08

CHAPTER 8

SEPARATION OF AUDIT AND ACCOUNTS


8.1 We have already seen in Paragraph 1.10 why it is desirable in the interests of honest and sound finance that business transactions should be subjected to scrutiny of an agency independent to that charged with the duty of keeping the accounts of those transactions, Theoretically, the same principle should apply equally to Government transactions.
 8.2 In the pre-independence era, the question of separation of accounts and audit was raised time and again but could not be given serious consideration. Apart from the practical difficulties, there were problems of cost and manpower. Thus, except for the fact that Defence Accounts remained always separate from Defence Audit, the combined set up of accounts and audit continued until separation was introduced in the Railways on an experimental basis from December 1, 1925 and was adopted as permanent measure in 1929.

Position after independence

8.3 After independence the process of separation proceeded on a gradual basis. From April 1951, Postal Life Insurance work was transferred from the Deputy Accountant General (Posts and Telegraphs) to the Director, Postal Life Insurance, Calcutta, an officer under the administrative control of the Director General, P&T. A Pay and Accounts Office was set up in Pondicherry with effect from the November 1, 1954 on the defacto transfer of French Establishments in India to the Government of India. The responsibility for making payments and maintaining accounts of the Food, Rehabilitation and Supply Departments was transferred to the respective Ministries with effect from the April 1, 1955. Similar transfer regarding payments and accounting of the Rajya Sabha and Lok Sabha Secretariats was made with effect from the October 1, 1955, and of the Printing and Stationery Department with effect from the December 1, 1955. Thereafter the accounts relating to Goa, Daman, and Diu were departmentalised. The accounts work relating to Savings Bank transactions was transferred to the P&T Department in 1962. Subsequently in 1968 the accounting functions in respect of the Telecommunications Branch were transferred.

Departmentalisation of accounts in 1976

8.4 It was in 1976 that a major exercise of departmentalisation of accounts covering all the Ministries and Departments of the Union Government and all the Union Territories except Andaman and Nicobar was undertaken and completed in a phased manner with the main objective of integrating accounts with the Administrative Ministries and Departments. Under this scheme, accounts and Finance will form an integral part of overall management. Administrative Ministries have been entrusted with the responsibility of arranging payments and timely compilation and rendering of accounts.
 8.5 The salient features of the scheme are briefly indicated below:
 (a) The Secretary to the Department/Ministry shall act as the chief accounting authority and discharge this responsibility through and with the assistance of the Integrated Financial Adviser of the Ministry/ Department.
 (b) The Integrated Financial Adviser shall be responsible for:
(1) preparation of budget of the Department/Ministry, distribution of budget allocations to the various wings, departments/formations;
(2) arranging payments directly to the bodies, corporations and authorities of grant-in-aid, loans, etc., as may be sanctioned by the Department;
(3) arranging payments through Pay and Accounts Offices under him in various regions of the country, all pay and allowances, office contingencies, miscellaneous payments, all admissible loans and advances to government servants including provident funds claims in accordance with prescribe financial and treasury procedures;
(4) compilation and consolidation of the accounts of the Department/ Ministry  in accordance with the instructions issued by Central Government and/or the Comptroller and Auditor General and rendering the appropriation accounts;
(5) introduction of a system of management accounting suited to the functions and requirements of the Department/Ministry;
(6) installation of a sound system of internal inspection within the department to ensure both accuracy in accounts and efficiency in operation as a part of the management.
(c) Payment and accounting functions of the Ministry/Department will be discharged through departmental Pay and Accounts Offices functioning at the headquarters of the Department/Ministry and regional Pay and Accounts Offices functioning in the various regions of the country. The formation of regional Pay and Accounts Offices will be determined with reference to the number and spread of field organizations in the various regions of the country.
(d) The payments as well as receipt transactions relating to the Ministry/ Department and its attached and subordinate offices will be transacted at the branches of the Reserve Bank of India and State Bank of India or its subsidiaries or at specified branches of the public sector bank accredited to the department without intervention of the treasury.
 (e) The Regional Pay and Accounts Offices will compile the accounts of the region and render them to the central accounts office at the headquarters, which will be responsible for compiling the accounts of transactions directly paid for by him, or received by him and consolidating the accounts of the Department as a whole on the basis of the compiled accounts received from the regional Pay and Accounts Offices and his own office.