divisions and sections. The division may be a unit

having independent existence, but coming under a Department or have several sections

under it. The Divisions are generally headed by Dy. Directors. A Section is the lowest

organizational unit in a department with a defined area of work. It normally consists of

Assistants and Clerks supervised by an Assistant Director/Section Officer.

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1.2 Objective and scope of Internal Audit

1. Scope of Internal Audit

The scope of internal audit function is not limited to independent audit. Internal

audit (or internal auditing) is another significant type of audit, which involves

conducting a systematic examination of the records, systems and procedures, and

operations of an organisation as a service to management.

'Internal audit' traditionally developed as an audit on behalf of the management

to ensure that:

• (a) the existing internal controls are adequate and effective,

• (b) the financial and other records and reports show the results of operations

accurately and promptly, and

• (c) each unit of the organisation follows the policies and procedures laid down

by the top management.

Thus, traditionally, internal audit was primarily concerned with questions like

whether the assets of the organisation were adequately safeguarded and properly

accounted for, whether the accounting and other allied records were reliable, and

whether the organisational procedures and policies were complied with. With a

significant emphasis on detection of frauds and accuracy of financial records, the

internal auditor was performing the work similar to that of the statutory auditor. As

such, he was mostly engaged in conducting routine checking of stock records;

purchase invoices, cash receipts and payments, sale bills and other similar records and

documents.

The modern concept of internal audit goes far beyond the traditional limits.

Internal audit is no longer considered as a mere routine review of financial and other

records by specially assigned staff. As the Institute of Internal Auditors, USA (IIA)

defines it, "Internal auditing is an independent and objective assurance and

consulting activity designed to add value and improve an organisation's

operations. It helps an organisation to accomplish its objectives by bringing a

systematic, disciplined approach to evaluate and improve the effectiveness of risk

management, control and governance process". IIA further states that internal audit

activities are performed by persons within or outside the organization as a service to

the organisation.

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2. Standards of Internal Audit

Standards of Internal Audit provide a frame work for the internal auditing steps

and procedures, with an aim to improve the degree of uniformity of internal auditing

practices. The international standards of Internal Audit are indicated in this manual for

information of the officers engaged in Internal Audit work.

The Institute of Internal Auditors USA has issued international standards for

professional practice of Internal Auditing. The purpose of the standard is to

a) Delineate basic principles that represent the practice of internal auditing as

it should be,

b) Provide a framework for performing and promoting a broad range of value

added internal audit activities,

c) Establish the basis for the evaluation of internal audit performance and

d) Foster improved organizational process and operations.

3. Independence of Internal Auditors

An internal auditor can only be as effective as the management wants him to

be. However, if an internal auditor has to perform his duties effectively, he should be

independent of the activities that he audits. This can be achieved only if he is given the

requisite organisational status and if he possesses the desired degree of objectivity.

The professional standards of IIA require the following in this regard.

i) Internal Audit Charter

The purpose, authority and responsibility of the internal audit activity should

be formally defined in a charter, consistent with the standards of IIA, and approved by

the governing body of the organisation. The charter should cover the nature of

assurance services as well as that of consulting services.

ii) Organisational Independence

A proper organisational status for the internal auditing department ensures its

relative independence so that it can carry out its work freely and objectively and render

impartial and unbiased judgments. In this regard, the IIA standards state that the chief

audit executive should report to a level within the organisation that allows the internal

audit activity to fulfill its responsibilities. Further, the internal audit activity should be

free from interference in determining the scope of internal auditing, performing work

and communicating results. To ensure this, the following steps may be taken.

1. The chief audit executive should be responsible to an officer of sufficient rank

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and authority so as to ensure broad audit coverage as well as sufficient and prompt

consideration and action on audit reports.

2. The chief audit executive should have direct communication with the

Chairman and the Board.

3. The chief audit executive should submit annually to the Chairman for approval,

and to the board for its information, a summary of the department's work schedule,

staffing plan and financial budget (including scope of the work and any limitations

placed on that scope).

4. The chief audit executive should submit activity reports to the Chairman and to

the Board highlighting significant audit findings and recommendations.

5. The chief audit executive should regularly attend and participate in those

meetings of the board, which relate to its oversight responsibilities for auditing,

financial reporting, organisation governance and control.

Thus Internal Audit is primarily a service to the organization and should report

directly to the Chairman. It should be free from interference in determining the

scope of internal auditing, performing work and communicating results.

iii) Individual Objectivity

Internal auditors should have an impartial, unbiased attitude and avoid conflicts

of interest. The following steps would be useful in this regard.

1. The internal audit staff should be so assigned to various audit jobs that all

potential and actual conflicts of interest and bias are avoided.

2. It should be obligatory for the staff to inform the chief audit executive if any

conflict of interest or any bias is possible in an audit situation.

3. Assignments of internal auditors should be rotated periodically whenever it is

practicable to do so.

4. Internal auditors should not generally be asked to assume operating

responsibilities. This is because having assumed authority or responsibility for any

function; an internal auditor cannot review the performance in that area objectively.

Even designing, installing and operating the systems are not internal audit functions

and they are likely to impair audit objectivity. Of course, the internal auditor can

review the procedures before they are implemented, or recommend the standards of

control for systems. In this regard, IIA has stated that objectivity is presumed to be

impaired if an internal auditor provides assurance services for which he had

responsibility during the previous year. IIA, however, states that internal auditors may

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provide consulting services relating to operations for which they had previous

responsibilities. It is also required that if independence or objectivity is impaired,

whether in fact or in appearance, the details of the impairment should be disclosed to

appropriate parties. The nature of the disclosure will depend upon the impairment.

5. Results of an audit should be reviewed before the audit report is released in

order to provide reasonable assurance that the work was performed objectively.

Thus the function of Internal Audit may be expressed as an independent

appraisal activity within an organization for the review of operations as a service to

management. It is a managerial control, which functions by measuring and evaluating

the effectiveness of other internal controls.

1.3 Internal Controls

As per the Institute of Internal Auditors Inc. (Florida) – Internal control is

broadly defined as a process, effected by an entity’s board of directors, management,

and other personnel, designed to provide reasonable assurance regarding the

achievement of objectives in the following categories:

� Effectiveness and efficiency of operation;

� Reliability of financial reporting so that organisation is not exposed to

unavoidable financial risk;

� Compliance with applicable laws and regulations.

Internal Auditors should serve as facilitators to the organization. It is

necessary to have appropriate dynamic internal controls in place, which can respond to

the changes within a reasonable time and this can be achieved only by internal audit

through continuous monitoring, evaluating and upgrading the control.

As Internal Audit is concerned with the appraisal of controls, it is important

that every Internal Auditor should be aware of the nature and purpose of controls, the

extent of their existence and the basis on which they could be judged.

1.4 Usefulness of Internal Audit

Internal audit is expected to be useful in two ways, namely (i) Protective and

(ii) Creative. It is protective in as much as it detects irregularities, omissions/

commissions and frauds through its concurrent or post audit, checking of accounting

and other records and of actual operation at site, and creative because it constantly

reviews internal controls, policies, plans and procedures and has to make suggestions

for improvements and bring out useful information as an aid to the management

decisions. The overall objective of internal audit is to assist the management in the

effective discharge of the responsibilities by furnishing them with objective analysis,

appraisals and pertinent comments concerning the activities reviewed. It is to play a

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positive, forward looking and constructive role in assisting the management to achieve

maximum efficiency, economy and effectiveness. As a matter of fact, the internal audit

can be described as the eyes and ears of the management.

In general, the internal auditors are expected to render valuable assistance to:

• verify accuracy, authenticity and propriety of the transactions

• ascertain the extent of compliance with the prescribed policies, plans, rules and

regulations, systems and procedures

• review and make appraisal of the soundness, adequacy and application of

accounting, financial and operating controls and suggest improvements therein

• confirm that expenses and liabilities have been incurred only for the legitimate

activities of the organization

• scrutinize contracts and purchase orders

• examine the prescribed books of accounts along with subsidiary records to

ensure that these are maintained properly

• facilitate the prevention and detection of frauds

• conduct independent and surprise physical verification of stocks and other

commodities/ articles held in the offices/ godowns and to report the

discrepancies from the financial records

• review that sanctions for expenditure are accorded by the competent authorities

and are in order

• verify the relevance and reliability of financial and other data given to the

management

• analyze and improve the system of internal check and to see that:

� it is working

� it is sound

� it is economical

1.5. Monitoring

Internal Audit should continuously monitor the overall effectiveness of the

internal controls. The frequency of monitoring the different activities should be

determined by considering the risks involved and the frequency and nature of changes

in the operating environment. Ongoing monitoring activities can offer the advantage of

quickly detecting and correcting deficiencies in the system of internal control.

Such monitoring is most effective when the system of internal control is

integrated into the operating environment and produces regular reports for review.

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Examples of ongoing monitoring include the review and approval of book entries,

management review and approval of exception reports.

1.6 Internal Audit Reports

As already discussed, for internal audit to be effective, it is imperative that

internal auditor give prime consideration to how line managers would react to his

findings and suggestions. Only then can he motivate managers to overcome their

shortcomings and improve performance. During the process of auditing, preliminary

observation memo should be issued from time to time. The auditee view about the

audit conclusions or recommendations may also be included in the Internal Audit

Report.

Reports are a major means of control by management. Inadequate and

untimely reporting can lead to unwise decisions or ill-considered action. As with

records, reports must be prompt, accurate, concise and complete. Additionally, they

should be

(i) impartial in presenting a fair picture of what has been done in comparison with

standards and prior periods, and

(ii) usable in administration – to fit the pattern of organizational responsibility.

(iii) Wherever possible the monetary impact should be indicated for better

appreciation of a given audit observation though in certain cases the lapses/

failures in non-observation of laid down procedures may be very important for

managerial action even when the monetary impact is not much.

In this context, utmost attention needs to be given to the reports of the internal

auditor. The approach in framing an internal audit report has to be qualitatively

different than in the case of other types of audit, particularly independent financial

audit. The following suggestions may be useful in the preparation of the Report.

1. Due attention should be paid to the format of the report, e.g., it should contain

the following:

(a) A brief description of objectives and scope of audit.

(b) Executive summary highlighting significant observations

(c) Detailed Report

• Observations (duly supported by sufficient evidence, as far as possible in

terms of quantitative data)

• Implications

• Recommendations

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(d) Comments of the auditee institution.

(e) Annexures giving supporting data

2. The report should be brief, specific to the point and based on facts and figures.

It should not contain suggestions based on mere theoretical concepts, without regard to

the situation under audit. Hasty conclusions should be avoided; the facts and figures

should speak for themselves.

3. Positive points should also be highlighted. The auditee should not feel that his

achievements are not being appreciated. Moreover, the observations should be worded

carefully; they should be such as would motivate the auditee to improve.

4. An in-depth cost-benefit analysis should be presented along with each

significant recommendation.

5. Confidentiality of findings should be maintained wherever the situation so

warrants. Sensitive issues may be discussed in separate reports.

The internal auditor should prepare the report in the following format:

Part A i) Introduction

ii) Gist of major irregularities

Part B Detailed report

Part C i) Outstanding irregularities of previous reports

ii) Follow-up and settlement of previous audit objections

1.7 Coverage of Audit and Periodicity

The quantum and periodicity of checks to be exercised in respect of various

items of work would depend upon various factors such as extent of internal controls

and checks, volume, value and nature of transactions and accordingly the sampling

technique has to be adopted to ensure reasonable coverage of transactions by Internal

Auditor.

While a predefined scope for an auditor’s work at the micro level is difficult to

draw, if not impossible, a better way of dealing with it is to indicate the broad areas

where audit can be conducted. This will incidentally allow discretion to the internal

auditor to concentrate on the important points that come up during the audit and

accordingly set the exact course in which the audit should be directed appropriately to

the audit situation.

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1.8 Ethics of Internal Auditors.

The essentials for an Internal Auditor are integrity, objectivity and

competency.

Internal Auditors should be able to put across comments in a manner that it

should be acceptable even to the person whose activities are reviewed and commented

upon.

The auditee should be brought to the same wavelength with the auditors, in

realizing and appreciating that the checks, suggestions and recommendations of

Internal Audit aim at betterment of the auditee’s performance, by eliminating

unproductive activities, systems and practices.

The auditee should be convinced that internal audit is an aid to improvisation,

and further increase in productivity of his functions. Both the auditee and the auditor

have the same goal.

Internal Audit should not impose any idea on the auditee unilaterally. While

suggesting any change or modifications of the existing practice, the auditee’s

constraints and limitations should also be highlighted. Thus, an internal auditor has to

be a good listener. The auditee may, by himself, have some idea of betterment of his

performance in his own way. Such ideas should also be exchanged and examined

jointly with the auditee, before drawing up the report with final recommendations.

However, observance of laid down procedures is most essential, until the same is

amended.

Internal auditor must not be vindictive or biased. He should remember that,

primarily his job is not that of a personal fault finder. In case any system or practice is

observed to be detrimental to the corporate interest that should be brought out in an

impersonal manner.

The “sine qua non” for an internal auditor is to have the integrity and

detachment of a professional. He will often come across confidential and sensitive

information. His conduct should assure the management that confidentiality of such

information would be maintained.

The internal auditor should have:

(i) Integrity

(ii) Detachment (Objectivity in approach)

(iii) Analytical approach.

(iv) Sound knowledge of accounting principles and techniques.

(v) Expertise in evaluation of control systems in all line functions of the

Board.

(vi) Ability to interact with people.

(vii) Ability to make constructive criticism.

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(viii) Synchronization of his activities and objectives with the corporate

objective

(ix) Patience to observe and hear the views of auditee institution (Good

Listener).

(x) Ability to communicate effectively.

(xi) Ability to develop data.

(xii) Ability to create proper backup data for audit reports for easy retrieval.

1.9 Organising an Internal Audit Department

While the specific organisational structure of the internal audit department will

depend on the particular circumstances of an organisation, the following provides the

basis on which an effective internal audit function can be organised.

1.9.1 Management of Internal Audit Department

The chief audit executive should properly manage the internal auditing

department.

1. Purpose: Authority and Responsibility The chief audit executive should have a

statement of purpose, authority and responsibility for the internal auditing department.

2. Planning: The chief audit executive should establish plans to carry out the

responsibilities of the internal auditing department.

3. Policies and Procedures: The chief audit executive should provide written policies

and procedures to guide the audit staff.

4. Personnel Management and Development: The chief audit executive should

establish a programme for selecting and developing the human resources of the

internal auditing department.

External Auditors: The chief audit executive should coordinate internal and external

audit efforts.

5. Quality Assurance: The chief audit executive should establish and maintain a

quality assurance programme to evaluate the operations of the internal auditing

department.

1.9.2 Professional Proficiency of Internal Audit Department

1. Staffing. The internal auditing department should provide assurance that the

technical proficiency and educational background of internal auditors are appropriate

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for the audits to be performed.

2. Knowledge, Skills and Disciplines. The internal auditing department should

possess or should obtain the knowledge, skills and disciplines needed to carry out its

audit responsibilities. The personnel selected to work in internal Audit Section should

have sufficient experience in functional wings. The Head of Department may give

special attention to their training and skill development.

3. Supervision: The internal auditing department should provide assurance that

internal audits are properly supervised.

1.10 Role of Risk in Internal Audit

1.10.1 The Internal Auditors should possess sufficient understanding of the Role of

Risk.

1.10.2 Risk is the possibility of an event occurring that will have an impact on the

achievement of objectives. Risk is measured in terms of impact and likelihood. A

process to identify, assess, manage and control potential events or situations to provide

reasonable assurance regarding the achievement of the organization objectives is

called Risk Management. Residual Risk is the Risk remaining after management takes

action to reduce the impact and likelihood of an adverse event, including control

activities in responding to a Risk.

1.10.3 The internal audit should be alert to the significant risks that might affect

objectives, operations or resources. However assurance procedures alone even when

performed with due professional care do not guarantee that all significant risks will be

identified.

1.11 Role of Risk in Planning

1.11.1 The Internal Auditor should establish risk based plans to determine the

priorities of the internal audit activity, consistent with the goals of the office. Internal

Audit's plan of engagements should be based on a risk assessment undertaken at least

annually. Inputs should be obtained from Group officers. As and when different risk

factors are noticed, the initial risk assessments should be revised. The perception

about risk factors may be shared across similar offices and their views may be taken

into account for revising initial risk assessment.

1.11.2 Internal Audit activity should assist the office by identifying and evaluating

significant exposures to risk and contributing to the improvement of risk management

and control systems.

1.11.3 The Internal audit activity should monitor, evaluate and report to the Chairman,

the effectiveness of the Office's risk management system.

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1.11.4 The internal audit activity should evaluate risk exposures, and assist the office

in maintaining effective controls encompassing the governance, and information

systems in the office. This should include.

• Reliability and integrity of financial and operational information.

• Effectiveness and efficiency of operations.

• Safeguarding of assets.

• Compliance with law, regulations and contracts

Illustrative risk factors.

Some of the factors influencing risk are shown below. The list is only

illustrative and not exhaustive.

• The characteristics of the functions or functional wing (where the governing

conditions, processes and calculations are complex)

• The personnel doing the work.

• History of error in the function or functional wing.

• Whether there is any motive to manipulate the figures. (presentational reasons,

to avoid showing poor performance etc.)

• Volume and size of transaction, cases handled

• Previous history of non co-operation in producing records to internal audit.

• The risk of fraud occurring

• Shortage of staff in a functional wing

• Introduction of computers on new working procedure.

• History of complaints on new working procedure.

• History of complaints received from the public, MLAs, MPs, etc.

• Quantum of arrears of work

• Absence of proper system of maintenance of records

• Commitment to public like Citizens Charter.

• Allegation of improper contact by audit personnel

• Adverse observations by court of law or tribunals.

• Grievance redress mechanism.

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Chapter 2

Audit Evidence and Techniques

2.1 Audit evidence

2.1.1 Concept of evidence

The concept of evidence is fundamental to auditing. Auditing is considered as a

form of judgment concerned with verification and examination of quantifiable

information. In this process auditors collects and evaluates evidential matter to

establish facts and to draw conclusions and inferences.

In Internal Audit, evidential matter consists of underlying records and all

corroborating information available to the auditor. The auditor seeks evidence to

verify the adherence to the prescribed policies, procedures, rules and instruction. He

also seeks evidence regarding the economy and efficiency of the various activities.

With the application of various audit techniques, auditor collects different types of

evidence.

2.1.2 Sources of evidence

The principal source of evidence will be the records of the office. It is the

primary duty of Internal Audit to ensure that the audit conclusions drawn about the

various sections, activities, transaction etc. are based on sufficient, competent and

relevant evidence. Evidence must be planned, gathered and analyzed before any

conclusion can be reached. Evidence may be gathered by:

• Physical observation, including joint inspection by the officials of internal

audit and functional wings, the resultant observations being signed by both as

confirmation or performance of achievements.

• Re performance of accounting routines.

• Analysis of financial data and inter relationships or comparison between

elements of relevant information

• Vouching i.e. checking of documents in support of transactions.

• Critical scrutiny of documents

• Confirmation and enquiry

• Evaluation of the quality of internal control mechanisms

• Interview with officers of functional wings and

• Computer assisted audit techniques.

Evidence may not be obtained by making independent enquiries from private

individual or members of the general public.

The quantity is a matter of judgment guided by generally accepted auditing

principles. During the course of audit, the auditor has to check all high value and key

items and then be selective by examining a representative sample of the remaining

transactions.

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Internal Audit function needs to focus on processes of compliance testing to

establish the reliability of internal controls and conduct substantive tests to the extend

found necessary to identify and quantify individual audit objections or conclusions.

The work should be supported by relevant evidence.

2.1.3 Reliable evidence

Reliable audit evidence is the one that is impartial. The reliability depends up

on its nature, source and the methods used to obtain it. Sometimes alternative forms of

evidence sources and methods are available and the following guide lines may be

noted regarding their relative reliability and the internal audit party should ensure that

the most reliable sources and methods are employed with in the time and cost

constraints imposed up on the audit.

• Documentary evidences are more reliable than oral evidence

• Evidence of which the auditor has more personal knowledge is the most

reliable evidence.

• Independent evidence obtained from external sources is more reliable than

internal evidence if that evidence is truly independent and complete.

• Visual evidence is highly reliable for confirming the existence of assets, but

not their ownership or value.

• Drawing conclusions through examining relationships between figures in the

account is less reliable evidence.

• Oral evidence must be considered as the least reliable. When ever feasible,

auditors should attempt to obtain documentary confirmation of oral evidence

(Written records of interviews etc.)

• The auditor may gain increased assurance when audit evidence obtained from

different sources is consistent.

2.1.4 Relevant Evidence

Relevant Evidence is information that is pertinent to the audit objectives. Once

the audit objectives have been clearly defined at the planning stage, the question of

relevance in the evidence should lead the auditor to a consideration of the audit

approach to be adopted.

2.1.5 Reasonable Evidence

Reasonable evidence is information that is economical in that the cost of

gathering it is commensurate with the result that the auditor is trying to achieve.

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2.2 Audit Techniques

Systematic Audit:

In which every aspect and stage of the audited subject is considered. It includes

review of both the design and operation of controls.

Compliance Audit:

Where there is pre-existing confidence that controls are well designed; but

effective operation is a material issue, audit which test only for effective operation of

controls can be appropriate.

Key control Testing:

A variation of compliance audits but clearly focused on a small number of

material or key controls.

Quality Assurance Review.

Reviewing the approach and competency of other reviewers rather than

reviewing risks and controls designed to form an opinion of the reliance which can be

placed on the work of others.

Systems development audit:

Phased review of developing plans and designs for new systems and processes

aimed at identifying potential weaknesses in control if the plans and designs go ahead

as they are.

2.3 Testing of Internal Controls

2.3.1 Internal Auditors use testing to confirm their understanding of how a system

works to form or corroborate an opinion about the adequacy or otherwise of a control.

This is done by measuring particular characteristics of selected transactions or

processes and comparing the results with those expected. Testing may be undertaken

at different stages in a system audit.

2.3.2 Types of Tests:

i) Walk through

Walk through or ‘cradle to grave’ tests are designed to confirm the auditors'

understanding of how a system operates. The understanding is likely to be derived

from a combination of observations, interviews, and examination of management’s

documentation of the system. In conducting walk through tests, the auditor looks

primarily for the evidence of existing controls. This may involve examining a number

of different transactions at each stage of the process or following the same transactions

from start to finish. The aim is to follow the system from the input stage through the

processing stage of the resources used to the outputs from the processing, confirming

at each stage the controls in place. The walk through tests should be conducted during

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the period under internal audit and not later to provide assurance that the controls were

operating during the period.

ii) Compliance Testing

When an auditor considers that the internal control is adequate, the next step is

to determine whether the control is effectively and consistently applied. If the

effectiveness of the control is likely to vary the auditor should ensure that the sample

selected for testing takes in to account as far as practicable such variations. The aim of

compliance testing is to obtain assurance that controls established are operating as

intended and are effective. If deficiencies are observed during compliance test, the

auditor will be interested as indicating the possible inadequacy of controls.

Errors found in compliance testing may indicate control weaknesses. They do

not demonstrate that the system is failing to achieve its objectives. For example, if in

an audit of computerized system of Ledger posting there are failures to comply with an

instruction that passwords should be changed at regular intervals, it does not mean that

the system was used by unauthorized personnel. The auditor should find out why such

omissions occurred and what steps were taken to check compliance with the

instructions. If the system provided for such checks to be undertaken by this control

was not being applied the auditor should report that the controls appear to be adequate

but were not consistently applied. The auditor would also consider the risks involved

and the need for more stringent controls. The auditor should be more concerned with

the reasons for errors or omissions and the effectiveness of controls rather than the

mistakes themselves.

Conversely, records of controls, for example signatures confirming that checks

have been exercised are not taken as proof, the auditor needs to re-perform the process

to discover any instances found otherwise.

iii) Substantive Testing

The purpose of substantive testing is to enable a conclusion to be reached on

the completeness, accuracy and validity of information and records. It is concerned

with output rather than adequacy of controls. It is sometimes used as a means of

demonstrating the existence or seriousness of weaknesses when the auditor is unable

to convince the management by any other means.

2.4 Testing Strategy

The auditor should decide:

• What to test

• What each test is for and

• How to test.

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Each test should be expected to lead to or corroborate an audit opinion. It

should take account of the analysis of risk and materiality undertaken as part of the

evaluation control. Where the auditor is satisfied that there are weaknesses, there is no

point in testing unless, the auditor wishes to test whether significant control

weaknesses have been exploited. There is no other way in convincing management of

the existence or seriousness of weaknesses with out the evidence provided by the tests.

2.4.1 Standards

Standards are necessary to compare the results of testing. The provisions of

various codes, manuals, rules, regulations and instructions provide the yardstick

against which test should be carried out and reported.

2.4.2 Period of testing

Tests should normally be biased towards the current period. If changes in

operating conditions, i.e. performance of a particular staff, peak working period etc.

are likely to affect the controls, auditor should take these also into account in selecting

transactions to make sure that audit findings are representative.

2.4.3 Level.

There can be no hard and fast rules about the amount of testing necessary

except that the auditor should take into account the materiality of possible failures to

meet objectives. The cost of testing large populations is usually prohibitive unless

computer interrogation is possible. Statistical sampling techniques may be used in

testing such populations by manual methods. In some cases judgment sampling may

be adequate. To decide on the level of audit testing the auditor should take into

account the following.

Testing objective:

The aim of testing objective is to confirm the auditors’ understanding of the

system (walk through) to test the application and effectiveness of controls

(compliance) or to attempt to quantify the impact of a weakness (substantive).

Risk and materiality:

The relative risk and materiality of failures to achieve objectives.

Results of evaluation of control by auditor:

This will influence the need for testing. The out come of previous audit and

changes in personnel or system could also affect the nature and extent of tests.

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Time available:

This tends, in practice, to be the principal limiting factor. The Internal audit

team leader should refer to higher levels of management if there is good reason to

devote more time than planned.

The variability and volatility of the population is to be tested.

The acceptance criteria and confidence levels desired by the auditor.

2.4.4 Sequence

The order in which tests are performed depends on the audit objectives and

how far controls inter-relate. Output from one test often provides inputs to another.

For eg. in auditing a pay roll system it is important to test that all new entrants are

authorized and placement on the pay scales is correctly made. The authorization yet

should provide successful items from which the Auditor might select a sample on

which to perform pay scale Test.

Where the controls inter-relate it is important to co-ordinate testing especially

where the work is shared between Auditors. Uncoordinated tests can be wasteful and

may not achieve the testing objective

2.5 Inter related controls

Where a system comprises a set of inter-related sub systems, the auditor will

have to separately analyze and test the controls in each sub system before forming a

judgment on internal control as a whole.

2.6. Appraising the Results

During testing, there needs to be a continuing appraisal of the results so that the

auditor can decide whether to change the testing strategy. For example, when auditors

perform compliance tests on a control and find some non-compliance, they must

decide whether to continue to rely on that control and if not how their earlier

evaluation is affected. The following are some of the questions to be considered.

• How important is the control?

• Are there compensating or complementary controls which reduce its intrinsic

importance?

• How serious are the deviations and why did they occur?

• Is further testing necessary and feasible?

• Is any control failure likely to be isolated or recurring?

• Is any weakness so serious that management needs to be informed urgently?

The conclusive appraisal takes place when all tests have been completed and

the results summarized and analyzed. The auditor must decide,

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• Whether the testing objectives have been achieved.

• What conclusions have been drawn.

• Whether the findings show serious or minor weaknesses.

• The cause of weakness and what corrective operations are available.

The auditor is not simply keeping a score of errors found. The purpose is to

form an opinion about the reliability of the controls, which requires an intelligent

appraisal of the testing results. Absence of errors does not necessarily prove that the

control was applied in all cases.

2.7 Techniques of examination

Observation, inquiry/interviewing; analysis and re-performance are the main

techniques of examination. Observation is important where there is no permanent

record of activities. For example, discrete observation can reveal whether there is

improper access to a restricted computer area despite stringent formal controls.

Interviewing is useful where evidence is absent or unclear. Care should be

taken because, the behavior of the auditor could affect the attitude of the auditee and

an insensitive approach could lead to an un-cooperative and defensive reaction.

Where a transaction or process comprises a set of inter related parts the auditor

may need to analyses and verify each part before a judgment is formed about the

whole. For example in the case of contracts and agreements where the soundness of

the contract itself depends on the nature and inter relationship of its individual terms

and conditions it should be ensured that appropriate controls exist over the process of

developing the contract and also conduct compliance tests to confirm that,

• the relevant documentation is free from ambiguity or contradiction

• is comprehensive and

• is in accordance with prescribed policy and instructions.

Verification involves the confirmation of the truth, accuracy or validity of the

transactions. The role of audit is to evaluate and test the controls and not to confirm

the validity of data as an end in itself. In using verification tests, the auditor should

ensure that they are related to the operation of controls. The methods used are,

Comparison: with some ascertainable fact or standard. For example, those manuals

are up to date or passwords of a computer system have been changed at

prescribed intervals.

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Confirmation: Checking statements of performance. For example, checking with

Finance & Accounts Department whether previous papers of retiring

employees were sent in a timely manner as claimed by Administration,

Vouching: Checking a transaction against supporting documentation. For example,

payment to a supplier against purchase order and stock entry.

2.8 Re-performance

Re-performance is relevant where calculation or measurements have been

supposedly checked as a control and the auditor wished to check that the control

actually operated. For example, the internal auditor may recalculate the balance as per

Cash Book or re performs the calculation in a pension authorization.

2.9 Delegation of Powers

In the Management terminology delegating the powers provide for demarcation

of responsibilities at various levels and assessing the individuals to see whether they

are suitable for carrying the tasks in terms of ability, motivation and time available.

The basic purpose of delegation is to delegate powers and responsibility.

The internal audit guidelines relating to internal audit of delegation of powers

are indicated below:

1. It should be seen that the delegation of powers clearly provide for demarcation

of responsibilities and duties of different officials of Board.

2. Whether the business is conducted in accordance with delegation of powers?

3. Whether there is periodical review of the delegation of powers to ensure that

the responsibilities entrusted to various officials can be carried out with in the

powers delegated to them.

4. The delegation of powers is readily available with the concerned authorities to

enable them to check whether they are exercising their powers according to the

delegated authority.

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Chapter 3

Sampling in Internal Audit

3.1 General

3.1.1 The internal auditor applies audit procedures like inspection, observation,

enquiry, and confirmation, computation and analysis to various types of records,

transactions and account balances. He can apply such techniques to an entire data or

may choose to draw a sample of items selected from it. This process is called audit

sampling by which testing of less than 100% of the items within a population to enable

to form certain conclusion about the population.

3.1.2 The population can be a class of records, transactions, or account balances. The

documents which are needed to be examined for particular tests can be regarded as

populations for example, GPF ledger cards, P.P.Os, GPOs, salary bills, contingent

bills, vouchers, subsidy payment records, etc.

3.1.3 Sampling is a process of learning about a great deal by looking at a little.

When using sampling, Internal Auditor should accept the risk that the sample selected

may not fully represent the population i.e., the characteristic projected from the sample

may not be the same as those that would be found if the entire population were

examined. Thus sampling is only a means to an end and not an end in itself. The

sample and sample results should be analyzed for materiality, reasons, causes, and

actual or potential effect.

3.1.4 When deciding how much testing of a population to do the internal audit has a

combination of options available like

i) 100% testing

ii) examining some transaction and items selected on a basis decided.

(Selective Testing)

When the auditor applies his tests to a representative sample of transactions,

and balances it is called Audit sampling.

3.1.5 The Internal Auditor must make a judgment as to whether sampling is an

appropriate way of obtaining some of the audit evidence required. Amongst the

factors that must be considered are,

• No. and relative size of items in the population.

• The materiality of and inherent risk of error in the items concerned.

• The relevance and reliability of evidence produced by alternative tests and

procedures and

• The relative time and costs involved in each.

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3.1.6 Hundred percent testing is normally not required and also not practicable.

However sometimes it may be necessary to carry out 100% testing of a particular part

of population depending upon their value or high risk of error or in case of unusual or

suspicious items or weak areas. Sampling can be applied to the balance population.

In some cases sampling may not be necessary or applicable. For example,

when the internal auditor is reviewing the attendance register of a section or the

inward or outward registers about their general maintenance, he may feel that an

overall review of the register for a period may give the desired result. The internal

auditor should apply analytical procedure (like ratios comparison, checking for

unusual items etc.) on the entire population or a strait of population possessing a

particular characteristic, instead of using only a sample. On the other hand, whether

I.A checks the pension cases authorized by the Administration wing, he may find that

using a representative sample would give the desired result.

3.2 Fundamental principles of sample selection

3.2.1 Procedure for sampling

In any sampling procedure, the following fundamental principles should be

applied.

a. Define the audit objective.

b. Know what is being tested i.e. know the population. This is required as, audit

conclusions are based only on the sample taken from that population.

c. Establish the sampling unit in terms of audit objectives.

d. Give every item in the population an equal chance of being selected. Thus

when the population and sampling unit are properly defined, the whole audit

thrust and approach improve. A good practice is to plot the population on a

database or spreadsheet before sampling to identify sub populations or strata.

The principles on which scientific sampling is based operate only if the sample

is selected at random.

Thus the initial questions must be,

1. What are the objectives of present audit?

2. What is the population to be tested? And

3. What are the sampling units required to be examined.

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3.2.2 Simple Random Sampling

Simple Random Sampling is considered as the most likely method to obtain a

representative sample if there are no wide variations in the characteristics of the items

making up the population. The selection method makes use of random number tables.

The tables provide substantially complete assurances that every item in a population

has an equal chance of being selected.

3.2.3 Stratified Random Sampling

If there are wide variations in the amount or characteristics of the items making

up the population stratified sampling is generally used. In stratified sampling, the

auditor separates the population into two or more strata with in each stratum and their

samples are taken from each. Stratified sampling provides greater sampling efficiency.

Normally, the auditors set aside the largest or more expensive or most

significant items in a population for detailed examination and then select a sample

from the remainder. This two strata approach has been traditionally used.

If the population is sub divided into different strata carefully, it can help reduce the

number of items needed to obtain a representative sample of the population.

3.3 Sampling Methods

There are basically three methods of sampling viz. attribute sampling, variable

sampling and probability proportional to size sampling. Of these, attribute sampling is

more relevant to Internal Auditors. Attribute sampling calls for ‘right’ or ‘wrong’,

‘yes’ or ‘no’ type of answers. It is used for testing systems of internal control. It is

concerned with the estimation of numbers of errors or other characteristics in a

population. A statistical conclusion obtained from statistical sampling that control had

failed 6 times out of 100 would considerably assist the auditor in making his

assessment of the strength of the control.

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Chapter 4

DETECTION AND PREVENTION OF FRAUD

4.1 General

It is recognised that internal auditors are not only responsible for detection of

fraud but also for assisting in the deterrence of fraud by examining and evaluating the

adequacy and effectiveness of the internal control system, commensurate with the

extent of the potential exposure/risk in the organization’s operations. Adequate control

is the principal mechanism for deterring fraud and limiting its exposure, and the

primary responsibility for establishing and maintaining control rests with management.

4.2 What is Fraud

The term 'fraud' can be defined as a set of irregularities and illegal acts

characterised by intentional deception. A fraud may be for the benefit of or to the

detriment of the organisation and by persons outside as well as inside the organisation.

Thus, an irregular or illegal act carried out intentionally would be a fraud even if it

benefits the enterprise. For example, issue of predated cheques after the close of the

financial year would be a fraud even if it results in better allocation of funds/grants

from Government. This is because such fraud benefits the organization by exploiting

an unfair or dishonest advantage that deceives Government or other funding agencies.

Perpetrators of such frauds usually benefit indirectly, since personal benefit usually

accrues when the organisation is aided by the act.

Frauds which are detrimental to the organization include acceptance of bribes,

collusion with contractors/ suppliers, embezzlement by misappropriation of money or

property and falsification of financial records to cover up the act, intentional

concealment or misrepresentation of events or data, or claims submitted for services or

goods not actually provided to the organisation.

4.3 Overall Controls for Fraud Prevention

The internal auditors should determine whether:

(a) the organisational environment fosters control consciousness;

(b) realistic organisational goals and objectives are set;

(c) written policies (e.g., code of conduct) exist that describe prohibited activities

and the action required whenever violations are discovered;

(d) appropriate authorisation policies for transactions are established and

maintained;

(e) policies, practices, procedures, reports and other mechanisms are developed to

monitor activities and safeguard assets, particularly in high-risk areas;

33

(f) communication channels provide management with adequate and

reliable information; and

(g) recommendations are made for establishing cost-effective controls to

help deter fraud.

While the internal auditor conducts examination of transactions to a reasonable

extent, he cannot conduct detailed audit of each and every transaction. Accordingly,

internal auditor cannot achieve absolute assurance that non-compliance or

irregularities do not exist.

4.4 Internal Auditors’ Role in Detecting Fraud

An internal auditor's role in detecting fraud is to:

(a) have sufficient knowledge of the characteristics of fraud, the techniques used

to commit fraud, and the types of fraud associated with the activities under audit to be

able to identify indicators that fraud may have been committed;

(b) be alert to opportunities, such as control weaknesses, that could allow fraud. If

significant control weaknesses are detected, additional procedures should include tests

directed towards identification of other indicators of fraud, such as unauthorised

transactions, overrides of controls, and unexplained pricing exceptions. Internal

auditors should recognise that the presence of more than one indicator at any time

increases the probability that fraud may have occurred;

(c) evaluate the indicators that fraud may have been committed and decide

whether any further action is necessary or whether an investigation should be

recommended;

(d) notify the appropriate authorities within the organisation if there are sufficient

indicators of the commission of a fraud to recommend an investigation.

When an internal auditor suspects wrong doing, the appropriate authorities

within the organisation should be informed. Internal audit may recommend whatever

investigation is considered necessary in the circumstances.

4.5 Investigation of Fraud

Investigation of fraud consists of performing extended procedures necessary to

determine whether fraud, as suggested by the indicators, has occurred. It includes

gathering sufficient information about the specific details of a discovered fraud.

Internal auditors, lawyers, investigators, security personnel, and other specialists from

inside or outside the organisation are the parties that usually conduct or participate in

34

fraud investigations.

When conducting fraud investigations, internal auditors should:

(a) assess the probable level and the extent of complicity within the organisation.

This can be critical to ensuring that internal audit avoids providing information to, or

obtaining misleading information from, persons who may be involved;

(b) determine the knowledge, skills, and disciplines needed to effectively carry out

the investigation. An assessment of the qualifications and the skills of internal auditors

and of the specialists available to participate in the investigation should be performed

to ensure that the investigation is conducted by individuals having the appropriate type

and level of technical expertise, including their professional certifications, licenses and

reputation. It should also be ascertained whether any of the above persons has any

relationship with those investigated or to any other employees or management of the

organisation;

(c) design procedures to be followed to identify the perpetrators, extent of the

fraud, techniques used, and cause of the fraud;

(d) coordinate activities with management personnel, legal counsel, and other

specialists as appropriate throughout the course of the investigation;

(e) be aware of the rights of alleged perpetrators and personnel within the scope of

the investigation and the reputation of the organisation itself.

On conclusion of a fraud investigation, internal auditors should assess the facts

known in order to: (a) determine if controls need to be implemented or strengthened to

reduce future vulnerability; (b) design audit tests to help disclose the existence of

similar frauds in the future.

4.6 Reporting Fraud

In reporting fraud, the following should be kept in mind.

(a) When the incidence of significant fraud has been established to a reasonably

certainty, senior management and the board should be notified immediately.

(b) The results of a fraud investigation may indicate that the fraud has had a

previously undiscovered significant adverse effect on the financial position and

results of operations of the organisation for one or more prior years. Internal

auditors should inform Senior Management of the Board/Chairman of such a

discovery.

(c) A written report should be issued at the conclusion of the investigation phase,

including all findings, conclusions, recommendations, and corrective action

taken.

35

(d) A draft of the proposed report on fraud may be submitted to Vigilance Division

for review in appropriate cases.

36

Chapter 5

Internal Audit – Planning and Procedure

5.1 Internal audit wing should prepare an audit plan based on risk analysis. The

assessment of risk should be inclusive of internal as well as external risk factors.

Some of the illustrative risk factors were indicated in paragraph 1.10 of Chapter 1 of

this Manual. In this process, Internal Audit wing would help to identify and evaluate

significant risk exposure and contribute to risk management and internal control in the

office. The audit plan should provide resources for appropriate follow up for audit

resolution of the issues raised in audit.

5.2 It is the duty and responsibility of the I.A Division to completely test check all

the Departments/Divisions/offices of the Board with in a period of four years.

However a different period (cycle time) for coverage is fixed under the Manual

governing the functioning of a particular category of field office, the internal audit of

all sections shall be completed at least once in that period. The internal audit of a

Regional Office/Zonal Office/Section should normally be completed within 3-4 days

and that of a Field Office in 1 or 2 working days. The audit party may consist of a

Section Officer and one Sr. Clerk or an Auditor. This can be varied depending upon

the manpower position and exigencies of work. The Internal audit should be done in

such a way that the various aspects of work done in the office/section are critically

examined and hidden arrears if any are brought to the notice of Chairman. The

working of the offices/sections should be examined with reference to the provisions of

1. FRs and SRs, GFRs, and other Codes and Manuals of the Government of India.

2. Various Codes, Manuals, etc. issued by the Chairman.

3. Rules and Regulations applicable to the Board.

4. Office orders/circulars issued from time to time,

5. Resolutions of the Board and the sub committees.

6. Orders/ directions issued by the Government of India from time to time.

5.3 The three kinds of periodicity for the test check of

departments/divisions/offices are, Annual, biennial and Quadrennial.

5.4 The selection of the offices for test audit should be made on risk assessment. All

the Departments in the Head office and the ICRI should be audited annually along

with other offices assessed to be having high risk. All the other sections should be

audited once in two/four years.

5.5 The divisions under the direct control of the Chairman should also be subjected

to internal audit. The frequency of audit mentioned above may be varied at the

discretion of the Head of Department.

The internal auditors should apply the care and skill expected of a reasonably prudent

and competent I.A. Due professional care does not imply infallibility.

37

5.6 The internal auditor should exercise due professional care by considering the:

• Extent of work needed to achieve the assignment objectives.

• Relative complexity, materiality or significance of matters to which audit

procedures are applied

• Adequacy and effectiveness of risk management, control and governance

process.

• Probability of significant errors, irregularities etc.

• Cost of an audit procedure in relation to potential benefits

Internal auditor should use the computer aided audit tools and other data for

analysis techniques.

5.7 The illustrative checks to be carried out during the test audit of

departments/offices are indicated in the subsequent chapters of this Manual. These

checks should be supplemented by preparing detailed checklists based on the

provisions of Codes/Manuals/Rules and instructions. It will be the responsibility of

the Internal Audit wing to conduct test audit in an adequate manner to attain their

objectives. The test checks should be applied to a sample of transactions, items of

work selected on random basis as well as the month selected by the Dy. Director for

detailed review.

5.8 Test check by I.A Division amongst other things includes surprise check of

administration sections (including cash).

5.9 The errors and omissions pointed out by Internal Audit should be corrected

expeditiously after issue of the Report. The Heads of Divisions/ offices should

submit the compliance report to the Head of Department with in one month of date of

issue of the Report. In cases where the Compliance Report is not received, the Internal

Audit Division should invariably verify after two or three months or within the

timeframe fixed by the Chairman whether the errors or omissions pointed out earlier

have been rectified and the persistent repetitions of the same defects should be brought

to the notice of Head of the Department/Chairman.

5.10 Important items of work to be seen personally by supervisory officers

During test audit, important items of work are to be seen by the Section

Officer. An illustrative list is given below:

• Investigation of important arrears.

• Review of corrections to ledger balances.

• Consolidation of monthly arrear reports.

5.11 The Dy. Director (Internal Audit) should personally see the following items of

work without intervention of the Section Officer.

1. Review of Cash Book

38

2. Disposal of Telegram/Fax messages/E mail/VIP references/ Parliamentary

Questions, etc.

3. Check of monthly reports of outstanding letters, etc.

4. Periodical returns and reports to the Government of India.

5.12 The Chairman may at his discretion vary the cycle of test check according to

the circumstances and needs of the office and utilize Internal Audit Division for

corrective action in areas found weak or defective

5.13 Horizontal check

Horizontal check is the check of certain processes done in various sections of a

Department whereas the test audit is in respect of a Department/ Division/office

selected (it covers all items of work in the Department/ Division/office). Horizontal

check is carried out in respect of an item common to many offices of a Department.

Horizontal check of an item gives a comparative picture of that item in different

Departments/Divisions/Offices. It is supplementary to test audit of the

Department/Division/Office. It is left to the discretion of the Chairman to arrange for

the horizontal check whenever he considers it to be necessary and useful.

5.14 The following records of at least one department/division should be taken up

during each quarter, for Horizontal check.

1. Calendar of Returns.

2. Register of statistics.

3. If considered necessary one or more items from the following may also be

selected for Horizontal check.

i. Register for watching receipts of Government orders.

ii. Register of advances and adjustment of advances

5.15 List of items of work, which may be entrusted to Internal Audit

• Check of statistics in support of staff proposals.

• Cent percent review of all complaint cases which were not settled for six

months from the date of complaint

• Test of 5% to 10% complaint cases received in the office.

• Scrutiny of Reports of audit and review conducted by the Accountant General

(Audit)

• Adequacy or otherwise of existing arrangements for audit and review.

• Correctness of audit fees charged/paid.

• Fixation of price of periodicals

• Fixation/revision of testing fees fixed for various tests carried out by QEL and

ICRI.

• Maintenance of Guard File for Office Orders.

• Monitoring of the implementation of important office orders issued from time

to time

39

• Fixation of subsidy under various schemes with reference to the estimated cost.

• Fixation of mileage for operation of departmental vehicles.

• Pre check of work bills.

• Pre check of pensionary benefits to retiring employees.

• Pre check of subsidy claims and payments

• Periodical review of cash Book

• Test check of Service Books and leave account

• Scrutiny of service books of personnel who would be completing 30 years of

service or attaining 55 years of age.

• Independent scrutiny of details in support of Budget proposals of different

wings.

• Check of rosters for reservation of vacancies for candidates belonging to

Scheduled Castes and Tribes.

• Check of Honorarium and Overtime claims.

• Check of Gradation list.

• Review of complaints addressed to the Government.

• Review of calendar of Returns and Attendance Register.

• Liaison between audit parties of Accountant General and other inspection

parties from Government of India.

• Investigation of procedural omissions / irregularities and lapses brought to the

notice by the Accountant General..

• Checking of quality of audit conducted and commenting specifically on this

aspect in its report so that suitable measures may be initiated for improvement

wherever necessary.

• Any other special work allotted by the Chairman.

.

5.16 Programme of work

The programme of work of I.A Division for each quarter should be got approved

by the 5th of the month preceding the quarter. The Department/Division/Office to be

taken up for audit, items for Horizontal check and the month of account for detailed

scrutiny etc. should be got approved by the Chairman. After the selection is done

intimation should be sent to the offices concerned by 10th of the month preceding the

month in which test audit is to be taken up for keeping the records ready.

As far as possible all offices in a functional group should be taken up for test

audit in one spell. In the case of larger functional groups comprising of several

subgroups, test audit of all offices in one subgroup should be arranged as far as

possible. The number of offices taken up for test audit in various quarters should as

far as possible be evenly distributed. The actual number of sections to be taken up for

check in each month or quarter will depend upon exigencies of circumstances

The Offices should furnish, the records called for by I.A Division on the same

day and the Inspecting Party should return the records promptly on completion of the

40

test check. The common defects in the working of the offices noted during the test

audit should be periodically brought to the notice of these offices by issuing circulars.

The Dy. Director (Internal Audit) will be responsible for the general

supervision of the work of the entire I.A Division. The duties and responsibilities of

Dy. Director (Internal Audit) and the staff attached to the Division are given in the

Manual of Administration.

5.17 Progress Register

The issue, return and the submission of the Internal Audit Report to the

Chairman and its final closing should be watched through a Progress Register. A

separate Progress Register may be maintained to watch the disposal of Service Book

Check Reports.

The Internal Audit Division should issue reminders to defaulting Offices

through the Head of the Department concerned, and also bring to the notice of the

Chairman, the position of outstanding reports once in a month indicating the offices

which have not furnished the replies to the report and the period from which the

reports are outstanding.

5.18 Preservation of records.

The Internal Audit Reports may be preserved for a period of two years after the

closure of the Report on settlement of all the paragraphs.

41

Chapter 6

Internal Audit of Administration Group

6.1 General

This chapter covers internal audit of Administration Group. The

Administration Department is under the immediate control and supervision of the

Secretary. The department is responsible for providing administrative services to the

personnel and other functional departments of the Board. The following divisions are

coming under the Administration Department.

1. Administration

2. Official language

3. Engineering

4. Publicity

5. Library & documentation and store

6.2 Administration Division

6.2.1 The Administration Division comprises of both personnel administration and

general administration. The functions of Personnel Administration branch includes

mainly the following.

1. All matters connected with selection, appointment, promotion, transfer and

posting etc. such as-

a) Advertising the posts/collecting lists from Employment Exchange and tabulation.

b) Scrutiny of lists of candidates/applications and obtain approval for test/interview.

c) Conduct of test, arrangement of valuation of answer papers, tabulation and

selection of candidates for interview.

d) Constitution of selection committees and arrangements for interviews, fixing of

selection norms for interview, publication of results and offer of appointments.

e) Scrutiny of documents of those who join duty and issue of posting order.

f) Maintenance of transfer norms, detailed examination of claims and

representation etc., discussions with service organisations connected with

transfer and posting of employees.

g) Promotion, transfer and postings of officers and staff, holding of DPC for the

purpose of promotion etc.

h) Assessment for promotion under FCS, award of higher grade under ACP Scheme

and Career Improvement.

2. Reservation in appointments with reference to:-

a) Maintenance of post based rosters and brochure on Government instruction etc.

regarding reservation in employment of SC/ST/OBC and PH.

b) Appointment of Liaison Officer in the Board for SC/ST communities and

Physically handicapped (PH) to ensure compliance of Government instructions

and periodical reports to the Government.

3. Maintenance of employee records and statistics:

42

a) Maintenance of prescribed registers/files/records/returns/statement etc. in regard

to employment of personnel.

b) Compilation of employee statistics for various purposes.

c) Collection of information from sister organizations on employment matters like

conditions of service, strength of staff, recruitment rules etc. for statistical and

comparative studies.

4. Other matters with regard to:

a) Examination of representations from service organizations and individual

employees regarding service matters

b) Preparation of material for court cases on service matters.

c) Assistance to work study unit for assessment of staff strength

d) Correspondence with the Government seeking permission to fill up the direct

recruitment posts under Recruitment Regulations.

e) Correspondence with the Government / other Government organisations on

personnel matters

f) Processing of applications received under Right to Information Act and

g) other matters concerning deployment of personnel and any miscellaneous items

entrusted from time to time.

5. All matters connected with -

a) Pension, gratuity and other terminal benefits of all employees of the Board.

b) Maintenance of service books, leave account and personal files of the employees

(including attestation of entries in the service books by authorised officers)

c) Probation and confirmation of employees including periodical review for

consideration of eligible cases.

d) Grant of house building advance for employees of the Board.

e) Grant of vehicle advance (car/scooter/cycle) and other advances such as festival

advance/drought/flood advance, fan advance etc. to employees of the Board.

f) Grant of increments.

g) Sanction/passing of pay bills.

h) Reimbursement of medical expenses.

i) Supply of uniforms and chappals and payment of washing allowance to eligible

staff.

j) Group insurance schemes/accidental insurance

k) Sanction of leave travel concession

l) Conveyance allowance to handicapped employees

m) Incentive for small family norms

n) Immediate relief to the family of employees who die in harness

o) Fixation of honorarium/fees for different purposes and issue of sanction orders in

eligible cases

p) Granting permission for staying beyond the limits of headquarters.

q) Any other matter connected with staff entitlements and welfare.

r) Deputation/foreign service of employees and connected matters.

43

s) Issue of identity cards to employees and pensioners and issue of authorization

letters for inspections envisaged under the Act/Rules.

t) Forwarding of applications for outside posts.

u) Issue of no objection certificates for travel abroad and for various other purposes.

v) Leave of all kinds

w) Issuing certificates to trainees

x) Issuing salary certificate

6.2.2 The following functions would mainly constitute the activities connected with

General Administration

1. Running and maintenance of vehicles including registration, payment of tax,

insurance, approval of workshops for the Board as a whole, annual contracts for

purchase of tyres and tubes, half yearly mileage testing for the entire vehicles of the

Board, action on internal audit inspection reports on fuel consumption and the use of

vehicles in general, allotment of vehicles for approved purposes and recovery of dues,

purchase of new vehicles, disposal of old/ unserviceable vehicles, issue of policy

guidelines on vehicle maintenance and operation, and maintenance of register/records

connected with the vehicles.

2. House keeping, caretaking and allied functions connected with caretaking and

maintenance of Board’s headquarters premises and the buildings including numbering

of Board’s furniture and equipments.

3. Telephone/telex/telefax/photocopying, electricity, water supply services and

their proper maintenance and keeping of registers for recovery of dues.

4. Opening/sorting/distribution of dak, etc. and timely presentation of

Government. letters and other important communications to the Chairman/ Secretary

/other Heads of Depts.

5. Arrangements for central inward (CDS)/dispatch, cyclostyling, photocopying,

etc.

6. Routing of files received from the Secretary/Chairman with orders and also of

files received from other offices.

7. Transfer of telex/telefax/telegraphic/telephonic messages to the respective

offices.

8. Functions connected with Departmental Canteen of the Board, formation of

Management Committees and enforce administrative control.

9. Issue of office orders/circulars/delegation of powers and circulation of

Govt.orders.

10. Issue of instructions to all Departments of the Board on general administration

matters based on Govt. instructions/decisions of the Chairman.

11. General administrative matters relating to purchase of land/ construction of

building, hiring of building for offices / Guest Houses, fixing rent, execution of lease

agreements, their renewals, etc. and allotment of space, sanction for purchase of

furniture, equipments, sweeping charges, other facilities, etc.

12. General Administration matters in regard to-

a. Fixing/revision of rent rates of Guest rooms under the Board.

44

b. Preparation of budget pertaining to items of work handled.

c. Insurance of Board’s properties.

d. Maintain liaison/co-ordination with other Departments/offices to ensure

efficient functioning of the Board’s establishment.

e. Convene periodical meetings to review progress in secretarial and other

activities of different departments and take steps to issue minutes thereof.

f. Compile monthly progress report of the Dept. of Administration.

g. Reservation of tickets, arrangements of accommodation for Chairman, Board

members, officials/ visiting dignitaries, etc.

h. Arrangements of lunch / refreshments, etc. for meetings as and when

necessary.

i. Any other matter connected with general administration not particularly

included.

13. Follow up action to issue instructions, watch and implement decisions taken on

the inspection reports of Dy Director (Internal Audit).

14. Allotment of staff quarters and arrangements for recovery of dues, implementation

of quarters’ allotment rules, etc.

15. Redress of public grievance including preparation of quarterly returns on

progress of their disposal.

16. Ensuring adequate amenities and working conditions for the staff and disposal

of their grievance and representations of service organizations in this regard.

17. Disposal of unserviceable articles and stores.

18. Maintenance of stock file.

19. Recognition of service organizations and collection of periodical returns from

them.

6.2.3 The illustrative checks to be exercised and points to be seen during internal

audit are given below:

(a) Staffing

(i) The number of sanctioned posts for the office in each cadre, the number of

persons actually in position and reasons for any variation may be obtained.

(ii) Number of temporary posts, if any, specially sanctioned for clearance of

arrears/special items of work indicating the period of sanctions and other

details may be obtained.

(iii) How many ad-hoc/casual/temporary posts (Group-wise) were sanctioned

during the last three years and for what purpose? How many posts were filled

in? What are the periods for which those were filled in?

(iv) Whether the retentions of staff in various cadres are reviewed from time to

time in terms of the declared transfer policy (vide para 2.58 of the Manual of

General Procedure) and in cases of prolonged retention whether the orders of

the Chairman have been obtained.

(v) Whether confirmation of any person in initial cadre is held up; if so, ascertain

the reasons cadre-wise and individual-wise.

45

(vi) How many persons could not be sent on training after recruitment during the

period from last inspection to date and for what reasons?

(vii) Whether there has been any case in which candidates otherwise not

eligible/educationally qualified as per extant orders/rules were given

promotion? Whether approval of competent authority obtained?

(viii) Whether entitlements of Government servants extended with the benefit of

Assured Career Progression Scheme have been checked in the light of

orders/clarifications issued by Government of India?

(ix) Whether the engagement of contract employees/labourers was justified with

reference to norms?

(x) Whether attendance registers are checked by Supervisory Officers periodically

and whether action is taken on crosses for late coming, absence, etc.

(xi) Whether Government of India instructions issued from time to time on

compassionate appointments regarding verification of applications, adherence

of prescribed quota, time limit for making compassionate appointment,

financial condition of the applicant/family etc. are being strictly followed.

(xii) Whether Government’s instructions issued from time to time on post-based

reservations are being followed scrupulously in the maintenance of cadre

wise/methods of appointment-wise reservation rosters? Current status of cadre-

wise backlog of SC/ST/OBCs and efforts made to clear the same may be

examined.

(xiii) Check the material provided to the Departmental Promotion Committee (DPC)

relating to preparation of promotion panels in respect of all cadres.

(xiv) Whether instructions issued by Government of India from time to time

regarding creation/abolition of posts are being strictly followed? If there has

been any case(s) of violation of instruction during the year, the details may be

examined.

(xv) In the revised instructions relating to post based recruitment, the number of

persons-in-position in a particular quota (Seniority/ Direct Recruitment) of a

cadre is not to exceed the number of posts prescribed as per given percentages

in the relevant recruitment rules. Whether there has been any case of deviation

from these instructions? If so, the reasons thereof may be examined.

(xvi) Whether training was given to staff in problem areas? Inter alia see:-

How many training programmes have been conducted during the year/previous

financial year?

What are the topics covered therein and also state the level of participants in

the training programmes?

(xvii) Cases of sexual harassment of working women at work place:

(a) How many cases of sexual harassment are pending

(b) Present position of each case

(c) Whether committee prescribed for the purpose has been formed; if so, collect

details.

(d) Reason for not finalizing the cases so far.

46

(xviii) Whether complaint register to monitor the grievances of SC/ST employees is

maintained and reviewed by the Deputy Director monthly.

(xix) Check the material relating to preparation of gradation list.

(b) Administration Setup and other matters.

(i) Ascertain the distribution of work amongst various Sections in the Department.

(ii) Whether Calendar of Returns is maintained in the prescribed form and

submitted regularly to the concerned Supervisory Officers and Head of

Department (Wherever required)

(iii) Whether any control register is maintained in the Chairman’s office to watch

the timely submission of those returns.

(iv) What are the names of the officials with their designation against whom the

disciplinary proceedings are pending? Also supply the following information

for each case:-

a. Date of incidence

b. Date on which disciplinary proceedings initiated

c. Nature and present position of the case

d. Since when pending

e. Reasons for not finalizing the case so far

f. Any other remarks to be offered by Administration in regard to delay in

finalization of disciplinary cases.

g. Check the records relating to grant of cash awards with reference to the

eligibility, and relevant rules.

h. Check the material relating to preparation of Annual/Administration Report.

(v) Court cases/Tribunal cases

Information in the following proforma may be collected and examined

Year Nature

of case

in brief

Date of

filing

Date of

disposal

Whether

disposed of

in favour of

Board or

employee or

any other

party

Expenditure

incurred

If not

disposed,

stage at

which

pending.

Reasons

for

delay, if

any

(1) (2) (3) (4) (5) (6) (7) (8)

47

(c) Service Books

1. Internal Audit is required to test check the service books of the office staff.

For this purpose, IA should maintain a register of service books in alphabetical

order. In the first quarter of each year, this register should be updated by

taking note of service books for check every quarter.

2. The selection will be done in such a manner that all the service books are

subjected to check within a cycle of four years. The check of service books

should be conducted with reference to the personal files in respect of each

official maintained in the Administration Department. A suitable note of

having done the check should be recorded in the service books checked,

indicating the cycle for which the check is done.

3. The service books of the staff of Internal Audit Division should be got test

checked by any other section.

4. When pay fixation is done on the basis of additional charge, regular

promotions, temporary promotions, pay commission recommendations, etc. it

should be checked 100 % in the same year.

5. The remarks raised as a result of the check shall be communicated to

Administration Department in the form of a report. The report should be sent

not later than 15th of the month following the quarter for which the selection is

done. Compliance of the report should be watched and after all the points are

settled, it should be closed under the orders of the Dy. Director (Internal

Audit).

6. A report on the scrutiny of service books should be submitted to the Chairman

on completion of the checking of service books in the last quarter of the year.

Illustrative Checks:

The test check should be conducted on the following lines:-

(i) Check whether entries are attested (including re-attestation after every five

years).

(ii) Check whether the record with reference to which the date of birth has been

verified is noted against the entry in the service book.

(iii) Check whether the entries regarding physical fitness, verification of

antecedents etc. have been noted in the service book

(iv) Check whether there are any erasures, overwriting or unattested/unauthorized

entries in the service book.

(v) Check whether particulars regarding the appointment, promotion, punishment,

etc. have been correctly recorded quoting relevant orders.

48

(vi) Check whether signature of employee is taken every year in token of annual

verification.

(vii) Check whether services have been verified with reference to pay bills and bank

statement for e-transfer.

(viii) Check whether the date of increment has been worked out correctly with

reference to the data recorded in the service book.

(ix) Check whether service books of all the employees are maintained properly

along with their leave account?

(x) Check whether the leave account has been correctly maintained and the entries

of leave taken, balance at credit, etc. are correct with reference to the leave record in

the personal file/ data in the system and whether leave availed are reconciled with

attendance record.

(xi) Check whether particulars of Foreign Service and the note regarding the

recovery of leave salary and pension contribution (wherever applicable) is taken in

respect of officials who were on Foreign Service.

(xii) Check whether the options exercised by the employee regarding revision of

pay/pension have been pasted in the service book.

(xiii) Check whether the note regarding the receipt of nomination for DCRG is taken

in the service book.

(xiv) Check whether the records of LTC availed of (All India/hometown) are

declared correctly

(xv) Check whether details of family members are kept pasted in the service book.

(xvi) Check whether certificate relating to taking of oath of allegiance/affirmation to

the Constitution of India is available.

(xvii) Check the affixing of photograph of the employees and its renewal after every

10 years.

(xviii) Whether periodical verification of the service books is conducted?

(xix) Whether registers for nomination in respect of DCRG/Group insurance

scheme, family pension, GPF are maintained up to date and periodically physically

verified?

(xx) Whether the options for pay fixation have been received and the same pasted in

the service books.

(d) Employees Group Insurance Scheme

The following points should be seen by internal audit parties.

(i) Whether the head of the Division is maintaining a Register of members in the

prescribed form.

(ii) Whether nominations have been obtained by the head of the division from

each member, they have been pasted in the service Books of the officials and that

entries regarding the receipt of nominations have been made in the Service Books.

(iii) Whether the subscription is being recovered form the salaries of the members

through regular pay bills at the prescribed rates.

49

(iv) In the case of death of a member, whether the insurance money has been

correctly paid? (In addition to the insurance money the nominee would be allowed the

amount from the Saving fund at the prescribed rates).

(v) Whether the recovery of insurance premium at the lower slab has been

continued till the end of the financial year only in case of promotion of an employee

during the middle of a year.

(e) Staff Cars (Board`s Vehicles)

In respect of offices maintaining staff cars/vehicles, the internal audit party

should see that following records are maintained:

(i) Log Book for each staff car in the prescribed form.

(ii) A register of repairs and replacements indicating the cost and dates.

(iii) A register showing the cost of petrol, engine oil, etc. consumed and all

incidental expenditure.

(iv) An inventory of equipment.

(v) Has the mileage test conducted at prescribed intervals and the certificate

recorded in the Log Book?.

Internal Audit should also review the system of purchase of fuel, payment of

insurance charges, road tax, etc. arranging major and minor repairs and utilization of

vehicles.

(f) Log Books

While scrutinizing the log books and their records the following points should be

borne in mind:-

(i) It is maintained in the prescribed form.

(ii) The entries made in the log books are in ink.

(iii) The entries of mileage at the beginning of the journey and also at the

completion of the journey are noted by the officers using the staff cars

themselves except in the case of the Chairman, in which case the entries may

be made by his Personal Assistant.

(iv) The log books are scrutinized by the Asst Director (Admn) Head of Office to

ensure that there is no misuse.

(v) That the log books are closed at the end of each month, and summary showing

details of off duty and on-duty journey performed during the month is prepared

in the prescribed proforma.

(vi) That the staff cars are used for bonafide official duties at headquarters.

(vii) That the staff cars have not been taken outside headquarters without the

approval of the competent authority.

(viii) That staff cars are not used for non-duty purposes to the places of

entertainment, public amusement, play-grounds, pleasure trips etc. and by

officers on leave

50

(ix) The sanction of the Ministry has been obtained for all cases of replacement of

staff cars.

(x) That the average monthly consumption of petrol/diesel per kilometer is

calculated at the end of each month and that this average is not on the higher

side compared to the test mileage obtained.

(xi) The cost of repairs and replacement is not on the higher side.

(xii) That the replacement of the same parts are not frequent.

(xiii) The reasons for frequent repairs/breakdown of the vehicles are not such as to

indicate any negligence on the part of the drivers.

(xiv) All the bills paid towards the cost of petrol are entered in the P.O.L Register as

well as in the log book and that the entries agree.

(xv) It should also be seen that D.D.O has recorded the following certificates on the

contingent bills relating to payment of petrol:-

a. Certified that the quantity of petrol purchased has been entered in the log book

of the respective vehicle.

b. Certified that the necessary recoveries have been made/are being made from

the parties concerned who have used the staff car for non-duty journeys.

(xvi) That all non-duty journeys are charged at the rates specified in para 20.15 of

the Manual of General Procedure and the charges at these rates are recovered

promptly for the distance covered by the staff car from the time it leaves

office/garage till returns to office/garage.

(xvii) That the controlling officer has personally checked the inventory of equipment

every month and any loss arising out of negligence is made good through

appropriate recovery.

(xviii) That no cleaner has been appointed for cleaning of the staff car.

(xix) That no extra allowance is paid to staff car drivers for cleaning and washing of

the cars as this forms a part of their duty.

(xx) That the staff cars are not parked at the residences of the drivers or of the

officials.

(xxi) If overtime allowance has been paid to the driver for non-duty operations, the

same has to be recovered from the employee concerned along with the charges.

(g) Grants-in-Aid

Grant-in-aid to Medical institutions and Educational institutions and

educational stipend to children of Cardamom Workers are administered by the

Administration Department. Internal Audit should conduct:

(i) Scrutiny of the methods by which the sanctioning authority satisfy itself of the

fulfillment by the grantee of the conditions precedent to the issue of sanction.

(ii) Test check of the accounts or the returns submitted by the grantee to see that

the conditions were actually fulfilled.

The test check referred to above is conducted normally in the office of the

sanctioning authority. It should be seen that before sanctioning grants-in-aid, the

51

sanctioning authority has satisfied itself that proper arrangements exist for the scrutiny

of the accounts of the grantees and that rules have been framed to ensure that grants

are utilized by the grantees for the purpose for which they are intended and that

unspent balances are refunded to the Board after the close of the financial year.

The following points should receive special attention

(i) The grant-in-aid was properly spent on the specified objects within the time

allowed in the sanctioning order or within a reasonable time, if no limit has

been fixed.

(ii) Money has not been unnecessarily drawn in advance of the requirements to

avoid lapse of funds.

(iii) The conditions attached to the grants-in-aid are fulfilled.

(iv) Any portion of the amount of grant-in-aid which is not ultimately required for

expenditure upon the specified object is promptly refunded to the Board and

that no unspent balance of the previous grant-in-aid, if any, is lying with the

grantee.

(v) That the register of grants-in-aid is maintained by the sanctioning authority in a

proper form and all columns provided therein are complete and correctly filled

in.

(h) Pensionary benefits

(i) How many service books of officials who have completed 30 years of service

or left with 5 years service for retirement are to be verified as envisaged in

CCS (Pension) Rules as on date?

(ii) Whether there are any cases of persons who have already retired from the

office but whose pension cases/final payments of PF have not been finalized?

If so, the details of each case and reasons for the delay may be obtained in the

following proforma:-

Sl.

No.

Name

of the

official

Design-

ation

Date

of

retire-

ment

Date

of

PPO

Date

of

GPO

Date of

Payment

of leave

encash-

ment

Date of

Payment

of PF

dues

Reasons

for

delay

Remarks

1 2 3 4 5 6 7 8 9 10

(iii) How many nominations for Central Government Employees Insurance Scheme

in respect of the employees of the Board/Office have been received, accepted

and kept in Vol.II of the Service Books and how many nominations have not

been received? What action has been taken to obtain the same in the case of

wanting nominations? Whether the register for the purpose is being submitted

to the Dy. Director periodically with analysis of wanting nominations?

52

(iv) Whether periodical physical verification of nominations for family pension and

Death-Cum-Retirement Gratuity was being carried out? If so, the results of

physical verification may be seen.

(v) Whether there are court/CAT cases regarding pensionary benefits? If yes,

obtain full details.

(vi) Whether those employees having date of birth on first of a month has retired on

superannuation on the last day of the previous month.

(i) Stock registers

1. Accession Register

(i) Whether Accession Register as prescribed in GFR (Form No.MGP/36) is

maintained for Codes and Manuals and other books and physical verification is

being carried out annually? When was the last physical verification? What

action was taken to set right the discrepancies?

(ii) What are the names of local manuals maintained in the office (Group-wise)?

Which is their year of print (1st edition)? Which is the year of latest

publication?

(iii) Whether up to date correction slips have been issued and pasted in the

respective manuals?

(iv) Whether any manuals/regulations are lying with Government for approval? If

yes, since when and what efforts have been made by the office to get the

manuals printed early.

(v) Whether proper record of books issued to various functional groups/offices and

field units have been maintained and availability of books reported by them

annually, before the date of annual physical verification of books.

(vi) Ascertain the value of books purchased during last three years indicating the

value of Hindi and English books purchased.

(vii) Ascertain the details of review of old books, codes and manuals conducted

during last three years to weed out the books no more required.

(viii) Similar information may be obtained in respect of sale of waste paper, scrap,

etc.

2. Computers, Typewriters, etc.

(i) Whether proper records are maintained regarding all machines and equipments

and whether any typewriters, accounting machines, duplicators, computers,

printers or other machines are lying out of order? If so details thereof may be

obtained along with the dates from which they are lying out of order and action

taken to get them repaired? In case any of them are unserviceable, the action

taken to dispose them off may be verified.

(ii) Whether Annual Maintenance Contracts (AMC) were entered into for

computers, printers, etc.

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(iii) Whether annual physical verification was conducted? If so, when was the last

verification done and with what results?

3. Dead Stock Register

(i) When was the last stock verification of dead stock articles carried out?

Whether the verification disclosed any Surplus/Shortages? If so, whether the

shortages have been got regularized and surplus taken to stock?

(ii) Whether a separate register of repairable/unserviceable furniture maintained to

account for the repairable and unserviceable items.

(iii) Whether furniture articles are lying in unserviceable condition? If so, what

steps have been taken to get them repaired or to dispose them off?

(iv) Expenditure (year wise) incurred on repair of furniture during last three years

may be collected and reviewed.

(v) Whether the reconciliation of dead stock articles has been done? If not, reasons

for delay may be stated. Action taken to utilize/dispose of the items may be

ascertained.

(vi) Whether all the consumable and non-consumable items are entered in the

registers?

(vii) Whether proper record is maintained in respect furniture and other items

supplied to officers’ flat/residence for official use and whether the supply

commensurate with that admissible as per rules.

(viii) Whether proper records are maintained relating to procurement of forms and

stationery including indents for their distribution and stock in hand.

(ix) Whether Inventory Registers and History Sheets of machines, purchased

including typewriters, computers, air conditioners, coolers, vehicles, cycles,

photocopiers, vacuum cleaners, shredders, printers, servers, Fax machines,

UPS,EPBX system etc. are maintained properly.

(x) Whether a stock register of computer hardware and software maintained to

record all purchases made indicating their machine nos./configuration details.

(xi) Ascertain the total number of fire extinguishers in the office and their location.

(xii) Ascertain whether all the fire extinguishers are in working condition? What is

the date of expiry of their refill? Is periodical mock fire fighting exercise is

done?

(xiii) How may persons have been given trainings in fire fighting?

(xiv) Whether all stock items having identification letters/numbers marked/painted

on them.

(j) Asset Register

Check the maintenance of Register of Fixed Assets.

It may be ensured that:

1. Instructions contained in the Administrative orders and circulars issued from

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time to time regarding maintenance of Asset Registers have been observed strictly

while making entries in this register.

2. Items of consumable nature and stationery have not been entered in this

register.

3. The "General Classification of Assets" such as buildings, plant and machinery,

furniture, office equipments, etc. has been adopted while making entries in this

register. When a main head of asset is entered, all items coming under that head and

available in the unit should be entered completely and only thereafter the next main

head and items there under should be entered.

4. Complete description of each Asset has been given to enable an easy

identification.

5. Key numbers have been given in 'Remarks' column against each Almirah,

Table, Cash Box, Cash Chest, File Cabinet etc.

6. Numbers stamped or engraved on each asset such as Diesel

Engine/Motor/Pump set/Bicycle/ Engines and Chassis of Vehicles etc. has been

similarly shown in the description column in the Register against each item.

7. In the case of Typewriters, Computers, Printers, Duplicators, Photo Copiers etc

the serial number of the machine has been given in the 'description' column against

each item.

8. Whenever transfer of charge takes place whether both the relieved and

relieving officer have signed below the last entry in the case of each item, after writing

"Handed over" and "Taken Over" respectively.

9. Whether physical verification of asset has been carried out at the end of each

financial year and necessary certificates of physical verification recorded in the case of

each item in this register. A test check of some major item of assets may be done in

internal audit as well.

10. Whether items damaged/lost/became unserviceable have been identified and

action taken for their disposal.

(k) Old Records management

(i) Whether Registers of Files are maintained year wise by each section

(ii) Whether files for more than two years are reviewed annually by each section to

weed out/transfer the file to old record section.

(iii) Whether any regular review was being done regarding files and records and

weeding them as and when necessary according to the period of preservation

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prescribed? If so, period up to which records destroyed/weeded out may be

obtained/checked.

(iv) Whether Old Records Register was being maintained? The records for the third

preceding year are required to be sent by various sections. Verify the position

of receipt of records in the Old Records Section

(v) Whether physical verification was being done continuously in a faced manner,

in such a way that all divisions are covered in a spell of 2 years?

(vi) Whether orders from Head of Office for weeding out/destruction were obtained

and whether the registers were submitted to the Head of Office after doing the

needful?

(l) System of receipt and issue of letters

(i) Whether periodical verifications by the Assistant Director (Establishment) are

being made in accordance with Manual of Office Procedure with all connected

records to see that all letters received are diarised, action taken and all letters

received for issue were despatched in time?

(ii) Whether the letters required to be sent by E-mails are sent by E-mail? If not,

reasons for the same may be examined

(iii) Whether the computerized Dak Monitoring System has been working

satisfactorily? In cases where the Dak distribution system has not been

computerized whether there is proper arrangement for diarising the Dak?

(iv) Whether there is any delay in distributing the letters among concerned

divisions/sections?

(v) Whether the letters are delivered to concerned officials and acknowledgement

obtained.

(vi) Whether all the letters are entered in the Personal Register maintained by the

concerned dealing hands and also disposal indicated properly by recording

relevant file number in which the letter was dealt with.

(vii) Whether weekly/monthly report of outstanding letters is being prepared and

submitted regularly and submission watched though Calendar of Returns.

(viii) Whether all the letters to be issued are issued immediately?

(ix) Whether there is a system to update the addresses of the different offices from

time to time to avoid delay in delivery, transit loss, etc.

(m) General Maintenance

Check whether the Administration Department is making satisfactory efforts

for the maintenance of the following. (Give remarks as satisfactory/unsatisfactory).

• State of lawns, gardens, open space around office

• State of lawns and garden and open space around residential houses/quarters.

• State of toilets in office

• Cleanliness of corridors and stair cases

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• State of lifts

• Appearance of office building

• State of tables, chairs and side shelves in section

• State of recreation and open playground

• Fire fighting equipment

• Cleanliness of canteen and hygiene in kitchen and canteen.

• State of water coolers, air-conditioners, water filters and desert coolers

• Clean look of curtains, walls, floors, windows, doors, fans and lights in

sections.

• Wearing of uniforms, shoes, etc. by staff to whom liveries are supplied.

• State of compound walls, security fences and deployment of watch and ward

staff in office and residential premises (separately).

• Upkeep of records.

• Maintenance of old record section/room.

• Display of office circulars on the notice board and their periodic removal.

• Exhibition of citizens charter at the entrance of office.

• Whether complaint box is kept at the entrance of the office.

(n) Expenditure

The essential points to be seen in the internal audit of expenditure are as

follows:-

(i) That payments made by DDOs are in accordance with the rules and orders

governing them, their arithmetical calculations are correct and the

recoveries/deductions made from bills are in order; and that the payments are

supported by vouchers and these are sent periodically to Accounts Department.

(ii) For expenditure beyond the powers of Head of Office and other officers,

whether there exists a sanction, either specific or general, accorded by the

competent authority.

(iii) For every payment made, there is a voucher complete in all respect or a

certificate of payment where it is not possible to support a payment by a

voucher.

(iv) The payment is against provision of funds sanctioned by the competent

authority.

(v) The expenditure has not been incurred solely to prevent lapse of budget

allotment.

(vi) In case of work done or purchases made, the accepted tender along with the

rejected tenders, comparative statements and notices of tender are available in

the office of the accepting authority along with the reasons for non-acceptance

of lowest tender.

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(vii) The payment has been made to the proper persons and it has been

acknowledged and recorded so that a second payment on that account is not

possible.

(viii) The charges do not exceed the rates or scale fixed under rules/ orders issued by

the competent authority.

(ix) The payments have been correctly accounted for in the initial accounting

records.

(x) Sub-vouchers and acquittance retained by the DDO are marked cancelled, after

their entry in the payment bill charges register, so as to prevent further use of

the vouchers.

(o) Telephone & STD call charges register

The following points should be borne in mind while conducting the audit of

telephone Bills/Register of Telephones and Trunk/STD calls and the other connected

records.

(i) That telephone with STD facility has been provided only to the officers entitled

to the facility.

(ii) That the telephones register for bi-monthly rent and call charges is being

maintained to prevent double payment.

(iii) The officers entitled to S.T.D. facility on their residential telephones, may be

asked to certify whether the calls in excess of the prescribed ceiling, if any, are on

account of S.T.D calls and, if so, whether these S.T.D calls are on official account or

otherwise. This certificate should be countersigned by the controlling officers. It will

be open to the controlling officers to look into the cases where, in their opinion, the

number of excess calls is too high.

(iv) That a register showing trunk calls made for official and private purposes are

maintained by the officers both for office and residential telephones in the prescribed

form, and in case of private calls necessary recoveries are effected from the official

concerned.

(v) That residential telephones are generally provided to officers of the rank of

Director and above and in case of officers below them not more than 25% of the

Group A officers are provided with residential telephones.

(p) Liveries Account

While conducting internal audit of the liveries account, it should be seen that

the provisions contained in the Hand Book of Uniforms have been observed by the

D.D.O. In particular it should be seen:-

(i) That the Register of Liveries is maintained by head of office in the prescribed

form (form No.MGP/47) and entries in regard to receipts as well as issue of

Liveries to Group ‘C’ and Group ‘D’ officials are made in the register under

proper attestation.

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(ii) That issue of liveries for Group ‘C’ and Group ’D’ officials have been made

according to the prescribed scale.

(iii) That washing allowance is paid to Group ’C’ and Group ’D’ officials in

accordance with the rules and orders issued by the Government of India from

time to time and in case of officials proceeding on leave for more than 15 days

in a calendar year, necessary recoveries on account of washing allowance have

been effected from their salary bill for the month of January each year.

(iv) That the uniforms have been issued only to those employees who are eligible.

(v) Measurement card for each employee is maintained in the prescribed form.

(vi) Where the local purchase of articles of uniform beyond the normal limits laid

down by D.G.S & D. becomes necessary for some administrative reasons or

delay by D.G.S & D., etc. specific permission for the same is obtained from

D.G.S & D.

(vii) That the uniforms have been withdrawn from employees who have either

resigned or have been discharged or promoted to the post where such uniforms

would not be used.

(q) Consumption of Electricity

It should be seen that economy instructions issued by the Government of India

in connection with the consumption of electricity in Government offices etc. are duly

observed. Installations/Workshops etc. where the consumption of electricity is very

high and where high voltage transformers have been installed for the bulk supply of

electricity, it should be seen that average actual consumption of electricity is not less

than minimum limit for which the charges are levied by the Electricity Board. If the

actual consumption of electricity is much less than the sanctioned load, the

departmental officers may be advised to consider the possibility of a reduction of the

sanctioned load so as to save expenditure on electricity due to excess billing.

(r) 1. Office Building

(i) What is the number of buildings along with floor area in which the office is

located?

(ii) How much floor area is available vis-à-vis the actual requirement as per

approved scale?

(iii) How much area is in possession indicating the area owned and leased

(separately).

(iv) Ascertain the Average Gross office area per employee, taking Group A to D

together, (excluding casuals) compared to previous year.

(v) In case of building taken on rental basis for office what is the rent per month

and whether the same is covered by fair rent certificate? Whether the rent has

been enhanced before expiry of the term of agreement.

(vi) Whether any proposal was sent to Head Office for acquiring of land/building

for office? If yes, when and what is the present status of the proposal?

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(vii) Whether any land is possessed by the office for construction purpose?

(a) What are the plans for construction?

(b) Whether Administrative Approval/Financial Approval have been obtained

(c) Whether the work is executed through CPWD or any other agency?

(d) What were/are the stipulated dates of commencement and completion of the

works?

(e) Whether any cost/time overruns occurred, examine the reasons therefor.

(f) What is the expected date of completion in case of delay?

(g) Whether adequate mechanism exist for supervision of execution of the works

regarding quality/specification/timelines.

(h) Whether copy of the contract agreement concluded for construction of office

building is available to ensure/check that the work is being executed as per

specifications asked for and concluded.

(i) Whether any periodical reports on the progress of work is obtained from

CPWD or the agency entrusted with the execution of work?

(viii) Whether there has been avoidable loss on account of payment of rent for rental

building due to delay in execution/completion of the civil and other works.

(ix) Whether the office building needs to be renovated/reconstructed/restored?

a. If yes, whether future requirement like generating more space, provision for

computerization, modern and modular furniture/fixture, integration and

coordination among various Offices/Wings, functional smoothness etc. have

been taken care of.

b. Whether any consultant architect has been engaged for the purpose? If yes, the

basis for selection, his past experience, quantum of fees and other terms and

conditions for payment of fees may be ascertained.

c. Whether the work is to be got executed through CPWD or any other agency?

What is the basis for selection of the agency and what are the terms and

conditions of the contract?.

d. In case of restoration/renovation/reconstruction of heritage building, whether

the contractor has got adequate experience for similar type of works? If not,

reasons to select such contractors may be examined.

e. Whether the stipulated time schedule has been adhered to?

f. Mechanism evolved to ensure appropriate quality, quantity and timeliness in

the work.

g. Whether bar chart was prepared for completion of various activities as per the

time schedule.

h. Whether there were time/cost overruns; if so, examine the reasons therefor.

i. Whether various activities got disturbed due to non-completion of one/two key

activities in time? If yes, action taken to overcome the bottlenecks.

j. Whether periodical meetings were convened by the designated authority to get

the work completed in time and as per specifications.

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k. Whether effective pursuance were made to get required clearance from local

bodies and whether the project got delayed for want of required clearance from

local bodies?

(x) Whether any position of the building/space has been given on rent to any

Government office/Private agency? If yes, how the rent was fixed and whether

with the permission of Head Office?

(xi) Ascertain the Office accommodation area not used for seating staff or officers

but used for storing Records/Stationery, Stores, Recreation Club, Co-operative

Society, Garage, Cycle Shed, Canteen, Post Office, bank etc.

(xii) Whether proper arrangements are made for safeguarding by Watch and Ward

of the office building?

(xiii) Whether adequate fire fighting equipment with trained personnel exists?

2. Residential Buildings

a. Ascertain the total staff strength (persons in position) category-wise.

b. Number of staff quarters available (type I to type V)

c. Whether details of fixtures and fittings have been noted in the register of

buildings to check during handing/taking over of each quarter as well as for

maintenance purpose.

d. Ascertain the number of staff staying in quarters (type I to type V)

e. Ascertain the number of staff staying in rented accommodation who are

eligible for accommodation (type I to type V)

f. Ascertain the percentage utilization of staff quarters (type I to type V)

g. Ascertain the total number of applicants in waiting list (type I to type V)

h. Ascertain whether any residential quarter had been allotted to CPWD or any

other authority and if so, under what authority.

i. Whether the staff quarters are physically checked periodically by a nominated

officer to see that no quarter is unauthorizedly sublet/occupied. Whether any

register has been maintained to record results of verification and follow-up

action if any.

j. Ascertain the total number of quarters occupied unauthorizedly /illegally by

employees/families of employees/others.

k. Whether action has been taken against the unauthorized occupants?

l. Whether any land has been procured for construction of residential houses? If

yes, from whom and whether procured at market rate or concessional rate?

m. Whether all legal formalities like registration of deed etc. have been completed

and the land is free from all encumbrances?

n. Whether plans have been prepared to construct houses on the land procured? If

yes, ascertain:

I. Category-wise details of the houses along with justification

II. Whether administrative Approval/Financial Approval have been obtained.

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III. Whether the plan of the building was approved by local authority

IV. Whether the work is executed through CPWD or other agency.

V. What were/are the stipulated dates of commencement and completion of the

works?

VI. Whether there are any cost/time overrun. If yes, reasons thereof.

VII. What is the expected date of completion of the work incase of delay?

VIII. Whether adequate mechanism exists for supervision of execution of the works

regarding quality/specification/timeliness.

o. Whether Board’s accommodation is available and employees are staying in

rental houses resulting in payment of HRA? If yes, reason for non-occupying the

Board’s Accommodation by the employees may be ascertained.

p. Whether any house/space is used for non-residential purpose? If yes, by whom

and for what purpose? Whether any action has been taken in this regard?

How are the security, sanitation and cleanliness arrangements in the residential

quarters?

q. Whether there is any system/mechanism to invite/entertain suggestion and

complaints regarding maintenance, security, sanitation and cleanliness arrangement in

the residential houses? If yes, how many suggestion/complaints were received and

what action was taken thereon?

r. How is it ensured that at the time of vacating the house that the occupant

obtains no dues certificate from all the concerned Agencies/Authorities and the house

surrendered is ready to be allotted to another applicant?

(s) Complaint Cases

Total numbers of complaint cases received, disposed and balance pending for

the period from last inspection to date may be ascertained. Also ascertain what control

mechanism exists for redress of complaints/grievances.

6.3

Official Language Division

This division is performing the implementation of Official Language policy and

conducting training in Hindi for employees of the Board. This division attends to the

translation of Annual Report, Audit Report, Minutes of Board Meetings, Report of

Parliamentary committees, documents coming under Section 3 (3) of the Official

Language Act, etc. from English to Hindi. This division also attends to translation of

letters received in Hindi and translation of draft replies to such letters received in Hindi

from Ministry and other State Governments. The work connected with visiting cards,

seals, forms, invitation cards, banners, brochures and publicity materials required to be

prepared in Hindi are also attended to by the division. Other items of work attended to

by the division are:-

• Conducting of TOLIC meetings once in 3 months and its follow up action

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• Preparation of quarterly/half yearly progress reports of TOLIC.

• Preparation of half yearly/ annual training report in connection with Hindi

training

• Preparation of Hindi version of “the Spice India”, etc.

• Translation of Spices Board web site into Hindi

• Organization of Regional Hindi Workshop

• Conducting of Official Language inspection of all outstation offices

• Conducting of Hindi Week/Fortnight

The Internal Audit of official Language Division should be conducted in such a

way as to ensure that:

i) various targets laid down in the annual programme issued by the Department of

Official Languages has been achieved so far as the Board is concerned.

ii) the Hindi Week/Fortnight, the meetings of the Official Language

Implementation Committee, Hindi workshop, etc. has been conducted as per

target/programme.

iii) the training programmes have been organized as envisaged

iv) the inspection of out station offices has been conducted as required

v) the periodical returns have been sent as per the target

vi) the expenditure incurred was within the budget provision, sanctioned by

competent authority and within the limits prescribed.

6.4 Publicity Division

The Division is responsible for the over all public relations and image building

activities of the Board. Publication of all publicity matters related to the Board,

arranging the Board’s participation in the International and Domestic Fairs/Food

exhibitions, execution of work relating to promotional activities such as giving

advertisement, exhibition of hoarding, etc. and arranging press meetings are the major

functions of the division. Printing and distribution of publications such as Spices

Market Weekly, Spice India (English, Malayalam, Tamil, Kannada, Telugu and Hindi),

Foreign Trade Enquiry Bulletin, Spices Export Review and preparation of directories,

visiting cards and ID Cards are also undertaken by the Division.

The important items to be scrutinized/ points to be seen during the internal audit

of the division include the following:

a. Scrutiny of contracts for printing of periodicals should be done.

b. The stock account of printed material/CDs should be scrutinized to ensure that

the quantity actually printed had been taken to stock, the distribution was in

accordance with the list of subscribers, the sale proceeds have been received

and remitted to Board’s Account, complementary copies issued, if any, was

under proper orders, the stock of unsold/non distributed material was not much,

etc.

c. Payment to contributors of articles to the publications should be verified with

the sanction issued by the competent authority, monetary limit fixed, etc.

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d. The payment of fees for translation work should be verified with the contract to

see that the same is in order; the payment has been approved by the competent

authority, etc.

e. The expenditure on hoardings was within the sanctioned limit and the actual

display was verified physically and supporting proof was produced by the

agency before effecting payment. It should also be ensured that the contract

with the advertisers cover sufficiently longer period for exhibiting the display.

f. Purchase and issue of complementary material should be verified to ensure that

these are covered by orders of competent authority and within the delegation of

financial powers.

The income and expenditure accounts of national and international exhibitions,

trade fairs etc. should be scrutinized in internal audit. It should be ensured that these are

strictly in accordance with the budget allotment and approval of the Government. It

should also be verified and ensured that the balance of foreign exchange remaining

unutilized has been correctly remitted back to the Board’s account.

In regard to fairs, exhibitions, conferences in which the Boards have to

participate, they should send details (regarding name and duration of the event,

justification for participation in the event, number of participants proposed to be sent

and duration of their stay abroad, expenditure in foreign exchange and in Indian

currency and details of previous participations) along with the budget proposals so as to

enable the Department to obtain approval of Department of Economic Affairs in

respect of foreign exchange requirements before the provision is finally included in the

budget estimates and to issue a blanket foreign exchange sanction for the total

requirements of each Board. The Boards will not be required to obtain sanction from

the Government for release of foreign exchange against each individual case for

participation in exhibition, fairs, etc. They will, however, continue to refer to the

Department cases of the officers proposed to be deputed abroad for clearance.

(Government of India, Ministry of Commerce, Order No.27/28/85-Plant (B) dated 7th

August 1985)

g. The fixation of rent for stalls sublet during exhibitions, fairs, etc. should be

scrutinized and it should be ensured that the schedule of rates has been prepared

reasonably, the recovery of rent has been correctly made for the entire period and the

amount has been credited to Board’s account.

6.5 Engineering Division

The division functioning under the Administration Department is responsible

for all construction work in Head Office and Zonal/Regional offices of the Board and

for payment of recurring charges such as rent, electricity, water, telephone, etc. The

Division is also responsible for interaction with CPWD, KITCO, etc. who are entrusted

with the preparation of draft agreement, for discussion with Director (Finance),

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Director (Marketing) and Chairman and for taking action for finalisation of the

agreement, daily monitoring of the on going projects, sorting out technical problems

arising, if any, in the execution of the projects, verification of bills and processing the

same for payment, submission of bills to the competent authority for sanction and

payment after approval by the Chairman.

Estimates for any renovation work, extension work, fabrication work, etc in

India not being executed through consultants, will be prepared and placed before a

works committee consisting of the Secretary, Director (Finance), Director (Marketing),

Director (Development), Director (Research), Deputy Director (Administration) and

Assistant Executive Engineer (Convener) for approval. On approval by the committee

the proposal will be submitted to the Chairman for sanction. On getting sanction, the

work will be arranged through the Head of the Department concerned. The work will

be monitored in due course and after inspection and measurement the bill will be

passed for payment by the competent authority and payment will be made through the

Department concerned. Sanctioning and payment of recurring charges are also

undertaken by the division with the approval of the Secretary

The execution of the works envisaged in the schemes will be governed by the

following guidelines.

1. Original/ Repair works taken up by the Board are covered by proper sanction

from Government/ EFC. The entrustment of work shall normally be through Public

works organization which includes state Public Works divisions, CPWD, Public sector

undertakings of Central/ State governments. In the case of repair works costing up to

Rs. Ten lakh, the work can be entrusted to private contractors. The proposal in this

regard will be scrutinized by a committee constituted by Chairman. The work may be

awarded by inviting tenders.

The works executed in the Board can be classified as departmental works,

works executed through agencies and maintenance work. In the case of departmental

works, the execution of work is arranged by the department concerned. The checks to

be exercised by internal audit include the following:

1. Verify and ensure that the orders of Government of India have been complied

with.

2. The internal audit in these cases involve:

a) Scrutiny of the estimates, invitation of tenders, processing of tenders and

awarding the work, collection of Earnest Money/ Security Deposit. It should be

ensured that the authority sanctioning the award of work has proper delegation

of financial powers.

b) Scrutiny of the bills with the agreement and connected records, verification of

quantity of work done with the details in Measurement Book, ensuring that

check measurement has been done by competent authority, checking the bill

with schedule of approved rates, whether the bill has been passed by the

competent authority, ensuring the correctness of recovery of advance, security

deposit, statutory levies, etc.

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c) In the case of departmental works it should be ensured that the proposals have

been scrutinized by the works committee constituted for the purpose before

entrusting such works to private contractors. The minutes of the work

committee should be reviewed to see that the committee has considered all the

aspects relevant in that context and the work was awarded by inviting sealed

tenders as required under the Government of India guidelines.

d) In the case of security deposits it should be verified and ensured that there was

security covering the entire period of contract including period of guarantee

after completion of the work if envisaged. In the case of security deposit

furnished by way of Bank Guarantee it should be ensured that they are renewed

in time.

e) As regards release of Earnest Money Deposit it should be ensured that the terms

specified in the notice inviting tenders have been followed.

3. Internal Audit should also:

(i) Examine the terms and conditions of the tender documents and ensure that the

documents contain complete specifications and requirement of work and that the

conditions are specific and there is no ambiguity.

(ii) Check that the required publicity has been given for the tenders and wherever

necessary tender notices have been published in the newspapers.

(iii) Check that the detailed drawings and estimates of works have been prepared and

these have been approved by the competent authority within his delegation of powers.

It may also be ensured that wherever required approvals of the local bodies have been

taken as per the bye laws.

(iv) In the case of major repair and capital works ensure that the tenders are invited

on two bids system and that the technical bids were opened first by the duly constituted

committee and financial bids have been kept in the safe custody till the technical bids

are finalized.

(u) Scrutinize the recommendations of the committee constituted for examination

of the technical bids for major repair and capital works with reference to tender

specifications and approval by the competent authority and to what extent these

recommendations have been approved by the competent authority.

(vi) Check that the price bids are opened only for those bidders who have been

considered technically responsive. Review the recommendations of the committee for

opening the price bids and ensure that the works are awarded to the lowest technically

responsive bidders with the approval of the competent authority.

(viii) Check the award of works with the terms and conditions of the tender

documents, bids received, recommendations of the committees (technical and

price) and the approval of the competent authority.

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(viii) Ensure that the works are being regularly measured and the details of the works

executed have been entered in the measurement books. The measurements have been

signed by the person in charge of the works and have been certified by the next

superior authority.

(ix) Examine the Register of Works Tests to ensure that that the mandatory tests of

material, concrete, etc. are being regularly carried out and that the materials used in

construction are of required specifications.

(x) Check that the advances given to the contractors are in accordance with the terms

and conditions of the contract/ agreement and these have been entered in the Advances

Register.

(xi) Check the bills of the contractors with the entries in the measurement books

and ensure that the payments are made as per the terms of agreements and recoveries

on account of advances paid and taxes are being effected.

(xii) Ensure that the rates for extra items, additional or substituted works claimed by

the contractors are based on the rate analysis and supporting vouchers and these rates

have been approved by the competent authority.

(xiii) Review the reports of test check of the work executed by various prescribed

authorities to ensure that the works are being executed as per the approved

specifications and terms and conditions of work orders.

(xiv) Review the cases of delay in execution of works with Hindrance Register to

ascertain the reasons for the delay in execution. Check wherever such delays are

attributable to the contractors, penalties have been recovered in accordance with the

terms of the contract agreements.

(xv) In the case of contracts awarded for operation and maintenance of various

systems check that the performance guarantees have been obtained from the

contractors for the period of the agreements. Check the bills with reference to the

terms of the contract/ agreements.

(xvi) Check that the defect liability period has been indicated in the contracts/

agreements to ensure that the contractors are responsible for rectifying the defects at

their own cost during the guarantee period.

(xvii) Check that the contracts/ agreements contained provision that the contractors

would provide guarantee for structural safety and seepages for specified periods and

such guarantees have been invoked if these shortcomings have been noticed during the

guarantee periods.

(xviii) Check that the unserviceable and surplus material of different works has been

returned to the Stores under proper acknowledgement.

(xix) Review the insurance policies and bank guarantees furnished by the contractors

and ensure that these have been extended/ revalidated till the currency of the

agreements.

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(xx) Review the complaint register maintained by the Division and ensure that there

are no undue delays in attending to the complaints with reference to the requirements

indicated by other Divisions.

6.6 Library and documentation division

The library attached to the Head Office of Spices Board is under the control of

the Library and Information Officer. He is responsible for the acquisition of books and

periodicals and their classification, indexing, custody, issue and maintenance. The

Library and Information Officer is also in charge of the store of the Head office.

Internal audit of the Division should cover the following aspects:

1. Whether the acquisition of books, periodicals, etc. is properly sanctioned by

the competent authority

2. Whether the books and periodicals have been indexed, classified properly and

taken to stock.

3. Whether the system of keeping the books and periodicals and issues are proper

4. Whether the return of books and periodicals lended is properly watched and

action taken to get back the same or recovery of the cost in case of delay/non

return are satisfactory.

5. Whether there exists a system of reviewing the periodicity of preservation of

various books and periodicals and identifying the items for disposal.

6. Whether a proper system for disposal of old periodicals and newspapers exists

and the amount realized on disposal of these items is accounted for and

remitted to the Board’s Account regularly.

7. The work orders issued for binding of books, periodicals, etc. should be

reviewed to ensure that the work has been given after observing the formalities.

8. Whether annual physical verification of stock has been conducted and action

taken on deficiencies/shortages noticed, if any, and excess, if any, taken to

stock.

9. Check whether the head of office or other officers of the Department have

incurred expenditure on purchase of stationery according to the powers

delegated to them.

10. In case the head of office or other officers have incurred expenditure in excess

of powers delegated to him, whether the same is regularized by obtaining

sanction of the competent authority.

11. Whether the prescribed purchase procedure ( purchase committee, tendering,

etc) has been followed.

12. Whether there is excessive purchase of stationery, which is not reasonable to

the immediate requirement.

13. Whether the web based Consumable Management Software (CMS) was

properly utilized for monitoring of the requirement, purchase, receivables,

inventory, distribution and tracking of items.

CHAPTER 7

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FINANCE & ACCOUNTS DEPARTMENT

7.1 Functions

The Finance & Accounts Department in the Board has been functioning

independently as a service department for the other departments in the Board viz.,

Marketing, Development, Research and Administration. The Department has three

Sections namely Accounts (Budget and Accounts), Accounts (Payments) and Accounts

(Research & Development). Currently, the following functions are discharged by the

Finance & Accounts Department.

1. Making payments for the supplies and services received by the Board.

2. Paying subsidies, grant-in-aid, etc. for various development and marketing

schemes of the Board.

3. Giving necessary financial advice to the various Departments and Heads of

Departments as and when requested by them.

4. Assessing the financial requirements of the Board under various programmes,

office expenses and contingencies, their classification and documentation and

getting approval of the budget from the Board.

5. Mobilisation of funds required for the implementation of the programmes and

monitoring progress of expenditure within the budget provisions and ensuring that

payments are made as per prescribed rules and regulations in accordance with

approval granted by the Government for various schemes and programmes.

6. Proper documentation of financial transactions, preparation of necessary periodical

statements including Annual Accounts and getting them audited by the C&AG.

7. Deal with Central Income tax, Service tax, Agricultural Income tax and Sales

tax/VAT pertaining to the activities of the Board.

8. Act as the Project Manager for the UNDP Project.

9. Computerised data processing in the field of financial accounting, pay roll, etc.

10. Drawal and disbursement of pay and other entitlements of the employees of the

Board based on orders issued by Government of India from time to time.

11. Management of Pension Fund and General Provident Fund and regulating

disbursements there from.

12. Maintenance of E.P.F. Account of labourers.

13. Collection of testing fee, licence fee, sale proceeds of cardamom, Bio agents, etc.

and remittance of the same to the Spices Board Fund.

7.2 Checks to be exercised by Internal Audit

7.2.1 Cash, valuables and related records:

Illustrative checks to be exercised in respect of cash, valuables and related

records:

i) How many persons were working as Cashier and Assistant Cashier in Cash

Branch? Ascertain their names and date of appointment as Cashier and Assistant.

Cashier, as the case may be.

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ii) What is the currency of Fidelity Bond/Insurance policy in respect of each

officials and due dates of their renewal? The records through which the renewal of

Fidelity Bond/Insurance, etc., is watched may also be examined.

iii) What is the maximum amount of cash handled by each Cashier and Assistant

Cashier at any time during the last one year? What was the actual cash balance at the

close of each day during the month of inspection? Are there huge cash balances?

1. Ascertain the names of Drawing and Disbursing Officers (DDO) for the period

from last inspection (to date).

2. Whether there had been any case of defalcation/losses/ embezzlement of cash

in the office since last inspection? If so, a brief history of the case indicating

the action taken may be obtained and kept in inspection file.

3. What was the amount of imprest sanctioned to the office? Whether detailed

account is being maintained? Whether certificate of balance was being sent to

Head Office periodically?

4. In case imprest is insufficient, whether Head Office was approached for raising

the amount of imprest?

5. Whether the amount from undisbursed pay and allowance is being utilized to

meet emergent office expenses? If so, details for the last 3 years may be

ascertained and examined.

6. Year wise total of amount of honoraria paid to the employees and whether

approval of Chairman was obtained for payments made beyond prescribed

ceilings.

7. Whether cash book and other documents are being maintained as per procedure

laid down in Receipts and Payments rules.

8. Whether periodical surprise check of cash is carried out by personnel other

than from Administration wing.

9. Whether the cash book is maintained in the prescribed form.

10. Whether the pages of cash book are machine numbered and a certificate of

count of pages recorded on the first page before a cash book is brought into use

(in case the cash book is maintained manually).

11. Whether all monetary transactions have been entered in the cash book as soon

as they have occurred and attested by the DDO.

12. Whether the cash book is closed regularly and properly checked and at the end

of each month DDO has personally verified the cash balance and given a

certificate to that effect under his dated signature.

13. Whether the totals have been checked by a person other than the writer of the

Cash Book (in case the cash book is maintained manually).

14. Whether surprise physical verification of cash has been conducted at periodical

intervals by the DDO.

15. Whether there is a voucher for every entry setting forth full and clear

particulars of the claim and all information necessary for its proper

classification and identification in accounts. It may be verified and ensured that

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the amount of cheque drawn/issued/amount of e transfer tally with the amount

as shown in the voucher? For this purpose the amount of cheque as shown in

the cheque issue register or the amount shown in the counterfoil of the cheque

can be compared. (Test check of debits in the Bank Account with the details as

per Bank Reconciliation Statement can also be done for this purpose)

16. Whether the amounts received have been paid in full into the bank without

undue delay, for credit to Board’s Account under proper head?

17. Whether there is a system of preparing Bank Reconciliation statements

periodically. (The verification of credits of the selected month’s receipts should

be made with reference to the bank reconciliation statements of receipts

prepared by the DDO).

18. Whether a receipt in the prescribed form has been issued to the payee when

money is received. This receipt is to be signed by the DDO who should satisfy

himself at the time of signing the receipt that the amount has been entered in

the cash book.

19. In cases where the cash book is maintained manually it should be verified

whether there are erasures or over writings in the cash book. Erasure or

overwriting of an entry once made in the Cash book is prohibited. If a mistake

is discovered it should be corrected by drawing a line through the incorrect

entry and recording the correct entry in red ink.

20. Whether adequate security as envisaged in the General Financial Rules in

respect of cashier has been obtained, accepted by the competent authority and

relevant documents kept in the safe custody of the Head of Office.

21. Whether cash has been kept in strong cash box secured by double lock.

22. The officers in charge of Internal Audit parties may physically verify the cash

in hand or get the cash balance verified in their presence and have a certificate

of verification recorded in the Cash Book.

23. Whether the cheques issued are being entered in a cheque issue register and the

acknowledgements obtained from the recipients at the time of delivery.

7.2.2 Register of Valuables

Illustrative Checks/Points to be seen

(i) Whether the register is being maintained in the prescribed form.

(ii) Whether the cheques/demand drafts received have been entered in the register

on the day of their actual receipt.

(iii) Whether full particulars of the valuables are recorded in the register

(iv) Whether the valuables (cheques/demand drafts, etc.) have been sent to the bank

soon after their receipt for credit to Board’s Account.

(v) Whether the register is being closed every fortnight or at such other intervals as

may be prescribed.

(vi) Whether the credit of valuables has been traced in the bank scroll and

particulars thereof recorded in the register.

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7.2.3 Register of Bank Drafts

It may be seen,

i. Whether the register of bank drafts is being maintained in the proper from.

ii. Whether full particulars i.e. Bill No. and date have been indicated before

cheque is sent to bank for preparation of the bank drafts.

iii. Whether the bank drafts have been sent to the party (intended recipient)

without delay.

iv. Whether the date of acknowledgement has been indicated in the columns

prescribed for this purpose.

7.3 Establishment

7.3.1 Categories of employees

The Employees of the Board can broadly be classified into following categories:

• Regular Employees

• On deputation from other Departments.

• Labourers working in Nurseries, ICRI and other research stations.

• On Contract basis.

While the regular employees are generally governed by the rules and

regulations of the Government of India/Board, employees on deputation are governed

by the terms and conditions of deputation. Labourers working in Nurseries, ICRI and

other research stations are governed by the Plantation Labour Act and the employees

on contract are governed by the terms and conditions of the contract.

7.3.2 Pay Bill

The Board has computerized the pay roll system. The software program

should, therefore be examined to find out, whether it takes care of annual increment,

encashment of leave, supplementary payments, advances and recovery thereof, Income

Tax and other deductions. It may be ensured that in the case of Half Pay leave and

Loss of Pay leave proportionate deduction from salary has been effected and that the

programme takes care of such contingencies. In case these aspects are in-built in the

system and audit trail provided therein detects the mistake/omission/commission, the

audit should undertake test check to ascertain that there is no irregularity. If the system

does not take care of all such aspects then the monthly reimbursements and allowance

such as HRA, dearness allowance, medical facilities, overtime, loans and advances,

and deductions made should be scrutinized in the following manner:

In case of regular employees (other than daily/ temporary/ casual employees), Internal

Auditor should examine the following aspects:

1. Whether sanction for the posts exists.

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2. Whether salary register is maintained properly and in the prescribed format.

3. The pay and allowances have been paid according to the terms of appointment

and Dearness Allowance, HRA and Transport Allowance are paid strictly as

per rules.

4. Changes/ variations noticed in emoluments of any employee and also in the

recoveries/ deductions with reference to last audited pay bill should be

carefully checked.

5. Pay rolls should be cross checked with service book and leave account to

ensure that recovery /reduction has been made for leave on loss pay, HRA/

transport allowance during the period of leave if not admissible, etc.

6. Advances and loans are recorded in the subsidiary register and recoveries

effected regularly.

7. Provident Fund, Income Tax, profession tax, insurance and all other

compulsory deductions have been correctly made and accounted for. The

remittance of the amounts recovered to the authorities concerned should also

be verified.

8. The recovery towards Contributory Provident Fund of the labourers in the rolls

of the Board has been correct and the remittance including the employer’s

share of contribution has been correctly made.

9. The net amount of salary has been transferred correctly to the Bank Account of

the employees by e transfer.

10. Recovery in respect of PF of deputationists, income tax, etc. has been promptly

remitted to the respective authorities and their acknowledgements obtained.

11. Leave salary and pension contribution of the deputationists have been correctly

and promptly remitted to their parent departments and their acknowledgements

obtained.

12. In case of terminal settlement, verify whether outstanding dues, advances,

income tax, etc. have been recovered from the final payments.

13. In case of deceased personnel, the outstanding dues have been paid to the

nominee(s), or if there is no nominee to the legal heirs.

14. Arithmetical accuracy of calculations.

15. Whether payee’s acknowledgements have been obtained for payments made.

16. In case of VRS payments, verify that dues have been calculated/ paid in

accordance with the Voluntary Retirement Scheme.

17. For payments to daily/ casual employees, relevant records, terms of

appointment and sanction of the competent authority should be seen.

18. Verify whether the recovery towards GPF from regular employees who has

completed one year of service has been @ 6% of basic pay plus grade pay.

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19. The employee’s contribution to CPF in respect of labourers has been correctly

recovered and employee’s/ employer’s contribution remitted to the Regional

Provident Organisation correctly.

20. The recovery towards GPF of the employees other than labourers has been

correctly entered in the Provident Fund Ledger.

21. The deductions against P.F. Advances are made as per terms of advance.

22. PF reconciliation is carried out with General Ledger periodically and also with

the Broad sheet at the close of the year.

23. PF amount is deposited in the bank in accordance with the rules in this regard

and within the stipulated time.

7.3.3 Overtime Allowance

Overtime payments should be verified with reference to rate, attendance

records and sanction of the competent authority. Audit should also ensure that

overtime is not allowed as a matter of routine.

7.3.4 Travelling Expenses

Verify that:

• Sanction of the competent authority exists for the journey and whether journey

is for official purposes.

• The claim agrees with the approved tour programme and tour diaries submitted

by the concerned official.

• Railways/ Air/ Bus fares are correct and supported by tickets where ever

necessary.

• Daily allowance for halting and transit has been correctly claimed as per rules

of the Board.

• Whether proper record for traveling advance is maintained, advances paid, if

any, have been recovered from TA Bills, whether interest has been recovered

as per provisions of GFR for delay in adjustment of advances.

• The claim has been submitted within the stipulated period, in the prescribed

format, giving complete details and the claimant has signed the bill. In respect

of journeys outside India, the relevant TA/ DA claims will be with reference to

the specific foreign exchange, sanctioned by the competent authority. It should

be seen that incidental and other expenditure are duly supported by vouchers.

• There exist an internal control system to ensure that there are no double

payments in respect of same journey.

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7.3.5 LTC Claims .

The following are the illustrative checks to be exercised/points to be seen during

internal audit of payments of Leave Travel Concession.

Illustrative procedure

i. Check whether declaration of home town has been received from each official

and recorded in the Service Book in accordance with the applicable

instructions.

ii. Check whether the declaration of home town once made has been allowed to

be changed more than once during the service.

iii. Check whether the concession is allowed to any Government Servant or his

family members where the official has not completed one year’s regular

service as on the date of journey performed by him or by his family, as the case

may be.

iv. Check whether the concession to home town is allowed not more than once in

a block of two calendar years commencing grom1.1.1956 i.e.1956-57,1958-59

& 1960-61 and so on.

v. Check whether any official undertakes the journey in a chartered bus, van or

other vehicles, which are owned by private operators.

vi. Check whether any official undertakes the journey in private cars (the cost of

propulsion being borne by Government Servant himself).

vii. Check whether the advance granted to the officials, if any, has been adjusted in

full.

viii. Check whether any civilian official avails himself of Leave Travel Concession

for journey to any place in India for more than once in a block year of 4

calendar years commencing from 1974—77,1978-81 and so on.

ix. Check to see that there is no bar for the Government Servants and his family

members to visit the same place or different places of their choice (any where

in India).

x. Check to see that the leave travel concession for journey to any place in India

is allowed only in lieu of and in adjustment against the leave travel concession

to the home town including concession, if any, carried forward to which an

official may be entitled at the time of journey to any place in India is

undertaken.

xi. Check whether the officials are submitting adjustment bills along with

supporting tickets/vouchers etc. within the prescribed period after completion

of the journey.

xii. In case of encashment of leave in connection with LTC verify that it has been

entered in the service records/leave account.

7.3.6 Medical Facilities

The Board is providing medical facilities to its employees and their family

members as per CS (MA) Rules.

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Following points may be looked into while examining the claims of the employees

relating to the medical facilities.

• That the claims are covered by the Rules.

• That the claims are made on the prescribed format supported by the essentiality

certificates, prescription of the Doctor and cash memos in original indicating

the quantity, date of purchase and counter signatures of the Authorized

Medical Attendant on the Cash Memo.

• The medicines are purchased in accordance with the prescription of the

Authorised Medical Attendant. In case the medicine is not available in loose

form, the same is purchased in the smallest packing available.

• That the consultations are with the Authorised Medical Attendant and the fees

are in accordance with the grade of the Doctor and the entitlement of the

employee claiming the reimbursement.

• That in the case of out patient treatment the period did not exceed 10 days.

• That claims for specialized diseases or indoor treatment or emergency

treatment are supported by documentary evidences.

7.3.7 Advances for Medical Treatment

Verify that:

• the advances have been sanctioned by the competent authority and are within

the prescribed limits.

• the advances are for meeting expenditure on medical treatment of the employee

or members of his family in Government approved hospitals.

• the medical advances are adjusted in accordance with terms and conditions laid

down for grant of medical advances.

7.3.8 Other Expenditure

7.3.8.1 General :

The essential points to be seen in the internal audit of expenditure are as

follows:-

1) That payments made are in accordance with the rules and orders governing

them, their arithmetical calculations are correct and the recoveries/deductions

made from bills are in order.

2) For expenditure beyond the powers of Head of Office, there exists a sanction,

either specific or general, accorded by the competent authority.

3) For every payment made, there is a voucher complete in all respect or a

certificate of payment where it is not possible to support a payment by a

voucher.

4) There is a provision of funds sanctioned by he competent authority.

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5) The expenditure has not been incurred solely to prevent lapse of budget

allotment.

6) In case of work done or purchases made, the accepted tender along with the

rejected tenders, comparative statements and notices of tender are available in

the office of the accepting authority along with the reasons for non-acceptance

of lowest tender.

7) The payment has been made to the proper persons and it has been

acknowledged and recorded so that a second payment on that account is not

possible.

8) The charges do not exceed the rates or scale fixed under rules/ orders issued by

the competent authority.

9) Whether penalty or interest has been paid on account of delay in payment of

rent, electricity charges, telephone bills, water charges, etc and if so the reasons

for the same.

10) Whether payments have been correctly accounted for in the initial accounting

records.

11) Sub-vouchers and acquittance are marked cancelled, after their entry in the

contingent charges register, so as to prevent further use of the vouchers.

7.3.8.2 The points to be seen specifically in the case of certain expenses are given

below:

1) Rent, Rates & Taxes (i) Examine the agreements with the owners for taking the accommodation on hire

and scrutinize the basis of fixation of rent/ hiring of accommodation for office

as well as residence.

(ii) Check timely payment of rent, rates and taxes and review the cases of

penalty/interest paid, if any, with reference to various taxation rules and

legislation thereof.

2) Children’s Education Allowance and tuition fees

i) It should be seen that the eligibility criteria has been met.

ii) The rate and period to which reimbursement made is correct/as per rules.

3) News paper subsidy

i) whether limited to eligible officers

ii) whether recovery towards cost of scrap has been adjusted/effected?

iii) whether the claim has been limited to one newspaper?

4) Reimbursement of cost to departmental canteen

i) Whether eligibility criteria ahs been satisfied?

ii) Scrutiny of the reimbursement claim against admissibility to be done.

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5) Drawal and settlement of foreign exchange for international seminars,

exhibitions, meetings etc.

i) To verify whether the expenditure is covered by budget provision.

ii) Whether necessary sanction has been obtained from the Government of India

for the expenditure?

iii) Whether the balance amount has been refunded in foreign exchange/settled

immediately after the event/purpose?

6) Repairs and maintenance

(i) Examine the contracts/ award of work to outside parties for repairs and

maintenance (including annual Maintenance contracts) of buildings, furniture

and fixtures and other equipment viz. air conditioners, computers, photocopy

machines, etc.

(ii) Bills for other administrative expenditure such as postage and telegrams,

telephones, printing and stationery, publicity and sales promotion,

entertainment, running and maintenance of owned vehicles, logbooks of

vehicles, hiring of vehicles, etc. need also to be reviewed.

7) Contingent Bills

It may be seen,

i) Whether expenditure has been incurred within the provisions of budget grant

for that particular head of account.

ii) Whether each voucher bears a pay order signed by the competent authority

specifying the amount both in words and figures.

iii) Whether all the paid vouchers have been stamped ”paid and cancelled” by the

paying authority so that these may not be misused.

iv) The contingent bills for wages of Mazdoors engaged in manual work and paid

at daily or monthly rate, rent electricity and other charges incurred on the hire of

private buildings, expenditure on light refreshment, etc. are in accordance with the

rules and the Government orders issued form time to time.

v) Whether the flow of expenditure during March in any financial year is not on

high side with a view to exhausting the budget allotment.

vi) Whether expenditure has been sanctioned by the competent authority and

sanction to the expenditure has been attached with the bill.

vii) Whether a register of contingent charges, to watch the expenditure under each

sub-head is maintained in the prescribed form, budget provisions against each sub-

head have been noted on the top of the columns provided and that every entry has been

attested by the sanctioning authority before any payment is made.

viii) Whether progressive totals of expenditure under various sub-heads are being

struck so that expenditure does not exceed the budgetary allotment.

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ix) Whether the vouchers bear dated acknowledgement of the payment received

together with a stamped receipt in case of payments above the prescribed monetary

value.

x) Whether all the vouchers for purchase of stores bear a certificate by the

competent officer regarding entry of stores in the stock register, indicating the page

number of the stock register; and a certificate by the competent authority that the

quantities of stores received were in order and that the stores were according to the

approved specification.

8) Advances

(i) Ascertain separately the number and amount of TA advances and LTC

advances outstanding as on the starting date of the month of commencement of

inspection? Also ascertain the year-wise position.

(ii) Why the advances pending for more than prescribed period could not be

recovered from the salary of the concerned officials?

(iii) How many TA claims/LTC claims submitted by employees are pending with

the office for more than one month as on the starting date of the month of

commencement of inspection?

(iv) Whether control registers for all interest bearing and non-interest bearing

advances are maintained in order to keep watch on their timely recovery. In

this connection, check whether the Registers of House building/Motor Cycle

advances are being maintained in the prescribed proforma. Check the

calculation of interest and fixation of installment and the amount adjustable

from DCRG if any is limited to that permissible under the rules. Also look into

the aspects of obtaining requisite documents and charging of penal interest at

the prescribed rates in case of defaulters.

(v) Scrutinize the special advances to Development Offices, Quality Evaluation

Laboratories, Research Stations, etc. to ensure that they are within the limits

prescribed and ensure the correctness and adjustment of the same within the

period specified.

9) Pension

It should be verified/ensured that -

i) the payment of pension/family pension is in accordance with the Pension

Payment Order, the dearness relief has been correctly worked out,

ii) life certificate obtained periodically, and

iii) the amount has been correctly credited by e transfer to the beneficiary’s

account.

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10) Gratuity

All gratuity payments should be made according to provisions of the gratuity

rules and sanctioned by the competent authority. Internal audit should ensure that

gratuity payments are correctly made as per gratuity payment order issued by the

Administration Department and the amount is transferred correctly by e transfer to the

beneficiary’s Bank Account.

11) Provident Fund

Internal Audit should review the Receipts and Payments Account of the

General Provident Fund of Employees, test check and ensure that subscriptions have

been correctly entered in the ledger accounts and reconciled with the Broad sheet

figures, the temporary advance and part withdrawals from the Fund are in accordance

with the provisions in the Regulations and recovery towards temporary advances has

been correctly made, whether the investments of the Fund are made in accordance with

the provisions in the Regulations and the rate of interest applied is as per the

Government rates and the calculation of interest has been correctly done.

12) New Pension Fund

It should checked in internal audit and ensured that the employees appointed

on or after 1-4-1004 are covered by the New Pension Fund Scheme and the recovery

of the employees contribution and the employer’s share have been correctly invested

as required under the Rules.

7.4 Budget Estimation, Sanctioning of Budget, Drawal of Funds, Distribution/

release of Funds and Utilisation

i) Scrutinize the budget proposals received from various departments and

projected to the Government to ensure that the requirement was projected realistically.

ii) Ensure that the release of funds requested periodically from Government was

commensurate with the requirement, the funds received have been distributed to

various departments according to necessity, the departments have utilized the funds for

the budgeted purpose without being blocked up and the expected results have been

achieved.

iii) Examine the reasons for not utilizing or spending substantially the funds

allocated to departments, if any.

iv) Examine cases of unauthorized utilization or diversion of the funds, if any,

without specific approval of the Government.

v) Was there cases of rush of expenditure during the fag end of the year and if so,

was there satisfactory explanation for that.

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7.5 Financial Accounting System

The Board has a computerized system of financial accounting. As per the

practice followed by the Board, the dealing hands prepare and enter in the system

journal vouchers for each transaction. The journal vouchers are then authorized by the

Accounts Officer/Deputy Director. These vouchers when authorized become

cash/bank payment voucher. The Cash/Bank payment voucher is then verified by the

Section Officer, which is again authorized by the Accounts Officer. The vouchers so

authorized go to Cash Counter for cash/cheque/e payment. The journal vouchers are

prepared and passed as above even in cases of adjustments not involving payment.

Internal Audit should test check the ledger postings and verify and ensure that

the procedure prescribed has been strictly followed. It may be verified and ensured

that all adjustments including adjustments of advances made have been incorporated in

the accounts before drawing the final Trial Balance. The correctness of the Receipt and

Payments Account, Income and Expenditure Account and Balance Sheet and the

Schedules forming part of the financial statements should also be subjected to scrutiny

by Internal Audit.

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CHAPTER 8

DEVELOPMENT DEPARTMENT

8.1 Functions

Development Department is one of the important executing arms of Spices

Board under which the extension network of Spices Board functions. The

department is the connecting link of Spices Board with the spice growers,

Governmental and non-governmental agencies, Agricultural Universities and

Research stations functioning in the field of agriculture. The responsibility of

making available the assistance offered by Government of India for development and

post harvest improvement of spices vests with the development department. This is

achieved through planning and implementation of various Plan schemes and projects

of the government. The department functions in close coordination with all other

departments and sections of Spices Board for the smooth implementation of various

programmes of the Board. The technically qualified personnel of the department

extend all sorts of technical advice to the spice farming community especially the

cardamom growers. The department is headed by the Director (Development)

stationed at Spices Board Head Office, Kochi, Kerala. Director (Development) is

assisted by Joint Directors (2), Regional Deputy Directors (8), Zonal Assistant

Directors (19), Field Officers (34), Farm Officers (7), Assistant Farm Officers (5),

Extension Assistants (27), Field Assistants (13) and Field Men (37) for the

implementation of various programmes.

The Department has the following two divisions:

1. Development (Monitoring)

2. Development (Extension and Implementation)

The Monitoring Division functioning at headquarters is monitoring all the

development schemes of the Board. The division is under the charge of a Deputy

Director who will be reporting to the Director.

The Extension and Implementation division is basically the field set up of the

Board and has Joint Directors, Deputy Directors, Assistant Directors, Field Officers,

Farm Officers and Extension Assistants and other field staff. These officers are

responsible for the extension work of the Spices Board and also for the implementation

of various development schemes of the Board. As on July 2009 there are 8 Regional

Offices, 24 Zonal Offices, 38 Field Offices and 5 departmental Nurseries functioning

under the Division. The Development Department is responsible for the overall

development of Cardamom. For improving production and productivity of Cardamom,

both small and large, Board has formulated and implemented various development

programmes.

The Government have also entrusted to the Board the implementation of pepper

development schemes in Idukki and Wayanad Districts. While the funds for pepper

development scheme in Idukki District is made available by the Agriculture Ministry,

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that for Wayanad District is received from the Commerce Ministry.

8.2 Frame work of Development Department

8.2.1 Board`s own development schemes.

The lowest segment of activities of the Department is Field Office headed by the

Field Officer. The applications for assistance under the various schemes are received in

the Field Offices. The applications in the prescribed form when received are entered in

the Field Office in the Register of Receipt of Applications maintained scheme-wise.

After initial scrutiny and spot verification the recommended applications are entered in

the Register of Recommended Applications. The recommended applications are then

forwarded to the Zonal Office for further processing. After exercising the prescribed test

check, applications requiring sanction from higher authorities are sent to Regional

Office. A certain percentage of applications are further test checked by the Dy. Director

of the concerned Regional Office. The permits for taking up the work involving payment

of subsidy are issued from the Zonal Office and given to the eligible beneficiaries. The

eligible subsidy is then sanctioned at the level of the Assistant Director of the Zonal

Office or at the level of the Dy. Director/Director/Chairman based on the delegation of

financial powers and the payment is effected from the Zonal Office. The Field Officer is

responsible for inter acting with the farmers, sorting out their problems, rendering

necessary advice to them regarding manuring, pest control, disease control, etc. and to

report on out burst of any disease to higher authorities for appropriate action, etc.

8.2.2 Pepper development scheme in Idukki aided by NHM

In the case of benefits under the pepper development scheme the procedure for

finalisation of benefits are prescribed in Board’s circular No.

DEV/NHM/PEP/IDKI/REP-REJ/02/09/1066 dated 30th December 2009 (effective from

1st January 2010).

As per the circular, in order to ensure 100% public delivery, transparency and

accountability, it is decided to make e-payment of subsidy to all beneficiaries. Spices

Board has developed a new software for its Financial Accounting System (FAS) for

the above purpose. For the current year, Board is having an offline mode to capture

data from the field for making e-payment. The procedure for the above would be as

follows:

Field Office- Collect application form in the given format, make field inspections,

recommend the case for payment as per eligibility and enter the entire data in the

'PRIDE' system installed in the computer given in the field office. Take a printout of

the Inspection report (filled) properly signed, and sealed, may be sent to zonal office.

Zonal Office - On receipt of the hard copy, make random selection of desired

percentage of applications for test checking by field inspections. Assistant Director

authorizes all the cases (except those rejected by him) for payment and forward the

same to Regional Office.

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Regional Office - Random selection of the percentage of cases required for test

checking through field inspections is done at Regional Office. Deputy Director

endorses all authorizations made by the Assistant Director (except those rejected by

Dy. Director) for payment. Wherever cases demand authorization by the Deputy

Director based on the financial powers delegated to him, he may authorize such

payments/ cases.

Dy. Director may take one copy of inspection report with sanctions and

forward them to the Director (Development) and the originals back to field office.

Field Office- On receipt of the sanctions/ rejection of cases, make necessary entry in

the 'PRIDE' and pass it to Head Office as either attachment to an e-mail or in the form

of a CD. The details of rejected applications are to be forwarded to Director (Dev) for

uploading in the website. Copies of this can be forwarded to Zonal Office and

Regional Office.

Head Office- Development Section on receipt of the information from regional office

in the form of hard copy and from field office in the form of soft copy may compare

same for authenticity, and check details of budget code, name of the scheme, account

code, authorization/ sanction, test checking and payment details etc. with the support

of EDP Department and approve each case for payment and pass it on to accounts

section.

Accounts Section III- The Section will verify the details and authorize for payment in

the FAS format. Cashier after making necessary verifications and entry pass it to bank

with payment details for e-payment to the beneficiary. Status of the payment may then

be communicated to the respective field offices. Status of application and payment

details may be uploaded in the website of the Board by EDP Section.

8.3 Records maintained and returns submitted.

1. Field Office:

a) Records maintained -

i. Inward Register

ii. Despatch Register

iii. Stamp Account Register

iv. Staff Movement Register

v. Receipt Book

vi. Imprest Cash Book

vii. Assets Register

viii. Stationery Stock Register

ix. Consumable Items Stock Register

x. Bank Account

xi. Stock Register of Receipt Books

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xii. Work Diary of Staff maintained individually.

xiii. Scheme Registers in respect of each scheme.

xiv. Plantation Register

xv. Permit Register

xvi. Register of Training Programmes

b) Returns submitted -

i) Monthly expenditure statement

ii) Reconciliation Statement

iii) Monthly progress Report of Schemes showing No. of applications received,

No. of applications processed, No. of applications forwarded to Zonal Office and No. of

applications pending.

iv) Report on training programmes showing list of participants, expenditure

statement and report on training.

v) Annual Action plan for each activity separately including training programme.

vi) Annual Report showing target and achievements and reasons for short fall in

achievement, if any.

vii) Vehicle performance Report

viii) Reports on crop estimation (preliminary, mid term and final).

4. Zonal Office

a) Records maintained

i) Cash Book

ii) Imprest Account

iii) Register of Advances

iv) Register of Settlement of advances

v) Vehicle Expenses Register

vi) Inward Register

vii) Despatch Register

viii) Stamp Account Register

ix) Payment Voucher Register

x) Cheque Issue Register

xi) Receipt Book and Stock Register of Receipt Books

xii) Register of Permits Issued

xiii) Rent Register

xiv) Staff Movement Register

b) Returns submitted

i) Monthly expenditure statement

ii) Reconciliation Statement

iii) Monthly progress Report of Schemes showing No. of applications received,

No. of applications processed/sanctioned and No. of applications pending.

iv) Report on training programmes showing list of participants, expenditure

statement and report on training.

v) Report on Extension Advisory Services (visits, group meetings and seminars)

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vi) Report on the auction center, if any, under the zonal Office.

vii) Reports on crop estimation

viii) Paid bills and vouchers along with cash abstract

ix) Statement of advance paid/settled for each month

x) Bank statement along with Bank Reconciliation statement.

xi) Vehicle performance statement based on vehicle expenses register.

5. Regional Office

a). Records maintained

i) Cash Book

ii) Imprest Account

iii) Inward Register

iv) Despatch Register

v) Stamp Account Register

vi) Cheque Issue Register/Bill Register

vii) Payment Voucher Register

viii) Vehicle Expenses Register

ix) Register of Advances

x) Register of Settlement of advances

xi) Staff Movement Register

xii) Receipt Book and Stock Register of Receipt Books

b) Returns submitted

i) Monthly return of accounts supported by paid bills and vouchers, journal

voucher, abstract of cash book, statement of miscellaneous income and receipt of funds.

ii) Imprest Account

iii) Reconciliation statement

iv) Bank statement and Bank Reconciliation Statement

v) Monthly abstract of Stamp Account

vi) Report on Extension Advisory Services

8.4 Internal Audit guidelines –

The responsibility of making available the assistance offered by Government of

India for development and post harvest improvement of spices vests with the

development department. The Department should therefore see that the various schemes

under implementation by the Board are made known to the growers and others interested

through the media

8.4.1 Financial assistance under schemes

The details of checks to be conducted during the internal audit of financial

assistance under various schemes are given below:

1. Whether the scheme is covered under the functions of the Board as envisaged in

Section 7 (2) of the Spices Board Act or any scheme specifically approved by

Government?

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2. Whether the Scheme is covered by the approved plan/scheme, the rates of

assistance have been arrived at based on realistic data of direct and indirect cost and that

funds have been allocated at the prescribed rates of subsidy and for the targeted number

of beneficiaries?

3. Whether the eligibility criteria as per the scheme have been met? For example

eligibility of growers holding area up to 8 hectares for replanting, irrigation and land

development, etc. and 4 hectares for rejuvenation of Cardamom plantations. It should

also be ensured that the same beneficiaries are not given the benefits before expiry of the

period specified in the scheme rules, for which the Register of Beneficiaries during

earlier years should be reviewed.

6. Whether the applications accompanied by necessary documents have been

received in the Field Office within the time limit prescribed?

7. Whether the applications have been entered in the Register of Applications

Received in their chronological order after preliminary scrutiny?

8. Whether inspections by the Field Officer have been carried out in respect of

all applications received?

9. Whether the eligible applications have been entered in the Register of

Accepted Applications and forwarded to the Zonal Office for further action?

10. Whether the prescribed percentage of checks/inspections have been carried

out by the Assistant Director of Zonal Office and Dy. Director of Regional Office?

11. Whether the quantum of subsidy sanctioned is in accordance with the scheme

rules? In case the payment of subsidy is in installments, it should be ensured that the

installment amount has been correctly arrived at.

12. Whether amount sanctioned is as per the delegation of financial powers of the

sanctioning authority and in case of sanctions exceeding the financial powers of the

Zonal Officers whether sanction from Dy. Director/Director has been obtained? As

payments are generally effected at the level of Zonal Officers even in cases where

financial sanctions from higher authorities are obtained, the internal audit should

concentrate the audit of subsidy payments more in the Zonal Offices.

13. Whether the payments were effected by e-transfer to the Bank Account of the

beneficiaries and in such cases whether the transfer of the amount has been ensured

through Bank Reconciliation?

14. In the case of payments by cheque, the acknowledgements of the recipients

obtained should be verified with vouchers.

8.4.2 Establishment and Administration:

The guidelines for internal audit of establishment and administrative matters

given in Chapter 6 above are applicable in the case of Development Department also.

The Internal Auditor should refer to these guidelines to check the various records on

establishment and administrative matters are maintained in the Department.

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8.4.3 Financial records:

The accuracy of the return furnished by the field offices should be verified and ensured

in audit. The Registers maintained should also be scrutinized to ensure their

correctness.

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CHAPTER 9

RESEARCH DEPARTMENT

9.1 Functions

The primary objective of Research Department is to develop sustainable

production, protection and post-harvest technologies for small and large cardamom. Its

activities have recently been expanded to cover comprehensive research studies on

vanilla and export-oriented adaptive research programmes on other spices such as

black pepper, ginger, turmeric, chilli, tree spices, herbal spices, paprika seed spices

and minor spices. The current emphasis is on evolving agro-techniques for the

production of organic spices by integrating biocontrol and eco-friendly nutritional

management of spices.

The Main Research Station is at Myladumpara in Idukki District. There are

two Regional Research Stations, one at Sakleshpur in Hassan district of Karnataka

State and another at Thadiankudisai in Dindigul district of Tamil Nadu State, to focus

on location-specific research interventions for small cardamom growing areas in the

Western Ghats and another Regional Research Station at Gangtok in Sikkim to initiate

research effort in large cardamom, an important commercial crop of State of Sikkim

and Darjeeling district of the State of West Bengal. The overall research coordination

rests with the Directorate of Research located at the Main Research Station at

Myladumpara.

9.2 Thrust areas of research and development:

Different Divisions of Research Department undertake research on specifically

identified thrust areas, as under:

9.2.1 Crop Improvement Division:

• Collection, conservation, cataloguing and evaluation of germplasm of

cardamom, vanilla, herbal spices and its allied species.

• Development of location-specific high yielding varieties having superior

quality.

• Evolving varieties resistant to biotic (pests and diseases) and abiotic (drought)

stresses.

• Field adoption trials of varieties of spices and tissue culture plants in farmers’

plots.

• Multi-location field testing of varieties in pipeline in collaboration with other

agencies like ICAR, SAUs, DBT, etc.

9.2.2 Agronomy and Soil Science Division:

Undertaking basic and applied research on crop management and agricultural

chemistry (all production technologies from seed, nursery, planting, land preparation,

nutrition, water management, weed control, optimizing yield and quality, etc.).

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• Evolving Integrated Nutrient Management (INM) strategies for cardamom and

other spices.

• Laying out organic farming practices for spices.

• Providing farm advisory services based on soil and plant analytical report.

• Evaluation of organic inputs and revalidation of farmer’s practices and

traditional knowledge for framing scientific base.

• Providing quality test report for cardamom and vanilla samples received from

farmers.

• Maintenance and recording of Agricultural Meteorology Station of the

Institute.

• Drought management in cardamom.

9.2.3 Plant Pathology Division:

• Undertaking research on identification of diseases of cardamom and its

management.

• Laying out Integrated Disease Management (IDM) practices for production of

quality spices.

• Identifying efficient local strains of bio-agents for the control of diseases

replacing chemical fungicides and its on-farm evaluation.

• Production and distribution of bio-agents (Trichoderma, Psuedomonas, VAM,

etc.) based on farmer’s demand through the Bio-agent Production Unit.

• Imparting training on bio-agent production to members of Kudumbasree and

farmer groups (SHGs, NGOs, etc.).

9.2.4 Entomology Division:

• Undertaking basic and applied research on pest management in cardamom and

vanilla.

• Developing Integrated Pest Management (IPM) strategies for cardamom and

other mandated spices.

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• Surveying and screening natural enemies against pests of cardamom and other

spices for biological method of pest management.

• Conducting monthly pest surveillance for advising farmers on pest outbreak

and remedial measures.

• Small-scale multiplication of bio-agents for supply to farmers.

9.2.5 Biotechnology Division:

• Undertaking basic research on development of protocols for tissue culture of

various spices.

• Molecular level characterization of cardamom and vanilla germplasm.

• Inducing genetic variability in vanilla and other exotic spices.

• Imparting training for skill development to Kudumbasree unemployed youths.

• Mass production of tissue culture plants based on demand.

• A technique has been developed for mass multiplication of VAM in sorghum

roots.

• A number of new diseases such as panicle blight, root rot and leaf yellowing,

stem lodging measures for these, etc. were reported and control measures

developed

• Pilot trials showed that viral disease in plants can be detected through ELISA

for the quick diagnosis.

• Control methods were developed in diseases of vanilla and herbal spices where

Pathogens were identified.

9.2.6 Library

ICRI has a well established library which maintains a good collection of

documents on cardamom and related spices. The total collection of books is around

5000 including bound volumes of journals and abstracts. Newspapers are subscribed in

three languages. The library maintains a good collection of documents of cardamom

and other spices.

Library has a computerized cataloguing facility providing details regarding the

available books in the library and this can be used for quick reference.

The library is regularly publishing newspaper clippings service on spices and

condiments as well as current title service.

9.2.7 Administration

The ICRI at Myladumpara has an administration wing headed by an Assistant

Director (Administration).

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9.3 Services Offered

The following services are offered by the Department to growers of spices.

� Soil testing and fertilizer advisory service

� Plantation visit and on the spot study of pests and disease problems

� Recommendation for pest and disease control

� Supply of planting materials of high yielding and improved varieties

� Supply of bio control agents for controlling specific diseases and pests

� Conducting spice clinics, planters’ meets and group discussions

� Offering training to planters on various aspects of spice cultivation

� Imparting training on mass production of bio agents and on Good Agricultural

Practices

9.4 List of Records maintained

1. Cash book

2. Ledger

3. Cheque register

4. Receipt register

5. Central asset register

6. Inward register

7. Despatch register

8. Fuel stock register

9. Stationary and stock register

10. Central computer asset register

11. Stock register of chemicals, glassware, rectified spirit, bioagents etc.

12. Register of consumables.

13. Library register

14. Attendance register

15. Vehicle stock register

16. Plantation visit register

17. Register for advisory service

18. Visitors register

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9.5 Returns furnished:

The following returns on the accounts are furnished by the ICRI to the head office

every month:

1. Monthly accounts statement supported by paid bills, journal vouchers, receipt

vouchers, copies of receipts, statement of cheque issued, expenditure

statement, statement of advances paid/settled, Bank Reconciliation Statement,

Statement of accounts received from Bank.

2. Progress report on research activities

3. Progress report on advisory services rendered

4. Report on training imparted on Good Agriculture Practices.

5. Report on spice-clinic, seminars/group meetings, etc.

9.6 Internal Audit checks:

1. Scrutiny of funds transfer:

The funds required for meeting the expenditure on Research are transferred

from the Head Office to the Bank Account of the ICRI with State Bank of Travancore,

Nedumkandam and the funds required by the Regional Research Stations are

transferred to their respective Bank Accounts from the ICRI. It should be verified and

ensured by internal audit that the transfer of funds have been properly brought to

account by the various units and there is proper system of reconciling periodically the

inter unit transfer of funds.

As per the directions from Head Office all receipts on behalf of the Board

should be remitted to the non-operative revenue account of the Board with AXIS

Bank, Kochi (Account No.081010200018081). It should be verified that the

instructions have been observed and there was no delay on the part of the Research

Station/Regional Research Stations in remitting the amount into the account and that

there was no diversion of receipts for meeting expenditure.

Items of individual receipts should be checked with the schedule of rates for

various tests/services and ensure their correctness. It should be verified whether the

duties and taxes leviable on the testing charges have been correctly worked out,

recovered and paid.

It should be checked and ensured that the fixation of testing charges/fees for

services have been correctly done with reference to the cost of materials, men and

machinery and other expenditure involved. It should also be ensured that periodical

review is conducted regarding the adequacy of testing charges fixed and that revision

is done wherever necessary.

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2. Scrutiny of purchase of Lab chemicals and other materials:

It should be checked in internal audit:

• that the purchase procedure prescribed have been strictly observed.

• that the material so purchased have been brought to account, the issues/

consumption were as per norm fixed, if any, and the closing stock was not

much in excess of the normal requirement for consumption.

• In regard to purchase of assets, lab equipments, office equipments, furniture

and fittings, books, etc. it should be ensured that the purchase procedure have

been observed, approval of higher authorities including Chairman obtained

wherever necessary.

In regard to the expenditure on maintenance and repair works it should be

ensured that the procedure prescribed have been followed

3. Security arrangements

The security arrangements at ICRI are made by the Department directly. The

procedure followed in selecting the security guards, the terms and conditions of

contract, the payment effected, etc. should be reviewed. Whether approval of the

Chairman was obtained for the contract may also be ascertained.

4. Operation and maintenance of Generator

The consumption of fuel for generator, details of operation of the generator such as

hours operated, units of power generated, other expenditure on repairs and

maintenance of generator, etc should be reviewed.

5. Conduct of Training and other Programmes

The Institute is conducting various training programmes for the benefit of farmers,

officials and other public/private parties/institutions. The expenditure on training on

Good Agricultural practices incurred by the Institute was substantial It should be

ensured that the expenditure was within the approved budget allocation for each

programme of training. The expenditure incurred on printing and supply of course

material should be verified to ensure that the printing was arranged observing the

procedure prescribed, the material printed were not in excess of the requirement, the

fee paid to faculties were as per norms or orders obtained from the Chairman, etc. The

expenditure on meetings and seminars arranged by the Institute should be reviewed to

ensure that there was sanction for the expenditure covered by budget allocation, the

expenditure was commensurate with the number of participants/ beneficiaries, whether

the feed back from participants obtained and reviewed, the inadequacy/deficiency

pointed out by participants on earlier occasions had been taken care of in the

subsequent event, etc.

6. Expenditure on Projects

Scrutiny of expenditure on projects implemented by Research such as eco

friendly Neem face project, monitoring of pesticide residue, INM project, AICRPS

sponsored project, etc. should be scrupulously conducted with the approved scheme

and out come to ensure their cost benefit.

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7. Accounts of Research Farms:

The Research Station/ Regional Research Stations have farms attached to them.

The labourers/workers attached to the farms are governed by Plantation Labour Act

and Rules made there under. The payment of wages and other benefits to the labourers

such as, leave, sick leave, holiday wages, encashment of sick leave, issue of country

blanket and sleeping blanket, benefits such as transportation of children to schools,

free accommodation and electricity up to Rs.75/-, additional payment of incentive for

spraying insecticides, contribution to CPF together with employer’s contribution and

the remittance thereof, etc. should be checked with the terms and conditions of service

as given in the respective statutes and the accuracy thereof should be ensured.

The crop registers maintained for accounting of crop, there processing and disposal

should be reviewed to ensure that the yield has been correctly brought to account, the

processing has been done in time and the out turn obtained compares reasonably with

the prevailing standard.

The sale price realized should be compared with the prevailing market trend and it

should be ensured that the sales were at the maximum realisable price.

8. Establishment and Administration:

The guidelines for internal audit of establishment and administrative matters

given in Chapter 6 are applicable in the case of Research Department also. The Internal

Auditor should refer to these guidelines to check the various records on establishment

and administrative matters maintained in this department.

9. Financial records:

The accuracy of the returns furnished to the Head Office should be verified

and ensured in audit. The Registers maintained should also be scrutinized to ensure

their correctness.

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CHAPTER 10

MARKETING DEPARTMENT

10.1 Functions of the Department

10.1.1 The prime objective of the Board is to promote and regulate export of spices

and spice products from India. The Board regulates the marketing of spices and spice

products through issue of certificate of registration, issue of licences, quality

certification, etc. The marketing activities include regulating the domestic marketing

of cardamom through auction system. The export development and promotion

programmes are formulated and implemented by the Marketing Department of the

Board. The programmes are aimed at equipping the exporters to have necessary

competitive edge in sustaining and increasing exports of Indian spices. The Marketing

Department is headed by Director (Mktg). The Department has three divisions viz.

Marketing, Trade Information service and Market Research and Publicity. The

activities of the Department are undertaken through the Marketing Division at Head

Office and11 Regional Offices spread over India. The Regional Offices are headed by

Dy. Director (Marketing)/Assistant Director (Marketing).

10.1.2. The programmes planned and implemented by the Marketing division of

Spices Board focuses the following areas:

i) Market Promotional Role

• Technology transfer & Technology Up gradation.

• Inflow of Advanced technology from abroad in Processing, Packaging, Value

addition and Quality.

• Providing quality infrastructure to the industry matching international

standards and in conformity with the stringent food laws being implemented by

the buying countries.

• Market Promotion – Facilitating exporters to promote the products by

organizing international fairs, buyer-seller meet, assistance to develop quality

brochures and other publicity materials, supporting sending of samples to

buyers, supporting packaging development in line with the customers changing

shopping habits and in line with the needs of the super markets.

• Brand promotion – Promoting Indian Spices Logo and supporting individual

brands; helping exporters to win wider market acceptance by implementing

quality enforcement regime, which ensures that products exported are

conforming to the international requirements.

• Product Development & Research - Helping exporters by assisting them in the

Product Research activities.

• Market Development Assistance Programmes - Helping exporters to

participate in trade delegations, buyer-seller meet and exhibitions under Market

Development Assistance schemes.

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• Promote Organic Certified spice products - Assisting exporters for organize

certification and for participating in specialized exhibitions for organic

products such as Biofach, Germany.

• To assist and encourage studies and research for improvement of processing,

quality, techniques of grading and packaging of spices.

• To authenticate medicinal value of spices by research, thereby to find new

market.

• To strive towards stabilization of prices of spices for export

• To evolve suitable quality standards and introduce certification of quality

through "Quality Marking" for spices for export

• To undertake marketing of any spice, if it considers necessary, in the interest of

promotion of export.

• Organising international meetings to project India's capability as a major

producer, processor of spices, viz.,

(1) World Spices Congress

(2) American Spice Trade Association (ASTA) meetings

(3) European Spices Association (ESA) meetings

(4) Meetings related to Codex Alimentarious

(5) ISO meetings related to spices quality

(6) International Pepper Community (IPC) meetings

• Recognizing exporters with Spice House Certificate and Indian Spice Logo for

the high standard maintained in processing, packaging and quality.

• Promoting exports under Market Access Initiative (MAI) Schemes, conducting

market studies, helping exporters to set up warehouses abroad and other

marketing promotional activities under MAI schemes.

• Promoting Spices Parks to provide quality, marketing and processing

infrastructure and processing facilities at the growing centers, so that spice

growers of the region will get their due share of value addition.

• Promoting ‘product specific’ Spice Parks at various spice growing regions

which would lead to rise in the income of growers with increase in exports

under consumer acceptance.

• Dissemination of market information, production and price trends, import-

export strategies and market data related to imports/exports.

• Promotion of Geographical Indication (GI) Certification for spices.

ii) Regulatory Roles:

• Issue of Certificate of Registration as Exporter of Spices (CRES).

• Issue of Cardamom Auctioneer Licence, issue of Cardamom Dealer Licence,

& conducting Cardamom Auctions as per the Cardamom (Licensing &

Marketing) Rules, 1987.

• Issue of Registration cum Membership Certificate (RCMC)

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• Issue of Spice House Certificate.

• Issue of Indian Spices Logo.

Implementing quality enforcement in select spices prior to import by

sampling/testing and clearing exports.

The Marketing division has three sections viz., Licensing & Registration,

Implementation of Market Development & Promotion Schemes and Mandatory

Sampling, all headed by Assistant Directors.

Registration of spices exporters, renewal of registration of the existing spice

exporters, Auctioneers licence, RCMC, Spice House Certification and Logo

Certification are the major works attended under Licensing & Registration.

The records of Registration and renewals, issue of licences, certificates, etc.

and their renewals are maintained in the computerized system only.

The Department is responsible for conducting mandatory sampling of spices

and spice products indented for export. All the consignments of chilli and chilli

products, turmeric powder and sugar coated fennel seeds exported from India is

mandatorily sampled and tested in the Quality Control Laboratory of the Board for the

presence of Sudan I - IV dye and for aflatoxin and sunset yellow FCF. Similarly the

Mandatory Sampling section is responsible for arranging the collection of samples

from the exporters and stuffing of the materials. The mandatory sampling of export

consignments of spices and container stuffing supervision activities to be done by the

Board are undertaken through the authorized service provider (licensed contractors of

the Board)

10.2 Records maintained

The specific records pertaining to the department are maintained in the system

and reports are generated from the system. Important items include the

following.

1. Bank guarantee Register

2. Register for watching fulfillment of export obligation

3. Sample receipt register

4. Sampling register

5. Stuffing register

6. Mandatory sampling analytical report register

7. Customer samples cheque/demand draft /cash register.

8. Local samples received register

9. Files relating to formulation of schemes and scheme Rules

10. Rules for implementation of various subsidy schemes.

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10.3 Internal Audit checks:

As per the system followed, the receipts on account of fees for Registration of

Exporters and renewal of registration, for issue of cardamom Auctioneers’ licence and

renewal of licence, are remitted to the non-operative revenue account of the Board

with the Axis Bank, Kochi.

With regard to registration/renewals, issue and renewal of various certificates

and licences the following checks are to be exercised in Internal Audit.

1. Registration of Exporters and renewal of registration:

It should be ensured in audit that--

i) the procedure prescribed in the Regulations in this regard has been complied

with.

ii) fee for the grant of original certificate of export at the rate of Rs.2000/- has

been collected in all cases for a block period of three years ( current block period

commencing from 1st September 2008 and ending on 31

st August 2011) irrespective of

the date of application.

iii) renewal fee has been collected at the rate of Rs.1000/- in all cases of renewal.

iv) the application for renewal has been received before 30th June of the year in

which the validity of the licence expires

v) in case of delay whether additional fee at the rate of Rs.100/- for delay of each

month or part thereof has been collected.

2. Cardamom Auctioneers licence:

It should be ensured that

i) the rules regarding grant of licence to auctioneers have been complied with.

ii) whether the prescribed fee of Rs.5000/- has been collected

iii) whether the application for renewal of licence was accompanied by a fee of –

a) Rs.5000/- where the average auction turn over does not exceed Rs. One Crore,

b) Rs.10000/- where the average auction turn over exceeds Rs.One Crore but

does not exceed Rs.Ten Crore.

c) Rs.25000/- where the average auction turn over exceeds Rs.Ten Crores;

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in any three immediately preceding financial years.

iv) whether application for renewal of licence was filed before 30th June of the

year in which the same expires.

v) whether for the delay in applying for the renewal of licence, additional fee @

Rs.250 per month has been collected for the period up to the date of expiry of the

licence.

3. Mandatory sampling

The Board has entrusted the work of mandatory sampling and container

stuffing supervision activities to new agencies as per order No.MKT/SS/01/2009 dated

3-11-2009 of the Director (Marketing).

The internal audit of the item may include the following:

1. It should be ensured that the empanelment of agencies for Sampling and

Stuffing Supervision Work have been made after observing necessary formalities and

verifying their capacity and capabilities. Whether necessary agreement in the

prescribed stamp paper has been executed and whether the agreement contains the

terms and conditions of sampling and stuffing supervision along with penal

provisions?

2. Whether necessary Bank Guarantee as per agreement towards security for

execution has been furnished by the agency? Their performance may also be reviewed

periodically and unsatisfactory cases taken up with the Marketing Department for

appropriate action including termination of the contract.

3. Whether the DD/Cheque (at par /multi city/local) towards the analytical

charges have been collected from the exporter as per the prescribed rates per sample

and furnished to the Board’s office from where the sampling intimation has been

received?

4. It should be seen that the samples are invariably accompanied by the payment

of analytical charges at prescribed rates and the DDs or cheques for payment of

analytical charges have been promptly remitted to the “non-operative receipt account”

of the Board with Axis Bank.

5. Ensure that Conveyance charges for sampling/stuffing supervision have not

been paid to the agency within city limits where the Board’s office function in the

concerned area of operation?

6. That the sampling charges are for “per consignment under intimation”

irrespective of number of samples required to be taken on one consignment. However

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if one consignment exceeds 25 metric tonnes, subsequent 25 MTs will be considered

as additional consignment.

7. Stuffing supervision charges will be per consignment of up to 25 MTs at basic

rate and every additional 25 MTs will be considered as additional container of

consignment and the rates payable will be that applicable to additional consignment.

8. The claims for sampling charges, container supervision charges and courier

charges are to be submitted by the agency on fortnightly basis. It should be ensured

that the stuffing was done only on the basis of cleared analytical report issued by the

Board except in the case of Chilli Whole to South East Asian countries.

9. It should verified and ensured that conveyance charges for stuffing supervision

were allowed only if there was separate visit for the purpose other than the visit for

sampling in the same place, date and time.

10. In case of stuffing supervision, it should be ensured that if consignments of

more than one exporter do occur in the same container (LCL) only one stuffing

supervision charge was allowed.

11. In the case of payment of service tax it may be ensured that the agency is a

registered service tax assessee.

12. It should be ensured that conveyance charges have been paid as fixed by the

Board only in places beyond the city limits of the Board’s Office where local offices

are there for the Sampling Agency.

15. Verify and ensure that there was no claim of conveyance charges on

unproductive visits.

16. Minutes of the monthly meetings organized by the Regional Offices to

review the work and update the procedure and attended by officials of the agencies

should be scrutinized and action taken in accordance with the decisions taken in the

meetings should be reviewed.

10.4 XI Plan Schemes

The Schemes of subsidies/financial assistance under implementation during XI Plan

include the following:

1. Promotion of Indian Spice Brands Abroad

2. International Trade Fairs/Meetings

3. Spices Processing in North Eastern Region

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4. Trade Promotion

5. Infrastructure Development

6. Product development and research

The checks to be exercised during the internal audit of subsidies/loan

assistance under various schemes depend on the terms and conditions envisaged under

the scheme rules.

Under the scheme of “promotion of Indian Spice Brands Abroad” there are two

components viz. (i) Product and Packaging Development and Bar Coding and (ii)

Brand promotion. The audit checks of the assistance under the schemes include

the following:

1. Whether the application in the prescribed form along with the supporting

documents envisaged under the scheme rules was received?

2. Whether the eligibility criteria have been met?

3. It should be ensured that the exporter has furnished supporting documentary

evidence for having incurred/ committed for incurring the expenditure.

• In the case of assistance in the form of loan it should be ensured that Bank

Guarantee for the amount has been obtained.

• In the case of export development schemes, the beneficiary has to furnish six-

monthly progress reports to the Board. The receipt of the report should be

ensured.

• It should be ensured that periodical review of the progress of implementation

has been conducted by the Board.

• In the case of Brand promotion scheme, at the end of the third year a detailed

review should be made by the Board to ascertain the detailed impact of the

implemented scheme.

• It should be ensured whether the approved amount of the programme was

released in installments as per the scheme rules?

• Whether the repayment of loan installments commenced at the appointed time

so as to complete the recovery during the scheme period?

• Whether the export obligation has been achieved within the prescribed period?

For example the export obligation under the Brand promotion scheme is five

times the amount of loan within a period of 8 years.

• In the event of misuse of funds from the loan, the exporter has to refund the

entire amount of loan with interest at existing bank rate plus 2 per cent penal

interest.

• In the case of default in repayment, the bank guarantee should be enforced so

as to recover the entire amount of loan together with interest.

• It should also be ensured that the assistance has been given only in Indian

currency.

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The scheme of International Trade Fairs/Meetings has two components viz. (1)

Participation in International Trade Fairs and Exhibitions and (2) Participation in

International Meetings and Seminars. All Registered Exporters are eligible for grant

under component No.1 above. It should be ensured in internal audit

1. Whether the application in the prescribed form along with the supporting

documents envisaged under the scheme rules was received at least 15 days

ahead of the event and the eligibility criteria have been met?

2 Based on application and verification thereof the Board will give necessary

preliminary authorization. The beneficiary should submit their claim along

with necessary supporting documents within 90 days of his return to India. On

receipt of the claim the cases will be considered and the grant will be released

as per the Board’s marketing guidelines.

Representatives of the Exporters Association or the forum nominated to attend

to International Meetings/ Seminars to address common issues of the Spice Industry

are eligible to avail of the assistance under component No.2 of the scheme.

It should be ensured that the eligibility criteria have been met, the scale of assistance

has been as per rules, the application for assistance together with supporting

documents are submitted at least before 15 days of the event, the in-principle approval

had been given to proceed with the activity, whether the claim submitted immediately

after completion of the activity but positively within 90 days of return to India together

with the necessary documents.

Under the scheme of Spices Processing in North Eastern Region, the scheme

proposes to provide financial assistance to spice growers’ cooperative societies,

farmers’ Associations, NGOs representing Spice Growers and individual entrepreneurs

in North Eastern and Hill States to establish primary processing facilities for spices of

organized marketing of produce in domestic and inter national market with possible

value addition

It should be seen that-

1. The application for assistance has been submitted in the prescribed format

with prescribed documents,

2. The in principle approval of the proposal has been obtained before

implementation of the project,

3. Eligibility criteria have been met,

4. That the scale of assistance is in accordance with the scheme, i.e., 33% of the

cost of all types of the primary processing facilities to a maximum of Rs.25

lakh during the plan period per beneficiary, in the case of farmers’ groups the

assistance will be 50% subject to a maximum of Rs.35 lakh.

5. All payments for processing facilities/equipments should be by crossed

cheques which should be reflected in the Bank Accounts subject to a maximum

of Rs.35000 representing petty cash payable in cash

6. Whether the beneficiary on completion of the machinery installation has

submitted the required documents

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7. Whether the required inspection by a team nominated for the purpose has been

conducted on receipt of the required documents.

8. Whether the beneficiary has executed an agreement for the discharge of export

obligation (export obligation of 5 times the value of grant in aid within 5 years

from the date of completion of the processing facilities has to be achieved

(including deemed export)).

The scheme of Trade Promotion has three components viz. 1. Sending

Business Samples Abroad, (2) Printing Promotional Literature/Brochures (3)

Packaging Development and Bar Coding Registration.

It should be ensured that-

1. The application for assistance has been submitted in the prescribed format

with prescribed documents,

2. The in principle approval of the proposal has been obtained before

implementation of the project,

3. Eligibility criteria have been met,

4. That the scale of assistance is up to 50 % of the cost subject to a ceiling of Rs.1

lakh

5. Prior approval is obtained in cases other than reimbursement of courier / air

freight charges.

6. That necessary documents are submitted on completion of the specified

activity.

7. Whether the reimbursement has been made after completion of the activity and

based on verification report received

8. Whether in the case of courier/air freight charges the exporter claimed

reimbursement on quarterly basis and bills relating to the last quarter of the

financial year has been submitted before 20th March

The scheme of Infrastructure Development has the following four

components.

• Adoption of hi tech in spices processing

• Technology and process up gradation

• Setting up/ up gradation of in house quality control laboratory

• Quality certification, validation of check samples, training of Laboratory

personnel

It should be ensured that -

1. The application for assistance has been submitted in the prescribed format with

prescribed documents

2. Eligibility criteria have been met,

3. The in principle approval of the proposal has been obtained before

implementation of the project,

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4. Grant in aid provided is 33% subject to a maximum of Rs. 100 lakh in general

areas and 50% of the cost or Rs.200 lakh whichever is less for special areas.

5. Should see that the payments for all items of plant and machinery, equipment

and consultants are by crossed cheques which has to reflect in the bank account

provided petty payments up to Rs.25000 can be in cash.

6. Whether the beneficiary on completion of the project/ installation has

submitted a claim enclosing necessary documents.

7. On receipt of the claim for the specified activities whether a team has been

deputed for inspection and the payment has been effected on the basis of a

report of the inspection team and whether a Bank Guarantee for an amount

equal to the amount of grant in aid towards export obligation has been obtained

and whether the bank guarantee has been released on completion of the export

obligation.

Major areas of assistance under the scheme of product development and

research are-

i) Utilization of services of national and international Research Institute for

developing new spice products/ applications or for establishing traditional and

non traditional values.

ii) In house Research Programmes by entities with sufficient infrastructure

facilities

iii) Clinical trials to establish and validate therapeutic properties of spices through

reputed third parties

iv) patenting and product registration in consuming countries

It should be ensured that –

• The application for assistance has been submitted in the prescribed format with

supporting documents.

• Eligibility criteria have been met,

• The in principle approval of the proposal has been obtained before

implementation of the project,

• The scale of assistance is up to Rs.25 lakhs for research and development and

Rs.1 crore if clinical trial and patenting is involved.

• Whether the beneficiary on completion of the project/ installation has

submitted a claim enclosing necessary documents and additional documents if

required by the Board

Based on receipt of completion report and on verification of the report the

amount may be transferred to the beneficiary’s account by e transfer.

10.5 Trade Information Service & Market Research

This Division is responsible for collection, compilation and dissemination of

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statistics on exports, imports, area, production and domestic and international prices of

various spices and the market research activities. In addition to preparation of reviews,

reports, etc. are also done by the division. Some of the policy related issues are also

dealt by the division as and when directed by higher officials.

The Internal Audit should ensure that –

• There is a proper system for collection and compilation of data and for

dissemination of the same for research applications, the use of traders and

business community, for the Government/Board to formulate policies, etc.

• The data have been collected, compiled and published in time.

• The data collected are reliable and put to use.

10.6 Internal Audit of financial and accounting records

The important records maintained in the Regional Offices of the Marketing

Department include the following:

1. Attendance Register

2. Inward Register

3. Despatch Register and Stamp Account

4. Staff Movement Register

5. Register of Advances

6. Imprest Cash Book

7. Receipt Book

8. Stock Register of Receipt book

9. Stock Register of Stationery

10. Sampling Recording Register

11. Tour Diaries and Tour Reports

12. Assets Register

13. Stock Register of Books and periodicals

14. Bank Account

15. Scheme Registers

In addition, the field offices render various monthly returns to the Head Office.

The guidelines for internal audit of establishment and administrative matters

given in Chapter 6 above are applicable in the case of Research Department also.

The Internal Auditor should refer to these guidelines to check the various records

on establishment and administrative matters maintained in this department.

The accuracy of the returns furnished to the Head Office should also be

verified and ensured in audit. The Registers maintained should also be scrutinized to

ensure their correctness.

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CHAPTER 11

QUALITY EVALUATION DEPARTMENT

11.1 Functions

The Laboratory provides analytical services to the Indian Spice Industry and

monitors the quality of Spices produced and processed in the country. It also

undertakes analysis of consignment samples under the mandatory inspection of Spices

Board. It has facilities to analyze various physical, chemical and microbial parameters,

including pesticide residues, aflatoxin, heavy metals and contaminants/ adulterant,

artificial dyes in spices and spice products. The Laboratory follows internationally

accepted test methods for various analysis. The laboratory is equipped with the latest

sophisticated instruments to undertake the analysis as per the requirements of

importing countries. All the activities under the ISO 9001:2000 systems established in

the laboratory are fully computerized. There are three branches to the laboratory viz.

Chemistry Lab, Residue Lab and Microbiology Lab.

The laboratory is conducting analysis of chilli and chilli products for the

presence of Sudan I –IV and Aflatoxin under the mandatory sampling of consignments

of chilli, chilli products, turmeric powder and other food products containing chilli.

The laboratory is providing analytical services for the presence of other illegal dyes

like Para Red, Rhodamine B, Butter Yellow, Sudan Red 7 B, Sudan Orange G, etc.

Under Mandatory Sampling, the laboratory is also conducting analysis of the ‘Sugar

Coated Fennel Seeds’ exported from India for the presence of ”Sunset Yellow FCF”.

In addition to its main laboratory attached to Head Office at Kochi the Board

has also set up laboratories at Mumbai and Guntur. The Quality Evaluation

Laboratories of the Board are equipped to undertake analysis of various parameters on

the spices and spice products.

11.2 Analytical Services and fees there for

Details of the Analysis conducted by the Lab on various parameters, the

minimum quantity required for sample analysis, number of days required for analysis

and the rates of analytical charges, etc. are prescribed and periodically

revised/published by the Laboratory.

The procedure followed in regard to the collection of samples, collection of fees

and remittance thereof, sending the sample to the Lab for analysis and sending the

analysis report are described below:

The Board has empanelled authorized agencies at various places to collect

samples for analysis and for stuffing supervision work in the premises of the exporters.

The exporters requiring sample analysis report will initially approach the Marketing

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Department at Head Office or the concerned Regional Office under the Marketing

Department for the purpose. On getting the information, the authorized agency in the

concerned area according to jurisdiction will be given sampling intimation to collect

samples for analysis. The terms and conditions of contract with the Agencies for

collection of samples include the following:

1. The samples should be drawn as per the EU norms and/or the norms fixed by

the Board in accordance with the International standards. The details of the

consignment will be provided in the intimation form.

2. The consignments sampled should be stack-sealed properly (fool proof) with

identification tag.

3. The samples drawn should be properly packed to avoid damage on transit and

sent to the Sample Receipt Desk (SRD) under the Marketing Department of the Board

either in Kochi or Mumbai or to any other Board’s laboratory as the case may be on

the same day with two copies of the sampling report as per the prescribed format.

Samples drawn within the city limits of Board’s laboratory should be delivered on the

same day of drawal of sample and from distant places by courier/air cargo.

4. The Demand Draft/Cheque (at par/multi city or local) towards the analytical

charges should be collected from the exporter at fixed rate per sample and forwarded

to the concerned Offices of the Spices Board from where the sampling intimation has

been received. The instruments should be sent separately (not along with sample)

either on the same day of the drawal of sample or the very next day along with the

statement detailing the cheque/DD number, date, amount, the exporter name and the

Bank/branch name.

The analytical charges so collected/received by the Board are remitted to the

non-operative revenue account of the Board with the Axis Bank by the receiving office

or by the Accounts Department at Head Office.

The Laboratory is maintaining the following records and registers.

1. Document movement register

2. Issue register for standards

3. Register for annual maintenance contract

4. Register for control of gas cylinder

5. Inventory of laboratory equipments

6. Instrument performance register

7. Maintenance control register

8. Issue register for chemicals/ filter paper

9. Issue register for bonded chemicals

10. Breakage register for glassware

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11. Movement register for master sets

12. Register for standard stock cultures.

13. Master list of documents

14. Agenda of management review meetings

15. List of equipments to be calibrated in Chemistry lab

16. List of equipments to be calibrated in Residue lab

17. List of equipments to be calibrated in Microbiology lab

18. MOL distribution list

19. MOA distribution list

20. MOC distribution list

11.3 Internal Audit Checks

The Internal Audit checks of the registers and connected records of the quality

Evaluation Laboratory include the following:

1. The rates of analytical charges fixed should be reviewed periodically to ensure that

these are arrived at in such a way as to cover the cost of materials, men and machinery

put to use for each type of test.

2. The system existing for periodical revision of rates taking into account the cost

escalation should be reviewed.

3. The analytical time fixed for various tests should also be reviewed to ensure

that the out turn from the Laboratory is the maximum possible without foregoing the

quality standards of tests.

4. It should be ensured that the test reports are promptly sent to the exporters

concerned as specified in the schedule.

5. Various records and registers maintained in the Laboratory should be reviewed

and the compliance with the requirement thereof specified by ISO certification agency

and other National/Inter National Agencies should be ensured.

6. The observance of prescribed purchase procedure in regard to procurement of

laboratory chemicals, other consumables and laboratory equipments should be

ensured.

7. The stock records of laboratory chemicals and other consumables should be

reviewed and accumulation of stock, existence of dead/obsolete stock and slow

moving items should be pointed out.

8. The utilization of machinery and equipments should be reviewed with

reference to the log book and connected records.

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CHAPTER 12

Divisions under the direct control of the Chairman

12.1 Vigilance Division

12.1.1 Functions

In order to maintain purity in public service and to implement the anti-

corruption measures in the Board, the Board has a Vigilance Division functioning

directly under the control of the Chairman. The Vigilance Division is responsible for

monitoring various vigilance activities including disciplinary proceedings against the

employees of the Board. The Division also deals with all types of complaints against

the staff of the Board from the public as well as from other affected persons and

conducts surprise checks/inspections for ascertaining proper working of the offices of

the Board. Any irregularities detected are immediately taken up for corrective action

and results followed up to their logical end. The Division is also responsible for the

safe custody of the Annual Confidential Reports of all the staff. The work of imparting

of necessary training to the staff of the Board is also entrusted with the Vigilance

division.

The functions of the Division are mainly the following.

i) To ascertain in respect of each member of the staff:

(a) What are his terms of appointment,

(b) What disciplinary rules apply to him, and

(c) The authority empowered to impose different kinds of penalties.

ii) If there are no clear rules on the points noted under item (i), action should be

taken to regularize and clarify the points.

iii) Examination of the existing organization and procedure with a view to

eliminating or minimizing factors which provide opportunities for corruption and

malpractices; enforcement of a system of regular inspections and surprise visits with a

view to detecting failures in quality or speed of work which would tend to the

prevalence of corruption and/or malpractices. In this connection the instructions

issued by the Central Vigilance Commission in Office Order No.23/7/07 dated 5-07-

2007 regarding transparency in works/purchase/ consultancy contracts on nomination

basis should be adhered to.

iv) Arrange surprise inspections where there is suspicion or complaint of

irregularity or malpractice.

v) Ensure that action or enquiry instituted is done with due speed and vigour.

vi) Suggest ways and means to economize Board’s expenditure.

vii) Administer oath of allegiance and secrecy of office/affirmation.

viii) Issue timely instructions regarding security of records and maintenance of

Board’s property.

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ix) Deal with vigilance cases.

x) Deal with the matters connected with the training of staff in various aspects,

selection, monitoring, etc.

It is also necessary to maintain a register for disciplinary proceedings. It

should contain details of the persons proceeded against, date of framing of charges,

appointment of Enquiry Officer, if any, and the progress of the case. This register is to

be put up to the Chairman on the 10th of every month so that the progress can be

reviewed.

All classified communications to and from the Vigilance Division are to be

treated as secret and should be addressed to the officers concerned by name.

The procedure for dealing with vigilance cases and disciplinary proceedings is

given in the Spices Board Service (Classification, Control and Appeal) Regulations,

1992.

12.1.2 Internal Audit Checks

The internal audit checks of the vigilance division should be confined mainly

to the following:

1. To review the register of complaints maintained in the division to ensure the

speedy disposal of the complaints received from staff of the Board as well as from the

public.

2. To review the register of vigilance cases, ascertain the stages of disciplinary

action taken against the employees and to bring to the notice of the higher authorities

any undue delay in proceeding with and finalizing the cases.

3. To review the cases of surprise inspections conducted, especially on the

basis of complaints received and ensure that any irregularities detected are

immediately taken up for corrective action and results followed up.

4. The system of watching the receipt of the Annual Confidential Reports in

respect of all the staff, communicating adverse remarks to the employees concerned,

their follow up and further action taken wherever necessary should be reviewed.

5. The details of staff trained during the period should be reviewed with

reference to the plan/programme of training budgeted. The basis of selection of staff

for various training courses/programmes, monitoring of the results achieved out of the

training and whether the trained staff are posted in such a way that the benefit of the

training given is actually received to the organization should be reviewed.

12.2 Planning & Coordination Division

12.2.1 Functions

The major functions of the Division are Planning and Coordination of the

activities of the Board. Planning is done by collecting plan proposals from various

Departments/Divisions and preparing plan documents there from which will be sent to

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the Ministry. On approval of the plan, budgets will be prepared and approval obtained

from the Ministry. The programmes as per budget will be implemented through

various departments. The implementation of the schemes by various departments will

be periodically monitored by conducting review meetings.

The division is also responsible for correspondence with the Commerce

Ministry, other Ministries, Planning Commission and State Governments, co-

coordinating visit of Parliamentary Standing Committees, pursuing the follow up

action on PSC reports, preparation and submission of periodical returns like monthly

report, quarterly progress report, etc. on the activities of the Board, preparation of

annual report and annual administrative report, up dating of web enabled monitoring

system, ensure compliance with the provisions of RTI Act, answering parliament

questions, LA questions, VIP references, promotion of Spice Tourism, etc.

12.2.2 Internal Audit Checks

The internal audit should review the activities undertaken by the Division in

general with reference to the records and registers maintained and should in particular

see to the following.

1. Was there any delay in calling for Plan proposals from various

Departments/Divisions and for preparing plan documents?

2. Whether the budget proposals submitted to the Ministry were strictly in accordance

with the approved plan.

3. Whether the implementation of the schemes by various departments is periodically

monitored by conducting review meetings.

4. Whether the prescribed returns and reports are submitted in time.

5. Whether the system of complying with the provisions of RTI Act is adequate.

6. Whether parliament questions, LA questions, VIP references, etc. are answered

promptly.

7. Whether the up dating of web enabled monitoring System was promptly done, etc.

12.3 EDP Division

12.3.1 Functions

The EDP Division of the Board attend to the following activities:

1. Administration of organization with IT resources namely hardware, software,

databases, networking, peripheral equipment and team of IT personnel.

2. Perform design, development, documentation, testing, implementation and

maintenance of Information Systems and application software.

3. Formulate strategies for technology acquisition, integration and

implementation.

4. Advise, guide and assist various departments and offices of the Board for the

effective use of Information Technology.

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5. Help desk management for existing applications, messaging solutions, Internet

and Web site maintenance.

6. Identify the need for new systems (or modifications to existing systems) or

respond to requests from users.

7. Up gradation of IT infrastructure.

8. Defining and implementing systems and procedures for the smooth functioning

of computerized systems.

9. Data Processing.

10. Development, maintenance and up dating of Board's web site and web enabled

applications.

11. Providing Internet and E-mail service to user departments.

12. Formulate and conduct Computer training programmes.

12.3.2 Software packages developed

Software packages have been developed and implemented in the following

areas:-

• Trade Information Service

• India's spices exports

• World Import

• Prices in domestic and international markets

• Area and production

• Trade Directories: Exporters, Dealers, Auctioneers, Importers, Suppliers,

Planters etc.

• Registration and licensing

• Electronic Auction of small cardamom.

• Pre-shipment sampling

• Monitoring receipt, analysis and delivery of Spice samples received for quality

evaluation.

• Analysis of analytical data of the Quality Evaluation Lab to assess the

incidence of physical, chemical and microbial contaminants.

• Financial Accounting and Pay roll.

• Interest bearing loans like GPF, HBA etc.

• Personnel Information, leave accounting and income tax assessment.

• Library Cataloguing, circulation and control of external documents.

• Market Survey Analysis.

• Area and Production Surveys.

• Maintenance of subscriber addresses, monitoring of subscription expiry and

mailing of periodical publications.

• Receipt and issue of consumables and maintenance of assets.

• Maintenance and accounting of provident fund and pension scheme for casual

labourers.

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12.3.3 Internal Audit checks

The following are the checks generally to be carried out during the internal

audit of EDP Division.

(i) What is the total number of PCs/Servers/Printers etc. in the office? How many

of them are in working condition and are being utilized?

(ii) What is the number of total employees trained in computer (Cadre-

wise/Package-wise) including persons trained on their own, outside office,

persons who gained working knowledge by actual practice and self study even

though they might not have attended formal departmental training

programmes.

(iii) How many of the computer trained persons are working on computers?

(iv) Whether returns required to be sent by E-mail are sent by E-mail.

(v) Whether computer training programmes are arranged through outside agencies

or/and through in-house trainings and

(vi) Whether Computers, UPS, LCD etc. were purchased during last four years?

Entire details of the same may be obtained?

vii) Whether the computers were purchased from the vendors empanelled by

DGSD or at the rates fixed by them? Whether all the works relating to

Administrative Reports, Activity Reports, Annual Reports, important returns to

Ministries, Gradation list of employees etc. are done through computers?

viii) Who are the annual maintenance contractors for computers etc.? What is the

basis of selection of the contractors? Whether the annual maintenance rate

exceeds 6% of the cost of the items? Whether AMC is given with prior

approval of Competent Authority?

ix) How is the performance of AMC contractors? In case of any dispute please

collect the details.

x) Has the Office made appropriate arrangements for loading Akshar or similar

package in computers used for communication in Hindi? Is there facility/

compatibility of necessary fonts software in the computers used for

receiving/sending emails in Hindi?

xi) Please furnish information in the following proforma:

Is it ensured that there is no pirated software in use?

Name of Software

Number of Licenses

Total Number of machines on which installed

Number of each machine on which installed along with location/room Number

where the machine is placed.

xii) Whether arrangements have been made for uninterrupted power supply

to all computer machines.

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In this connection please furnish information in the following proforma:-

(a) UPS (Size in KVA) Numbers Total KVA

(b) Machines

(c) Nos. covered under UPS Nos. not covered under UPS

Servers

PCs

Printers

Note:- The guidelines mentioned above are not exhaustive and provisions laid down

in relevant Codes, Manuals, Rules and Regulations as prescribed by the

Government and Instructions issued from time to time by the Chairman/Board shall

also be applied.