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Audit on IR 3.3.09

Audit on IR 3.3.09

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Audit on IR 3.3.09

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  1. Audit on IR3.3.09

  2. Introduction • Audit - a constitutional function • Derived from Constitution of India (Articles 149-151) • Rly. Audit separated from Accts in 1929 • Scope and extent of Audit determined by C&AG • Addl. Dy.C&AG of India (Rlys.) controls the Audit functions at Apex level (Rly. Bd) • PDA conducts Audit of Zonal Railways

  3. Audit Duties • Duties include audit of all • Expenditure from Consolidated Fund of India • Receipts into Consolidated Fund of India • Transactions relating to Contingency Fund & Public Account • Trading, Manufacturing, P&L Account, Balance Sheets and other subsidiary accounts • Accounts of Stores & stocks held • And to report on the transactions so audited

  4. Objectives of Audit • Ensure • Adequacy of systems of accounts of Railway • Accurate balances • Necessary safeguards or maintenance of accounts • Proper checks and mechanism to protect financial interests of Railway

  5. Significance of Audit • Constitutional requirement • Audit is independent • Identifies infructuous and redundant areas of expenditure • Presents a Free and Fair view of events • Identifies pockets of loss of revenue • Independent certification of accounts • Ensures independent check of finance transactions • Enables PAC to examine the accounts of Railways

  6. Purpose of Audit • Accountancy Audit Check of arithmetical accuracy; transactions being supported by vouchers; assess the accuracy of accounting systems and systems of internal check • Administrative Audit Check of sanctions to see that expenditure is incurred as per rules & regulations; sanctioned by competent authority • Appropriation Audit ( parliamentary control) Check of classification of expenditure; ensure that grants are not exceeded

  7. Methodology of Audit • Test check of vouchers • Inspection of offices • Check of financial sanctions • Check of all orders/sanctions issued by GM & other officers • Check of all receipts and payments & accounts • Check of tenders & Contracts • Check of procedures and systems

  8. Communications from Audit • Draft Observation Slips • Audit Notes - Part-II • Inspection Reports - Part-II • Audit Notes - Part-I • Inspection Reports - Part-I • Audit Reviews • Special Letters • Draft Para • Provisional Para • Paras and Chapters in Audit Report • Action Taken Notes

  9. Disposal of Audit Objections • Prompt replies at initial stage of objection • Coordinated approach between Executive and Accounts (Bipartite Meetings) • Tripartite meetings to explain the administrative point of view • Close monitoring at higher level • Monitoring through Monthly Progress Reports • Connected vouchers/ records not be destroyed till the objection is closed

  10. Disposal of Audit objections • All audit objections to be promptly disposed off by Accounts Office. Matters which can not be replied to be referred to the executive • In case audit view is to be upheld, action to be taken to implement the same • Executive to send reply to accounts for scrutiny. Accounts Officer may call for further information. • The reply should be an “authoritative statement of facts”

  11. Nature of Audit The audit done by C&AG is broadly classified into • Regularity Audit, • Propriety Audit and • Performance Audit.

  12. Regularity Audit • Regularity Audit is also known as Transaction Audit and Compliance Audit • Regularity Audit is with reference to • Provision of funds • Rules and regulations • Sanction of expenditure

  13. Propriety Audit • Propriety Audit extends beyond mere scrutiny of expenditure. • Audit also looks at wisdom and economy of any expenditure. • Audit brings to light cases of improper expenditure or waste of public money.

  14. Performance Audit • To ensure that Government programmes have achieved the desired objectives at lowest cost and given the intended benefits.  • Studies included in Audit Para of 2007 are: • Planning and execution of MMTS/HYB • Track Renewal works on IR • Cleanliness and Sanitation on IR • Freight and Wagon Management

  15. Performance Audit - IT • IN THE REPORT 2007 RELATING TO 2005-06, INFORMATION TECHNOLOGY, DEALT AS A SEPARATE SUBJECT HAS : • COMPUTERISED PASSENGER RESERVATION SYSTEM OF THE INDIAN RAILWAYS • COMPUTERISED APPLICATIONS OVER INDIAN RAILWAYS

  16. Repercussions of improper handling • Objections at lower layers get escalated. • Part I / Part II objections / Special Letters may get converted to Draft/Provisional Paras and later figure in the Audit Report. • PAC obtains personal evidence of Officers at the highest levels like GM and Board members in select cases. • At ATN stage responsibility gets fixed at very high levels. • Loopholes in the system will persist, if corrective steps are not taken at appropriate level

  17. To sum up- • Role of Audit to be viewed in proper prospective • Audit is not a fifth wheel • Soundness of internal systems are put to test • Audit be taken as guiding, correcting and constructive machinery Now, Let us see some Audit Paras…… ...... from Audit Report 2007

  18. Reply to Draft Paras • Draft reply should contain • brief history of the case, • sentence-wise comments, • chronological summary of the events, • defense of the railway administration, • remedial action taken and • disciplinary aspects.

  19. Draft Paras • Draft Paras sent to GM with copies to PHoDs concerned, FA&CAO and also Railway Board. • DP to be replied to PDA within 8 weeks • 5 Weeks in all for the Railway • 2 weeks for furnishing remarks by the executive, • 1 week for vetting by accounts, • 2 weeks for GM’s approval • 3 weeks for Railway Board for the zonal railway.

  20. Provisional Paras • Provisional Paras can be • Direct Provisional Paras • Draft Paras proposed for inclusion in Audit report • Replies not given in time or nor given at all • Audit not convinced fully or partially with Railway Reply. • Railways given only 2 weeks to furnish reply to the Railway Board, with the approval of the GM • If Audit not convinced by the replies, the Provisional Paras become final and get incorporated in Audit Report as Audit Paras as part of Regularity Audit. • Besides Regularity Audit, Audit Report also mentions about contains Performance of Railways in the form of Chapters.

  21. Replies to Draft and Provisional Paras All such Draft Paras addressed to the GM and copies endorsed to concerned PHoD/PHoDs and FA&CAO. The nominated JAG/SAG officers of Accounts Department co-ordinate with the concerned HoDs/ PHoDs for obtaining remarks. Reply/remarks to have PHoD’s approval. Sentence wise remarks to be vetted by the Associate Finance. Consolidated Reply/Remarks sent through FA&CAO for GM’s personal Approval.

  22. North Eastern RailwayAvoidable loss due to delay in stitching of clothes (1) Various Offices send indents for supply of uniforms and liveries to the Uniform Ward (UW) of Stores Depot. The UW places work orders on the Cloth Cutting Factory (CCF). The CCFcloth from the Cloth Ward (CW) and after cutting these into required sizes, sends them to the various stitching centres. Stitched clothes are sent back to UW for onward supply to indenting units. The capacities of these stitching centres stated to be sufficient.

  23. North Eastern Railway Avoidable loss due to delay in stitching of clothes (2) Some 46,684 pieces sent by CCF during 2001 to 2005 to the stitching centres not received back (August 2006) by UW even after a lapse of one to five years. In addition, a backlog of 6,580 pieces sent to stitching centres as far back as 1994-95 still to be received back (October 2006). Similarly, 13,898 cloth pieces sent by CW during the same period for cutting still lying with CCF. The total value of these pieces works out to Rs.0.54 crore. Since uniforms are to be supplied every two years, it is evident that the bulk of the cloth would have outlived its normal life and therefore not fit for utilisation.

  24. North Eastern RailwayAvoidable loss due to delay in stitching of clothes (3) The Railway stated (July 2006) that the bulk of the work carried out and pending only due to non-availability of raw materials. Reply not acceptable as the raw material required (buttons and lining cloth) cannot be reason for delays of more than five years. Railway ought to have arranged for required raw material as any delay in supply would result in denial of a staff facility, blocking up of capital and danger of deterioration. Failure to effectively monitor the supply and return of the material to the cutting and stitching centres has resulted in blocking up of Rs.0.54 crore and possible deterioration of stock.

  25. South CentralInadequate care during construction (1) An old bridge across the river Papagni on the Renigunta – Guntakal section with permanent speed restriction of 20 KMPH proposed to be replaced by a new box girder bridge with 15 spans. Construction work of the new bridge taken up in Dec 02 - completion period two years. The staging erected on RCC blocks. While casting PSC girder for span No.6, one of the stagings on which the PSC Box girder was cast, sank by five to seven centimeters due to flash floods (Sep 04) and a ‘U’ shaped crack developed in the girder.

  26. South CentralInadequate care during construction (2) Noticing the crack, repair work was undertaken but when load test was conducted, development of tensile stress near the crack location noticed rendering the girder unfit. Rehabilitation of the damaged girder completed only in Oct 06. Railway forced to continue use of old bridge with SR resulting in avoidable expenditure of Rs.1.17 crore beside blocking of capital to the extent of Rs.16.36 crore.

  27. South CentralInadequate care during construction (3) Railway contended that there was no failure on their part as the delay in execution was due to unusual occurrence of high flash floods which was beyond human control and was unavoidable. Sinking of the staging was as a result of the scouring below the RCC block during the flash flood. Reply not tenable as the river has a history of flash floods, as seen from the records of the Central Water Commission and the same should have been kept in view during execution of the work. Prudence dictates that the work should not be carried out in the monsoon months, particularly in view of the history of flash floods during the monsoon months.

  28. South CentralInadequate care during construction (4) The Indian Railway Bridge Manual (Rules 609) stipulates that during the construction of pre-stressed concrete bridges, cribs and supports are to be used from below and girders cast in situ; due care to be taken in supporting the staging columns and to check the staging at various stages to see that it does not settle under the load. Engineering Code also stipulates that Executive Engineer in charge of the work will be totally responsible for proper execution of work irrespective of executing agency.

  29. Western RailwayIrregular concession to salt meant for export (1) • Two distinct classes provided for salt • 'salt for human consumption' and 'salt for industrial use'. • Salt meant for ‘human consumption' booked under subsidised rates but • Salt meant for ‘industrial use' booked at higher rates. • Railways have not provided separate classification for salt meant for ‘export'. • Salt consignments booked by M/s. Salt Trading Company Ltd, Nepal (STCL) from nine stations of Western Railway to Katihar and Gonda of NER and Raxaul and Samastipur of ECR booked as 'salt for human consumption' and freight was recovered at subsidised rates.

  30. Western RailwayIrregular concession to salt meant for export (2) These consignments were meant to be exported to Nepal and were being offered for booking since 1992. Since salt meant for export has no bearing on the social obligation towards the people of our own country, booking the same under subsidised rates not justified and required separate higher classification. On the other hand, even haulage cost not being recovered. Irregular booking of salt for export under subsidised rates provided for 'salt for human consumption' has resulted in loss of revenue of Rs.18.86 crore during the period 1 April 2001 to 31 March 2006.

  31. Western RailwayIrregular concession to salt meant for export (3) Railway Administration admitted that the salt consignments booked by STCL were meant for export but were charged as 'salt for human consumption' on the basis of declaration by the consignor that these were meant for human consumption and also because salt meant for export does not have a distinct classification. Failure to distinguish between a product which needs to be subsidised in the national interest and that meant for export has resulted in a loss of Rs.18.86 crore on one stream of traffic alone.

  32. Thank you