Government Audit - Expenditure Audit (Rules, Sanctions, Propriety, Provision)

# Expenditure Audit

Audit of Govt expenditure is a major component of Govt audit. Basic standards aim to ensure provision of funds authorised by competent authority.

## Four Standards of Expenditure Audit

### 1. Audit against Rules and Orders

To ensure expenditure conforms to relevant provisions of statute and to Financial Rules & Regulations framed by competent authority. This is quasi-judicial work.

Categories of rules/orders:

• Rules and orders regulating powers to sanction expenditure from CFI/State
• Rules and orders dealing with mode of presentation of claims against Govt, withdrawing money from CFI
• Rules and orders regulating conditions of service, pay, allowances and pensions of Govt servants

Important: It is the function of the executive Govt to frame rules, regulations and orders; it is NOT a function of audit to prescribe what rules shall be. But it IS the function of audit to examine that:

• They are not inconsistent with provisions of Constitution or law
• They are consistent with essential requirements of audit as determined by C&AG
• They do not conflict with orders of higher authority
• If not separately approved by competent authority, the issuing authority possesses necessary rule-making power

### 2. Audit of Sanctions

Each item of expenditure must be covered by sanction (general or special) of competent authority. Audit ensures:

• Expense is properly covered by sanction
• The sanctioning authority is competent under Constitution

### 3. Audit against Provision of Funds

Ensures:

• Expenditure is incurred on the purpose for which grant/appropriation is provided
• Amount of expenditure does not exceed the appropriation made

### 4. Propriety Audit

Expenditure must be incurred with regard to broad and general principles of financial propriety. Auditors try to bring out cases of improper, avoidable, or ineffective expenditure even when incurred in conformity with rules.

#### General Principles of Financial Propriety

• Expenditure should not prima facie be more than the occasion demands. Every public officer is expected to exercise the same vigilance in respect of public money as a person of ordinary prudence would exercise in respect of his own money.
• No authority shall exercise its powers of sanctioning expense to pass an order directly or indirectly to its own advantage.
• Public moneys should not be utilised for benefit of a particular person or section unless:
• Amount of expense involved is insignificant
• Claim could be enforced in a Court of law, OR
• Expense is as per recognised policy or custom
• And the amount of allowance granted to meet expense shall be regulated so that allowances are not sources of profit to recipient

## Performance Audit (Full-Scope Audit)

Scope extended to cover efficiency, economy and effectiveness audit:

### Procedure for Conducting Performance Audit

1. Identification of topic

2. Preliminary study

3. Planning

4. Execution of audit

5. Reporting