Internal control system is an integrated process by which an organisation governs its activities so as to give reasonable assurance for achieving the objectives of organisation. It consists of methods and policies designed to protect resources against loss due to waste, abuse and mismanagement. The Health Department was established with the primary objective of providing health care facilities. Evaluation of the internal control system in the department disclosed that Internal Control viz. financial control, expenditure control and operational control were not working and ineffective in the department. Budgetary control was poor as reflected in huge surrenders and savings. The Public Health programmes failed to deliver the intended benefit to the target population due to deficient implementation of the programmes. Internal audit mechanism was deficient as indicated by poor compliance to audit observations of internal audit wing and statutory audit. Monitoring and evaluation mechanism was non-existent in the department. Main audit findings are summarised below:

1. Budget estimates were not prepared on the basis of actual requirement which resulted into saving of Rs 1072.82 crore and lapse of Rs 497.16 crore during 2001-06.
2. 690 Drawing and Disbursing officers did not submit DC bills of Rs 136.43 crore during the year 2003-06 to AG (A&E). Only Rs 1.24 crore were utilised on purchase of medicines and equipments against available funds of Rs 10.06 crore provided under PMGY.
3. The expenditure of Rs 2.21 crore incurred on National Malaria Eradication Programme (NMEP) and control of Kalazar proved unfruitful due to non-spraying of DDT within prescribed time.
4. Internal audit observations containing monetary value of Rs 48.97 crore were noticed during 2001-06. Of this Rs 4.41 crore relates to defalcation, misappropriation and recovery. Paras involving Rs 0.04 crore only were settled during 2001-06.
5. The Department failed to properly monitor the execution of various schemes.