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Supreme Audit Institution of India

Comptroller and Auditor General of India

A brief introduction

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The Indian Audit and AccountsDepartment (IA&AD) is the SupremeAudit Institution of India, set up over 150years ago in 1860. We, the members ofthis service, assist the Comptroller andAuditor General of India in dischargingthe duties mandated to him by the

Constitution of India. In this booklet, wehave encapsulated the origins of ourorganisation, our vision and mission, ourduties, responsibilities and the work thatwe do.

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3

Who are we?

Our Vision, Mission and Core Values

A bit of history

Independent CAG in independent India

Our organisation

Whom do we audit?

The audit process

What are the types of audit we do?

The final product of the audit process

The Audit Reports

What happens to the Audit Reports?

Impact of our work

CAG a few misconceptions

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Contents

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7

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In the Indian polity, we, the Indian

Audit and Accounts Department

(also known as the Supreme Audit

Institution in the international

context) are an instrument for

ensuring accountabil ity. The

Constitution of India has mandated

us as the auditors to the nation.

In a democracy, those holding power and positions of responsibility must

be answerable for their action. The democratic state has a Social

Contract with the citizens and functions on behalf of the people. To

ensure that this contract is respected, a democracy provides for several

institutional mechanisms like the Judiciary, Vigilance bodies and an

independent Supreme Audit Institution (SAI). The Comptroller and

Auditor General of India (CAG) and the Indian Audit and AccountsDepartment (IAAD) functioning under him, constitute the Supreme Audit

Institution of India. Senior functionaries of the SAI representing the CAG

in the states are called Accountants General.

Who are we?1

5

The origin of auditing is as ancient as the

origin of organised governance. TheArthashastra provides detailed guidance on

the manner of accounting and the

verification of accounts. During the

medieval period, the mushrif and the

mustaufi performed the accounting and

auditing functions respectively.

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In the Indian system of governance, the policies set by the Parliament and

State Legislatures give the goals to be achieved through public spending.

These policies are translated into programmes and implemented byvarious departments of the government. For this, the Parliament sanctions

the budget which prescribes how Government will collect money through

taxes and how much and for which purposes it shall spend. There are also

financial rules which the Government departments and other public

bodies must follow when they receive and spend public money. The

spending departments are accountable to the Parliament for both the

quantity and quality of their expenditure. Articles 148 to 151 of the

Constitution prescribe a unique role for the Comptroller and Auditor

General of India in assisting the Parliament to enforce the said

accountability of the Government departments.

The SAI of India audits both Central and State Governments and also

maintains the accounts of the State Governments.

6

It's all in words.In the 15th century, the word Controller developed the

alternate spelling Comptroller as a result of an association between the first

part of the word, cont, and an unrelated word count and its variant compt.

Many people pronounce comptroller like controller but both are acceptable.

But the word Comptroller has a different meaning - someone who maintains

and audits business. Comptrollers are controllers but all controllers are not

comptrollers.

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7

The of SAI India represents what we aspire to becomevision

Our enunciates our current role and describes what we are

doing today

mission

Our are the guiding beacons for all that we do and give us

the benchmarks for assessing our performance

core values

Our Vision, Mission and Core Values

We strive to be a global leader and initiator of national and international

best practices in public sector auditing and accounting and recognised for

independent, credible, balanced and timely reporting on public finance and

governance.

Mandated by the Constitution of India, we promote accountability,

transparency and good governance through high quality auditing and

accounting and provide independent assurance to our stakeholders the

Legislature, the Executive and the Public that public funds are being used

efficiently and for the intended purposes.

n Independence

n Objectivity

n Integrity

n Reliability

n Professional Excellence

n Transparency

n Positive Approach

2

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Government audit in British India

The role of the CAG evolved through practice and tradition in British India.

Just prior to the mutiny of 1857, Lord Canning had initiated a major

administrative reorganisation. This led to the setting up of, for the first

time, in May 1858, a separate department with an Accountant General at

the helm. He was responsible for accounting and auditing of the financial

transactions under the East India Company. After the mutiny, the BritishCrown took over the administration of India and passed the Government

of India Act 1858.

This Act introduced a system of an annual budget of Imperial Income and

Expenditure in 1860. The budgeting system laid the foundation stone of

Imperial Audit. Sir Edward Drummond took charge in November 1860 as

the first Auditor General. The term Comptroller and Auditor General of

India was first used in 1884. Under the Montford Reforms of 1919, theAuditor General became independent of the Government. The

Government of India Act 1935 strengthened the position of the Auditor

General by providing for Provincial Auditors General in a federal set-up. Till

1947, when the last British Auditor General Sir Bertie Monro Staig handed

over the reins, the department remained an integral part of British

administration. Under various nomenclatures like the Accountant

General, the Auditor General and the Comptroller and Auditor General, it

provided unified accounting and auditing arrangements for the whole of

British India.

A bit of history

8

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9

Independent CAGin independent India

Personally speaking for myself, I am of the opinion that this dignitary or

officer is probably the most important officer in the Constitution of India. He

is the one man, who is going to see that the expenses voted by Parliament are

not exceeded or varied from what has been laid down by Parliament in what

is called the Appropriation Act. If this functionary is to carry out the duties -

and his duties, I submit are far more important than the duties even of the

Judiciary - he should have been certainly as independent as the Judiciary.

Dr. Ambedkar in the Constituent Assembly

Foreseeing the problems inherent in having an

auditor who is subordinate or open to pressure

by the Government in power, the framers of our

Constitution put in place several provisions in

Articles 148 to 151 to ensure that the CAG and

the officers of SAI of India are able to conduct

their work in an impartial and upright manner.Article 148 imbues the CAG with the immunities

from executive action accorded to a Supreme

Court Judge (making him independent of

Governmental and political influence). Articles

149 and 150 define his duties and powers. Article 151 prescribes that his

reports are to be submitted to the President/Governor and placed before

the respective legislatures (Lok Sabha or Vidhan Sabha).

Sh. V. Narhari Rao,the First Indian Comptroller

and Auditor General(1948 to 1954)

The Constitution enables the independent and unbiased nature of

audit by the CAG by providing:

Appointed by the President of India

Special procedure for removal (like a Supreme Court Judge)

Salary and expenses are Charged (not Voted)

Cannot hold any other Government office after his term expires

4

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Duties and powers of CAG

The duties of the CAG as defined by the DPC Act, 1971, are to audit and

report upon:

All receipts into and spending from the coffers (called the Consolidated

Fund) of the Union and State Governments.

All transactions relating to the Emergency

expenses (called Contingency Funds) andrelating to the monies of the public held by

the Government e.g. Postal savings, Vikas

Patras (called Public Accounts) at Central

as well as State levels

All trading, manufacturing, profit and loss

accounts, balance sheets and other

subsidiary accounts kept in any

Government department.

All stores and stock accounts of all

Government offices and departments.

Accounts of all Government companies

and Corporations e.g. ONGC, SAIL etc.

Accounts of all autonomous bodies and authorities receiving

Government money e.g. municipal bodies, IIM's, IIT's, State Health

societies.

Accounts of any body or authority on request of the President/Governor

or on his own initiative.Power to inspect any office or organisation subject to his audit.

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The DPC Act 1971

As envisaged in Article 149, the Parliament

enacted a detailed legislation in 1971 known asthe CAG's DPC (Duties, Powers and Conditions

of Service) Act. This Act lays down the service

conditions to secure the autonomous nature of

the CAG. It also gives him a wide mandate and

puts almost every spending, revenue collecting

or aid/grant receiving unit of the Government

under his audit domain.

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Power to call for any records, papers, documents from any audited

entity.

Power to decide the extent and manner of audit.

n

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Power to examine all transactions and question the executive.

11

The DPC Act also provides for compilation of accounts by the CAG. We

compile the accounts of State Governments from the subsidiary accounts

submitted by treasuries and other officers of the State Governments.

While compiling accounts, we do not just mechanically total up incomes

and expenditures but act as financial advisors. We raise an alarm if monies

are being drawn in excess of authorisation or if there are no supportingbills to an item of expenditure. We actively monitor expenditure patterns

and issue advice on excesses/surrenders/ lapses of funds. This ensures that

systemic corrections are made in time and acts as an important circuit

breaker that prevents frauds.

In 2007, the CAG has issued, under section 23 of the DPC Act, 'Regulations

on Audit and Accounts' which define in detail the scope, manner, and

extent of his auditing and accounting mandate

The infamous Bihar Fodder Scam was a result of chronic financial indiscipline

in the State Government treasuries which were notorious in not submitting

accounts or delaying them badly. Without the Treasury account or with

incomplete accounts, there was no way to know what was the total amount

spent under each grant. This helped a government department to draw huge

sums of money in excess of the authorisation from the Treasury for fodder,

medicines and other supplies to non-existent animal stock. The Dorandatreasury in Ranchi had withdrawn Rs.104 crore against a budget provision of

Rs. 74 crore! Each of the six government farms in Ranchi spent Rs. 20 crore

every year to feed pigs and cattle.

Since 1998, CAG has computerised compilation of accounts and has actively

assisted and guided the state treasuries in computerising their work so that

such overdrawals can be immediately detected and alert messages

generated.

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Our organisation5

The Comptroller and Auditors General

Indian Audit and Accounts Service

Shri V. Narhari Rao was the first CAG from 1948 to 1954. The CAGs after

him were Shri A K Chanda, Shri A K Roy, Shri S Ranganathan,

Shri A Baksi, Shri Gian Prakash, Shri T N Chaturvedi, Shri C G Somiah,

Shri V K Shunglu and Shri V N Kaul. Shri Vinod Rai is the present

incumbent.

At the top and middle

managerial level in the

SAI there are around 600

I n d i a n A u d i t a n d

Accounts Service (Group

A) officers. They are

either directly recruited

through the Civil Services

examination conducted

by the UPSC or inducted

by promotion from

Group B (supervisory staff). The directly recruited officers receive

foundation training at the Lal Bahadur Shastri National Academy of

Administration, Mussorie followed by professional training at the

National Academy of Audit & Accounts at Shimla and at premium

institutes like Indian Institute of Management, Institute of Public Finance

and Policy etc. All IA&AS officers receive extensive in-service training at the

National Academy at Shimla, at the Indian Institutes of Management and

at the International Centre for Information Systems and Audit (iCISA). The

IAAS officers are valued nationally and internationally for their multi

faceted experience in audit, accounts and financial management. Many of

them are in key positions in the Union ministries, UN organisations and

advisory positions with foreign Governments. Some officers have beenawarded the Prime Minister's Award for excellence in Public

Administration.

12

National Academy of Audit and Accounts, Shimla

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Subordinate cadres

Hall of fame: Excellence in other fields

Our total staff strength is approximately

50000. The gazetted supervisory cadre(Group B) consists of Senior Audit/

Accounts Officers, Audit Officers and

Assistant Audit/ Accounts Officers. They

may be directly recruited or promoted

from the lower cadres. Apart from this

there is support staff cadre (Group C). We

have a large network of Regional Training Institutes and Regional Training

centres to provide extensive induction and in service training to our staff.

Our hall of fame is filled with persons who

have worked in the Department and are

also acclaimed in diverse fields. To name

only a few, the Nobel LaureateDr. C.V. Raman spent his initial years as

Deputy Accountant General in the

Accountant General (AG) office in

Kolkata and Grammy award winner music

maestro Pt. Vishwa Mohan Bhatt had

worked in the AG office, Rajasthan.

Kathak danseuse Padmashri Shovana

Narayan has continued to blaze the stage while ably handling variousassignments in the Department and in the Government of India. Smt.

Malashri Prasad, an acclaimed Grade A singer of the All India Radio, is

currently the Additional Deputy Comptroller and Auditor General.

Cricketer Debashis Mohanty from AG Orissa and umpire Swaroop Kishen

from Delhi office have been representatives of our Department on the

international cricket arena. Kiran Khongsai, Gunbir Singh and Manoharan

are our international footballers from Kolkata office.

13

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The CAG Office

The office of the Comptroller and Auditor General in New Delhi directs,

monitors and controls all activities connected with audit, accounts and

entitlement functions of the Indian

Audit and Accounts Department. It

lays down the long term vision,

mission and goals of the SAI, India.

It also sets the policies, audit

standards and systems and does

the final processing and approval

of all Audit Reports.

The Deputy CAGs and additional

Deputy CAGs are the functional

heads reporting directly to the CAG. They are assisted by Directors

General, Principal Directors and Directors, who are all senior level

managers. A functional chart is shown below.

Comptroller and Auditor General

Deputy CAGs(Five)

Additional Deputy CAGs(Four)

Directors General / Principal Directors /

Directors (Hqrs)

HumanResources

InternationalRelations

AuditPolicy

Audit ofCentral

GovernmentDepartments

Audit ofCentral

CommercialBodies

Audit ofCentral

andState

Revenues

Audit ofLocal

Bodies

Accountingof

StateGovernments

Auditof State

Expenditures

Audit ofState

CommercialBodies

Audit ofCentral and

StateAutonomous

Bodies

Directors General / Principal

Directors / Directors (Hqrs)

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The different types of field offices in IA&AD

The field offices of the IA&AD carry out the audit for all the different

functions. There are following types of field offices:

Offices of the Accountants

General (Audit) in every State

are responsible for audit of all

receipts and expenditure of

the State government, audit of

Government companies,corporations and autonomous

bodies in the State. There are

57 AG Audit offices in India.

Besides, there are 29 offices of Accounts and Entitlements (A&E)

headed by Accountants General (A&E) engaged in maintaining

the accounts of the State Governments and authorising GPF and

pension payments of their employees.

Offices of the Principal Directors of Audit (28) are responsible for

audit of the activities of the Union Government, including Civil

Ministries and Departments, Defence, Indian Railways and Posts

and Telecommunications. We also have Overseas Audit Offices in

Washington, London and Kuala Lumpur for audit of embassies.

The Offices of the Member Audit Board (MAB) are responsible forthe audit of Central Public Sector undertakings. They certify the

annual accounts of the statutory corporations and conduct

Supplementary Audit of Government Companies.

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Organisation of a field office

A field office has an Accountant General or a Principal

Director at the helm. There are various functional

wings involved in different types of audit or

accounting functions such as works audit, civil audit,

commercial audit, works accounts, GPF, accounts,

pension etc. headed by middle level IA&AS officers

called Sr. Deputy Accountants General. There are

Audit Officers, Assistant Audit Officers or Accounts

Officers/Assistant Accounts Officers below them to supervise theAuditors, Accountants and Clerks constituting the supporting staff. The

structure of a typical audit office and an accounts office is shown below.

A typical field accounts office

Accountant General(Accounts and Entitlement)

Sr. Dy.Accountant General

(Administration)

Administration


(Accounts)

StateAccounts


(GPF)

General ProvidentFund of State Govt.

Employees


(Pension)

Pension of StateGovernmentEmployees

Accountant General(Audit)


(Administration)


(Expenditure Audit)


(Commercial Audit)


(Revenue Audit)

Administration Civil

Works

Local Bodies

StateCommercial Audit

State RevenueAudit

Central RevenueAudit

A typical field audit office

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The organisations subject to the audit of the SAI India are:-

All the Union and State Government departments including the

Indian Railways Defence and Posts and Telecommunications.

About 1500 public commercial enterprises controlled by the

Union and State governments, i.e. government companies and

corporations.

Around 400 non-commercialautonomous bodies and

a u tho r i t i e s ow ned o r

controlled by the Union or the

States.

Bodies and authorit ies

substantially financed from

Union or State finances.

Notable among these are

some of the local bodies and

Panchayati Raj Institutions

which are critical grass root

agencies for implementation

of developmental programmes and delivery of services

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Whom do we audit?

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The annual audit plan details the units to be audited during the year which

are selected after a risk assessment exercise. This plan is carried out

through quarterly audit programmes. The departments to be audited are

informed in advance. Field audit parties comprising Audit Officers and

Assistant Audit Officers conduct local inspection of records according to

the audit objectives. Our teams visit the audited entity and check all

financial and operational documents. Based on this they make queries and

obtain written replies of the department.

The audit process

Every audit office prepares an annual

audit plan based upon a long term

perspective plan to optimise the use

of its resources. We aim to cover

almost every spending unit of the

Government, at least once in three

years. However, we focus more

rigorously on areas which are riskprone. These are generally audited

annually. The various stages of the audit process are depicted in the flow

chart.

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7

Annual AuditReport

Inspection Report(IR)

Quarterly AuditProgramme

Draft Paragraphs(DPs)

Field Audit

CAGs AuditReports

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Thereafter, an Inspection

Report (IR) is prepared by a

field audit party and

finalised and issued by a

middle level IAAS officer

who monitors the audit

process. The IR is then

served to the audited entity.

It contains the preliminary

audit observations. This

gives an opportunity to theaudited entity to verify all

facts and figures and put

forth its views or to take corrective action. Where significant audit

observations remain unattended, we bring them to the notice of the

highest level of Government as Draft

Paragraphs (DPs). When either no

explanations are given or when the

explanations given are not substantiated,the cases feature in the annual Audit

Reports placed by the CAG before the

concerned Legislature. The Accountant

General monitors the entire process of

planning, execution and audit reporting

by a field office.

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AuditObjective

Fieldwork

Reporting

Analysis

Presentation

&

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What are the types of audit we do?

Depending upon the objective of audit, we can classify audits by the SAI

India into:

Compliance Audit

Financial Attest Audit

Performance Audit

Apart from these traditional audits, we have successfully

done a number of audits of Information Technology (IT)

Systems and on Environmental issues.

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Compliance audit

Compliance audit is often called a transaction audit in which some

selected transactions (for e.g. a purchase by a Medical Officer, a contract

executed by a Public Works Division for building a road or a tax assessment

order by an Assessment Officer) of an entity for a particular financial year

are chosen for examination.

20

Government rules require that a supplier of equipment will be paid onlywhen the office where it is to be installed, submits an installation report.

We found that expensive equipment purchased by Chhattisgarh Government

Health department had been paid for on the basis of installation reports

furnished by the supplier, instead of the receiving Chief Medical Officer.

While this may seem just a rule that was not followed, further investigation

showed that the installation reports were fake. We found that a local

supplier had appropriated the purchase orders addressed to a well known

firm and faked the invoices and letter heads of the firm to supply sub-

standard equipment.

8

Traditionally, auditors checking procedural adherence would use a red

pencil to underline all lapses - an image which endures - though auditing

techniques are highly evolved today.

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A compliance auditor would ask what has

been/ not been done in a transaction against

rule, sanction, provision and propriety. He

checks whether a transaction:

conforms to sanction/provision of

funds;

adheres to all rules and regulations;

adheres to the principles of financial

propriety, which go beyond mere

observation of rules.

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Financial Attest Audit

Financial statements are prepared by

departmentally run undertakings, statutory

corporations, Government Companies and

other autonomous bodies and authorities.

We certify how far the accounts are trueand fair i.e. whether the financial

statements (accounts) are properly

prepared, complete in all respects and are

presented with adequate disclosures.

In some cases, our financial Audit is a

supplementary audit with the primary

auditor usually being a Chartered Accountant.We also audit and certify the annual accounts of the Central and State

Governments.

21

Our reports on Central PSUs have found substantial discrepancies in the

accounts of many PSUs. We found that BSNL had overstated its profit for

two years by Rs 1,000 crore and Rs. 587.38 crore respectively.

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Our review of Governments flagship Health care scheme NRHM revealed a

sluggish fund-flow mechanism, especially in the states which have poor

health indicators. This has a cascading effect on development of

infrastructure at Primary and Community Health Centre levels. The

procurement and supply system of medicines in many states was plagued

with delays, poor stock management and poor quality control. In nine states,

not a single PHC/CHC test-checked had the requisite two month's buffer

stock of essential drugs/vaccines and contraceptives.

Performance audit

Performance audit does not

correspond to the traditional imageof auditing as a process centered on

'checking the books' to attest their

correctness. It seeks to establish at

what cost and to what degree the

policies, programmes and projects

are working. Performance Audit,

apart from asking whether things are

being done in the right way, goes a step further and analyses whether theright things are being done. In addition to all the financial audit checks,

the Performance Audit seeks to assess whether a programme, scheme or

activity deploys sound means to achieve its intended socio-economic

objectives.

A performance auditor would ask what should have been done to achieve

the objectives; how can we do things better and how to do better things.

Our review on the Farmers' relief package in Maharashtra found that the

Rs. 1075 crore package was not only tardily implemented but also left out a

large number of distressed farmers. The package addressed short term

relief measures like rescheduling of loans and grants for marriage, illness

etc. but failed to correct the root causes of indebtedness such as low

minimum support prices of cash crops and high cost of seeds, water and

electricity.

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23

To take up audit of computerised

systems and e-Governance

initiatives, the officers and staff of

IAAD are extens ive ly and

rigorously trained in auditing

information technology systems.

We also collect and analyse data

for our traditional (non IT sector)

audits. We have carried outaround 250 IT Audits till now,

pointing out not just deficiencies in the software but overall service

delivery issues in IT enabled systems.

The IT Audit initiative of SAI India has been awarded with Prime Minister's

Award for excellence in public administration in the year 2008.

Information Technology Audit

The IT Audit of E-governance in Andhra Pradesh revealed that key data and

huge volumes of cash pertaining to various departments linked with the

system were left to the administration of a private service provider without

adequate internal controls

IT audit of Land Records Computerization Systems in several States revealed

that the information fed was incomplete/full of errors. Therefore, they have

been unable to replace the manual systems despite putting in huge amount

of funds and resources.

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Environment Audit

Our department has done a number of performance audits on various

environmental issues in the past. This has been identified as an area of

specialised auditing and we are in the process of establishing an

international centre which shall provide training on environment audit

and conduct research on environmental issues and sustainable

development.

24

Social Audit

We are conscious that the general public has become much more

discerning and seek reports evaluating the performance of GovernmentSchemes. Since Civil Society Organisations have been conducting close

scrutiny of the implementation and outcomes of the schemes, we have

taken various initiatives to synergise our Audit Reports with these

organizations. The objective has been to muster the local knowledge and

competence of these civil society organizations for a better reach of the

formal audit process. Such social audits are being carried out for social

sector schemes such as in health, education, rural employment and water.

In our report on Management of Waste we raised question about flawed

waste policy in India which was directed only at 'waste disposal' and ignored

'waste recycling' and 'waste reuse'. We recommended that 'waste recycling

and reuse' should be incorporated as waste management strategies as they

have long term viability and are internationally accepted best practices.

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The final product ofthe audit process The Audit Reports

What do our Reports focus on?

An Audit Report contains the final, fully corroborated audit findings.

These may have been accepted by the department and/ or are proved

factually and are material enough to be

placed before the Legislature. The

objective of our audit is to bring aboutimprovement in the management and

conduct of government's activities and

programmes. We seek to determine the

nature of the inadequacies identified,

whether they are isolated or recurring. We

want not only to stimulate corrective

action but to ensure that the lapse does

not occur again. We make appropriate,informed and implementable recommen-

dations to improve systems, procedures

and processes.

25

Our report on Income Tax Refunds revealed that while the number of refund

cases has reduced significantly over the last decade-the Tax department still

takes an average of a year to finally refund the excess tax. This compares

poorly with the department's target of 3-6 months and international average

of 40 days. The CAG has suggested to the Finance Ministry to incorporate a

mechanism at the Bangalore-based Central Processing Centre so that the

refund claims are dealt with on priority basis.

9

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Types of Reports

The Audit Reports of the CAG submitted to the

Parliament and State Legislatures consist of

compliance and performance audit reports

covering revenue collection and expenditure of

Government, separate audit reports on the

functioning of certain autonomous bodies as

provided by legislation, reports on the Financial

position of Central and State Governments andreports on the adherence to the Appropriation

Acts passed by Parliament and Legislatures. The

CAG also submits the certified annual accounts of

the States, known as the Finance and

Appropriation Accounts, to the State Legislatures.

26

Review

of

Appeals

in

Income

Tax

Audit ofe-SEVA

Performan

ce

Auditof

GangaAct

ion

Plan

Review

ofRailways

Safety

Performan

ce

Auditof

PortTrusts

Exciseduty

paymentsby

Pharmaceutical

Industry

Review

of

Defenc

e

Procur

ement

s

Perform

ance

Auditof

Sarvashi

ksha

Abhiyaa

n

Review onProcurement

of Paddy

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The reports of the CAG are submitted to the President in case of the Unionand to the Governor in case of the State who in turn cause them to be

tabled before the House. After tabling in the House, these Reports attract

considerable media and public attention. To

sensitise societal groups, media and the academic

fraternity of our findings, we also print small

booklets. These are designed for wide

dissemination and to mould public opinion for a

critical appreciation of social sector schemes beingimplemented by Government. A soft copy of the

Report is enclosed in these booklets in a CD. All

reports are also available on our website

www.cag.gov.in.

Once tabled in the House, the Reports stand

permanently referred to the Central and State

Standing Committees on Public Accounts (PAC)/Committees on Public Undertakings (COPU). These specialised

committees have been constituted to facilitate timely and intensive

scrutiny of the Annual Accounts and

the Audit Reports thereon. The

Committees select those findings and

recommendations from our reports

that they judge to be the most critical

to the public interest and arrange forhearings on them. We provide

technical assistance to the Committees

in this task. At the hearings of the

Committees, the executive can be

called to account for their actions/ inactions. Based on their Examination,

the Committees prepare and submit their reports to the Legislature that

summarise the Committee's hearings, the action taken by the executive

and include recommendations to improve administrative practices andprocedures.

What happens to the Audit Reports?

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Impact of our work

The numbers

The audited entities accept our audit

findings for over-payment/ recovery in the

range of Rs. 15000 crore and recoveries

upwards of Rs 2750 crore are made

annually.

We have already seen that the mandate ofour SAI is very wide. In our audits we are

concerned with not just the fidelity of

accounts or regularity of transactions but

with the overall performance of schemes and adequacy of systems. Hence

the impact of our audit is both quantitative (in terms of money value of the

observations) and far more importantly- qualitative.

Since audit is carried out by test check of a miniscule percentage of

transactions, the quantum of over payments/ under recoveries assumes

greater significance.

Annually we conduct on-site audit and issue inspection reports in more

than 64,000 units of the Union, State and Union Territory Governments

across the country and abroad and audit 14.33 million vouchers and

transactions.

Qualitatively, audit provides many tangible and intangible benefits. Ourpresence has a deterrent and preventive effect on financial lapses. Our

audit reports provide an analysis of the financial health of the Union and

State Governments based on time series data so that the respective

Governments can draw appropriate lessons and take corrective action. At

the instance of audit, many changes in policy, law and rules are made by

various departments at the Union/State levels to avoid recurrence of

similar irregularities. These make services more efficient, improve revenue

collection and strengthen management of resources.

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A sample of our reports

A report in a State revealed that a scheme for raising the economic status of

poor farmers by encouraging them to take up mushroom cultivation through a

one time provision of input subsidy backfired. The farmers took bank loans but

being poorly trained and lacking any marketing support abandoned the self-

help projects and were pushed into further indebtedness.

Our report on a scheme to save the Dal lake of Srinagar revealed that while the

Government had spent Rs. 236 crore on the project, the efforts were

misdirected and concentrated on mechanical removal of silt and weeds rather

than checking the unauthorized construction, polluting effluents andencroachments around the lake area. Thus the lake had reduced to half of its

size and became shallower by 3 metres during the project period.

A review of visa, Passport and consular services had pointed out 21 instances

where, due to weak internal controls, passports had been issued on fake

identities by our Passport offices. These assume significance in view of the

heightened internal security threats.

Changes in policy, rules, regulationsin the recent past

n

n

n

Indian Railways handed over pantry cars to IRCTC without making any

provision regarding realisation of haulage cost of pantry cars. Based

on the audit recommendation, a clause on this has been incorporated

in the MOU.

Ministry of Finance amended section 18 of the Custom Act, 1962 to

provide for levy of interest on differential duty payable on finalisation

of the provisional assessments.

Ministry of Finance amended the Service Tax rules to enable the

assessee to make adjustment of the amount paid in excess from the

amount of service tax liability to be discharged in the succeeding

month/ quarter.

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The advisory role

SAI India is also engaged as an impartial advisor and standards setting

organisation so as to bring about improved financial management in theGovernment. We regularly organise seminars and workshops for training

the State Government departments in accrual accounting, accounting

formats for PRI's etc. We also interact with Union and State legislators

through conferences so that they are equipped to understand the role of

audit and can utilise our Reports to ensure better governance for the

citizens.

n Government departments in strengthening internal controls and

understanding risks to improve delivery systems.

n The Finance Commission to gain an informed opinion on State Government's

finances.

n The State Governments in putting in place better, transparent accounting

systems for Local Bodies and PRIs.

n Through the Government Accounting Standards Advisory Board (GASAB)* inframing Government Accounting Standards for greater transparency.

To enumerate, the SAI helps:

* GASAB is a high power body which aims to make Government accounts understandable,reliable, relevant, timely, consistent and comparable across departments and organisations,

both at Union and State levels. It includes representatives of the Ministry of Finance, GOI,Finance department of four States, RBI and nominee of ICAI. It also has stewards of six majoraccounting departments of the GOI including the SAI India.

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We also impart training to audit professionals from over 120 countries at

our State of art International Centre for Information Systems and Audit at

Noida. This institution also caters to the training needs of our ownpersonnel especially in the area of IT. We have also acted in an advisory

capacity to SAIs of other countries by imparting training in their offices,

doing training needs analysis for capacity building and providing audit

experts to guide and assist their personnel.

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The SAI beyond Indian boundaries

SAI India is the member of the UN panel of external auditors and of the

Governing Board of the International Organisation of Supreme AuditInstitutions (INTOSAI).

The CAG chairs the INTOSAI Working Group on IT Audit and the

knowledge sharing committee. Currently, we are the external auditors for

UN bodies like World Health Organisation, IMO, WTO and the WFP.

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Gorton Castle Yarrows

Our buildings, our heritage

We are a vast department with 219 offices throughout the country. Many

of these offices are housed in landmark buildings of their cities -aesthetically built and functionally efficient. Owing to the Raj legacy we

also have possession of some glorious heritage buildings. Foremost

amongst these are: the

Treasury building at Kolkata

which houses the offices of

two Accountants General;

the Gorton Castle at Shimla

which houses the offices ofthe Accountants General,

Himachal Pradesh and

Yarrows at Shimla which is a

home away from home for

officer trainees. These

buildings are immaculately

maintained. They have been restored to provide modern amenities while

keeping their original character and external facade intact.

Treasury Building

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A career in the SAI

An official in the SAI has the benefit of working in an environment where

he can pursue professional excellence free from political influence and

interference. The SAI actively encourages its officials to acquire

internationally recognised

professional qualifications like

CISA, CIA etc. Working in the

department provides extensive

opportunities to interface with

a lmost a l l b ranches o fGovernment. From Panchayats

to Defence and from Public

Sector Undertakings to the

Railways, an officer in the

department has the opportunity to understand the working and

contribute to the cause of Good Governance of almost every department.

There are many opportunities internationally in the form of audit of Indian

missions abroad, audit of UN agencies and other internationalorganisations and participating in conferences, seminars and training

programmes. Group 'A' officers are recruited through the Civil Services

Examination conducted by the UPSC and for Group 'B' and 'C' posts there is

recruitment through Staff Selection Commission. Departmental level

Section Officers Grade Exam also enables officials from entry level cadres

to get merit based promotion to Assistant Audit (or Accounts) Officer

cadre.

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CAG a few misconceptions

If there are delays in taking action on its reports, does it mean that the SAIis ineffective? Is SAI an institution with limited utility or merely a fault

finding exercise that cramps quick decisionmaking?

Let us recall the Answerability tenet that is central to our democracy.

How well has the State honoured the Social Contract? How can People

assess that? Is there any way of measuring Performance and monitoring

the implementation from a citizen's point of view? Today, despite a high

rate of economic growth and rising social-sector expenditure, India ranks

low on key developmental parameters. In this context, the SAI provides

regular, reliable and relevant information on the efficacy of the Public

Finance system.

Through the audit process and by ensuring accountability and

transparency we partner the Government in providing leakage free

delivery systems by pointing out areas vulnerable to leakage. We have

brought out a special study report on

the state of preparedness for the

Commonwealth Games in July,

2009. The objective was to provide

the Government a c red ib le

assessment of the stages of

completion of different projects by

various agencies. This was the first ofa series designed to assist the

Government for a midterm appraisal

of their schemes and was not a

conventional Audit Report.

Where independent inquiry and

cross-verification of Government

sector spending down to the lowest levels is concerned, only the SAI hasthe expertise, the reach and the wherewithal to render professional,

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unbiased reports. The SAI functions as the eyes and ears of the Parliament.

We track expenditure of each of the hundreds of Government schemes

and programmes, pinpoint leakages, report inefficiencies and corrupt

practices and ensure that the accountability chain of the executive to the

legislature does not suffer complete breakdown. At the same time we

have appreciated and pointed out good practices followed by the

Government departments.

Moreover as befits a developing economy, the SAI India has attempted to

link performance of Government programmes with 'outcomes'. We have

used clear, concise and measurable performance indicators and

recommended performance benchmarks and Good Practices Guides to

Government departments.

Pointing out procedural lapses and violation of rules is a part of ensuring

financial fair play. Today when transparency and accountability are key

concerns and demand for thorough scrutiny of Government spending is

growing, the key issue is how audit findings can be acted upon by theconcerned agencies in a time-bound and effective manner. Any talk that

audit by SAI cramps decision making is nothing but a red-herring to take

attention away from the fact that accountability needs to be enforced for

every rupee of public money that is spent.

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Citizens have every right to know how the tax-payers money is being spent by

the government to implement various programmes. If any funds spent by thegovernment do not come under the scrutiny of Comptroller and Auditor

General of India then it is nothing but a "lacuna".

Vice President Shri Hamid Ansari (June 2010)

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Documents

150_year