CHAPTER –III

INTERNAL CONTROL IN A GOVERNMENT DEPARTMENT

WATER RESOURCES DEPARTMENT

3 Internal Control in Water Resources Department

Highlights
Internal control is an integral component of an organization’s
management processes, which are established in order to provide
reasonable assurance that its operations are carried out effectively and
efficiently, financial reports and operational data are reliable and the
applicable laws and regulations are complied with so as to achieve
organizational objectives. The Government of India has prescribed
comprehensive instructions for maintenance of internal control in
Government departments through Rule 64 of the General Financial Rules
2005. A review of internal controls in the Water Resources Department
has revealed the following:
Due to deficiencies in expenditure control, there was excess expenditure of
Rs 7.78 crore over the allotments issued by the Engineer-in-Chief.
(Paragraph 3.5.3)
Due to non-compliance with State Treasury Rules, lapsed deposits worth
Rs 24.90 lakh were not credited to Government account.
(Paragraph 3.6)
Due to deficiencies in assessing requirements while framing estimates,
there was excess expenditure of Rs 1.91 crore.
(Paragraph 3.7.7)
Due to deficiencies in enforcing terms of agreement, additional security
deposit and royalty were not deducted resulting in undue aid to
contractors.
(Paragraph 3.7.9 and 3.7.10)
There was non-compliance with provisions relating to quality control tests
in works amounting to Rs 1.43 crore.
(Paragraph 3.8.2)

3.1 Introduction
Internal controls in an organisation are meant to give reasonable assurance that
its operations are carried out according to the prescribed rules and regulations
and in an economical, efficient and effective manner.
The Water Resources Department (WRD) is responsible for managing the
water resources of the State, primarily through the creation and maintenance
of major, medium and minor irrigation projects. The department has six major
projects, 32 medium projects and 2,242 minor projects in Chhattisgarh. Of
Audit Report (Civil and Commercial) for the year ended 31 March 2009

these, five major, seven medium and 471 minor projects have been completed
and the remaining are under progress. The department has also identified
(June 2005) 595 locations for construction of anicuts1 across various rivers for
the purpose of ground water recharging and assistance in agriculture. As of
March 2009, 61 anicuts worth Rs 74.89 crore have been constructed and the
work of another 153 anicuts worth Rs 387 crore is under progress.
The department maintains the headworks2 and also undertakes major
maintenance of canals. The minor and routine repairs of canals are done by
Water Users Associations3.

3.2 Organisational Setup

The department is headed by a Principal Secretary/Secretary to the
Government of Chhattisgarh. The Engineer-in-Chief (E-in-C) is the head of
the department and is assisted by four Chief Engineers (CEs). There are 11
circles headed by Superintending Engineers (SE) who supervise 62 divisions
headed by Executive Engineers (EE). A chart of the organisational structure of
the department is given in Appendix-3.1.

3.3 Audit Objectives

The review of internal controls has been conducted to test compliance with the
Chhattisgarh Financial Rules, the Works Department Manual (WD Manual),
the State Treasury Code and the Central Public Works Accounts Code (CPWA
Code) for accounting functions. The arrangements for monitoring, evaluation
and internal audit have also been examined.

3.4 Audit Coverage and Methodology

The office of the E-in-C and two4 out of four CEs were selected. Under each
of the two selected CE’s offices, one SE’s office each5 was selected. The
office of the SE, (Electrical/Mechanical), Raipur was also selected. Under
each of the two selected SE’s offices, 50 per cent of the divisions i.e. three
divisions each6 were selected. The sample was discussed with the Secretary,
WRD and other officers of the department during the entry conference on 13
March 2009 and mutually agreed upon. On the Secretary’s suggestion, one
ground water survey division7 was also selected. The selection was made by
Simple Random Sampling Without Replacement (SRSWOR). The selected
units were reviewed for the period from 2006-07 to 2008-09. The
methodology used was scrutiny of records and files of the selected divisions/

1
Barriers across a river to enable storage of water for dry season.
2
Works undertaken at the site of storage of water such as reservoirs, dams, anicuts
etc.
3
Associations of farmers, responsible for equitable distribution of water and
collection of water rates.
4
CEs, Minimata Bango Project, Bilaspur and Mahanadi Reservoir Project, Raipur.
5
SE’s, Indravati Project Circle, Jagdalpur and Minimata Dam Circle, Kharsia.
6
Minimata Bango (MMB), Canal Division No 4, Dabhara, Tribal Development Pilot
Project (TDPP), Jagdalpur, Water Resources Division, Kanker, Minimata Bango,
Canal Division No. 5, Kharsia, Water Resources Division, Kondagaon and Minimata
Bango, Canal Division No. 6, Sakti.
7
Senior Geohydrologist, Ground Water Survey Division No. 9, Bilaspur.

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 Chapter-III Internal Control

offices. The objectives and scope of the review were explained to the
Secretary during the entry conference. The exit conference for the review was
held on 26 August 2009 with the Secretary, during which all the findings were
discussed.

Audit Findings

3.5 Compliance with financial rules and Works Department

Manual relating to budgetary and expenditure control
3.5.1 Persistent savings in expenditure
The budget provisions of the department are available under six grants8. The
details of budget provisions, allotments and expenditure during the period
2006-07 to 2008-09 are given below:

Table-3.1: Year-wise budget provision, expenditure and savings

(Rupees in crore)
Year Budget Expenditure Savings (percentage)
provision
2006-07 914.43 759.21 155.22 (16.97)
2007-08 965.33 861.83 103.50 (10.72)
2008-09 1090.34 1008.11 82.23 (7.54 )
Total 2970.10 2629.15 340.95
(Source: Appropriation Accounts)
It was observed that the savings were high at around 17 per cent in 2006-07
but showed a decreasing trend subsequently. The E-in-C attributed (March and
September 2009) the savings to delays in obtaining administrative approval for
new projects/schemes, local problems/issues that arose from time to time,
incomplete construction work due to the rainy season and the imposition of the
model code of conduct during the general elections of 2008.
The Government stated during the exit conference that the general instructions
in the budget manual may not be adequate at all times in view of the special
nature and functions of the department and decided that some department
specific guidelines would be drawn up regarding framing of the budget and
supplementary estimates, taking into consideration the feasibility of the
projects, realistic projection of works, time assigned for execution, status of
ongoing works etc.
3.5.2 Surrender of funds after the prescribed dates
According to Clause 4.155 of the Manual, surrender of funds to the
Government should ordinarily be made by 15 February and in any case upto
15 March. For surrenders beyond the prescribed date, an explanation had to be
given by the concerned offices as to why they could not foreseen earlier.
The E-in-C surrendered unutilised funds worth Rs 118.54 crore after 15 March
during the period 2006-07 to 2008-09 as shown in Appendix-3.2. The letters
proposing surrenders sent by the E-in-C to the Government did not contain

8
23 (WRD), 41 (Tribal Area Sub-Plan i.e. TSP), 45 (Minor Irrigation Works), 57
(Externally Aided Projects pertaining to WRD), 64 (Special Component Plan for
Scheduled Castes) and 75 (NABARD Aided Project pertaining to WRD).

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 Audit Report (Civil and Commercial) for the year ended 31 March 2009

any explanation as to why the surrenders were not foreseen prior to the
prescribed date. Thus, timely surrenders were not made as envisaged in the
Manual which limited the scope of the Government to provide the surrendered
funds to other departments. During the exit conference, the Government
agreed to issue directions for recording justifications for surrenders made after
15 March for the concerned financial year.
3.5.3 Excess expenditure over allotment
After the budgetary provisions are approved through the Appropriation Bill,
the E-in-C allots funds, head-wise, to the CEs, who in turn allot them to the
divisions. The expenditure is to be monitored regularly to ensure that there is
no excess over the allotments.
Lack of
control
It was observed that in respect of three grants, there was excess expenditure
resulted in over allotments, amounting to Rs 7.78 crore, as shown in Appendix-3.3. The
excess excesses indicated shortcomings in the monitoring and control of expenditure.
expenditure During the exit conference, the Government took serious note of such cases
of Rs 7.78 and decided to review all the cases and to call for explanation from the
crore over
allotment
concerned officials.
3.5.4 Non-receipt of security deposit for custody of cash
Rule 282 of the Chhattisgarh Financial Code provides that every cashier,
storekeeper and other subordinate, who is entrusted with the custody of cash,
stores or other valuables, is required to deposit security except in exceptional
cases as specified by Government.
Scrutiny of records in the test-checked units revealed that out of the 51
officials handling cash/stores, none had made any security deposits except for
two officials, one under SE, Electrical and Mechanical Circle, Raipur (SE,
E/M Circle, Raipur) and one under SE, Indravati Project Circle, Jagdalpur as
detailed in Appendix-3.4.
During the exit conference, the Government directed that security deposits
should be recovered from all the cashiers as per the rule.

3.6 Compliance with State Treasury Rules

Lapsed deposits not credited to the Government Account
According to Para 562 of the Chhattisgarh Treasury Code, deposits which
remain unclaimed for more than three complete accounting years, should be
credited to Government revenue under ‘Lapsed Deposits’.
During scrutiny of records of seven divisions, it was observed that in three9
Lapsed
deposits not
divisions, a total amount of Rs 24.90 lakh was outstanding (between
credited to December 1954 to July 2002) under the deposit head for more than three
the Govern- years. It was, therefore, evident that the divisions were not taking requisite
ment action for crediting the lapsed deposits to the Government account and the
account amounts were being retained in the public account at the cost of State revenue.
In two10 other divisions, the deposit registers were not produced to Audit
although as per the monthly accounts of March 2009, Rs 1.15 crore and

9
WRD Kanker, MMB Dn. No. 5 Kharsia and TDPP, Division, Jagdalpur.
10
WRD Kondagaon and MMB Dn. No.6 Sakti.

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 Chapter-III Internal Control

Rs 13.57 lakh were shown under the deposit head. In the absence of the said
registers, the exact amount of lapsed deposits could not be ascertained. MMB,
Dn. No.4 Dabhara did not have any case of lapsed deposits while EE, WRD,
Kondagaon stated (April 2009) that the register would be furnished after
updating but could not furnish it to Audit. During the exit conference, the
Government agreed to review all lapsed deposits in the divisions so that the
amounts could be credited to revenue.

3.7 Internal control activities

Under the internal control activities, compliance to the Manual, CPWA Code
and related instructions dealing with all operational activities of the
department were scrutinized. The findings are discussed in the succeeding
paragraphs.

Accounting activities
3.7.1 Amounts outstanding in suspense accounts
As per para 13.2.1 and 22.4.10 of the CPWA Code, the divisions were
required to maintain Cash Settlement Suspense Accounts (CSSA) and
Material Purchase Settlement Suspense Accounts (MPSSA) with item-wise
details. The operation of these suspense heads were dispensed w.e.f. 1983 and
1984 respectively but old outstanding balances were required to be reconciled
and cleared.
The balances under MPSSA represented amounts which were payable for
materials procured on credit from other divisions. The balances under CSSA
represented amounts receivable from other divisions for materials supplied on
credit. These heads were operated to ensure inter-divisional adjustments and
served as a control against loss/pilferage of stock.
Three11 of the test-checked divisions had old balances of Rs 52.85 lakh under
Long MPSSA and Rs 25.70 lakh under CSSA. It was observed that the divisions did
pending
not have any item-wise break-up of these balances which were outstanding for
balances
under periods from 1969-70 to 1999-2000. In the absence of the item-wise break-
suspense ups, it would be difficult to clear these balances and the problem would get
heads not further compounded with the passage of time. During the exit conference, the
cleared Government agreed that such old outstanding balances which were pending in
many divisions should be settled once and for all.
3.7.2 Miscellaneous Public Works Advances
According to Para 13.4.1 of the CPWA Code, (i) sale on credit (ii) expenditure
incurred on deposit works in excess of deposits received (iii) losses,
retrenchments, errors, etc. and (iv) other items are recorded under the head
‘Miscellaneous Public Works Advance’ (MPWA).
Huge
outstanding The items under this head are cleared either by cash recovery or by transfer to
balances some other head of account. A sum of Rs 7.58 crore was outstanding under
under MPWA in the test-checked divisions from March 1954 as shown at
MPWA
11
MPSSA: WRD, Kanker and MMB Dn. No. 6 Sakti; CSSA: TDPP, Jagdalpur and
WRD Kanker. Other four test-checked divisions did not have any outstanding
balances.

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 Audit Report (Civil and Commercial) for the year ended 31 March 2009

Appendix-3.5(i). Detailed scrutiny of the pending amount of Rs 5.47 crore in

three divisions showed that Rs 68.58 lakh was pending against departmental
officials and Rs 4.79 crore was pending against contractors as detailed in
Appendix-3.5 (ii).
EE, MMB Canal Dn. No-6 Sakti replied (May 2009) that action was being
taken to adjust the amounts. EE, WRD, Kondagaon replied (April 2009) that
the amount under MPWA would be adjusted after receiving explanations from
the concerned officials and EE, WRD, Kanker replied (April 2009) that the
amount would be adjusted after receipt of allotment.
Adequate action had not been taken by the three divisions to clear the amounts
either by cash recovery or by booking under the proper head. During the exit
conference, the Government took a serious view of the items outstanding
under MPWA and as a first corrective measure, decided that it would instruct
every division to adjust the amounts under MPWA for the last three years.
3.7.3 Works Abstract Registers not maintained
As per Para 10.5.1 of the CPWA Code, an account of all the transactions
relating to a work during a month should be prepared by the Divisional Officer
in the Works Abstract Register. The register should record the final charges,
advances to contractors and other entities and contingent charges to monitor
the adjustment of all types of advances made for a particular work.
Scrutiny (April and May 2009) of divisional records revealed that in four12
divisions, the register was not maintained and there was no assurance that all
advances made for execution of works were adjusted. During the exit
conference, the Government stated that due to shortage of staff, these registers
were not being maintained and agreed to explore the possibility of developing
a software for divisional records which would reduce the requirement of
maintaining multiple registers.
3.7.4 Non-reconciliation of cheques and remittances
Para 22.3.1 of the CPWA Code provides that each divisional officer should
reconcile with the treasury, the encashment of cheques issued and remittances
to the bank. A reconciliation statement should, thereafter, be prepared in Form
51. Reconciliation is a critical control which ensures that all receipts have
actually been remitted to the Government account and that there is no scope of
encashment of cheques by manipulating the amounts after the cheques have
been issued by the divisions.
It was observed that out of seven divisions, only two viz. MMB Dn. No.4
Non- Dabhara and MMB, Dn.No.5 Kharsia, prepared the Statements in Form 51
reconciliation upto March 2009, while the remaining divisions were in arrears ranging
of cheques between 3 to 51 months. Moreover, there were significant differences between
issued and
the department’s and the Treasury’s figures to the tune of Rs 2.37 crore in
amounts
remitted into cheques and Rs 4.47 crore in remittances as detailed in Appendix-3.6. During
treasury the exit conference, the Government agreed that Form-51 should be kept up to
date and stated that preparation of the form would also be included in the
proposed computerisation project.

12
MMB, Dn.No. 4 Dabhara, MMB, Dn.No.5, Kharsia, WRD Kondagaon and MMB Dn.
No.6 Sakti.

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 Chapter-III Internal Control

3.7.5 Non-submission of accounts by Water Users Associations

The Chhattisgarh Sinchai Prabhandhan me Krishakon ki Bhagidari Adhiniyam
2006 (Act) was notified in May 2006 for adequate maintenance of the
irrigation systems, efficient and economical utilisation and equitable
distribution of water among users by Water Users Associations (WUAs).
Test check of records of six13 divisions revealed that WUAs were paid grants
of Rs 94.93 lakh during 2006-09 as shown below:
Table-3.2: Statement showing disbursement to WUAs
(Rs in lakh)
Sl. Name of division Year Total
No. 2006-07 2007-08 2008-09
1. WRD, Kanker 2.77 9.54 7.89 20.20
2. MMB, Dn. No-4 Dabhara - 18.99 14.50 33.49
3. MMB, Dn. No-6 Sakti - 6.37 5.50 11.87
4. MMB, Dn. No-5 Kharsia 7.00 6.37 5.50 18.87
5. TDPP, Jagdalpur 1.23 3.77 2.87 7.87
6. WRD, Kondagaon - 2.63 - 2.63
Total 11.00 47.67 36.26 94.93
(Source: Information supplied by department and compiled by Audit)
Neither accounts for utilisation of the amounts nor details of maintenance
works executed were submitted by the WUAs to the divisions. On this being
pointed out, replies were received from five divisions. Two14 of the divisions
confirmed that no accounts or records had been presented by the WUAs.
One15 division stated that the Government had not given any directions for
receipt of accounts or records of the associations. The remaining
two16divisions stated that the accounts would get audited if the expenditure/
turnover was more than Rs 10 lakh and that they would take action to get the
accounts from the WUAs. It was stated in the exit conference that while the
Act said that the WUAs should get their accounts audited, it was silent about
submitting the same to the EEs concerned.
The replies and discussions indicate that there is lack of clarity on the records
required to be maintained and submitted by the WUAs to the divisions.

Execution of work without approval of competent authority

The department prescribed the delegation of powers for various items of work.
In three out of the seven test-checked divisions, it was observed that there
were instances where the delegations were not being properly adhered to.
3.7.6 Award of multiple piece works without approval from SE
Departmental instructions provide that survey works can be executed through
labour contractors on piece work basis. For each piece work, estimates are to
be prepared and approved by the competent authority. However, approval of
the SE is essential before issuing the work order. One work can be awarded to

13
The Seventh test-checked division i.e. Ground Water Survey Division No. 9, Bilaspur
did not have any WUAs.
14
MMB, Dn. No. 4 Dabhara and WRD, Kondagaon.
15
TDPP, Jagdalpur.
16
WRD, Kanker and MMB, Dn. No.6 Sakti.

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 Audit Report (Civil and Commercial) for the year ended 31 March 2009

one contractor at a time and the concerned contractor is eligible for further
piece work only after completion of the earlier piece work allotted to them.
Three17 test-checked divisions entered into 16 piece work agreements
Piece
amounting to Rs 43.14 lakh. Executive Engineer, WRD, Kondagaon awarded
works four piece works to the same contractor within the same month i.e. February
awarded 2009. EE, WRD, Kanker awarded (February 2009) five piece works to a
without single contractor within a span of four days and awarded (January and March
permission 2009) another four works to another two contractors within a span of one and
of SE
a half months. EE, TDPP, Jagdalpur awarded three piece works to a single
contractor on the same day. Allotment of multiple orders to the same
contractor without ensuring completion of the earlier works allotted to them,
was in contravention of the existing instructions. Details are given in
Appendix-3.7. Moreover, in these cases, while the administrative approval and
technical sanctions were obtained from the CE, the requisite prior approvals of
the SE before issue of the work orders were not available on record.
This matter was discussed during the exit conference and the department
agreed with the audit observation and stated that instructions would be
reiterated to all divisions for compliance.

Shortcomings in assessment and tendering

3.7.7 Incorrect assessment resulted in excess expenditure of Rs 1.91 crore
Scrutiny of records of EE, MMB, Dn.No 6 Sakti revealed that the Government
had accepted two item rate tenders for construction of 20 km of cement
concrete lining of Sakti Branch Canal from RD18 0 to 11000 m and 11000 to
20000 m. Both the estimates involved 13 items including Cohesive Non-
Swelling Soil (CNS). Details of the two agreements are given below:

Table-3.3: Details of agreements

1. Agreement No. 9DL/05-06 10DL/05-06

2. Reach RD 0 to 11,000 metres RD 11,000 to 20,000
metres
3.Total estimated value of Rs 1,024.50 lakh Rs 843.86 lakh
work
4. Total estimated value of Rs 178.28 lakh (17.40 per Rs 206.68 lakh (24.49 per
CNS cent of estimated value) cent of estimated value)
5. Estimated quantity of 88,987 cum 1,15,455 cum
CNS
6. Estimated rate of CNS Rs 200.35 per cum Rs 179.02 per cum
7. Lowest tender 13.67 per cent below 17.57 per cent below
percentage schedule of rates schedule of rates
8. Estimated rate of CNS Rs 153.91 Rs 170.37
reduced by overall
tender per cent
9. Rate quoted by L1 Rs 80 Rs 21
contractor for CNS
(Source: compiled from MMB canal Dn.No.6, Sakti)

17
TDPP, Jagdalpur ,WRD, Kanker and WRD, Kondagaon.
18
RD : ‘Reduced distance’ which is a unit for measuring distance in canals.

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 Chapter-III Internal Control

It was observed that though CNS was projected in both the estimates as one of
the main components, it was not executed at all in either of the contracts
because the entire construction was through areas of non-expansive soil where
CNS layers were not required. It was evident that the projection and
assessment of the tenders and agreements on the basis of the price quoted for
CNS was incorrect. It can be seen from item nine of the table above that the
two contractors quoted very low rates for CNS work, which enabled them to
become L1 i.e. the lowest tenderers. If the EE had assessed the requirements
correctly and excluded CNS from the estimates, two other contractors who had
quoted lesser rates for other components would have become L1 and the
works would have been completed at a lower cost. Consequently, Government
incurred excess expenditure of Rs 1.91 crore on the two works as detailed in
Appendix-3.8.
During the exit conference, the Government decided that the non-execution of
CNS work against such a large estimated quantity was a serious issue and both
the tenders would be re-examined to ascertain whether there was any
manipulation in the estimates.

Deficiencies in enforcing terms of agreement

3.7.8 Inadequate provisions in agreements to ensure that steel and cement
had been procured from authorised companies
The Government decided (May 2002) that instead of receiving supplies of
cement and steel from them, contractors would have to procure cement
directly from factories with daily production capacities of 450 metric tonnes of
cement and steel from the Steel Authority of India Limited, its authorized
primary retailers or the Tata Iron and Steel Company. The circular also
directed that the tender documents should specify the type and grade of
cement to be procured, with IS19 numbers and dates.
Scrutiny of records of nine agreements of the three20 test-checked divisions
Inadequate
provisions in
under CE, MRP, Raipur showed that the provisions were included in the
agreements for relevant clauses of the agreements. However, it was not mentioned in the
procurement of agreement that the contractors were required to submit proof of procurement
steel and of cement and steel from the approved companies. Consequently, none of the
cement by contractors submitted any proof that the cement and steel used in their
contractors
construction work was procured from the prescribed companies only. In
another 12 agreements of three21 divisions under CE, MMB, Bilaspur, there
was a condition in the notes to the tenders that proof of despatch for
procurement of steel had to be produced. Consequently, in 10 agreements, the
proof of procurement from the prescribed companies was available in the form
of purchase invoices submitted by the contractors, while the proof was not
available in the remaining two agreements.
Thus, the instructions of the Government were being interpreted differently by
the two CEs. During the exit conference, the Government agreed to issue

19
It is a certificate issued under Indian Standards Certification act regarding quality.
20
TDPP Jagdalpur ,WRD Kanker and WRD Kondagaon.
21
MMB Dn. No.4-Dabhara, MMB Dn. No.5 Kharsia and MMB Dn. No.6 Sakti.

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 Audit Report (Civil and Commercial) for the year ended 31 March 2009

instructions to standardise the agreement clause which would prescribe the

documents required to be provided by the contractors.
3.7.9 Undue aid to contractors by not deducting additional security
deposit
In NITs issued for item rate tenders, ‘Schedule G’ is appended showing the
quantities and rates for the various items of work required to be executed.
Departmental instructions provide that in cases where unbalanced rates22 are
quoted in item rate tenders, a revised ‘Schedule G’ has to be included in the
agreement containing a list of all items, quantities, the rates quoted by the
contractor and the estimated rate plus/minus the overall tender percentage.
Wherever the rates quoted are higher than the estimated rate plus/minus tender
percentage, payment has to be made at the latter rate and the difference has to
be withheld as additional security deposit. The revised Schedule ‘G’ should
also mention the manner in which the withheld amount has to be released.
Additional It was observed that in the cases of two item rate tenders, additional security
security deposit of Rs 30.97 lakh was not deducted by the EE, Tribal Development
deposit not
deducted Pilot Project Division Jagdalpur (EE, TDPP Dn. Jagdalpur) and EE, WRD
Kanker as per the revised ‘Schedule ‘G’ as detailed in Appendix-3.9.
Similarly, in earthwork to remodel and provide a cement concrete lining for
Mandhar Branch Canal from RD 16000 M to RD 32860 by EE, Water
Management Division No.1, Raipur (Agmt. No.8DL/07-08) with a contract
value of Rs 6.14 crore, the revised Schedule 'G' was not attached to the
agreement and additional security deposit of Rs 30.97 lakh on unbalanced
items was not deducted.
These cases indicated that unbalanced tenders were not being regulated in the
manner prescribed by the Government. During the exit conference, the
Government stated that action would be taken against the defaulting divisions
for the cases cited by Audit and instructions would be reissued to all divisions
regarding deductions of additional security deposit.
3.7.10 Non-deduction of royalty of Rs 26.32 lakh from contractors
Departmental instructions provide that contractors are required to produce
royalty payment certificates for use of minor minerals in works executed by
them. In case the contractors fail to produce the certificates, the amount of
royalty payable has to be deducted from the payments made to them.
Royalty of It was observed that in seven agreements, royalty paid certificates were not
Rs 26.32 available on record but the divisions had not deducted any royalty charges as
lakh was
not per the instructions of department. Rupees 26.32 lakh was due from the
deducted concerned contractors. Details are given in Appendix-3.10.
from
contractors
On this being pointed out by Audit, EE, MMB, Dn. No. 4 Dabhara replied
(May 2009) that the contractors would be asked to submit royalty certificates
or else the amount would be deducted from their final bills or security
deposits. EE, WRD, Kanker replied (April 2009) that royalty would be
adjusted from the security deposits. During the exit conference, the
22
If the quoted rate of an item in an item rate tender is more than the estimated rate
plus or minus the overall tender percentage, then the tender will be called an item
rate tender with unbalanced rates.

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 Chapter-III Internal Control

Government stated that instructions would be issued to all divisions for

ensuring deduction of royalty as per rules.

Inventory Control
3.7.11 Non-maintenance of stock records
As per para 4.082 of the WD Manual, physical verification of stores is to be
conducted once in a year. Para 4.073 of the manual also envisages that as soon
as stores articles become unserviceable, a survey report should be prepared
and the stores disposed of after sanction from the competent authority. Para
4.083 of the Manual envisages that all articles of stock which are not likely to
be required during the following 12 months should be reported by the Sub-
Divisional Officer to the EE who, if necessary, would take the SE’s orders for
their disposal.
It was observed that in three23 out of seven test-checked divisions, the stock
position as per the monthly accounts was ‘nil’. The position of stock in the
remaining four divisions is given below:
Table-3.4: Division-wise position of stock
(Rupees in lakh)
Sl. Name of division Value of stock as per monthly
No. account
1. EE, WRD Kanker 60.74
2. EE, MMB Dn. No. 5 Kharsia 46.95
3. EE, MMB Dn. No. 6 Sakti 125.81
4. EE, TDPP Dn. Jagdalpur 3.92
Total 237.42
(Source: Information supplied by department and compiled by Audit)

Stock The total outstanding balance in case of four divisions was Rs 2.37 crore. It
records not was observed that EE, TDPP, Dn. Jagdalpur maintained full stock records, EE,
maintained MMB, Dn.No. 5 Kharsia had a list of stock items of only Rs 1.59 lakh and
for stores
there was no explanation for the balance stock of Rs 2.32 crore carried
valued at
Rs 2.32 forward in the monthly accounts.
crore EE, WRD, Kanker and EE, MMB Dn. No. 6, Sakti did not maintain any stock
register and there was no record regarding the large quantity of stock indicated
in the monthly accounts. Consequently, there was no way to ascertain how
much physical stock actually existed in these divisions against the amounts
shown.
On this being pointed out, EE, WRD, Kanker replied (April 2009) that the
stock of Rs 60.74 lakh pertained to the period prior to 2000. The stock records
had been seized by the Economic Offences Wing in 1996-97 and it was not
possible to maintain any record thereafter. EE, MMB Dn. No. 5, Kharsia
replied (May 2009) that as the transactions were old, reconciliation would
require minute examination which would require time. EE, MMB Dn. No. 6,
Sakti replied (May 2009) that the verification of stock was being taken up with
the SDOs concerned.

23
Ground Water Survey Dn. No. 9 Bilaspur, MMB Dn. No.4 Dabhara and WRD,
Kondagaon.

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 Audit Report (Civil and Commercial) for the year ended 31 March 2009

It is evident that a special drive is required to verify available physical stock,

in order to segregate serviceable and unserviceable items and also to reconcile
them with the account figures of stock. During the exit conference, the
Government agreed to take corrective measures in the divisions and get the old
stock reviewed to declare unserviceable items and utilise whatever stock
remained usable.

Administrative control
3.7.12 Deficiencies in manpower deployment
The deployment of EEs in the office of the E-in-C and CEs is detailed below:
Table-3.5 : Staff position in the cadre of EEs as on March 2009
Sl. Name of Office Sanctioned Working Excess
No. strength of strength
EE (Civil)
1.Engineer-in-Chief 5 10 5
2.CE, Mahanadi Godavari Basin, 5 7 2
Raipur
3. CE, Hasdeo Bango Basin, 7 9 2
Bilaspur
4. CE, Mahanadi Reservoir Project, 7 10 3
Raipur
5. CE, Minimata Bango Project, 6 8 2
Bilaspur
Total 30 44 14
(Source: Information supplied by E-in-C and compiled by Audit)

Fourteen While the table indicates that 14 EEs were posted in excess of the sanctioned
EEs posted strength in the offices of the E-in-C and CEs, it was observed that 15 Assistant
in excess of Engineers (AEs) were holding the higher charge of EEs in 1524 divisions. The
sanctioned department should reconsider equitable deployment of manpower in order to
strength in ensure that posts of higher responsibilities such as those of EEs are not
E-in-C and
CE offices
manned by AEs, especially when EEs are available and posted in excess in the
offices of the E-in-C and CEs.
Scrutiny of the sanctioned strength and deployment under CE, MRP, Raipur
revealed that the distribution of staff was not uniform as detailed in the table
below:

24
(i)WRD Dn. Baikunthpur (ii) WRD Kharang Dn. Bilaspur (iii) MMB Dn. No. 4
Dabhara (iv) Tandula Dn. Durg (v)WRD Dn. Janjgir (vi) WRD Dn. Jashpur (vii)
WRD Dn. Kanker (viii) WRD Dn. Kawardha (ix) WRD Dn. Kota (x) Maniyari WRD
Dn. Mungeli (xi) WRD Dn. Pendra road (xii) WM Dn. 1 Raipur (xiii) WM Dn. Rudri
(xiv) Dam Dn. No. 2 Rudri (xv) WRD, Dn. Surajpur.

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Table-3.6 : Deployment of AEs and Assistants’ Grade-II as on March

2009
Sl. Name of In AE cadre In Assistant Grade-II cadre
No. office Sanctioned Working Excess Vacant Sanctioned Working Excess Vacant
1. CE, MRP, 6 16 10 -- 08 16 08 --
Raipur
2. SE, 43 31 -- 12 50 44 -- 6
Indravati
Project
Circle,
Jagdalpur
3. SE, MMB 20 23 03 -- 25 27 02 --
Dam Circle,
Rudri
4. SE, 27 42 15 -- 34 44 10 --
Mahandi
Circle,
Raipur
Total 96 112 28 12 117 131 20 06
(Source: Information supplied by CE, MRP and compiled by Audit)
The table indicates that 28 posts of AEs were in excess of sanctioned strength
in the SE’s and CE’s offices. On the other hand, there were vacancies of 12
posts of AEs in the office of the SE, Indravati Project Circle, Jagdalpur.
Similarly, 20 posts in the cadre of Assistant Grade-II were in excess of the
sanctioned strength in the two25 SE and one26 CE offices but six posts were
vacant in the office of the SE, Indravati Project Circle, Jagdalpur. The
department should examine the deployment of manpower to remove the
existing imbalances.
Similarly, under the MMB project, Bilaspur, 80 AEs were working against the
sanction of 84, whereas 132 Assistants, Grade-II were working against the
sanction of 109 posts. During the exit conference, the Government agreed to
review the deployment of personnel in various cadres.
3.7.13 Payment of salaries to officials working in other offices
Six officials During scrutiny of records, it was observed that six officials in two27 divisions
on divisional were drawing salaries from the divisions but were working in offices of other
pay rolls departments for the last three to five years as detailed in Appendix-3.11.
were serving
in other The EE, WRD, Kondagaon stated (April 2009) that correspondence was being
departments initiated to recall the officials. This was required to be done expeditiously as
the office of the EE, WRD was paying the salaries of these officials without
getting the benefit of their services. The officials were required to either be
reverted or alternatively, transferred or placed on deputation to the concerned
offices/departments. During the exit conference, the Government stated that it
would examine the cases.

25
Mahanadi Circle, Raipur and MMB Dam Circle, Rudri.
26
MRP, Raipur.
27
Ground Water Survey Dn. 9 Bilaspur and WRD, Kondagaon.

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 Audit Report (Civil and Commercial) for the year ended 31 March 2009

3.8 Monitoring including internal audit

3.8.1 Non-establishment of Internal Audit wing
Internal audit is an important instrument to examine and evaluate compliance
with the department’s rules and procedures. No Internal Audit wing had been
established in the department since the formation of the State. During the exit
conference, the Government stated that the feasibility of starting an Internal
Audit wing would be examined.
3.8.2 Quality control test reports not available for works costing
Rs 1.43 crore
According to Para 6.001 of the WD Manual, quality control is necessary for
safety, reliability and durability of structures. It was observed that in three28
works executed for Rs 1.43 crore, the quality control test reports were not
available on record.
On this being pointed out, EE, TDPP Division, Jagdalpur stated (April 2009)
that quality control tests were not done due to shortage of staff and machinery.
The EE, WRD, Kanker stated (April 2009) that a suitable amount had been
deducted from the contractor’s bill. However, regardless of the deduction
made from contractor, in the absence of quality control tests, it was not
possible to have an assurance that the works had been carried out with
adherence to standards of safety, reliability and durability as envisaged by the
Government. During, the exit conference, the Government stated that shortage
of staff was not an acceptable reason for not carrying out quality control tests
and show cause notices would be issued to the erring officials.
3.8.3 Non-compliance of provisions of WD Manual on annual inspection
Paras 5.006, 8.016 and 8.018 of the WD Manual prescribe the periodical
inspections to be carried out by officers at various levels. It further provides
that a yearly and four-yearly programme for inspection of works should be
framed by each inspecting officer and entered in a programme registers, which
would also be used to note the dates of inspection.
Programme During scrutiny of the records of CE, SE and EE offices, it was observed that
register for the prescribed programme register was not being maintained in any of these
inspection offices. On this being pointed out by Audit, the departmental officers replied
not that inspections were being carried out on a regular basis and furnished copies
maintained of inspection reports. While inspections were indeed being carried out, in the
absence of the programme registers, it was not possible to ascertain whether
they were being done as per the prescribed frequencies. During the exit
conference, the Government stated that the requisite registers would be
maintained.
3.8.4 Lack of response to Statutory Audit
The Accountant General (Audit), Chhattisgarh arranges to conduct periodical
inspections of the department and divisional offices. The audit findings are
communicated through Inspection Reports to the Heads of

28
(i) Construction of structures under Kosorteda Project by TDPP Dn. Jagdalpur.
(ii) Construction of Dudhawa RBC and structures ch 270 to 390 by WRD, Kanker
(iii) Construction of Dudhawa RBC and structures ch 390 to 530 by WRD, Kanker.

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Offices/Departments for compliance and necessary rectification of

deficiencies pointed out.
Outstanding As on March 2009, 1,992 audit paragraphs relating to 517 Inspection Reports
audit paras issued from 1994 to January 2009 were awaiting settlement. (The department
not settled should take proactive steps to settle pending audit paragraphs to strengthen the
accountability mechanism). During the exit conference, the Government stated
that regular Audit Committee meetings would be conducted to discuss and
take requisite action on the paras.

3.9 Conclusion
The review of the internal control mechanism in the Water Resources
Department revealed that there were persistent savings and instances of excess
expenditure over the allotments given by the Engineer-in-Chief. Amounts
were pending for settlement under suspense heads. There were instances of
non-reconciliation of cheques and remittances, deficiencies in preparation of
works abstract registers and execution of work without approval of the
competent authorities. There were deficiencies in maintenance of stock
records and deployment of manpower. The department did not have an
Internal Audit wing, in the absence of which the extent of compliance with the
existing rules, procedures and instructions could not be monitored on a regular
basis.

3.10 Recommendations
It is recommended that the Department should
• identify and review lapsed deposits and credit the same to revenue,
• clear outstanding suspense balances through a special drive,
• examine the feasibility of computerising the maintenance of divisional
accounts and related registers,
• issue guidelines to all divisions prescribing regular returns from Water
User Associations,
• introduce a standard clause in agreements to confirm that contractors
have procured cement and steel from approved suppliers,
• review the deployment of manpower,
• consider setting up an Internal Audit wing in the department
• maintain programme registers of inspections to ensure that inspections
take place as per the prescribed frequencies and
• take proactive steps to settle pending audit paragraphs to strengthen the
accountability mechanism.

79