The Finance Division of the Ministry of Defence is headed by the Secretary (Defence Finance)/Financial Adviser (Defence Services).The SDF/FADS is tasked with the exercising of financial control over the proposals involving expenditure from the Defence Budget and the Ministry of Defence (Civil) estimates, and with the responsibility for internal audit and accounting of the Defense Expenditure and expenditure from the Civil Estimates.Currently the Defence and Defence related Expenditure is about Rs.95,922 crores (2004-05),including the Civil Estimates ofaround Rs.16,000 crores comprising about Rs.11,000 crores towards Defense Pensions.In the task of internal audit and accounting, the Controller General of Defence Accounts (CGDA) assists the SDF/FADS.Defence planners currently face the task of reviewing programmes in the light of changes, which have taken place at the global level, as well as in the context of specific threats in our own region.The endeavour of the defence planners is to balance the minimum requirements of our Defence Forces and the need to modernize them, without unduly straining the national economy.

In 1776 a Military Department was created in the Supreme Government of the East India Company.  Over a period of twenty two decades, the Military Department underwent several changes.  The Charter Act of 1833 brought about a number of changes in the functioning of the Govt. of India.  The Secretariat of the Government was reorganized in four Departments, including a Military  Department.  In 1864, the Military Accounts Departments of the three Presidencies, viz Bengal, Bombay and Madras were merged with the Military Department.In order to bring about a closer association between the Administrative  Ministries and their Financial Advisers and to enable the latter to play a more effective and constructive role, Government had introduced the Scheme of Internal Financial Adviser, under which the Financial Advisers became a part and parcel of the Administrative Ministry, thereby enabling closer association in formulation and implementation of proposals.  In May 1976, the IFA system was introduced in the Deptt. of Defence Supplies and Defence Production.  The system was extended to the Department of Defence in 1983.  With this, the complete integration of the former Defence Division of the Ministry of Finance with the Defence Ministry was achieved

The  Ministry of  Defence  (Finance),  is  responsible  for  financial  scrutiny,  vetting,  advice and concurrence of all proposals of the Ministry of Defence, both from the Defence Service Estimates, and the Civil Estimates. The above role and functions are exercised through a hierarchical structure headed by the Financial Adviser (Defence Services) and officers of the Finance Division.  The SDF/ FADS is assisted by five Addl. Financial Advisers,  about 20 Directors/Dy.Financial Advisers, and  about 30 Assistant Finacial Advisers and 30 Sections.  On the Defence Acquisitions side, the SDF/ FADS is assisted by a Financial Adviser (Acquisitions), 3 Finance Managers, 3 Directors/ DFAs.  The AFAs/Sections are common to both Revenue and Capital side proposal examination/ vetting and scrutiny.

There is a separate Finance Division of the Raksha Mantralaya (Ministry of Defence) for dealing with all defence matters having a  financial bearing.  The head of this division is the Financial Adviser (Defence Services).

With a view to ensuring greater efficiency in administration and quicker disposal of the cases, Ministry of Defence has been delegated enhanced financial powers in regard to expenditure met from the Defence Services Estimates.  In matters within the delegated powers of the Ministry of Defence, Financial Adviser(Defence  Services)  or authorised Representatives of Finance Division    are to be consulted before exercise of financial powers.  In all matters beyond the powers delegated to the Ministry, the Finance Division functions as Associate Finance and is responsible to and have the right of access to the Ministry of Finance and to the Finance Minister through Secretary (Expenditure).  If any important change in the duties and functions of Finance Division or the Defence Accounts Department is contemplated, approval of the Finance Ministry is necessary.

The financial control exercised by the Finance Division is really a careful and intelligent scrutiny of all proposals involving expenditure from the public funds, the objective being the safeguarding of economy, efficiency and propriety in public finance.  Before according financial concurrence to any proposals involving fresh expenditure, it is the duty of the Finance Division to seek complete and comprehensive justification for the proposals.  The division   may even challenge the necessity for spending so much money or on such a scale to secure a given object.    In fact the Division may ask every question that might be expected from an intelligent taxpayer for obtaining best value for   money.  

The rules provide that no expenditure which has not been provided for in the Budget or which having been provided, has not been sanctioned shall be authorized without the concurrence of the Finance Division.  The strict observance of this rule is automatically ensured as the Controllers of Defence Accounts will not make any disbursement in respect of charges not covered by regulations or Government orders.  

The according of financial concurrence by the Finance Division of the Ministry of Defence falls generally in three, more or less, well defined stages –  

(1)    the examination of the proposal on its merits.

(2)   the  assessment of the financial effect.  

(3)   if  the proposal is accepted, the careful examination and vetting of the final orders before issue.

Sometimes two or more of these stages are combined, but all proposals having a financial bearing inevitably follow through this process.  This procedure ensures not only close and adequate control by Finance, but also enables them to give constructive suggestions and advice from the financial point of view at a fairly early stage of the consideration of a proposal.

The Finance Division   prepares the Defence Budget and the Civil   estimates for the Civilian Establishments of the Ministry of Defence.   It  also furnishes the Heads of the Branches of the Armed Forces Headquarters and Heads of Civilian Deptts./Organisations  with all information necessary    to enable them to discharge their financial responsibilities in respect of the grants allotted to them and advises them in regard to the preparation of proposals and the disposal of financial business generally.  Finance Division is also fully associated with formulation and implementation of Defence Plans. 

The Financial Adviser (Defence Services) is assisted by Financial Adviser (Acquisition) and  3 Finance Managers and  3 Directors with corresponding staff, for processing Capital Acquisition cases of the Armed Forces of the Union .  On the Revenue Expenditure sides, FA(DS) is assisted by  5 Addl. Financial Advisers, and about 22 Directors/Deputy Financial Advisers along with corresponding complement of   Assistant   Financial Advisers and Sections to carry out the examination, scrutiny, vetting and concurrence   of all proposals of the Defence Services Estimates and the Civil Estimates of the Ministry of Defence having a Financial implication. 

In addition to these functions, the FA(DS) is also the Chief  Accounting Officer for Defence Services.  It is in this capacity that he prepares the Appropriation Accounts for the Defence Services Expenditure,  and  this responsibility is discharged through the Controller General of Defence Accounts

Defence Accounts Department, with the Controller General of Defence Accounts at its head, functions under the administrative control of the Financial Adviser (Defence Services).  The duties of the Defence Accounts Department are broadly  audit, payment and accounting of all charges pertaining to the Armed Forces, including bills for supplies and services rendered and for construction/repair works, pay and  allowances miscellaneous charges, pensions, etc.  The Department is also responsible for the audit of cash and stores account kept  by the various units and formations (including arsenals, workshops and storage depots) in the three services and maintenance of pay accounts of Army Officers and combatants of Army.  The manufacturing accounts of Ordnance factories and the Naval Dockyard and the store accounts of the Ordnance factories are also kept by the Defence Accounts Department.  They also maintain Accounts relating to works services and audit the construction and other accounts relating to works project maintained by Military Engineer Services. In addition to the duties mentioned above, the Controller of  Defence Accounts function as Local Financial Advisers to the General Officers Commanding-in-Chief of Commands, Area Commanders, etc.

The Defence Accounts Department comes under the Ministry of  Defence with the Controller General of  Defence Accounts as the Head of the Department.  The organization of the Defence Accounts Department corresponds broadly to the organization of the three Services.  In addition, it also caters for the Ordnance Factories.  Defence Research & Development Organisation, the Canteen Store Department, the Coast Guard, the Border Roads Organisation and Inter-Service Organisations under the Ministry of  Defence.

The field organization of the department dealing with the Army has been structured by and large on the pattern of Army Commands/Areas.  The location of these Controller Offices is in close proximity to the Command Headquarters/Area Headquarters in order to enable them to render prompt services to the units/formations located in these areas.  Under some of the Controllers’ offices, there are also Area Accounts Offices to render prompt services to the Sub-Areas.  In addition, there are Local Audit Offices to audit  the accounts of the units and formations and one Unit Accountants (AAO) is attached to each Garrison Engineer.   The Pay Accounts Offices (JCOS/Ors) are also under the jurisdiction of the nearest Regional Controller.  In all there are 12 Regional Controllers.  In addition, one Controller of Defence Accounts at Pune specifically deals with the pay and allowances of the Commissioned officers.

The remaining Controllers’ Office are patterned to serve a particular Service or function except for CDA (Headquarters) at Delhi which covers all the Services, Inter-Services Organisations and the Ministry of Defence.  The Principal Controller of Defence Accounts covering  the Navy is located at Bombay .  In the case of the Air Force, there are two Controller of Defence Accounts, one Principal Controller at Dehra Dun covering all the Commands and field areas and one Controller at New Delhi covering the units located in Delhi including Air Headquarters.  The Defence Research & Development Organisation has expanded considerably and there are a number of projects being handled by the Defence Laboratories.  Accordingly, there is a Principal Controller for R&D at New  Delhi and one Controller each at Bangalore and Hyderabad   to deal with all matters connected with the R&D Organisation with regional Joint Controller of R&D functioning at  Pune, Dehradun and Balasore.  For the Canteen Stores Department, the Controller is located at Bombay .  Similarly one Controller is separately established at Delhi for Border Roads.

The organization of the Ordnance Factories has 39 Factories under the Ordnance Factories Board.  The entire payments, accounting,  internal audit and  financial advice functions for these factories is looked after by the Chief Controller of Finance & Accounts (Factories) at Kolkata.  A Controller of Accounts in the Headquarters and ten Controllers (Fys) located alongside major Ordnance and Clothing  Factories assist him.  This complex accounts set up is a highly specialized segment of the department dealing with the cost accounts of the Ordnance and Clothing Factories.

The pension establishment of  Defence has been growing substantially.  Consequently, the responsibility of the department to determine the entitlement and make prompt payments of pensions has increased.  In order to handle this complex task, there is a Chief Controller of Defence Accounts located at Allahabad to deal with the sanctions of pensions in respect of the Service personnel (excluding Air Force and Navy personnel  which are sanctioned by CDA (Air Force) and CDA (Navy) respectively ) defence civilians and the staff of the Defence Accounts Department.  He is assisted by a Controller of Defence Accounts in the Main Office.  In addition, there is a Controller at Meerut dealing with the disbursement of pensions through 49 Defence Pension Disbursing Offices (DPDOs) located in various States.  11 DPDOs also function under the CDA (Chenai), who is responsible for disbursement of pension in four Southern States.

The General Provident Fund Accounts of the civilian personnel of the Army as well as the staff of the Defence Accounts Department are maintained by the Joint Controller  of Defence Accounts (Funds) who functions under the administrative control of CDA (Army), Meerut    The  GPF Accounts of other defence civilians are maintained by the concerned functional Controllers such as Controllers of Finance & Accounts (Fys),  Controller of Defence Accounts (R&D), CDA(Navy) and CDA (Border Roads).  In addition, there is a Controller of Defence Accounts (Training) at Meerut to take care of the training requirements of the personnel of the department.

The Principal Controller of Defence Accounts  (Headquarters) New Delhi deals with the pay and allowances, traveling allowance claims and fund accounts of civilian staff of Ministry of Defence, the Army and Navy Headquarters and the Inter-Services Organisations located at Delhi.  Claims pertaining to contingent and miscellaneous charges of the above said organizations are also dealt with by this Controller.  In addition, this Controller also handles all work relating to payments of foreign contracts including contracts entered into by the Department of Defence supply, payments for purchases made by Army Purchase Organisation and  the work relating to London Account Current.