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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;
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(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.
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(d) A draft of the proposed report on fraud may be submitted to Vigilance Division
for review in appropriate cases.
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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.
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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.