Audit of Government Agencies – A Practical Approach


Basically, Government Agencies receives Grant in Aid from the Central/State Govt. for their Operations & Day to Day activities, Auditor’s first Role evolves here only Generally the manner & mode of usage is prescribed with the of each & every installment of Fund so received by agencies, thus this constitutes the First part of the work of an Auditor i.e. Proper Utilization of Funds so granted, things that require Special Attention in this regard are enumerated hereunder:-

·         At the period end an Auditor shall Examine the Fund Received during that Period is expended in the Ratio/Manner prescribed by the Higher Authorities & the Expenditure under any head if exceeds the Budget so allotted by it, whether proper ratification is obtained or not.
            Things Useful in this regard: – Receipts & Payments A/cs, Utilization Certificates.
·         Identify any Idle/ Blocked Funds in the non operating Bank Accounts/Activities & Schemes.
            Things Useful in this regard: – Bank Statements, Bank Reconciliation Statement.
·         While Auditing the Funds disbursed check that no additional funds are Disbursed to the Lower Hierarchical Offices without obtaining the Utilization Certificate(s) of the Previous Funs Sanctioned.
            Things useful in this regard: – A summary sheet of Total Funds disbursed to be verified with the Utilization Certificate available with it.
·         Transfer of Funds from one Activity/Scheme to other should be treated as Unsecured Loans & Advances, & such transfer should be backed by Authority of Eligible Official, viz. Generally Collector’s Permission is required for transfers above 5 Lakhs. Thus Funds Transfers should be watched vigilantly for classification of Assets, i.e. not treating Loans as just Advance.
            Things useful in this regard: – Bank Statement & Cash Book.
Second Part
Advance Adjustment
Government Agencies generally receives Advance funds for the Infrastructural Developments like Constructions of Buildings/Offices & any Structure attached to existing one, thus while auditing the same needs special attention , point wise checks are mentioned hereunder:-
·         Utilization Certificates of each & every work should be prepared & stored safely & the same should be complete in all regards such as:-
a)      Details of Funds Disbursed & Work Completion, [for this use the Engineer’s Completion Certificate &Summary of Funds disbursed from the H.O.];
b)      The Difference between Funds Disbursed & Work Completion (if Positive i.e. W.C. is less than F.D.) is meant for Recovery from the Constructing Agency (normally Gram Panchayats), the amount of recovery should be appropriately disclosed in the reports;
c)      Name, Signature of all concerned officers & Date of Sanction should be mentioned in the UC.
·         Adjustment should be done of Amount lower of Amount Sanctioned/Funds Disbursed or Work Completion (as mentioned in the Completion Certificate issued by Civil Engineers).
Third Part
Statutory Requirements
It’s the General point at which maximum Govt. Offices fumbles & here the role of an Auditor becomes important to avoid unnecessary Penalties, Interest, and Legal Suits etc. Areas where the Auditor can point some irregularities are:-
·         Regarding Registration of Societies- It should be noted that every society (whether Govt. or Private) operating in a given state is required to get itself registered under the State’s Societies Registration Acts (applicable in some states) & follow the regulations prescribed therein, like in Madhya Pradesh under section 27, 28 of the M.P. Society Act,1973 audited accounts needs to be submitted and likewise in other States, Common Checks pertaining to the above are as under:-
a)      Registration obtained or not;
b)      Final Statements submitted in due time or not;
c)      Payment of due Charges/Taxes in stipulated time period.
·         Regarding Income Tax Compliance- This is the Area in which maximum irregularities are noticed, thus this area needs special attention of an Auditor so that the lacunas can be unearthened like:-
a)      TDS is deducted at proper Rate wherever applicable & the same is deposited before the due dates & TDS return is filed at specified intervals & the certificates in Form 16/16A are delivered to respective deductees within the stipulated time period;
b)      Tax is deducted on the whole amount (i.e. inclusive of Service Tax) & not just on the Principal Amount payable [Except in case of Rent (Sec. 194I)], {CBDT circular 4/2008};
·         Other Miscellaneous Statutoryduties-
a)      PF & Insurance deducted is deposited in time period prescribed or not & the Yearly returns thereon are timely & completely filed;
b)      VAT Act & its procedures needs to be followed properly;
c)      State’s Professional Tax requirements needs to be fulfilled duly.

Fourth Part
Expenditure Audit
Most of the Government Agencies generally have no Income or a meager amount of it, thus the major area that constitute the Audit Plan is the Audit of  Expenditure/Payments, Points to ponder while Auditing of Expenditure are as follows:-
·         All the Payments of Expenditure should be made only after Acquiring Services/Products, i.e. Advance payments to Outsiders should be avoided, & if given proper record of this should be kept.
·         Strict watch should be kept on payment of expenditure, as regards double payment & double recording in Cash book.
·         Procurement Procedures laid down by Policy Framing Authority should be duly followed, each and every conditions specified in procedure should be fulfilled (Eg. Procurement of Grocery should be made from Registered Dealers only or Open Tenders to be called for Expenditure exceeding ceiling limit of (say) Rs.50, 000 etc.).
·         Advance given to Staff for Payment of Expenses on behalf of the Agencies should be adjusted properly & if it remains unadjusted at period end then it should be properly disclosed in the Financial Statements.
·         Vouching:- All the Expenses that are Incurred at the offices should be duly supported with all relevant documents such as Orders, Bills, Quotations (Price Estimates from at least 3 different parties) & Tenders (wherever required), the above mentioned documents should be present in the Voucher File even in case of a Single penny, things to look at while vouching :-
ü  Vouchers should be passed by Appropriate Authority & the Amount so paid is within his/her delegated powers;
ü  Bills should be made “Pakka”  & bills on Simple Paper should be reported;
ü  Date & Amount of Bill & that of Cash Book;
ü  Rate of Quotation passed & the Bill;
ü  Payment mode (Generally through A/c Payee Cheques, though Cash Payments are permissible to a certain limit prescribed);
ü  Recording & Posting of the Expenses should be done in proper way in the applicable Account Heads only as there are Budgets allotted from which any exceeding expenses shall be reported [if no ratification obtained]
ü   Penalty paid (if any) on delayed deposition of Telephone & Electricity Dues should be noted;
ü  In Case of Procurement of Services, description of Services provided should be mentioned in the Invoices, as this would help in proper bifurcation of the expenses in the applicable heads.
Any deviation from the above mentioned checks shall form part of the Audit Report.
Fifth Part
Record Keeping
Generally it is seen that Maintenance of Books of Accounts & Other Records (Voucher File, Advance Registers etc.) is very poor or not up to the mark, things that require attention of an Auditor are:-
·         Regarding Cash Book Maintenance:- Common Checks-
a)      It should be updated daily;
b)      Properly balanced at the end of each day;
c)      No Overwriting should be there;
d)     No Left Blank Pages;
e)      Use of Pencils shold not be allowed in writing Books of Accounts;
f)       Duly verified & Signed by Responsible Authority.
·         Same checks apply to Ledger maintenance also.
·         Voucher File:- Vouchers should Arranged properly (duly numbered, Arranged in Chronological Order, All the Documents such as Bills, Orders, Quotations & Tenders relating to a particular expense should be kept at single place).
·         Along with the above mentioned Primary Records supplementary records such as Cheque Book Issue Register, Advance Given Register and Stock Register etc. should also be kept properly.
Hope that you had been informed with the Glimpse of a Government Audit from the above article, as the actual working has dimensions which neither can be written down nor be explained which can be experienced only when you jump into the Actual Arena, wishing you best of luck for the assignment.