Strategic Plan 2020 Prepared by The Group of Officers and Perspective Plan

STRATEGICPLAN 2020
FORIAAD
SEPTEMBER2010
TableofContents
ExecutiveSummary .........................................................................................................................i 1 SettingtheContext......................................................................................................................... 1

1.1 InstitutionoftheCAGandtheIndianAuditandAccountsDepartment........................................................... 1 1.2 Existing/PreviousPlans......................................................................................................................................... 2 1.3 ChangingFocusofGovernancein2020............................................................................................................... 3 1.4 NeedforaseparateStrategicPlan2020forIAAD ............................................................................................. 4
OverallFrameworkofStrategicPlan2020forIAAD....................................................................... 6
2.1 TermsofReference ............................................................................................................................................... 6 2.2 InternationalPractices .......................................................................................................................................... 6 2.3 ScopeandCoverageofStrategicPlan 2020forIAAD ...................................................................................... 7 2.4 HighLevelStrategicGoals..................................................................................................................................... 7 2.5 MechanismforImplementationandMonitoring ............................................................................................... 7
Goal1:Integratingauditefforts ..................................................................................................... 9
3.1 Background ............................................................................................................................................................ 9 3.2 ReOrganisingAuditofGoIaccordingtoMinistry.............................................................................................10 3.3 CurrentAuditOrganisation.................................................................................................................................11 3.4 ProposedAuditOrganisation..............................................................................................................................11 3.5 StaffImplicationsofReorganisationofGoIAudits ..........................................................................................14 3.6 ReorganisationofAuditofStates......................................................................................................................14
Goal2:PromotingProfessionalisminPublicSectorAuditing ......................................................16
4.1 Sectorspecificknowledgecentresandresourcepersons................................................................................16 4.2 Encouragecentralandstategovernmentstobuildandstrengtheninstitutionalarrangementsforinternal auditandriskmanagement ..........................................................................................................................................18 4.3 EstablishingaCharteredInstituteofPublicAccountantsandAuditorsofIndia(CIPAAI)..............................19 4.4 SettingupanInternational Consultancywing...................................................................................................22
Goal3:Improvingcommunicationwithstakeholdersandensuringhighervisibility....................24
5.1 NeedfortheCAGtobemoreproactiveinhisinteractionswiththemedia...................................................24 5.2 SettingupaseparateParliamentary/LegislativeRelationsUnit......................................................................26 5.3 Buildingabrandfortheorganisation ................................................................................................................26
5.4 TreatInspectionReportsasproductsoftheCAGforconsumptionbythepublicandotherstakeholders .27 5.5 IntroducemoreValueaddedproductsotherthanauditreportslikeAidtoManagementSeries .............27 5.6 Settingupcountersineachcityfordistributingauditreportstocommoncitizens ......................................30 5.7 GivingmorefocusondisseminationandcommunicationthroughHindi/Vernacularlanguages ................30 5.8 RevampingtheCAGWebsite ..............................................................................................................................31
Goal4:EnhancingAuditEffectivenessandImpact.......................................................................32
6.1 IntegratedApproachtoFinancialandComplianceAudit.................................................................................32 6.2 EnhancedFocusonFinancialAttestAuditofGovernmentAccounts..............................................................35 6.3 FinancialAttestAuditofGovernmentCompaniesandAutonomousbodies..................................................39 6.4 ReorientationofapproachtoComplianceAudit ..............................................................................................40 6.5 StrengtheningPerformanceAudit......................................................................................................................43
Goal5:Improvingdeliveryofaccountingandentitlementfunctions...........................................48
7.1 AccountingFunctions ..........................................................................................................................................48 7.2 Entitlementfunctions..........................................................................................................................................56
Goal6:ImprovingHuman ResourceManagement .......................................................................58

8.1 Background ..........................................................................................................................................................58 8.2 Reviewofexistingstaffstrength ........................................................................................................................59 8.3 Ensuringoptimumspanofcontrol.....................................................................................................................59 8.4 RecruitmentandPromotion ...............................................................................................................................60 8.5 Ensurestabilityoftenure ....................................................................................................................................65 8.6 DevelopleadershipqualitiesinyoungIAASOfficersbygivinghigherresponsibility .....................................66
Annexe1 PerspectivePlan201015 KeyGoals......................................................................................................69 Annexe2 MappingofGoalsbetweenStrategicPlan 2020forIAADandPerspectivePlan201015 ................72 Annexe3 IndicativePerformanceMeasures..........................................................................................................73 Annexe4 ProposedReorganisationofGoIAuditOffices .......................................................................................75 Annexe5ProposalforestablishingaCharteredInstituteofPublicAccountants&AuditorsofIndia(CIPAAI)...78 Annexe6 SuggestedApproachtoIntegratedFinancialcumComplianceAudit ...................................................84 GLOSSARYOFTERMS.....................................................................................................................................................88
StrategicPlan2020forIAAD ExecutiveSummary
Background
InMarch2010,theCAGhadindicatedthatthevisionandmissionstatementsfortheIAADwerebeing revisited,andaStrategicPlanwasnecessaryinordertorealizethevisionandelaborateontheactivities thatwouldflowfromthemission.TheStrategicPlanisexpectedtoprovidedirectiontotheDepartment forthenexttenyears,andwouldcoverbothauditandaccounts/entitlementfunctions.Aworking group,consistingof ShriKRSriram,ShriRGViswanathan,Ms.RebeccaMathai,ShriYNThakare (Convenor),ShriAnadiMishra,andMs.VidhuSood,was constitutedtocomeupwithaStrategicPlan thatwasinconsonancewiththeexisting/proposedlegislativemandate. Wereviewedthestrategic/corporateplansofseveralSAIs,inordertoconsidertheinternational practicesfollowedincorporateplanning.Further,wealsoidentifiedthefollowingpatternsin governancethatarelikelytoemergeoverthenexttenyearsorso:
DeliveryofbasicserviceswillcontinuetoremainGovernmentsresponsibility. PPP will become thepredominant mode for delivering infrastructure and other economic services. Devolutionanddecentralizationwillincreasesubstantially. ITwillbeusedinanintegratedfashiontodrivegovernanceandempowerthecitizen. Sustainable development and the rights of underprivileged groups will become larger concerns. Fraud,corruptionandwastewillcontinuetoremainkeyconcerns.
ThesepatternshaveactedasdriversforourStrategicPlan.Inourview,thisStrategicPlanshould representtheoverarchingframeworkforplanningintheIAAD,whichwillneedtobesupportedby detailedplansoverfiveyearandannualtimehorizons.Wehaveidentifiedsixkeygoals.Our recommendationsinrespectofthesegoalsaresummarizedbelow:
Goal1 IntegratingAuditEfforts
OurcurrentarrangementsforauditofGoIentitiesareorganizedbasedonthenatureoftheentity (Governmentoffice,PSU,autonomousbodyetc.),ratherthanwithaMinistry/sectoralperspective.We recommendthefollowing: 1A. Restructuring the organizational structure for audit of Government of India entities on the basisoftheMinistry/Department,ratherthanonthetypeoftheentity(Governmentoffice, PSU, Autonomous Body etc). In this way, a Central Ministry as well as the PSUs and AutonomousBodiesunderitwillbeauditedtogetherbyasingleoffice(orgroupofoffices), andauditofseveralMinistries/Departments(groupedsectorwise)willbeunderasingleDAI. TheexistingboundariesofCivil,Defence,Railway,CommercialandAutonomousBodiesAudit willbedoneawaywith. Regional ADAIs for State Reports, with arrangements for coordination and ensuring consistencyinacountrywideapproach.
1B.
Goal2 Promotingprofessionalisminpublicsectorauditing
We recommendthefollowingmeasures,topromotegreaterprofessionalismwithintheIAAD: 2A. 2B. Creatingan institutional mechanism ofKnowledgeCentres (KCs)forknowledgecapture and maintenanceonasectorspecificbasis CreatingsectorspecificpoolsofKnowledgeResourcePersons(KRPs)attwolevels(IAASand supervisory officials) and providing suitable remuneration for this continuing, additional responsibility Encouraging Central and State Governments to build and strengthen institutional arrangementsforinternalauditandriskmanagement EstablishingaCharteredInstituteforPublicAccountantsandAuditorsofIndia(CIPAAI)onthe linesofICAIandICWAI,undertheaegisoftheCAGofIndia. CIPAAIwould tackle issues ofdaytodayaccountingproblemsand professionalupgradation oftheskillsofthevastpooloffinance,accountsandauditpersonnelatthegrassrootslevel, and addressdeficienciesintheaccountingprocessesandfinancialcontrolsacrossorganisation likehugearrears inaccountsfinalisationandweaknessesininternalaudit. CIPAAI would provide professional certification to the Group A professionals of the CAG organisationenteringintotheGovernmentofIndiathroughCivilServiceExaminations. CIPAAIwouldprovide professionalcertificationtotheGroupBandCprofessionalsfromthe CAGbysubsumingtheSOGEcurrentlybeingconductedbytheCAGandalsotootherfinance, accountingandauditprofessionals in State/Centralgovernmentdepartmentsondemand.
2C. 2D. 2E.
2F. 2G.
2H.
TheneedinSAIIndiatosetupanInternationalConsultancywing,asthereisagreatdemand for SAI Indias expertise in areas of Public Audit and Financial Management amongst many SAIswhoareintheprocessofdevelopingthepublicauditsystemsin theircountries.
Goal 3 Improving communication with stakeholders and ensuringhighervisibility

Werecommendthefollowingmeasuresforimprovedcommunicationwithallstakeholders: 3A. 3B. 3C. 3D. 3E. 3F. 3G. 3H. Needforthe CAGtobemoreproactiveinhisinteractionswith the media SettingupaseparateParliamentary/LegislativeRelationsUnittoextendproactivesupport Buildingabrandfortheorganisation TreatingInspectionReportsasproductsofthe CAGforconsumptionbythepublicandother stakeholders Introducingmorevalueaddedproductslikestudyreports,compendiumsetc.,sothattheyact asAidstoManagement Settingupcounters ineachcityfordistributingauditreportstocommoncitizens Givingmorefocuseddisseminationandcommunicationthroughvernacularlanguages RevampingtheCAGwebsite
Goal4 Enhancingauditeffectivenessandimpact
Withregardtoanintegratedapproachtofinancialandcomplianceaudits,werecommend: 4A. Conductingpilotintegratedfinancialcumcomplianceauditsindifferentareaswithaviewto assessing the advantages and disadvantages of such integration, and drawing up a phased approachtointegratedfinancialcumcomplianceaudit
Werecommendthefollowingapproachforfinancialattestaudits 4B. 4C. 4D. 4E. 4F. StrengtheningtheassurancebasedapproachtofinancialattestauditofGovernmentaccounts Preparing detailed annual financial attest audit plans and evolving appropriate statistical models Combining inputs from past audit findings and VLC data analysis into the financial audit process Commenting on adequacy and effectiveness of internal controls affecting the accuracy of financialstatements,andencouragemovestowardsaManagementResponsibilityStatement Introducingauditautomationsoftware,towardspreparationofassurancememos
4G. 4H.
Building capacity for the forthcoming alignment of Indian Accounting Standards with IFRS fromApril2011 Movetowardsconductofcertificationauditofautonomousbodiesexclusivelybycommercial audit staff
Withregardtocomplianceaudit,werecommendthefollowing: 4I. Switching to a thematic approach for compliance audit (involving at least 80% of available compliance audit resources), with assurancebased reporting and followup based on recommendations ReducingthenumberofcomplianceauditsandIRsdrastically,andintroducingdetailedaudit planningforthematicaudits Introducingauditautomationsoftware,forsystematicdocumentationandworkingpapers
4J. 4K.
Withregardtoperformanceaudit, werecommendthefollowing: 4L. SincePerformanceAuditsgreatlyenrichpublicaccountabilityandenabletheCAGofIndiato make practical contributions to improving the efficiency and effectiveness of the public administration, there isaneedto increasetheallottedpartymandayson suchauditsfrom thecurrentexposureofaround10percent to50percent by2020. New strategies to strengthen the process of Performance Audits like greater stakeholder involvement,finetuningauditmethodologyandredefiningthefollowupprocess,needtobe institutionalisedsothatPerformanceAuditsmakethedesiredimpact.
4M.
Goal 5 Improving delivery of accounting and entitlement functions

Withregardtoaccountingandentitlementfunctions,werecommendthefollowing: 5A. 5B. 5C. 5D. 5E. Encouraging States to assume ownership of accounts, where they express willingness and possessadequatecapacity Leading reforms of the accounting structure and partnering the GoI/ States in ushering in institutionalaccountingmechanismsfordirecttransfersoffunds TransformingA&Eofficesintodatacentresforfinancialinformationandanalysis EncouragingStatesindevelopingcapacityforassumingentitlementfunctions,andmanaginga diminishingrole Ensuringeffectiveuseof technology for deliveringservicesof the highestquality,as long as entitlementfunctionsremainwithIAAD
Goal6 ImprovingHumanResourcesmanagement
Inviewof theenormousdemandsonourauditresourcesduetothelikelychangesingovernance,HR (bothattheGroupAandGroupBlevels)willneedconsiderablerevamping.Werecommendthe following: 6A. 6B. 6C. 6D. 6E. 6F. 6G. 6H. 6I. Reviewing office wise existing sanctioned staff strength to ensure that audit resources are optimallydeployedacrossalloffices DeterminingtherightspanofcontrolforGroupOfficerstoachievequalityperformance RecruitingonlyatAssistantAuditOfficerlevelandphasingoutrecruitmentatauditor,clerk, stenoandGroupDlevels. CreatinganexclusiveIAAS GroupBService(withDAGlevelpostsintheGroupBcadre) CreatingZonalCadres of IAASGroup B in the short term andan All India cadre in the long term ModifyingRecruitmentRulesforIAASGroupAtoincludefasttrackpromotionsfromIAAS GroupB Creatingan IAAD RecruitmentBoard EnsuringaconstantintakeofProfessionalsinto IAAS GroupB RaisebenchmarkforpromotionbyselectiontoVeryGood
Operationalising the Implementation
Strategic
Plan
and
Monitoring
ForoperationalisingtheStrategicPlan2020(afteritsapproval),afulltimeStrategicPlanningGroup needstobecreated.Thisgroupwillberesponsibleforfinalizingthedetailedimplementation(for approvalbythecompetentauthority),andmonitoringitsrolloutinaphasedmanner. ForensuringeffectivemonitoringofimplementationoftheStrategicPlan,formalmechanismsfor monitoringareessentialintheformofperformancemeasuresforeachgoal,alongwithassociated timelines.Anindicativesetofperformancemeasuresandtimelineshasbeensuggested.
th StrategicPlan 2020forIAAD 9 September2010
1.SettingtheContext
1.1 Institution of the CAG and the Indian Audit and Accounts Department
TheComptrollerandAuditorGeneralofIndia(CAG)isanindependentConstitutionalfunctionary,who deriveshisauthorityfromArticles148to151oftheConstitution.Hisduties,powersandconditionsof 1 servicehavebeenamplifiedintheCAGsDPCAct,1971 . TheIndianAuditandAccountsDepartment(IAAD)undertheCAGistheinstrumentthroughwhichhis Constitutionalandlegalfunctionsaredischarged.Ourcurrentvision,mission,andcorevaluesareas follows: Vision Westrivetobeagloballeaderandinitiatorof nationalandinternationalbestpracticesinpublic sectorauditingandaccounting,andrenownedfor independent,reliable,balancedandtimely reportingonpublicfinanceandgovernance. Mission AsmandatedbytheConstitutionofIndia,we promoteaccountability,transparencyandgood governancethroughhighqualityauditingand accountingandprovideindependentassuranceto ourprimarystakeholders theLegislature,the ExecutiveandthePublic thatpublicfundsare beingusedproperly,andfortheintended purposes.
OurCoreValues Independence Objectivity Integrity Credibility ProfessionalExcellence Transparency Innovation KnowledgecentricOrganization ConstructiveApproach
1.2 Existing/PreviousPlans
1
Inaddition,certainotherCentralActse.g.TheCompaniesAct,1956alsoassignadditionalresponsibilitiestothe CAG.
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StrategicPlan2020preparedbyGroupofOfficers
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1. 2. 1
StrategicAuditPlan
AStrategicAuditPlanfor200208waspreparedfortheDepartmentasawhole,settingforththe Organisationsstrategicperspectiveforthesixyearperiod.TheprioritiesadoptedfortheXPlanofthe GoIbythePlanningCommission bythekeydriversforthisStrategicAuditPlan. ThePlanidentifiedfivekeythemeshavingacriticalbearingontheIndianeconomyandthequalityof lifeofpeople humandevelopment;economicliberalization;infrastructuremodernization;technology upgradation;andnationalsecurity.Italsoidentified21strategicobjectivesunderthesefivethemes,in respectofwhichdetailedperformancegoalsforauditwereset. Currently,IAADdoesnothaveaStrategicAuditPlan,whichcutsacrossallfunctions/ wings/offices;the lastStrategicAuditPlanfortheIAADcoveredtheperiodfrom20022008. WeneedasingleStrategicAuditPlanforCentralGovernmentAudit(typicallyforafiveyearperiod), coveringallfunctions/wings Civil,Commercial,Defence,Railways,P&T,AutonomousBodies,Revenue andalsocoveringperformanceandcomplianceauditbytheStatePAGs/AGsofimplementationof CentrallySponsoredSchemes(CSS)/CentralSectorSchemesthroughgrassrootlevelimplementing agencies.Thekeythemes/focusareasforthisStrategicAuditPlanwillbedrivenbytheprioritiesspelt outintheXIPlananditsMidTermAppraisal,theFinanceCommissionReportetc.Suchaplanhastobe necessarilyadopted/approvedatthelevelofIAADtopmanagementandtheCAG,asitsimplementation wouldrequirecommitmentandsupportfromallwingsandfunctions.Asimilarapproachhastobe adoptedinrespectofeachState,coveringallwings civil,works,commercial,autonomousbodies,local bodies,revenue. However,drawingupsuchaStrategicAuditPlan isadistinctexercisefromthisdocument,andwould requireaseparatetaskforce.
1. 2. 2
PerspectivePlans 200308and201015
Twosetsofperspectiveplans,settingoutDepartmentwideperspectivesondifferent areasforthenext fiveyears,havebeenprepared.ThefirstPerspectivePlanwasfortheperiod200308,whilethe PerspectivePlanfor201015wasfinalizedrecently.AsummaryofthekeygoalsofthePerspectivePlan 201015isgiveninAnnexe1.
There is substantial congruence between the goals and objectives set out in the latest PerspectivePlanand thestrategicobjectivesindicated inthis document,although the time horizonofthisStrategicPlanislonger.Amappingbetweenkeygoalsinthesedocumentshas beenpreparedandisindicatedinAnnexe2.
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1. 2. 3
Discussions and Recommendations of Conferences of Accountants General
TheConferencesofAccountantsGeneral(inparticularthelasttwoConferences)havedealtwithseveral strategicissuesindifferentareas,throughpreparationsofthemepapersonareasofconcernsand discussions/recommendationsthereon.Manyoftheissuesdiscussedinthisdocumenthavefeaturedin therecentXXVAsGConference.

1. 2. 4
AuditPlansofIndividualOffices
IndividualfieldauditofficespreparetheirAnnualAuditPlans,whichdetailtheallocationofaudit resourcesacrossdifferentcategories/subcategoriesofaudit,thethemesforperformanceauditand unitsforcomplianceauditetc.Inaddition,somefieldofficesalsoprepareStrategicAuditPlansfor performanceandcomplianceaudits,whichdetailthekeyfocusareastobecoveredduringthenext35 years.
1.3 ChangingFocusofGovernancein2020
Overthenexttenyearsorso,we believethatthefollowingpatternsingovernancearelikelytoemerge:
Delivery of BasicServiceswill continue to remain Governments responsibility Despite the high trajectorygrowth oftheIndianeconomy in thelast few yearsand theincreasing contribution of the private sector to the Indianeconomy, the Government (Central, State and Local) will continue to retain responsibility for providing most basic services to the commoncitizene.g.health,education,employmentsupport,ruralinfrastructure etc. Public Private Partnerships (PPP) will become the predominant mode for delivering infrastructure and other economic services The Government has recognized PPP to be thepreferredmodeforprovisionofinfrastructureservices,bothonaccountofthelimited resources available to Government (which would be better utilized for delivery of social services) as well as increased efficiency in delivery of services; this trend will accelerate further to go beyond national highways, ports and airports to cover other infrastructural services.TheGovernmentwillstepinonlyinsituationswheresuchservicesareinherently uneconomical, either throughviability gapfundingor throughdirect provisionof services. Also, in other economic services (particularly those involving exploitation of natural resources e.g. oil and gas, minerals etc.), private sector participation through appropriate revenue sharing arrangements will become the norm. The role of Government in these areasislikelytobecomemoreandmorefacilitativeandregulatory,focusingonaspectslike ensuring a level playing field, protecting the interests of the citizens/ users, and ensuring ValueForMoneytotheGovernment. DevolutionandDecentralisationwillincreasesubstantially Thetrendtowardsdevolution of powers not only to the State Governments (e.g. the proposed GST) but also PRIs and
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ULBs will gain momentum. Also, decentralization of programme implementation (through NGOs,civilsocietyorganizations,aswellasquasigovernmentorganizations,Govenrment/ 2 NGOpartnerships)willcontinue togainpace. Information Technology will be used in an integrated fashion to drive governance and empowerthecitizenAlthoughIThasmadeconsiderableinroadsintomanyGovernment Departments and Ministries, it has been implemented, by and large, in a fragmented fashionandprovisionofegovernanceservicestocitizenshasbeenverylimitedinscope.IT is still not as critical to or integrated into Governmental operations, as in the Indian corporatesector.Overthenexttenyears,withtheimplementationofvariousegovernance initiatives/missions,introductionofUniqueIdentificationforcitizens,leveragingofGISand other technologies, and better integration with mobile technology (which represents the mostaccessibletechnologyforthecommoncitizen),weexpectthatITdrivengovernancein 2020willreachatleastthecurrentlevelsprevalentindevelopedcountries,ifnotsurpassing them. Citizens rich and poor will be far more empowered to hold Governments and Governmentofficialsaccountablefordelivery(ornondelivery)ofmandatedservices. Sustainable Development and the Rights of Underprivileged Groups will become larger concerns With the increased role for private players, conflicts between the rights of privatepartiesaswellasthoseofsocietywillcontinuetoincrease(asistobeexpectedina vast,diverseandyetdemocraticnationlikeIndia).Ensuringsustainabledevelopment(while minimizingtheadverseimpactonenvironment)andprotecting/promotingtheinterestsof underprivileged groups in society will become larger concerns, and the role of NGOs and civilsocietyorganizationsinpromotinggreaterpublicdebateontheseissueswillincrease. Governmentswillhavetoplayanincreasinglysensitiveroleinmanagingtheseconflicts,and balancingtheinterestsofallparties. Fraud, Corruption and Waste will continue to remain key concerns Notwithstanding projections of economic growth and improved governance structures, fraud, corruption, wasteandotherfinancialirregularities(whichhavebeenlongstandingconcernsofnotonly theIAADbutalsotheCBIandCVC)willcontinuetoremainkeyconcerns.
Thesetrendsingovernancewillhaveseriousandlongtermimplicationsforourstrategicaudit approach,whichwillhavetoadapttonewermethodsofprogrammeandservicedelivery,whileatthe sametimeretainingourfocusonfraud,corruptionandrelatedissues.
1.4 NeedforaseparateStrategicPlan 2020forIAAD
Notwithstandingourconcernsontheweakenedstructuresforaccountabilityandfinancialmanagement
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Inthiscontext,thereisaneedforanoverarchingframeworkwhichwouldprovidedirectionand guidanceonallsignificantareasforalongertimehorizon(10yearsormore).Forexample,thechanges proposedintermsofHumanResourcesmanagementaswellasauditintegrationwilltakelongerthana 35yeartimeframe(whichisthenormaltimeframeforotherplans) forbeingfullyoperationalised,and forbenefitstobederivedfromsuchchangestobefullyachieved.ThisStrategicPlan2020forIAAD seekstofulfilthisneed.
HierarchyofPlans
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2 OverallFrameworkofStrategicPlan2020forIAAD
2.1 TermsofReference
InMarch2010,theCAGhadindicatedthatthevisionandmissionstatementsfortheIAADwerebeing revisited,andaStrategicPlanwasnecessaryinordertorealizethevisionandelaborateontheactivities thatwouldflowfromthemission.TheStrategicPlanisexpectedtoprovidedirectiontotheDepartment forthenexttenyears,andwouldcoverbothauditandaccounts/entitlementfunctions.Aworking group,consistingof ShriKRSriram,ShriRGViswanathan,Ms.RebeccaMathai,ShriYNThakare (Convenor),ShriAnadiMishra,andMs.VidhuSood,wasconstitutedtocomeupwithaStrategicPlan thatwasinconsonancewiththeexisting/proposedlegislativemandate.
2.2 InternationalPractices
Inordertoconsidertheinternationalpracticesfollowedincorporateplanning,thegroupreviewedthe strategic/corporateplansofseveralSAIs USA,UK,NewZealand,Canada,Australia,SouthAfrica,and Ireland.ThepracticesfollowedbydifferentSAIsforcorporateplanningvariedwidely,assummarized below:
The US GAOs Strategic Plan waspredominantly a strategic audit plan threeout of four toplevel strategic plans were external goals, while only one goal was an internal goal focusedonachievingresultsthatareunmatchedbyanyotheraccountabilityorganization intheworld.ThecorporateplansoftheotherSAIsdidnot,however,spellouttheiraudit focusareasindetail. Mostofthestrategicplanswereforperiodsrangingfromthreetosixyears. ThemixofperformanceandfinancialauditinthecorporateplanvariedfromSAItoSAI.The US GAO is predominantly performance audit oriented, while UK and New Zealand are financial audit focused (New Zealand allocates 87 per cent of its resources to financial audit). None of the developed country SAIs had anything similar to our transaction/ complianceaudit theyhadeitherfinancialauditorperformance/VFMaudit. MostSAIsconductedformalperiodicsurveysoftheirstakeholders(Legislature/Executive) totakeintoconsidertheirrequestsforaudits,andalsoobtainfeedbackaboutthequalityof their audit products.In fact, between86 to94percent of GAOsprogrammeaudits were undertakeninresponsetolegislativerequests. Other SAIs treat all their outputs (audit opinions on financial statements, VFM/ program evaluation reports, legislative testimonies, briefings to Congressional assistants etc.) as auditproducts.Incontrast,ourgeneralpositionisthatInspectionReportsrepresentonlya setofpreliminaryauditfindings,ratherthanastandaloneauditproduct.
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All SAIs used their Annual Performance Report (or equivalent document) as a tool for periodic reporting of progress visvis the goals and targets stipulated in the Corporate/ StrategicPlan.
2.3 ScopeandCoverageofStrategicPlan 2020forIAAD

TheStrategicPlan 2020shouldformtheoverarchingframeworkforplanningintheIAAD.Thiswillhave tobesupportedbydetailedfunctionalplansoverafive yeartimehorizon aStrategicAuditPlan;a StrategicPlanforAccountsandEntitlements;HRandInfrastructuralSupportPlanetc.AnnualPlansfor differentofficeswillhavetobederivedfromthesedetailedfunctionalplans,andshouldbein consonancewiththeoverallStrategicPlan.
2.4 HighLevelStrategicGoals
ThehighlevelstrategicgoalsindicatedinthisStrategicPlanaresummarizedbelow: Goal1 Integratingauditefforts Goal2 Promotingprofessionalisminpublic sectorauditing Goal4 Enhancingauditeffectivenessandimpact
Goal3 Improvingcommunicationwith stakeholdersandensuringhighervisibility Goal5 Improvingdeliveryofaccountingand entitlementfunctions
Goal6 ImprovingHRmanagement
2.5 MechanismforImplementationandMonitoring
ForoperationalisingtheStrategicPlan2020(afteritsapproval),afulltimeStrategicPlanningGroup (headedbyaDG/PD,andwithtwoDirectors)needstobecreated.Thisgroupwillberesponsiblefor finalizingthedetailedimplementation(forapprovalbythecompetentauthority),andmonitoringits rolloutinaphasedmanner.
3 ForensuringeffectivemonitoringofimplementationoftheStrategicPlan2020 ,formalmechanisms formonitoringareessential:
Performancemeasuresforeachgoal,alongwithassociatedtimelines,needtobefinalized. AnindicativesetofperformancemeasuresandtimelinesisindicatedinAnnexe3;thesewill needtobefirmedupandapproved. AnannualreviewbyIAADtopmanagementofimplementationofthegoalsandobjectives shouldbeconducted,withdecisionsoncorrectivemeasurestobetaken.
AswellasthePerspectivePlan201015
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TheAnnualPerformanceReportshouldbereorientedfromreportingactivitiesindifferent areas (auditing, accounting,budget, personnel)to reportingperformance visvisthe laid downgoalsandobjectives;thiscanbesupportedbyinternalhalfyearlyreports.
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3 Goal 1: Integrating auditefforts
Thisstrategyisabout:
1A.
Restructuring the organizational structure for audit of Government of India entities on the basis of the Ministry/ Department, rather than on the type of the entity (Government office, PSU, Autonomous Body etc). In this way, a Central Ministry as wellasthePSUsandAutonomousBodiesunderitwillbeauditedtogetherbyasingle office (or group of offices), and audit of several Ministries/ Departments (grouped sectorwise) will be under a single DAI. The existing boundaries of Civil, Defence, Railway,CommercialandAutonomousBodiesAuditwillbedoneawaywith.
1B.
Regional ADAIs for State Reports, with arrangementsfor coordination and ensuring consistencyinacountrywideapproach.
3.1 Background
OurauditarrangementsinrespectofentitiesundertheGovernmentofIndia(GoI)areorganized primarilybasedonthenatureoftheentity,ratherthanonasectoralperspective.Forexample,
While Ministries and Departments of Government of India are audited by the respective Principal Audit Offices (DGACE, PDAESM and PDASD on the Civil Side; DGADS, PDAFN, PDAOF on the Defense Side, theRailway Audit Offices etc.), the commercial undertakings undertheadministrativecontroloftheseMinistries/DepartmentsareauditedbytheMABs reportingtoDAI(C). UnitsofMinistries/DepartmentslocatedoutsideDelhiareauditedbytheconcernedState PAGs/ AGs, except in Mumbai and Kolkata, where they are audited by DGA(C)/ PDA(C), whoseprimaryreportingrelationshipis,however,toDAI(RA). The autonomous bodies functioning under these Ministries/ Departments are audited by the respective Principal Audit Offices as well as State PAGs/ AGs, but are processed by a separatewinginHqrsunderADAI(C&AB).
ProblemswithExistingAuditOrganisation
Eachauditoffice,andfunctionalwinginHeadquarters,isconcernedprimarilywithauditof the units under its audit jurisdiction. There is lack ofoverall perspective for the Ministry/ Departmentaswellasthesector.
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Currently,integration ofaudit perspectives across audit offices andfunctionalwings takes placeonanadhoc/casetocasebasis,andeffectiveintegrationdependstoalargeextent onthepersonsinvolvedin such anexercise.While thereare manysuccessful instancesof 4 integrated audit across functional boundaries , in the absence of an institutional mechanism for integration, there are often cases of lack of adequate ownership for an integratedauditexercise.
Thecurrentorganizationalstructuredoesnotfacilitatecreationofdomainknowledgeona sectoralbasis;suchknowledgeisrestrictedtoindividualpocketsindifferentofficesandthat tootoalimitedextent.

Thisorganizationofauditofficesmaybecontrastedwiththeorganizationoftheauditeeentitiesunder GoI,wheretheadministrativecontrolofPSUs,autonomousbodies,aswellasattached/subordinate offices(locatedinDelhiandelsewhere)restswiththeMinistry/Department.
3.2 ReOrganisingAuditofGoIaccordingtoMinistry
Inthelightoftheneedforinstitutionalmechanismsforintegratedaudit,theauditofentitites under the GoI should be completely reorganized on the basis of the Ministry/ Department, ratherthanonthenatureoftheauditeeentity.
Theexistingboundaries/divisionssuchasCivil/Defense/RailwayAudit,CommercialAudit,Autonomous BodiesAuditshouldbedoneawaywith.Thiswillprovideafarbetterplatformforintegration,thanthe currentstructure. Twoissuesarelikelytobethrownupinthecontextofsucharadicalreorganisation:
Currently, commercial audit staff form a separate pool and are deployed for commercial auditofCentralandStatePSUs(withadhocdeploymentforcertificationauditofCentral/ State Autonomous Bodies). Under the proposed reorganisation, these entities will no longerfallwithinalimitedsetofauditoffices.Insuchasituation,thecadreofcommercial auditstaffwillbedeployedforallAuditOfficeswhichrequiretheirservices,particularlyfor certificationauditandalsoforspecializedsectoralknowledge(e.g.oilandgas);thisshould notbeamajorhandicap. The audit reports of the reorganized audit offices will be referred either to PAC or COPU (dependingon thesubject matter of the report). This is also not a major problem, as the auditeeMinistries/DepartmentsdealwithseveralCommitteesofParliament(PAC,COPUas well as the Departmental Standing Committees) as part of their normal operational activities.The paragraphs/chapters dealingwith PSUscanbereferredto the COPU (as in
4
E.g. coordination between the Commercial and RC wings on performance audits of Hydrocarbon Production SharingContractsandNACIL.
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the case of Commercial Chapters in combined State Audit Reports in the North Eastern States). Further, the proposed Parliamentary Relations Unit will also handle coordination issues,ifany.
3.3 CurrentAuditOrganisation
Currently,there are43auditofficesdealingwithauditofGoIentities,assummarizedbelow:
13CommercialAuditOffices(12MABsplusDGAP&T); 4DefenceAuditOffices; 6Civil/CentralRevenueAuditOffices(DGACE,PDAESM,PDASD,DGA(C)Mumbai,PDA(C) Kolkata,andDGACR); 17RailwayAuditOffices;and 3OverseasAuditOffices.

TheseauditofficesarecurrentlyreportingtofourDAIs DAI(RC),DAI(C),DAI(LB&A),andDAI(RA),and oneADAI(ADAI(C&AB)).
3.4 ProposedAuditOrganisation
WenowproposethattheauditofGoIbereorganisedunder53auditoffices 43existingofficesplus10 5 newoffices ,assummarizedbelow: Function DAI(Economicand InfrastructuralMinistries) No.ofAudit Offices 7DGs/PDsfor Economic Ministries DG/PD Petroleum(Upstream) DG/PD Petroleum(Downstream) DG/PD Steel DG/PD Coal DG/PD HeavyIndustries&Micro,SmallandMedium Enterprises(MSME) DG/PD Commerce,CorporateAffairs,Textilesand Tourism DG/PD Mines,ChemicalsandFertilisers 5DGs/PDsfor Infrastructure DG/PD Power(Thermal) DG/PD Power(HydropowerandPower
OralternativelybydiversionofexistingDG/PDlevelpostsinotherareas(e.g.PDRTIs,PDARailwaysforsome ofthesmaller,newlycreatedzones),asdeemedappropriatebyseniormanagement.
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Function
No.ofAudit Offices Transmission) DG/PD Shipping,RoadTransportandHighways DG/PD CivilAviation,UrbanDevelopment,Housing andUrbanPovertyAlleviation DGAP&T
DAI(SocialandGeneral ServicesSector)
3DGs/PDsfor DG/PD Agriculture,FoodProcessingIndustries,and SocialSector ConsumerAffairsandFood&PublicDistribution DG/PD HumanResourcesDevelopment,Panchayati Raj,WaterResources,Labour&Employment, Social Justice&Empowerment,MinorityAffairs,Tribal Affairs,andNorthEasternRegion DG/PD HealthandFamilyWelfare,Women&Child Development,andRuralDevelopment 3DGs/PDsfor Scientific Departments DG/PD AtomicEnergyandSpace DG/PD ScienceandTechnology,Agricultural ResearchandEducation,EarthSciences,Information Technology,andMedicalResearch DG/PD Environment&Forests,andNewand RenewableEnergy 3External AuditOffices PDALondon PDAWashington PDAKualaLumpur 2DGs/PDsfor General Services DG/PD HomeAffairs,UT,ExternalAffairs,Overseas IndianAffairs,LawandJustice,andParliamentary Affairs DG/PD I&B,Culture,Personnel,YouthAffairsand Sports,PlanningCommission,Statisticsand ProgrammeImplementation
DAI(FinanceandRevenue Audit)
4Revenue AuditOffices
DGACR,NewDelhi DGACR,Mumbai DGACR,Kolkata DGACR,SouthernRegion(Bengaluru/Hyderabad/ Chennai)
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Function
No.ofAudit Offices 2Financial AuditOffices DG/PD Finance(overallresponsibilityfor certificationofGoIaccounts,andauditofMinistryof Finance) DG/PD Finance&InsurancePSUs
DAI(DefenceandRailway Audit)
7DGs/PDsfor Defence
DGADS,NewDelhi PDANorthernandCentralCommands,Chandigarh PDASouthernCommandandDRDO,Pune DG/PD AirForce DG/PD Navy DG/PD OrdnanceFactories DG/PD DefencePSUs
17Railway AuditOffices
Restructuring/ reductionofRailwayAuditOffices maybeconsidered,afterconsideringtheworkload (especiallyinthenewlycreatedRailwayZones)and alsoinviewofthecurrentandfutureavailabilityof IAASOfficersatAGlevel AuditofRailwayPSUs(KRCL,DMRC,CONCOR,RITES, IRCONetc.)shouldbewiththeRailwayAuditWing
Ideally,aseparatepostofDAI(Accounts)wouldberequired,soastofocusfullattentiononthis importantfunctionandalsoforappropriatedirectionforstandardsetting(includingGASAB). Tillsuch timeasaseparatepostisnotavailable,thisfunctioncanbehandledbyoneoftheDAIs DAI(Finance andRevenueAudit)orperhapsDAI(Hqrs)orDAI(DefenceandRailwayAudit),dependingonan assessmentoftheirrelativeworkload Detailsof theproposedreorganisationofauditofficesinrespectofGoIareindicatedinAnnexe 4.
Theproposedreorganisationisacomplexone,involvingmajorrestructuringonascalenot seenintheIAADsince1984(whentheStateAGOfficeswerebifurcatedintoAuditandA&E Offices). Hence, a gradual and longterm approach will be required for its implementation, eveninphases.
Further,auditofallcentralunits(expenditure/receipts/ABs) whetherlocatedinNewDelhior elsewhere wouldbedoneonlybytheCentralAuditOffices.StatePAGs/AGswillberesponsibleonly forconductofAllIndiaReviewsofCentralSector/CentrallySponsoredSchemeswithintheirStateaudit jurisdictions.
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While the proposed reorganisation would ensure integrated audit for Ministries/ DepartmentsandotherunitsofGoIinmostcases,AllIndiareviews(inparticularthoseinthe socialsector)willneedactiveinvolvementandcooperationoftheStatePAGs/AGs,without whicheffectiveintegratedauditcannotbeachieved.Therewould,thus,needtobeextensive coordination between DAI (Social and General Services Sector) and the ADAI (Reports States),primarilyinauditofCentrallySponsored/CentralSectorSchemes.
3.5 StaffImplicationsofReorganisationofGoIAudits
Considering the sensitivity of such reorganisation on IAAD staff, we propose that no transfers ofIAAD officialsonaccountof thisreorganisation outside their currentstationof postingwouldbemade,withouttheirconsent.
Officialswhoconsenttomovetootherlocationscouldbeappropriatelyposted,whileofficialswhodo notagreetomovetootherlocationsmayeitherbeadjustedinotherauditofficesatthesamelocations withvacancies,oradjustedagainstpostspersonaltothem(whichwilllapsewiththeirtransfer/ retirement). Suchreorganisationisnotexpectedtobeamajorproblemintermsofstaffimplications,sincethereare notonlyhugevacancies (especiallyontheCentralCivilside)butthereisneedforincreasingthe sanctionedstaffstrengthinmanyareaswhichhaveseenahugeincreaseinexpenditureinthepast (withoutcorrespondingincreaseinstaffstrength).Suchincreasesinstaffstrengthshouldbeonlyatthe supervisorygrades.
3.6 Reorganisation ofAuditofStates

RecentproposalsforreorganisationofauditofStateshavecentredaroundcreatingpostsofRegional ADAIs;thiswouldhavetheadvantageofauniformcommandstructureandsinglereportingrelationship forfieldPAGs/AGs.Consideringtheadvantagesanddisadvantages,webroadlyagreewiththeapproach ofcreatingRegionalADAIs(eitherfourorfive,dependingonwhetheraseparateADAI(NorthEast States)istobecreated.Inaddition,theRegionalADAIorganizationwouldalsofacilitatecoordination amongstthedifferentStatePAGs/AGstoensureacommonalityofauditapproach,andminimizing chancesofimportantauditareasnotbeingauditeddue tolackofcoordination. WithRegionalADAIs,therewouldalsobenoneedfortheconceptofasinglePAG,withaco ordinatingresponsibilityinrespectofotherAGsintheState. Suchanapproachofacoordinating PAGwouldaddanadditionallayerintheorganizationalhierarchy,withoutanycommensuratebenefits totheorganization,sincehe/shewillnotbeheldaccountablefortheAuditReportsproducedbythe otheroffices.
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However,twokeyissueswiththeRegionalADAIstructureneedtobeaddressed:
ThereisadangerofAllIndiaReviewsofCentralSchemesbeingorphaned,withoneDAI having to deal with five zonal ADAIs; this could seriously compromise the objective of integrating audit efforts. To minimize this problem, in respect of Centrally Sponsored Schemes/CentralSectorSchemesinvolvingtransferandutilizationoffundsattheStateand lowerlevels,theconcernedDAI(primarilyDAI SocialandGeneralServicesSector)willhave tobeassignedaformalcoordinatingroleinthisregard. Eveninotherareas,theopportunityforauniformcountrywideapproach(particularlyfor Commercial and State Receipts) should be retained. This could be achieved through 6 designationofnodalDAIs/ADAIsforaspecifictopic .TheresponsibilitiesofthenodalDAIs/ ADAIswouldincludeprovidingoverallguidanceand,asfaraspossible,uniformityonanAll India basis,and alsoresourcesupport incasesofshortageof resources with the requisite competencies.ThisconceptofnodalDAI/ADAIwouldalsotieinneatlywiththeconceptof knowledgecentresandresourcepersonsproposedinthenextchapter.
This need not necessarily be the DAI dealing with Central Audit. While DAI (Economic and Infrastructural Ministries)couldbethenodalofficer forroadsandhighways,theRegionalADAIscouldbe thenodalofficersfor areaslikepublicworks,irrigationprojects,powerdistributionetc.
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4 Goal2:PromotingProfessionalisminPublicSectorAuditing
4.1 Sectorspecificknowledgecentresandresourcepersons
2A.
Creating an institutional mechanism of Knowledge Centres (KCs) for knowledge captureandmaintenanceonasectorspecificbasis
2B.
Creating sectorspecific pools of Knowledge Resource Persons (KRPs) at two levels (IAAS and supervisory officials) and providing suitable remuneration for this continuing,additionalresponsibility
4. 1. 1
NeedforKnowledgeCentres
Theissueofconstitutingknowledgecentresandpoolsofresourcepersonswithsectorspecificdomain knowledgeinareashasbeenengagingtheattentionoftopmanagementatseveralforums.Ourcurrent workindifferentsectors(whetherperformanceorthematicaudits)isstructuredonanassignmentby assignmentbasis,andthereislittlelongtermcontinuityinmaintainingandtrackingdevelopmentsina specificsector.WhileinstructionshavebeenissuedbyHeadquartersfromtimetotimeforpreparing auditeeprofilesintheformofpermanentauditfilesetc.,thesearepreparedroutinelyinmostfield auditofficesandcoveronlyindividualgroundlevelunits,withoutprovidinganoverallsectoral perspective. Consequently,asandwhenaperformanceaudit(especiallyanAllIndiaPerformanceAudit)is undertaken,literatureandinformationhavetobecollectedandassimilatedabinitio,andthereisno institutionalstructureormechanismformaintaininganorganizationalmemoryonasectoralbasis.In theabsenceofsuchsectorspecificknowledgegatheringmechanisms,theauditguidelinesoftenplace undueemphasiseitherongenericissueswhichcutacrossallsectors(e.g.planning,financial management,monitoringandevaluation)orgodowntoveryhighlyentity/unitspecificissuesarising outofpastauditreports/IRfindings.Thereisthusapressingneedforinstitutionalarrangementsfor knowledgecaptureandmaintenanceonasectorspecificbasis. IllustrativeSampleofSectorsforKnowledgeCentres Petroleum Agriculture and Irrigation; InternalSecurity foodsecurity; Power Telecommunications Defence Rural Preparedness generationand Railways transmission employment Financial Roads and poverty markets Power Shipping alleviation; distribution StateFinances
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Steeland Women and CivilAviation Coal(includingmining) Child Atomic Energy and Development Space Environment Scientific Health Institutions Education Weareproposingtwoarrangementsforsectorspecificknowledgebuilding:
OfficestobedesignatedasKnowledgeCentres(KCs)forspecificsectors; IndividualofficialstobedesignatedasKnowledgeResourcePersons(KRPs).
4. 1. 2
KnowledgeCentres(KCs)
WiththeproposedreorganisationofGoIauditoffices,generallytheoffice dealingwithaspecificsector (oraStatePAG/AGofficewithrichexperienceandcompetenceinaspecificsector)willactasthe knowledgecentreforthatsector,andwillalsocatertotheneedsofStatePAGs/AGs.The responsibilitiesoftheknowledge centerswillincludethefollowing:
Preparingperiodiccomprehensivesectorspecificpapersaswellasstatusupdates(withthe assistanceofKnowledgeResourcePersons); Preparingelectronic compendiumsof sectorspecific data relatingto (a) auditees (b) audit findings (both audit reports and IRs) (c) accounting and other statistical information of a sectorspecific nature (d) other policy and related documentation (both national and international)forusebyIAADoffices; Providing assistance to individual field offices in preparing guidelines for performance/ thematicauditsofspecificsectorsincludingdrawingupofauditobjectives,auditcriteria, andauditissues; Providingassistanceinhiringofexternalexperts(forprovidingsecondlevelsectorspecific knowledgewhichcannotbeprovidedfromwithintheDepartment).
4. 1. 3
KnowledgeResourcePersons(KRPs)
Giventhewide variation incompetencies andskillsof officials within the Department (and indeedGovernmentasawhole),wecannotrelyexclusivelyoninstitutionalmechanismssuch asknowledgecentresforsectorspecificknowledgebuilding.
Inadditiontosuchknowledgecentres,wealsoneedtocreatesectorspecificpoolsofKnowledge ResourcePersons(KRPs)attwolevels:
IAASKnowledgeResourcePersons(KRPs)whocouldbeamixofDGs,PDs,andDirectors soastoensurecontinuityintheeventofretirement,deputationsetc.(ideallythreepersons
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for eachsector);these IAASKRPs will continue to act asresourcepersonsforthat sector, irrespectiveoftheircurrentplaceofpostingorfunction.TheseKRPswillhavetopreparea draftcomprehensivepaperforthespecifiedsector(typicallyonceeverythreeyears)along withhalfyearlystatusupdates;thesewillberoutedthroughtheconcernedofficesactingas KnowledgeCenters.TheywillalsoneedtotaketrainingsessionsonthesetopicsatNAAA, iCISAetc.Forthiscontinuingitemofwork,suitableremunerationintheformofhonorarium (e.g.onemonthsbasicplusgradepayperannum)couldbeprovidedasanincentive Supervisory Knowledge Resource Persons (KRPs) these would be at the level of SAO/AO/AAOwhowouldbepostedtotheKnowledgeCentresinthespecifiedoffices;they would be responsible for collecting background information (both from the Ministries/ Departments/ units, as well as websites, newspapers etc.) and would be feeding this informationtotheIAASKRPs.Inaddition,thesesupervisoryKRPswouldberesponsiblefor ensuring that sectorspecific electronicdatabases /compendiums are kept upto date and also for internal circulation (hard copy/ IAAD website) of these documents within IAAD officesandofficials.TheywillalsoneedtotaketrainingsessionsonthesetopicsattheRTIs etc.Forthiscontinuingitemofwork,suitableremunerationintheformofhonorarium(e.g. onemonthsbasicplusgradepayperannum)couldbeprovidedasanincentive
4.2 Encourage central and state governments to build and strengthen institutionalarrangementsforinternalauditandriskmanagement
2C.
Encouraging Central and State Governments to build and strengthen institutional arrangementsforinternalauditandriskmanagement.
4. 2. 1
EncouragingInternalAuditsystems
Astronginternalauditsysteminanyorganisationaidsinevaluatingtheadherenceoftheorganisation tothepolicieslaiddownbymanagement.Effectiveresponsetoissuesflaggedbytheinternalaudit mechanismcoupledwithtimelyinterventionbythemanagementimprovesthegovernancelevelsinthe organisation.Aweakinternalauditleadstoanadditionalburdenonexternalauditastheexternal auditorsareforcedtoexaminethebasicissuesofcomplianceratherthanconcentratingoncritical policy,performanceandsystemrelatedissues. IntheGovernmentofIndiainternalauditmechanismshavelargelybeennonstarters.Mostofthe ministriesbarelyhaveafewinternalauditsbeingconductedeveryyear.Rarelydotheinternalaudit teamsflagcritical issues,whichcanberelieduponbytheexternalauditteamsintheassuranceprocess. EvenafterthestrengtheningoftheroleofFinancialAdvisorsbytheGovernmentofIndia,thesituation doesnotseemtobeimprovingsignificantly.ThoughtheFinancialAdvisorsoftheMinistrieshavebeen givenindependencetoactinafairmannerwithoutpressurefromthelineministriesinwhichthey
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serve,theyhavereallynotbeenabletodeliverthegoods.ThesituationintheStatesisevenworse, andbutfor afewexceptions,inmostofthestates,internalauditisaverylowpriority. Itis,therefore,intheinterestoftheCAGofIndiatopromoterobustinternalauditmechanismswithin theCentral/StateGovernments,sothattheCAGcouldconcentrateonmorecriticalissuesthatrequire evaluationbyanexternalauditor.TheCAGofIndiawouldneedtoaidtheCentral/Stategovernmentsin capacitybuildinginauditskillsthroughtrainingprogrammes.Theproposalforcreationandsettingupa separateinstitutefortraining(CIPAAI),whichcouldaidtheCentralandStateGovernmentsinbuilding capacityforinternalaudit,hasbeendiscussedseparatelyinthisstrategydocument.Theinclusionofa sectiononinternalauditintheManagementResponsibilityStatementandacommentontheadequacy ofinternalauditsystemshasbeendiscussedfurtherinparagraph6.2.2.
4. 2. 2
Encourage betterriskmanagement byCentralandStateGovernments
Auditofriskmanagementfocusesonhowwell theexecutivehasmanagedrisks associatedwithits key activities. Asauditors, weareequallyinterestedinpromotingadoptionofgoodriskmanagement frameworks/practicesinMinistries/Departments;assuchmanagementpracticeswouldfacilitatebetter governanceandimplementationof publicsectorschemes,programmesandactivities. However,risk managementis,andshouldbe,theresponsibilityoftheExecutive(andnotaudit) anditwillbethe endeavoroftheCAGtopromotebetterriskmanagementbysupportingthe InternalControlandRisk Management(ICRM)frameworkinitiativesoftheGovernmentofIndia.Bettermanagementofriskand betterinternalcontrolswillgoalongwayinaidingtheassurancethatistobegivenbytheCAGonthe accountsoftheGovernment.
4.3 Establishing a Chartered Institute of Public Accountants and AuditorsofIndia (CIPAAI)

2D.
EstablishingaCharteredInstituteforPublicAccountantsandAuditorsofIndia(CIPAAI)onthe linesofICAIandICWAI,undertheaegisoftheCAGofIndia.
2E.CIPAAIwouldtackleissuesofdaytodayaccountingproblemsandprofessionalupgradationof theskillsofthevastpooloffinance,accountsandauditpersonnelatthegrassrootslevel,and addressdeficienciesintheaccountingprocessesandfinancialcontrolsacrossorganisationlike hugearrearsinaccountsfinalisationandweaknessesininternalaudit.
2F.
CIPAAI would provide professional certification to the Group A professionals of the CAG organisationenteringintotheGovernmentofIndiathroughCivilServiceExaminations.
2G.
CIPAAIwouldprovide professionalcertificationtotheGroupBandCprofessionalsfromthe CAGbysubsumingtheSOGEcurrentlybeingconductedbytheCAGandalsotootherfinance, accountingandauditprofessionals in State/Centralgovernmentdepartmentsondemand.
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4. 3. 1
TheRationalefor establishing aseparateInstitute

CurrentBackground
4 .3 .1 .1
Finance,AccountsandAuditManagementinIndiaiscurrentlybeingcarriedoutintheGovernmentby constitutedAccountsandAuditServicesandbyCharteredAccountants,CostandWorksAccountants andMBAsinthePublicUndertakingsandPrivateSector.Theseprofessionalsundertakefinancial, accountsandauditmanagementfunctionsmostlyatthetoplevels.Further, thereareamultitudeof otherlayers (atthesupervisoryandclericalcadres) intheGovernmentandNonGovernmentSectors alsoinvolvedinmanagingandimprovingfinance,accountsandauditadministrationinthiscountry. Mostoftheseinstitutionsonlyaddressandtacklethehigherleveloffinancialpolicymaking,accounting andstandards, insteadofdaytodayaccountingproblemsandtheneedfor professionalupgradationat thegrassrootslevel. Whilethecertifications bytheInstituteofCharteredAccountantsofIndia,InstituteofCostandWorks AccountantsofIndiaetc, are professionallyrecognised,theskillsacquiredbytheGovernmentauditing andaccountingservices/specialists arewithoutanyprofessionalrecognition.Thoughsome ofthese functionarieshaveaformalbackgroundinfinance,accountsandaudit, amajorityofthemdonot possessprofessionalqualifications.Eventhosepossessing professionalqualificationshave acquired them onlyattheentrypointanddonot goinforupgradation/continuingprofessionaleducationinthe courseoftheirlongcareerspanning30to40years.Inthepast,clearingtheSAS(SubordinateAccounts Services)examination(currentlyknownastheSectionOfficerGradeExamination)conductedbythe CAG wasconsideredasasuitablequalificationforrecruitmentinotherPublicSectorOrganisations. However,thispracticehasdisappearednow.
4 .3 .1 .2
Theproblem
Currently,thereislackofprofessionalismamongstthelowerandthemiddlelevelfunctionariesinthe areaoffinance,accountsandauditing.Thishasledtodeficienciesintheaccountingprocessesand financialcontrolsacross organizationse.g.
Huge arrears in finalization of accounts of many institutions both Governmental and Commercial, with even routine functions like reconciliation within offices are being neglected. InternalAudit,whichisrequiredtoflagaccounting,controlandotherrelatedissuesto themanagement, ismostoftennonexistent orineffective.
FinallytheburdenofthisfallsontheExternalAuditors,who havebeenpointingoutnumerous shortcomings yearafteryear.Theproblemhasacquiredacutedimensions andiswidelyrecognized. Thereisalsoahugeshortageofproperlytrainedandskilledaccounting/auditingpersonnelatthelower
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andmiddlelevels.Withoutanyprofessionalqualification(apart fromtheirexperience),the lower/middlelevelaccounts/auditfunctionaries donothaveasophisticatedunderstandingofthe principlesofaccountingortheirimplementation.Intheabsenceofanygrowthprospectslinkedto qualifications, theyarenot adequatelymotivatedenoughtoupgradethemselvesinlinewithbest practices.Thereis,therefore,akindofviciouscyclethatoperates,leadingtoalowerlevelofefficiency andeffectivenessinthefinance,accountingandauditingprocessesinStateGovernments,State/Central Governmentundertakings,Cooperatives,AutonomousOrganisations,Urban&Rural LocalBodies, Universities,Publicutilitiesetc. Withtheadventof globalization,policymakers,state/centralgovernments,theCAG, endusers andthe WorldBankandothermultilateralfundingagencieshavehighlightedtheneedforupgradingand professionalizingtheskillsofthefinance,accountsandauditstaffatthelowerandmiddlelevels. Further,theneedforsuchupgradationisalsovalidatedbythefactthatIndiaisemerginggloballyasa leadingserviceproviderinbusinessprocessoutsourcingintheFinancialSector.
4 .3 .1 .3
International Scenario
Thisproblemhasalreadybeenaddressedinmanycountriesbysettingupprofessionalbodieslike the GovernmentFinanceOfficersAssociation(GFOA),AssociationofGovernmentAccountants(AGA)and CertifiedGovernmentAuditingProfessionals(CGAP)intheUnitedStatesofAmerica(USA),Chartered InstituteofPublicFinanceandAccountancy(CIPFA)intheUnitedKingdom,AssociationofAccounting Technicians(AAT)inSouthAfrica,Australia,SriLankaandtheU.K.InCanada,certificationintheformof CertifiedGeneralAccountant(CGA)addressesthisneed.TheseInstitutions/certifications havehelped inbridgingthegapofskillandknowledgerequirementsatthegrassrootslevel.

4 .3 .1 .4
WhytheneedforaseparateCharteredInstitute
Itcouldbearguedthatthealreadyexisting institutions liketheICAI,ICWAI etc.couldaddresstheissue ofskillupgradationatthemiddleandlowerlevelsofaccountsprofessionals.However,themandateand cultureoftheseinstitutionsdonoteasilyfacilitatethemtoundertakethistask,asthey havewell establishedprocedures,whichcatertoapredeterminedselecttargetgroup,whichformsaminiscule elite.Itwouldbedifficultand disadvantageousforthemtoexpandtheirprocessestocatertoalower targetgroup.Further,theexistingInstituteshavemaintainedtheirstandards, mainlyduetothe homogeneityofthebackgroundoftheirmembers.Henceitisessentialthataseparatenationalbody establishaspecialisedinstitutionforcreating aprofessionallayeroflower/middleaccountants/auditors withindividualaspirationsandqualifications,especiallysincemassivenumbersacrossthecountryare involved.Insuchascenario, itwouldbeessentialforawellestablishedorganisationlikethe CAG totake theleadandaddressthevariousissuesdetailedintheproposal.
4 .3 .1 .5
Whattheinstitutewoulddo
TheestablishmentofaCharteredInstituteislikelytobeamajorstepin:
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Overcoming the deficiencies in the available knowledge and skill of the lower and middle level of finance, accounts and audit functionaries, and acting as a major provider,motivatorandfacilitatorforupgradingtheirskills,andalsobringingabout a quantumchangeinthequalityoffinance,accountsandauditinthecountryandserving asamodelfordevelopingcountries. Providing professional certification to the Group A Audit and Accounts professional entering into the Government of India and State Governments through Civil Service Examinations. Providing professional certification to the Group B and C Audit and Accounts professionals. Establishing a programme for Continuing Professional Education (CPE) for certified professionals.
4 .3 .1 .6
StatutoryRecognitionforCIPAAI
ThecertificationbeingissuedbytheCIPAAI wouldrequiretoberecognizedbythegovernmentsothat thecertificationbeing offeredhasvalueinthemarket.InordertooperationaliseCIPAAI asaseparate charteredornationalinstituteonthelinesofICAIorICWAI, itwould,therefore,benecessarytoobtain parliamentaryapprovalthroughpassingofanAct.Thereafter,CIPAAIdegree/certificationcouldstriveto havethesamekindofrecognitioninthepublicauditingandaccountingspacethattheCAcertification enjoysinthecommercialaccountancyspace.
Thedetailedproposal is giveninAnnexe 5.
4.4 Settingup an InternationalConsultancywing
2H.
TheneedinSAIIndiatosetupanInternationalConsultancywing,asthereisagreatdemand for SAI Indias expertise in areas of Public Audit and Financial Management amongst many SAIswhoareintheprocessofdevelopingthepublicauditsystemsintheircountries.
With150yearsofhistoryinauditingandaccounting,theCAGofIndiahasbeenabletoemerge asoneof themostdevelopedandmaturedSAIsintheworld.Inthelast3decades,SAIIndiahasbeenalso showcasingitsstrengthbytakingupmanyprestigiousinternationalauditassignments.Furtherthere alsobeenaverygreatdemandforSAIIndiasexpertiseinmanyotherSAIswhoareintheprocessof developingthepublicauditsystemsintheircountries,especiallybecauseofthesimilarityoftheauditee environmentandchallenges(unlikeSAIsindevelopedcountries).Further,inmanyemergingareasof auditlikeITaudit,socialsectorauditandenvironmentaudit,theCAGhasbeenabletomakeamark internationallyandemergeasworldleaders.
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IntheyearstocomethereisneedtobuildawinginSAIIndiawhichwouldprojectitselfasseriousplayer involvedintakingupInternationalPublicAuditandFinanceconsultancies.Thespecializedwingcouldbe initiallyheadedbyaDirectorGeneralofAudit/PrincipalDirectorofAuditandhaveayoungteamof3to 4Directorlevelofficerswhocouldspecialiseinareaslikeaccounts,PerformanceAudit,Compliance Audit,CertificationAuditetc.Inaddition,apanelofexperts(bothIAASandsupervisoryofficers)with sectorspecificdomainexpertisecouldalsobemaintained.Theidentityofthiswingcould,perhaps,be separatefromtheInternationalRelationsWingthoughthetwowingswouldrequireworkingtogether whilesolicitingandundertakinginternationalassignments. TheInternationalConsultancywingcouldalsoassociateitselfwithsomeofthe multilateralfunding agencieslikeWorldBankandtheAsianDevelopmentBankwhocouldalsofundsuchconsultancy initiativesinSAIswhofeeltheneedforupgradingtheirPublicAuditandFinancialsystems.
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5 Goal 3: Improving communication with stakeholders and ensuringhighervisibility

3A.
Needforthe CAGtobemoreproactiveinhisinteractionswith themedia
3B.
SettingupaseparateParliamentary/LegislativeRelationsUnit toextendproactivesupport
3C.
Buildingabrandfortheorganisation
3D.
TreatingInspectionReportsasproductsoftheCAGforconsumptionbythepublicandother stakeholders
3E.
Introducing more valueadded products like study reports, compendiumsetc., so that they actasAidstoManagement
3F.
Settingupcounters ineachcityfordistributingauditreportstocommoncitizens
3G.
Givingmorefocuseddisseminationandcommunicationthroughvernacularlanguages
3H.
RevamptheCAGwebsite
5.1 Need for the CAG to be more proactive in his interactions with the media
5. 1. 1
Currentposition
ThecurrentpracticebeingfollowedforinteractionswiththemediaintheCAGorganisation onlyentailsholdingapressconferencewiththemediaafterpresentationofauditreportsto the parliament/legislature. Thereafter, interactions on these audit findings are not structured,andonlyhappeninrarecasesinareactive,adhocmanner. Sometimes (especially on the Central side), multiple Audit Reports are bunched together for tabling, and a single Press Conference is held covering a variety of disparate topics. Often,adequateattemptsarenotmadetotargetmediacorrespondentsfromspecificbeats (health and education, water and irrigation etc.) due to lack of adequate internal communicationbetweendifferentwings. Eveninthepressconference,thepresentationandthepressbriefwhicharepresentedto the media are based largely on the highlights/executive summary forming part of the approvedAuditReport.Hence,noadditionalinformationofaclarificatory/supplementary nature is shared in the press conference. Thus, an opportunity for invoking the kind of
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responsewhichiscommensuratewiththestronginformationandfindingscontainedinthe reportsisnotfullyexploited. Accordingly,onlythoseissuesthatqualifyassensationalnewsaccordingtothepress,are pickedup.Allthisleadstoaskewedreportingofthe Reportsandveryoftensmallissuesget highlighted unduly, at the cost of leaving out big ticket issues. This situation is further handicapped by the fact that there is no strategy in place to counteract and rectify such skewedreporting.
5. 1. 2
Needtoframea morerealisticmediapolicy
Thereisaneedtoframeasuitablepolicythatallowspressbriefingstoextendbeyondtheapproved highlights/executivesummarythatalreadyfeaturesintheauditreports.Fieldofficesneedstobe empowered(andtrained)tosuitablybriefandhandlecontroversialquestions fromthemediawithout puttingthe CAG inadifficultposition.Wheneveramediainteractionisplannedbyanyfieldoffice,there isaneedtoensurethepresenceofrepresentativesfromthemediawingof the CAG.Thiswillensurea certaindegreeofconsistencyintheapproachofdifferentfieldformationstothemedia.Thus,thereisa needtospelloutaclearmediapolicytoensurethatthevastreachandsphereofinfluenceofthemedia istakenadvantagebyusfordisseminatingthe CAG auditfindings.
5. 1. 3
Needforstructureddisseminationofauditfindingsthroughmedia
Forwidedisseminationof audit reports,wearelargelydependentontheprint/TVmedia.However,we findthatmediaoftenpicksuponlythose audit reports orissueswithinanauditreport, whichintheir viewmakegood/sensationalnews.Thisveryoftenleadstoskewedfocusoncertainissuesinouraudit reports.Toaddressthisissueandtoincreasetheimpactoftheauditreports,theIAADcouldconsider regularlybuyingspaceinprint/TVmediasothatthesereportsaredisseminatedinastructured,focused andsustainedfashionthroughouttheyear. TheIAADcouldalso consider disseminating the audit reports anditsfindings throughorganisationally sponsored(bytheCAG) columnsinnewspapers/magazines, programmesonTVetc. Inordertomanagetheseprocessesmoreeffectively, theIAADmay also considerempanellingfulltime 7 PublicRelations/MediaManagement agencies forthispurpose.
5. 1. 4
Needto moreproactivelyaidthemedia
An exercise for appointing a PR agency for the celebrations of the 150years of the institutionof the CAG is currentlyunderway.Inourview,thisshouldbeextendedtoalongertermengagement,withclearlydefinedscope, objectives,anddeliverables.BuildingtheIAADorCAGbrandasalongtermexerciseshouldalsobepartofthis assignment.
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Veryoftenissuesgetflaggedbythemediawhichstirupadebateinthecountry.Atthisjuncture,the medialooksforauditreportsoftheCAGasacredibleandindependentsourceofinformationto supplementthedebate.ThisposesagreatopportunityfortheCAGtoshowcaseitsreportswhichcould addvaluetothe issuesbeingdebatedearlieralso. However,currentlywedonothaveanymechanismto aidthemediawithsuchinputs.Itis,therefore,proposedthatasandwhentopicalissuesarise,there mustbea mechanism ofcollatingandpresenting(onthe website,throughthemediawing)pastaudit findingsorotherrelatedissues(coveringfindingsacrossCentre/State/differentfunctionalwings)so thatthemediagetsanappropriateperspective. Thiswillgoalongwayinimprovingtheimageofthe organisation. Forexample,wheneveranyrailway accidentoccurs,themediastartshuntingforreportsoftheCAGthat hadflaggedsuchsafetyissuesinthepast.However,iftheCAGquicklyputstogetherallreportsinthe 8 lastfewyearsissuedrelatingtosafetyandhighlightstheresponsebytherailways ,itwillgoalongway inenhancingthepresenceandimageoftheorganisation.
5.2 SettingupaseparateParliamentary/Legislative RelationsUnit

Parliament(andtheStateLegislatures)aretheprimarystakeholdersfortheCAG.AllmajorSAIshave separateParliamentaryRelationsUnits orsuchequivalentarrangements,whichprovideinformationand feedbacktoPACmembers/otherMPs/Congressionalstaffonrequest.The CAG mustpositionitselfto thefirstpointofcontactandsupportonaccountabilityandassuranceissuestotheParliament/ Legislatures inamoreproactiveway. Currently, suchsupport isbeinghandledbyindividualreport wings,whohavetoprocessthesecasesinadditiontotheirongoingandcontinuouswork.Weneedto haveanadequatelystaffedParliamentaryRelations/LiaisonUnit,whichneedstorespondto Parliamentaryrequests.Induecourseoftime,suchaUnitshouldalsoenvisageaproactiverolein providingbriefings/documentstoParliamentarians. Suchastructureshouldbeappropriatelyreplicated attheStateLevel. Further,inadditiontosupportingthePAC/COPU,wecouldalsoconsiderofferingappropriatingsupport (throughthisunit)toafewselectedDepartmentalStandingCommitteesofParliament.
5.3 Buildingabrandfortheorganisation
Toensurerecallinthemindsof citizensregardinganyinstitution,itisnecessary todistinctivelybrand theproductsoftheinstitution.Forthis,thereisaneedtoensurethattheproductsoftheinstitutionlike auditreports,presentations,referencesetc.,havesomedistinguishingandstandardizedfeaturessuch asaparticularcolourscheme,logo,header,footer,fontetc,sothattheycanberecognisedeasilyasa brandedproductofthatinstitution.Inthiscontextthereisaneedtostandardisetheletterheads, visitingcards,presentationtemplates etc.,fortheCAGorganisation.Introducingaclipon badge/broucheforallfieldauditstaff withtheinsigniaoftheorganisationwouldalsogoalongwayin buildingabrandfortheorganisation.
Aswasdonerecently.However,insteadofbeingaoneoffexercise,thisshouldbeinstitutionalized.
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TheservicesofPRagencies,whospecializeinsuchbrandbuildingexercises,shouldbeutilizedtothe extentpossible.
5.4 TreatInspectionReportsasproductsoftheCAGforconsumptionby thepublic andotherstakeholders

InspectionReports issuedbytheCAGtoauditedentitiesareastorehouseofinformationregardingthe 9 entities .Itisimportantthatsuchinformationisavailableforthescrutinyofallstakeholderswhowould liketogeteducatedonallsuchissues.Sucheducationcouldalsoleadtootherstakeholdersactingas pressuregroupsinensuring correctiveactionbytheexecutive.Howeverasperthecurrentsystem,this informationisnotavailableinthepublicdomainandislefttoeithertheauditorsandtheaudited entitiestofollowupontheissuesreflectedintheseinspectionreports.Disclosuretootherparties (includingthepublic)ismadeonlyinareactivefashioninresponsetorequestsundertheRTIAct. Inordertoimprovetheoverallgovernanceinthecountry,itbecomesnecessarytoensurethatother stakeholderslikethegeneralpublicareeducatedonsuchissues.Itisthusproposedthatweshouldtake proactivemeasurestoensurethat all InspectionReportswhicharealreadyaccessibletothepublic throughtheRTIActbemadepubliclyaccessiblethroughthe various websitesoftheCAG. WehavedrawnattentiontotheindifferentqualityofIRsandtheisolatednatureoffindingsreported throughtheseIRs(ratherthananoverallperspective).However,despitetheseobviousdeficiencies,the IRsstillremainavaluablesourceofinformationforinterestedstakeholders.Inadditiontomakingthese IRspubliclyavailable,parallelactionshouldbetakentoimprovethequalityofIRsthroughmeasures suggestedelsewhereinthisdocument. AphasedapproachcouldbeadoptedtopublicdisclosureofIRsthroughuploadingontheInternet. Initially,IRsarisingoutofthematicauditscouldbedisclosed,followedupaselectionofhighqualityIRs aftercarefulscrutiny.Inthethirdphase,allIRscouldbeplacedinthepublicdomain;hopefullybythat time,measurestostrengthenandreorientcomplianceauditwouldbefullyimplemented.
5.5 IntroducemoreValueaddedproductsotherthanauditreportslike AidtoManagementSeries

CurrentlytheCAGauditreportsaretheonlypublicproductsbeingputoutinthepublicdomain.With justabout150auditreportsbeingpresentedtoParliament/legislatureeveryyear,thevoiceoftheCAG asanaidtomanagementinimprovinggovernancegetsrestricted.Recently,theCAGhasbeen experimentingwithsomeothervalueaddedproductswhicharetargetedtoactasanaidto management andnotforpresentationtotheParliament.Afewsuchproductsalreadybroughtoutby theCAGlikestudyreportsandcompendiumshavemetwithgreatsuccess.Thereisaneedto consolidateandpopularisetheseproductsandalsolookatafewmoresuchproductsinthenearfuture.
9
An introduction about the entity {Part I(a)}, outstanding objections in brief from previous reports {Part I(b)}, major complianceirregularitieswhich pointtosystemfailure{PartIIA}, irregularitiesorrecoveriestobeeffectedor regularised,whichthoughnotmajoraretobebroughttothenoticeofhigherauthorities{PartIIB}andTestAudit Notecontainingminorirregularities,towhichascheduleofitemssettledonthespotshould beattached{PartIII}.
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We should roughly be able to target at least 75 such alternate products that could be presentedtotheExecutiveasanAidtoManagementSeries.
5. 5. 1
StudyReports
StudyReportsliketheoneonthe PreparednessfortheXIXCommonwealthGameshavebeenvery positivelyreceivedbytheExecutive;thesewerefollowedbyStudyReportsonpreparednessfortheSAF GamesinUttarakhandaswellasCWGrelatedRailwayProjects.SuchStudyReportshelpus toposition ourselvesinamoreproactiveparticipatoryroletowardsthecommonobjectiveofboththeauditeeand theauditorofimprovinggovernance,i.e. aspartofthesolution,ratherthanmerelyhighlighting deficiencies.

5. 5. 2
Compendiums
TherecentcompendiumonPoliceModernisationwasanotherproductwhichwasverywellreceived bytheExecutivetoplantheirfuturestrategiesacrossstatesinthecountry.Thisproductwastimelyin highlightingthecriticalissuesthattheexecutiveneedtoaddresswhiletacklingimportantlawandorder issuesinthecountry.

5. 5. 3
Transitioningproductsfornewgovernments/legislature
Wheneverthereistransitionbetweengovernments,theCAGcouldevaluateandbringoutareportthat highlightscriticalissuestobeaddressedbythenewgovernment.However,thishastobedoneinavery sensitiveandprofessionalwaysothatitisensuredthatthecriticalissuesidentifiedbytheCAGdonot getconstruedasareporthighlightingtheweakareasofthepreviousgovernmentanddonottakeon politicalovertones.Theideaofthistransitioningproductismoretoflagallthecriticalissuesthatrequire neworcontinuedfocusbythenewgovernment.
5. 5. 4
PreparingahighrisklistforGovernment
InadditiontoexaminationofriskmanagementprocessesintheGovernment, theCAG couldconsider attemptingalistofhighriskareasfortheUnionGovernment,basedonpastauditexperience.Such auditexperiencewouldessentiallybebasedonpastAuditReports(Performance, Compliance and FinancialAudits)andactiontakenthereon(orlackofsuchaction).Suchadocumentwouldbe worthwhileproducing,asitwould,inasingledocument,highlighttheCAGskeyconcerns(top1020)on thegovernmentsaccountability.However,suchanauditassessmentofhighriskareaswouldhaveto beamacro,highlevelassessment,andcannotaffordtofocusonlessimportant/routineissues.Further, itwouldhavetobebasedprimarilyonauditreportmaterial(whichiswhatourinstitutionscredibility comesfrom).Theoreticalanalysisofissues withoutauditeffort could,atbest,beusedonlyto supplementfindingsbasedonaudit,sincesuchanalysiscouldbeproducedbyseveralotherinstitutions andnotjusttheCAG.
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5. 5. 5
GoodPracticeSeminarSeries
Overtheyears,theroleoftheC&AGhasbeenrecognizedasaninstitutionthathasaidedinimproving governance,butonlyindirectly.Thisislargelybecausemostofthewisdomwhichhasbeenimpartedby theC&AGhasbeenthroughthevehicleofauditreports,whicharemoreinthenature ofpostmortems. Thegeneralperceptionhasbeenthatauditorsalwayscomeinaftertheeventisoverandthishasvery oftenimpactedontheoverallimageoftheC&AG intheeyesofits numerousstakeholders.Inorderto enhancetheimageoftheC&AG,weneedtoconsidertheconceptofPreventiveauditonthelinesof Preventivevigilance.Inthiscontext,wecouldconsiderholdingaseriesofGoodPracticeSeminarsall overIndia.Theseseminarswouldhelpin:
Increasingawarenessamongststakeholdersonimportantgovernanceissues Sensitizingexecutivedepartmentstotheprevalentrulesandregulationsanddiscussingits complexities Reviewingnewtrends,techniquesandbestpracticesbothnationalandinternational. Suggestingimprovementstotheexistingframeworks

SometopicsfortheseGoodPracticeseminarseriescouldbeprocurement,publicprivatepartnerships, research&innovation,consultancy,performancemeasurement,projectmanagement,regulation, publicservicedeliveryetc.Themodalitiesofconductingtheseminarcouldbe
Selectatopicandafterdueinternalresearch,finalizethesubthemesfordeliberationinthe seminarandprepareastatuspaperfordeliberation. RuntheseGoodPracticeSeminars,acrossthecountryinaround4to6citiesforaperiodof 6 months. The duration of the seminar could either for a day or two depending on the subject. Invite panelists from a mix of stakeholders (e.g. implementing departments, NGOs/ Civil SocietyOrganisationsandauditors)tosharetheirthoughts.Thenumberofpanelistscould varybetweento5to10dependingonthesubject.Somepanelistscouldbecommonacross cities Inviteparticipantsfrommixfromimplementingdepartmentsandauditors.Thenumberof participants could vary between 50 to 60 participants in each city. The local Accountant Generalcouldidentifytheparticipants. Circulate seminar deliberationsimmediatelyafter6months and bring out a goodpractice paperaspartofCAGsGoodPracticeSeries. Target twosuchGoodPracticeSerieseveryyear.
ConductingaseriesofGoodPracticeSeminarsandbringingoutaGoodPracticeSerieswillgoalong wayforwardinenhancingtheimageoftheinstitutionoftheCAGasbeinginvolvedinimproving
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governanceinthecountry,andalsoprovideadditionalavenuesformediacoverageandcommunication withthelargerstakeholdercommunity,whichwouldbeseparate fromtheAuditReports.
5.6 Setting up counters in each city for distributing audit reports to commoncitizens
OurAuditReports(aswellaspictorialCDbooklets,whichprovideasummaryofthemainauditfindings alongwithanelectroniccopyofthefullAuditReport)represent theeasiestwaytocommunicatewhat wedotoourtargetaudience.Currently,printedcopiesoftheCAGsAuditreportsareavailableonly withtheofficesproducingthesereports.However,ourmechanismsfordistributionareveryweak,and accessibilityofstakeholdersandthegeneralpublictothesereportsremainslimited.Thereisnoeasy waybywhichanybodycanask(whom?)foracopyofanAuditReport,andgetitimmediatelyorquickly. Whileelectronicversionsofthereport(inEnglish)areavailableonourInternetwebsite,theserepresent onlyasupplementarymethodofdistribution(targetedprimarilyatayoungerITsavvyaudience). Consequent,thereisaneedtobroadenthechannelsfordistributionofauditreports:
Settingupcountersineachcity(thelocationofwhichisinahighvisibilityareaandiseasily accessible by common citizens), where common citizens can collect copies of our Audit Reports(CentralaswellasStateAuditReports)andCDbooklets.TheAuditReportsforthe last few years should be arranged themewise. Further, electronic version of all Audit Reports (Centre and States) for the last 1215 years should be available, so that through appropriate searches based on the topic, reports/chapters of relevance could be located andeithermadeavailableonCDorprintedoutanddistributedatnominalcost. DisplayingselectedAuditReportsinotherGovernmentBuildings(appropriatelytailorede.g. SocialSectorAuditReportsinthereceptionareaofMinistriesofGoIdealingwiththesocial sector); MakingreportsavailablethroughthefieldofficesoftheDirectorateofPublicationsDivision (DPD), Ministry of I&B; leading libraries in academic and research institutions, as well as throughtheNationalBookTrustofficesaswellasleadingbookstorechainswiththeclear understanding that the objective is not to recover costs or generate revenues, but to generateawareness.
5.7 Giving more focus on dissemination and communication through Hindi/Vernacular languages
AllCAGReportsarepublishedinEnglishaswellasavernacularlanguage/Hindidependingonthestate inwhichthereportisbeingpresented.Whileovertheyears,thequalityoflanguageusedintheEnglish reportshasbyandlargebeenstandardised,the qualityofthetranslatedreportsinHindi/Vernacular languagesneedssomeenhancementinquality,primarilyonaccountoftheuseofhighlystiltedphrases
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10 andusages whichareusedonlyinbureaucraticparlanceandarenoteasilyunderstandablebythe commonman.Inordertoimprovethequalityofthesetranslatedreports,thereisaneedtouse quality professionalstoenhancequality.Thisisparticularlyimportantasmostofourstakeholderspreferto readthereportsinHindi/VernacularlanguagesovertheEnglishlanguage.Thisisanareawhere renewedfocusisrequired.
Further,theCAGwebsitedoesnotupdateandupload Hindi/Vernacular reports ascurrentlyasthe Englishones.Thereis,therefore,aneedtoupload allCAG reports (inEnglish/Hindi/Vernacular Language)inthewebsiteonthedayofpresentationalongwithtickerstoattractattention.Further,all otherproductsoftheCAGshouldalsobetranslatedintosomekeylocallanguageswhereverrequiredso thatreadabilityandourreachcouldimproved.
5.8 RevampingtheCAGWebsite
InthenewITage,Internetwebsiteshavebecomethe mostcommonsourcesofinformationand knowledgesharingbyanyentity.Themoreinformativeandinteractivethewebsite,themorethe chancesofincreasedhitsonthewebsite. TheCAGsInternetwebsiteshouldpositionitselfasaonestopportalforindependent,credibleand validatedinformationongovernance.Forexampleifanyvisitortoourwebsitewantsinformationabout healthrelatedissuesfeaturinginauditreportsacrossthecountry,thenthesearchengineshouldbeable tolistoutallsuchissuesreportedontheCAG,suitablycategorizedandclassified(e.g. compliance/financial/performanceaudits,yearwise,statewise,departmentwiseetc). Thesearchfacilitiescurrentlyavailableonourwebsitearerudimentary.Thusthereis,therefore,aneed torevampourwebsitetoensurethat:
All audit products (Audit Reports, Management Studies, IRs etc.) are available on the website. Anymemberofthegeneralpubliccaneasilynavigatethroughthewebsitetoelicitsubject wiseandsectorwiseinformation. Itispossibletoeasilyquerythesystemandextracttherequiredinformation Thewebsiteisvisuallymoreappealing,yetsimple.
10
Thisgenerallyarisesbecauseoffrequent,overuseofEnglishHindidictionariesbyourstafffortranslationofthe EnglishReport
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6 Goal4: EnhancingAudit EffectivenessandImpact

6.1 IntegratedApproachtoFinancialandComplianceAudit
4A.
Conductingpilotintegratedfinancialcumcomplianceauditsindifferentareaswithaviewto assessing the advantages and disadvantages of such integration, and drawing up a phased approachtointegratedfinancialcumcomplianceaudit
MostdevelopedcountrySAIsconductonlytwotypesofaudit:
Financial / regularity audit, which covers both expression of an audit opinionon financial statements,aswellasassessmentofcompliancewithapplicablelaws,rulesandregulations; and Performance/VFMaudit
Thereisnoseparatetypeofcomplianceortransactionaudit;thisisanintegralpartoftheannual financialauditprocess.
11 Thetransaction/complianceauditbyIAAD is,thus,differentfromthefinancial/regularityaudit,asis internationallypracticed,inthefollowingways:
It is undertaken separately from the certification/ audit process and no coordination is attempted. Major findings arising out of the transaction audit (viz. instances of noncompliance, irregular/ wasteful expenditure, fraud etc.) do not feed into the annual certification process;donot,ingeneral,haveanimpactontheCAGsauditcertificatethattheaccounts present a true and fair view of the financial position of Government; and, thus, do not contributetoprovidingassuranceonthefinancialstatements. Whiletheannualauditopinionisbasedonfindingsrelatingtoactivities/transactionsduring the financial yearonly,complianceauditfindings,aspresented inthe CAGsAudit Report, are not restricted to transactionsduring that year and could cover transactions upto34 12 yearsold .
Thus,ourtransaction/complianceauditprocessis,inmanyways,ananachronism(viewedwith referencetointernationalpractices).It would,therefore,belogicaltointegratefinancialandcompliance
11 12
AndsomeotherSAIsindevelopingcountries(notablythesubcontinent) The preface to the CAGs Compliance Audit Reports carries a specific reference that findings relating to transactions of earlier years have also been included. As a matter of practice, however, findings relating to transactionswhicharefiveyearsoldormorearenotgenerallyconsideredforinclusionintheAuditReport.
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auditintoasingleprocessgearedtowardstheobjectiveofprovidingauditassuranceonthefinancial statements,asalsoontheadequacyandeffectivenessoftheinternalcontrols. However,asagainstthenumerousadvantagesoftheintegratedfinancialcumcomplianceaudit approach,severaldifficultiesinpracticalimplementationofsuchanapproachhavealsotobe recognized:
TheIAADitselfhasbeenconductingintegratedfinancial cum complianceauditsduringits auditsoftheUN,WHO,FAOandotherinternationalagencies.Forsuchprestigiousinternal audits, officers and staff are chosen through a rigorous selection process targeted to maintainahighqualityofauditresources;however,this,initself,isnotaninsurmountable obstacle to an integrated audit approach in domestic assignments. Similarly, our audit of expenditure on World Bank and other multilaterally funded projects is increasingly an integratedfinancialcumcomplianceaudit,asisthecaseforsmallautonomousbodies. Themainimpedimenttoconductofintegratedauditsisthepoorgovernanceandinternal control structures of our auditee agencies. It is well recognized that the adequacy and effectiveness of internal controls, including financial controls, in most Government Departments and agencies leaves much to be desired. The timeliness of rendering of accounts (both the primary accounts by the Treasuries and Divisions of the State Governments as well as the Appropriation Accounts and Finance Accounts statements by the different Pr. PAOs of the Central Government) and adherence to the stipulated time schedules is extremely poor. The process of rendering the audit opinion on the annual accounts isthus a race against time.Combiningthe financial andcompliance auditsmight welldelaythefinalizationoftheCAGsauditopinion. Acasecouldbemadeforatwo/threephaseauditinaconcurrentmannerthroughoutthe year,soastominimisethetimetakenattheendoftheyearforfinalizingtheauditopinion. Itishoweverwellrecognizedthatasignificantproportionoftheannualexpenditure(andin somecases,themajorityoftheexpenditure)isincurredinthelastquarterofthefinancial year,especiallyin themonthofMarchitself.Theriskfornoncompliance,improprietyand wastefulness(ifnotfraud)ofsuchexpenditurelatein thefinancialyearisextremelyhigh, andconductingfinancialcumcomplianceauditinahighlycompressedtimeframe,soasto ensuretimelyfinalizationoftheauditopinion,carriespotentialauditrisks.
13 Given the state of internal controls in most Government organisations , it would not be difficultto givesuitable qualifications/disclaimers on the adequacyand ineffectivenessof
13
AnInternalControlandRiskManagementframeworkisunderadoption.However,eventhisdraftframeworkis notanintegratedframework,covering the entireactivities oftheMinistry/Department.Bycontrast,listedPSUs have,ingeneral,bettercorporategovernanceandinternalcontrolstructures,primarilyduetotherequirementsof quarterly financial reporting, the rigour of external scrutiny by private shareholders, investors and financial analysts,andthecorporategovernancerequirementsstipulatedinthelistingregulationsbySEBI.
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14 control structures , as part of our audit opinion on the financial statements; indeed, this wouldbeappropriate anddesirable.However, giventheexpectationsofour stakeholders (thelegislature,themedia,andthepublicatlarge)wholookforwardtoourauditfindings highlighting instances of irregular/ wasteful expenditure etc., a disclaimer on the state of internal controls would not absolve us from conducting and reporting the results of our compliance/transactionaudits.
It is, thus, clear that while an integrated financialcumcompliance audit approach has enormous advantages in terms of providing overall audit assurance, there are serious practical issues in its potential implementation, primarily on account of the poor internal controlandgovernancestructuresinGovernmentDepartmentsandagencies.
Considering that an integrated audit approach has not been tried out by IAAD in its mainstream audits, we recommend that pilot integrated audits be conducted in different areas,withaviewto
assessingtheadvantagesarisingfromsuchintegratedaudits,
assessingthedifficulties(externalandinternal)insuchintegrationandhowthesecanbe addressedwithaviewtoprovidingoverallauditassurance,
ascertaining the limits of integration (where control deficiencies in auditees and other external factors would constrain our audit approach, and beyond which our credibility couldbepotentiallycompromised),and
drawingupaphasedapproach(withindicativetimelines)tointegration,giventheabove factors.
Suchpilotauditscouldcover amixof:
selected Central PSUs (especially listed PSUs, where internal control and corporate 15 governance structures are part of an institutional framework and a threephase audit approachhas alreadybeenadoptedforcertificationaudit u/ S 619(4) oftheCompanies Act)
Two State Governments either as a whole, or selected Departments within the State Governments;
TwoCentralGovernmentMinistries/Departments
14
ThefindingsinReportNo.1/ChapterIIrelatingtoappropriationsintheCentral/StateGovernmentsis,byitself, adequatetojustifysuchqualifications/disclaimers. 15 ThankstoClause49oftheListingAgreement
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The pilot studies could be conducted for the financial year 201112, for which adequate preparatorystepswouldneedtobeundertaken.Basedontheresultsofthepilotstudies,a phasedstrategyforintegratedfinancialcumcomplianceauditcouldbedrawnupthereafter.
Detailsofasuggestedapproachtointegratedfinancialcumcomplianceaudit,whichcouldbeadopted forthepilotstudies,areenclosedinAnnexe6.Pendingtheintroductionofanintegratedfinancialcum complianceauditpursuanttothesepilotstudies,theapproachtofinancialauditandcomplianceauditis discussedseparatelyinthesucceedingsections.
6.2 EnhancedFocusonFinancialAttest Audit ofGovernmentAccounts

4B.
Strengthening the assurance based approach to financial attest audit of Government accounts
4C.
Preparing detailed annual financial attest audit plans and evolving appropriate statistical models
4D.
Combining inputs from past audit findings and VLC data analysis into the financial audit process
4E.
Commenting on adequacy and effectiveness of internal controls affecting the accuracy of financialstatements,andencouragemovestowardsaManagementResponsibilityStatement
4F.
6. 2. 1
Introducingauditautomationsoftware,towardspreparationofassurancememos
Background
ThefinancialattestauditofCentralandStateGovernmentaccounts,resultingintheexpressionofthe CAGsauditopinion,isacoreproductoftheCAGunderArticle151oftheConstitution.However,the financialauditprocessinanAGofficereceivesinadequatepriority,andprimarilycomprisesof:
Central audit of vouchers by the CAP/ CASS Sections In the typical AG office, these sections are staffed with human resources of less than adequate quality (who cannot be effectively utilized for assignmentsconsidered to be of higherpriority). The proportionof vouchers to be examined, as prescribed in the existing manuals and instructions, is very high, since it is based on monetary limits prescribed several decades ago and is entirely inconsistentwithcurrentexpenditurelevels.Inpractice,theoutputofCAP/CASSislargely limited to preparation of audit notes, covering relatively inconsequential items, and does notfeedintothefinancialauditassuranceprocessinanymeaningfulmanner. ScrutinyofthedraftFinanceandAppropriationAccountsAtthisstage,giventheavailable resourcesandtighttimeframesforfinalizationoftheauditopinion,thescrutinyisrestricted
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to checks at aggregate levels (primarily in terms of arithmetical accuracy),based on fairly rudimentarychecklists(whicharegenerallyfilledinaroutinefashion).
Consequently,thefinancialauditprocess,ascurrentlypracticed,isnotappropriatelygeared towards providing overall audit assurance (at acceptable confidence levels, based on well designed and structured methodologies and truly representative samples) on whether the annual accounts really present a true and fair view of thestate of finances of the Central/ StateGovernment.
6. 2. 2
Strengthenassurancebasedapproach
Inordertoensurethatthefinancialauditprocessisreorientedtoprovidingassuranceonthereliability ofthefinancialstatementsoftheCentralandStateGovernments,thefollowingstepsneedtobetaken:
6 .2 .2 .1
PrepareadetailedAnnualFinancialAttestAuditPlan
Suchaplancannotbeamerelistingoftheunitstobecoveredandthetimeallowedforeachunit,but mustidentifythekeyareasofhighrisk(typically,alistingoftoprisks),basedonbackgroundsearchand scrutinyofpastexpenditureandbudgetprofiles,annualreportsandotherrelevantdocumentsandalso consideringkeyweaknessesinfinancialcontrolsidentifiedinthepast.Thiswillalsoinvolveallocationof afarhigherproportionofresourcesforauditplanning;allocationofabout20percentofoveralltime andresourcestoauditplanningwouldbereasonable,andwouldalsobeconsistentwithinternational bestpractices.

6 .2 .2 .2
Evolveappropriatestatisticalmodelsforsampling
Thereisaneedtodesignstatisticalmodels,linkedtotheriskanalysismentionedabove,which minimizesthesubstantivetestingofvouchersinthefield(thuskeepingthecostofauditdownandalso reducingthedemandplacedonStateGovernmentDepartmentsinattendingtoouraudit),butatthe sametimeisdesignedtoprovideassuranceatacceptableconfidencelevels.Thecurrentsystemofnodal statisticalofficershasbeenconfined,byandlarge,tosampleselectionforperformanceauditing,and hasnotbeenveryeffectiveineitherfinancialorcomplianceaudits.Consequently, anapproachinvolving acrossIAADguidanceonthegeneralapproach,aswellascustomizationatthefieldlevel(basedon inputsdrawnfromlocallyavailabletrainedstatisticians notnecessarilyIAASofficers)wouldbe necessary.
6 .2 .2 .3
Combine inputs from past compliance audit findings, CAP/ CASS audit findings, and analysisofVLCdataintothefinancialauditprocess
Evenwithoutfullscaleintegrationoffinancialcumcomplianceaudit,itisnecessarytoconsiderpast complianceauditfindings(analysedandsummarizedonaDepartmentwisebasis)toidentifyfocus areasforsubstantivetestinginindividualAppropriationAccountsandFinanceAccountsStatements. Similarly,analysisofVLCdata(andCOMPACT/eLekhadataontheCentralGovernmentside)onan ongoing/periodicbasiswillalsothrowuppotentialirregularities/deficiencies,whichwillneedtobe validatedthroughsubstantivetesting.Further,CAP/CASSaudithasnorelevance,unlessitisfully
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integratedintothefinancialauditprocess,sothatoffsitescrutinyofvouchers/sanctionsiscombined withonsitescrutinyofselectedvouchers/sanctions;also,centralauditshouldalsobeintroducedina 16 phasedmannerinrespectofauditoftheGoI .

6 .2 .2 .4
EncourageamovetowardsaManagementResponsibilityStatement
Internationallyacceptedauditstandardsrequirestheauditortoobtainastatementfrommanagement thattheyunderstandandaccepttheirresponsibilitytowardspreparationofaccounts.Inlinewiththese standards,weshouldencourageamovetowardsamanagementresponsibilitystatementfromthe Central/ StategovernmentsonthelinesoftheResponsibilityStatement forDirectors incommercial organizations. InthecaseoftheStateGovernments,suchaResponsibilityStatementsshouldclearly acknowledgetheirresponsibilityforpreparationoftheinitialaccounts(themonthlytreasuryaccounts aswellasdividisonalaccounts).Theresponsibilitystatementshouldalsocovercompliance withthe applicablefinancialreportingframework;forsuchinternalcontrolthatisnecessarytoenablethe preparationofsuchstatementsandtoassurecompliancetorules;andtoprovidetheauditorwith accesstoalldocuments thatthemanagementisawareisrelevanttothepreparationoffinancial statements/additionalinformationthattheauditormayseekforhiswork/andaccesstopersonswithin the auditee fromwhomtheauditordeterminesitnecessarytoobtainauditevidence. Sucha ManagementResponsibilityStatementshouldalsogivedetailsofdetailsofinternalaudits/internal appraisalsconducted,andcompliancethereto.
6 .2 .2 .5
Comment on adequacy and effectiveness of internal controls affecting the accuracy andreliability offinancialstatements
Intheabsenceoffullintegrationbetweenfinancialandcomplianceaudit,itisnotpossibletofocuson allcategoriesofinternalcontrols.However,inadditiontopointingoutindividualcomments/errors/ issues(arisingoutofsubstantivetesting),theauditopinionand/ortheAuditReportshoulddraw attentiontotheadequacyandeffectivenessofinternalcontrols,whichdirectlyaffecttheaccuracyand reliabilityoffinancialstatements.Theadequacyofinternalaudit(based ontheinformationfurnishedin theManagementResponsibilityStatementandauditverificationthereof)couldbemandatorily commentedupon.
6 .2 .2 .6
Consideratwo/threephaseauditapproach,wherefeasible
Athreephaseauditapproachisalreadyfunctionalfor S619(4)auditoflistedPSUs.Subjecttotheissues raisedinparagraph6.1,weshouldconsideratwo/threephaseauditapproach,wherefeasible,whereby atleastaportionofthefinancialattestauditworkisdoneconcurrentlyduringtheyear(andnot after theendoftheyearandafterreceiptofthedraft/finalannualaccounts).Inadditiontocrunchingthe
16
Thebifurcationofcompilationandcentralaudittookplacein1984,aftertherestructuringofIAADintoseparate auditandA&EofficesfortheStates.However,sincetheDepartmentalisedaccountingorganizationinrespectof theCentralGovernmentwasintroducedin1976,thereisnoprovisionforcentralauditinrespectofGoIaudit.
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timeforfinalizingtheauditopinion,thiswouldalsoprovideanopportunitytoprovideconcurrent feedbacktotheauditee,providinganopportunityforimmediatecorrectiveaction.
6 .2 .2 .7
PreparationofanAssuranceMemo
AdetailedAnnualFinancialAttestAuditPlanisofuse,onlywhenattheendoftheannualaudit,a formalassurancememoisdrawnup(typicallyintheformofanaidememoire)whichclearlyhighlights theauditeffortsundertakeninrespectofeacharea,theresultsofaudit eithera 17 comment/qualification/noteorauditassurance(eitherpositiveornegative )oralternativelyjustifiable reasonsastowhytheareacouldnotbeexaminedinaudit(allsuitablycrossreferencedtoKDs/ supportingdocumentation),andsuggestionsforfutureactioninthefuture.Suchanassurancememoor aidememoireisfarmoreassuranceorientedthanthecurrentsystemofKDsonlyforthosefindings/ commentswhichappearintheauditreport.
6 .2 .2 .8
IntroducingAuditAutomationSoftware
Therigourthatexistsinperformanceauditondocumentationofworkingpapersforallfindings (regardlessofwhethertheassuranceispositiveornegative)shouldbeextendedtofinancialand complianceaudit;thiswillalsoensureaccountabilityoffieldauditparties/teammembersor,atthe least,makeassessment oftheirworkmoreobjective.Consideringthevolumeoffinancialaudit assignmentsbeingundertaken,theonlypracticalwaytodocument/establishthatauditassurancehas beenprovidedisthroughuseofautomationsoftware.Suchsoftwareshould,attheminimum,have provisionsforcapturingeachauditactivity/step(intheformofauditchecklists/subchecklistsfor individualaccountareas),thedetailsofauditfindings,andtheresultsintheformofcomment/ qualification/auditassurance;additionally,featuresforauditplanning,HRassignmentandother ancillaryactivitiescanalsobebuiltin.Suchsoftwareiscommerciallyavailableofftheshelf(e.g.Price WaterhouseCoopersTeamMatesoftware),butitislikelythatbespokedevelopmentofaudit automationsoftwarefortheIAADislikelytobecheaper(consideringthelargenumberoflicensesthat wouldberequiredforofftheshelfsoftware)andisalsolikelytobettermeetourneedsthrough appropriatecustomization.
6 .2 .2 .9
FinetunetheFinancial AttestAuditManual
Currently,theFinancialAttestAuditManualonlyliststhegeneralprinciplesforfinancialaudit,and exceptforoneAnnexureprovidingcertainlimitedinformation,doesnotprovidedetailedguidance specificallyforcertificationof Governmentaccountse.g.forindividualFinanceAccountsstatementsas wellasAppropriationAccounts.Consequently,themanualneedstobefinetuned,withsupporting detailedguidance,whichwillalsoformthebasisforthedetailedfinancialauditplan(aswellasforthe assurancememo).
17
A statement that we found no significant evidence of weaknesses/ deficiencies etc. provides negative assurance.Whilethisislesssatisfactorythanpositiveassuranceourauditrevealedthattheinternalcontrolswere broadlyadequateandeffective,manyofusintheIAADmaybemorecomfortablewithsuchassurance,given theweightofhistoricalprecedence.
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6.3 Financial Attest Audit of Government Companies and Autonomous bodies

4G.
Building capacity for the forthcoming alignment of Indian Accounting Standards with IFRS fromApril2011
4H.
Move towards conduct of certification audit of autonomous bodies exclusively by commercialauditstaff
ThecurrentsystemofattestauditofGovernmentCompaniesenvisagesappointmentofChartered AccountantsasstatutoryauditorsbytheCAG(whoalsoissuesdirectionsfortheconductoftheaudit) combinedwithasystemofsupplementaryauditofaccounts(onaselectivebasis)byauditteamsfrom theIAAD.ThissystemprovidesahighlevelofassuranceonthereliabilityofPSUaccountswithan arrangementthatminimizesduplicationofauditeffortandoptimizestheutilizationofscarceresources withtheIAAD. Asafurtherimprovement,athreephasesystemofaudithasbeenintroducedinrespectoflistedPSUs:
In the first phase, which is conducted after finalization of the accounts of the second quarter, a general review of accounting policies, changes and compliance with past observationsiscarriedout. The second phase audit is conducted after the draft annual accounts are received, and deviations/ deficiencies noticed are communicated to the PSU management for quick remedialactiontoimprovethequalityofitsaccounts.
Inthethirdphase,themodificationsmadebythePSUsmanagementinthedraftaccounts arereviewedalongwiththestatutoryauditorsreport.
ThisinnovativemeasurehassubstantiallyimprovedthequalityofaccountsofPSUs,reducedthe timeframeforfinalization,andalsominimizedtheadversarialrelationshipbetweenthePSUandthe IAAD. ThemainchallengetobefacedbyPSUauditteamsistheforthcomingalignmentofIndianAccounting Standards(IAS)withtheInternationalFinancialReportingStandards(IFRS)from1st April2011,whichwill havefarreachingimplicationsforourcertificationauditapproach.Ourmainchallengeistobuild capacitytorespondtothesechanges;thecommercialauditwinghastakensuitablestepssuchas(a) preparationofauditchecklistsforIFRSand(b)trainingofauditpersonnel.Itisimportantthatthese measuresaretakentotheirlogicalendsothatthecapacitytoauditIFRScompliantaccountsis st establishedbefore1 April2011. Theothermajorareaofcertificationauditistheaudit oftheaccountsofautonomousbodies,whichare preparedinlinewithacommonformatofaccounts(basedonaccrualaccountingprinciples)prescribed
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bytheMinistryofFinance(inconsultationwiththeCAG).Thequalityofmaintenanceofaccountsacross differentautonomousbodiesisinconsistent;correspondingly,thequalityofcertificationauditneedsto besubstantiallyupgraded.WhilethereareinstructionsforassistancefromtheCAwingintermsof commercialauditstaff,inthelongrunwemustensurethatallcertificationauditofautonomousbodies isconductedexclusivelybycommercialauditstaff.Further,itwouldbedesirabletomovetowards adoptionofIFRScompliantAccountingStandardsinrespectofthesebodies,whichwouldensurethat the qualityoftheiraccountsisconsistentwithinternationallyacceptedbenchmarks.
6.4 Reorientationof approachtoComplianceAudit

4I.
Switching toa thematicapproach forcompliance audit (involving at least 80% of available compliance audit resources), with assurancebased reporting and followup based on recommendations
4J.
ReducingthenumberofcomplianceauditsandIRsdrastically,andintroducingdetailedaudit planningforthematicaudits
4K.
6. 4. 1
Introducingauditautomationsoftware,forsystematicdocumentationandworkingpapers
CurrentPosition
Reviewofcompliancewithlawsandregulationsisimportantinpublicaudit, becauserulesprovidethe frameworkinwhichgovernmentdecisionsbecometransparentandagainstwhichinternalcontrolscan besubstantivelychecked.Thisisanimportantareaofauditworkandtheassuranceprocess;itsplace andimportanceneedreiterationinanenvironmentwhererulesand byimplication,audit are occasionally seenbycertainparties asspeedbreakersorevenasdetrimentaltoinnovation. However, ourcomplianceaudit,ascurrentlypracticed,hascertainsystemicweaknesses,whichare summarized below:
Not assurance oriented Thecomplianceauditprocess isnotoriented towardsproviding assurance or an overall perspective on governance and compliance issues. Instead, our Compliance Audit Reports/ Chapters depict isolated findings (which came to our notice during the course of test audit). The issue as to what the presence of certain selected findings in our Audit report means or implies is left vague; are we providing a kind of negativeassurancetoourstakeholders(i.e.wefoundnosignificantdeficiencies)? OrientedtowardsnumericaltargetsInasense,ourcomplianceauditislargelydrivenby numerical targets primarily the number of draft paragraphs (DPs) featuring in the Audit Report,andsecondarilythenumber/percentageofDrawingandDisbursingOfficers(DDOs) coveredthroughtransactionaudits.CoveringasmanyDDOsaspossiblethroughtransaction audits(often of a weeksduration orless)is largely seen asanendin itself,rather than a meanstoanend.
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Inadequate attention to audit planning The audit planning exercise consists mainly of categorizationofunitsintoA,BandCcategoryunits(accordingtoaroughriskassessment), assigningauditperiodicitiesanddurationtosuchunits,andtryingtocoverasmanyunitsas possible, given the available audit parties (which are generally divided and assigned to different types of receipts/ expenditure). No unit level audit planning is conducted and thereisnoidentificationofalimitednumberofhighriskareaswithinaunit. Indifferent quality of Inspection Reports (IRs) Given the enormous number of units coveredincomplianceaudit,anequallylargenumberofIRsofindifferentqualityareissued. The debateover whetherour IRs can be madeproactively disclosed through the Internet andalsoourgeneraldefensethattheIRsrepresentpreliminaryauditfindings,whichhave notbeenapprovedbytopmanagementisgenerallydrivenbyourownperceptionofthe poor quality of IRs; this is also confirmed by the negligible ratio of conversion of IR paragraphs into Audit Report paragraphs (i.e. findings which we are confident about defendingpublicly).It isnexttoimpossiblefortheGroupOfficer(withhisotherpriorities) tosignificantlyimprovethequalityofsomanyIRsathislevel;allhecandoissomeediting ofthelanguage,anddropsomeoftheworse/unsupportedfindings. Hugevolumeofoutstandingauditobjections Theotherresultofvoluminousproduction of IRs of less than adequate quality is a growing Objection Book of outstanding audit objections,wherethepressureforsettlingauditobjectionsfallsontheauditorandnotthe auditee;thisisusuallyintheformofquantitativetargetsforreductionofoutstandingaudit paragraphs.Unfortunately, dueto the lackofrunning themesacrosstheaudit objections, wecannoteveneasilysuggestasetofkeyrecommendations,which,ifimplemented,would reducerecurrenceofsuchirregularities/deficiencies.
6. 4. 2
ReorientedApproachtoComplianceAudit
Whilecertainmeasures(e.g.integratedaudits,DDOcentricaudit,internalcontrolaudits)havebeen takenoverthelastfewyears,webelievethattheentireapproachtocomplianceaudithastobe orientedtowardsprovidingoverallassuranceonthe governanceandcontrolstructuresonMinistries, Departmentsandotherentities.Forthispurpose,thefollowingmeasuresneedtobeundertaken:

6 .4 .2 .1
SwitchtoThematicApproach
InsteadofcoveringindividualDDOs,weshouldswitchtoathematicapproachtocomplianceaudit.The themescouldbe:
ChiefControllingOfficers(CCOs)/Departments/Directoratesasawhole,orcomponentsor partsthereof;
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18 DevelopmentorotheractivitieswithinaDistrict/constituencyorothergeographicalunit ;
Activities cutting across CCOs/ Departments/ Divisions e.g. (eg like PPP, environment management,procurement,vigilanceetc)
Theobjectiveofthecomplianceauditwillbetoprovideoverallassuranceonthetheme,andassociated governance/controlstructures.Obviously,theHODofthefieldofficewillneedconsiderableflexibilityin thetypeofthemestobeselected(toprovideadequatescopeforinnovation),asalsotheextentand depthofcoverageofDDOs(orotherentities)tobecoveredaspartofthethematicaudit.Ingeneral,the scopeofthesethematicauditswillbenarrowerthanthosecoveredthroughfullscaleperformance audits,andwillbeakintominireviewsproducedinthepast.Intime,atleast80percentofthe availablecomplianceauditresourcesshouldbedevotedtocomplianceaudits,withamaximumof20 percent(or evenless)tobeallocatedforoneoffauditsofDDOs/auditees.
6 .4 .2 .2
ReducethenumberofcomplianceauditsandIRsdrastically
Adoptionofathemebasedcomplianceauditapproachwillinevitablyresultinadrasticreductioninthe numberofcomplianceaudits conductedandIRsissued,andindeedinthenumberofDDOs/auditees 19 covered . Inourview,thereisnothing eitherexplicitandimplicit inourauditmandate,which prescribesthatwemustinevitablycoverall(ormostDDOs)withsomekindofperiodicity(every1,2, 3,5oreven10years),andfailuretodosoisinasenseafailureofaudit. Thisviewmayhavebeen appropriateseveraldecadesago,wheretherewerearelativelysmallnumberofDDOs.Inthecurrent era,withsomelargerStateshavinglakhsofDDOsonthecivilsidealone,focusingonthecoverageof DDOsisinappropriate.
6 .4 .2 .3
DetailedAuditPlanning
InsteadofjustplanningforthenumberofDDOstobecovered,wewillhavetomovetowardsdetailed auditplanningforeachthematicaudit(withspecificauditobjectives,auditcriteria,andissueanalysis onasimplifiedbasis),adoptingmostoftherigourfollowedforperformanceauditplanning.Inorderto providereliableassurance,wealsoneedtohavelongtermplanningforeachwing/fieldtoensurethat allsignificantareasarecoveredeitherthroughthematicauditsorfullscalePAreviews,andnomaterial/ significantareaisomittedandfallsthroughthecracks.Suchcomplianceauditplanningwillalso requireasubstantialallocationofaudittime allocating20%ofthetotaltimeforcomplianceauditsfor auditplanningwouldnotbeunreasonable.

6 .4 .2 .4
AssurancebasedReporting
Thereportingofthematicauditsshouldbe assurancebased,highlightingnegativefindingsorpositive findings(orabsenceofdeficiencies)inperspectivetoourauditsample.Further,thereportingshould coveralltheauditobjectives/focusareasindicatedintheauditplan,andshouldalsogivespecific

18 19
E.g.theKBKDistrictsinOrissa(coveringtheerstwhileKalahandi,BolangirandKoraputDistricts) Withacorrespondingincreaseinthedurationofeachaudit
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recommendations.HODsshouldbefreetodecidewhetherandhowspecificauditfindings(intheform ofextractsofthethematicIRs/subIRs)wouldbemadeavailabletolowerlevelfunctionariesofDDOs/ individualunits(inadditiontothemainIR).

6 .4 .2 .5
FollowupbasedonRecommendations
Followupactiononauditfindingsshouldflowfromourrecommendations;suchrecommendations couldincluderecommendationsforsystemicimprovement,financialrecovery,asalsoactiontofix accountabilityandresponsibilityforirregularities,fraudetc.

6 .4 .2 .6
SystematicDocumentationandWorkingPapers
Asrecommendedforfinancialaudits,anassurancememo(intheformofanaidememoire)wouldneed tobepreparedattheconclusionofeachcomplianceaudit,summarizingtheresultsofauditinrespectof eachareaindicatedintheauditplan.Also,forappropriatecrossreferenceanddocumentationof workingpapers,introductionofauditautomationsoftwareforcomplianceauditswouldbenecessary.It may,however,be notedthatwhilethechecklistsforfinancialauditwouldberelativelyuniform,similar checklists/individualauditstepsinrespectofcomplianceauditarelikelytovarywidelyfromauditto audit;theautomationsoftwarewillalsohavetoprovidefor suchflexibility,andalsoincorporate provisionsforpreparingandupdatinglibrariesofauditprocessesforcommonthemes,whicharelikely tobereplicatedacrossStates.
6 .4 .2 .7
AuditScopeLimitation
Theissueofnonproductionofrecordsmay also needtobedealtwithsquarely.Itcouldbearguedthat theremedy fornonproductionofrecords liesinintensiveinteractionwiththeMinistrybutsuch intensifiedeffortsoneachauditisadepletionofaudittimeandresources. Internationalauditing standards providethatinallcaseswhenareasonableassurancecannotbeobtainedandaqualified opinionintheauditorsreportisinsufficientinthecircumstancesforthepurposesofreportingtothe intendedusersofthefinancialstatements,theauditor candisclaimanopinion. Auditscopelimitations and/ordisclaimers couldbeconsideredinextremesituations bothforfinancialandcomplianceaudits anditsefficacytestedwiththeExecutive.
6.5 StrengtheningPerformance Audit

Thehighlightsofthisstrategyare:
4L.
SincePerformanceAuditsgreatlyenrichpublicaccountabilityandenabletheCAGofIndiato make practical contributions to improving the efficiency and effectiveness of the public administration, there isaneedto increasetheallottedpartymandayson suchauditsfrom thecurrentexposureofaround10percent to50percent by2020.
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4M.
New strategies to strengthen the process of Performance Audits like greater stakeholder involvement,finetuningauditmethodologyandredefiningthefollowupprocess,needtobe institutionalisedsothatPerformanceAuditsmakethedesiredimpact.
PerformanceAudits(PAs)greatlyenrichpublicaccountabilityandenabletheCAGtomakepractical contributionstoimprovingtheefficiencyandeffectivenessofthepublicadministration.PAsanalyzeand assesstheperformanceofgovernmentprogrammesorpublicservices.Incontrasttofinancialaudit,PAs focusontheactivityratherthantheaccountsandflowofmoney.Incontrasttocomplianceaudit,PAs relatemainlytointentionsbehindgovernmentinterventionsandtotheconceptsofeconomy,efficiency andeffectivenessratherthanmerecompliancetocertainlaiddownrulesandregulations.PAsinIndia assumeevenmoresignificanceasthefundsallottedfordevelopmentschemesofGovernmentofIndia havebeenincreasingmanifoldovertheyears.However,thereisnocrediblesystemforevaluationofthe effectivenessandimpactoftheseschemesasthesystemswithintheministriesforinternalauditand internalevaluationsareinadequate.Insuchascenario,inIndia, PAsbytheCAGareoneofthemost comprehensivetoolsavailableformakingacriticalevaluationofsuchschemes.
20 Currently,mostfieldofficesdevoteroughly 10to15%ofauditpartymaydaysonPerformanceAudits . ConsideringthepositiveimpactPAshave beenhavingonimprovinggovernance,itwouldbeour endeavortoincreasethisto50%by2020.
Parallely, thereisalsoaneedtostrengthentheprocessofPerformanceAudits,afewstrategiesfor whicharediscussedbelow. Whilemanyofthesestrategies(e.g.balancedreporting,useofinnovative evidencegatheringtechniquesetc.)havebeenusedinsomeperformanceauditsandbysomefield offices,thereisapressingneedtoinstitutionalizethesestrategiesacrossallfieldauditofficesandfor allperformanceaudits.

6. 5. 1
Greaterstakeholderinvolvement
Identify keystakeholderswithduecare
6 .5 .1 .1
TheLegislature(inparticular,themembersofPAC/COPU)andtheExecutiveareourprimary stakeholdersforperformanceaudits.However,inaddition,someoftheotherstakeholderswhocould beconsulted,couldinclude
Planning Commission, our Audit Advisory Boards, Prime Ministers Office and Ministry of Finance Research/monitoring agencies like National Council for Applied Economic Research, InstituteofEconomicGrowth,CentreforMonitoringofIndianEconomyetc Mediaorganizations; CivilSocietyOrganisations;
20
AlthoughtheircontributiontotheprintedAuditReportsissubstantial typicallymorethan50percentofthe materialfortheAuditReports.
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ConsideringanindividualMemberofParliament/LegislativeAssemblyasastakeholderand doing aPA on aconstituencyas a whole (either allgovernance functions orsomespecific sectorslikesocialdevelopment,healthetc.) General public (for connecting with the general public, new methods such as surveys, advertisementsinpapersetc.have,andcanbeusedforelicitingtheirviews)
6 .5 .1 .2
SelectionofPerformanceAuditTopicsinConsultationwithKeyStakeholders
ToensurethesuccessofanyPA,itisimperativetoactivelyinvolvingallkeystakeholders(otherthanjust theauditedentities)intheauditprocesssothatthe actualconcernsofallpartiesareflaggedatthe initialstageoftheauditprocessitself.SelectionoftopicsforPAsinconsultationwithkeystakeholdersis asoundstrategyinensuringthatPAsfindownershipatalaterstage.Thisaidsinbuilding uppressure ontheauditedentitiestoactontherecommendationsofaudit,andalsohelpsinminimizingthe adversarialrelationshipthatoftendevelopsbetweentheauditeeandtheIAAD.Forthispurpose,formal andstructuredinteractionsatperiodicintervals(inadditiontoinformalmeetings)arenecessary.AIso,in additiontoselectionofPAtopics,stakeholderscouldalsobeconsultedonitsscopingandaudit objectives. ThefinaldecisionontheselectionofPAtopicsisultimatelythatoftheCAG; theroleofother stakeholderisonlyadvisoryandconsultative.However,theinternationalpracticeistotakeseriousnote ofrequestsfromthestakeholders(primarilylegislative).Asmentionedearlier,ourUScounterpart,GAO, takesprideinstatingthatbetween86to94percentoftheprogrammeaudits(overthelastthreeyears) wereundertakeninresponsetolegislativerequests.
6 .5 .1 .3
Evolving criteria for evaluation in consultation with stakeholders other than the executive/audit
Mostgovernmentprogrammesespeciallyinthesocialsectordonothaveperformanceindicatorswhich canactasbenchmarksforassessmentoftheprogramme.Evenwhereindicatorshavebeendefined, theydonottakeonboardtheconcernsofotherkeystakeholders.Thusthereisaneedtoset parameters,agreeabletokeystakeholders,onthebasisofwhichtheprogrammescanbeevaluated. Suchcriteriathatareevolvedinconsultationwithkeystakeholders maybequitedifferentfromthose evolvedbythepolicymakingorimplementing agencies.Thesecriteriacanbetheguidingprinciplesfor auditevaluationofsuchschemes.

6 .5 .1 .4
Maximise our domain knowledge and enhance our understanding of critical issues fromstakeholders
Keepingabreastofthelatestdevelopmentsinanysectoriskeyforanyauditortocomeupwithtimely andcriticalrecommendationsthatleadtoimprovementintheoverallgovernance.Whiledomain knowledgecanbeacquiredbytheoreticalresearch,itisimperativetotapthehugepractical knowledgebasewhichtheinformedstakeholdershave.Thisispossiblebyensuringthatwehave structuredandperiodicstakeholdersmeetings.
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6. 5. 2
FinetunethePerformanceAuditMethodology
BalancedReporting
6 .5 .2 .1
Traditionallyauditorshaveshiedfromreportingthegoodperformanceoftheexecutive duetothelack ofanassurancebasedauditapproach, whichresultedinlackofappreciationofgoodperformanceand ledtoanimbalancein performanceaudit reporting. BalancedReportingshouldbeencouragedas reportingonbothpositiveandnegative performanceisessentialinbringingoutafairrepresentationof performance.Balancedreportingwillalsoensurethattheauditedentityismorepositiveinactingon thedeficienciespointedoutastheycomealongwithanendorsementofgoodperformance, wherever achieved. Specifically,weneedtoeschewthepracticeofexcludingareasfromourAuditReports,where wedonothavegood(i.e.strongnegative)findings. WhileoflatewehavebeenadoptingbalancedreportinginourPerformanceAudit,weneedtomove towardsinstitutionalizingthispracticewithwelldefinedguidancefordoingthesame.
6 .5 .2 .2
Suggestinggoodpracticesbothlocalandinternational
Followingupimportantauditfindingswithabouquetofbestpractices(includingpositiveinnovations) beingfollowedbothlocallyandinternationallyisastepforwardtomaketherecommendationsofaudit moreuserfriendly.Thisfacilitatesthepublicadministrationtocontemplatesolutionsbestsuitedto localconditions.Thisalsoenablesotherstakeholderstoinfluencepolicymakersinmakingmore effectivepolicylevelinterventionswhicharebasedonsuccessfulpracticesadoptedbothlocallyand worldwide.

6 .5 .2 .3
Enhanced and widespread use of innovative methods of collection of collateral evidence
FieldInspectionsThereisneedtoinstitutionalizejointsiteinspectionsandextensivefield visits, with photographic evidence gathering. Field visits are able to pinpoint the specific gaps in the implementation at the ground level and photographic evidence helps in establishing therisks variouscritical projects sufferfrom. SurveysWidespreadbeneficiarysurveyshelpinidentifyingtheactuallevelsofdeliveryof benefits tothe targetedcitizens. Use of IT There is also a need to extensively use Information Technology for data compilation,collation,andanalysis.Extensivecollationofhugevolumesofgrassrootlevel data relating to compliance with rules, regulations and programme guidelines, as well as status of implementation will help in driving home audit conclusions more effectively. Recommendationshavebeenmadeforautomatedauditsoftwareforfinancial/compliance audits; thesecould alsobe considered for extension to performance audits (although this would require greatly enhanced flexibility for customization of checklists, collation of All India/acrosstheStatedataetc.)
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6 .5 .2 .4
Hasteningthetimetakentoconduct PerformanceAudits
NormallyittakesaroundayearforaPAreporttobeprintedfromthetimeofselectionofthetopic. WhileforallIndiaPAreports,thistimeframecouldbejustified,thereisaneedtospeeduptheprocess forotherPAreportswhichdonotinvolveauditbeingconductedalloverthecountry.Thisisparticularly relevantforPAswhichdealwithtopicalissues.Whilethetimetakenforfieldauditneednotbe compromised,theprocessingofthePAreportsbothatthefieldofficelevelandtheheadquartersoffice levelneedstobespeededupsothatthePAreportsareprintedwithin3to4monthsofselectionofthe topic.

6. 5. 3
Follow upofPerformanceAudits basedonrecommendations
CurrentlytheauditfindingsusedinthePAstoarriveatauditconclusionsaretreatedasindividual commentswarrantingindividualresponseandindividualactiontakenreports.Actiontakentoaddress thefinalconclusionandtherecommendationsthatflowfromthemarenotconsideredadequateto addressthePA.ForexampleinaPAonprocurementsystemsinanydepartment,theindividualcasesof defectiveprocurementsareusedtoarriveatsomelargersystemicconclusionfollowedbya recommendationbytheauditor.ThePArequiresactiontobetakenonthelargerpointi.e.theparticular systemicdeficiencythatledtodefectiveprocurementandnotnecessarilytheindividualcasesusedto arriveatthatauditconclusion.Ithasbeenourexperiencethattheauditedentitiestendtoaddressthe individualcasesandoftentendtoignorethemaingovernanceissues. Inordertoensurethattherecommendationsareaddressed,itissuggestedthatinfuture,forallPAs,we pursuetheactiontakenthroughjustfollowupontherecommendationsmade.Caseswherethe executivehaseithernotacceptedtherecommendationsorhasnotactedupontheaccepted recommendationscanbebroughttothenoticeoftheParliamentaryCommittees.Inthisway,onlyaPA reportwhich has lowacceptabilitybytheauditedentitieswouldgetdiscussedinParliament/Legislature. Thisprocedurewouldalsoactasanincentivetotheexecutivetoaddresstherecommendationsofaudit moreseriously.ThiswouldalsoeasetheParliament/Legislatureoftheheavyloadofreportsthatithas todealwith.
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7 Goal 5: Improving delivery of accounting and entitlement functions

7.1 AccountingFunctions
Thestrategyisabout:
5A.
EncouragingStatestoassumeownershipofaccounts,wheretheyexpresswillingness andpossessadequatecapacity
5B.
LeadingreformsoftheaccountingstructureandpartneringtheGoI/Statesinushering ininstitutionalaccountingmechanismsfordirecttransfersoffunds
5C.
7. 1. 1
TransformingA&Eofficesintodatacentresforfinancialinformationandanalysis
Background
TheIAADundertakes accountingandentitlementfunctionsinrespectoftheStateGovernmentsand UTs.Goa,PuducherryandNCTofDelhiaretheonly State/UTGovernmentswhichpreparetheirown accounts.AccountingandentitlementfunctionsinrespectoftheCentralGovernment were takenover bytheCentralGovernmentin1976, whenadepartmentalizedaccountingstructure was adopted. InrespectofaccountingarrangementsfortheStates,concernshavebeenexpressedoccasionallyfrom theperspectiveofinternationalbestpracticesofasomewhatincongruoussituationwheretheSAI,in additiontoitsauditingresponsibilities,isresponsibleforcompilationofaccountsandsubmissionof accounts(bothmonthlyandannualfinancialstatements).Inpractice,thissituationdoes not resultin anysignificantconflictofinterestoradverseimpactinthe independentandobjectivedischargeofaudit functions,since:
The responsibility for passing payments and preparing initial accounts vests with the Treasury Officers under theState Governments, and A&E Offices are only responsible for compilationofaccounts. Acleanbifurcationofauditandaccountingfunctionsisinplacesince1984,withcomplete separationofpersonnelatalllevels(exceptatthelevelofIAAS).
7. 1. 2
Encourage States toassumeownershipofaccounts
Overaperiodoftime, the possibilitiesofStateGovernmentspreparingtheirownaccountshave multiplied, givenextensiveeffortsattreasurycomputerizationandtheabilityoftheStatestonetwork accountingunits.However,sofarnoStatehasexpressedwillingnesstotakeovertheaccounting function.
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Itisimperativethatadepartmentalviewbeformulatedontheresponsetofuturerequests from the State Governments to take over accounting responsibilities. As and when States express willingness to take over accounts and demonstrate adequate capacity for such a takeover, the IAAD would encourage handover of accounting responsibilities to State Governmentsandwouldensureasmoothtransition.
AnassessmentisrequiredtobedonebyallAsG (A&E) forat leastthenexttenyearstoanticipate the possibilityoftheStatetakingover thefunction, inwhichcaseavenuesforutilizationofmanpowerand resourceshavetobeplanned. Ayearwisealternativemanpowerandresourcedeploymentplanfrom 2015onwardsshouldbe preparedforallofficessothatasandwhenthepossibilityarises, asmooth transitionispossible. Whiledoingso,however,wemustbecarefultoensurethataccesstoaccountinginformationis ensuredtoourofficesatalltimes.Thiscanbeensuredifwedevelopourofficesasdatacentres, networkingallinformationchannelsavailableintheState,sothatevenifwedonotcompileaccounts, informationisavailableonanearrealtimebasisforvalidation,certificationandauditpurposes.
7. 1. 3
Leadreformofaccounting structure
ConcertedeffortstowardsimprovingqualityofFinance andAppropriationAccounts
7 .1 .3 .1
Astheorganisationonwhoseadvicetheformofaccountsisfinalized(underArticle150ofthe Constitution)andwhocompilestheaccountsoftheStateGovernmentsandUTs,theresponsibilityon theCAGwithregardtoqualityof accountsisimmense.Inthepresentscenario,theownershipof accountsisalsosomewhatdiffused.Whileinthelastfewyears,significantstepshavebeentakento improvethequalityofaccounts,yetincertainareas,systemicdeficienciesaredifficult toovercome.For instance,theamountofphysicalassetsrepresentedintheaccounts(throughthefiguresforcapital expenditure)andfinancialassetsrepresentedbyloansneedgreaterverification.Informationonloans givenbytheStateDepartmentsis sketchyandtheytoodonothavedatathatcanbeeasilyretrieved andverified.Similarly,assetsregisters,thoughprescribed,arenotmaintainedbymostdepartments. WhiletheonusofmaintainingthedetailsisontheStateGovernments,yettheaccounts getidentified withtheorganisationoftheCAG.Hence,effortsareneededtoidentifysuchareasandpartnerStatesin promotingimprovements.
7 .1 .3 .2
Worktowardsstandardizingchartofaccounts(subheadandbelow)acrossCentreand States
Underthecurrentsixtierchartofaccounts(introducedfrom1987),uniformityacrossallGovernments (CentralandState)isachievedatthelevelofthefirstthreetiers(major,submajorandminorheads), whileatthelowerthreetiers(subhead,detailedheadandobject head),thereisnouniformityandthe CentralandindividualStateGovernmentsadoptdifferentcodingsystems.Whilethisapproachhas workedreasonablywelloverthelasttwodecades,theadventoflargescalecomputerizationhasbeena gamechanger,throwingupopportunitiesfordetaileddataanalysiswithscopefordrillingdownto individualitemsofexpenditureacrossGovernments(e.g.subsidies,grantsinaid).However,thescope
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forcollectingandanalyzingsuchgranulardataisaffectedbythelack ofstandardizationofaccount codes(subheadandbelow).Thereisthusagrowingneedtoworktowardsstandardizingthechartof accounts(subheadandbelow)acrosstheCentralandStateGovernmentforpurposesofbetter transparencyandinformationsharing,aswellaseaseofcomparison. WewillneedtotaketheStateGovernmentsonboardanddispelanydoubtssincesuchstandardization maybeperceivedtobeanomaloustothesenseofautonomyoftheStates.Whilestandardheadsof accountfortheentire budget wouldnotbefeasible,standardizationcouldberestrictedtothefollowing categories:
Objectsheadswhichrepresenttheitemofexpenditureandwhichdonotreallyvaryacross States, e.g. salaries, wages, office expenses etc. Some standardization is available but the entiregamutofactivitiesneedtobeassignedcommoncodes Subheads/Minorheadsdenotingcentral/ACAschemesandothersuchschemescommonto allStatesandtheircomponentswhichcouldbecodedatthelevelofthedetailedheadand below
7 .1 .3 .3
PartnerCGAinanewchartofaccounts,especiallyforthe Union
Theothermajorissuewiththecurrentchartofaccountsistheaccountingforthelargenumberof CentrallySponsoredSchemesandAdditionalCentralAssistanceSchemes,beingfundedbydifferent MinistriesandDepartmentsofGoI.Itisdifficulttoobtainahighlevelperspectiveofexpenditureonkey flagshipprogrammesfromtheUnionFinanceAccountsintheircurrentformat;inthecaseofmany AdditionalCentralAssistance(ACA)schemes(e.g.JNNURM),theexactexpenditureontheseschemesis concealedatthesubheadlevelorbelow,andcannotbetracedfromtheFinanceAccounts.Thereis thusaneedtopartnerwiththeControllerGeneralofAccounts(CGA)andtheMinistryof Finance towardsdevelopinganewchartofaccounts,especiallyfortheUnionGovernment,whichismorein tunewiththediverseandnewerfunctionscurrentperformedbytheMinistriesandDepartments. TheCGAhasconstitutedacommitteeforthepurposeandourorganizationisrepresentedinthe committee.Itwillbeourendeavourtosensitisethecommitteefortheneedforstandardizationas mentionedaboveandfacilitateadoptionacrossStates.
7. 1. 4
Partner States in improving institutional mechanisms for monitoring publicexpenditureandreceipts

Usher in institutional accounting mechanism for agencies that receive funds through thesocietymode
7 .1 .4 .1
Increasingly,themajorportionofGoIfundingthroughCSS/ACAisreleased,notthroughthe ConsolidatedFundsoftheStates,buttoStatelevelimplementingagencies,whicharetypically incorporatedassocietiesandareoutsidetheGovernmentaccountingloop.Inturn,releasesoffundsby
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theStatelevelimplementingagenciestolowerlevelagenciesatthedistrict, block,andGramPanchayat levelsisalsooutsidetheGovernmentaccountingstructure. ThereasonsstatedbymostMinistries/Departmentsforswitchovertothesocietymodeinclude fastertransferoffundstothegrassrootlevel(withreducedchancesofdiversionforunrelated 21 schemes/activities)andlessbureaucraticandmoreefficient systemsforprogrammedelivery . However,onemajorweaknessofthesocietymodeoffundstransferisthelackofeffective institutionalmechanismsforaccountingforreleasesandutilizationoffundsatdifferentlevels(State, District,BlockandGP). Sincefundreleasestolowerlevelsofagenciesareusuallybookedasexpenditure underthecashsystemofaccounting,itisdifficulttoascertainhowmuchofthefundsreleasedbythe GoIactuallytranslateintograssrootlevelexpenditure. Further,thesystemsforaccountingofreleases(bothinwardandoutward),utilization,bank reconciliationetc.areofteninconsistentandlessthanadequate,despitefinanceandaccounting manuals/procedureshavingbeendevelopedforsomeschemes;auditingarrangements(usuallythrough CharteredAccountantsand/orLocalFundAuditors)arealsooftenweak.WhilewebbasedMIS reportingarrangementsforfinancialandoperationaldatahavebeenputinplaceformostschemes, datareportedthroughtheMISdoesnothavethecredibilityorauthenticityofauditedaccounts/ financialstatements,witherrorsinthedataoftenbeingattributedbytheconcernedofficials/agencies responsibletodataentry/compilationorothererrors.Thereisnorealsubstitutefortherigourof properlyauditedaccounts,whichisnecessarytoprovideassuranceastotheutilizationoffunds provided. Currently,theAG(A&E)officescompile about 70percentoftheexpenditureintheState.Wewouldbe abletocompileaccountsfortheremaining 30percentofexpenditure, providedthereareinstitutional arrangementsinplacetocaptureplanfundsreleasedbytheUnionandStateGovernmentto implementingagencies/societiesandresultantexpenditure.InorderenabletheAG (A&E) officesto accountforfundsreleasedunderthesocietymode, thefollowingaspectswillneedtobetakencareof; thesewouldhavetobetakenupwiththePlanningCommissionandtheMinistryofFinance.
Uniformaccountingformatsfortheimplementingagencieswouldhavetobedevisedwhich are amenable for integration/link with the State Accounts. For the PRIs, some accounting formatshavebeenframed.Theircompleteness,utilityandpracticabilityshouldbeassessed andappliedtootherimplementingagencies. Electronic data capture of accounts of the autonomous bodies/societies and NGOs maintained in uniform accounting formats on an IT system has to be ensured, providing
21
Thisalternativemethodoffundtransferanditsimplementationmayhavesomeadvantagesintermsofcutting through bureaucratic delays,but the fact remains that these bodies are also headed by the same bureaucratic structure.Further, lackofaccountability of these bodies isan equallyserious concern.Thesemechanismswere conceivedaboutadecadeandahalfback andnowwith tremendousstrides made in corebanking, monitoring timelinessofreleaseoffundsshouldnotbeanissue.Moreandmorefundsshouldberoutedthroughtreasuries; any other system has tonecessarily be suboptimal. However, despite our views onthis issue, we will have to promotebetteraccountingmechanismsfordirecttransfers,aslongastheycontinue.
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accesstobothAG(A&E)andPr.AG/AG(Audit).Thevouchersandotherdocumentsshould beretainedbythem,foroffsiteverificationbytheaudit/A&Eteamsasappropriate. Suitable mention would have to be made in GFRs of both GOI and the States and in sanctionsissued byGOI/States for rendering accounts inthese formats totheAsG,failing whichfurthergrantsaretobestopped. AmendingtheSocietiesRegistrationActs,oralternatingsuitableprovisionsinthesanctions (or standardized addendum to the sanctions) to incorporate provisions regarding maintenance of accounts and disclosure requirements, filing of accounts, appointment of auditorsandconstitutionofauditcommittees. Atpresent,aUCissuedbyaStatelevelagencyisinadequate,asittreatsreleasestolower level agencies as expenditure, without obtaining documentary evidence. Consequently, in theabsenceofapyramidofUCsfromthegrassrootlevelimplementingagencyupwards, the UC issued atStatelevel is largely meaningless. Rule 212 (1), note 1 of the GFRstates that the UCs of Central Autonomous Organisations shall disclose separately the actual expenditureincurredandtheloansandadvancesgiventosuppliersofstoresandassets,to staff, to construction agents etc that do not constitute expenditure at that stage. This shouldbeappliedtotheDRDAs,Societiesetcwhich,too,donotincurexpenditureattheir levelbutextendloans,grantsetc.todownthelineimplementingagencies.Inessence,the UCs submitted by all levels of agencies should clearly specify whether it is direct expenditure or a loan/transfer. In case of actual expenditure, broad categories of expenditure could be specified (assetscreation, construction, maintenance, wages, grants tobeneficiariesetc).Also,acopyoftheseUCs,alongwithauditedstatementofaccounts (in the prescribed formats), should mandatorily be endorsed to the AG(A&E) and Pr AsG (Audit).
7 .1 .4 .2
Arrangementsforauditofdirectfundtransfers
Whilemostcentralplanschemesinvolvingreleasesthroughsocietieshaveaprovisionforaudit(by CharteredAccountants)ofaccountsofsuchsocieties,theresultsofsuchauditsarenotwholly satisfactory.Annualauditofsuchsocietiesarecarriedoutbycharteredaccountantappointedbythe governingbodyoftheStateordistrictsocietyorStateGovernment.Thereisanissueoflackof independenceofauditorsastheauditorsareusuallyappointedbythesocietiesthemselves.Also,the CAsarenotrequiredtoassertorconfirmthatthefundshavebeenutilisedforintendedpurposes.In ordertoimproveaccountabilitythroughauditthefollowingmeasurescanbethoughtof:
Anelementofindependencemaybebroughtintheprocessofselectionbyaprocesssimilar tothatinPSUswheretheauditorsareappointedbytheCAG.
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Guidelines maybeformulated eitherby theCAG(similar tothedirectionsissuedunder S. 619(3)oftheCompaniesActtoPSUstatutoryauditors)orinconsultationwithCAGforthe auditorstocoveralistofadditionalissues(generalissuessuchasinternalcontrols,control overassets,inventory,reconciliationofexpenditure,physicalverificationandalsoscheme/ sectorspecificissues). Provisionshouldbemadeforpreparationofannualreports,reflectingtheperformancefor the year together with audited financial statements, within a specified time frame (uniformlyforallschemesinvolvingdirectGoItransfers) afterthecloseoffinancialyear
Theincreasingtendencyofroutingthegovernmentassistancethroughintermediarieswiththe immediategranteebodyorauthorityassigningapartorwholeoftheamountofsuchassistancetosub granteesforactualexpenditureandprogrammedeliveryhasraisedtheissueofCAGsauditjurisdiction andindependentoversightinregardtosubgrantees.CAGauditjurisdictionoverthesubgranteesin suchcasescanbemademandatoryandplacedbeyonddoubtbymakingsuitablechangesin GFRs/sanctionsasunder:
Prescribing inthe GeneralFinancial Rules that it shall bethedutyofthegrantee to make available the relevant books ofaccountsand recordsforCAGs auditincludingthe related books of accounts and records of the subgrantee, if any, to whom a part or whole of Government assistance may be transferred by the original grantee; and the grantee shall incorporate a suitable backtoback condition to this effect in the order of release of any amountthatmaybesotransferredtothesubgrantee;andincludeasuitableconditionin theGovernmentsanctionontheabovelines. The Pr.AG/AG (Audit) should have free and complete access to the accounts, accounting documentsandotherrelateddocumentstothestate/centralautonomousbodies,PRIsand UrbanLocalBodies. Pr. AG/AG (Audit) could earmark a portion of his resource for concurrent random verification of the correctness andcompleteness of data provided and maintained by the implementing authorities across the State(s). Such randomverification should be able to detecttheerrorsinreportingwithoutestimatingthefullimpactofit.
7 .1 .4 .3
Usher in detailed accounting of receipts and analysis; aid in pointing out areas of resourcegeneration
Traditionally,accountingofexpenditurehasbeengivenfarmoreimportancethanaccountingof receipts,wherecompilationofreceiptfiguresisdoneonthebasisoftheabstractsubmittedbythe Treasuries(CashAccount)withoutthesupportingchallans.Thisshouldbeanimportantthrustareafor accountingattheStatelevel,wheredetailedaccountingofreceiptsshouldbeconsidered.Suchdetailed accountingwouldalsoprovideopportunitiesfordetailedanalysis,whichcouldaidinpointingoutareas wherescopeforadditionalresourcegenerationexists.
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Onthereceiptside,wedonotcollectbasicchallanwisedata,asthedataisnotevenavailablewiththe Treasury.Usually,theCommercialTaxRangeorthe RTOdepositsthedailycollectionthrougha consolidatedchallanintheTreasury.Unlesswecapturechallanwisedata,wewouldnotbeina positiontooffermuchanalyticalsupport. Ontheotherhand,ifwemanagetobuildupafewyears challanwisedata,predictivemodelsoftaxrateandcollection,taxadministrationandcollectionetc. can bedeveloped.Wewouldbeinapositiontodosensitivityanalysisoftheimpactofvarious pronouncementsrelatingtochangesintaxationrates.Improvementinaccountingwouldoffergreater valueforthedecisionmakerswhenreceiptaccountingisalsomadecomprehensive. TwoStateshavebeencurrentlyaskedtoundertakepilotstudiesinthe field.Necessarylinkageswiththe receiptdatabasesintheStateswillhavetobeestablishedtoaccessdataandnecessarycapacity developedtoanalysethesame.
7. 1. 5
Develop treasury inspection as a robust and regular feedback mechanismonthefinancialmanagementsysteminStates
Inspectionoftreasuriesisakeyinstitutionalmechanism,wherebytheAG(A&E)cangainassurance abouttheadequacyandeffectivenessofcontrolsoverfinancialaccountingandreportingbythe Treasuries(whopreparetheinitial accounts,whicharesubjecttocompilationbytheAG(A&E)). However,thisactivityhasgenerallynotbeenaccordedhighpriorityinmostStates,andisoften conductedinaroutinefashion.Itisthereforenecessarytoaccordextremelyhighprioritytotreasury inspectionanddevelopitasarobustandregularfeedbackonthefinancialmanagementsysteminthe State.
7. 1. 6
AccountsOfficestoevolveasdatacentersforfinancialinformation
CompleteElectronicDataCapture
7 .1 .6 .1
ElectronicdatacapturefromthetreasuriesisatvariousstagesofimplementationacrossStates, anditis expectedthatinthenexttwoyears, therewouldbenearuniversalcoverageofthesame.However, computerisationof PublicWorksandForestDivisionsisnotevenclose tothelevelsachievedinthe treasuries.Wetherefore,havetostressoncomputerizationofthedivisionsandcapturedetaileddata fromthem, asagainstthecompiledaccountsthatwereceivetoday.Moreover,theelectroniccaptureof datashouldbefacilitatedbynetworkingtheofficeswiththerespectivedirectoratessothatdatais capturedonrealtimebasisorwithminimumtimelag. TheneedfordatacapturefromotheragenciesthatreceivefundsdirectlyfromtheGOIandthosewho receivefundsfrom theStatebutwhosetransactionsdonotpassthroughthetreasurieshavealsotobe broughtintoacommonaccountingframework.Electronicdatacapturefromtheseagencieshastobe ensuredsothatintegratedaccountsfortheStateasawholeareprepared.Thetotalityofall expenditureandreceiptsintheState wouldthenbe captured.Afundamentalrequirementforthisisthe needtodefinethesebodiesasmeaningtheStateanddevelopingwidespreadconsensusforthesame.
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GiventhatthesebodiesaresubstantiallyfinancedbytheGovernments,thereisanurgentneedto ensurethattheyarebroughtintoacommonaccountingframework.
7 .1 .6 .2
DevelopmentofDataWarehouse
Thoughthereisawealthofdataavailableonthefinancialpositionofagivenstatebefore thecloseof thesucceedingmonthatstatelevel,thepositiononanyavailableparameterisnotamenablefor comparison,onaconcurrentbasis,amongallthestatesoramongafewchosenones.Establishmentofa centralDataWarehousewouldservethepurposewell. TheDataWarehouse,withdataprimarilybeingfedby the VLCsystems,shouldbedevelopedand maintainedcentrallyfortheentirecountrybyonefieldoffice.Adedicateddataanalysisgroupshouldbe responsiblefortheupkeepandenhancement ofthecentralDataWarehouse.Whiletherearemany variantsofVLCdatabaseacrossdifferentA&Eoffices,suitableextractionofdatawillensureuniformity oftheformatsforreportingthroughtheDataWarehouse.Allreportsshouldbecapableofbeing accessedoverthe VPN/intranetorthroughofflinemodes. TheDataWarehouseshoulduseandprovide thebestpossiblereportingsolution,asisavailablethroughthelatestdevelopmentsinthefieldof BusinessIntelligenceandDataMining. Theassociatedadvantagesareimmense.Auditwouldalsobeabletoextractsuitabledatafromthe Warehouse,eitheronlineorusingofflineanalysistools.ThereportsavailablethroughaData WarehouseandBusinessIntelligence(BI)solutionscanbedifferentfromthereportsgeneratedthrough VLC.TheBIreportsareanalyticalinnature,andempowerstheusertoSliceanddicethedata,and seeonlythedatathathewantsandinthemannerthathewants.MakingaBIsolutionavailabletoaudit will facilitaterealtimeuseofaccountsdatabyauditforbothauditplanningandexecution.
A data warehousing project has been initiated and is expected to be completed by the last quarterof2011.OnceaccountinginformationavailablethroughtheVLCintheStatesismade available, the next step would be to integrate receipt databases and information on receipts andexpenditureofbodiesthatreceivefundsdirectlyfromtheGOIetc.
7 .1 .6 .3
CombinedFinanceandRevenueAccountsasaliveanalyticsproduct
Atpresent, theCombinedFinanceandRevenueAccounts (i.e.combinedFinanceaccountsoftheUnion Government,allStateGovernmentsandUTsincludingGoa,PuducherryandtheNCTofDelhi) are preparedalmostayearaftertheaccountsforanyyeararefinalized.Ittakeshugemanualefforts, as thereisnoITapplicationatpresenttofacilitateeasydatacompilation.Withthedatawarehouse,the CFRAwouldbepreparedassoonastheaccountsofalltheGovernmentsarefinalisedanditisexpected thatthetimetakenwouldbereducedtoonefifthofthetimetakennow. Further,theelectronicversion oftheCFRAcouldbemadeavailableontheInternet,withhyperlinksenablingdrillingdowninahighly granularfashiontobothhistoricalandlivedata.TheCFRAcouldthenbecomeatrulyliveanalytics product.
7 .1 .6 .4
Developmentofvalueaddedproductswhichaidinfinancialmanagementfunctions
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Presently,thereisawholesetofdatathatisavailableonStatefinancesfromanynumberofsources accounts,budgets,RBIetc. However, exceptforthecompendiumonCFRpreparedfrom200708 onwards,wehavenotbeenabletoprepareanynicheproducts,that drawupontherichandgranular datathatisavailableintheVLCsystem.Theinformationondeposits,advances,suspensetransactions (payablesandreceivablesoftheState),loans,ACbillsetccanbeanalysedacrossstatesandpresented toevaluatetherealfinancialhealthofStates/countryasawhole. This canbeofimmenseusein enhancingaccountabilityofGovernmentfunctionaries,astheinformationhithertohiddeninaccountsis broughttothefore.
7. 1. 7
PartnerStatesandUnionGovernmentininstitutingadequatereporting standards
TheGovernmentAccountingStandardsAdvisoryBoard(GASAB),ahighleveladvisoryboardwith representativesfromtheCAG,theMinistryofFinance,otheraccountingorganizationsoftheGoIaswell asrepresentativesfromtheStateGovernments(nominatedonarotationalbasis)hasbeenactively developingstandardsongovernmentaccounting,aimedatimprovingthetransparencyandreadability ofGovernmentFinancialStatements.However,continouseffortsneedtobemadetopersuadeGoIto formallynotifythestandardsoncashbasisaccountingalreadypreparedbyGASAB. Further,GASABisactivelyinvolvedinpreparatorywork(includingpilotstudiesandresearch)towards adoptionofaccrualaccountinginboththeUnionandStateGovernments.Weneedtoengagewithall relevantstakeholderstobuildaconcertedopinioninfavourofmovingtowards accrualaccounting,and thenplanaphasedtransitiontoaccrualaccounting.
7.2 Entitlementfunctions
5D.
Encouraging States in developing capacity for assuming entitlement functions, and managingadiminishingrole
5E.
Ensuring effective useof technology for delivering servicesof thehighest quality,as longasentitlementfunctionsremainwithIAAD
7. 2. 1
StrategicApproach
WiththeNewPensionScheme(NPS)inplace,theroleoftheAsGofficesinregardstoentitlement functionsisadwindlingone.Itisevidentthatoverthenextfewyears,wewouldbedealingwith diminishedactivities/operationsinpensionandprovident fundandwithinthenext20years,therole wouldbeminimal.Ourfocusshouldthereforebetwofold:
toassistStatesintakingoversuchfunctions;and
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todeliverservicesofthehighestquality,aslongastheentitlementfunctionsremainwith us.
Forthehighestqualityofservice,weneedtolaydownenhancedstandardsfordeliveryofservice(in timeandqualityterms)foralloffices,andalsoenforcethesame.
7. 2. 2
Encourage States to develop capacity for assuming the entitlement functionsandensure smoothtransition
Weneedtoanticipateassumptionof entitlement functionsbyeachStateGovernment,assess the capacityofStateGovernmentsforthesameandlaydownstepbystepprocessesfortransferineach office. Wealsoneedtolaydownthetime frameforthetransferoffunctions andensurecompleteness ofrecordstoensuresmoothtransition.Simultaneously,plans foralternatedeploymentofremaining staffacrossauditofficesneedtobeinplace.Arealisticassessmentisrequiredofthemanpowerthat wouldbeavailableandofitssuitabilityofredeploymentgiventhatmostofthisstaffwouldnothaveany auditexperience. Trainingmayalsorequireeffortgiventheageprofileofthestaff,averageagebeing about4550acrossoffices. IntheeventthattheStatesdonottakeoverthefunctionandforthenext20yearsthefunctionremains withus,theattritionofstaffwouldlargelybeintunewiththerateatwhichthepensionandprovident fundworkwilldwindle.
7. 2. 3
Ensure latest technological changes are harnessed for efficient service delivery
Variousofficesareat differentlevelswhenitcomestointerfacewithservicerecipients.Whileactivities insomeStatesareautomated(IVRS,webbasedenquiryetc.),othersarestrugglingtokeepuptodate withtechnology.Acommitteehasbeenconstitutedtolookintothedifferentsystemsrunningacrossall officesandhasbeenentrustedwiththetaskoflayingdownstandardsofpublicdeliveryand technologicalaidsthatcouldbeadoptedbyalloffices.TherecommendationsareexpectedbyOctober 2010andsystemsshouldbeinplacewithinayear.
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8 Goal 6:ImprovingHumanResourceManagement
6A.
Reviewingofficewiseexistingsanctionedstaffstrengthtoensurethatauditresources areoptimallydeployedacrossalloffices
6B.
Determining rightspanofcontrolforGroupOfficerstoachievequalityperformance
6C.
RecruitingonlyatAssistantAuditOfficer level andphasingout recruitmentatauditor, clerk,stenoandGroupDlevels.
6D.
CreatinganexclusiveIAAS GroupBService
6E.
CreatingZonalCadresofIAASGroupBintheshorttermandanAllIndiacadreinthe longterm
6F.
ModifyingRecruitmentRulesforIAASGroupAtoincludefasttrackpromotionsfrom IAAS GroupB
6G.
Creatingan IAAD RecruitmentBoard
6H.
EnsuringaconstantintakeofProfessionalsinto IAAS GroupB
6I.
RaisebenchmarkforpromotionbyselectiontoVeryGood
8.1 Background
HumanResources(HR) constitute themostvaluedassetofanyknowledgebasedorganization moreso inIAADwhichisentirelydependentontheoutputgeneratedbyitsemployees.HumanResources managementessentiallyinvolves:
recruitingcompetentpeople; providingrichjobcontent tokeeptheworkforcesatisfied; ensuringdecentcareerprogressionprospectstokeeptheworkforcemotivated; impartingperiodicaltrainingtohonetheirskills; and givingthemprofessionalpride.

Overtheyears,wehavenotbeenabletoimproveandoptimizeourHumanResourceManagementas ourstereotypedrecruitmentsystemhasaffectedourHumanResourcecapabilities.Thereis,therefore,a needtotakearelookatourexistingHumanResourcesystemsandoverhauloursystem.
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8.2 Reviewofexistingstaffstrength
Atpresent,theofficewisestrengthofstaffamongIAADofficesacrossthestatesisnotbasedon adequate scientificanalysisandthereiswidedisparityamongthemgiventhenature,volumeand complexityofauditwork.Forinstance,thesanctionedstaffstrengthinasmallerstateofKeralais higherthanthecombinedsanctionedstrengthofBiharandJharkhand.Suchaskeweddistributionleads 22 tosuboptimalutilizationofmanpower .Therefore,weneedtoevolveacriteriontodeterminethe staffstrengthrequiredforeachofficebasedonscientificworkstudynorms,riskperceptionetc.The needtomovetowardsqualityfromquantityandfromindividualirregularitytosystemevaluation shouldbekeptinmindwhiledeterminingthestrength. WiththemoveawayfromauditofDDOs,the numberofDDOscannotbeconsideredasasignificantfactorfordeterminingthestaffstrength.
8.3 Ensuringoptimumspanofcontrol
AnotherissueaffectingtheperformanceofofficersinIAADisthespanofcontrol.The current ratioof GroupA(GroupOfficers)toGroupBOfficers(SeniorAuditOfficers,Audit Officers,AssistantAudit 23 Officers) ontheauditside isaround40 .Whilespanof controlmaynotbe as critical aconcerninthe A&EOffices,foraknowledgebasedactivitylikeauditing,asupervisoryspanofcontrolof40(12to15 audit parties)isindeedacriticalareaofconcernwhichneedstobebroughtdownsubstantiallyto 24 increasetheeffectivenessofmanagementcontrolbyGroupOfficers . Thisisespeciallyimportantwith thereorientationofapproachestoallstreamsofaudit(financial,complianceandperformanceaudit). About5to7AuditPartiesintheauditsetupcouldbeconsideredasamoreappropriatespanofcontrol foraGroupOfficer.Consideringastrengthofaround10,000officers(SeniorAuditOfficer/Audit Officer/AssistantAuditOfficer)ontheauditside,thiswouldentailaround3300parties(partyconsisting of3supervisory officersintherankofSeniorAuditOfficer/AuditOfficer/AssistantAuditOfficer) warrantingcontrolbyaround500GroupOfficers(spanof controlof around6.6partiesperGroup Officer).Currentlywehaveonlyaround250GroupOfficers,andwewouldrequireanother250Group Officersinordertoreducethespanofcontroltothisfigure. Tofinetunethespanofcontrolissue,acommitteeconsistingofallplayersinvolvedinthisprocesscould decideastowhatshouldbetheidealspan ofcontroldepending onthe natureofassignmentofwork (specificallykeeping inviewthevariedauditactivitieslikecivilaudit,worksaudit,commercialaudit, revenueaudit,accounts,entitlementsetc aswellasthemixoffinancial,performanceandthemebased
22
Theskeweddistributionislargelyduetolackofanynormsforcivilfieldauditparties,aswellasoutdatednorms forotherfieldauditteams.Forexample,forfieldinspectionofPWDivisions,agradedsystemofnormsforaudit periodicityandduration,linkedtoworksexpenditurehasbeenprescribed;however,thehighestauditdurationfor annual audits has been set for PW Divisions with annual works expenditure of Rs. 1 crore and above. It is inconceivablethatanyPWDivisioninanormalState (excluding someof the tiny NEStates) wouldhaveannual worksexpenditureoflessthanRs.1crore. 23 Historically,eachGroupOfficerwassupposedtocontrol30fieldauditteams,althoughnodocumentedrecord ofthisratiocouldbetracedeasily.WhilethecurrentprofileofpostsofGroupOfficerssuggestsalowerratio,even thisishighlyinadequate,inviewoftherenewedemphasisonofficerdrivenaudits. 24 ThismayperhapsneedtobefactoredintotheongoingstudyonworknormsbeingpilotedbytheStaffWingof Hqrs.Officethroughexternalconsultants(DeloitteandTouche).
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complianceaudits).However,thefactremainsthatthecurrentspanofcontrolwouldnecessarilyneed tobereducedfromthecurrentspanofabout40Audit OfficerstoOneGroupOfficer.Eventhoughthe extentofreductionmayvary,depending onthedetailedanalysisbythecommittee,thereisnoother optionbuttoincreasethepostsofGroupOfficersinthenearfuture.Weproposecertainmeasuresas statedbelowtoaddressthisissue.
8.4 Recruitment andPromotion

The presentsystemof directrecruitmenttoGroupAlevelof IAASofficersthroughUPSC(CivilServices Examination)isfunctioningwellandneedsnochange. It ensuresthat IAAS officerscomefromvaried academicbackgroundsandthisaugurswellwiththe needtoauditvarioussectorsoftheGovernmentas wellas toexercisemanagerialcontrolovertheentireauditprocess. TherecruitmentbelowGroupAlevelismainlydoneattwolevels i.e.GroupBlevel(AssistantAudit Officers)andGroupC(auditors,clerks,stenosetc.).Thereareinherentissuesofcompetencewhich requireachangeinthepresentsystemofrecruitmentasexplainedbelow.
Itmaybenotedthatthereareseparateprovisionsforthetermsandconditionsofservicefor officialsoftheIAADunderArticle148(5)oftheConstitution.WhileforGroupAofficerswe may continue with the uniform pattern of GoI, for our Group B staff, we should consider appropriatedeviationsfromtheGoIpattern;thisisabsolutelyessentialifwearetobefully equippedtodischargeourConstitutionalmandate.
8. 4. 1
Recruiting only at Assistant Audit Officer level by phasing out recruitmentatAuditorlevel
Thejobofanauditorentailscarefulexaminationofrecordsofauditeeandhencewarrantstheaudit stafftobeonestepaheadoftheauditee.Theminimumqualificationforrecruitmentattheauditorlevel hasbeenfixedasagraduationdegree.However,overtheyears,recruitmentattheauditorlevelhasnot beenattractingtherightkindoftalentduetolowerpayscalesattheauditorslevelandtheperception ofbetterprospectsoutsidethedepartment.Thisleadstoonlythosecandidatesstayingbackasauditors whoarenotabletomakeittoothermoreattractivejobs.Thus, IAADstartswithcapacitydeficitwhich cannotbemadeupthroughsubsequenttraining.Thecapacitydeficitisalsocompoundedbythefact thatthesecandidatesareselectedonlyonthebasisoftheirdossiersforwardedbytheStaffSelection Commissionwithoutanyotherspecificselectioncriterianeededforauditing responsibilities. RecruitmentevenattheAssistantAuditOfficerlevelalsohasonlyaminimumqualificationrequirement ofaGraduatedegree.Further,thechangeinworkingoftheGovernmentfromarchaicmethodstomore modernpracticesmakestheauditprocessmoreconducivetoauditbyAssistantAuditOfficerswith higherunderstanding,higherresponsibilityandhighersalariesratherthanbyAuditors.Asthejobofan AssistantAuditOfficerhasbetterprospects forcareerprogression,itattractsafarbetterrangeof candidateswholookatthisjobashavingbetterfutureprospectsandhencebecomeavaluablework forcefortheIAAD.Hencethereisaneedtomovetowardsasituationwhereweareabletorecruitonly
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attheAssistantAuditOfficerlevel.Thiswillensurethatweareabletorecruitandnurturebettertalent withinthe IAADforthefuture. TherecruitmentintheA&E Officescould,however,becontinuedattheAccountantlevelasthenature of assignments inthese officeswarrantspresenceofstaffatthatlevel.

8. 4. 2
Phasingout recruitmentattheclerk,stenoandGroupDlevel
Recruitmentatclerk,stenoandGroupDlevelsneedstobephasedout.Thesepersonnelrendersupport serviceswhichcanbeoutsourcedatmuchlowercostswithmuchhigherefficiencylevels.The IAAD shouldfocusoncoreauditareasandoutsourcethenoncorefunctionsofitsofficessothatits managementremainsfocusedanddoes nothavetodivertscarceresourcesforcontrolandsupervision ofstaffinnoncoreareas. However,thoseworkinginIAADatpresentwillcontinuetobegovernedby the presentsetofrules.
8. 4. 3
CreatinganexclusiveIAASGroupBService
AssistantAuditOfficers,AuditOfficersandSeniorAuditOfficers constitutegazettedGroupBOfficers. Theyarethecuttingedgelevelofofficerswhocarryoutactualfieldaudits.TheseGroupBofficers constitutethefaceoftheAuditDepartment.However,these GroupBofficershaveverylittleoptions forfuture advancementsandoftenremaininthesamepostfor nearly 20yearsoftheirworkingcareers leadingtostagnationandfrustration.Consideringtheimportantroleplayed bythemintheaudit process,thereisastrongcasetogivetheGroupBOfficersasenseofownershipwithintheIAAD and dulyrecognizetheirroleandservicesrenderedbythembycreatinganIndianAuditandAccountsGroup BService. ThecontoursofsuchaGroupBServicewouldbroadlybeasfollows:
The Indian Audit and Accounts Group B Service could span the cadres of Assistant Audit Officers, Audit Officers, Senior Audit Officers and Deputy Accountant GeneralGroup B (in theseniortimescale). Thus,AssistantAuditOfficers,afterinitialrecruitment,willbecomemembersofthisGroup BServiceandwillhaveanopportunitytorisetotheleveluptoDeputyAccountantGeneral instead of upto the level of Senior Audit Officers. Their posting as Deputy Accountant Generalcouldberestrictedtothestationfromwhichtheyarepromoted.However,ifposts arenotavailableinthestation,theywouldbeconsideredforpostingwithinazone. TheDeputyAccountantGeneral(GroupB)willactasGroupOfficers,whichwillsupplement the existing pool of Group Officers from the Indian Audit and Accounts Group A Service. These DAGs (Group B) will be entitled to the same perquisites and allowances (e.g. telephone expenses, pooled car for travel etc.) as their DAG Group A counterparts, and willalsohavethesame auditresponsibilitiesastheirGroupAcounterparts. Besides motivating these officers, this scheme will also take care of the additional requirement of more Group Officers in view ofproposed reduction in spanof control for
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Group Officers. Further as these officers would possess knowledge of local language, this would aid in supervising and controlling field audits which are more and more becoming dependentonknowledgeofthelocallanguage. TheIndianAuditandAccountsGroupBServiceOfficerswouldalsohaveanopportunityto 25 getinductedintoIAASGroupAwheretheywillhaveopportunitytorisetohigherlevels depending on their merit. However, as IAAS Group A Officers, these elevated officers wouldalsobe subjectto the sameAll Indiatransfer liabilityas otherofficers ofthe cadre currently.
8. 4. 4
Modifying Recruitment Rules for IAASGroup A to include fast track promotionsfrom IAAS GroupBcadres
Currentlythe IAAS GroupArecruitmentrulesallowfor33.34%quotaforpromotionsfromwithinthe IAAS onselectionbasisand66.66%directrecruitmentthroughtheCivilServiceExaminationconducted bytheUPSC.Overtheyears,ithasbeenobservedthatmostoftheseofficerspromotedintothe IAAS GroupAcadregetonlyaround5yearsintheIAASbeforetheirretirement.HencepromotiontotheIAAS doesnotreallyactasanincentiveeithertotheofficers ortotheorganisationastheseofficersare not satisfiedwiththeir outstationpostingsatthefagendoftheircareer. Inordertoensurealongertenureforthepromotedofficers,weshouldconsideramodifiedscheme for recruitment:
60percentofthevacancieswillbereservedfordirectrecruitmentthroughUPSC(DR)as againstthecurrent66.66percent; 20percentwillberetainedforpromotionfromtheGroupBcadreasagainstthecurrent 33.34percent; 20percentiskeptforinductionofIAASGroupBofficersintotheIAASGroupAonafast track promotion (FTP) scheme based purely on merit (outstanding past performance, 26 examinationandinterview) .
TheFTPscheme wouldensurethatonayearlybasis,weareabletogetsomesmartIAAS GroupB Officers,withrelativelylongertenuresandthescopeandtoreachuptothe SelectionGrade/Senior AdministrativeGradeinthefuture.TheseofficerswouldbeinductedatthelevelofGroupOfficersbut wouldbeawardedtheseniorityalongwiththedirectlyrecruitedIAASGroupAOfficerswhowere recruitedinthesameyear.Thereafter, theirfuturepromotionstohighergradeslikeJunior AdministrativeGradewouldbegovernedonthesamebasisasforthedirectlyrecruitedIAASGroupA Officers(6yearsfrominduction).TheRecruitmentRulesforthe IAAS GroupAwouldneedtobe modifiedaccordingly.
25 26
AmodifiedIAAS GroupArecruitmentschemehasalsobeensuggestedinthisdocument. BroadlyonthelinesoftheprocedureforonetimerecruitmentofIAASOfficersin1996.
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Concernshavebeenexpressedthatsuchafasttrackpromotionwouldleadtoanimbalance in the career progression of IAAS officers from other streams, especially at the Selection GradeofJAGandtheSAGlevels,aswasexperiencedintheearlieronetimerecruitmentof49 officers into the IAAS. In order to ensure that balanced career progression of IAAS Officers recruitedfromdifferentstreamstakesplace:
BunchingofFTPrecruitmentshouldbestrictlyavoided.Therecruitmentshouldtakeplace annually,and nomore than10 to15 IAASofficersshould be recruitedthrough FTPin a year.
TheFTPrecruitmentwouldbefromwithinapoolofGroupBOfficers(atalllevels)withan ageof42to48years,withatleast12/14yearsofpostSOGEexperienceintheGroupB cadre,andoutstandingperformancerecords.

8. 4. 5
CreatingZonalCadresofIAASGroupBintheshorttermandanAllIndia cadreinthelongterm
AtpresenttherearenumerouscadreswithintheIAADformanagingGroupBofficersatthestatelevel. Theexistenceofdifferentcadreshaslednumerousinconsistenciesinpromotionalavenuesacrossthe country.Insomestates,officersatAssistantAuditOfficerlevelgetpromotedasAuditOfficerswithin5 yearsandinsomestatestheytake20years.Thisproblemcannotbeaddressedinasystemicmanner, 27 withoutmovingtowardsunifiedcadres. OnewaytoaddressthisproblemistoconsiderhavinganAllIndiaCadrefortheIAAS GroupBofficers. However,ataskofintegratingnearly30to40smallcadresinnoeasytaskandwouldleadto numerous amalgamationandintegrationanomalies.Keepinginviewtheseconstraints,wecouldconsiderZonal cadres,whichcouldbemoremanageableandwouldalsotakecareofissuesofneedforlocallanguage 28 forourauditingstaff .Therecouldbefourorfivezonalcadres(North,South,EastWestandNorthEast) withrespectiveADAIsacting ascadrecontrollingauthorities.Inaddition,therewouldbeasingleAll IndiacadreforCentralGovernmentAudit,whichwouldencompassallwings. Currently,atthelevelofofficesofGovernmentofIndiaorcentralPSUs,theknowledgeoflocallanguage isnotessentialasmostoftherecordsaremaintainedinEnglish;hence,suchauditisconducivetoanAll Indiacadre.However,auditofStateGovernmentrecordsrequiresknowledgeoflocallanguageandvery oftenourfieldauditstaff,thoughcapable, faces alanguageconstraint;hence,azonalcadreismore desirable.
27
Headquarters has, from, time to time, sanctioned additional posts of AOs to Offices suffering from acute promotionalproblems.However,thisdoesnot,andcannot,addresstheissueofotherofficeswithpromotionsin 56years. 28 Thelanguageconstraintcouldbeaddressedbyensuringthateveryrecruitpassesalanguagepaper(foranyof thelanguagesinthezone)atthetimeofrecruitment.
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29 Amalgamationoftheexistingofficewisecadres intozonalcadresforauditofStateGovernments,and anAllIndiacadreforauditoftheCentralGovernmentwillbeanarduousandcomplextask.The followingfactorsmeritconsiderationinthisregard:
Allfuturerecruitment(fromAAOonwards)couldbeonlytotheZonal/AllIndiacadres As regards existing staff, amalgamation is difficult, especially at the AO/ SAO level, since promotions in some offices to AO take place in just 56 years (from the date of passing SOGE),whileinsomeotheroffices,thiscantakeaslongas1520years.Oneviamediaisto specify a cutoffdate(saySOGE1998) andupgradeadequate number ofAAO poststo AO level to accommodate all AAOs, who have been waiting for 12 years or more for promotion).Theupgradationofpostspersewillnotimpactworksubstantially,astheSAO/ AOisalsocurrentlyrequiredtodirectlyundertakeauditsofcriticalareas(inadditiontohis supervisoryresponsibilities). Any amalgamation exercise will result in the time from promotion from AAO to AO approaching an average figure (somewhere between 10 to 12 years). This will inevitably benefit those AAOs who have been waiting for long periods of time, while offices where promotionstakeplaceveryquicklywouldbeatadisadvantage.Therewould,thus,beboth gainers and losers in any such exercise; this cannot be avoided. The consequential implications of the losers taking recourse to judicial remedies etc. will have to be managed.
OncetheZonalCadresstabilize,inthelongrunwecouldconsideranintegratedAllIndiaCadreforall IAASGroupBOfficers.
8. 4. 6
CreatinganIAAD RecruitmentBoard
Auditingisanindepthknowledgeintensiveexercisewhichwarrantsauditorshavingvariedexposure andknowledgeofsubjects.Thisrequirestherecruitmentprocesstobeflexiblesothatshiftingdomain knowledgerequirementslikeinareasofeconomics,environmentalsciences,informationtechnology, science,engineeringetc,aremetpromptlythroughtherecruitmentprocess.Inthiscontext,agencies liketheStaffSelectionCommission(SSC)havenotbeenabletocatertotheseshiftingrequirements effectivelyandpromptly.WhilethereasonsfornondeliveryofeffectiverecruitmentservicesbytheSSC maynotallbeattributabletothem,thefactremainsthattheIAAD,beinganorganisationservinga constitutionalauthorityneedstheflexibilitytorecruittherightkind ofofficersitneeds. Thus,IAADneedsflexibilitytofixtheeligibilityrequirementsforcandidatesappearingforAssistant AuditOfficersrecruitment.Itwould,therefore,bedesirablethat IAAD undertakesitsownrecruitment foritsGroupcadrejustliketheRailwayBoarddoesforitselfforitsGroupCCadre.Suchanorganisation couldalsocaterpromptlytotherequirementsofthedeficitstaffincertaindomainareaslike
29
Someoffices(e.g.DGAP&T)haveseparatecadresevenforeachbranchoffice.
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informationtechnology,environmentetcandcertaingeographicalpocketsliketheNorthEasternstates inIndia.
8. 4. 7
EnsureaconstantintakeofProfessionals
Manysupremeauditinstitutionsrecruitonlyqualifiedaccountants(equivalentofChartered Accountants).Thisnotonlyhelpsinfinancialattestauditbutalsoinconductofperformanceaudit, as theseaccountantsarewelltrainedinauditingtechniques.InIndia,theexaminationforChartered AccountantscourseisverytoughandhenceanaverageCharteredAccountantwouldhavehigherability andcompetencethananaverageAssistantAuditOfficers(withagraduatequalification)recruited th throughSSC/UPSC.The6 PayCommissionhaschangedtheparadigmforpaybymakingtheAssistant AuditOfficerssalary(Rs.30,000plus)attractiveevenforCharteredAccountants.Inviewof inherent advantagesthattheCharteredAccountants(andforthatmattercostaccountantsandcompany secretaries)bringtothejob;wecouldconsiderthat20percent recruitmentintothe IAASGroupBto bereservedonlyforCharteredAccountants,CostAccountantsandCompanySecretaries.
8. 4. 8
RaiseBenchmarkforPromotionbySelectiontoVeryGood
Currently,thebenchmarkforpromotiontoandwithinGroupBcadres,aswellasfromGroupBtoGroup Afollowsamixofsenioritycumfitnessaswellasselection,butbasedonGoodCRrankingasthe benchmarkforpromotion.Theuseofgoodasthebenchmarkforpromotionhasnothaddesirable effectsonthequalityofpromotedstaff,aswellasactingasadisincentiveforstaffofVeryGood/ Outstandingrating,whoarenowclubbedwithotherofficials. Inordertoensurethatwehavetherightpoolofqualityofficersandstafffordischargingouronerous duties,itisessentialthatthebenchmarkforpromotionswhicharebasedonselection(viz.AAOtoAO, andSr.AOtoDAG eitherGroupBorGroupA)israisedtoVeryGood.Thecurrentprocedureof senioritycumfitnesswillcontinueforothernonselectionpromotions(e.g.Sr.AuditortoAAO,AOto Sr.AO).Thiswillbalancetheinterestsofcareerprogressionforstaffwiththeinterestsofthe organization.
Without ensuring VeryGoodas thebenchmarkfor promotiononselectionbasis,creation of a Group B IAAS Service or other measures to increase the career prospects for supervisory staff will be counterproductive, as it is likely to flood the Department with officersandstaffoflessthanthedesiredquality.
8.5 Ensurestabilityoftenure
Quickrotationisnormallyfollowedforassignmentswhichhavedirectpublicdealing andalsoinvolve sensitivefinancialmatters.Insuchassignments,rotationofOfficershelpstoensurethatnovested interestsaredevelopedandtheintegrityofthesystemismaintained.
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Ontheotherhand,auditinginvolvesindepthassimilationofknowledgeandexperienceaboutthesector ororganisationbeingaudited.Stabilityintenurealwaysaidsinincreasingthequalityofaudit.The stabilityoftenureenhancesaccountabilityandalsothequalityofoutput.Thereisnostabilityoftenure inthepresentsystem.Therefore,itwouldbedesirabletopostAGs/PDswithaminimumtenureof3to 5years.
8.6 DevelopleadershipqualitiesinyoungIAASOfficersbygivinghigher responsibility

YoungIAASofficersrarelygettoworkindependently, astheyreporttoDG/PAG/AG/ PDsittinginthe samestation/ building.Thissituationisnot conducivetodevelopingleadershipqualitiesinsuch officers. Theyneedtobegivenindependentcharges(oratleastchargeofseparatebranchoffices) and responsibility, sothattheygetopportunitytobecomeleaders.Thiscanbedone inseveralways:
Asaresultofintegrationofaudit effortsassuggestedinthisdocument,therewouldaneed toestablishseveralofficesforthevarioussectorsofauditoftheCentralGovernment,each ofwhich would havedistinct branchoffices.Givingresponsibility for thesedistinct branch offices to young IAAS officers would provideopportunitiesfordeveloping their leadership qualitiesforthefuture Consideration couldbegiven to Sr.DAGsholding independent charge for commercialand receipt audit in the smaller states (e.g.the NorthEasternStates) anddirectly reportingto thezonalADAIs.
Referencehasalreadybeenmadeinparagraph3.6thatwiththeconceptofRegionalADAIs,therewould benoneedforaPAGineachStatewithacoordinatingrole.Inadditiontotheotherissueswithsuch acoordinationmechanismmentionedearlier,thiswouldalsonotbeconducivetodeveloping leadershipqualitiesinyoungIAASOfficersbyaddinganadditionalcoordinationlayer.
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ANNEXURES
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StrategicPlan2020preparedbygroupofofficers
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Annexe1 PerspectivePlan201015 KeyGoals

ComplianceAudit Defineasprovidingoverallassuranceon governanceandcontrolprocesses,andre orienttoCCObased,district/constituency centricand/orthemebasedapproach Detailedunitlevelaudit planning Buildcapacitiesindomainspecificauditsand upgradestaffskills FinancialAudit Reorienttowardsprovidingassuranceon reliabilityoffinancialstatements Reviseprocedurestoconsidersampling,risk assessment,controlsevaluationand materiality IntegratewithCAP/CASSauditandauditof VLCdata ReorientcommercialaudittowardsIFRS adoption PerformanceAudit Prepareastrategicperformanceauditplan, basedonDepartmental StrategicAuditPlan Ensureengagementwithallstakeholders,and synergisewithsocialauditgroups Ensurewideruseofnewmethodologies Bringoutstandalonereports,wherefeasible AuditMandate Pursueinitiativestoexpandauditmandate/ reach StrengthenroleofDG(Audit)asheadof policy,planningandresearchactivities IntegrationofAudit Efforts Ensurecoordinatedselectionofauditthemes betweendifferentfunctionalwingsandan institutionalframeworkforintegratingaudit efforts Ensurecoordinationbetweenofficestoverify AuditPlanningandRiskAssessment PreparecomprehensiveStrategicAuditPlan fortheDepartmentandidentifyfocusareas for35years Ensurepreparation/dovetailingofFunctional StrategicAuditPlansandOfficewiseAnnual Plans Formalmechanisms formidtermreviewof progressvisvistheStrategicAuditPlan Embedunitlevelauditplanninginaudit process AuditofLocalBodies Provideforactualstaffrequirement IntegrateLB auditwithcivilaudit Improvequalityofexistingaudit Collaborateindevisinguserfriendly accountingsystems
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utilizationofGoIfundstransferredthrough CSS StrengthenroleofDG(Audit)asheadof policy,planningandresearchactivities StakeholderInteraction Formallyidentifymajorstakeholders,and introducemechanismsforconsultationfor identifyingauditthemes Channeliseinformationwithcitizensasinputs forauditplanningandevidencegathering Exploreopportunitiesforprovidingsupportto selectedParliamentaryStandingCommittees
Initiateexercisesforauditevaluationsofrisk management,andfocusonpotentialrisksas partofauditreporting
Reporting Simpler,readerfriendlyAuditReports IncreaseuseofCDsandbooklets ExpandeduseofStudyReports,Evaluation StudiesandManagementLetters StandardiseformatofInspectionReport PlaceIRinpublicdomain,andensurequality onparwithAuditReport Accounts ReviewformatofFinance&Appropriation Accounts,aswellasChartofAccounts Facilitateimplementationofaccrual accountingandstandardsbasedaccounting StabiliseandupgradeVLC;developinterface withTreasuryAccountingSystems Digitizevouchers,andlaunchproceduresfor capturingaccountsofepayments Setupacentraldatawarehousingwithdata miningfacilities
CommunicationandPublicRelations Moveoutofivorytowerapproach Formulateanactionplanforengagingwith mediainthelongrun,andengagemedia proactively GiveafreehandtofieldHODsformedia interaction,subjecttobroadframework Entitlements Definequalityofserviceindicatorsand measureactualservicedelivery Havehelplinesandinformationkiosksfor ensuringservicequalityonparwithbanking services;providemoreonlinefacilities InformationSystems Identifymorecloselyatsystemdevelopment stagewithauditeeformissioncriticalsystems IntegrateITsystemsforauditplanningand
RecruitmentandCareerProgression Ensureadequateno.ofIAASOfficers AppropriatecriteriaforpromotiontoIAAS Stabilityintenureofofficers(especially
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supportwithVLCsystems PlanforITsystemsforknowledgegathering Usetechnology(notebooksandIT infrastructureforaudit teams,video conferencing) RedesignCAGswebsiteanddevelop applicationfordisseminatingauditfindings andactiontakenthereonthroughthe Internet/intranet
PAG/AG) Ensurerequisitequalityandnumberofofficers forfinancial,complianceandperformance audits Drawupcareerprogressionplansfor individuals Moverfromappraisingperformance to managingperformance EnsureappropriateincentivesforGroupB Postpromotedofficerswithlessthan10years ofserviceintheirareaoffamiliarity
TrainingandCapacityBuilding Upgradetraininginfrastructureattrainingestablishments;provide impetustoresearchactivities DevelopmentanddisseminationofstandardizedcoursewarebyRTIsdesignatesasCentresof Excellence Improvedomainknowledgebyusingservicesofconsultants,sectorspecifictraininginstitutes, auditeesetc. SpecialisedtrainingforofficersandstaffinpremierinstitutionsinIndiaandabroad IRwingtodisseminateglobalbestpracticesandauditmethodologies
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Annexe2 MappingofGoalsbetweenStrategicPlan 2020forIAADandPerspectivePlan201015

Goal Goal1 StrategicPlan:SpecificGoals Para3.6 ReorganisationofAuditof States Para4.1.2 Knowledge Centres PerspectivePlan:CorrespondingGoals Goal2.3(i),(ii)and(iii); Goal1.4(i) Goal1.1(vi); Goal6.3(iii),(iv)and(v) Goal6.3(ii)
Goal2
Para4.1.3 KnowledgeResource Persons Para4.2 InstitutionalArrangements forInternalAuditandRisk Management Goal3 Para5.1 Tobemoreproactivein interactionswiththemedia Para5.4 TreatIRsasproductsforthe public Para5.5 Introducemorevalue addedproducts Goal4 Para6.1 Integratedapproachto FinancialandComplianceAudit Para6.2 Financialauditof Governmentaccounts Para6.3 FinancialAttestAuditof GovernmentCompaniesandABs Para6.4 Reorientedapproachto complianceaudit Para6.5 Strengtheningperformance audit Goal5 Para7.1.3 Reformsofaccounting structure
Goal2.2(iv)
Goal2.6(i)to(v)
Goal2.5(iv)and(v)
Goal2.5(iii)and(vi)
Goal1.2(iv)
Goal1.2(i)to(iv)and(vi) Goal2.2(vii) Goal1.2(v)
Goal1.1(i)to(vii) Goal2.2(v),(vi)and(x) Goal1.3.2(ii),(iii)(v)and(vi) Goal2.4(i)(ii) Goal3(ii)
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Para7.1.6 DataCentresforfinancial information Para7.1.7 AdequateReporting Standards Para7.2.3 Efficientservicedelivery Goal6 Para8.4 RecruitmentandPromotion
Goal3(viii)
Goal3(iii)
Goal4(i),(iii)and(iv) Goal6.1(i),(ii),(iii)and(v) Goal6.2(iii) Goal6.1(iv)
Para8.5Stabilityoftenure
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Annexe3 IndicativePerformanceMeasures
TentativeTimeframes Activity Goal1:IntegratingAuditEfforts 6monthsto1year FormulatingadetailedschemeforreorganizationofCentralandState AuditOffices 2to4years PhasedImplementationofreorganisedstructure Goal2:PromotingProfessionalisminPublicSectorAuditing 6monthsto1year IdentificationofKnowledgeCentresandKnowledgeResourcePersons 6months DecisiononestablishingCIPAAI 23years EstablishingCIPAAI 1year SettingupanInternationalConsultancyWing Goal3:ImprovingCommunicationwithStakeholdersandHigherVisibility 6months 1year Stepsformoreproactiveinteractionwithmedia 1year SettingupaParliamentary/LegislativeRelationsUnit 12years BuildingabrandfortheOrganisation Phasedover23years IntroductionofValueAddedProducts 6months 1year CountersforDistributionofAuditReports 6months 1year Stepsforimproveddisseminationinvernacularlanguages Goal4:EnhancingAuditEffectivenessandImpact 12years Pilotstudiesonintegratedaudit 1 2years StepsforenhancedfocusonfinancialattestauditofGovernment accounts 1year PreparednessforalignmentwithIFRS Phasedover1to3years Reorientedapproachtocomplianceaudit 12years StepsforStrengtheningPerformanceAudit Goal5:ImprovingDeliveryofAccountingandEntitlementFunctions 6months 1year FormulateIAADstrategyonownershipofaccounts 2 4years Reformsinaccountingstructure 1 2years TransformingA&Eofficesintodatacentres Goal6:ImprovingHumanResourcesManagement 25years PlanandimplementrestructuredHRstrategies
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Annexe4 ProposedReorganisationofGoIAuditOffices
Sr
NewAuditOffice
Ministries
1 2
DG/PD Petroleum(Upstream) DG/PD Petroleum (Downstream)
Petroleum&NG(1)
MappingtoPresent Office(s) MABIIMumbai MABIINewDelhi
OutstationBranches
BarodaandDehradun Mumbai,Kolkata,andChennai
3 4 5
DG/PD Steel DG/PD Coal DG/PD HeavyIndustriesand MSME
8 9
10
Steel(1) Coal(1) HeavyIndustries&PE,Micro, Small&MediumEnterprises (2) CorporateAffairs,Commerce& DG/PD Commerce,Corporate Industry,TextilesandTourism Affairs,Textiles&Tourism (4) MinesandChemicals& DG/PD Mines,Chemicalsand Fertilizers(2) Fertilisers Power(1) DG/PD Power(Thermal) DG/PD Power(Hydropowerand PowerTransmission) ShippingandRoadTransport& DG/PD Shipping,Road Highways(2) TransportandHighways
MABRanchi MABIIKolkata MABIKolkata
BhilaiandVizag Ranchi Delhi
NewofficeatDelhi
MABHyderabad
MABIIINewDelhi NewofficeatDelhi
KolkataandChennai Kolkata
MABINewDelhi
MumbaiandChennai
Sr
NewAuditOffice
Ministries
11
12
DG/PD CivilAviation,Urban Development,Housing&Urban PovertyAlleviation DGAP&T
13
DG/PD Agriculture,Food
CivilAviation,Urban DevelopmentandHousing& UrbanPovertyAlleviation(3) Communication&IT(1) (excludingDepttofIT) Agriculture,FoodProcessing
MappingtoPresent Office(s) PDAESMNewDelhi
OutstationBranches
MumbaiandKolkata
DGAP&T
11branches(samesetup)
MABIVNewDelhi
Chandigarh,Mumbai,Kolkataand
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14
ProcessingIndustriesand ConsumerAffairsandFood& PublicDistribution DG/PD HRD,PanchayatiRaj, WaterResources,Labour& Employment,SocialJustice& Empowerment,MinorityAffairs, TribalAffairsandNERegion
15
16 17
DG/PD HealthandFamily Welfare,WomenandChild DevelopmentandRural Development PDA(AtomicEnergyandSpace) PDA(ScientificDepartments)
Sr
NewAuditOffice
IndustriesandConsumer Affairs,Food&Public Distribution(3) HRD,PanchayatiRaj,Water Resources,Labour& Employment,SocialJustice& Empowerment,Minority Affairs,TribalAffairsandNE Region(8) HealthandFamilyWelfare, WomenandChild DevelopmentandRural Development(3) AtomicEnergy,Space(2) Science&Technology, AgricultureResearch& Education,IT,EarthSciences, andMedicalResearch(2) Ministries
Chennai
DGACENewDelhi
NewOfficeatDelhi
NewOfficeatMumbai PDA(SD)NewDelhi
Bengaluru
18
PDA(EnvironmentAudit)
Environment&Forests,New andRenewableEnergy(2)
19 20 21 22
PDAWashington PDALondon PDAKualaLumpur DG/PD HomeAffairs,UT, ExternalAffairs,OverseasIndian Affairs,LawandJusticeand ParliamentaryAffairs
23
DG/PD I&B,Culture,Personnel, YouthAffairsandSports,Planning Commission,Statisticsand
HomeAffairs,UT,External Affairs,President/Parliament, OverseasIndianAffairs,Law& JusticeandParliamentary Affairs(7) I&B,Culture,Personnel,Youth AffairsandSports,Planning Commission,Statisticsand
MappingtoPresent Office(s) NewOfficeatNewDelhi (linkedwithiCED,Jaipur) PDAWashington PDALondon PDAKualaLumpur NewOfficeatDelhi
OutstationBranches
PortBlairandChandigarh
NewOfficeatDelhi
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ProgrammeImplementation
ProgrammeImplementation (7)
24 25 26 27
28 Sr
DGACRNewDelhi DGACRMumbai DGACRKolkata DGACRBengaluru/Chennai/ Hyderabad DG/PD Finance NewAuditOffice
DGACRatNewDelhi DGACRatMumbai PDACRKolkata Newoffice
TakingoverGroupOfficersdealing withCRAintheStatePAG/AGoffices
Finance(1) Ministries
29
DG/PD FinanceandInsurance PSUs
Newoffice MappingtoPresent Office(s) MABI,Mumbai
OutstationBranches
Kolkata,Chennai,andNewDelhi
30 31
32
33 34 35 36 37 to 53 Notes:
DGADS PDADS(Northern&Central Commands) PDA(SouthernCommand& DRDO) PDA(AirForce) PDA(Navy) PDA(OF) PDA(DefencePSUs) 17RailwayPDAs
MinistryofDefence(1) None
DGADSatNewDelhi PDADSatChandigarh
Meerut,Allahabad,andPatna Jammu
DRDO
NewOfficeatPune
Delhi,ChennaiandBangalore
MoD(AF) MoD(Navy) MoD(OF)
Railways(1)
PDA(AF&NAVY) NewOfficeatMumbai PDA(OF)Kolkata MABBangalore 17RailwayAuditOffices
DehradunandBangalore Delhi Jabalpur,KanpurandChennai TobereorganizedbyRailwayAudit Wing
1. Therewillbeanetincreaseofnineoffices 7newofficesatNewDelhi,1inPune,1inMumbai.Further,MABChennaiwillbereplaced byonenewDGACR(SouthernRegion). 2. AdditionalbranchofficestobecreatedwillbeMumbai(3),Kolkata(5),Chennai(5),Delhi(2)andBengaluru(2);DurgapurandBhopal officesareproposedtobeclosed.
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Annexe5 Proposalforestablishinga Chartered InstituteofPublic Accountants &AuditorsofIndia (CIPAAI)

1. TheRationaleforestablishingCIPAAI
1.1 Finance,AccountsandAuditManagementinIndiaiscurrentlybeingcarriedoutinthe GovernmentbyconstitutedAccountsandAuditServicesandbyCharteredAccountants,CostandWorks AccountantsandMBAsinthePublicUndertakingsandprivatesector.Theseprofessionals undertake financial, accounts andaudit managementfunctionsatthemiddleandtoplevels.While the certifications byICAI,ICWAIetc, areprofessionallyrecognised,theskillsacquiredbytheGovernment AuditingandAccountingServices/proarewithoutanyprofessionalrecognition. 1.2 Therealsoexistsamultitudeoffinance, accountsand audit functionariesconsistingofaccounts clerks,accountants,auditors,assistants,treasuryofficialsandothers,whofillupthelowerandthe middlelevelsofthefinancial,accountingandauditinghierarchy intheGovernment.Thoughafewof thesefunctionarieshaveaformalbackgroundinfinance,accountsandaudit, amajorityofthemdonot possessprofessionalqualifications.Eventhose possessing professionalqualificationshaveacquired them onlyattheentrypointanddonot goinforupgradation/continuingprofessionaleducationinthe courseoftheirlongcareerspanning30to40years. Inthepast,clearingtheSASexamination(currently knownastheSectionOfficerGradeExamination)conductedbytheComptrollerandAuditorGeneralof IndiawasconsideredasasuitablequalificationforrecruitmentinotherPublicSectorOrganisations. However,thispracticehasdisappearednow. 1.3 Thelackofprofessionalismamongstthelowerandthemiddlelevelfunctionariesinthisvery importantareaoffinance,accountsandauditinghasledtodeficienciesintheaccountingprocessesand financialcontrolsacrossorganisations.Therearehugearrearsinthefinalizationof accountsofmany institutions, bothGovernmentalandCommercial.Evenroutinefunctionslikereconciliationwithin officesareneglected. InternalAudit,whichisrequiredtoflagaccounting,controlandotherrelated issues tothemanagement,ismostoftennonexistentorineffective.Finallytheburdenofthisfallsonthe ExternalAuditors,whohave beenpointingoutnumerousshortcomings yearafteryear.Theproblemhas acquiredsuchacutedimensionsthatithasresultedinnumerouscourtcasesandindictmentsfromthe judiciary.TheshortcominghasalsobeenrecognisedbythemultilateralagenciesliketheWorldBank, AsianDevelopmentBanketc.
1.4 Oneofthereasonsforunevenanddeficientaccountingandauditingisthehugeshortageof properlytrainedandskilledaccounting/auditingpersonnelatthelowerandmiddlelevels.Withoutany professionalqualification(apartfromtheirexperience),thelower/middlelevelaccounts/audit functionaries donot have asophisticatedunderstandingoftheprinciplesofaccountingorthe implementationofit.Intheabsenceofanygrowthprospectslinkedtoqualifications,theyare not
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adequately motivatedtoupgradethemselvesinlinewithbestpractices.Thereis,therefore,akindof viciouscyclethatoperates,leadingtoalowerlevelofefficiencyandeffectivenessinthefinance, accounting and auditingprocessesinStateGovernments,State/CentralGovernmentundertakings, Cooperatives,AutonomousOrganizations,Urban&RuralLocalBodies, Universities,Publicutilitiesetc. 1.5 Withtheadventofglobalisation,policymakers,state/centralgovernmentsandendusers,in Indiafeeltheneedforupgradingandprofessionalisingtheskillsofthefinance,accountsandauditstaff atthelowerandmiddlelevels.TheComptrollerandAuditorGeneralofIndia,WorldBankandother MultilateralFundingAgencieshavealsoflaggedtheneedtoupgradetheskillsofthevastpoolof finance, accountsandaudit personnelinIndia.Further,theneedforsuchupgradationisalsovalidated bythefactthatIndiaisemerginggloballyasaleadingserviceproviderinbusinessprocessoutsourcingin theFinancialSector.Insuchascenarioitwouldbeessentialforawellestablishedorganisationlikethat oftheComptroller&AuditorGeneralofIndiatotaketheleadandaddressthevariousissuesdetailedin theproposal. 1.6 ThereareamultitudeofplayersintheGovernmentandNonGovernmentSectorsinvolvedin managingandimprovingfinance,accountsandauditadministrationinthiscountry.Mostofthese institutionsonlyaddressandtacklethehigherleveloffinancialpolicymaking,accountingandstandards insteadofdaytodayaccountingproblemsandissuesofprofessionalupgradationatthegrassroots level.WhileononeendwearelookingatadoptionofInternational FinancialReportingStandards (IFRS), computerisationofaccounts,acceptanceofBestPracticesandevenconsidering shiftingtoaccrual accounting,therealityisthat government/quasigovernmentorganisationsdonot often havethe accounting/auditing skillsatthegrassrootsleveleventomaintainbasisbooksofaccountsoncashbasis. Thisholdstruefortheprivatesectoralsowherebooksofaccountsinsomeofthesmallenterprisesare stillmaintainedintraditionalsingleentrysystems(bahikhata).
2.
InternationalScenario
Thisproblemhasalreadybeenaddressedinmanycountriesbysettingupprofessionalbodieslikethe GovernmentFinanceOfficersAssociation(GFOA), AssociationofGovernmentAccountants(AGA) and CertifiedGovernmentAuditingProfessionals(CGAP)intheUnitedStatesofAmerica(USA),Chartered InstituteofPublicFinanceandAccountancy(CIPFA)intheUnitedKingdom,AssociationofAccounting Technicians(AAT)inSouthAfrica,Australia,SriLankaandtheU.K.InCanada,certificationintheformof CertifiedGeneralAccountant(CGA)addressesthisneed. TheseInstitutions/certifications havehelped inbridgingthegapofskillandknowledgerequirementsatthegrassrootslevel.Eveninternational organisationslikeUnitedNationsarealreadyaddressingtheissueofimprovementinfinancialsystems intheirMillenniumDevelopmentGoals.UNCTADhasalsosoughttobringoutasetofAccounting Standardsforsmallandmediumenterprises.
3.
WhytheneedforaseparateCharteredInstitute
3.1 ItcouldbearguedthatthealreadyexistingInstitutionliketheICAI,ICWAetc.couldaddressthe issueofskillupgradationatthemiddleandlowerlevelsofaccountsprofessionals.However,the mandateandcultureoftheseinstitutions donoteasilyfacilitatethemtoundertakethistask.The existinginstitutionshavewellestablishedprocedures,whichcatertoapredeterminedselecttarget
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group,whichformsaminisculeelite.Itwouldbedifficultanddisadvantageousforthemtoexpandtheir processestocatertoalowertargetgroup.Further,theexistingInstituteshavemaintainedtheir standardsmainlyduetothehomogeneityofthebackgroundoftheirmembers.Hence itisessential thataseparatenationalbodyestablishaspecialisedinstitutionaligningitsobjectiveofestablishinga professionallayeroflower/middleaccountants/auditorswithindividualaspirationsand qualifications. Sincemassivenumbersacrossthecountry are involved,aseparateorganisationwithan identityisrequired. 3.2 Inafederalsetup,itisessentialthataCharteredInstituteofthiskindbesetupattheNational level,sinceithastobea nationalproviderforupgradingandmaintainingfinancialinformationwith Internationalcredibility.Such anInstitutewouldstrengthengrassrootslevelaccountingandauditingall overthecountryineverysectorandwillhavenationalacceptanceandinternationalvalidity.Further, thisInstitutewouldestablishrelationshipsandlinkageswithbodieswithinthecountryandabroadlike CIPFA,CGAandAAT,whichhavesimilarobjectives. 3.3 InIndia,thereisnoopportunity,apartfromtheentrylevelqualification(SchoolBoardsor undergraduatedegree)forcontinuingupgradationofskillandknowledgeforthefinance,accountsand auditfunctionaries. Continuingeducationisrequiredtobedeliveredingradedcapsulesoverthe averageworkspanof30to40years.TheproposedInstitutewouldprovidecontinuingprofessional educationlikeanopenuniversity toamultitudeofpersonsalloverthecountrythroughexaminations, counselingandlearningmaterial. Hence, nationalandseveralsubnationalcentres wouldneedtobeset up.ThereforeitwouldbeimpracticaltolinktheproposedInstitutewithanalreadyexistingone.Inother countriesalso, separateInstituteshavebeensetupforthisobjective. 3.4 TheproposedInstitutewouldalsoprovidelowendadvisoryandconsultancyservices.The servicescouldincludesettingupofinternalauditsystemsininstitutions,guidancerelatingtoaccounting policies,proceduresandpracticesinMunicipalitiesandevenintheprivate/NonGovernment Organisation(NGO)sector.ThisInstitutecouldalsoundertakedevelopmentofManagement InformationReportsfromtheAccountsoforganizationssothatthedecisionmakershaverelevant information.Creationofreliabledatabanksatthelowerandmiddlelevelscouldbeanotherobjective.
4.
TheInstitute
ThebasicaimoftheproposedInstitutionistoaddressthecapacitybuildingneedsforlowerandmiddle levelfinance,accountsandauditfunctionariesinIndia.TheInstitutecouldbeknownas the Chartered InstituteofPublicAccountants&AuditorsofIndia (CIPAAI).
4.1
VisionStatement
Developalarge poolofhighlytrainedmiddleandlowerlevelfinanceandauditfunctionariesinIndia, whichwouldinturnenabletimelyandrelevantfinancialreportingfordecisionmakersinlinewithbest practices.
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4.2
MissionStatement
To raise the benchmark of knowledge and skills in finance, accounting and auditing for lower and middle level government/semi government/commercial and semi commercial functionariesinIndia. Tomotivatethemiddleandlowerlevelaccountsfunctionariesbyprovidinganopportunity to acquire a nationally recognised professional qualification supported by continuing professionalcertification. To provide grass root level advisory consultancy & research services, accounting, internal audit,managementinformationsystemsetc. To disseminate professional information on finance, accounting and auditing to the membersoftheinstituteandotherorganisationsinneedoftheseservices. Toserveasacentreofexcellenceforpromotinggenerallyacceptedaccounting andauditing standardsattheinstitutionallevelincludingGovernment/CommercialSector,Cooperatives, NGOs,Universities,PublicUtilities,AutonomousInstitutions,UrbanandRuralLocalBodies.
4.3
Guidingvalues
Toensurecompletetransparencyandfairnessinthecertificationprocess. Tomaintainimpartialityandprofessionalisminprovidingtechnicalsupportandguidancein respectofaccountingsystems,proceduresandpractices. To advance accountability in organisations through individual excellence in accounts and audit. ToensureintegrityinperformanceofallthemembersoftheInstitute.
5.
DirectoratesofCIPAAI
CIPAAI wouldfunctionthrough3Directoratesaslistedbelow:
Directorate for Certification & Continuing Education (DCCE) will design, develop and conduct5levelsofcertificationexaminations,createnewsyllabusfortrainingandprepare learningmaterialfor the examinations. TheDCCE would alsoprovide Distance education, counselingservicesandestablishcentresattheStateandRegionallevels.Thefirst3levels ofCertificationExaminationswouldaim ataddressinggeneralareasoffinance,accounting andauditing.TheSectionOfficerGradeExaminationbeingconductedbytheCAGcouldbe subsumed in the second and third levels. The fourth level would address the needs of specific sectors like power, municipalities etc. The fifth and highest level would address issues like accrual accounting, international best practices, ethics in profession, management information systems, certified information systems audit etc. The fifth level
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couldalsobethelevelforcertifyingtheIndianAuditandAccountsServiceOfficersafter theirintensivetrainingintheNationalAcademyofAuditandAccounts,Shimlaonjoining the service. The Directorate would also be responsible for establishing programmes for Continuing Professional Education (CPE) for certified professionals, which would be mandatoryformaintainingthevalidityofthecertificationsacquired(asisthecaseforother national/ international professional certifications); this would ensure that these professionalsarekeptuptodatewiththelatestdevelopmentsintheprofession. DirectorateofTechnicalGuidance&InternationalRelations(DTGIR)willprovidetechnical guidanceforaccountingandauditingandgivenecessaryexpertopinionwhenreferredto. DGTIR would maintain close interface with Government Accounting Standards Advisory Board(GASAB). DTGIRwouldalsobringoutamonthlynewslettertoinformmembersabout latestdecisions/trends.ThisDirectoratewouldstudytheinterfacewithotherorganisations withinthecountryandabroadinordertoestablishrelationshipsandlinkageswithbodiesin Indiaandabroad,whichhavesimilarobjectives. DirectorateofMembershipAdministration&Secretariat(DMAS)willinteraliaadminister and monitor membership and professional certification. The Secretariat would provide all theadministrativesupportservicetotheCIPAAI.
6.
Beneficiaries
ThetargetgroupcomingunderthescopeofCIPAAIwouldbeintherangeof 10to20lakh personsfrom varioussectors.Thevariouslevelsofcertificationcouldbe:
Levels1,2and3certification Lower & middle level governments/semi government/commercial & semi commercial staff in Central and State Government Organisations, Central and State Government AutonomousBodies, UrbanandRuralLocalBodies,CooperativesandNGOs Supervisory andlowercadre officials inthe IndianAudit andAccountsDepartmentand otheraccountsservicesoftheGovernmentofIndia(SOGEequivalent).WhileSOGEcould be equivalent to level 3, the level 1 could be targeted at the accountant/auditor level examinations. Levels4certification Specific certificationforsectorslikeEducationalInstitutions,MedicalInstitutions,Public Utilities Power,Sewerage,Wateretc. Levels5certification(HighestLevelCertification)
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GroupAOfficersofIndianAuditandAccountsDepartmentandotheraccountsservices ofGovernmentofIndiaandStateGovernments.
7.
StatutoryRecognitionforCIPAAI
ThecertificationbeingissuedbytheCIPAAI wouldrequiretoberecognizedbythegovernmentsothat thecertificationbeingofferedhasvalueinthemarket.InordertooperationaliseCIPAAI asaseparate charteredornationalinstituteonthelinesofICAIorICWAI, itwould,therefore,benecessarytoobtain parliamentaryapprovalthroughpassingofanAct.Thereafter,CIPAAIdegree/certificationcouldstriveto havethesamekind ofrecognitioninthepublicauditingandaccountingspacethattheCAcertification enjoysinthecommercialaccountancyspace.
8.
Conclusion
TheconstitutionofaCharteredInstituteas outlined aboveislikelytobe amajorstepinovercoming deficienciesintheavailableknowledgeandskillofthelowerandmiddleleveloffinance,accountsand auditfunctionaries.Itwouldserveasabody,whichwouldprovideprofessionalcertificationforthe lowerandmiddlelevelfinance,accountsandauditmanagement,whichtheInstituteofChartered AccountantsofIndiaprovidesatthehigherend. Itwouldalsoprovideprofessionalcertificationtothe GroupAAuditandAccountsprofessionalsenteringintotheGovernmentofIndiaandState GovernmentsthroughCivilServiceExaminations.Thisplatformshouldworkasamajorprovider, motivatorandfacilitatorforupgradingfinance, accountsandaudit skillsofthoseatthelowerendofthe hierarchyinthecountryandinadoptingandimplementingstrategiesevolvedinternationally.There wouldbequantumchangeinthequalityof finance, accounts andaudit inthecountryandthis could alsoserveasamodelfordeveloping countries.
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Annexe6 SuggestedApproachtoIntegrated FinancialcumComplianceAudit

1. Ourregularityaudit(i.e.financialandcomplianceaudit)shouldresultinaninformedopinionon theoverallpublicfinancialadministrationinthecountryoftheGovernmentofIndia;separatelyfor eachstategovernment;andtogether. Theaim shouldbe totracetherupeetoitslastpointof implementation,throughthegovernmentalschemestothereportingstatements.Theauditoutput mustbeaccurate,timely,completeandbalanced. 2. Ourauditprocessesare,however,verytargetoriented.Thequestfordraftparagraphshasan overwhelmingimpactontheentireprocessofauditplanning,implementationandreporting.The narrationofaneventofindividualinfractionisparamount:theenormousauditeffortsthrough avery largequantumofsubstantivetestingdonotyieldanoverallauditopinion;tracetherupee;orhelp developasyncreticviewoftheCAGonanysectororonoverallgovernanceanddeliveryofservices. DespitethesheerspreadoftheCAGsauditmandate anddeployingsuchalargeworkforce,complete, accurateandtimelyreportingisyettobeachieved.Financialattestisthemainstayforeveryauditor. ButitisplacedverylowintheprioritiesofanAGofficeandistheweakestlinkintheaudit chain. 3. Anauditreportongovernmentshould,foranordinarycitizen,reportforgovernancei.e.,report ondeliveryofservices,whichisentirelydifferentfromreportingondepartments. Wecertifyfiguresfor instance,UPspendingaroundRs73,000crorefordevelopment during200910,whichmaynotfind resonancewithgroundrealities.Intheabsenceofnormsfor disaggregationofcomponentsof expendituretoworkoutthedeliverycost,wearenotinapositiontoreportthesametoanordinary citizen. 4. Thefragmentationofauditiscurrentlyreflectedinplanning,executionandreporting. Fragmentationofauditbyfittingauditresourcesintosilosoftransactionsaudit,centralaudit, performanceaudit,hasledtogapsinaudit,wherebylargechunksofgovernmentalactivityiseithernot auditedorisauditedinadisparatemannerthatdoesnotyieldacomprehensivecoverage.
Contours of a model: reporting for governance

5. Thethresholdandhencethemostimportantstageistheauditplan. Eachofficemustdrawan annualauditplanintegratingallstreams ofregularityaudittransactions,financialaudit andcentral audit. Athematicapproachwillbenecessitatedtoorientourreportstowardsgovernance.Theaudit shouldbeplannedwiththeordinarycitizenandthequalityofgovernancehereceives,inthecentre stage. Theboxillustratesthepossiblethemesforaudit.
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Themes Changing security threats
Focus Internal security
Changing nature of Governance
Government as a facilitator and regulator
Audit areas Audit of Home Ministry Use of army; paramilitary forces in internal security State Police Judicial system Audit of Regulatory functions Audit of Non tax Receipts to ensure cost recovery
Sustainability concerns
Financial health; use of natural resources; environment protection,
Serving the underserved
Inclusive growth, development of backward areas
Improving the quality of life of citizens
Provisioning of services
Protecting financial security of government resources
Food security
Sustaining provision of food
Non Plan expenditure Fiscal policies Environment Audit Mining; allocation of natural resources Dispute resolution mechanisms Agriculture Science and Technology Tribal welfare Management of Forest areas Rural development and panchayati raj Labour Health Water Education Audit of Tax Revenues Investment in Public Sector Creation of Asset Register FRBM Procurement of food Research in agriculture and extension Public distribution Midday meals
Thebasescouldalsobedistricts/constituencies/othergeographicalunitseg:KBKdistrictsinOrissa; CCOs/departments/directoratesasawhole;oractivitiesacrossCCOseg:PPPs. Avalueaddedproduct, drawnfromastrongattestationprocess,wouldbeareportoftheCAGoncostofdeliveryofbasic services(gross/percapita)acrosstheStates.Weshould,thus,beinapositiontoharnessthe strengthofourauditreach. 6. Animportantconsiderationisthatthisbasisshouldconcurrentlylendtodrawingasamplethat isfairlyrepresentativeoftheuniverse(sothatacoherent,comprehensiveauditopinioncanbedrawn) andthatitshouldreflectareasofhighriskingovernance.Whiletheannualbudgetwillbetheprincipal documentthatwillbethetemplatefortheselectionofthebasis,thesourcesshouldbeasbroadbased aspossible.Thisrequirescollectionofdatarelatingtoeachprogramme/scheme;researchstudieson thesector,plandocuments,pastreportsetc. 7. Theauditplanandtheselectionoftheauditeeunitswillneedtobebasedontwin requirements:theauditmustprovideanopiniononthethemeandalsomeettherequirementsof financialattest.Auditplanningshouldbeallocated20%oftheoverallallocationoftimeandresources.
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8. Twopartieswillbedeployedforeveryaudit:theteamforauditingparticulardepartment/CCO shouldbethesame.Oneoftheteamswillfocus LR MR HR onlyoninternalcontrolsthatimpactfinancial 6 months 3 months 2 Period for months Conducting Audit attest. Theauditperiodwilldependonthe 4 6 numberofDDOsproposedtobecoveredunder Number of DDOs to 10 be covered in the eachCCOduringtheyear.Forthispurpose, Department departmentscanbecategorisedunderhighrisk (HR);mediumrisk(MR)andlowrisk(LR). Theselectionwillnotbeontheneedforequitable distributionacrosswingsetc.,butontheneedtodrawanauditopinionontheselectedsample. 20%of theauditpartiescouldbekeptasidetocoverotherdepartmentalCCOs(otherthanthoseselectedfor detailedthematicstudyduringtheyear butwillbeimportantforthepurposeoffinancialattest).The numberofDDOs,ifany,tobeselectedfromtheseremainingdepartmentswilldependonmanpower availability. 9. Afterthefirstyear,theauditedunitsautomaticallygetshiftedtoafourthnewcategoryunder thesubcategoryHRDone.DependingontheresultsoftheauditoftheselectedBandCcategory units,theAGofficecandecideforamoreextensiveaudit:forexampleifduringthecoverageofthe Handloomdepartmentfortwomonthsitisfeltthatthisisapotentialunitwhichrequiresafurtherin depthanalysisthenmoretimecouldbedevoted.OtherwisethesedepartmentsgetcategorisedintoLR doneandMRdonecategory.Assumingthatthereare40departmentsinaState, theauditbaseof anofficewillbeasillustratedbelow: No. of departments HRD MR LR HR Done MR Done 0 4 8 LR Done 0 2 4 Total
First Year Second Year Third Year
8 6 4
15 11 7
7 5 3
0 2 4
40 40 40
10. Inthesecondyear,theauditoftheunitsalreadycoveredwillbemainly,afollowuponthe controlweaknessesidentifiedinthefirstyearofaudit.Hencetheallocationofpartydaystotheunits alreadycoveredwillbeproportionatelylower,thusprovidingspaceforcoverageofunitsthatareyet uncovered.Withinaperiodof45years,alldepartmentscangetcovered. 11. Centralauditcouldbethefulcrumfordirectingourauditeffortsforfinancialattest. The centralauditwingorthefinancialattestunit(FAU)willidentifytherisksspecifictoeachareaby analyzingtheaccounts;preparethethemesforthefinancialattest;coordinatewiththethemeson otheraspects(otherthanfinancialattest)inthearea;selectvouchersbiasedtothosethemes(orbases likeCCOs)undercheck;receiveTreasuryinspectionReportsfromA&Eoffices;receivemonthly appreciationnotesissuedbytheA&Eofficeetc.Itwillplayacentralroleinauditplanning. Theconcept ofthreephasedauditcouldbeintroducedinfinancialattestofStategovernmentsaswell.For instance,thecentralauditwingcouldissue(everyquarter)theinfractionsthatdeviatefromrules,for
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st eg:nilpaymentvouchersthatshowtransferofplanfundstoPDAsin1 quarter,andrequesttheState governmenttoreversethetransfer,lestitshouldimpactthefinalcertification.
12. Theeffectivenessoftheauditreportwillbeenhancediftheintegrationisreflectedinthe report. Ourregularityauditisnotgearedtoprovideanoverallopinion thiswouldappeartoan outsider,asshyingawayfromclearresponsibility.Theroleofauditinidentifyingtheriskoffraudsand grosserrorsmustbeintegratedandreflectedintheauditproducts.Investigativeauditgearedto determiningtheriskoffrauds,iscurrentlyweak.Thisisparticularlyimportantinnewareaswhere governmentrulesareinchoateornotadequateorwhereexperientialwisdomisminimal. Avalue addedproductthatwecanaddtoourplatter,wouldbeayearly appreciationofrisksinidentified sectors;itcouldbeprovidedwhenthereischangeofgovernment;ortailoredaswesodecide. 13. Reviewofcompliancewithlawsandregulationsisimportantinpublicauditbecauserules providetheframeworkinwhichgovernmentdecisionsbecometransparentandagainstwhich,internal controlscanbesubstantivelychecked.Thisisanimportantareaofauditworkandtheassurance process;itsplaceandimportanceneedreiterationinanenvironmentwhererulesandtherefore,auditis seenasspeedbreakersorevenasdetrimentaltoinnovation.Thedecisionmakersneedtoknowifthe lawsarebeingfollowed,whethertheyhavethedesiredresultsandifnot,whatrevisionsarenecessary. Theconceptofmaterialitymustalsobesuitablyadoptedinpublicaudit.Thequalitativeaspectsof materiality,measuredbywhetheritcouldaffectdecisionsofthelegislaturetocontinueaprogrammeor grantfunding playsagreaterroleinpublicsectorthanintheprivatesector.TheISAs recognizethat whilemisstatementsofsmallmonetaryamountsmaybedeemedtrivial,theymayberelatedto complianceorinternalcontrol,andthusmaynotbeseenastrivial.Importantinarrivingatanaudit opiniononwhethertheinfractionisqualitativelymaterial,isthatauditorexerciseshisprofessional judgment,maintainingprofessionalskepticisminhisauditapproach.AKDbasedapproachoften underestimatestheimportanceofsuchjudgment;thereisaneedtoshiftintheapproachwhichallows theauditortobasehisopiniononpersuasiveratherthanconclusiveauditevidence. 14. Theintegratedauditrequiresthatthefieldofficeshaveconsiderablefreedominauditplanning andimplementation,freefromthetyrannyofnumericaltargets.Inplaceofsuchtargetsthataresoout ofplaceinanassurancebasedauditprocess, wecouldstrengthenthealreadyexistingmechanismof seekinganauditassuranceareportlikeanaidememoire,thatwill,withregardtoeachsubpartof theauditplan,provideanauditopinionthatwillassure,qualifyordrawattentiontoanyspecificrisks. Careshouldbetakenthatprocessesautomaticallyleadtosuchanaidememoire,withoutplacinga strainontheAGoffice.Werecommendautomatedsoftware(e.g.Teammate)foruseinauditplanning andimplementation.Therigourthatexistsinperformanceauditondocumentationofworkingpapers forallfindings,regardlessofwhethertheassuranceispositiveornegative)shouldbeextendedto regularityauditaswell.Thiswillalsoensureaccountabilityoffieldauditpartyanditsmembers,atleast, makeassessmentoftheirwork,moreobjective.
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GLOSSARYOFTERMS
ABBREVIATION EXPANSION
ADAI (C&AB)
AG (AUDIT) AG(A&E) BI CAP CASS CCO CFRA CONCOR COPU CSS DAI DAI (C) DAI (LB&A) DAI (RA) DAI (RC) DG DG (P&T) DGA(CE) DGA(CR) DRDO GOI HOD IAAD IAAS IFRS IRCON IRs IT KBK MAB NGO PAC PAG PAO PD PDA(AF&N) PDA(E&SM) PDA(OF) PDA(SD) PR.PAO PRI
ADDITIONALDEPUTYCOMPTROLLER&AUDITORGENERAL(COMMERCIAL& AUTONOMOUSBODIES) ACCOUNTANTGENERAL,AUDIT ACCOUNTANTGENERAL,ACCOUNTS&ENTITLEMENTS BUSINESSINTELLIGENCE CENTRALAUDITPARTY CENTRALAUDITSUPPORTSECTION CADRECONROLLINGOFFICER COMBINEDFINANCE&REVENUEACCOUNTS CONTAINERCORPORATIONOFINDIA COMMITTEEONPUBLICUNDERTAKINGS CENTRALSECRETARIATSERVICE DEPUTYCOMPTROLLER&AUDITORGENERAL DEPUTYCOMPTROLLER&AUDITORGENERAL(COMMERCIAL) DEPUTYCOMPTROLLER&AUDITORGENERAL(LOCALBODIES&ACCOUNTS) DEPUTYCOMPTROLLER&AUDITORGENERAL(RECEIPTAUDIT) DEPUTYCOMPTROLLER&AUDITORGENERAL(REPORTCENTRAL) DIRECTORGENERAL DIRECTORGENERAL,POSTS&TELECOMMUNICATIONS DIRECTORGENERALOFAUDIT,CENTRALEXPENDITURE DIRECTORGENERALOFAUDIT,CENTRALRECEIPT DEFENCERESEARCHANDDEVELOPMENTORGANISATION GOVERNMENTOFINDIA HEADOFDEPARTMENT INDIANAUDITANDACCOUNTSDEPARTMENT INDIANAUDITANDACCOUNTSSERVICES INTERNATIONALFINANCIALREPORTINGSTANDARD INDIANRAILWAYCONSTRUCTIONCOMPANY INSPECTIONREPORTS INFORMATIONTECHNOLOGY KALAHANDIBOLANGIRKORAPUT MEMBERAUDITBOARD NONGOVERNMENTALORGANISATION PUBLICACCOUNTSCOMMITTEE PRINCIPALACCOUNTANTGENERAL PAYANDACCOUNTSOFFICER PRINCIPALDIRECTOR PRINCIPALDIRECTOROFAUDIT,AIRFORCE&NAVY PRINCIPALDIRECTOROFAUDIT,ECONOMIC&SERVICEMINISTRIES PRINCIPALDIRECTOROFAUDIT,ORDNANCEFACTORIES PRINCIPALDIRECTOROFAUDITSCIENTIFICDEPARTMENT PRINCIPALPAYANDACCOUNTSOFFICER PANCHAYATI RAJINSTITUTION
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PSU RITES RTI ULB UTs VFM VLC VPN
PUBLICSECTORUNDERTAKINGS RAILINDIATECHNICALENGINEERINGSERVICES REGIONALTRAININGINSTITUTE URBANLOCALBODY UNIONTERRITORIES VALUEFORMONEY VOUCHERLEVELCOMPUTERISATION VOICEPHONENETWORK
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IndianAudit&AccountsDepartment
perspectiveplan 2010-15
Forinternalcirculationonly
TableofContents
1 Audit.............................................................................................................................. 5 1.1 1.2 1.3 ComplianceAudit ................................................................................................... 5 FinancialAudit ....................................................................................................... 8 PerformanceAudit ................................................................................................ 10 StrategicAuditPlanforIAAD ........................................................................... AuditPlanforPerformanceAudits................................................................ 11
1.3.1 1.3.2 1.4 1.5 2
AuditofLocalBodies ........................................................................................... 12 Auditof GreenfieldAreas ..................................................................................... 14
AuditMethodologiesandPractices.............................................................................. 16 2.1 2.2 2.3 2.4 2.5 2.6 AuditMandate ...................................................................................................... 18 AuditPlanningandRiskAssessment .................................................................... 19 IntegrationofAuditEfforts................................................................................... 20 StakeholderInteraction ......................................................................................... 21 Reporting .............................................................................................................. 22 CommunicationandPublicRelations.................................................................... 22
3 4 5 6
Accounts ..................................................................................................................... 23 Entitlements ................................................................................................................ 25 InformationSystems.................................................................................................... 26 HumanResources........................................................................................................ 28 6.1 6.2 6.3 Recruitment .......................................................................................................... 30 Careerprogression ................................................................................................ 31 TrainingandCapacityBuilding............................................................................. 31
Page|2
Preface
ThisPerspectivePlanoutlinesthegoalsthattheIndianAuditandAccountsDepartmentwill pursuetorealisetheVisionandMissionoftheDepartment.Itdefinesthebroadparameters for medium term progress of the Department, specifies the major milestones and identifies thesupervisorsandmanagersresponsibleforensuringthateachofthegoalsisachieved. All theFunctional Wingswilldrawuptheirannualprogrammesinsyncwiththeoverall structure laid down in this Perspective Plan and commit resources for specific activities relating to theseprogrammes.
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VisionofSAIIndia
We strive to be a global leader and initiator of national and international best practices in publicsectorauditingandaccounting,andrenownedforindependent,reliable,balancedand timelyreportingonpublicfinanceandgovernance.
MissionofSAIIndia
AsmandatedbytheConstitutionofIndia,wepromoteaccountability,transparencyandgood governancethroughhighqualityauditingandaccountingandprovideindependentassurance to our primary stakeholders the Legislature, the Executive and the Public that public fundsarebeingusedproperly,andfortheintendedpurposes.
OurCoreValues
Independence
Objectivity
Integrity
Credibility
ProfessionalExcellence
Transparency
Innovation
Knowledgecentricorganization
ConstructiveApproach
1 Audit
The Indian Audit and Accounts Department has been an active stakeholder in promoting transparency, accountability and good governance though its oversight function over the financialandrelatedtransactionsoftheGovernmentandprovidinginputstotheGovernment onthestatusoffinancialandprogrammemanagementviz.issuesrelatingtofraud,wasteand noncompliancewithprescribedrules andregulations inGovernmentaltransactionsandthe economy,efficiencyandeffectivenessofimplementationofdevelopmentalprogrammes. InkeepingwithournewMission,weneedtoprovideassurancetoourprimarystakeholders thatpublic fundsare beingusedproperlyand forthe intendedpurpose.Thiswould involve moving away from reporting isolated and individual instances of irregularities, towards bringing out weaknesses in the control environment, analysing key risks and challenges to projects/schemes/programmesandsuggestingsuitableandtimelyrecommendationsforgood governance. Towardsthisend,ourchallengesandgoalsforaudit,tobeachievedoverthenextfiveyears, aredetailedbelow.
1.1 ComplianceAudit Challenges

In terms of the need for qualitative improvement, compliance audit is perhaps our most criticalarea.Complianceaudithasfartoooftenbeenperceived,bothwithinandoutsidethe Department, as following a needleinthehaystack approach with undue attention being paid to minor pay/TA and other related issues. This has two implications (a) we are perceivedasgunningforindividualsatapersonalleveland(b)moreimportantly,auditeffort and resources allocated to such audits are not available for more significant and material issueslikeexecutionofhighvalueprojectsandcoreoperationalactivities. Whileweidentifythedepartments/areasforauditbasedonhigh,mediumandlowrisk,wedo notgenerallycarryoutanysuchexercisetodeterminetheextentofriskwithinanauditarea. Forinstance,wemayselectaDDO,whoseofficeiscategorisedashighriskforaudit,but within that DDOs office, we do not assess the risk level of various transactions or operational areas. At the unit (auditee) level, we do not even determine the scope and coverageof audit,samplesizeorthemodeofsampleselection.
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Ourcurrentapproachtotransactionauditandtheexcessivefocusonestablishmentaudithas comeinfordebateanddiscussionatvariouslevels,bothwithinandoutsidetheDepartment. The common response to such perceptions is that transaction audit is our bread and butter auditand itprovidesadeterrenteffectontheauditees.While it ispossiblethat mostofthe auditobservationscomefromestablishmentaudit,theseauditsdotakeawaythefocusfrom more serious issues relating to development and governance and the resources allocated to audits of this nature deprive attention to other sectors, where we can make a difference to good governance. Establishment audit should certainly not be ignored but it can be carried outonthematicbasissoastoprovideassurance(couldbeeitherpositiveornegative)tothe stakeholders,ratherthanasisolatedinstances,exceptincaseofindividualfraud. Ifwearetobeperceivedasmakingadifferencetogovernance,weneedtomoveawayfrom ourtraditionalapproachofreportingafewauditparagraphswithoutprovidinganyassurance on the rest of the activities of the Ministries/Departments of Government, towards an assurancebasedapproachasoutlinedinourMission.Forthispurpose,weneedto:
Goals
i. Definetheobjectiveofcomplianceauditasprovidingoverallassuranceongovernance and control processes in Ministries/ Departments/ entities (rather than highlighting isolatedirregularitiesarisingfrom testcheck) ii. In line with the redefined objective, reorient our compliance audit approach from coverage of DDOs to CCObased, District/ Constituencycentric and/or themebased approach. iii. Gaininternalassuranceaboutourauditprocessesandproceduresthroughdetailedunit levelauditplanning,scopingtheworkanddocumentationofworkingpapers iv. Revise our compliance audit methodologies/ practices in line with the redefined objectiveandapproach v. Optimisetheallocationofauditresourcesforcomplianceaudit vi. Build capacities in domain specific audits like power, irrigation, mining, aviation, telecometc. vii. Upgrade our staff skills to meet the redefined compliance audit objectives and approach.
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GoalSupervisor:AllDAIsandADAIs GoalManager:DG(Audit)andDGs/AGs/PDs(Audit) Roadmap: a. ChapteronComplianceAuditinMSO(Audit)shouldberevisedbyJune2011detailed auditchecklistsforcommonareasofaudite.g.education,healthetc.shouldbedrawn upandfinetunedinaphasedmannerbyMarch2012. b. Compliance Audit Chapters/Reports to be tabled in 201112 should contain at least 50%thematic/CCObasedorotherassurancebasedparagraphs.Thisshouldincreaseto 80%by201213.Further,by201213,atleast80%oftheauditresources(partydays) for compliance audits should be devotedtothematic audits only 20% or less of the availablecomplianceauditresourcesshouldbesetasideforauditofindividualDDOs. c. Forworksaudit,whichisoneofourmajortransactionauditareas,thefocusshouldbe on large projects based on prioritisation rather than on audit of individual divisions works audit should invariably combine document scrutiny with physical inspection andassessmentofcontrolsbothfinancialandoperationalcontrols. d. AuditPlansfor201112forindividualAuditOfficesshouldprovideforunitlevelaudit planningfor50%ofthecomplianceauditsthisshouldresultinadrasticreductionin the number of units planned for audit during the year. By 201213, this should be increasedto80%oftheaudits. e. The process of audit planning should be reviewed and standardised working papers should be prescribed by June 2011. All Audit offices should ensure that working papers are maintained to reflect the audit planning as well as execution process by December 2011. For this purpose, the department should also select/design and
1 implementauditautomationsoftware(onthelinesofTeamMate ).
f. The department should create a pool of knowledge resource persons (KRPs) for specific domains cutting across office boundaries by March 2011. This should be complementedbyasecondlevelKRPsineachAuditOfficeforrelevantdomain,who shouldbegroomedwithappropriateskillsinthatdomainbyJune2012.
ConsideringthatTeamMateisanexpensiveproprietarysoftwareandisdesignedprimarilyforfinancialaudit of accrual based accounts, we may need to design our own software which will provide for customised checklistsforcomplianceauditsofdifferentdepartments.
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g. AlltheAuditofficesshouldchalkoutplansincoordinationwithRTIs/auditeetraining institutes/sectorspecialistsandotherpremiertraininginstitutes,toorganiseatleasttwo trainingsinayearintheselecteddomaintobuildcapacitiesinthatdomainby2012.
1.2 FinancialAudit Challenges

Therearetwotypesof financialauditcarriedoutbyusrelatingtothe(a)accountsofthe PSUs/AutonomousBodiesand(b)Governmentaccounts.WehavebroughtouttheFinancial AttestAuditManualrecentlyandhavealsobeenendeavouringtoformulateourGovernment andPublicSectorAccountingStandardsinlinewithinternationalstandards. Ourfocusonfinancialaudit,especiallywithregardtoGovernmentaccounts,hasbeenrather inadequate. The emphasis here has generally been, on arithmetical accuracy and completenessintermsofcompliancewithHeadquartersinstructions,ratherthanonauditand analysis of the underlying data. We have revised the Chapter Iof the Civil Audit Report withalotofvaluableadditionalinformationandhavebroughtitoutasastandalonevolume since 2009. We have also done that with Railway finances with effect from 200910 accounts.However,wehavenotchangedthemannerofauditoftheAccounts.Nottoomany personnelarefamiliarwiththewayFinanceandAppropriationAccountsareprepared,tobe abletoappreciate,understandandanalysethemfromanauditperspective.Weneedtobuild capacitiesandacquiredomainknowledgeinthisregard. AsignificantnumberofPSUs haveautomatedtheir financial accounting system.However, we continue to carry out a manual audit of these accounts, without giving any assurance about the adequacy of the internal controls in place to take care of the risks and vulnerabilities of these systems to such risks. While it is the responsibility of the Management/executivetoputinplaceadequatecontrols,weshouldgainassurancethatthese controls are functioning as envisaged, to be able to express an opinion on the accounts compiledfromsuchsystems.Towardsthegoalofimprovingourfinancialaudit,weneedto:
Goals
i. Reorientourfinancialauditapproachtowardsprovidingassuranceonthereliabilityof the periodic financial statements of Governments and entities within our audit jurisdiction
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ii. Reviseourfinancialauditprocedures in linewith international bestpractices interms ofsampling,riskassessment,controlsevaluation,andmateriality iii. Increase the allocation of audit resources for financial audit of state commercial undertakingsandautonomousbodies. iv. IntegrateCAP/CASSauditandauditofVLCdatawithauditofGovernmentfinancial statements,andalsoensurelinkagesbetweenfinancialandcomplianceaudit v. ReorientourcommercialauditofPSUs(underSection619(4))tomeetthechallenges arisingoutoftheforthcomingmovetoIFRSfrom2011onwards i. Upgradeourstaffskillstomeettheredefinedfinancialauditapproach. ii. Evolve a formal platform for engaging with audit firms in the private sector to exchangeinformation/experienceaboutthebestpracticesinauditofvariousindustries. GoalSupervisor:AllDAIsandADAIs GoalManager:DG(Audit)andDGs/AGs/PDs(Audit) Roadmap: a. For audit of Finance and Appropriation Accounts from 201011 onwards (i.e. from April2011onwards),adetailedfinancialattestauditplanshouldbepreparedbyallthe PAGs/AGs (Civil Audit), identifying the key areas in important Appropriations/ Finance Account statements. This financial attest audit plan should also integrate CAP/CASS audit, analysis of VLC data and scrutiny of Finance and Appropriation accountsatvariousstages. b. Include a specific section in the standalone report on State, Central and Railway Financesfromtheaccountsfor201011onwards,ontheadequacyandeffectivenessof internal controls affecting the accuracy and reliability of financial statements. This should cover aspects like timeliness of rendition of accounts, reconciliation etc. The results of Treasury Inspection (our key tool for assessing controls at the primary accountingunit)shouldfeedintothissection. c. Auditautomationsoftwareshouldbeselected/designedandimplementedintimeforthe financialauditofaccountsfor201112. d. ChecklistsforalltheIFRStandardsshouldbepreparedbyDecember2010andallthe commercialauditstaffshouldbetrainedinthesebyMarch2011. Page|9
e. CarryoutapilotstudybyJune2011onhowtoleveragetheinformationandexperience ofprivatesectorauditfirmsinourcertificationaudit.
1.3 PerformanceAudit Challenges

Wehavebeenevaluatingvarioussocioeconomicdevelopmentalprogrammes,especiallythe flagship schemes of the Government individually as PA reviews. If, as the SAI, we are to identify strategic risks at the Government level, then there is a need for a centrally co ordinated strategic plan to conduct audit evaluations on a longterm cycle of the identified areas in each sector.This would necessarily have to be supplemented by plans for auditof areas of State/ local importance, which would be derived from State Plan schemes, local media, legislative and public perception etc. The Strategic Audit Plan prepared in 2003 coveredtheperiod200207tobecoterminuswiththeTenthFiveYearPlan.Itanalysedall theissuesidentifiedbytheTenthPlanaskeyfordevelopmentofvarioussectorsduringthe Plan period and formulated strategies for audit of those areas. Almost all the areas/issues identified in that Audit Plan have been covered during the last five years and it is time to prepare another Strategic Plan after proper risk assessment, in line with the priorities identifiedbytheEleventhPlantoprovideaclearfocusanddirectiontoourauditefforts in thenextfiveyears.Itisestimatedthatabout90percentofthetotalPlanoutlayisconsumed by no more than 10 to 15 programmes across all sectors. These programmes need to be constantlyonourradar. There are however, important sectors with key nonplan activities (e.g. fertilizer and petroleumproductssubsidies)whichdonotdirectlyfitintotheplanframework.Fiscalissues, whichdo notformpartofthePlanningCommissionsremit, needtobecovered, including transfers through the Finance Commission. Moreover, the defence sector and the complete receiptsside(taxand nontaxreceipts)alsoneed tobecovered inourStrategic AuditPlan, apart from the key areas of national significance identified by the Eleventh Plan and programmesthatengagetheattentionofpublic,media,legislatorsandpolicymakers. Wecouldalsoconsideridentifyingthestrategicrisksforeachsectorandthosethatcutacross sectorsattheendoftheannualauditcycleandreporttotheGovernmentsbothCentraland Statewithclearandlogicalexplanationsastowhywehaveconsideredtheseashighrisk,and what corrective action needs to be initiated by the Government in order to mitigate these risks. Page|10
Forexample,ahostofsocioeconomicdevelopmentalprogrammestargetbeneficiariesbased ontheirBPL(BelowPovertyLine)status.Theidentificationofanindividualbeneficiaryasa BPL household is a critical element, which significantly affects their entitlement to various schemes (housing, healthcare, education, food distribution, credit, employment etc.). Our audit evaluations have also, from time to time, thrown up deficiencies in the identification process e.g. inclusion of higher income households, Government servants in the BPL list etc. However, the process of identification/ updation of BPL families has not received the required attention of Governments. Further, this process has also not been reviewed separately in audit, as it does not have separate financial materiality, nor is it a specific schemeoraprogrammeinitself. We need to dovetail our performance audits of individual schemes in a sectorto provide a holisticperspectiveoneachsectortofacilitategoodgovernanceandrightdecisionmakingby policy makers. We also need to improve our domain knowledge of various sectors and strengthenandconsolidatetheprogressthathasbeenmadesofarinourperformanceaudit. Forthispurpose,weneedto:
Goals
1.3.1 AuditPlanforPerformanceAudits i. Prepare and implement a performance audit plan (for selection of performance audit themes), as a subset of the Strategic Audit Plan of the department, cutting across functionalandgeographicalboundaries ii. Ensureengagementwithallthestakeholders intheprocessofplanningandexecution ofperformanceaudits iii. Ensurewideruseofnewmethodologies/techniquesforevidencegathering(fieldvisits/ inspections, photographic evidence, beneficiary surveys/ interviews, and other social audit techniques) and reporting (user friendly presentation, use of pamphlets, CD brochuresetc.) iv. Synergise our performance audit efforts in social sector with those of social audit groupsandcivilsocietyorganisations. v. Bring out standalone reports wherever feasible, to focus the attention of the stakeholders.
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vi. Substantiallyincreasetheallocationofauditresourcestoperformanceauditonalong termbasis,bycorrespondinglyreducingtheallocationforcomplianceaudit(exceptfor thematicaudits). GoalSupervisor:AllDAIsandADAIs GoalManager:DGs/AGs/PDs(Audit)&FunctionalwingsinHdqrs Roadmap: a. SeetheRoadmapunderStrategicAuditPlanwithregardtoperformanceauditplanand interactionwithstakeholders. b. With effect from Audit Plan 201112 onwards, synergise our audit efforts in social sectorwiththoseofsocialauditgroupsandcivilsocietyorganisations c. Every Audit Office should endeavourto bring out at least one Study Report per year from2011onwardsinadditiontotheregularauditreport.
1.4 AuditofLocalBodies Challenges

Increasingly, many social sector programmes are being implemented by the Government throughPanchayatiRajinstitutions(PRIs).PRIsattheBlockandGramPanchayatlevelsare receiving enormous funds which are often beyond their financial, operational and administrativecapacitytohandle.OntheUrbanLocalBodies(ULB)side,megaprogrammes
2 th like JNNURM are similarly ensuring huge devolution of funds. In fact, the 13 Finance
Commissionhasrecommendedallocationofgrantstolocalbodiesonabasiswhichmimics theallocationofresourcestoStateGovernments.Consideringthisparadigmshiftinfunding andgovernancepattern,weneedtogearourselvesuptoplaytheroleenvisagedbythepolicy makers as a mentor as well as a mechanism for ensuring accountability for public expenditure on social sector involving livelihood, social amenities, utilities and basic infrastructure, among others. This involves strengthening our institutional framework for conductingauditofurbanandrurallocalbodies. Currently, the staff available for audit of PRIs and ULBs is extremely inadequate to cope withtheexpectationsofourstakeholdersordischargetherolesetbythedepartmentforitself
JawaharlalNehruNationalUrbanRenewalMission
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in this area. While there is huge transfer of funds to the PRIs for implementation of developmentalprogrammes,thereisnoclaritybothwithinIAADaswellastheauditeeunits, astowhoshouldbeauditingtheseprogrammeswhetheritshouldbethecivilauditwingor theLBwing.SincetheLBwinghasconfineditselftostandardisingtheaccountingformats, providing technical guidance and carrying out technical inspections, audit of public expenditure at the grass root level is not getting the attention that is required. We need to overcomethispredicamentifwearetorespondtodecentralisedgovernanceadequately.
Goals
i. Determine the actual staff strength required for auditing the local bodies and provide foritexpeditiously. ii. Integrate LB audit with civil audit, so as to ensure proper audit of centrally funded schemesatgrassrootlevel iii. Continue to collaborate with Ministries of Panchayati Raj, Urban Development and Finance, as also with the State Governments, to devise user friendly accounting systemsandaccountsbasedMIS. iv. ImprovethequalityofexistingLB/PRIaudit,whereitiswithCAG(Bihar,Jharkhand andWestBengal) v. ImprovethequalityofourfinancialauditbytracingfundsfromGoItoStates/Statesto Districts/DistrictstoBlocks/BlockstoGPs/ULBsetc. GoalSupervisor:DAI(LB) GoalManager:DG(LB) Roadmap: a. WorkoutthestaffrequirementforLBwingbyDecember2010andinitiaterecruitment process,soastohavethestaffinplacebyMarch2012(includingtraining). b. Carryoutanintegratedauditofatleasttwosocialsectorschemes(preferablyNREGA andNRHM)onapilotbasisbyMarch2011involvingLBauditandcivilauditwings and replicate it across the department by September 2011. As part of this integrated auditeffort,tracethefundsfromGoItoStates/StatestoDistricts/DistrictstoBlocks/ BlockstoGPs.
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c. Preparespecific checklists byMarch2011 forauditofPRIs/ULBswhereCAG isthe soleauditorandsuperimposedauditoftheworkdonebyCharteredAccountantsetc.to gainassuranceaboutinternalcontrolsinplaceinthePRIs/ULBs d. ReviewthequalityofexistingLB/PRIauditinBihar,JharkhandandWestBengal, whereCAGisthesoleauditor,byMarch2011andputinplaceadequatemechanism byJune2011togainassuranceaboutauditqualityin theseStatesinLB/PRIaudit.
1.5 AuditofGreenfieldAreas Challenges

We have, over the years, gained sufficient expertise and knowledge in various traditional areasofaudit.Itistimenow,toplanforauditofgreenfieldareasi.e.emergingareasofaudit, where we are still in the learning process. These are the areas where there is substantial investment and change in the structure of management and governance. It therefore necessitates a paradigm shift in audit approach as well as audit methodologies and techniques. Some of the greenfield areas for audit are Publicprivate partnership projects (PPP),egovernanceprojects,environmentaudit,socialaudit,auditofregulatorybodiesetc. Of late, Government of India and increasingly State Governments, have been going in for publicprivate partnerships for bringing in the much needed investment into infrastructure, like roads, airports, ports, railways, power etc. PPP projects are considered to be projects between the private and public sector based on legally enforceable contracts or concession agreementsfordeliveringservices,historicallyprovidedbythepublicsector.Paymentforthe servicescanbemadeeitherthroughuserfinancedchargesorpaymentsbytheGovernment. PPPsinvolveallocationofrisksbetweentheprivateandpublicsectors,dependingonwhich partyisinthebestpositiontomanageaspecificrisk. AuditofsuchPPPventureswouldhavetogobeyondthecurrentformsofauditingtoaddress issues like revenue and risk sharing, choice of the PPP model, scope for innovation, tariff setting,accountingtreatmentandproject/contractmanagement.Theguidelines forauditof PPPhavealreadybeenformulatedandcirculatedtoall thefieldoffices. EgovernancereferstothedeliveryofGovernmentalserviceselectronicallyprimarilytoits citizensandsecondly,otherclientswithintheGovernment.This isagovernanceprocess in which Information and Communications Technology (ICT) plays a significant role. E governanceseekstotransformthegovernanceprocess,toimprovethedeliveryofservicesto Page|14
the citizens and ensure transparency and responsiveness in the functioning of the Government. The Government of India formulated an EGovernance National Action Plan 20032007 to give impetus to egovernance to promote long term growth, and facilitate high quality and highspeedservicestoitscitizens.Someoftheservicesthatarecurrentlybeingprovidedby theCentralGovernment/StateGovernmentsthroughelectronicmeansincludedetailsofland records, treasury transactions, digital mandis, utility payments, eSeva/ electronic service deliveryetc.ManyotherareaslikeCustomsandCentralExcise,postalservices,registrations, healthcare, entertainment and various other services and administrative functions of the Government are being automated and information is being provided tothe citizens through internetandmobiletechnologies. TheinitiativesofboththeCentralandtheStatesGovernmentsinthisregardhaveposednew challengestotheauditors.Weneedtounderstandtheworkingofnotjustourareaoffocus, butalsothelinkagesbetweenthedifferentdepartmentsinvolvedinegovernance,interfaces betweendifferentsystems,interactionamongdifferentagencies,expectationsfromdifferent quartersetc. Our Department has now gained considerable experience and expertise in the field of IT audit,andwehavereviewedafewegovernanceprojects.However,oureffortsintheauditof egovernanceneedtokeeppacewiththeexplosivegrowthineGovernanceprojects.Further, with manyofourtraditionalaudit areas beingautomatedthroughegovernance,there isan urgentneedtochangeourconventionalauditmethodologiesin theseareas. Social audit is increasingly becoming popular as it seeks to make the audit process more transparentandtakeauditfindingstoawiderpublicdomainofstakeholders,i.e.usersofthe Government schemes, services and utilities. The spread ofsocial audit has been increasing due to the steady shift in devolution of Central funds and functions relating to socio economic schemes to the local tiers of Government like PRIs, ULBs and other special purpose agencies set up by the Government for implementation of specific schemes like NRHM, SSA etc. Discussions were held with the stakeholders and other opinion makers active in social audit guidelines have been drawn up for synergising and mainstreaming socialauditwithpublicauditandcirculatedtoalltheoffices. SAI India has been focusing on environment related issues vigorously and has been conducting a number of international training programmes and workshops to create Page|15
awareness on this issue and conducting performance audit of various environment related projectsandconcerns.Wehaveafieldofficedealingspecificallywithenvironmentauditand an RTI designated as a Centre of Excellence in this area. Initiatives are afoot for creating internationaltrainingfacilitiesforenvironmentverysoon.Weneedtobuildonthisinitiative andexpertisebymainstreamingenvironmentauditintoourregularauditandbringout,not onlytheconcernsrelatingdirectlytopreservationanddevelopmentofenvironment,butalso theenvironmentalimpactofvariouspoliciesandprogrammesoftheGovernment.Amanual onEnvironmentAuditwillbeavailablewithintheyear2010.
Goals
We have already initiated action for developing our skills for audit of these and other emerging areas. We need to follow suit with the other identified greenfield areas and build capacitiesatvariouslevelstofacetherelevantchallengesinatimeboundmanner. GoalSupervisor:AllDAIsandADAIs GoalManager:DG(Audit)
2 AuditMethodologiesandPractices Challenges
Overthelastfewyears,wehavebreachednewfrontiersintermsoftakingupauditsinareas whichwerehithertonotperceivedtobepartofourmandate.Forexample,wehavemadea forayintoauditofPPPprojects,privateoilcompanies,privatetelecomcompaniesetc.atthe specificrequestoftheGovernment.However,thesearesporadicinstancesandnotbuiltinas partofourregularmandate.Therehavealsobeeninstanceswherethefieldauditteamshave beenquestionedabouttheauditmandate. Further, in keeping with the changing priorities of the Government, huge funds are being devolved to the local self governing institutions like ULBs/PRIs and other special purpose agencies, as mentioned in paragraph 1.4. Our audit mandate with regard to these bodies is nebulousandrequires clarity.There arealsoa numberoffundswhichare beingoperated outsidetheauthorityofLegislatures,althoughthesereceivebudgetarysupport.Theseareall outside the purview of audit as of now. In order to fulfil the role envisaged by the ConstitutionmakersandtherolebeingassignedbysuccessiveGovernmentstoplayanactive partinensuringtransparency,accountabilityandgoodgovernance,weneedtostrengthenour
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mandatetomakeitcomprehensiveandencompassalltheactivitieswhicharecurrentlybeing taken up on request basis or where we would like to review the
programmes/schemes/activitiesinviewoftheinvolvementoftaxpayersmoney. Oneoftheimportantareasthatrequireattentionisourauditplanningprocess.Whilewedo carryoutariskassessmentofthegovernmentdepartments/PSUs/otheragencies/bodiesbased ontheauditeeprofile,expenditureincurredoverthepastthreeyearsandotherparameters,we alsogobycategorisationofauditeeentities(A,B,Ccategories)basedonthenormsrelatingto expenditure,fixedmanyyearsago.Therehasbeenanexplosivegrowthinexpenditureover the decades and it would not be possible for us, given the time and resources available, to auditalltheauditableunitsoveracycle.Therefore,ourriskassessmentprocessneedstobe more stringent and we need totake a relook atthe norms for categorisation of the auditee units. There have been changes the world over in the way the SAIs plan their audits. Apart from riskassessment,somecountrieshavebeenconsciouslytryingtotakeinputsfromthepublic intheirauditplanningprocess.AcaseinpointisSAI,Korea,whichinvitesviewsfromcivil societywhileplanningtheauditsandsharestheresultsofauditwiththepublic.SAI,Korea notifiesthecitizens inadvance,ofthescopeandtimingofplannedaudits,wheretheissues concern the citizens and their inputs are considered in finalising the audit reports. A CitizensAuditRequestSystemwasintroducedin2001toenablethecitizenstorequestfor audits related to public sector institutions, where they perceive corruption/malpractices that could undermine public interest, which has become very popular with the citizens. These initiatives have also helped the SAI in monitoring its own errant staff, apart from strengtheningitsoversightoverGovernmentfunctioning.InkeepingwithournewMission, where Public has been identified as one of the stakeholders of audit, we could consider factoringtheinputsofcivilsociety/informedcitizensinourauditplanningprocess. OneofthemainstrengthsofIA&ADisitscomprehensivereachacrossmultifariousCentral and State Departments, agencies and bodies, and its ability to trace funds down to the last rupee. Our mandate is comprehensive (although there is a need for further clarity and expansionasmentionedabove),andweshouldnottakeatunnelvisionapproachtoauditof various programmes of the Government. We need to move towards an integrated audit to harnessourexperienceandknowledgeinthisregardtoprovidehighlevelstrategicinputson a sectoral basis for informed decision making by policy makers. There have been sporadic efforts to carry out integrated audits but we need to, as a department, leverage the unitary Page|17
nature of audit in the Indian Constitution, and ensure integration of audit efforts across functionalwings,andCentral/StateAuditOffices. TherehasbeenbetterandmoreformalinteractionwiththeExecutiveintheformofentryand exit conferences as part of our performance audit process. We need to continue with this approachandinteractwithnotonlytheExecutive,butalsowiththeotherstakeholdersmore frequentlysothattheiroutputformstheinputforourauditplanningprocessandouroutput formspartoftheirinputfordecisionmakingandpolicyformulationprocess. Whilewe have beenappraisingalmostallthe flagshipprogrammesofthe Governmentand otherimportantfinancialandrelatedtransactionsandmakingfarreachingchangesintheway wecarryoutourwork,ourAuditReportsdonotgetthevisibilitythattheydeserveandnot manypeopleseemtoreallyreadourReportsapartfromtheconcernedpeopleinGovernment and Legislature. This is primarily on account of two factors (a) our reports are not user friendly in terms of the format and style (except for a few recent reports) and (b) we are media shy. It is time to improve the quality and presentation of our reports and simultaneously make a conscious effort to engage the media proactively to disseminate the contentofourreports. Wehavebeenendeavouringtoimproveandupgradeourauditmethodologiesconstantlyand havemadegoodprogresswiththetargetssetforourselvesinthePerspectivePlan200308. We need to consolidate and further strengthen our audit methodologies, practices and proceduresasmentionedabove,tokeeppacewithglobalbestpractices,clientexpectations, and be a partner in governance process. Towards this end, the following specific action is proposedwithregardtotheareasdetailedintheprecedingparagraphs.
Goals 2.1 AuditMandate

i. EnsurecomprehensiveLegislativechangestothereach/mandateofCAGsaudit ii. Pursue theinitiativestakenforexpandingtheauditmandateofCAGtofruition iii. Formulate specific timeframe in consultation with the Government, for tabling Audit ReportsinParliament/StateLegislature iv. Declutter the Audit Wing in Headquarters and strengthen the role of DG (Audit) to function more effectively as the head of policy, planning and research activities,
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consideringthemyriademergingareasofauditthatneedtobeaddressedinafocused manner. GoalSupervisor:DAI GoalManager:DG(Audit) Roadmap: a. Create a separate Strategic Planning Unit headed by a DG/PD under DAI (Hdqrs) by December 2010 and entrust the work relating to policy, planning, preparation of a Strategic Audit Plan for the department, monitoring and followup of the relevant activitiestothisUnit.DG(Audit)shouldbetaskedwithresearchandformulation/fine tuningofaudit methodologies anddissemination of bestpractices in various areasof auditwithinthedepartment.
2.2 AuditPlanningandRiskAssessment
i. Prepare a comprehensive Strategic Audit Plan for the Department with appropriate linkagestotheEleventhFiveYearPlanandidentifykeyfocusareasforauditoverthe nextthreetofiveyears. ii. Ensure preparation of Strategic Audit Plan for each Functional Wing /Field Office, dovetailedwiththeStrategicAuditPlanoftheDepartment iii. Ensurethatthe Annual AuditPlansofevery Functional Wing/FieldOffice flow from theconcernedStrategicAuditPlanoftheFunctionalWing/FieldOffice. iv. Instituteaformalmechanism for high level midtermreviewofprogressvisavisthe Strategic Audit Plan and determine the associated changes, if any, required in audit methodologiesandprocedurestocomplywiththeStrategicAuditPlan. v. In addition to macrolevel planning (strategic and annual), ensure that detailed unit levelauditplanningisembeddedintheauditprocess,especiallyforcomplianceaudits. vi. Ensurethatauditplanning(bothmacrolevelplanningandunitauditplanning)involves a detailed, formal and documented assessment of significant risk factors, while decidingthemesandauditscope/coverage. vii. UseVLCdataextensivelyforauditplanningandriskassessment. viii. Initiateexercisestoconductauditevaluationsof risk management(risk identification, assessment,andmitigation)byselectedMinistries/Departments. Page|19
ix. Increasefocusonpotentialrisks(inadditiontoactualinstancesoffraud,irregularities etc.)aspartofauditreporting. x. Ensure preparation of Audit Plans for individual audits, indicating scope of audit, sample size, timeframe and resources make available detailed audit guidelines and checklistsforauditofdifferentfunctionalareastofieldauditteams. xi. Institutionalise the use of services of experts/consultants for various areas of audit. Develop a database of all the outside experts in various areas so that their technical inputscanbeobtainedasandwhenrequired. xii. Set up a knowledge centre at Headquarters to decide on the mode of selection of themes/topics for variousauditsandprovideguidance in executionandreportingthe resultsofsuchaudits. GoalSupervisor:AllDAIsandADAIs GoalManager:DGs/AGs/PDs(Audit) Roadmap: a. Prepare a Strategic Audit Plan for the department, primarily covering the audit of activities/schemes/programmes of GoI by March 2011. All the Functional wings in HeadquartersandfieldAuditofficesshouldprepareasimilarPlanbySeptember2011, covering the focus areas for audit overthe ensuing three to five years. Review these plansatperiodicalintervals(sixmonthlyforGoIandannualforotherentities). b. Hold discussion with the stakeholders like representatives of Planning Commission, PAC/COPU,ParliamentaryStandingCommittees,AuditeeMinistries/Departmentsetc onanannual basis(Decemberpreferably)toobtaintheir inputs intheauditplanning process. c. Design and implement a database of outside experts/consultants in various areas by June2011soastotaptheirtechnicalexpertiseasrequired.
2.3 IntegrationofAuditEfforts
i. AsafollowupoftheStrategicAuditPlan,ensurecoordinatedselectionofthemesfor performance and compliance audit between different functional audit wings, especially: a. CentralCivil/Defence/RailwayAuditOfficesandMABs Page|20
b. CentralCivilAuditOffices,StatePAGs/AGs(CivilAudit)andStateLocalBodies AuditOffices ii. Ensure coordination between Central Civil Audit Offices, State PAGs/ AGs (Civil Audit),StateLBAuditOffices,andA&EOfficestoverifythechainoftransfersand ultimateutilisationofGoIfundstransferredunderCentrallySponsored/CentralSector Schemes. iii. Putinplacean institutional framework(organisationalandprocedural) forintegrating audit efforts across various functional areas and carry out the required structural changesbothatHeadquartersandfieldlevel. iv. Institute a formal mechanism for ensuring the success of such cooperation among variouswingsandhandlingofcasesofmiscommunication/inadequatecooperation. GoalSupervisor:AllDAIsandADAIs GoalManager:DGs/AGs/PDs Roadmap: a. RestructuretheorganisationalsetupoftheDepartmentby December2010onthebasis ofMinistry/departmentratherthanonthetypeofentity,toensureintegrationofaudit effortsandpresentationofasectorbasedperspectivetotheGovernment.
2.4 StakeholderInteraction
i. Formally identify majorstakeholders intheauditplanningandreportingprocess(e.g. PAC/ COPU members and other legislators, Planning Commission/ Finance Commission, Ministry of Finance/ Finance Department, Other Ministries/ Departments, Civil Society Groups, Media etc.), in addition to the Audit Advisory Boards. ii. Introducemechanismsforformalconsultationwithstakeholders(atleastonanannual basis)foridentifyingthemesforperformance/complianceaudits. iii. Explore opportunities for providing support to selected Parliamentary Standing CommitteesalongthesamelinesasPAC/COPU. iv. Consolidate guidelines for interaction with the auditee institutions in performance audits,andconsiderguidelinesforsimilarinteractionsduringcomplianceaudits.
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v. Channelize the information base available with the citizens, NGOs, civil society organisations, government servants etc. in to inputs for audit planning and evidence gatheringpurposes. GoalSupervisor:AllDAIsandADAIs GoalManager:DGs/AGs/PDs(Audit)
2.5 Reporting
i. Simplify the Audit Reports and make them more reader friendly give adequate attentiontopresentationofAuditReportsintermsofformatting,useofcolours,print qualityetc. ii. Increase the use of CDs and booklets for wider dissemination of significant audit findings iii. BesidesreportingtheresultsofaudittoParliament/StateLegislatureindischargeofour Constitutional responsibility, we could expand our reporting relationship to cover Study Reports/Evaluation Studies/ Management Letter etc. to top management and policymakers,whereconsideredappropriate iv. StandardizetheformatofInspectionReportsofalltheFunctionalWings v. EnsurethatthequalityofInspectionReportsisonparwiththatofAuditReportsand placetheInspectionReportsinpublicdomain vi. With the flow of funds from GoI directly to the lowest level of governance, ensure translationofInspectionReportsintothelocallanguageandmakethemavailableto thePRIs.Also,maketheseavailableinaudiovisualformat. GoalSupervisor:AllDAIsandADAIs GoalManager:DG(Audit)andDGs/AGs/PDs(Audit&FunctionalWingsinHdqrs)
2.6 CommunicationandPublicRelations
iii. Moveoutofourivorytowerapproachindealingwiththepublicandmedia iv. Formulate an action plan for engaging with the media in the long run rather than initiatingactionforspecificeventsalone. v. Engage media proactively to create awareness among the general public and policy makersaboutthecriticalandconstructiveroleweplayinfacilitatinggoodgovernance. Page|22
vi. Makeaconsciousefforttoreachouttotheopinionmakersthroughthemedia. vii. Consider buying mediatimetocreateawareness amongcitizensaboutCAGsreports andfacilitateinformeddiscussionsinthisregard. viii. Give a freehand to the DGs/PAGs/AGs/PDs at the field level to interact with media relatingtoauditactivitiessubjecttobroadframeworkratherthanretainingcontrolat Headquartersforeverydetail. GoalSupervisor:DAI GoalManager:DG(CommunicationPolicy)/MediaAdvisor Roadmap: a. Formulate a proactive Media Policy and engage a PR Agency by October 2010 to enhancethevisibilityoftheDepartmentandeducatethepublicandthepolicymakers abouttheroleofauditandthesignificantfindingsemergingfromCAGsreports.
3 Accounts Challenges
We have initiated a series of measures in the last few years, to bring about reforms in GovernmentAccountsandthewaythesearepresented.However,ourfocusinthisregardhas essentially been on timeliness and transparency with very little attention being paid to the quality of accounts itself. There are a number of Suspense Heads in Accounts where huge amountsarereflected.Therearealsoalargenumberoftransactions/Heads,whichhavebeen figuringintheAccountsfordecades(someofthemdatingbacktopartitionofthecountryor earlier)withoutanychangeinthestatusofamounts/nofreshtransactionsand/orhavebecome redundantduetovariousreasons.Therearealso ahuge numberof misclassificationsevery year. Concerted action should be taken to review all such Heads/transactions, analyse and clear/adjusttothecorrectHeadofAccount,andifnotpossibletoidentifythecorrectHeador adjustthetransaction,writeoff inconsultationwiththeStateGovernment within aspecific timeframe. TheAdditionalCentralAssistance(ACA)givenbytheGovernmentofIndiatotheStatesfor variousdevelopmentalprogrammesisinthenatureofgrantsinaidanddoesnotgetreflected as funds allocated for specific programmes under the relevant Head of Account. Consequently,neithertheCentralnortheStateGovernmentsgetthecompletepicturerelating Page|23
to allocation and expenditure for programmes at one place. There is also no uniformity in booking expenditure under certain Heads among States dueto lack of uniformity in Object Heads and the expenditure on similar schemes is reflected under different Heads across States.Weneedtobringaboutuniformityinthisregardsoastoenableproperanalysisand comparisonofexpenditureundervariousHeadsacrossStates. TheVLCsystemhasservedaveryusefulpurposeforoveradecadebutwiththechangesin technologyandrapidobsolescence,thesystemisbecomingincreasinglydifficulttomaintain and is notabletoprovidethe functionalityexpectedof it.Also,withalltheStatesgoing in for computerisation of treasuries, it is important to build proper interface between the TreasuryAccountingsystemsandVLCsystemsothatwecanharnesstheadvantagesoffered inthisregardtocompile/finalisetheStateGovernmentaccountsmorerealtime. We need to continue with our endeavour to bring about reforms in Government Accounts with the ultimate objective of enhancing the quality and transparency of Government accountingwhileprovidingvaluableinputstoStateGovernmentsinfiscalmanagementand expenditurecontrol.Towardsthisend,
Goals
i. ReviewtheformatofFinanceAccounts&AppropriationAccountsto: a. Provideappropriatelevelofreportingdetailedvs.highlevel b. Includeoverallfinancialperformanceandcashflow c. Aidinmovingtoaccrualbasedaccounting d. Providemoreanalyticalreasonsforexcesses&savings e. EnsurealltheStatesincludethemandatedappendicestoFinanceAccounts f. Facilitatemeaningfulanalysisoftheaccounts ii. Reviewaccountingprocedures/chartofaccountsto: a. TrackexpenditureincurredoutofCentralgrantsrightdowntothegrassroots level b. Bringaboutuniformityinobjectheadsaddresstheneedfordistinctheadsfor flagshipprogrammesanddistinctcapitalheads iii. Facilitate the implementation of accrual accounting and standardbased accounting systeminconsultationwiththestakeholders iv. StabilizeandupgradetheVoucherLevelComputerisationsystems. Page|24
v. DevelopaninterfacebetweentheTreasuryAccountingsystemsandVLCsystems. vi. Digitise the vouchers in consultation with the State Governments to enable comprehensivedigitizationofaccountingprocess. vii. Where epayment has been initiated by the States, launch procedures to capture and compileaccountsofsuchreceiptsinamoredetailedmanner. viii. Setupacentraldatawarehousetohousethedetailedaccountinginformationofallthe Stateswithappropriatedataminingfacilities. Goal Supervisor:DAI(AEC) GoalManager:DG(AEC)/PAGs/AGs(A&E) Roadmap: a. Identify the problems with the existing VLC system by December 2010 prepare the specificationsforanewsystembyMarch2011andimplementanewVLCsystemby December 2011. This system should also provide an interface with the Treasury systems and capture all the epayments/etransactions/egovernance initiatives of the StateGovernments. b. InconsultationwithCGA(forCentralAccounts),revisetheChartofAccountsbyApril 2011tobringaboutuniformityinobjectheadsandtrackexpendituretothelastpaisa. c. Pursue with the State Governments vigorously so as to move towards accrual based accountingduringtheEleventhPlan. d. Plan for setting up a central data warehouse with data mining functionality by December2011tocapturealltheaccountinginformationoftheStatesandfacilitatea meaningfulanalysisformanagementreports/research/advicetotheGovernmentetc.
4 Entitlements Challenges
Withregardtoentitlements,whilewehavebeenmakingalleffortstoensurethatpensionary benefits are released to the retired employees expeditiously, there are often delays in authorising the benefits due to delay in receipt of the requisite documents from the departmentalofficers.Weneedtocoordinatewiththelatterandensurethattheysendusall thenecessarydocumentswellbeforetimetoenableustokeepupourtargetdates.Thereis Page|25
alsoaneedtoimprovethequalityofservicesprovidedtotheStateGovernmentemployeesin termsofensuringthatallthedeductionsmadefromtheirpaybillstowardsGPFarecredited timelyandcorrectlytotheiraccounts.
Goals
i. Defineindicatorsformeasuringqualityofserviceandmeasureactualservicedelivery atperiodicintervalsmakeourservicedeliverymechanismtransparenttothepublic. ii. Ensurethatthequalityofservicerelatingtoentitlementsisatparwiththatofbanking servicesasfarasfacilitationofonlinetransactionsareconcerned.Considersettingup informationkiosksforthepurpose. iii. Strengthen our commitment to the citizens through the Citizens Charter by adding additional areas like Gazetted entitlements and maintenance and settlement of long termadvancestakenbygovernmentservants iv. Haveahelplineforregisteringcomplaintsagainstunsatisfactoryservicedeliverybythe department v. Improve interface with DDOs/departments to obtain complete information relating to pension/GPFdocuments vi. HoldPensionAdalatseverymonthandinteractmoreproactivelywiththepensioners vii. Provide more online facilities to access information and to contact the AG regarding GPFAdvancesandGazettedentitlementsandupdatethewebsiteoftheAG(A&E)on aregularbasis. GoalSupervisor:DAI(AEC) GoalManager:DG(AEC)/PAGs/AGs(A&E)
5 InformationSystems Challenges
IAAD was among the first Government Departments to make extensive use ofInformation Technology (IT) for automating both its internal processes, as well as audit of IT systems fromlate1980s.SAIIndiahasbeenrecognisedamongINTOSAI/ASOSAIandotherSAIsas anexpertinauditofinformationsystemsandhasbeentheChairoftheINTOSAIWorking Groupon IT Audit for about 19 years. We need to leverage the recent developments in IT Page|26
primarilyintermsofwebconnectivityandmakeoptimumuseof IT to(a)improvesharingof knowledge across the organization for increased productivity, control and transparencyand (b)increasepublicinterfaceandvisibilitytotheworld(c)bealeaderinauditofITsystems. Forthispurpose,
Goals
i. Identify more closely at the system development stage with auditee in respect of mission critical systems of the Government (both Central and State)/ PSUs by intimating the important controls that are required to be built in, in the systems and statetheauditrequirementsintermsofAuditModule,ExceptionReportsetc. ii. Identify major/core applications of Government/PSUs where we need to acquire additionalskillsinauditing,andplanforbuildingcapacitiesinsuchareas iii. IntegrateourITsystemsrelatingtoauditplanandsupportfunctionswithVLCsystems iv. Plan for IT systems within IAAD for knowledge gathering for our traditional audit activities.Developelectronic librariestodeliver domainspecificsupporttoouraudit teams in terms of making available all the relevant information about specific audit areas(likemining,aviation,poweretc)atoneplace. v. Developknowledgenetworkstoensurethatnotonlyauditrelatedinformationbutalso auditdepartmentrelatedinformation,rules,proceduresetc.areavailableandsharedon line. vi. Makeuseofvideoconferencingandothercosteffectivetechnologiestoimparttraining anddiscussworkrelatedissues. vii. Disseminate the latest trends and methods of carrying out IT audits through the intranet/newslettersatregularintervals viii. Use technology (eg. Netbooksor mini notebooks)toreducethe time lag between the conductofauditandsubmissionofIRsbytheauditteams. ix. Develop and implement an IT application for capturing all audit findings and action taken thereon, tobemadeavailableontheintranet/internet. x. Improve the IAADs IT infrastructure and develop/ upgrade applications for managementandmonitoringofauditandadministrativeactivitieswithinfieldoffices andCAGsoffice. Page|27
xi. Redesign the CAGs website for better presentation and search facilities, and ensure constantupdationofcontent. GoalSupervisor:DAI(AEC&LB) GoalManager:PD(IS&ITAudit) Roadmap: a. Ensure that Audit Management System is in place by April 2011 so as to provide managementinformationontheactivitiesoftheDepartmentatbothmacroaswellas microlevel. b. RevamptheCAGswebsite by November2010(intime for150yearcelebrationsof the Department) to present it as a one stop portal for complete information on the activitiesandproductsoftheDepartmentwithsearchandqueryfacilities.
6 Human Resources Challenges

HR is an important area of focus to enable us to convert our plans mentioned above in to action. We need to transform this function from one of cadre control, to development of human resources and formulate human resources development policies and procedures to attractandretainthebesttoIAADfold. Over the years, audit function has moved gradually from one where there was contribution from the Auditors level in field audit and the Audit Officer was required to supervise their work, toone where the Assistant Audit Officer and Audit Officer do the actual field audit underthesupervisionofGroupOfficerandattimesAG/PD,dependingonthesignificanceof theareabeingaudited.Withthedepletioninthenumberofstaffandofficersandincreasein the areas and expenditure to be audited, it is becoming increasingly difficult to fulfil the expectations of the stakeholders and adhere to the benchmarks and standards of quality of auditsetforourselves. Even with a risk based audit planning where we focus our attention on essentially the key areas,weare havingtojugglethe fewqualitystaff availableandthe burdenof supervising abouttenteamsormoreandensuringgoodqualityInspectionReportsandAuditReportson theGroupOfficers(duetosevereshortageofGroupOfficers,a majorityofGroupOfficers have been holding additional charge) and AGs/PDs is enormous. With the benchmark for Page|28
promotion to IA&AS being merely Good, on one hand, we do not always get Group Officersofhighcalibre,andontheotherhand,theaspirationsofrelatively youngandhigh calibreGroupBofficersarenotmet. WeneedtobemorecircumspectwhileallocatingportfoliostoofficerspromotedfromGroup B cadre. Often they are posted to an office/area of work, where they have never been exposedtoduringtheir2530oddyearsofservice.Forinstance,GroupBofficerspromoted toIA&ASfromA&EstreamarepostedtoAuditandthosefromAuditstreamarepostedto A&E stream. This would not help either the officer concerned, nor does it improve the productivityoftheofficeconcerned. The Section Officers Grade examination mostly tests the candidates on FRSR related knowledgeandthereisntenoughemphasisonpracticalfieldlevelskills.Further,thenewly recruitedAAOsdonotalwaysgetexposuretofieldlevelauditatinitialstagestohonetheir skillsanddespitetheshortageinthiscadre,wetendtodemotethemincasetheyareunable to clear the exams within the given time. Apart from the other factors, this is one of the reasonsforthehighattritionrateindirectlyrecruitedAAOs.Whileitisimportanttoensure qualitystaff,itisalsoimportanttogroomthenewrecruitsandprovidetherightorientationto ensurethattheirservicesareavailableinthelongrun. Despite the emphasis on training and career progression on paper, we have a vast pool of traineeswhoare,quiteoftenthannot,theonesdeputedforanyandeverytrainingatRTIs, since the really good staff cannot ostensibly, be spared. The training requirements of IA&ASofficersalsoneedstobeplannedandintimatedtothemwellontime,soastoavoid lastminutecancellationsduetoexigenciesofwork.Careerprogressionplans needtobe in placetoensurethatofficersandstaffaretrainedaspertherequirementsofworkandnoton availabilitybasis. ThefollowingcourseofactionisproposedtodovetailtheHRfunctionwiththeprofessional developmentofthehumanresources,whichareourgreatestasset.
Goals
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6.1 Recruitment
i. Ensure availability of adequate number of IAAS officers in the Department through initialinduction,lateralentryandpromotion(bothfasttrackandwhendue),especially in viewofthe increasedresponsibilitiescastonIAADandthepivotalroleofGroup Officersinleadingcriticalauditassignments. ii. For promotion to IA&AS, ensure the prescription of appropriate criteria to meet the demanding requirements of IA&AS, so that the aspirations of bright and relatively youngerofficersinGroupBcadrearefulfilled. iii. Ensure requisite quality and number of officers is available, keeping in view the suggestedreorientedapproachforfinancialandcomplianceauditsandrenewedthrust onperformanceaudits. iv. Expeditetheimplementationoftherecommendationsofthecommitteeonstaffnorms, wherealreadyaccepted. v. Ensurestabilityinthetenureofofficersinapost,especiallyatthePAG/AGlevel. vi. Reorient the SOGE to meet the requirements of work as detailed in the section on Audit. GoalSupervisor:DAI GoalManager:AC(P)/PD (Staff) Roadmap: a. RevamptheRecruitmentRulesforinductiontoIA&ASbyMarch2011andprovidefor 60% direct recruitment, 20% promotion and 20% fast track promotion through examinationandtrackrecord. b. Ensure,inconsultationwiththeCentralGovernment,thatonlythecandidatesfulfilling the minimum benchmark of very good are promoted to IA&AS with effect from 2011. c. Recruit/promoteatleastdoublethecurrentnumberofGroupOfficersbyJune2011to facilitateadequateplanningandsupervisionofauditwork. d. Revise the staffing norms by March 2011 and ensure that staff is provided tooffices basedonworkload.
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6.2 Careerprogression
i. Draw up career progression plans for individuals in terms of timeframe for upward mobility and area/field of specialization, places of posting, long term training needs, specialassignmentsandsecondmentofservicestootherdepartments/organizations. ii. Transformthepresentsystemofappraisingtheperformanceofofficersandstafftoa systemofmanagingtheperformancethiswouldinvolvechangingthepresentACR systemkeepinginviewtheARCsrecommendations,toenableatwowayconsultative process promote growth and learning and recognising that capacity building and individual performance improvement leads to better achievement of organisational goals. iii. Ensure appropriate incentives are given to the cream of Group B cadre so as to motivatethemtorealisetheirfullpotentialandimprovetheoverallproductivityofthe Department. iv. IncasetheofficerspromotedfromGroupBcadretoIA&AShaveovertenyearsto go before retirement, they may be posted to any stream of work like the directly recruitedIA&ASofficers.Ifnot,they may bepostedtotheareaofworkwithwhich theyarefamiliar. GoalSupervisor:DAI GoalManager:AC(P)/PD (Staff)
6.3 TrainingandCapacityBuilding
Developthecapacityandskillsofpersonneltokeeppacewiththechangesinfunctioningof GovernmentandexpectationsfromIAAD: i. Consolidate and upgrade training infrastructure at RTIs/RTCs and other training establishmentsstrengtheninhousetraininginfrastructure ii. Provide impetus to research activities identify specific individuals/office/RTIs for carryingoutresearchinselectedareasofauditwithcleartimelinesforcompletionof researchwork iii. EnsureRTIsthathavebeendesignatedasCentresofExcellence,developstandardised courseware in the identified subject/area and devolve the responsibility of disseminatingthatdomainspecificknowledgewithinIAADtothatRTI Page|31
iv. Takehelpofauditeeentities/sectorspecifictraininginstitutesforimprovingourdomain knowledgethroughtrainingcourses/workshopsandseminars/talks. v. Use services of consultants and eminent persons to build capacities in new and emergingareasofaudit vi. Deputeofficersandstaffatvariouslevelsforspecialisedtraininginidentifiedareas,to premier Management Institutes / Universities (both within the country and abroad) and/orotherorganisationsofreputeintheidentifiedarea. vii. Ensurethatglobalbestpracticesandnewmethodologiesofauditaredisseminatedfrom IRwingtoalltheofficesandNAAA/iCISA/RTIs viii. Provide IT infrastructure for audit teams PCs, notebooks, pen drives and digital cameras(forcapturingphotographicevidence). GoalSupervisor:DAI GoalManager:AC(P)/DG(NAAA)/DG(iCISA) Roadmap: a. Standardise course design, course material and training methodology across all RTIs andRTCsbyMarch2011. b. Prepare a shelf of case studies by June 2011 to enhance the impact of training and upgradethequalityoffacultyinvarioustraininginstitutes. c. Identify specific individuals/office/RTIs by December 2010, for carrying out research inselectedareasofauditanddisseminationofbestpractices.
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Strategic Plan 2020 Prepared by The Group of Officers and Perspective Plan

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Strategic Plan 2020 Prepared by The Group of Officers and Perspective Plan

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STRATEGICPLAN 2020

ExecutiveSummary .........................................................................................................................i 1 SettingtheContext......................................................................................................................... 1

Goal6:ImprovingHuman ResourceManagement .......................................................................58

2C. 2D. 2E.

Goal 3 Improving communication with stakeholders and ensuringhighervisibility

Goal 5 Improving delivery of accounting and entitlement functions

Operationalising the Implementation

th StrategicPlan 2020forIAAD 9 September2010

Twosetsofperspectiveplans,settingoutDepartmentwideperspectivesondifferent areasforthenext fiveyears,havebeenprepared.ThefirstPerspectivePlanwasfortheperiod200308,whilethe PerspectivePlanfor201015wasfinalizedrecently.AsummaryofthekeygoalsofthePerspectivePlan 201015isgiveninAnnexe1.

Discussions and Recommendations of Conferences of Accountants General

TheConferencesofAccountantsGeneral(inparticularthelasttwoConferences)havedealtwithseveral strategicissuesindifferentareas,throughpreparationsofthemepapersonareasofconcernsand discussions/recommendationsthereon.Manyoftheissuesdiscussedinthisdocumenthavefeaturedin therecentXXVAsGConference.

1.4 NeedforaseparateStrategicPlan 2020forIAAD

2.3 ScopeandCoverageofStrategicPlan 2020forIAAD

Goal3 Improvingcommunicationwith stakeholdersandensuringhighervisibility Goal5 Improvingdeliveryofaccountingand entitlementfunctions

TheAnnualPerformanceReportshouldbereorientedfromreportingactivitiesindifferent areas (auditing, accounting,budget, personnel)to reportingperformance visvisthe laid downgoalsandobjectives;thiscanbesupportedbyinternalhalfyearlyreports.

3 Goal 1: Integrating auditefforts

Thecurrentorganizationalstructuredoesnotfacilitatecreationofdomainknowledgeona sectoralbasis;suchknowledgeisrestrictedtoindividualpocketsindifferentofficesandthat tootoalimitedextent.

13CommercialAuditOffices(12MABsplusDGAP&T); 4DefenceAuditOffices; 6Civil/CentralRevenueAuditOffices(DGACE,PDAESM,PDASD,DGA(C)Mumbai,PDA(C) Kolkata,andDGACR); 17RailwayAuditOffices;and 3OverseasAuditOffices.

No.ofAudit Offices Transmission) DG/PD Shipping,RoadTransportandHighways DG/PD CivilAviation,UrbanDevelopment,Housing andUrbanPovertyAlleviation DGAP&T

DGACR,NewDelhi DGACR,Mumbai DGACR,Kolkata DGACR,SouthernRegion(Bengaluru/Hyderabad/ Chennai)

Restructuring/ reductionofRailwayAuditOffices maybeconsidered,afterconsideringtheworkload (especiallyinthenewlycreatedRailwayZones)and alsoinviewofthecurrentandfutureavailabilityof IAASOfficersatAGlevel AuditofRailwayPSUs(KRCL,DMRC,CONCOR,RITES, IRCONetc.)shouldbewiththeRailwayAuditWing

3.6 Reorganisation ofAuditofStates

Creating an institutional mechanism of Knowledge Centres (KCs) for knowledge captureandmaintenanceonasectorspecificbasis

Encourage betterriskmanagement byCentralandStateGovernments

4.3 Establishing a Chartered Institute of Public Accountants and AuditorsofIndia (CIPAAI)

CIPAAIwouldprovide professionalcertificationtotheGroupBandCprofessionalsfromthe CAGbysubsumingtheSOGEcurrentlybeingconductedbytheCAGandalsotootherfinance, accountingandauditprofessionals in State/Centralgovernmentdepartmentsondemand.

TheRationalefor establishing aseparateInstitute

Currently,thereislackofprofessionalismamongstthelowerandthemiddlelevelfunctionariesinthe areaoffinance,accountsandauditing.Thishasledtodeficienciesintheaccountingprocessesand financialcontrolsacross organizationse.g.

FinallytheburdenofthisfallsontheExternalAuditors,who havebeenpointingoutnumerous shortcomings yearafteryear.Theproblemhasacquiredacutedimensions andiswidelyrecognized. Thereisalsoahugeshortageofproperlytrainedandskilledaccounting/auditingpersonnelatthelower

4.4 Settingup an InternationalConsultancywing

5 Goal 3: Improving communication with stakeholders and ensuringhighervisibility

Needforthe CAGtobemoreproactiveinhisinteractionswith themedia

5.2 SettingupaseparateParliamentary/Legislative RelationsUnit

5.4 TreatInspectionReportsasproductsoftheCAGforconsumptionby thepublic andotherstakeholders

5.5 IntroducemoreValueaddedproductsotherthanauditreportslike AidtoManagementSeries

TherecentcompendiumonPoliceModernisationwasanotherproductwhichwasverywellreceived bytheExecutivetoplantheirfuturestrategiesacrossstatesinthecountry.Thisproductwastimelyin highlightingthecriticalissuesthattheexecutiveneedtoaddresswhiletacklingimportantlawandorder issuesinthecountry.

Increasingawarenessamongststakeholdersonimportantgovernanceissues Sensitizingexecutivedepartmentstotheprevalentrulesandregulationsanddiscussingits complexities Reviewingnewtrends,techniquesandbestpracticesbothnationalandinternational. Suggestingimprovementstotheexistingframeworks

governanceinthecountry,andalsoprovideadditionalavenuesformediacoverageandcommunication withthelargerstakeholdercommunity,whichwouldbeseparate fromtheAuditReports.

6 Goal4: EnhancingAudit EffectivenessandImpact

ThefindingsinReportNo.1/ChapterIIrelatingtoappropriationsintheCentral/StateGovernmentsis,byitself, adequatetojustifysuchqualifications/disclaimers. 15 ThankstoClause49oftheListingAgreement

6.2 EnhancedFocusonFinancialAttest Audit ofGovernmentAccounts

ThefinancialattestauditofCentralandStateGovernmentaccounts,resultingintheexpressionofthe CAGsauditopinion,isacoreproductoftheCAGunderArticle151oftheConstitution.However,the financialauditprocessinanAGofficereceivesinadequatepriority,andprimarilycomprisesof:

to checks at aggregate levels (primarily in terms of arithmetical accuracy),based on fairly rudimentarychecklists(whicharegenerallyfilledinaroutinefashion).

integratedintothefinancialauditprocess,sothatoffsitescrutinyofvouchers/sanctionsiscombined withonsitescrutinyofselectedvouchers/sanctions;also,centralauditshouldalsobeintroducedina 16 phasedmannerinrespectofauditoftheGoI .

Thebifurcationofcompilationandcentralaudittookplacein1984,aftertherestructuringofIAADintoseparate auditandA&EofficesfortheStates.However,sincetheDepartmentalisedaccountingorganizationinrespectof theCentralGovernmentwasintroducedin1976,thereisnoprovisionforcentralauditinrespectofGoIaudit.

6.3 Financial Attest Audit of Government Companies and Autonomous bodies

Move towards conduct of certification audit of autonomous bodies exclusively by commercialauditstaff

6.4 Reorientationof approachtoComplianceAudit

Thereportingofthematicauditsshouldbe assurancebased,highlightingnegativefindingsorpositive findings(orabsenceofdeficiencies)inperspectivetoourauditsample.Further,thereportingshould coveralltheauditobjectives/focusareasindicatedintheauditplan,andshouldalsogivespecific

recommendations.HODsshouldbefreetodecidewhetherandhowspecificauditfindings(intheform ofextractsofthethematicIRs/subIRs)wouldbemadeavailabletolowerlevelfunctionariesofDDOs/ individualunits(inadditiontothemainIR).

Followupactiononauditfindingsshouldflowfromourrecommendations;suchrecommendations couldincluderecommendationsforsystemicimprovement,financialrecovery,asalsoactiontofix accountabilityandresponsibilityforirregularities,fraudetc.

6.5 StrengtheningPerformance Audit

TheLegislature(inparticular,themembersofPAC/COPU)andtheExecutiveareourprimary stakeholdersforperformanceaudits.However,inaddition,someoftheotherstakeholderswhocould beconsulted,couldinclude

AlthoughtheircontributiontotheprintedAuditReportsissubstantial typicallymorethan50percentofthe materialfortheAuditReports.

Enhanced and widespread use of innovative methods of collection of collateral evidence

Follow upofPerformanceAudits basedonrecommendations

7 Goal 5: Improving delivery of accounting and entitlement functions

Encourage States toassumeownershipofaccounts

Overaperiodoftime, the possibilitiesofStateGovernmentspreparingtheirownaccountshave multiplied, givenextensiveeffortsattreasurycomputerizationandtheabilityoftheStatestonetwork accountingunits.However,sofarnoStatehasexpressedwillingnesstotakeovertheaccounting function.

Partner States in improving institutional mechanisms for monitoring publicexpenditureandreceipts

Increasingly,themajorportionofGoIfundingthroughCSS/ACAisreleased,notthroughthe ConsolidatedFundsoftheStates,buttoStatelevelimplementingagencies,whicharetypically incorporatedassocietiesandareoutsidetheGovernmentaccountingloop.Inturn,releasesoffundsby

Develop treasury inspection as a robust and regular feedback mechanismonthefinancialmanagementsysteminStates

WiththeNewPensionScheme(NPS)inplace,theroleoftheAsGofficesinregardstoentitlement functionsisadwindlingone.Itisevidentthatoverthenextfewyears,wewouldbedealingwith diminishedactivities/operationsinpensionandprovident fundandwithinthenext20years,therole wouldbeminimal.Ourfocusshouldthereforebetwofold: