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The alleged embezzlement was unearthed during an internal audit in 2010-11 with the cashier Bichitrananda Mohanty failing to furnish details of the unspent money, the sources said.
Though Mohanty told audit officials that Rs 2,27,57,773 was unspent and in SBI and UCO bank accounts, on verification a balance of only Rs 37,23,16 was discovered.
It was found that money was withdrawn between April 1, 2010 and July 21, 2011 which not shown in the office cash registrar.
The audit officials had informed Panchayati Raj secretary P K Jena.
The district collector, directed by Jena made an inquiry and found the allegation true.
"After being directed to inquire I formed an inquiry committee which corroborated the report of auditors," Jajpur collector Anil Kumar Samal said.
The cashier has absconded, he said.