## Expenditure Audit (Government Audit)

The audit of government expenditure is one of the major components of government audit.

### Types of Expenditure Audit

#### 1. Audit Against Rules and Orders

Ensures expenditure conforms to relevant provisions of the Constitution and laws/rules made thereunder
Verifies expenditure is in accordance with financial rules, regulations and orders issued by competent authority

#### 2. Audit of Sanctions

Ensures each item of expenditure is covered by a sanction — either general or special — from the competent authority

#### 3. Audit Against Provision of Funds

Ascertains that expenditure has been on the purpose for which the grant/appropriation was provided
Ensures the amount does not exceed the appropriation made

#### 4. Propriety Audit

The auditor brings out cases of improper, avoidable or ineffective expenditure even though the expenditure has been incurred in conformity with existing rules
Based on general principles of financial propriety laid down in the Audit Code

Principles of financial propriety:

> 1. The expenditure should not be prima facie more than the occasion demands

> 2. No authority should exercise its power of sanctioning expenditure to pass an order that will be directly or indirectly to its own advantage

> 3. Public money should not be used for a particular person or a section of the community unless:

> - The amount involved is insignificant, OR

> - The claim could be enforced in a court of law, OR

> - The expenditure is in pursuance of a recognised policy or custom

> 4. Allowances (like travelling allowance) should not be a source of profit for the recipients

#### 5. Performance Audit (Efficiency-cum-Performance Audit)

Performance audit has three components:

Component	Focus
Efficiency audit	Whether schemes/projects are executed and operations conducted economically; whether they yield expected results
Economy audit	Whether the government has acquired financial, human and physical resources in an economical manner
Effectiveness audit	Appraisal of the performance of programmes, schemes and projects — are intended outcomes being achieved?

Worked example

### Example 1

Audit of sanctions: The State PWD purchases computers worth ₹80 lakhs. The financial rules require Secretary-level sanction for purchases above ₹50 lakhs. The auditor verifies that the requisite sanction exists — if only a Director-level sanction (competent only up to ₹30 lakhs) was obtained, this is an audit objection under 'Audit of Sanctions'.

### Example 2

Propriety audit — own advantage principle: A government officer approves payment of ₹5 lakhs to a consultancy firm owned by his relative. Even if the payment is within his sanction limit and follows procurement rules, the propriety principle that 'no authority shall sanction expenditure to its own advantage' is violated.

### Example 3

Performance audit — effectiveness: An audit of the Mid-Day Meal scheme examines whether the scheme has actually improved school attendance and nutritional levels (effectiveness), whether meals are prepared at minimum cost (economy), and whether the procurement and supply chain operates efficiently (efficiency).

### Example 4

Audit against provision of funds: A government department spends funds allocated for 'construction of roads' on procurement of office furniture. Even if the amount is within the total grant, it violates the provision that expenditure must be on the purpose for which the appropriation was made.

⚠️ Common exam mistakes

Confusing propriety audit with performance audit — propriety asks 'is the expenditure proper even if technically compliant?'; performance asks 'is the expenditure achieving results and is it economical?'
Stating only 2-3 types of expenditure audit when the full list has 5 — marks are allocated for completeness.
Forgetting the four principles of financial propriety — examiners frequently ask for these specifically.
Confusing the three sub-components of performance audit (efficiency, economy, effectiveness) — each has a distinct meaning.

Reference:

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Government Audit — Expenditure Audit and Its Types

Worked example

⚠️ Common exam mistakes