Lecture on Controller Local Audit

(Defence Services)
Delivered by: Banaras Khan Swati
Assistant Audit Officer, CMA (O),
Rawalpindi
Date: December 11, 2024
Location: DCLA (DS), Rawalpindi
 OFFICE OF THE DCLA (DS) RWP

• 1
• CONTROLLER LOCAL AUDIT
• (DEFENCE SERVICES)
• December 11, 2024
 2

• INTRODUCTION
• • CLA (DS) is one of the functionaries working under
• administrative and financial control of the MAG as
• Internal Auditor to all the three Defence Services
• (Army, Air Force and Navy) and Reports to Ministry
• of Defence through Military Accountant General
• (MAG)
• • CLA (DS) not only conducts internal audit but also
• assists, guides and advises the executive of Defence
• Services in financial matters to avoid any
• irregularities.
• December 11, 2024
 3

• SCOPE OF LOCAL AUDIT

• On the recommendations of a high-powered
• committee set up by the Government, the office of
• Controller of Local Audit (Defence Services) was
• established w.e.f. 1.1.1982 with four Deputy
• Controller Offices located at Rawalpindi, Lahore,
• Karachi and Peshawar unifying Local Audit of all
• the Units/Formations of the three Defence Services.
• The audit of ISOs, FWO and POFs, however,
• remained with the respective Controller offices.
• December 11, 2024
 4

• SCOPE OF LOCAL AUDIT

• • The scope of local audit includes overseeing internal
• controls, compliance, efficiency, transparency, risk
• management,
• performance,
• fraud
• detection,
• evidence, information reliability & decision-making
• December 11, 2024
 5

• TYPES OF AUDIT
• • Mainly there are two types of audit in public
• sector (Defence Services). The first is Statutory
• Audit which is conducted by the D.G. Audit
• (Defence Services) on behalf of Auditor General
• of Pakistan to carry out his statutory duties in
• regard to audit of Defence Services receipts and
• expenditure. This is generally known as Test
• Audit.
• • Test Audit reports to the Public Accounts
• Committee and the Parliament.
• December 11, 2024
 6

• TYPES OF AUDIT
• • The other type of Audit is Internal Audit
• which is conducted by the CLA on behalf of
• the Ministry of Defence to oversee that the
• Defence budget is being utilized under
• established
• rules.
• Reporting
• structure,
• discussion of audit findings, process flow
• and settlement of audit objections will be
• discussed in upcoming slides.
• December 11, 2024
 7

• Organizational Presence
• CLA(DS)
• Head of the Command
• DCLA
• (Lahore)
• Kharian
• To
• Dera Nawab
• DCLA
• (Rawalpindi)
• Jhelum
• To
• Attock, Rwp/Isd, Muree
• & AK
 8

• ORGANIZATIONAL HIERARCHY
• CLA (DS)
• DCLA (Lahore)
• JCLA (DS)
• GO (AT)
• Settlement
• GO (AT)
• Coord
• GO (AT)
• Categorization
• M.O.D.
• MAG
• CLA (DP) RWP
• LAOs=23
 9

• Office and Audit Management / Policy Making

• CLA / JCLA (DS)
• DC’sLA
• Field Management
• G.O’s and A.O’s
• Office and Audit
• Management
• LAO’s / SLA’s
• Work execution
• Reporting Hierarchy
• December 11, 2024
 10

• FUNCTIONS OF CLA(DS)
• 
• To exercise local audit of all Cash / Stores (Like
• ration, consumable items, stationery items, etc.)
• Accounts
• of
• Defence
• Services
• Units
• /
• Formations.
• 
• Render Financial Advice on Audit matters to the
• Executive (Defence Services).
 11

• SAMPLE ASVC
• December 11, 2024
• 12
• FUNCTIONS cont.
• 
• To collect and scrutinize all cases of serious
• financial irregularities and their inclusion in
• GSA report submitted monthly to the Ministry
• of Defence.
• 
• To scrutinize Audit, Review and Inspection
• Reports and their final categorization.
• 
• To deal with disciplinary aspect against CLA
 13

• FUNCTIONS cont.
• 
• To organize / re - organize Local Audit Offices.
• As per requirements of the Defence Services.
• 
• To scrutinize and approve the list of auditable
• documents.
• 
• To conduct Audit Meetings and Mobile
• Committee Meetings at various stations with the
• coordination of respective Fmn. HQ level for
• speedy settlement of audit objections.
• 
• To watch punctual submission of all periodical
 14

• OVERVIEW OF LOCAL AUDIT

• •
• Local Audit is conducted by : -
• •
• Local Audit Staff (LAO, SLA & Auditors)
• •
• Review of Local Audit by a Superior Service Officer (SSO) of DCLA (DS)
• Office.
• •
• General Rules for the conduct of Local Audit
• It should be seen: -
• •
• That the accounting procedure followed by units does not differ from that
• prescribed by the rules (FR 1986 Vol. I & II), DSR for MES 2021 etc);
 15

• • Inspection of Cash Book of Public Account

• • Inspection of units moving within Pakistan Limits
• • Inspection of units in Pakistan which are ordered
• to be mobilized
• • Inspection Reports
• • Lists of Accounts and Registers to be audited
• • Inspection of Accounts Section (UA)
• • Railway Warrants
• • Audit enfacement
• • Results of Audit (OM)
• • Discussion with CO/OC by LAO
• • Audit / Review / Inspection / Report
• OVERVIEW OF LOCAL AUDIT
• December 11, 2024
 16

•  Conduct Annual, Bi-Annual and Monthly Audit;

•  LAOs conduct audit, submit report after discussion
• with executive of Units/ Fmns;
•  Submit Reports for categorization and issuance to
• field offices for response;
•  Settlement on fast track through Front Desk Office
• (FDO);
•  SAM/ MCM; chaired by a GO on behalf of CLA
• (DS) for facilitating units / Fmns at door step.
• CONDUCT OF INTERNAL AUDIT
• December 11, 2024
 17

• DUTIES OF THE LAO

•  He will see that all accounts and ledgers
• prescribed for units / formations are actually
• maintained in accordance with the prescribed rules
• and orders on the subject.
•  LAO will ensure that the orders/amendments
• issued by the Government are being followed.
•  LAO is supposed to act as a financial advisor to
• the CO in all matters relating to expenditure and
• interpretation of rules.
• December 11, 2024
 18

• DUTIES OF THE LAO cont.

• 
• Special Stock verification during his periodical
• visits. All Store ledgers / Stock Records,
• Railway Warrants, Credit Notes, Sheet Rolls and
• Service Books etc. shall be checked by the LAO
• at the time of his audit of store accounts.
• 
• LAO shall inspect the accounts of Public Funds
• maintained by Units / Formations. LAO has full
• power and authority to examine the treasurers
• chest balances, the cheques and account books
• and call for any information, account, voucher,
• or document that he may require.
 19

• DUTIES OF THE LAO cont.

• The following LAO’s are helping different Navy
• Units/ Fmn. In exercising effective audit control.
• 1- LAO Navy-I Karachi
• 2- LAO Navy-II Karachi
• 3-LAO Navy-III Karachi
• 4- LAO NSSD (Naval Stores Depot) Karachi
• 5- SLA NASO Karachi
• 6-SLA Navy Manora
• 7-SLA PNS Raza
• 8-LAO (D) Lahore
• 9-LAO Navy Islamabad
• December 11, 2024
 20

• SCOPE / EXTENT OF AUDIT

• •
• SCOPE OF AUDIT.
• •
• 100% audit of all stores transactions occurring in one month in each
• half year. Remaining period is checked to the extent of 11% of the
• total vouchers.
• •
• Linking of Vouchers.
• •
• a.
• Ration Vouchers. 100 %
• •
• b.
 21

• Discussion
• with the Executive
• at Unit Level
• Reporting to the
• Executive
• Categorization of Objections
• as A,B,C by CLA(DS)
• Audit Plan
• Execution of Audit
• Submission of
• Audit Report to CLA
• Selection of objections
• for GSA & Appropriation Accounts
• Settlement / Resolution of Audit
 22

• FREQUENCY OF AUDIT
• • Major Units (PNS) Static / Mobile
• = ½ Yearly
• • Supply Depots and Workshops = Monthly.
• • Cash Inspection = Half Yearly
• • Physical Stock verification
• (Special or Normal) = Discretion of LAO.
• December 11, 2024
 23

• PROCESSING OF AUDIT
• OBJECTIONS
• • The observations pointed out during audit
• are concurrently brought into the notice of
• the CO / Manager by issuing an observation
• memo (OM) which is to be replied before
• completion of audit. The replies submitted
• are considered by the LAO after verification
• of documents and if found justified, the
• observations are dropped at the spot.
• December 11, 2024
 24

• PROCESSING OF AUDIT
• OBJECTIONS cont.
• • The remaining points are submitted to the CO in
• the form of a draft report for discussion.
• Observations can be dropped during discussion
• after ascertaining the view point of the CO.
• • The unsettled points are included in the objections
• statement and issued formally to the CO. At the
• same time the report is sent to the CLA for
• categorization as A, B and C according to their
• seriousness.
• December 11, 2024
 25

• CATEGORIZATION OF AUDIT
• OBJECTIONS
• Category – A. (Specimen Attached)
• •
• Minor procedural lapses / objections and
• observations.
• •
• Objections pertaining to losses of Cash &
• Store whether due to theft, fraud or
• neglect upto Rs. 30000.00.
• •
• Can be settled by the LAO himself.
• December 11, 2024
 26

• CATEGORIZATION OF AUDIT
• OBJECTIONS cont.
• Category – B. (Specimen Attached)
• •
• Items of financial irregularities and procedural
• lapses requiring Government sanctions.
• •
• Objections pertaining to losses of Cash and
• Store
• accounts
• valuing
• Rs.30001.00
• to
• Rs.100000.00 due to theft, fraud or neglect.
 27

• CATEGORIZATION OF
• OBJECTIONS cont.
• Category – C. (Specimen Attached)
• •
• All Losses other than those noted against
• A and B above.
• •
• Serious financial irregularities considered
• fit for inclusion in GSA Reports.(Above
• 500000)
• •
• Can only be settled with the approval of
• CLA(DS).
• December 11, 2024
 28

• GENERAL STATE OF
• ACCOUNTS (GSA) CASES
• 
• 1-The
• Cases
• of
• serious
• financial
• irregularities, un–satisfactory state of
• accounts, non - maintenance / non –
• production of auditable records.
• 
• 2-Cases of cash / stores losses due to theft,
• fraud, neglect or other causes having
 29

• GENERAL STATE OF
• ACCOUNTS CASES (GSA)
• •
• After acceptance of the irregularity by the
• CO of the Unit, the case is selected for
• inclusion in the GSA Report by the
• CLA/MAG. Case is then reported to the
• Fmn. HQ for holding court of inquiry. The
• final out come of the investigation is
• intimated to the Ministry of Defence.
• December 11, 2024
 30

• GENERAL STATE OF
• ACCOUNTS CASES (GSA)
• • Settlement of GSA cases is done by the
• MAG. However views of the Director (Pay
• and Accounts) Naval Head Quarter. and
• CLA
• are
• also
• kept
• in
• view
• while
• considering such cases.
• December 11, 2024
 31

• EXAMPLES OF OBJECTIONS.
• 
• Direct embezzlement / Fraud cases.
• 
• Want of sanction to advances, losses, special
• grants etc. required under rules.
• 
• Overpayments and recoveries.
• 
• Stores issued free without authorization.
• 
• Stores issued in excess of prescribed scales.
• 
• Stores issued to Unit/Fmn. But credits are
 32

• EXAMPLES OF OBJECTIONS. (Cont)

• 
• Delays in the recovery of sums due to
• Government.
• 
• Expenditure involving infringement of
• rules.
• 
• Misappropriation of Government money.
• 
• Excess over allotments.
• 
• Wrong transfer of closing balances in
• store ledgers.
 33

• EXAMPLES OF OBJECTIONS. cont.

•  Preparation of Fictitious Muster Rolls/false bills
•  Lapsable Amount not deposited into Government
• Accounts after close of Financial Year.
•  Misuse / profit earning from Government funds.
•  Irregular repair / renovation works.
•  Civilians employed instead of troops labour.
•  Local purchase procedure not followed.
•  Over-drawl of Ration against authorization.
• December 11, 2024
 34

• EXAMPLES OF OBJECTIONS. cont.

• • Excess issue of Clothing and premature condemnations.
• • Over stocking of stores.
• • Non-adjustment of TA/DA advances through final bills
• and non intimation to next unit on LPC.
• • Misuse of Defence Works Funds.
• • Misuse of Government MT and non-adoption of economy
• measures.
• • Non-maintenance / Non-production of auditable
• documents.
• • Excess expenditure over allotments and without sanction
• of the CFA.
• • Deviation from Rules and Regulations.
• December 11, 2024
 35

• GUIDELINES FOR COs

• 
• Knowledge about rules/ regulations.
• 
• Attitude of CO / Staff towards audit objections / audit
• staff must be quick and positive.
• 
• Observance of proper Operating Procedures (SOPs)
• must be ensured at all levels.
• 
• Timely corrective measures and completion of Court of
• Inquiries.
• 
• Liaison with audit authorities and to contact a proper
 36

• GUIDELINES FOR COs

• 
• Consultation with LAO before incurring financial
• transactions if any doubt is felt.
• 
• Grouping of similar objections for purpose of reply .
• 
• Non-repetition of irregularity once objected by audit.
• 
• Prompt submission of reply to objections in the presence
• of concerned persons.
• 
• Recovery action from the responsible persons.
• 
 37

• Thanks
• &
• Question
• December 11, 2024