Para 3.7.17 — MSO (Audit)
Original Rule Text
3.7.17 It should be seen that the provisions contained in Chapters 8 and 9 and Appendices 8 and 9 of the General Financial Rules (Revised and Enlarged), 1963, and Schedule V of the Delegation of Financial Powers Rules, 1978, have been complied with.
- E. Local audit of contracts, bills for purchases, etc.
The following are the main types of cases that may be examined in local audit:
(i) Acceptances of tenders, including Rate/Running Contracts and Supply Orders.
(ii) Amendments to Acceptances of Tenders.
(iii) Contracts placed from India directly on suppliers in UK, USA and other overseas countries.
(iv) Contracts placed by Indian Missions and Trade Commissioners abroad (other than those in UK and USA).
(v) Timber Purchase Orders.
(vi) Office orders and other instructions issued by the Purchase Organisation on incidence of sales tax, excise duty, etc.
(vii) Disposal contracts.
(viii) Arbitration cases. 3.7.19 The following are some of the points that should be kept in view and examined in local audit:
(i) Whether, so far as can be ascertained from the purchase files, demands received from other indenting officers received at the relevant time were consolidated and bulked as far as possible to secure the advantage of lower prices for bulk supplies and, if so, whether the aggregate of the quantities ordered for the individual indentors in the contracts entered into for the purpose was in excess of the quantities actually indented and so consolidated.
(ii) Availability of sanction of the competent authority for effecting purchases on the basis of a single tender or negotiations and of recorded reasons for resorting to this method of purchase.
(iii) Opening of all tenders on the due date and their authentication by the designated officer numbered and initialled with date by the officer opening them.
(iv) Availability on record of the comparative statement and whether it was verified with reference to the original tenders.
(v) Whether any tender received belatedly after the stipulated date had been included in the comparative statement and considered, and whether orders of the competent authority were obtained for doing so.
What This Means
The Audit Officer must verify compliance with the provisions in Chapters 8, 9 and related appendices of the General Financial Rules (1963) and Schedule V of the Delegation of Financial Powers Rules (1978). Additionally, during local audit, various types of cases must be examined including tender acceptances, rate/running contracts, supply orders, amendments, overseas contracts, timber purchase orders, disposal contracts, and arbitration cases. Para 3.7.19 lists detailed checks including whether demands were consolidated for bulk pricing, single-tender purchases had proper sanction, tenders were opened on time, lowest offers were accepted with recorded justification for any deviation, and government interests were protected in arbitration.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- 1Compliance with GFR Chapters 8 and 9 and Delegation of Financial Powers Rules must be verified
- 2Local audit covers tender acceptances, rate contracts, overseas contracts, disposal contracts, and arbitration
- 3Demands should be consolidated and bulked for bulk pricing advantages
- 4Lowest tender must be accepted unless adequate written justification exists for deviation
- 5Special conditions benefiting a tenderer over others must be examined for any hidden price increases
Practical Example
During local audit of a government department, the Audit Officer finds that a contract for office stationery was awarded to a firm that quoted Rs 2 lakhs more than the lowest bidder. The department justified the rejection of the lowest bid by citing the firm was 'untried.' The Audit Officer examines whether the department considered placing a trial order with the lower-priced firm, as required, and finds no such consideration was recorded. She quantifies the extra expenditure and includes it in her audit observations.
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 difference between a 'rate contract' and a 'running contract'?▼
Why must the Audit Officer check if demands were 'bulked'?▼
Can a belated tender be included in the comparative statement?▼
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.