Hundi Collections, Unsigned Vouchers and a Pledged Fixed Deposit
Sri Lakshmi Narasimha Swamy Temple has an annual income of about Rs. 1.85 crore. Hundi collection averages Rs. 12 lakh a month and the temple has nine staff. The Executive Officer was appointed ten months ago. The internal audit for FY 2024-25 finds: (i) Rs. 8.40 lakh in 46 vouchers paid for annadanam and electrical repairs without work orders or measurement books; the vouchers bear the signature of the honorary treasurer, who is not authorised, and not the Executive Officer; (ii) Rs. 5.00 lakh cash was withdrawn from the temple current account on 12 March 2025 and redeposited on 31 March 2025; (iii) a fixed deposit of Rs. 30 lakh was pledged as security for a loan of Rs. 25 lakh taken by a trust run by the treasurer's family; (iv) the hundi opening register is not signed by two independent witnesses on 18 days. The Executive Officer says he inherited these practices and that the board ratified them. The Assistant Commissioner orders a special audit.
1. Identify the statutory and audit violations and explain who is responsible.
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The special auditor should classify the findings as procedural violations, financial irregularities and possible breach of trust. Vouchers signed only by the honorary treasurer are not valid authority for payment; the Executive Officer is the drawing and disbursing authority and must certify work. Absence of work orders and measurement books for Rs. 8.40 lakh means the expenditure is unsupported. The Rs. 5 lakh temporary withdrawal is diversion of temple funds; even if redeposited, it deprived the institution of use and may have facilitated a temporary accommodation.
Pledging the Rs. 30 lakh fixed deposit for a loan to the treasurer's family trust is ultra vires-temple property cannot be used as security for a private loan. Board ratification cannot cure an act beyond the board's powers. Under Section 17 of the Act, accounts are subject to audit; the Executive Officer cannot escape by saying he inherited the practice-he has a duty to report and stop it.
2. How should the special auditor treat the pledged fixed deposit and the temporary cash withdrawal?
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Treat the pledged fixed deposit as an immediate recovery item. Write to the bank to ascertain the lien, the loan account and the beneficiary; direct that the fixed deposit be released and, if the bank has adjusted it, recover the amount from the treasurer and the borrowing trust. The temporary withdrawal should be examined through the bank statement and cash book; if any interest or amount is missing, recover it with interest.
The auditor should issue a surcharge notice to the persons responsible after giving them an opportunity, and report to the Commissioner for action under the Act. The transaction should also be examined for criminal breach of trust if there is dishonest intention; audit cannot itself punish, but it must preserve evidence and recommend a police complaint where warranted.
3. Recommend internal controls and follow-up action to prevent recurrence.
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Immediate controls: (a) dual signatories for all payments and bank operations; (b) no cash withdrawal except by cheque or transfer with Executive Officer and trustee approval; (c) work orders, measurement books and photograph-based completion certificates; (d) hundi opening by a team including two independent witnesses, with a signed register; (e) monthly bank reconciliation and quarterly audit committee review; (f) fixed deposits in the institution's name with a standing instruction that no lien be created without the Commissioner's sanction; (g) vendor rotation and related-party disclosure.
The board should pass a resolution adopting these and the Executive Officer should place the audit report before the next board meeting. Persistent violations should lead to suspension and surcharge proceedings.