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Welcome

To

Training Session

On

Army Local Audit Manual

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Central Audit & Local Audit

• Audit by DAD can be broadly divided into two

parts with reference to place of carrying
out Audit

1. Central Audit:-

• Vouchers/Documents are sent to Audit Office

• Ex: Audit done in PCsDA/CsDA Main Offices,

Area Accounts Offices and PAOs
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Central Audit & Local Audit

2. Local Audit:-

• Audit goes to the place where

Accounts/Vouchers/Documents are
maintained

• Ex: Audit done by Local Audit Officers

and Regional Audit Officers
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Local Audit - Categories

• Local Audit is organized under two Categories:-

1. Audit by Local Audit Staff & LAOs/RAOs:-

• Routine/Percentage Audit at periodical intervals

• Mandatory Requirement for the units and

formations

• Store Audit and Cash Inspection

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Local Audit - Categories

2. Super Review by IDAS Officers:-

• Selected units/Areas of work to enhance the

scope of Internal Audit

• Performance Audit and study of Systems &

Procedures

• To Suggest alternate options to the

Government to achieve three E’s in the
field of Defence Receipts and Expenditure
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Local Audit – Stage in the Audit Cycle

• Local Audit comes in to picture after the

procurement is completed

• Not involved in the necessity/procurement stages

• Reports the actual consumption/utility at the end

users level

• Ensures effective utilization and proper accounting

of the items/equipments/stores

• Suggests rectification action/remedial measures

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Local Audit – Steps in the process

• Preparation of Local Audit Programme

• Approval by PCDA/CDA Main Office

• Audit and Inspection

• List of auditable documents

• Local Audit Completion Report

• Major objections like items proposed for inclusion in

MFAI/IAR etc.
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Visit to the Units and Formations

• Intimation of audit schedule

• Entry Conference

• Audit and Inspection of Store/Cash Accounts

• Exit Conference

• Audit Report

• Watching for the corrective action and replies

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Local Audit – Common to all units

• Ration Returns

• MT – Vehicles

• Clothing

• Land

• Dead Stock

• Railway Warrants
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Local Audit – Specific to some units

• Military Hospitals

• Depots

• Military Farms

• Inspection agencies

• MES units
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Local Audit – Approach

• Mandate of the Unit/Establishment

• Understanding the working pattern of the unit

• Identification of Risk areas

• Focus on the major areas

• Cash Inspection
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Importance of Local Audit

• Role of pre audit is going to be confined

to merely a payment function

• It is the excess stocking, under

utilization of stores/equipment and
irregularities in accounting, which can be
pointed out in Local Audit

• Post Audit/Local Audit is the future of

DAD
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Distribution of Local Audit Work

• Distribution of units among LAOs and RAOs

• Part I, Part II and Part III units
• Authorization of Man-days
• Quantum of work handled
• Quality of work
• Budget handled by the units and formations
• Varieties of areas of work
• Review of distribution – Transfer in and out
• Even distribution
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Duties and responsibilities

• Local Audit Programme

• Local Audit by staff, ALAO and LAO himself
• Intelligent review of audit points and test check
• Investigation of cases that could be not be linked
• Study of systems and procedures adapted by units
• Review of orders/Monthly Conference with staff
• Framing of objection statements – properly worded
• Reference to Regulations/authorities/PCDA/CDA
• Local Audit Completion Reports
• Monitoring of Objections
• Reporting to PCDA/CDA through MFAI/IAR/AAC/App.A/c etc.
• Cash Inspection
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Frequency of Local Audit & Other Imp.

• Half yearly
• NCC units – yearly
• List of Auditable Documents – For each type of unit
• Addition/Deletion – PCDA/CDA
• Extent of Audit – Each area of work
• Relaxing – CGDA
• Extending scope of audit by LAO – PCDA - Skipping
• Financial Advice – If not accepted – Report to PCDA
• Loss Statements/Expense Vouchers – Pricing
• List of Reports and Returns
• Local Audit in Arrears
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General Principles of Local Audit

• Common to all units – Specific to the Units

• Accounting procedure – Correctness
• Receipts/Issues/Transfers – Sanction/Procedure
• Scales authorized
• Regularization of losses – Recovery wherever
required
• Stocks of stores – within limits fixed
• Stock Verification by Units – Period prescribed
• No stores are supplied after necessity lapsed
• Utilization of plant & equipment
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General Principles of Local Audit

• Casting
• Linking
• Pairing
• Consignor
• Consignee
• Consignor LAO
• Consignee LAO
• CRV/CIV
• RV/IV
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Issue of stores from Depots

• A copy is the issuing depot Office copy

• B copy is sent to consignee, receipted and returned
• C copy is the Consignee Office Copy
• D, E copies - Consignor LAO – Consignee LAO
• In the case of Ordnance Depots – 1, 2, 3, 4, 5 copy
• In the case of consuming units – D copy left out
• Skeleton List
• Top List and sub lists
• Nominal Vouchers
• Personal linking by LAO – 1% or 60 whichever is
less
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Issue of stores from Depots

• B copy if not received – Objection

• Link- send separate communication to consignee LAO
• Receipt audit – From voucher to ledger not vice
versa
• Issue audit – From Ledger to voucher not vice versa
• Local Purchase Vouchers – CRV scheduled by CDA
• Central Purchase Vouchers – 100% advance & 100%
payments by CDA and 90% & 10% payments
• Imported Stores, ISA/PBD – Refer to AT, A/c code
• Physical Stock verification by LAO
• Audit Enfacement/Objections/Observations
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Observations

• Simple guidance for future guidance – Supporting doc

• Delay in submission of accounts
• Fictitious adjustment/manipulation – not involving
loss
• Deviations from rules – no financial effect
• Errors in accounts – do not disclose defect
• Demand for information not received
• Enquires/remarks in respect of doubtful points
• Want of vouchers
• Remarks calling attention to minor errors of
procedure
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Objections

• Non verification of credit of stores

• Awaited receipted copies of vouchers
• Over drawing of rations
• Non production of vouchers based on which
transactions are adjusted/expenditure incurred
• Financial value involved
• Major deviations
• New practices
• Non maintenance of accounts
• Conversion of observation into objection – new points
• MFAI/IAR etc.
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Supply and Store Depots

Risk Indicators:
• Issue if items without any proper indents
from consuming units
• Overstocking of perishable items
• Procurement of ASC items through LPs in the
absence of proper contracts
• Mismatch between demand and supply factor
• Non availability of proper information
system
• Losses due to inadequate storage
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Supply and Store Depots

Stock by:
• Number
• Weight
• Volume
• Measurement
• Catalogue
• CRV/RV
• Indent/CIV/IV
• Free Issues/Payment Issues
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Description of stores

• Serviceable/Un serviceable
• Repairable
• Retrievable
• Doubtful
• Surplus
• BER – Cannot be repaired economic – Heavy repairs
• Salvage – Can’t be retrieved/recovered economically
or made suitable for use for which originally designed
• Obsolete & Obsolescence – Already discarded, out of
date, very old, Still in use but not best as on date
• Scrap – Waste/To be destroyed/disposed
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Stores

• Issues
• Loan
• Experimental purposes
• Samples
• Returnable
• Expendable
• Consumable
• Losses
• Condemned
• Payment Issues – MROs/TRs
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Audit of Indents

• Indent in prescribed form – Sanction of CFA

for items not covered under general/special
orders
• Quantity demanded is correct – authorized
scale – MMF – strength and other data
• No article supplied after the necessity lapsed
• Indent for articles supplied annually or
periodically with reference to the indent on
which last supply drawn and quantity shown as
remaining has been deducted from authorized
unit allowance
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Issues on payment

• Payment issues are authorized

• No erasures/alterations – attestation
• Payment issues are not made to other than covered
• Issues to units for payment issues to officers
marked so
• Special packing material charges to be recovered
• Departmental and additional charges are recovered
• NIV items are not issued on payment unless the
rates are received from MOD (Fin.)/A.H.Qrs.
• Book adjustment with other departments etc.
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Loss Statements

• Please refer to FR I – Losses chapter

• Loss is regularized through Loss statement
• Regularization by CFA
• Loss statement is not required for
Difference in book value and disposed sale value
Transit losses when made good by the carrying
company
• Loss statement by Consignee
• Loss statement by Consignor
• Pricing
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Register of Tender Forms – ASC/AOC/MF

• Fee is levied – Basis on which fee levied

• Details of tenders - articles, period, station
covered
• To whom issued
• Number and date on which communication issued
• MRO/TR for the tender fee
• MRO/TR forwarding details to CDA
• Acknowledgement by CDA
• Adjustment will be done by CDA
• In case of any amendment – the same to all
tenderers
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Post audit of check rolls

• Comparison with last pay roll – supporting changes

• No. of men agrees with daily statement
• First appointment/leave/discharge etc.
• Checking the entitlements of Pay, DA and Overtime
allowances – not exceeding scales laid down
• Period should not exceed
• Certificate from Commissioned Officer that payment
is done in his presence
• Undisbursed pay is credited to Government
• Submission to CDA for compilation
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Stores Depots - ASC

• Separate ledger for each group of articles

• Receipt entries are made in ink and signed by O i/c
• Issue entries are made in black ink
• Agreement with total shown in daily balance statement
• Issues in bags, packets – Broken quantities –
accounting by weight, volume and Number
• Supplies to units are not received back in general.
But in case of unit move received back with Pack. Mat.
• Issues as samples to CFL charged off on expense vr.
• Payment issues to units – not directly to individuals
• Accounting of POL – Standard Temperature
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Depot Contingent Return

• Charges debitable against Contingencies only

• No abnormal variation between hired labor and transport

• Pay and allowances of regular labor – Guidance – not

taken in to account for determination of CFA

• Separate statement for contingencies incurred for each

bakery to facilitate inclusion in production account

• Each item of expenditure is sanctioned by CFA

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Train Ration Return

• Complete unit move – OC of unit otherwise TQM

• Complete unit – audit by LAO detraining
• Otherwise – LAO of the entraining station
• For party of 20 or less – Cash Allowance
• LAO auditing Tr. RR will intimate separately each
unit wise to LAO to verify- Not to draw the
ration in unit
• Rations drawn for personnel in movement orders
• Expense vouchers – Train Rations and part of
reserve rations – Tinned meat, biscuits, where
pantry attached & Hot means – pantry not attached
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Acceptance of MF products by ASC

• MF products given preference over contractors supply

• Even for items for which contracts concluded all
products of MF will be accepted if
• Scales laid down and conform to ASC specifications
• Provisions governing % of variation of various
variety
• Procedure of notifying 3 days in advance to Manager,
MF, estimated quantities for issue on a particular
day
• Intimation by OC, Supply Depot to MF by 12:00 p.m.
each day for next day requirements
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ASC retail shops/ration stands in units

• Cash Memo, Reconciliation statement, MRO

• CP articles – Stock Book Payment issue rates
• LP articles – Latest rates published by Area/Sub Area
• Payment issues from Depots taken charge on ledgers
• Issue to auth. Personnel – Limits maintained
• Register showing entitled personnel and monitory
limit
• Cash memos are machine numbered & produced
• Cancellation of memo by OC
• Verification of ground balances on fortnightly basis
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POL Accounts

• Standard Temperature system adopted by depots

• Recording of daily transactions – posting in
ledgers
• Supported by Issue orders and indents
• Payment issues not made to individuals from Depots
• Return of packing material – serviceable,
repairable
• Prior approval of A.HQrs to be obtained for
disposal of unserviceable containers
• Board of Officers for disposal process
• Adjustment of MRO/TR
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Food Inspection Units

• Operation of Contracts concluded by CPO

• Inspection of goods tendered by Contractors

• Orders for despatch to consignee depots

• Stores charged off – Samples for inspection

• Rejected samples – Destroyed

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Medical Depots

• Overstocking of short life medicines

• Procurement of medicines on verge of expiry date
• Local purchase of huge quantities supposed to be
Centrally purchased
• Improper storage and refrigeration facilities
• Stores of long life & short life – separate ledgers
• Authority to be quoted in indents for demands
• Payment Issues: Class – I for services, Class II –
Civil medical depots, UK Government, Class III – Red
Cross society/Hindustan Air Crafts/UNO – Sanction by
appropriate authorities like DGAFMS/MOD etc.
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Spectacle group

• Free issues to authorized personnel

• Prescription by Eye Specialist

• Replacements – MRO in case required

• Payment Issues – MRO

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AOC – Ordnance Depots

Risk Indicators:
• Non submission of bills - 5% – CRVs not linked

• Non receipt of copy 2, 5 – CRV not linked

• Transit losses – Checking by Board – Consignee

• Delay between despatch and documentation of IV

• Delay in despatch by the traffic branch

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Returned Store Sub Depots

• Clothing, General, Technical stores – Account Cards

• Repairing – Job Cards
• Repair by Contractors
• MT vehicles – Details of Engine, Chassis and Class
Vehicle Depots:-
• Daily Receipt/Issue Return for vehicles of class A,
B, specialist, cased vehicles
• Issue of vehicles – Orders of MGO Branch, FIFO
• Re-classification by EME, Down grading
• Issue of vehicles to MES – Adjustment by CDA Meerut
• Issues to services – Forwarding to CDA/LAO – CRV
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EME Work Shops

Risk Indicators:
• Under utilization - workshop infrastructure/man power
• Outsourcing of repair of vehicles on job orders
• Delay in procurement of EME stores – Delay in repairs
• Not carrying out Annual Inspection of Military
Vehicles
• Non Maintenance of standard cost estimates of repair
Base work shops:
• 5% of B vehicles – Overhauling programme - Retrieval
of spares – Down grading to Class 6 – Return to depots
• Responsibility of Refrigerators in Officers Mess by
MES – Not by EME
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Units and Formations

• Ration Returns, Packing Material, ASC, Medical etc.

• Animals, Forage return, and veterinary stores
• Land registers, trees,
• Ammunition and explosives – specific/all the
soldiers
• MT & Vehicles, POL, Amenities and grants, clothing
• Equipment and other assets
• Salvage/scrap
• Losses
• Deserters
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Ration Returns

• Details of unit, station, month and year – Noted

• All the names – brought from previous month
• Sick, leave, TD, Transfers etc. to be verified
• No. of ration for each – Totals – Arithmetic
• To be prepared in Ink and signed by the OC
• Free rations are drawn for authorized personnel only
• Not to be drawn for sick, leave, TD, Train RRs etc.
• Meat cutting up allowance – 5% and 2.5% etc.
• Substitutes and Extra Rations – As per rules
• Under Drawal and Over Drawal of rations
• Payment Issues verification in to the Return
• Cash payment issues – MRO and adjustment
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Ordnance Stores

• Items are accounted for quantities only – Condition

• Unit Entitlements shown in pencil in the space
provided
• LP stores are treated as received from normal sources
• Entry in Pay Books wherever prescribed
• Distribution figures match with total held in the unit
• Items per man scale issued to be shown as distribution
• Issues for use/consumption like clothing
• Issues like ammunition to be returned
• Stock verification as per the schedule Monthly/yearly
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Land Registers and Accounts

• Entries in old register – brought forward correctly

• Entry about lease – verification with Lease agreement
• Recovery of Rent – Agrees with entry in Cash Book
• Unit Land Register
• Unit Register (Regimental Garden) – Two parts
• Register of Defence lands under cultivation
• Register of Trees (Usufructs & others)
• Details of land – Details received from DEO – ASTB
• Land in excess of 4 acres for 1000 troops – if
cultivated – ¼th of Net profit to Government - MRO
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Register of usufructs trees

• Categories of trees – location – ASTB

• Expenditure on supply, planting and maintenance

is met from Regimental funds

• Revenue generated – credited to Regimental fund

• Trees are Government property. When units are

not in active operation – Sale proceeds to
Govt. – MRO
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Vehicles/MT

• Vehicles Register

• Vehicle Log Book – Updating of repairs/replacements

• Vehicle Kit

• KM/Mileage card

• Car Diary

• POL consumed
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Car Diary

• To be completed, signed by officer/user/Staff Officer

• Driver should not complete the details
• Distance/place/purpose etc. to be filled
• Carter Patterson System – Collection/Delivery stores
• Amenity purposes – Recovery and MRO adjustment
• Jeeps, Motor Cycles – Not for amenity/Recr. Purposes
• Lady welfare workers – Amenity purposes – To visit
Family Welfare Centre, MH, ORs clubs and canteens
• Where TA/DA authorized – No Pvt. transport facility
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Car Diary

• No transport – Change of Residence

• Total annual ceiling limit of Class B vehicles
should not exceed with out sanction of Div./Area
Commander, who can sanction 50% extra KMs
• Sanction of AHQrs. – Visit of VIPs
• DAD/Civilian Officers on TD – Duty/Non duty
journey
• Use by PM/Ministers visit – Government duty
• Participation in functions on
Independence/Republic Day – Admissible to
CO/Senior Officer
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Units moving/Disbandment

• Moving within Indian Limits – Completion of Local

audit on priority – Settlement of objections – LAC

• Moving into Concessional/Field Area – War Out Fit –

Journey Ration – Field SD LAO – Ack. – No abnormal
consumption – Return of unused ration/under drawing

• Moving out of Field Area – STB – LAO to LAO new

• Disbanded – Audit by LAO – Stores transfer/return

to units/MH/Depots
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Hospitals – MH/CH

Risk Indicators:
• Purchase of hospital equipment with improper
planning.
• Non/delayed installation of hospital equipment.
• Referral of patients to other Military hospital due
to idling of equipment.
• Destruction of indents of various departments pending
audit.
• Over provisioning of medicines through LP procurement
• Receipt of medicines at fag end of its expiry date
due to lengthy procedure.
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Admission/Discharge

• Entitled persons are only admitted

• Private persons – Sanction OC station – Recovery HSR

• HSR – Due to own neglect Officers/Civilians/Private

• In Patient – Admission before 14:00 Hours

• HSRs sent to concerned Accounts/Audit Offices

• MRO/TR for HSR from private persons

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Ration/Diet

• No. of diets in requisition – No. of in patients

• Diets/Extras prescribed are within authorized scales
• Extras - by M.O. – not for patients on Ordinary diet
• Blank columns scored – Admn./Disch. Middle of month
• Free issues made only to authorized for concession
• Provision of Tea to Nurses during Night duty
• Over issue – Not to be compensated by Under Issue
• Hospital Diet not issued – Patients under observation
• Dependents – Same scales as per entitlement
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Others

• Number of beds
• Doctors and supporting staff
• Clothing to patients – Service Personnel
• Equipments – Utilization – Tech. personnel
posted
• Red Cross stores – Not to be issued on payment
• Medicines – Central/Local Purchase – 5/6th life
• DGLP/ECHS poly clinics
• Laboratories – In house and out sourcing
• Artificial Limbs, Spectacles – Free/Payments
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Military Farms/Bakeries etc.

• Quasi commercial basis – Commercial accounting

• Delay in installation of equipments
• Improper caring of live stocks
• Improper purchase and stocking of fodder/feeds
• Submission of monthly abstract of Cash book to CDA
• Receipt from CDA – Return to CDA after audit by LAO
• Correctness of entries in Cash Book – Trading, P&L
A/c
• Charging of liabilities in the corresponding year
A/cs
• Credit of sale proceeds in the Cash Book
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Military Farms/Bakeries etc.

• Payment Issues – clothing to Farm employees – Fodder

to units where ASC do not function – Cash Book
entries
• Sale of products/bi products not required by Govt.
• Diary Products – Milk/Ghee/Cream/Butter etc.
• Coupons – storage by Manager – Transfer to Cashier
• Sale of coupons – Purchased in a station Not allowed
at others – Not issued to Delivery men for sale
• Retention of coupons till audit is done
• Surrender and refunds
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Military Farms/Bakeries etc.

• Land and Cultivation – Details of Each crop – Output

• Expenditure on each crop – Booking to the crop
Loss of animals:
• Animals are not charged off within 6 months from date
of reported as lost. Animals recovered brought on
charge
• In the case of Farm Bred animals and purchased calved
at least once – Twice the book value
• Not calved – Purchase price to be recovered from
concerned people held responsible
• For Bakeries etc. – Please refer to OM II stores
section
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Cantonment Boards

• CEO – Elected Members – Station Commander

• Duties and responsibilities of Cantonment Board
• Audit Fees – Calculation/adjustment – Moiety
charges
• Pay and allowances – Service Books
• Conservancy services
• Pension cases
• Revenue/Taxes
• Grants in Aid by Central Government - UCs
• No audit by DGADS
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Misc. units

• Audit as per the mandate of Units

• Training Estts., CFL, Maps depots, Libraries, Tent
units etc.
• Railway Warrants, Concession Vouchers, Credit
Notes
• Loss of blank forms – Report to AFHQ
• Loss of blank forms – GOI Regularization
• Issues - Authorized personnel/Duty/Transactions
• Linking from counterfoils to authority
• Cancelled forms/Serial Numbers
• NCC units – Camp expenditure – 75& 25%
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Higher Audit

• Super Review
• Performance Audit
• Computer Assisted Audit Techniques
• Existing systems – Challenges from time to
time
• E- documents, Payments and online audit
• Risk Indicators
• Sharing of information between LAOs and IFAs
• Check Lists for each job
• Fraud indicators
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