Today we conclude the topic of "Audit of Local Bodies" by discussing what the audit programme of an auditor of local bodies is like. We have already discussed: Local Bodies- A Background, Financial Administration of Local Bodies, and The objectives of Audit of Local Bodies in our earlier articles, you can use the respective links for further reference.

For a summary, here are some paragraphs from those articles.

Local bodies are institutions of the local self governance, which look after the administration of an area or small community such as villages, towns, or cities. The Local bodies in India are broadly classified into two categories.

The local bodies constituted for local planning, development and administration in the rural areas are referred as Rural Local Bodies (Panchayats) and in the urban areas are referred to as Urban Local Bodies (Municipalities).

The taxation powers of the corporations are confined to a few items and are of a generally compulsive nature; on the other hand the tax powers of the other types of urban local authorities cover a wider range, optional in nature and subject to a procedure for their imposition requiring the final sanction of the state governments. Municipal authorities are endowed with specific local functions covering

1. regulatory,
2. maintenance and
3. development activities.

As regards the financial administration of local bodies, we have discussed the 3 basic financial aspects of a local body, viz.

1. Budgetary Procedure
2. Expenditure Control
3. Accounting System

And here is a list of objectives of an audit of local bodies.

(a) reporting on the fairness of the content and presentation of financial statements;

(b) reporting upon the strengths and weaknesses of systems of financial control;

(c) reporting on the adherence to legal and/or administrative requirements;

(d) reporting upon whether value is being fully received on money spent; and

(e) detection and prevention of error, fraud and misuse of resources.

So, with that being said and done, let's begin today's topic.

The Audit Programme of An Auditor of Local Bodies

Ensuring Appointment

The power to appoint an auditor of local bodies mostly rests with the local fund audit wing of the state government. However, some bigger municipal corporations e.g. Delhi, Mumbai etc have power to appoint their own auditors for regular external audit. So, the first matter on the audit programme for an auditor is to see if he has been appointed by the correct authority.

Primary Objective of Audit

Next item on the audit programme is to identify the objectives of audit of that local body. Here is a short synopsis on the objectives. Alternately, you can read Objectives of Audit of a Local Body by using this link for further understanding.

The auditor while auditing the local bodies should report on the fairness of the contents and presentation of financial statements, the strengths and weaknesses of system of financial control, the adherence to legal and/or administrative requirements; whether value is being fully received on money spent. His objective should be to detect errors and fraud and misuse of resources.

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Checks Performed by Auditor

Apart from the regular audit programme routines of corporations, the auditor of a local body should perform a few additional checks. Let's discuss each check in brief.

Expenditures

The auditor should ensure that the expenditure incurred conforms to the relevant provisions of the law and is in accordance with the financial rules and regulations framed by the competent authority.

Sanctions

He should ensure that all types of sanctions, either special or general, accorded by the competent authority.

Provisions and Reserves

He should ensure that there is a provision of funds and the expenditure is incurred from the provision and the same has been authorized by the competent authority.

Projects and Investments

The auditor should check that the different schemes, programmes and projects, where large financial expenditure has been incurred, are running economically and getting the expected results.

Well, with this we conclude our topic on Audit of Local Bodies. We will continue our journey through special audits with a new topic "Audit of Non-governmental Organizations (NGOs)". Stay tuned for that.

Like always,if you have any concerns, doubts or suggestions, let me know. Just click on ask question at the left panel of the screen.