1.1. One of the earliest available records relating to public works and projects as a systematic State activity in India is to be found in Kautilya's Arathashastra. This treatise on statecraft, dating from the period 321-296 BC, describes in some detail the construction activities expected to be taken up by the Sovereign in the realm of defence, in addition to public welfare. Arathashastra sets out not only different types of public works and projects undertaken by the Sovereign - such as forts, water reservoirs, market places, roads, hospitals, government buildings and temples but also spells out the detailed specifications in relation to each type of work. This celebrated treatise also sets out the business of keeping accounts and provides for their audit. It lists some forty ways in which State funds could possibly be embezzled and prescribes in some detail the penalties for such embezzlement. Construction activities for the common good leading to creation of tangible assets, have characterised enlightened rulers in India throughout the centuries. Construction activities involving monuments, which form an integral part of the rich cultural heritage of the country, have also been undertaken from time to time.
1.2. In modern times, public works and projects were undertaken by the British rulers, particularly from the later half of the nineteenth century, guided mainly by considerations of the interest of colonial rule. While the first railway was run in 1853, a separate Department of Public Works was created as early as in 1855. The accounting and auditing of Public Works as a distinct discipline has developed since then.
1.3. In post-independence India, a large number of projects in different sectors like irrigation, power generation, roads, railways, ports, aerodromes, bridges, etc., involving huge financial outlays have been completed through the successive Five Year Plans as part of planned economic development with the objective of creating the basic infrastructure necessary for rapid economic development. India is a Federation with clear cut demarcation of powers and functions as between the Union and the State Governments. While subjects like Railways, national highways, major ports, aerodromes, post and telegraphs, etc., are within the exclusive jurisdiction of the Union Government, roads and bridges not declared as national highways, water supplies, irrigation and canals, drainage and embankments, State buildings, etc., come within the jurisdiction of the State Governments. A centralised planning process overseen by the Planning Commission at the Union level, is intended to ensure integrated, balanced and co-ordinated development and execution of major public works and projects by the Central and State Governments within the framework of available resources. Public works and projects are executed not merely as direct activities of the Central and State Governments but also through the instrumentality of parastatals. Construction parastatals have also been established, which compete with the private sector contractors for the execution of public works and projects.
2.1. A complete system of project management must ensure formulation/selection of the most sound and viable projects, proper implementation of the projects selected and proper management of the completed projects. The main stages of the project cycle can be considered as under :
2.2. Public works and projects are mostly cost intensive and must satisfy the stringent criteria for adequacy of return before these can be taken up for execution. Apart from establishing the need for the project, this involves quantification of costs and anticipated benefits, preparation of cash flow tables and computation of internal rate of return. For certain projects, where it may not be possible to get a financial return, the economic return is calculated. The economic cost and benefits are determined by excluding the taxes, duties and subsidies which represent transfer of cost and resources within the economy. In a regime of controlled exchange rate, the official rate of exchange is suitably adjusted. For certain projects like improvements in roads, the principle of with and without is considered, i.e. comparison of the alternative of existing roads continuing without investment and the improved facilities likely to be available after project implementation is considered. The internal rate of return is then based on net cost and net benefit. Since, the social cost of capital is taken as 12 per cent, projects with an economic/ internal rate of return in excess of 12 per cent are only likely to be sanctioned. The sensitivity of the project consequent on changes of prices or availability of crucial inputs is analysed. One of the objectives of planned economic development has been the reduction of regional disparities and the provision of social services. These aspects are taken into account while considering the projects for clearance.
2.3. The investment criteria followed by Government for irrigation projects is, however, different. It has long been recognised that the returns from irrigation projects go beyond the mere irrigation rate likely to be earned by the supply of water on commissioning of the project and should include direct as well as indirect benefits on account of double cropping, diversification and better quality of crops, higher yields, etc. In view of this, the economic benefit criteria has generally been adopted for the authorisation of irrigation projects instead of the financial return criteria. The benefit of the project is represented by the net increase in gross value of the post-project produce while the annual cost is the total of interest on capital cost, depreciation and operation and maintenance charges. Irrigation projects with the benefit cost ratio greater than 1.5 are considered acceptable from the economic point of view; in the case of irrigation projects in drought affected areas, the benefit cost ratio of unity may be adopted in view of the special requirements of such areas.
2.4. Public works and projects in the general and social services sectors like buildings for hospitals, colleges, offices can obviously not be appraised with reference to the criteria of adequacy of return. The necessity of these works may be determined with reference to certain prescribed scales, e.g. provision of a hospital or a dispensary for a certain number of population or with reference to certain bed strength requirement. These are functional buildings and are sanctioned to meet specific needs, either independently or as part of the intended facility.
2.5. Investment decision in the public sector has necessarily to be viewed within the o v e r a 11 framework of the Five Year Plan as broken down into Annual Plans with a view to achieving the objectives enunciated in the Five Year Plan document. The Annual Plan is, therefore, the operation plan which is linked with the Annual budget. However, the inclusion of a project or a work in the Five Year Plan as well as the Annual Plan is at best taken to be a statement of intent which does not represent a definite decision to proceed with the work. Such a decision is given through a rigorous scrutiny and appraisal of the project proposal.
2.6. While project appraisal procedures at the Union level are definitely more stringent mainly because of the heavier outlays involved, these are broadly followed by the State Governments, though the levels of scrutiny, clearance and authorisation may be different. At the Union level, the concerned ministries have been empowered to accord approvals to projects involving investment of Rs.50 million (US$1 = Rs 31 approximately) only. Investments between Rs.50 million and Rs200 million require the approval of a designated body called the Expenditure Finance Committee (EFC) headed by the Secretary (Expenditure) in the Union Ministry of Finance and with Secretary, Planning Commission as one of the other members besides the Secretary of the relevant administrative Ministry. Projects costing more than Rs200 million require the approval of the Council of Ministers. However, before a proposal is remitted to the Council of Ministers, it is subjected to a rigorous screening through the Public Investment Board (PIB) which institutionalises a systematic evaluation of projects to facilitate their approval by the government. At the Secretariat level, the projects submitted for approval to EFC/PIB are first appraised by the Ministry of Finance (Plan Finance Division) and the Planning Commission (Project Appraisal Division) within the prescribed period of 2-4 weeks. The project approval procedure has an inbuilt mechanism of ensuring that cases involving heavy cost over-run of 20 per cent or more do not escape scrutiny and are resubmitted for consideration of the EFC/PIB as the case may be, with proper analysis of cost variance pinpointing the reasons and the responsibility for the cost over-run.
3.1. The basic document is the Detailed Feasibility Report which contains detailed information on the technical, marketing, organisational, managerial and environmental aspects and on financial and economic viability of the project. The quality of the project appraisal/investment decision largely depends upon the quality of Detailed Feasibility Report. The adequacy of the Detailed Feasibility Report as the basis for investment decision is largely determined by the thoroughness of studies and investigations whieh have gone into its preparation. Feasibility studies are conducted for establishing the need for the service proposed to be provided by the project (demand analysis) in the backdrop of existing facilities, availability and adequacy of inputs including manpower, material, equipment, organisation, upstream and downstream infrastructure and maintenance and operation requirements and impact assessment, financial, economic and environmental. The different elements of inputs are costed to work out the project cost and maintenance expenditure and financial and economic returns are assessed, based on the anticipated project output/service to establish the financial and economic viability of the project.
3.2. Detailed guidelines have been laid down by the government specifying the information required on the important aspects/parameters of the project and the way in which the data should be presented for appraisal and investment decisions in different sectors of the economy. Environmental clearance is invariably required in the case of all major projects. Surveys and investigations must provide necessary and sufficient data for environmental impact assessment.
4.1. Legislative supremacy as enshrined in the Constitution of India requires that no expenditure can be incurred except with the approval of the appropriate legislature. Project approval by the competent authority, therefore, does not automatically authorise incurring of expenditure unless funds are provided in the budget and voted by the legislature. The project report contains annualised estimates of expenditure likely to be incurred in each year. With reference to these annualised estimates and the anticipated physical progress during the year, financial proposals are prepared for inclusion in the budget estimates. No expenditure can be incurred on a new public work not included in the budget which may cost Rs.5 million or more. All works costing Rs.5 million or more are required to be specifically listed in the budget. The financial sanctions are accorded by the appropriate authority subject to the provision of funds in the budget voted by the legislature. This applies to foreign-funded projects as well, since all foreign assistance by way of loans and grants must initially enter the government accounts.
4.2. The Constitution of India recognises two types of expenditure - revenue expenditure and other (than revenue) expenditure from which capital expenditure on public works and projects is met. Classification of transactions in Government accounts on function-cum-project/programme basis introduced from April 1974 and further refined from April 1987, achieves the twin objectives of reflecting Government transactions in terms of functions, programmes, projects and securing correspondence between accounting classification and plan heads of development.
The transactions are classified under different sectors such as general services, fiscal services, social services, economic services and within the sectors under different major Heads, each of which corresponds to a distinct function of the government. The following level of classification, viz; - Minor Head denotes a project and the sub-Heads subordinates to a Minor Head represents the schemes under the project. The next level of classification indicates the object level of classification such as salaries, wages, etc. Thus, there are separate heads of account for recording transactions relating to roads and bridges, railways, ports and lighthouses, major and medium irrigation, minor irrigation, command area development, flood control, power projects, etc. The expenditure is further sub-classified as may be required on each project (minor head), segment of a project (sub-minor head) and object head (land, materials, machinery, wages and salaries). This enables capturing all transactions in respect of each project separately, classified further under the appropriate minor heads as well as the object heads. Finance accounts of government contain information of expenditure incurred on a particular project during the year as well as up to the end of the year.
Public works and projects are executed under the overall direction, control and supervision of the Chief Engineer functioning under the concerned Public Works Department. The Chief Engineer is assisted by Superintending Engineers and Executive Engineers under whom Divisions and Sub-divisions are established which are responsible for the actual execution of work. The preliminary financial control at the Divisional level is exercised by the Divisional Accountant who, in several cases, is an officer of the Indian Audit and Accounts Department. In the case of major projects, dedicated and exclusive project authorities are established which are headed by officers of appropriate status such as General Manager or Chief Engineer. The Financial Adviser and Chief Accounts Officer provides financial advice to the chief executive of the project and also maintains detailed account of expenditure. The accounts prepared by the Divisions or the Financial Adviser and Chief Accounts Officer are incorporated in the overall accounts of the government and submitted with an audit certificate by the Comptroller and Auditor-General of India to the President/Governor for presentation to the appropriate legislature. The Financial Adviser and Chief Accounts Officer may also have an independent internal audit unit, which submits its reports to the Chief project executive.
Except for petty works, public works and projects are executed by inviting tenders. Before tenders for a work are invited, a detailed estimate is prepared for approval. This estimate includes the bills of quantities, rates and amounts of various items of work and also specifications to be adopted. The bills of quantities is prepared after conducting detailed survey and investigation and after working out the items of work to be executed and their specifications. The Divisions and the Department maintain (and keep up-to-date) a schedule of rates for each item of work commonly executed, for preparing estimates, which also serves as a benchmark for settling the rates with the contractors. The schedule of rates is prepared on the basis of rates prevailing in each station and necessary analysis of rates for each description of work and for the varying conditions thereof is, as far as possible, recorded. The estimates are suitably adjusted for the particular site conditions like distances involved in the case of projects situated in remote areas where the standard schedule of rates may not be in alignment with the actual costs. When estimates are prepared adopting the actual rates obtained on construction works in nearby areas, the broad similarity in the working conditions in the two projects is ensured and factors such as differences in distances involved and price escalations wherever necessary are taken into account, hi some cases, it may become necessary to prepare the estimates on the basis of detailed rate analysis for principal items of work. A revised estimate must be prepared when any excess over the sanctioned estimate is foreseen, setting out in detail the reasons for variations, such as changes in scope of work, quantities or rates.
53.1. Tenders are invited in the prescribed form. The tender documents comprise the notice inviting tenders, the form of tender to be used along with a set of conditions, the schedule of quantities of work, status of drawings referred to in the schedule, quantities of work and complete specifications of each item of work to be executed. The tender documents specify the source of acquiring material; if required, the material to be issued by the department as well as the equipment, etc., which can be hired by the contractor from the department along with the applicable issue rates and hire charges. The tender documents also set out the manner in which work will be measured and payments made to the contractor, the important conditions regarding time, variation in quantities, price variations, penalties for delays, security deposits, labour regulations, etc. The tenders may be lump sum tenders, item rate tenders, percentage tenders (over and above the departmental estimates) or cost plus tenders (generally the last is discouraged).
5.3.2. The common methods of tendering are open competitive tenders, selective tenders, negotiated tenders and two stage tenders. Selective tendering is adopted when the sources from which responses can be accepted are definite and known in advance. A system of registration of contractors is adopted under which contractors are empanelled for award of works of specified cost and type with reference to their financial capacity, technical competence, past performance, etc. Tenders for works of specified cost/nature are then invited only from the registered contractors. Under the system of prequalification of tenderers, intending contractors are first asked to show details of their expertise and experience and only contractors adjudged by the evaluation criteria are then allowed to bid. Under the two stage system, technical bids are invited first, the bids are evaluated and final specifications worked out whereafter financial bids, including technical and commercial terms, are invited. In some cases, single stage two envelope system is followed: bidders submit two envelopes at the same time - one for technical (including specifications and commercial terms and conditions) and the other for price bids; the latter are opened and evaluated only when the technical bids are found acceptable.
5.4.1. The Executive Engineer assisted by Sub-Divisional Officers is responsible for the execution of the work in accordance with the terms and conditions of the contract. He ensures that the work is executed with due diligence, prescribed technical specifications are adhered to and the work is completed within the time stipulated. Any deviations from the contract, by way of extra or additional items, completely new items in addition to items specified in the contract, substituted items, i.e. items which substitute for existing ones or are taken up in lieu of the items already provided in the contract and variations in quantities where there are considerable increases or decreases in quantities of items of work stipulated in the contract require approval of the competent authority. The rates in each of these situations are settled and approved in the manner prescribed in the contract. On completion of the work, the Executive Engineer prepares a completion report and notifies the user department about its work, to whom the work will be handed over, for maintenance and utilisation. The Executive Engineer is the primary disbursing officer who makes payments to the contractor with reference to the work done by him as recorded in the measurement books. The measurements are required to be periodically test checked by him. In the discharge of his financial powers, he is assisted by the Divisional Accountant.
5.4.2. The Executive Engineer is authorised to issue cheques for making payments to contractors, suppliers, etc. The cheques are payable at the treasury or the accredited bank which is the focal point of payments in the Indian financial system. Depending upon the terms and conditions of the contract, payments may also be made to the contractors on account of mobilisation advance, against machinery and material brought to site and against the work done but not measured. All receipts and payments are entered in a cash book. The Executive Engineer maintains a separate account for each contractor (contractor's ledger), as well as permanent and collective record of the expenditure incurred in the division during a year on each work estimated to cost beyond a specified amount (register of works). He is also responsible for receipt, custody, issue and accounting of stores and construction materials.
5.4.3. A distinctive feature of public works expenditure is that all payments prior to the payment of final bill are interim on - account payments which are adjusted on the final settlement of the account of the contractors for the particular work. Quantity variations because of difficulties in correct anticipation of nature of soil, its topography, are quite common in construction works and these may lead to demands for higher rates from contractors, disputes, arbitration, etc. The Engineer Incharge of the project is responsible for monitoring the progress of the project, planning the provision of inputs like construction materials, machinery, labour, etc. and overall supervision. He obtains periodical progress reports from the Executive Engineers, identifies cases of slippages, bottlenecks and ensures remedial/corrective action where necessary.
5.5.1. The quality control system, which is internal to the project authority, encompasses precise depiction of construction specifications and estimates for effective quality control, adequately manned and equipped quality control agency, periodic appraisal of the quality control data by the second line construction managers for adopting corrective measures during construction and a system of feedback for effecting possible improvements in quality control and construction technique. The quality control team consists of a complement of trained personnel and a chain of properly equipped laboratories at the field level under the direct operational control of the Engineer Incharge of the work and at the circle level, which carry out tests of samples received from scattered works for which individual field laboratories may not have been set up and apex laboratories at the State level. The implementation of quality control requires close co-operation among the three agencies involved, viz. construction staff of the Engineer Incharge, the construction agency and the quality control team. Quality control team functions under the control of the Chief Engineer or the chief executive of the project.
5.5.2. The construction staff of the Engineer Incharge are responsible for ensuring use of only approved materials in the work, carrying out of prescribed laboratory tests at the appropriate time and general adherence to the laid down quality control procedures. The construction agency is associated with rhe routine quality tests carried out at sites. The quality control team is responsible for the inspection of works, application of random checks to quality of material used and finished items. The quality control team also carries out a systematic check on the field tests conducted by the field staff during the progress of work, provides necessary guidance to them and prepares an overall assessment report of the general standard of quality of work at the site, the standard of process control obtaining at the site and the corrective measures necessary for ensuring adequate quality control.
The adoption of system of mixed economy as an instrument of planned economic development in India witnessed the concomitant establishment of parastatals in the field of construction. Such parastatals set up by the Government of India and/or jointly with the State Government work on commercial principles and bid and compete for public works and projects with private contractors. Occasionally, they have enjoyed price preference in the allotment of works. Parastatals buy their own construction plants and equipment and they execute work either directly by employment of labour or through petty contractors or piece workers or by subcontracting. The establishment of parastatals in the construction industry has had a wholesome influence in stabilising the rates of private contractors. The parastatals prepare accounts on mercantile principles and capital investments therein by the Government of India and/or the State Governments are expected to earn dividends to government revenues. The parastatals have to bid for and win contracts in stiff competition with private contractors and at the same time, earn a reasonable margin of profit. The twin considerations - competitiveness with the private sector as well as ensuring reasonable rate of return on the capital investment - can be possible only with rigorous cost control and efficient functioning.
7.1. Government control over implementation of public works and projects may involve approval of major contracts above a specified value at government level. The primary responsibility for proper monitoring and control of the public works and projects is vested in the concerned administrative department or the Ministry, which may call for periodical returns and reports of physical and financial progress from the project authorities. The control is also exercised through the budgetary mechanism of annual allocations when the financial and physical progress are critically reviewed and the allocations for the subsequent year are determined for incorporation in the annual financial statement. In addition, the Project Monitoring Division of a dedicated Department namely Department of Programme Implementation, monitors and facilitates the implementation of Central projects costing over Rs.200 million. The officers of the Project Monitoring Division may visit the project sites to review the progress of implementation of the projects and hold indepth discussions with the parastatals and administrative Ministries and Departments in order to obtain first-hand knowledge of problems and to ensure facilitative action for solving them. In the two-tier system of monitoring adopted by the Project Monitoring Division, the major and mega projects are monitored on a continuous basis every month in view of the large quantum of investments involved.
7.2. In respect of the latter, the prescribed monthly flash report system requires the project authorities to furnish, at the beginning of each year, a list of designated milestones expected to be crossed during the course of the year against which achievements are monitored through input flash reports every month. The input flash reports are also required to indicate the details of any supply problem faced by the project authorities, anticipated problem areas, as well as the proposed remedial /corrective/facilitative action. In the case of slippages, the project authorities are required to indicate the reasons for non-achievement of scheduled milestones in the relevant month and their impact on the likely date of commissioning and the estimated cost of the project. A summary of the flash reports, together with the analysis of the report, is sent to the Prime Minister's Office/ Cabinet Secretariat and to the concerned ministry/department. The Ministry and the Department are required to analyse the reasons for slippage of the critical milestones and the action taken to tackle different problems reported by the project authorities. The action- taken reports received in the ministry and department are scrutinised and the consolidated action-taken report for all the projects costing above Rs. 1,000 million is drawn up before the end of the month.
7.3. Another control mechanism is the preparation of completion reports which correlate the actual expenditure with the estimated expenditure and the sanctioned estimates and explain variations in excess of 10 per cent, i.e. variance analysis. This mechanism also enables the engineers to draw appropriate lessons from their own failures as well as to update the schedule of rates for various items of work, which is the basic input for project estimates. The completion reports indicate the major technical deviations which might have become necessary during actual execution and also become a feedback mechanism for preparing estimates for similar works in the future.
The Chief Technical Examiner's Organisation, which functions independently of the Public Works Department or the project authorities, carries out concurrent administrative and technical audit of the works with a view to securing economy in expenditure and better financial and technical control. The Chief Technical Examiner is responsible for inspection of all important works during construction and after completion. He is authorised, inter alia, to get hidden works opened up and carry out laboratory tests on materials incorporated. His post-payment audit includes not merely examination of bills with reference to record of measurements but also the checking of measurements and quality of work done on site. He verifies that materials and labour are not used in excess, that the rates are reasonable and specifications are unambiguous, that payments are made for the works executed, works are test-checked, etc. He will render advice to Audit in connection with Audit paragraphs and examine such bills and contracts as Audit may desire him to examine. His duties include intensive examination of works and supplies of engineering materials from vigilance angle. The work of the Chief Technical Examiner, who functions under the Central Vigilance Commissioner is predominantly vigilance-oriented, as distinguished from the normal quality control and technical audit done by the project authority itself. Detailed procedures have been prescribed for the transmission and follow-up of the report of the Chief Technical Examiner.
9.1. In India, a number of public works and projects are partly or wholly funded with bilateral assistance or assistance by international agencies like the World Bank, International Development Association, the Asian Development Bank, etc. Foreign funding agencies insist upon more rigorous project clearance processes and conduct their own appraisals before agreeing to fund a public work or a project. These agencies also insist upon the adoption of their own bid procedures, which include prior clearance of bidding documents or adoption of standard bidding documents as well as approval to negotiations with contractors and prior approval of contracts. Any post-contract modification must also have their approval.
9.2. The agencies also require:
With the progressive liberalisation of the economy, particularly in the wake of economic reforms from the middle of 1991 and in the context of acute resource constraints, the government has been looking for innovative methods of financing public works and projects and additionality of resources particularly in the areas of highways, ports, power projects, etc. This has meant the assumption of the role of a facilitator rather than direct investor by the State. Various options like BOT (build, operate and transfer) or BOO (build, own and operate) of the public works and projects have been considered in different areas. A major area in which private sector is making a big entry is the power sector in which independent power producers are encouraged to construct power plants and sell power to government electricity boards. Privately- funded public works and projects raise several issues concerning the terms and conditions relating to risk sharing, pricing, sale, accountability, monitoring, etc., on which the entry of private sector is permitted by government.
11.1. No uniform principles exist for levy of user charges for the services provided by public works and projects in different sectors of economy, which are governed by a variety of considerations, sometimes conflicting, of providing adequate return on capital invested as well as serving as a public utility. Aspects such as subsidies, differential pricing, cross subsidies, relativities, social and environmental considerations, competitiveness and monopoly pricing are relevant.
11.2. Following the seperation of railway finances from the general finances in 1924, the Railways are required to make a contribution to general revenues on the capital invested in accordance with principles and/or rates prescribed from time to time. The pricing of railway services is thus intended to yield a net return on capital account after meeting the operational expenditure, depreciation reserves and general surpluses for future expansion. The price should have a close relationship to the cost of providing the services, should be competitive with other modes of transport and consistent with national, social and economic goals and should also accommodate the user ability to pay. The Railway passenger fares and goods freight rates are prescribed from time to time for different classes of travel, as well as for different categories of goods transported and services rendered.
113. The electricity tariff is fixed basically at three stages, viz. t ariff for sale of power by the generating companies and the Electricity Boards, transmission tariff for wheeling of power and electricity charge levied on consumers at the distribution point. The Central power generating utilities levy a two-part tariff, comprising of a fixed charge and a variable charge. The fixed charge includes interests on loan and working capital, depreciation, operation and maintenance expenses and taxes, if any on income from normative generation. The variable cost consist of fuel cost, viz. primary fuel such as coal and gas and the cost of secondary fuel, namely oil. The basic objective of the two-part tariff is to ensure that the sunken costs of the generating companies are recovered by way of fixed charges and do not vary with the level of generation at the station, whereas the variable charges are related to the actual levels of generation achieved. The wheeling charges are levied more or less on the same basis, except that these do not involve any variable charge. The general principles of finance of electricity boards are laid down in the Electricity Supply Act, 1948 in terms of which the State Electricity Boards are required to adjust their tariffs in a manner as will ensure a net return of not less than 3 per cent on fixed assets, after meeting all expenses properly chargeable to revenue, including operating, maintenance and management expenses. These provisions are, however, subject to overall guidance and directions issued by the State governments and in practice, the electricity tariff is highly subsidised in India, specially to the agricultural sector.
11.4. The National Water Policy of 1987 prescribes that water rates should be such as to convey the scarcity value of the resource to the user and to foster the motivation for economy in water use. They should be adequate to cover the annual maintenance and operation charges and a part of the fixed costs. In practice, however, the water rates have remained depressed and do not even cover the operation and maintenance costs. Irrigation is a State subject and varying practices are followed by different States. While some of the States do not levy irrigation rates, in some States, there is no separate water rate, but irrigated lands are classified as wet lands which carry a higher rate of land revenue. In other States, lands irrigated by public irrigation system are charged separate water rates which, as a rule, are levied on area actually irrigated and differentiated by season and crop. In certain other States, a basic water rate is levied on all lands within the culturable area of the project for the supply of water, whether used or not, for the suitable crops and individual water rates for non-suitable crops. The rates are generally uniform within a State for a given class of irrigation works, but practices may vary. Besides water rates, a few States levy general or special cess on irrigated areas/crops. Generally speaking, the considerations which have gone into the determination of rates include quantum of water consumed, paying capacity of irrigators, assurance of supply and the need to cover annual cost incurred for providing irrigation.
12.1. The Constitution of India prescribes a Supreme Audit Institution (SAI) described as the Comptroller and Auditor-General of India. The Comptroller and Auditor-General of India derives his mandate for audit of public works and projects from the Constitution of India and the Comptroller and Auditor-General's (Duties, Powers and Conditions of Service) Act, 1971 framed thereunder. The Constitution of India vests in the Comptroller and Auditor-General of India the authority to audit the accounts of the Union and the States and of any other authority or body as may be prescribed by or under law made by Parliament. According to the provisions of the Comptroller and Auditor-General's (DPCS) Act, 1971, the Comptroller and Auditor-General is authorised to make regulations for carrying into effect the provisions of the Act in so far as they relate to the scope and extent of audit including laying down, for the guidance of the Government Departments, the general principles of government accounting and the broad principles in regard to audit of receipts and expenditure.
12.2. The Comptroller and Auditor-General of India is also authorised to dispense with, when circumstances so warrant, any part of detailed audit of any accounts or class of transactions and to devise such limited check in relation to such accounts or transactions as he may determine. The powers of the Comptroller and Auditor-General of India in connection with the performance of his duties include the authority:
12.3. The person in charge of any office or department, the accounts of which are inspected and audited by the Comptroller and Auditor-General of India, is required, in terms of the Act, ibid to afford all facilities for such inspection and comply with audit requests for information in as complete a form as possible and with reasonable expedition.
12.4. In regard to parastatals executing public works and projects, either as owners or as contractors, the relevant provisions in the applicable statutes govern the authority and scope of audit by the Comptroller and Auditor-General of India. Where the relevant statute by or under which the parastatal is established, prescribes that its accounts are subject to audit by the Comptroller and Auditor-General of India, who is the sole auditor of all its transactions including those relating to projects executed by it. A large number of parastatals have however, been set up as government companies which are governed by the Companies Act, 1956. In the case of these companies, the primary audit of accounts is conducted by statutory auditors appointed on the advice of the Comptroller and Auditor- General of India The Comptroller and Auditor-General of India is authorised to give directions to the statutory auditors as to the manner in which the accounts shall be audited as well as to conduct a supplementary or test audit of the accounts. The supplementary or test audit covers not merely audit of accounts but also financial, compliance and value for money audit.
13.1. The main objectives of audit of expenditure on public works and projects are:
13.2. Consistent with the provisions of the Constitution and the Act, the Comptroller and Auditor-General of India follows the comprehensive approach which embraces financial audit, regularity (compliance) audit and value for money audit. Audit scrutiny by the Comptroller and Auditor-General of India thus covers not merely ascertaining whether the expenditure is covered by duly authorised provision of funds or whether the expenditure conforms to the applicable provisions of the Constitution, the laws and the rules but also extends beyond the formality of the expenditure to its wisdom, faithfulness and economy. This is called propriety audit which is intended to detect not only cases of clear non-compliance with the applicable laws and rules, but every matter which in the judgement of Audit appears to involve improper expenditure or waste of public money or stores, even though the accounts themselves may be in order and no obvious irregularity has occurred. With the onset of planned economic development, the scope of audit has been expanded to verify whether the value for money has been obtained, i.e. the economy, efficiency and effectiveness audit. While different types of Audit are mentioned to bring out the wide-ranging nature of Audit, SAI of India views the auditing function as essentially indivisible. Accordingly, water-tight compartmentalisation involving discrete types of Audit is considered to be neither necessary nor desirable.
In May 1994, the Comptroller and Auditor-General of India promulgated his own auditing standards which codify and prescribe the norms of principles, procedures and practices of audit. These standards, clearly and unambiguously state that the term 'Audit' shall include both financial audit and performance audit and lay down the general standards, operational standards and reporting standards which government Auditors are expected to follow. Consistent with the requirement of maintenance of highest standards of professional performance, the Auditing standards lay stress on execution of audit tasks in a timely, economic, efficient and effective way and maintenance of quality assurance systems and procedures which should govern the working of the SAI's organisation. The standards are supplemented by the guidelines contained in the various manuals and instruction books governing the work in the Indian Audit and Accounts Department.
15.1. The SAI of India does not have a separate, exclusive, dedicated cadre of staff for the audit of public works and projects. Such teams are drawn from the composite cadres at various levels. Auditors are appointed by the SAI of India on the results of competitive examination conducted by the Staff Service Commission. New entrants are given training through post-entry courses. They are also required to qualify a highly professional and technical departmental examination before they are appointed to the next level. This examination tests their knowledge in different branches of auditing including the audit of public works and projects.
15.2. At the management level, the managers are appointed on the results of a nation-wide competitive examination conducted by the Union Public Service Commission for recruitment to superior civil services of the country. The officers so appointed are trained through an intensive training programme followed by examinations in several subjects which include audit of public works and projects. SAI conducts refresher courses for staff at various levels which include courses for audit procedures and methodologies for public works and projects. While technical persons like engineers are not recruited qua engineers, a fairly large number of engineering graduates do get appointed particularly at the management level on the results of the combined competitive examination. The selection of personnel for audit teams is based upon their technical background, professional skills and past experience.
16.1. The audit of transactions of works and projects is conducted in three stages beginning with the checks exercised by the Divisional Accountant who, as already stated, is in several States an officer under the administrative control of the Indian Audit and Accounts Department.
The Divisional Accountant is charged with the responsibility of not merely applying certain preliminary checks on the initial accounts and vouchers which are rendered to the Divisional Officer by the sub-divisional Officers, but also to conduct similar check from day-to-day upon the transactions occurring direct in the Divisional Office. This is however essentially internal to the departmental and project authorities.
16.2. At the second stage, the accounts and transactions of public works and projects are checked centrally in the designated audit offices under the Comptroller and Auditor-General of India At this stage of central audit of works expenditure, audit checks are applied on the contracts, purchase orders, vouchers, schedules and other documents received from the Divisional Offices. This includes verification of the sufficiency of authority for incurring expenditure, accuracy of classification of charges against works, proof of payment to the correct individual as evidenced by the payees' receipts and observance of standards of financial propriety. The copies of contract documents are scrutinised for conformity with the prescribed general and special orders and the progress and final payments as subsequently made are checked thereagainst in order to verify that these are in accordance with the provisions of the contract and that the prescribed principles of financial management and rules and regulations are not violated.
16.3. The third stage of audit, which consists of on-the-spot check of transactions and vouchers, is conducted in the offices of the executing authorities and is rendered necessary because certain primary and initial records are retained in the Divisional Offices and are not forwarded to the central audit offices. These records relate to. formulation of estimates, notices inviting tenders, evaluation of tenders, award of work, records of measurements, approval of variations, justification for procurement, records of consumption of material, utilisation of machinery, recovery of charges from the contractors, reports of quality control, etc. It is at this stage that audit in a detailed manner is conducted by peripatetic audit teams deputed from the audit offices. The Auditors examine the formulation of estimates, ascertain whether the prescribed procedure for invitation of bids was followed and determine whether the bids were correctly evaluated and the work was awarded to the lowest technically acceptable bidder. The accuracy of payments is checked with reference to the work done as recorded in the measurement books and deductions to be made from payments to contractors on account of materials supplied, hire charges of machinery, security deposit, etc., are verified. Audit also examines cases of deviations from contracts, the necessity for and rates of extra and substituted items, extra contractual payments, variations in quantities, etc. The Audit Planning Standard laid down by the SAI of India requires that the Auditor and the audit organisation should plan the audit work to ensure a high quality audit in a timely and economic, efficient and effective way. This standard places responsibility on the audit organisation and the Auditor to plan the work both at the macro level for optimum utilisation of audit resources and for specific audit assignments for their orderly conduct in an economical, efficient and effective manner.
16.4. In certain major projects, which have independent finance and accounts units under the Chief project executive, Audit may station its team on a continuing basis in the office of the Financial Adviser and the Chief Accounts Officer. This will also be supplemented by periodical visits of the peripatetic teams to the offices of the departmental executing agencies.
16.5. Spot audit in the offices of the project executing agencies, conducted in a cyclical manner is essentially transaction oriented, with its emphasis on the examination of individual transactions, contracts, purchases and payments, etc. The approach is also by and large, one of compliance or regularity audit, though the scope of audit may extend beyond the mere formality of expenditure to its wisdom, faithfulness and economy, i.e. propriety audit. This may involve extension of the audit inquiry to see whether the expenditure is prima facie justified and not excessive. In these genre, comments relating to excessive purchases, award of work at abnormally high rates, use of richer specifications or expensive materials than prescribed and warranted are made in Audit. Despite its extended scope, the orientation of the audit is however overwhelmingly transaction-specific and may not cover aspects of end use or effectiveness of expenditure.
17.1. Comprehensive auditing, as practised by the SAI of India, is intended to ensure whether value for money is obtained for expenditure on public works and projects. This involves examination whether the public works and projects are executed economically and efficiently and whether they serve the intended purpose. Economy is secured through the process of rigorous cost control, proper preparation of estimates and getting the work executed at the most competitive rates. Efficiency involves maximisation of output with a given input and may well range over adequacy of sequencing of operations, careful examination of various alternatives such as the departmental supply of machinery and hiring of machinery, optimum utilisation of machinery and equipment, etc. Effectiveness involves examination as to whether the intended benefits have been achieved and also whether there are no adverse or negative effects, e.g. on environment. Audit inquiry thus ranges over the entire gamut of activities associated with the project from conception through implementation and execution to utilisation. Audit examines the feasibility reprot, detailed project report, the award of contracts, planning, procurement and utilisation of construction machinery, equipment and materials, reports of the quality control units, Chief Technical Examiner and internal audit, completion reports and the internal control mechanism while conducting value for money audit of public works and projects.
17.2. Audit scrutiny of the decision-making apparatus is regarded as an essential and integral element of the Auditing process by the SAI. Accordingly, all major investment decisions are subjected to detailed audit scrutiny as part of the value for money audit of projects. This involves examination of not merely whether the procedures prescribed for investment approval were followed before authorisation and sanction of projects, but also adequacy of the pre-approval appraisals conducted by the executive authorities. The assumptions which form the basis of project formulation, quantification of cost, anticipated benefits, cash flow tables, computation of internal rate of return or benefit cost ratio, as may be applicable, availability of inputs, determination of demand, utilisation of assets are looked into. The adequacy of feasibility investigations conducted is critically reviewed to see that it conforms to the prescribed norms and procedures. Value for money audit invariably includes a comment whether the anticipated benefit-cost ratio/rate of return was achieved and if not, the reasons which led to its non-achievement.
17.3. Value for money audit is directed towards the examination of the systems, procedures, planning, implementation, operational performance and monitoring of public works and projects. The system of invitation of bids, evaluation of tenders, award of contracts and their actual functioning are investigated. Cases of non-performance of contracts, abandonment of works, disputes with contractors and their settlement, incomplete works, delays in execution and cost and time over-run are critically reviewed. Post-contract developments, extra contractual payments, award of additional work not originally included in the contract, cases of extra, substituted or additional items of work, variations in quantities and price variation claims are areas of special concern both in regard to their necessity and justification and the methods / basis of computation of rates for payments to contractors.
17.4. The SAI of India is not associated with the evaluation of tenders which is essentially an executive function. However, the award of contracts per se is critically examined, in regard to general and special conditions which might have been stipulated by the contractors and the money value placed upon them. Any undervaluation of the conditions leading to the award of contract to the contractor, who is not the lowest is commented. The implications of any unusual conditions which might have been stipulated by the contractor are also brought out in relation to the extra expenditure involved.
17.5. The SAI of India does not as a matter of routine conduct an audit of the design of public works and projects mainly because of lack of sufficient capabilities for the purpose, but nevetheless, occasionally comments upon cases of faulty designs which might have led to failure of projects or avoidable extra expenditure. In this, reliance is placed on the internal investigations done by the departments involved or by other independent agencies. The comments made by different authorities at various stages of project approval are however carefully scrutinised to ensure that these are complied with and cases of wasteful, inefficient or irregular expenditure attributed to non-compliance are identified and reported.
17.6. The SATs scrutiny of estimates is however, more direct and estimates are critically examined to to see that they are realistic. In this context, both the computation of quantities and schedule of rates are looked into. Detailed examination of cost over-run is an integral part of the audit process to identify cases of insufficient investigation, incorrect computation of quantities or application of unrealistic rates. Where the tender priorities are vitiated because of incorrect estimation of quantities, the effect of such incorrect estimation by way of extra expenditure attributable to award of contract to the lowest tenderer based on incorrect quantities is commented.
17.7. Public works and projects have a long gestation period. Prolongation of construction period not merely delays the realisation of anticipated returns and benefits but may also involve cost over-run because of rising prices. Timely completion of projects is thus an area of essential concern in value for money audit and all cases of time over-runs are critically examined for the reasons for delay in completion, inadequacies in the planning, monitoring and review mechanisms as well as financial implications by way of increased cost. Project construction schedules, the PERT chart or any other monitoring machanism is critically reviewed. In view of the interrelated nature of the multiplicity of activities involved, the sequencing of operations and completion of various segments of the project is examined for optimisation to see that out-of-sequence, unplanned completion of various stages does not result in idle investment.
17.8. Effectiveness audit is directed towards verification of the extent to which the expected results have been achieved from the expenditure incurred on public works and projects. This goes beyond the mere creation of the intended asset or facility to its utilisation and achievement of the intended objectives. Thus, in the case of an irrigation project, it is not enough that the project is completed or that the envisioned irrigation potential is created but also whether the potential is utilised and results in increased crop production. This involves the examination of adequacy and timeliness of upstream and downstream infrastructure to bridge the gap between creation of irrigation potential and its utilisation. Similarly in the case of power projects, it is not enough that the power plant is actually established, but also that it generates the extent of power for which it was set up and the power so generated is evacuated. SAI of India has commented upon the negative impact of some projects, e.g. by way of rise in sub-soil water level leading to water logging. SAI of India has also commented upon the rehabilitation of project affected people, whether the measures were adequate, whether the rehabilitation sites were properly selected, developed and provided necessary infrastructure and whether the project affected people were actually rehabilitated therein.
17.9. In large projects, where the department procures equipment for hiring out to the contractors, the planning or procurement of equipment is subject to detailed audit scrutiny. This involves not merely an examination as to whether the equipment has been procured at the most competitive rates, but also whether various types of equipment are procured in quantities which are necessary as well as mutually compatible. Utilisation of equipment, fuel consumption and fixation of rates for recovery of user charges form the contractors are also looked into by audit. Audit of the procurement of materials involves examination of assessment of requirements, placement of purchase orders, storage, consumption, utilisation and cost recovery from the contractors. The actual consumption of materials is checked against theoretical consumption based on norms and adjustments for variations are linked with payments made to contractors for finished items of work.
17.10. Operation, maintenance and utilisation of assets is an essential area of concern for the SAL Governments have prescribed norms of operation and maintenance expenditure for different types of assets. SAI examines the adequacy of these norms and whether funds are in fact allocated and utilised for operation and maintenance with reference to the norms. Cases of under-provisioning are considered as objectionable as over-provisioning, as inadequate maintenance can result in distress of the project and its destruction. SAI has looked into the adequacy of soil conservation measures in the catchment areas of major irrigation projects which are threatened with a drastic reduction in their lives because of extensive siltation. SAI also comments on the adequacy of utilisation of created assets like the irrigation projects, hydro electric projects and the measures taken for bridging the gap between irrigation potential and actual irrigation. Instances of abandoned projects, incomplete projects and projects which because of inadequate maintenance or otherwise have ceased to be productive are commented by the SAI.
17.11. Not having technical expertise in engineering, the SAI of India has a system of close collaboration with the Chief Technical Examiner of the government. Copies of the reports of the Chief Technical Examiner are received by the SAI for scrutiny and further examination from audit and financial angles of the construction and other irregularities pointed out by the Chief Technical Examiner. The SAI also has a system of obtaining the views of the Chief Technical Examiner on comments/cases intended for inclusion in the Audit Report, where its technical advice is considered necessary to formulate or substantiate a comment or to critically examine the view point of the project authority. The SAI also examines the quality control procedures of the project authorities, whether these are in place and implemented and whether adequate follow-up action is taken on the recommendations of quality control units.
17.12. Computers are not used at present to any significant extent in the Public Works Division mainly because of the scattered nature of transactions. SAI of India recognises that audit in EDP environment will also involve expression of an opinion on the development of computer applications for the accurate and reliable processing and analysis, including controls. This may require the SAI to adapt audit the procedures and practices to the computer based system and to review:
18.1. Audit of contractor parastatals is conducted in three stages: supplementary or test audit of accounts to ensure that there is full disclosure and accountability and that the accounts represent true and fair view of the state of affairs of the parastatal; phase audit when the different units of parastatal are taken up for audit for test check of records related to selected transactions and performance appraisal. For performance appraisals, Audit Boards are constituted by the SAI and they work under its supervision. On these Audit Boards, two part- time members are appointed by the administrative Ministry in consultation with and with the concurrence of the SAI according to their technical knowledge, experience and expertise in the area'of operation of the parastatal. These part-time members are very closely associated with all stages of appraisal and are of special assistance in analysing areas where technical knowledge is required. Appraisals of parastatals are finalised only after discussions with the individual managements and the ministries.
18.2. In the context of the parastatals functioning as contractors, the emphasis is on the verification of the competitiveness of the parastatal, the number of bids entered, the number of successful bids as well as the successful completion of the works awarded to the parastatal. The SAI examines the working of the parastatals from the time of submission of bids to the award of works and their execution involving procurement of machinery, material, deployment of manpower, sub-contracting, etc., as well as the overall financial results and the return obtained by the parastatal from the work executed by it. All cases of loss or short realisation of anticipated profits are critically reviewed by the S AI and deficiencies like incorrect bidding, over-deployment of resources, managerial inefficiencies, are commented upon.
18.3. It should be noted that the organisation of work in the Indian Audit and Accounts Department is such that Audit teams deputed for the audit of parastatals are from one Wing, while another set of Audit team deputed from a different Wing may be entrusted with the audit of the accounts of the department or authority which is the owner of the work awarded to the parastatal as a contractor. The SAI is thus in the unusual position of being the auditor of the contractor as well as the client, yet two audits proceed, by and large, independently.
19.1. With its well-developed standards, systems and procedures of audit, SAI of India has special arrangements with the funding agencies in regard to audit of foreign-assisted projects. While the funding agencies may have a system of technical and physical oversight of the execution of the public works and projects assisted by them, in so far as financial audit is concerned, they place reliance on the Audit Certificate issued by the SAI of India. This is entirely in conformity with the Constitutional provision according to which all government expenditure shall be audited by the Comptroller and Auditor-General of India to the exclusion of any other agency. The SAI of India thus issues integrated Audit Certificates on the annual accounts and statements of expenditure of the foreign-assisted projects.
19.2. The annual accounts which are certified are the annual expenditure staements related to government acccounts in respect of projects executed by government departments. If any further details are required, these are furnished by the project authorities. Audit is conducted according to the standards and regulations of the Comptroller and Auditor-General of India and encompasses such tests of accounting records, internal checks and other auditing procedures as are necessary to confirm that the resources were used for the purposes of the project and that the expenditure statements are correct and represent a true and fair view of the implementation of the project. The Audit Certificate is issued in the proper printed letterhead and signed by an officer not below the rank of Audit Manager. The Audit Certificate also indicates, in brief, the amounts held under objection in relation to wanting vouchers, approvals, misclassifications, defalcations, overpayments, etc. that came to the notice of the SAI.
The audit of privately-funded public projects is an emerging area of concern for the SAL There may be no direct government expenditure on these projects, but they involve use of government resources and often result in creation of monopolies in favour of private parties. The State may act only as facilitator but the terms and conditions involving risk sharing, pricing, accountability, profit remittance assume importance. As private investment is permitted into public works and projects, SAI has to ensure that proper policy guidelines and procedures are put in place by government and the award of works to private investors is in conformity with those guidelines. SAI has also to ensure that appropriate regulatory mechanism is established for the proper functioning of privately-owned public utilities and review its performance. This is expected to be a major area of concern in the coming years.
21.1. Although cost recovery is a matter of considerable importance, particularly in the context of scarcity of resources, the SAI of India has not examined, in detail, the basis of fixation of user charges. It has been felt that this is a matter of government policy which may be dictated by several extra-financial considerations such as subsidisation of input cost with a view to maintaining low output cost, user capacity for payment, provision of basic essential services at low cost and so on. Generally speaking, SAI satisfies itself that the rules and procedures are designed to secure an effective check on the assessment, collection and proper allocation of revenue and are being implemented in practice. The peripatetic audit teams deputed by the SAI periodically examine the basic records maintained in the departmental offices in order to verify that the user charges are properly assessed, based upon the applicable laws and the rules, efficiently collected and brought to account and where necessary, allocated to the various agencies.
21.2. SAI of India comments not merely upon short levy or over-collection of user charges, but also leakages, by comparing the total supplies of services generated with their distribution. SAI also comments upon the outstanding dues from the users and looks into the failures and weaknesses of the system which have resulted in accumulation of overdues. While the emphasis is on system-based approach, individual transactions are examined for detection of possible infractions leading to under-assessment or short collection or non-accounting of revenues. At the macro level, the working results of some of the major and medium irrigation projects are included in the Finance Accounts presented to the legislature. In the case of railways, the SATs reviews have commented on unremunerative lines, routes, short recoveries and cross-subsidies between different sectors of service users, etc. In the case of power utilities, the working results as affected by low tariffs, are commented.
22.1. The observations of Audit based on test-check of records are communicated to the project authorities and their superior authorities for compliance in the form of required Audit Notes, Inspection Reports, etc. Corrective remedial action by project authorities as a result of deficiencies pointed out by Audit helps in the prevention of irregularities or leads to economy in the future. The replies to audit observations explain the stand taken by the project authorities on the points raised by auditors. Such raising and pursuance of points is done on a continuous basis. After sufficient information has been gathered on the Audit points, important audit findings amongst them, are selected for inclusion in Audit Reports submitted to President/ Governor for presentation to the Parliament or the State Legislature. The audit observations may be included in the composite Audit Report or separate volumes of the Audit Report may be brought out in respect of major projects, as may be considered appropriate and necessary by the SAI. The Auditing Standards promulgated by the SAI of India require that the Audit Report should also be constructive, that the Report should include well thought-out and well articulated suggestions in broad terms for remedying the defects, deficiencies and weaknesses noticed.
22.2. The Audit Reports are primary documents serving the Legislature to assess the degree of accountability of the executive. The Constitution of India enjoins that the Reports shall be placed before the Legislature and thereafter they become public documents. Thereports are considered by the Committees of the Legislature with the assistance of audit authorities and evidenceis taken from the departmental officers on the deficiencies commented in the Audit Reports. After completion of examination, the Committees place their Reports along with their recommendations before the Legislature for further action by the government. The action-taken notes required to be furnished by the government departments provide an instrument of follow-up action taken on the recommendations of the Legislative Committees.
23.1. Effective audit of the public works and projects is handicapped by several problems and litnitations encountered by the SAL To be truly professional, the public works auditor is required not merely to be proficient in the techniques of auditing but should also possess a certain level of knowledge of the related engineering discipline. While the post-recruitment and in-service training programmes organised by the SAI enable the auditors to acquire sufficient knowledge of basic principles of audit and the applied methodologies in the audit of public works and projects, the lack of adequate knowledge of the related engineering discipline is a severe constraint. This problem has been resolved only to a limited extent in the case of parastatals where the mechanism of Audit Board provides representation of outside experts whose technical knowledge is of immense assistance to the SAI. In other cases, the SAI is left to devise its own solutions, but there are major difficulties because of the conflicting requirements of the SAI for experts in various fields and career aspirations of the experts which cannot perhaps adequately be met within the existing hierarchical structure.
23.2. A further limitation, which is peculiar to the SAI of India, is its absolute reliance upon documents to the total exclusion of evidence based upon physical and site inspections. While the auditors are encouraged to visit the project sites so as to gain a proper insight into the implementation of the project, the audit observations have necessarily to be based on the documents furnished to Audit. This calls for analytical skills and capabilities of a high order where the auditor has to take recourse to indirect and ingenious analysis of related records to frame his formulation, which may not be prima facie forthcoming.
23.3. Public works and projects have long gestation periods which, in the case of irrigation, hydro-electric projects may extend up to a decade or even more. The proper timing of audit for project appraisal, therefore, requires careful consideration. Audit has to reconcile the need for contemporaneous audit which can enable a mid-course corrective remedial action, with the progress of expenditure which must reach a particular level before meaningful audit comments can be offered. This is a delicate task and requires careful planning of audit of public works and projects.
23.4. There are other problems as well. While the inadequacy of project reports or feasibility reports must come in for several comments by audit, Audit can transcend the limitations of project reports or the feasibility reports only up to a stage. Audit also faces difficulties in testing the assumptions regarding demands, cost benefits, capacity of different equipment or plants and their synchronisation, etc. Absence of clarity in projections in some cases or the combination of a number of objectives without indicating their weight age or objectives which do not land themselves to precise quantification for evaluation in measurable terms, is a severe constraint in conducting value for money audit. Value for money audit may also be seriously affected by the absence of suitable informatiom system to measure the benefits flowing from the projects apart from the problems of Unking the physical progress with financial expenditure.