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Manual on Audit of Local Bodies/Boards 2015 1

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Manual on Audit of Local Bodies/Boards 2015 1 0 OFFICE OF THE PRINCIPAL ACCOUNTANT GENERAL (GENERAL & SOCIAL SECTOR AUDIT), TAMILNADU AND PUDUCHERRY Manual on Audit of Local Bodies/Boards 2015 1 OFFICE OF THE PRINCIPAL ACCOUNTANT GENERAL (GENERAL & SOCIAL SECTOR AUDIT), TAMILNADU AND PUDUCHERRY Manual on Audit of Local Bodies/Boards 2015 For Internal Circulation and Use PREPARED BY only The information given in this manual has been gathered from 1. Shri. K.K. Easun, SAO various sources. For reporting, the originals have to be referred and 2. Shri. K. Sivagnanamurthy, AAO not provisions of this manual. This manual is only to educate the officials engaged in Local Bodies Audit 2 PREFACE Tamil Nadu is advancing rapidly in industrialization and urbanization with 48.45% of its population living in urban areas besides undergoing enormous changes in the socio- economic development of rural areas as well. Many major policies and schemes are implemented in the state meeting the comprehensive development of rural and urban areas in capacity building, accessing funds for infrastructure development, providing basic civic services in order to improve the physical quality of life of the people. The urban as well as the rural local bodies strive hard with self generated revenues and support of Government grants and funds to achieve the above. After entrustment of audit to C&AG by the Government, the challenging task of auditing the urban local bodies and the panchayat raj institutions who are carrying out increasingly diverse number of activities is set on us. To meet the above challenges the audit manual serves as an important tool to enable the auditors to have first hand information of various functions of auditee institutions by disseminating information of their activities. In accordance with the objectives enumerated in the perspective plan of IA&AD, this manual brings out modern techniques and also incorporates the best international practices, particularly of those endorsed by INTOSAI and ASOSAI as adopted by C & AG. Besides, after introduction of restructuring of functions within IA & AD, the audit of three Secretariat Departments, viz., Municipal Administration and Water Supply Department, Rural Development and Panchayat Raj Department and Housing and Urban Development Department along with four directorates, boards and authorities controlled by these departments has been passed on to SS II wing. These directorates, the boards and the authorities are also covered in this manual. I believe that the local audit parties may make use of this manual and become familiar themselves with the various activities of the auditee institutions resulting in constructive contribution by way of audit observations. With the constant change of priorities and shift in policies resulting in implementation of more and more new schemes and activities, the updation of this manual is inevitable to cope up with the changing scenario. 3 For this purpose, contributions with updated information from the field parties are welcome. I hope that the concerted efforts taken in bringing out this manual may not go in vain, if it is made use of by the audit parties. CHENNAI DEVIKA NAYAR May 2017 Prl.AG (G & SSA) 4 MANUAL ON AUDIT OF LOCAL BODIES/BOARDS INDEX Chapter Page Subject No. No 1 Constitution and functions 6 2 Code of ethics for IA & AD 49 3 Audit guidelines for dealing with fraud and corruption 60 4 Audit of stores and stock 69 5 Audit of contracts and agreements 73 6 Commissionerate of Municipal Administration 79 7 Directorate of Rural Development and Panchayat Raj 85 8 Directorate of Town Panchayat 90 9 Directorate of Local Fund Audit 95 Grants to Urban Local Bodies and Schemes implemented by Urban Local 10 109 Bodies 11 Municipal Corporation of Chennai 116 12 Other Municipal Corporations 134 13 Municipality 137 14 Town Panchayat 145 15 Check of Accounts in Local Bodies 156 16 Check of Works expenditure in Local Bodies 167 17 Check of Revenue accounts in Local Bodies 175 18 Grants to Panchayat Raj Institutions and schemes implemented by PRIs 180 19 District Rural Development Agency 195 20 District Panchayat 199 21 Panchayat Union 204 22 Grama Sabha 214 5 23 Village Panchayat 216 Questionnaire to be enclosed with draft inspection report on audit of local 24 223 bodies 25 Tamilnadu Water Supply and Drainage Board 235 26 Chennai Metropolitan Water Supply and Sewerage Board 241 27 Tamilnadu Housing Board 253 28 Tamilnadu Slum Clearance Board 266 29 Directorate of Town and Country Planning 272 30 Chennai Metropolitan Development Authority 278 31 Panchayat raj institutions accounting (PRIA) software 289 32 Forwarding note 294 33 Commercial organisations under SS II 313 Annexure 318 Draft Inspection Report new format in respect of Corporation, 319 Municipality, Town Panchayat and Panchayat Union Council 6 CHAPTER 1 CONSTITUTION AND FUNCTIONS 1.01. General Audit of transactions/accounts of certain panchayat unions, district panchayats, municipal corporations and municipalities which received substantial grants/loans from Government was conducted previously by ISC II Group. With the growing importance of Panchayat Raj Institutions/local bodies and to bring accountability in the process of development, C & AG vide order No. 233-Audit/M&C/223-2003 dated 22.07.2004 to form a separate office for Local Bodies Audit and Accounts known as “Office of the Senior Deputy Accountant General (Local Bodies Audit & Accounts)” under the administrative and technical control of the senior most Principal Accountant General or the Accountant General in station. All matters relating to providing Technical Guidance & Supervision (TGS) and conduct of audit and accounting work for Panchayat Raj Institutions (PRIs) and Urban Local Bodies (ULBs) in the state would henceforth be the function of this office. The office was formed in August 2004 and started functioning from October 2006. The office of Senior Deputy Accountant General (Local Bodies Audit & Accounts) was upgraded as office of the AG (Local Bodies Audit & Accounts) in 2011 vide order No. 3741 – GE. I/247-2007 dated 14.07.2011. Consequent to restructuring, office of the AG(LB &A) was merged with the Office of the Prl. Accountant General (G & SSA) in April 2012 vide Office order dated 82/SMU/PP/Restructuring/5-2011 to become one of its wings called “Social Sector II” headed by a Deputy Accountant General by including HUD and offices under HUD erstwhile functioning under DAG (Works) now under Prl. AG (E&RSA). The provisions of the C & AG’s (DPC) Act. Section 13 It shall be the duty of the Comptroller and Auditor-General- (a) to audit all expenditure from the Consolidated Fund of India and of each State and of each Union territory having a Legislative Assembly and to ascertain whether the moneys shown in the accounts as having been disbursed were legally available for and applicable to the service or purpose to which they have been applied or charged and whether the expenditure conforms to the authority which governs it; (b) to audit all transactions of the Union and of the States relating to Contingency Funds and Public Accounts; 7 (c) to audit all trading, manufacturing, profit and loss accounts and balance-sheets and other subsidiary accounts kept in any department of the Union or of a State; and in each case to report on the expenditure, transactions or accounts so audited by him. Section 14 (1) Where anybody or authority is substantially financed by grants or loans from the Consolidated Fund of India or of any State or of any Union territory having a Legislative Assembly, the Comptroller and Auditor-General shall, subject to the provisions of any law for the time being in, force applicable to the body or authority, as the case may be, audit all receipts and expenditure of that body or authority and to report on the receipts and expenditure audited by him. Explanation: Where the grant or loan to a body or authority from the Consolidated Fund of India or of any State or of any Union territory having a Legislative Assembly in a financial year is not less than rupees twenty-five lakh and the amount of such grant or loan is not less than seventy-five percent of the total expenditure of that body or authority, such body or authority shall be, deemed, for the purposes of this sub-section, to be substantially financed by such grants or loans as the case may be. (2) Notwithstanding anything contained in sub-section (1) the Comptroller and Auditor- General may with the previous approval of the President or the Governor of a State or the Administrator of a Union territory having a Legislative Assembly, as the case may be, audit all receipts and expenditure of any body or authority where the grants or loans to such body or authority from the Consolidated Fund of India or of any State or of any Union territory having a Legislative Assembly, as the case may be in a financial year is not less than rupees one crore. (3) Where the receipts and expenditure of any body or authority are by virtue of the fulfilment of the, conditions specified in sub-section (1) or sub-section (2) audited by the Comptroller and Auditor-General in a financial year, he shall continue to audit the receipts and expenditure of that body or authority for a further period of two years notwithstanding that the conditions specified in sub-section (1) or sub-section (2) are not fulfilled during any of the two subsequent years. Section 19 8 Section 19 of the act deals with the duties and powers of the C & AG in relation to the audit of the accounts of Government companies and corporations. These duties and powers are to be performed and exercised under sub sections (1) and (2) section 19.
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