1.31 Query: Ownership and place of maintenance of vouchers etc.
1. A company incorporated under the Companies Act, 1956, in wholly owned by the Central Government. It is a techno-financing institution for housing agencies in India. Besides, it has undertaken construction works pursuant to specific directions from its administrative ministry, Government of India. The company has sole responsibility to implement such construction projects out of its own funds, notwithstanding that the cost, plus the company’s administration charges, shall be recovered from the Government. For purposes of execution of construction works undertaken by it, the company has engaged a project management consultant (PMC). The PMC is broadly responsible for construction management, approval of expenditure and effecting payments pertaining to construction and also maintenance of accounts in respect thereof. Payments by the PMC are effected out of funds provided by the company to the PMC, in advance of such payments. Pursuant to predetermined arrangements, the PMC is required to forward to the company, at regular intervals, payment vouchers and supporting documents. Pursuant to the directions of board of directors of the company its internal audit department carries out concurrent audit of the accounts of construction works submitted by the PMC.
2. The querist has stated that presently documents submitted by the PMC to the company are photocopies only. Original documents are retained by the PMC on the plea that it is responsible for the entire project management including release of payments (though pre-financed by the company) and maintenance of accounts. The PMC is also accountable pursuant to the agreement as follows:
i) The project manager shall assist the company in preparing the draft replies to any queries raised by CTE/CVC during the contract period as defined in the agreement plus three months.
ii) The project manager shall maintain the project accounts and shall submit the audited accounts to the company on quarterly basis, within one month of the expiry of the quarter. The final project accounts, duly audited, shall be submitted within three months of completion of the project. The project manager shall extend assistance to the company in replying to audit queries during the contract period as defined in the agreement plus three months.
3. In view of the above the PMC assumes that its statutory auditors would insist on production of original vouchers and supporting documents. Whereas the querist is of the view that the payment vouchers and supporting documents in original be submitted by the PMC to the company with a view to:
a) Account for expenditure on construction works.
b) Carry out internal audit of supporting documents in an effective manner.
c) Produce on demand such vouchers to the statutory auditors assuming that the company and not the PMC is legally obliged to produce original documents to statutory auditors.
d) Produce to the government auditors such documents, assuming that they can insist on seeing original documents.
4. The querist has sought the opinion of the Expert Advisory Committee that whether payment vouchers and supporting documents in original should be retained by the project management consultant and only photocopies thereof be submitted to the company executing construction works for and on behalf of the administrative ministry or payment vouchers with supporting documents in original should be submitted to the company and only photocopies be retained by the project management consultant.
Opinion December 8, 1992
1. The Committee notes that section 209 of the Companies Act, 1956, requires, inter alia, that every company shall maintain at its registered office or at such other place as may be approved, proper books of account with regard to certain specific matters. Proper books of account include relevant vouchers etc., necessary to explain transactions recorded in the books.
2. The Committee also notes that although the agreement between the company and the project management consultant (PMC) stipulates that the PMC shall submit the audited project accounts to the company on quarterly basis, there seems to be no specific arrangement, requiring the PMC to also forward to the company payment vouchers and supporting documents, as mentioned by the querist in para 1 of the query.
3. The Committee is of the view that whether photocopies of the original expense vouchers forwarded by the project manager constitute proper vouchers would have to be considered on case to case basis. If the relevant expenses were incurred by the project manager in his own name and the primary liability to pay the related invoices was that of the project manager, the original expense vouchers/invoices should be kept by the project manager. It would be sufficient for the company to have a claim bill raised by the project manager for reimbursement, duly supported by the authenticated copies of the original expense vouchers. On the contrary, if it is the company in whose name the bills have been raised by the suppliers etc., to the project manager and the project manager is acting only as disbursing agent, the original payment vouchers should be kept by the company. A photocopy of the same may be retained by the project manager for his records.
4. On the basis of the above, the Committee is of the opinion that the original expense/payment vouchers should be kept either by the company or the project manager depending upon in whose name invoices have been raised and who is prima facie liable for making the payment. The other party may be provided with the authenticated copy of the relevant vouchers. _____________________________ |