Para 3.13.20 — MSO (Audit)
Original Rule Text
3.13.20 In auditing the transactions connected with Sinking Funds regularly constituted for the redemption of loans raised by the Union and State Governments, Audit has to satisfy itself that credits to these Funds are in accordance with the undertakings given by Government and set forth in the prospectus of the loans and that payments are eventually utilised for the purpose for which the Funds themselves were created.
- Reserves and Reserve Funds
What This Means
When the Union or State Government creates a Sinking Fund to repay its own loans, audit must verify two things: that the money credited to the fund matches the repayment commitments stated in the loan prospectus, and that the fund's money is ultimately used only for the purpose it was created -- redeeming the loans.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- 1Sinking Funds are created by Union and State Governments for redemption of their own loans
- 2Credits to these funds must match undertakings given in the loan prospectus
- 3Payments from the fund must be used only for the purpose of debt redemption
- 4Audit must verify both the credits and the end-use of fund money
Practical Example
The Union Government issues market bonds worth Rs 10,000 crore with a prospectus promising annual Sinking Fund contributions of Rs 500 crore. During audit, the auditor checks whether Rs 500 crore was indeed credited to the fund each year and whether withdrawals from the fund were used only to buy back or redeem the bonds, not diverted to other government expenditure.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
What is the purpose of a Sinking Fund for government loans?▼
Where are the repayment commitments for a Sinking Fund documented?▼
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.