Para 3.7.1 — MSO (Audit)
Original Rule Text
3.7.1 The responsibility for the conclusion of contracts for works to be done and supplies to be made and for enforcing them rests with the Executive. However, scrutiny of these contracts or agreements entered into by government servants on behalf of Government constitutes one of the important functions of audit. The objective of such a scrutiny is to see whether the contracts or agreements have led to loss or wastage of public money and also to ensure that the rules and regulations provide reasonable security against malpractices.
# General principles governing audit of contracts
What This Means
While the executive branch is responsible for entering into and enforcing contracts for works and supplies, the CAG's audit has an important role in scrutinizing these contracts. The audit objective is to determine whether contracts or agreements have resulted in loss or wastage of public money and to verify that the rules and regulations provide adequate safeguards against malpractices in the contracting process.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- 1Contract execution and enforcement is the executive's responsibility
- 2Audit scrutiny of contracts is one of CAG's important functions
- 3Audit checks whether contracts have led to loss or wastage of public money
- 4Audit also verifies that rules provide reasonable security against malpractices
- 5This covers contracts for both works (construction, etc.) and supplies (procurement)
- 6Audit does not interfere with contract decisions but reviews outcomes and compliance
Practical Example
The Public Works Department entered into a Rs 5 crore road construction contract. Audit scrutinized the contract and found that the contractor was given a 6-month time extension without invoking the liquidated damages clause, resulting in a loss of Rs 25 lakh to the government. Audit also noted that the contract lacked an escalation cap clause, exposing the government to unlimited price escalation risk — a gap in the rules providing security against malpractice.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
Can audit stop a contract from being executed?▼
What types of government contracts does this cover?▼
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.