INTERNAL AUDIT MANUAL - CGDA

1 INTERNAL AUDIT MANUALDEFENCE ACCOUNTS DEPARTMENTCHIEF INTERNAL AUDITOR (OFs)KOLKATAISSUED UNDER THE AUTHORITY OF CONTROLLER GENERAL OF DEFENCE ACCOUNTSDELHI2014 Disclaimer : This MANUAL is intended for guidance of officers and staff of the department andshould not be quoted in correspondence with offices outside the Department. Nothing in thismanual will be held to supersede any standing rule or order of Govt. of India with which it maybe at variance. This MANUAL contains instructions, drills and procedures for conducting INTERNAL AUDIT in Ordnance Factories by Chief INTERNAL Auditor (Factories). 2. INTERNAL AUDIT practice is moving away from the traditional role of mere assurance AUDIT which takes the form of transaction and compliance AUDIT and reporting control deficiencies to the management. Focus is now on providing a cost-effective and useful service. Audits are becoming more useful because they are oriented to identifying problems, working with management to solve them, providing overall ratings on the adequacy of controls and finding new and better ways to do things.

2 It is a continuous process. It serves as an aid to management to achieve its goals and In line with the above, the MANUAL has placed due focus on risk based AUDIT , IT AUDIT and AUDIT of INTERNAL control mechanisms etc. It also contains detailed AUDIT drills for major risk areas in Ordnance Factories keeping in view the recent modifications made to OM-VI. 4. This MANUAL is a departmental publication. The instructions contained therein are supplementary to the rules in the Civil and Defence AUDIT and Account Codes, Fundamental and Supplementary Rules, General Financial Regulation, Pay and Allowances Regulations, Pension and Financial Regulations, Any additions or alterations which may be necessary to the MANUAL will be notified periodically by the Chief INTERNAL Auditor (Factories) with the prior approval of the CGDA. (Vandana Srivastava)Controller General of Defence AccountsNew DelhiDated: PrefaceABBREVIATIONS Accounts Office/ Accounts Officer ( ) Assistant Controller of INTERNAL AUDIT (Ordnance Factories) AAP Annual AUDIT Programme ACP Assured Career Progression Addl.

3 GM Additional General Manager AFL Agreement Form of Labour AFMSD Armed Forces Medical Stores Depot AHSP Authority Holding Sealed Particulars AIAO Assistant INTERNAL AUDIT Officer AMC Annual Maintenance Contract ASD Additional Security Deposit Asstt. Assistant AV (HQ) Armoured Vehicle(Headquarters) Bin Cards Br. AO Branch Accounts Office BE Bachelor of Engineering BER Beyond Economic Repair BG Bank Guarantee BIS Bureau of Indian Standards BOE Board of Enquiry BPR Business Process Re-engineering CAAT Computer Aided AUDIT Tool C & AG Comptroller and Auditor General C of F Controller of Finance Controller of Defence Accounts CBC Central Budget Committee CCS Central Civil Services CE Chief Engineer CEA Children Educational Assistance CF & A Controller of Finance and Accounts CFA Competent Financial Authority CGDA Controller General of Defence Accounts CGEGIS Central Government Employees Group Insurance Scheme CIA (OFs) Chief INTERNAL Auditor (Ordnance Factories) CIF Carriage Inward Freight CNC Computerised Numerical Control COP Cost Of Production COTS Commercially Of The Shelf CP Central Purchase CPC Central Pay Commission CsF&A Controllers of Finance and Accounts CST Comparative Statement of Tenders ICSV Completed Stores Voucher CVC Central Vigilance Commission Disbursement Certificate Discrepancy Report Deposit Stock Daily Wages DA Dearness Allowance DAD Defence Accounts Department DAVP Directorate of Advertising and Visual Publicity DBT Direct Bank Transfer DDO Drawing and Disbursing Officer DDP Distributed Data Processing DDs Demand Drafts DEO Defence Estates Office DFPR Delegation of Financial Power Rules DGM Deputy General Manager DGOF Director General of Ordnance Factories DGQA Director General of Quality Assurance DGS&D Director General of Supplies and Disposals DOT Departmental Over Time DP Dearness Pay/Delivery Period DPS Daily Payment Sheet DRDO Defence Research and Development Organisation DSC Defence Security

4 Corps DV Descrepancy Voucher DW Daily Wages E-in-C Engineer in Chief EARS Electronic Attendance Recording System ECPA Efficiency Cum Performance AUDIT EDP Electronic Data Processing EL Earned Leave EMD Earnest Money Deposit EP End Product FOB Freight On Board FOH Fixed Over Head FP Foreign Purchase FR Part-I Financial Regulations Part - I FSN Fast Slow Non-Moving Fys Factories GOI Government of India G. Pay Grade Pay GFR General Financial Rules GM General Manager GO Gazetted Officer GOI Government of India GOs Gazetted Officers IIGovt. Government GP Grade Pay GPF General Provident Fund GPW Gang Piece Worker GTE Global Tender Enquiry HAG+ Higher Administrative Grade + HOO Head Of Office Hqrs. Headquarters HRA House Rent Allowance HS-I High Skilled-I HS-II High Skilled-II HSR Hospital Stoppage Roll HTML Hyper Text Markup Language HVF Heavy Vehicle Factory Inspection Note IA INTERNAL AUDIT IA Cell INTERNAL AUDIT Cell IAO INTERNAL AUDIT Officer IB Inspection Bungalow ID Schedule Inter Departmental Schedule IDEA Interactive Data Extraction and Analysis (CAAT) IEs Industrial Employees IFA Integrated Financial Advice IFD Inter Factory Demand IFD Items Inter Factory Demand Items IGP Inward Gate Pass IIA Institute of INTERNAL Auditor INTOSAI International Organization of Supreme AUDIT Institutions IPO Indian Postal Order IPOs Indian Postal Orders IPW Individual Piece Worker IRR INTERNAL Rate of Return IS Information System ISO International Organization for Standardization Issue Vr.

5 Issue Voucher IT Information Technology ITC Information Technology Centre JAG Junior Administrative Grade Jt. GM Joint General Manager KOD Kind Of Document KPL Kilometer Per Litre KVIC Khadi and Village Industries Commission IIILAN Local Area Network LAO Local Accounts Office LC Letter of Credit LCD Liquid Crystal Display LD Liquidated Damages LP Local Purchase LP Bills Local Purchase Bills LPC Local Purchase Committee/Last Pay Certificate LPG Liquefied Petroleum Gas LPR Last Purchase Rate LT Low Tension / Late Tender LTC Leave Travel Concession LTE Limited Tender Enquiry MACP Modified Assured Career Progression MCO Material Control Office MES Military Engineering Service MHA Ministry of Home Affairs MIS Material Inward Slip/Management Information System MM Material Management MOD Ministry of Defence MOF Ministry of Finance MP Material Planning MP SHEET Material Planning Sheet MRO Military Receivable Order MT Mechanical Transport Non Moving Stores Nominal Voucher NADP National Academy of Defence Production NC New Capital NDA Night Duty Allowance NFSG Non Functional Selection

6 Grade NGOs Non Gazetted Officers NIEs Non Industrial Employees NSB Night Shift Bonus NSIC National Small Industries Corporation ODCs Ordnance Development Centres OEF (HQ) Ordnance Equipment Factory(Head Quarter) OEM Original Equipment Manufacturer OFB Ordnance Factory Board OFH Ordnance Factory Hospitals OFIL Ordnance Factory Institute of Learning. OFs Ordnance Factories IVOM VI Office MANUAL Part VI OT Over time OTA Over Time Allowance OTB Over Time Bonus OTE Open Tender Enquiry P & M Plant & Machinery P & MM Planning and Material Management E Piece Work Earning PAC Propriety Article Certificate PAN Permanent Account Number PAO Pay Accounts Office PB Pay Band PBG Performance Bank Guarantee PC Personal Computer PCA (Fys) Principal Controller of Accounts(Fys) PDA Principal Director of AUDIT PDC Probable date of Completion PDF Portable Document Format PFC Plan Finalization Committee PIC Periodical Increment Certificate PIS Periodical Increment Statement PL CARD Production Ledger Card PM Punching Medium PO Purchase Order POL Petrol Oil & Lubricant PPC Production, Planning and Control PPL Priced Production Ledger PSA Price Store Accounts PSL Price Store Ledger PSS Priced Stores Schedule PSU Public Sector Undertaking PV Provisioning PW Piece Work PWCs Piece Work Cards PWP % Piece Work Profit Percentage PWR Piece Work Rate QC Quality Control QIAR Quarterly INTERNAL AUDIT Report Qty.

7 Quantity R&D Research And Development RBIA Risk Based INTERNAL AUDIT RC Rate Contract RFP Request For Proposal VRIAO Regional INTERNAL AUDIT Officer RMC Regional Marketing Centre RR Renewal and Replacement Rt. Vr. Receipt Voucher Service Book Spot Estimate SAG Senior Administrative Grade SBC Shop Budget Committee SD Security Deposit SFC Store Finalization Committee SHIS Store Holder Inability Sheet SIH Store in Hand SIT Store in Transit SKS Single Known Source SMH Standard Man-Hour SO Supply Order SOP Standard Operating Procedure SOs Supply Orders Sr. GM Senior General Manager SRO Sale Release Order STE Single Tender Enquiry SV Stock Verification SVC Sectional Variable Charges SWOD Supplementary Work Order Draft T&C Terms and Condition TAN Tax Deduction Account Number TC Term Contract TE Tender Enquiry TEC Technical Evaluation Committee. TOT Transfer of Technology TPC Tender Purchase Committee. TS Technical Sanction TV Transfer Voucher Un-official UAR Unavoidable rejection VFM Value for Money VOH Variable Overhead VPN Virtual Private Network VR Vendor Registration WIP Work in Progress WM Works Manager XML Extensive Markup Language VIAbnormal Rejection: There are certain manufacturing losses which are inherent in the production process.

8 Such losses are called normal rejection. When Standard Estimates are prepared, a maximum and minimum percentage of normal rejection of losses is specified. The basis of fixation of normal rejection percentages are:i)the nature of the product ii)Expected losses in quantity due to evaporation, shrinkage etc. iii)method of production process iv)volume of expected scrap arising When the quantum of Rejection exceeds the normal rejection provided for in a Warrant, it is treated as Abnormal Rejection. Normal Rejection is to be borne by the production by including the value in Cost of Production. Whereas value of Abnormal Rejection is to be kept out of Cost of Production and treated as cash loss. The same is required to be regularised by the CFA through loss statement. [Source: Para 679 of OM - VI]Allocation Sheet: Workers, who are continuously engaged on the same job throughout the month, the shops prepare a monthly allocation sheet, instead of Day Work Card. Such allocation sheets generally relate to indirect work orders.

9 The allocation sheets received from the shop for a month are priced by the Accounts Office by apportioning the total time wages earned by each worker, between the various jobs performed by the worker according to time spent for each job. [Para: 200(iii) of OM VI]Bin Cards: are maintained by the store holder in loose leaf forms with one Bin Card for each item of material and every receipts and issues thereof are entered in its respective columns. This is a continuous quantitative account maintained by the Factory management for all materials. Material code number is allotted to each material and is noted in the Bin Card. [Source: Para 415 of OM-VI]Cancellation of Extract: When a Class- I Extract is cancelled, the entire expenditure as has already been incurred on it will be transferred to some other Warrant and any scraps or components available will be returned to store. In case of all other Extracts, such expenditure should be adjusted to general charges under the orders of PC of A (Fys).

10 [Para 615 of OM VI]Day Work Card: Day Work Card is the record of the job done and time taken thereon by workers on daily rates of wages. [Item No. 8 of Appendix B of FAR]Day Worker: The workers who are on monthly rates of pay and whose wages are calculated on the basis of their attendance are called Day Workers. [Para: 120 of OM VI]Deferred Revenue Expenditure: All normal repairs to Plant and Machineries to keep them in working capacity, are treated as Variable Work Head Expenditure, and charge to production of the year, in which they were incurred. If such repairs are very heavy during any year, the expenditure may be spread over to a number of years under the prior approval of Ordnance Factory Board. The portion of Revenue Expenditure, , carried forward for absorption in subsequent year is Deferred Revenue Expenditure. The amount is shown as outstanding assets in the statement of Assets and Liabilities. [Source: Para 3 of Appendix A of OM VI]Demand Note: This is the authority to the store holder to issue store to the shop concerned as per the requisitions made by the shops.