SPEACH CAG

7/31/2019 SPEACH CAG

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FINANCIAL MANAGEMENT FOR IMPROVING PROGRAMME DELIVERY

DATE: 20 OCTOBER 2008

It gives me immense pleasure to be here with you this morning. I am

thankful to the CGA for inviting me to p articipa te in the Sem inar. I

am rea lly happy at the them e selec ted for the Sem inar. The

appropriate and productive use of public moneys is an

indispensable element of any modern, well-managed and fully

acc ountab le d emoc ra tic set up . Prog ramme d elivery is a t the top of

Governments agenda. Efficient delivery of public services, proper

management of public resources, high level of accountability and

transparenc y are its key conc erns.

Efficient management of financial resources is vital for ensuring

imp roved prog ramme delivery. The c ore of p ublic financ ia l

ma nag ement generally inc ludes bud ge t p lanning and preparation,

appropriations by the Legislature, expenditure monitoring and

c ontrol, financ ia l rep orting, aud it and eva lua tion. The ob jec tive of

the financ ia l ma nagem ent is tha t the req uirem ents of resources and

its ava ilab ilities are c orrec tly estima ted ; nec essary approp riations are

obtained and used legally, efficiently and effectively for

achievement of the intended outcomes of the prog ram me.

1) Allocative priorities: Every Government raises resources toperform its sovereign functions and maintain and upgrade the

network of delivery of social and economic services through

capital expenditure and investments. Correct assessment of

priorities for application of resources is of paramount importance


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in a financial management system. Increased focus on

programme delivery requires higher allocations under plan

schemes in different sectors to provide basic minimum services of

rea sonab le q ua lity to the c itizens. The trends in spend ing of the

Union Government indicate that though there has been an

increasing trend in allocations for plan expenditure, the plan

expenditure continues to be less than 25 per cent of the total

expend iture during the last three p lan periods. The o vera ll

a lloc a tion to soc ia l sec tor has been less than one per c ent o f GDP

in the past a nd it ha s me rely crossed one per cent in the last 3 to 4

years. Within the sphere of economic services, there has been a

considerable increase in expenditure on rural development,

energy and agriculture. However, the overall expenditure on

ec onomic services c ontinues to be around 6 per c ent d uring the

last 3 p lan p eriods. A signific ant p ositive shift in rura l deve lopment

programmes reflects the Governments overwhelming priorities for

the sector particularly in the context of generating employment

opportunities in rural areas. Efforts towards re-prioritization of

outlays need to be c ontinued for expansion a nd streng thening of

soc ia l and ec onomic servic es in the c ountry.

2) Encouraging financ ial ac countab ility: Government of India

transfers large amounts of funds every year directly to various

district agencies and NGOs for implementing various

deve lop menta l p rog ramm es and sc hemes. The release o f funds

directly to the implementing agencies is a paradigm shift to


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4) Improving Financial Management and Accountability in

Centrally Sponsored Schem es

A common pattern of shortcomings in execution of centrally

sponsored schemes is observed such as lack of timely release of

fund, multiplicity of schemes with similar objectives, inadequate

assessment of beneficiaries, lack of vertical and horizontal

linkages and absence of technological and institutional

capab ility. There is an absenc e o f any identified and measurab le

ind ica tors of performa nce a t ea c h level of imp lementa tion o f the

scheme. Further, funds are released through a variety of channels

and tracking of funds down to the end use is almost impossible in

the current framewo rk. There is a lso a c om mon p rob lem of lac k of

adequate monitoring and evaluation of implementation of such

schemes.

Any strategy for improving the financial management

performance and accountability in centrally sponsored schemes

must include issues related to flexibility in design to reflect local

level rea lities, ra tiona lisa tion of CSSs, sett ing up a framework for

flow of funds and mechanism for tracking of funds down to the

end use and ensuring better monitoring and evaluation. Greater

efforts are needed to improve governance at

d istric t/ b loc k/village level.5) Distortions in financ ial position

Direct transfers to societies are made as grants-in-aid which are

trea ted as revenue expend iture in Union ac counts. The sta te

accounts do not register any transaction on account of these


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devolutions as the funds transfer does not take place through

sta te acc ounts. The assets c rea ted under va rious flagship

programmes like NRHM, out o f fund s transferred to the soc iet ies a t

state/district levels are reflected neither in Union accounts nor

form part o f the Sta te ac c ounts. This may seriously d isto rt the

financial position of the Government as fiscal liabilities will not

have adeq uate asset bac kup . It is essentia l to evo lve a system by

which a ssets c rea ted by the imp lementing agenc ies are rec orded

either in the central or state accounts so that the capital

expenditure on assets creation is accurately reflected in the

ac c ounts of the Government.

6) Integration be tween projec t planning and budgeting

Prudent financial management practices require an effective

integration of developmental planning process with budget

process. It is very common to have development plans that are

not supported by budgeta ry resourc es. This lea ds to situa tions

where programme execution is seriously hampered due to non-

ava ilab ility of fund s a t c ritic a l sta ges. This c auses serious time and

cost overruns. There a re large number of suc h cases rep orted in

the Aud it rep orts both for centre a nd sta tes whic h c a lls for grea ter

integ ra tion of bud geta ry and p lanning p roc esses.

7)Public Priva te Partnership projec tsThere is a la rge gap in the dem and and supp ly of essentia l soc ia l

and ec onomic infrastruc ture and servic es. The Government is,

therefore, actively promoting Public Private Partnerships (PPPs) in


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the key infrastructure sectors. As per the Planning Commissions

estimates, around Rs.14.5 lakh crore is likely to be invested in the

infrastruc ture sec tor in Ind ia over the 11th Plan. A large part of this

investment will come from the private sector with PPP mode as

one of the preferred routes. PPPs entail a sharing of responsibility

between government and the private sector. Factors which add

va lue to a PPP p rop osa l inc lude innova tions, po tent ia l for va lue for

money like lower construction costs, lower operation costs etc,

early project delivery, improved asset utilization, and better

projec t ma nagem ent. Therefore, it is imp ortant to eva lua te

whether the above objectives have been efficiently achieved.

Besides, there a re risks inhe rent in suc h p artne rships. The

Government may not be able to achieve the benefits it seeks to

achieve for public services without effectively managing risks.

Sound risk ma nagement p roc ed ures a re, the refore, vital.

Conclusion:

Streng thening financ ia l managem ent system s is a t the hea rt o f

the reform agenda. It is a part of the overall effort to enable the

Government to manage public resources economically,

effic iently and effec tively. The reforms in financ ia l ma nagement

system is in need of serious attention and has to be brought out

system atica lly for imp roving delivery of Gove rnment p rog ramm es.

I am p lea sed to partic ipa te in the Sem inar tod ay. I wish the

Seminar all suc c ess.

Thank you.

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