TABLE OF CONTENTS Paragraph Page Number Number Preface vii Chapter 1 Introduction About this report 1.1 1 Auditee profile 1.2 1 Authority for Audit 1.3 2 Organisational structure of the Offices of the Principal 1.4 3 Accountant General (C&CA) and Accountant General (WF&RA), Bangalore Planning and conduct of Audit 1.5 3 Significant audit observations 1.6 3 Performance audits of programmes/activities/department 1.6.1 3 Compliance audit of transactions 1.6.2 5 Lack of responsiveness of Government to Audit 1.7 7 Inspection reports outstanding 1.7.1 7 Response of the Department to the Draft Paragraphs 1.7.2 8 Follow-up on Audit Reports 1.7.3 8 Paragraphs to be discussed by the Public Accounts 1.7.4 8 Committee Chapter 2 Performance Audit Food, Civil Supplies and Consumer Affairs Department Public Distribution System in Karnataka 2.1 11 Health and Family Welfare Department National Rural Health Mission 2.2 30 Water Resources Department Karanja project 2.3 49 Audit Report (Civil) for the year ended 31 March 2009 Paragraph Page Number Number Chapter 3 Audit of Transactions Non-compliance with the Rules 3.1 Labour Department Release of grant-in-aid without observance of procedure 3.1.1 57 Primary & Secondary Education Department Non-compliance with the Planning Commission 3.1.2 58 guidelines leading to diversion of funds Forest, Ecology and Environment Department Non-compliance with CAMPA directions leading to non- 3.1.3 59 recovery of Net Present Value Public Works, Ports and Inland Water Transport Department (Communication and Buildings) & Home Department Violation of codal provision resulting in avoidable 3.1.4 60 expenditure Revenue Department Diversion of calamity relief funds in violation of 3.1.5 61 prescribed guidelines Urban Development Department Avoidable expenditure due to non-observance of IRC 3.1.6 62 specifications Audit against propriety/expenditure without 3.2 justification Commerce and Industries Department Delay/inaction of the Department leading to loss of 3.2.1 63 dividend income Higher Education Department Payment of overtime allowance without fixing work 3.2.2 64 norms ii Table of contents Paragraph Page Number Number Procurement of higher bandwidth without adequate 3.2.3 65 infrastructure leading to wasteful expenditure Public Works, Ports and Inland Water Transport Department – Communication and Buildings Avoidable expenditure due to underestimation of quantity 3.2.4 66 of steel Urban Development Department Non-observance of regulations resulting in unintended 3.2.5 67 benefit to the contractor Water Resources Department – Minor Irrigation Lack of adequate defence of the arbitration case leading 3.2.6 68 to avoidable payment to contractor Avoidable expenditure due to defective survey and non- 3.2.7 69 observance of contractual provisions Persistent and Pervasive irregularities 3.3 Finance Department Excess payment of family pension 3.3.1 71 Failure of oversight/Governance 3.4 Forest, Ecology and Environment Department Restoration of a lake without arresting inflow of 3.4.1 72 untreated sewage into it leading to wasteful expenditure Urban Development Department Delay in acceptance of tender leading to avoidable extra 3.4.2 73 cost Execution of a water supply scheme without ensuring 3.4.3 74 availability of water source Water Resources Department – Minor Irrigation Unfruitful expenditure due to non-acquisition of land 3.4.4 75 iii Audit Report (Civil) for the year ended 31 March 2009 Paragraph Page Number Number Chapter 4 Internal Control System in a Government Department Public Works, Ports and Inland Water Transport Department Internal Control in Public Works, Ports and Inland Water 4.1 79 Transport Department iv Table of contents LIST OF APPENDICES Appendix Page Details No. No. 1.1 Year-wise breakup of Outstanding Inspection Reports as on 31 101 August 2009 1.2 Details of Departmental Notes pending as of 7 December 2009 102 (Excluding General and Statistical Paragraphs) 1.3 Paragraphs (excluding General and Statistical) yet to be 104 discussed by PAC as of 7 December 2009 2.1 Statement showing the comparison of cards with number of 106 households based on projected population 2.2 Statement showing the allotment and off take of food grains 107 2.3 Statement Showing the Particulars of erroneous fixation of first 108 and second lifting point 2.4 Statement showing the particulars of excess expenditure due to 109 erroneous fixation of FCI lifting point 2.5 Statement showing erroneous allocation of lifting points of sugar 111 (October 2007) 2.6 Abstract of number of unviable FPS in test checked taluks 113 2.7 Details of sample units selected for audit 114 2.8 Inadequate physical infrastructure at health centres 117 2.9 Deficiency in operation theatres 119 2.10 Cropping pattern and water requirement 120 2.11 Calculation of Benefit Cost Ratio 121 3.1 Statement of ineligible grants to private ITIs during 1997-2008 122 3.2 Statement of excess grants released due to pay fixed during 124 ineligible period 3.3 Statement showing details of items executed after resumption 125 and paid as per clause 15 (d) 3.4 Computation of avoidable cost of Rs. 52.99 lakh 127 3.5 Loss of dividend income 128 3.6 Calculation of non-levy of BDC by the Government 129 3.7 Statement showing excess internet port charges paid by 130 Bangalore University 3.8 Excess Payment of Family Pension 131 v PREFACE 1. This Report has been prepared for submission to the Governor under Article 151 of the Constitution. 2. Chapter-1 of this report indicates auditee profile, authority for audit, planning and conduct of audit, organisational structure of office of the Principal Accountant General (C&CA) and response of the Departments to the draft paragraphs. Highlights of audit observations included in this report have also been brought out in this Chapter. 3. Chapter-2 deals with the findings of performance audit while Chapter-3 covers audit of transactions in various departments including the Public Works and Water Resources Departments, Autonomous Bodies, etc., Chapter-4 comments on Internal Control System prevailing in a selected Government department. 4. The Reports containing points arising from audit of the financial transactions relating to Zilla Panchayats, Statutory Corporations & Government Companies and Revenue Receipts are presented separately. 5. The cases mentioned in the Report are among those which came to notice in the course of test-audit of accounts during the year 2008-09 as well as those which had come to notice in earlier years but could not be dealt with in previous Reports; matters relating to the periods subsequent to 2008-09 have also been included, wherever necessary. vii Chapter 1 Introduction 1.1 About this Report This report of the Comptroller and Auditor General of India (C&AG) relates to matters arising from performance audit of selected programmes and activities and compliance audit of Government departments and autonomous bodies. Compliance audit refers to examination of the transactions relating to expenditure of the audited entities to ascertain whether the provisions of the Constitution of India, applicable laws, rules, regulations and various orders and instructions issued by the competent authorities are being complied with. On the other hand performance audit, besides conducting a compliance audit, also examines whether the objectives of the programme/activity/department are achieved economically and efficiently. The primary purpose of the Report is to bring to the notice of the State Legislature, important results of audit. Auditing Standards require that the materiality level for reporting should be commensurate with the nature, volume and magnitude of transactions. The findings of audit are expected to enable the Executive to take corrective actions as also to frame policies and directives that will lead to improved financial management of the organisations, thus, contributing to better governance. This chapter, in addition to explaining the planning and extent of audit, provides a synopsis of the significant deficiencies and achievements in implementation of selected schemes, significant audit observations made during the audit of transactions and follow up on previous Audit Reports. Chapter-2 of this report contains findings arising out of performance audit of selected programmes/activities/departments. Chapter-3 contains observations on audit of transactions in Government departments and autonomous bodies. Chapter-4 presents an assessment of internal controls in the Public Works Department. 1.2 Auditee Profile There are 74 departments in the State at the Secretariat level, headed by Additional Chief Secretaries/Principal Secretaries/Secretaries, who are assisted by Directors/Commissioners and subordinate officers under them and eight autonomous bodies which are audited by the Principal Accountant General (C&CA), Bangalore and the Accountant General (WF&RA), Bangalore. 1 Audit Report (Civil) for the year ended 31 March 2009 The comparative position of expenditure incurred by the Government during the year 2008-09 and in the preceding two years is given in Table below. Table 1: Comparative position of expenditure (Rupees in crore) 2006-07 2007-08 2008-09 Disbursements Non Non Non Plan Total Plan Total Plan Total Plan Plan Plan Revenue expenditure General services 76 10,343 10,419 86 10,786 10,872 110 12,165 12,275 Social services 4,208 6,729 10,937 4,784 8,340 13,124 5,925 9,948 15,873 Economic services 3,539 6,901 10,440 3,443 8,010 11,453 3,699 7,438 11,137 Grants-in-aid and 29 1,610 1,639 - 1,926 1,926 796 1,578