Supreme Audit Institution of India

A brief introduction

Comptroller and Auditor General of India

The Indian Audit and Accounts Department (IA&AD) is the Supreme Audit Institution of India, set up over 150 years ago in 1860. We, the members of this service, assist the Comptroller and Auditor General of India in discharging the duties mandated to him by the Constitution of India. In this booklet, we have encapsulated the origins of our organisation, our vision and mission, our duties, responsibilities and the work that we do.

Contents
1 2 3 4 5 6 7 8 9
Who are we? Our Vision, Mission and Core Values A bit of history Independent CAG in independent India Our organisation Whom do we audit? The audit process What are the types of audit we do? The final product of the audit process The Audit Reports

5 7 8 9 12 17 18 20 25

10 11 12

What happens to the Audit Reports? Impact of our work CAG a few misconceptions

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Who are we?

In the Indian polity, we, the Indian Audit and Accounts Department (also known as the Supreme Audit Institution in the international context) are an instrument for ensuring accountability. The Constitution of India has mandated us as the auditors to the nation. In a democracy, those holding power and positions of responsibility must be answerable for their action. The democratic state has a Social Contract with the citizens and functions on behalf of the people. To ensure that this contract is respected, a democracy provides for several institutional mechanisms like the Judiciary, Vigilance bodies and an independent Supreme Audit Institution (SAI). The Comptroller and Auditor General of India (CAG) and the Indian Audit and Accounts Department (IAAD) functioning under him, constitute the Supreme Audit Institution of India. Senior functionaries of the SAI representing the CAG in the states are called Accountants General.

The origin of auditing is as ancient as the origin of organised governance. The Arthashastra provides detailed guidance on the manner of accounting and the verification of accounts. During the medieval period, the mushrif and the mustaufi performed the accounting and auditing functions respectively.

In the Indian system of governance, the policies set by the Parliament and State Legislatures give the goals to be achieved through public spending. These policies are translated into programmes and implemented by various departments of the government. For this, the Parliament sanctions the budget which prescribes how Government will collect money through taxes and how much and for which purposes it shall spend. There are also financial rules which the Government departments and other public bodies must follow when they receive and spend public money. The spending departments are accountable to the Parliament for both the quantity and quality of their expenditure. Articles 148 to 151 of the Constitution prescribe a unique role for the Comptroller and Auditor General of India in assisting the Parliament to enforce the said accountability of the Government departments. The SAI of India audits both Central and State Governments and also maintains the accounts of the State Governments.

It's all in words.In the 15th century, the word Controller developed the alternate spelling Comptroller as a result of an association between the first part of the word, cont, and an unrelated word count and its variant compt. Many people pronounce comptroller like controller but both are acceptable. But the word Comptroller has a different meaning - someone who maintains and audits business. Comptrollers are controllers but all controllers are not comptrollers.

Our Vision, Mission and Core Values

The vision of SAI India represents what we aspire to become
We strive to be a global leader and initiator of national and international best practices in public sector auditing and accounting and recognised for independent, credible, balanced and timely reporting on public finance and governance.

Our mission enunciates our current role and describes what we are doing today
Mandated by the Constitution of India, we promote accountability, transparency and good governance through high quality auditing and accounting and provide independent assurance to our stakeholders the Legislature, the Executive and the Public that public funds are being used efficiently and for the intended purposes.

Our core values are the guiding beacons for all that we do and give us the benchmarks for assessing our performance
n n n n

Independence Objectivity Integrity Reliability

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Professional Excellence Transparency Positive Approach

3 A bit of history
Government audit in British India
The role of the CAG evolved through practice and tradition in British India. Just prior to the mutiny of 1857, Lord Canning had initiated a major administrative reorganisation. This led to the setting up of, for the first time, in May 1858, a separate department with an Accountant General at the helm. He was responsible for accounting and auditing of the financial transactions under the East India Company. After the mutiny, the British Crown took over the administration of India and passed the Government of India Act 1858. This Act introduced a system of an annual budget of Imperial Income and Expenditure in 1860. The budgeting system laid the foundation stone of Imperial Audit. Sir Edward Drummond took charge in November 1860 as the first Auditor General. The term Comptroller and Auditor General of India was first used in 1884. Under the Montford Reforms of 1919, the Auditor General became independent of the Government. The Government of India Act 1935 strengthened the position of the Auditor General by providing for Provincial Auditors General in a federal set-up. Till 1947, when the last British Auditor General Sir Bertie Monro Staig handed over the reins, the department remained an integral part of British administration. Under various nomenclatures like the Accountant General, the Auditor General and the Comptroller and Auditor General, it provided unified accounting and auditing arrangements for the whole of British India.

Independent CAG in independent India

Personally speaking for myself, I am of the opinion that this dignitary or officer is probably the most important officer in the Constitution of India. He is the one man, who is going to see that the expenses voted by Parliament are not exceeded or varied from what has been laid down by Parliament in what is called the Appropriation Act. If this functionary is to carry out the duties and his duties, I submit are far more important than the duties even of the Judiciary - he should have been certainly as independent as the Judiciary. Dr. Ambedkar in the Constituent Assembly

Foreseeing the problems inherent in having an auditor who is subordinate or open to pressure by the Government in power, the framers of our Constitution put in place several provisions in Articles 148 to 151 to ensure that the CAG and the officers of SAI of India are able to conduct their work in an impartial and upright manner. Article 148 imbues the CAG with the immunities Sh. V. Narhari Rao, from executive action accorded to a Supreme the First Indian Comptroller and Auditor General Court Judge (making him independent of (1948 to 1954) Governmental and political influence). Articles 149 and 150 define his duties and powers. Article 151 prescribes that his reports are to be submitted to the President/Governor and placed before the respective legislatures (Lok Sabha or Vidhan Sabha).

The Constitution enables the independent and unbiased nature of audit by the CAG by providing:

Appointed by the President of India Special procedure for removal (like a Supreme Court Judge) Salary and expenses are Charged (not Voted) Cannot hold any other Government office after his term expires

The DPC Act 1971

As envisaged in Article 149, the Parliament enacted a detailed legislation in 1971 known as the CAG's DPC (Duties, Powers and Conditions of Service) Act. This Act lays down the service conditions to secure the autonomous nature of the CAG. It also gives him a wide mandate and puts almost every spending, revenue collecting or aid/grant receiving unit of the Government under his audit domain.

Duties and powers of CAG

The duties of the CAG as defined by the DPC Act, 1971, are to audit and report upon:
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All receipts into and spending from the coffers (called the Consolidated Fund) of the Union and State Governments. All transactions relating to the Emergency expenses (called Contingency Funds) and relating to the monies of the public held by the Government e.g. Postal savings, Vikas Patras (called Public Accounts) at Central as well as State levels All trading, manufacturing, profit and loss accounts, balance sheets and other subsidiary accounts kept in any Government department. All stores and stock accounts of all Government offices and departments. Accounts of all Government companies and Corporations e.g. ONGC, SAIL etc. Accounts of all autonomous bodies and authorities receiving Government money e.g. municipal bodies, IIM's, IIT's, State Health societies. Accounts of any body or authority on request of the President/Governor or on his own initiative. Power to inspect any office or organisation subject to his audit.

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n n

Power to examine all transactions and question the executive. Power to call for any records, papers, documents from any audited entity. Power to decide the extent and manner of audit.

The DPC Act also provides for compilation of accounts by the CAG. We compile the accounts of State Governments from the subsidiary accounts submitted by treasuries and other officers of the State Governments. While compiling accounts, we do not just mechanically total up incomes and expenditures but act as financial advisors. We raise an alarm if monies are being drawn in excess of authorisation or if there are no supporting bills to an item of expenditure. We actively monitor expenditure patterns and issue advice on excesses/surrenders/ lapses of funds. This ensures that systemic corrections are made in time and acts as an important circuit breaker that prevents frauds. In 2007, the CAG has issued, under section 23 of the DPC Act, 'Regulations on Audit and Accounts' which define in detail the scope, manner, and extent of his auditing and accounting mandate

The infamous Bihar Fodder Scam was a result of chronic financial indiscipline in the State Government treasuries which were notorious in not submitting accounts or delaying them badly. Without the Treasury account or with incomplete accounts, there was no way to know what was the total amount spent under each grant. This helped a government department to draw huge sums of money in excess of the authorisation from the Treasury for fodder, medicines and other supplies to non-existent animal stock. The Doranda treasury in Ranchi had withdrawn Rs.104 crore against a budget provision of Rs. 74 crore! Each of the six government farms in Ranchi spent Rs. 20 crore every year to feed pigs and cattle. Since 1998, CAG has computerised compilation of accounts and has actively assisted and guided the state treasuries in computerising their work so that such overdrawals can be immediately detected and alert messages generated.

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Our organisation
The Comptroller and Auditors General
Shri V. Narhari Rao was the first CAG from 1948 to 1954. The CAGs after him were Shri A K Chanda, Shri A K Roy, Shri S Ranganathan, Shri A Baksi, Shri Gian Prakash, Shri T N Chaturvedi, Shri C G Somiah, Shri V K Shunglu and Shri V N Kaul. Shri Vinod Rai is the present incumbent.

Indian Audit and Accounts Service

At the top and middle managerial level in the SAI there are around 600 Indian Audit and Accounts Service (Group A) officers. They are either directly recruited through the Civil Services examination conducted by the UPSC or inducted National Academy of Audit and Accounts, Shimla by promotion from Group B (supervisory staff). The directly recruited officers receive foundation training at the Lal Bahadur Shastri National Academy of Administration, Mussorie followed by professional training at the National Academy of Audit & Accounts at Shimla and at premium institutes like Indian Institute of Management, Institute of Public Finance and Policy etc. All IA&AS officers receive extensive in-service training at the National Academy at Shimla, at the Indian Institutes of Management and at the International Centre for Information Systems and Audit (iCISA). The IAAS officers are valued nationally and internationally for their multi faceted experience in audit, accounts and financial management. Many of them are in key positions in the Union ministries, UN organisations and advisory positions with foreign Governments. Some officers have been awarded the Prime Minister's Award for excellence in Public Administration. 12

Subordinate cadres
Our total staff strength is approximately 50000. The gazetted supervisory cadre (Group B) consists of Senior Audit/ Accounts Officers, Audit Officers and Assistant Audit/ Accounts Officers. They may be directly recruited or promoted from the lower cadres. Apart from this there is support staff cadre (Group C). We have a large network of Regional Training Institutes and Regional Training centres to provide extensive induction and in service training to our staff.

Hall of fame: Excellence in other fields

Our hall of fame is filled with persons who have worked in the Department and are also acclaimed in diverse fields. To name only a few, the Nobel Laureate Dr. C.V. Raman spent his initial years as Deputy Accountant General in the Accountant General (AG) office in Kolkata and Grammy award winner music maestro Pt. Vishwa Mohan Bhatt had worked in the AG office, Rajasthan. Kathak danseuse Padmashri Shovana Narayan has continued to blaze the stage while ably handling various assignments in the Department and in the Government of India. Smt. Malashri Prasad, an acclaimed Grade A singer of the All India Radio, is currently the Additional Deputy Comptroller and Auditor General. Cricketer Debashis Mohanty from AG Orissa and umpire Swaroop Kishen from Delhi office have been representatives of our Department on the international cricket arena. Kiran Khongsai, Gunbir Singh and Manoharan are our international footballers from Kolkata office.

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The CAG Office

The office of the Comptroller and Auditor General in New Delhi directs, monitors and controls all activities connected with audit, accounts and entitlement functions of the Indian Audit and Accounts Department. It lays down the long term vision, mission and goals of the SAI, India. It also sets the policies, audit standards and systems and does the final processing and approval of all Audit Reports. The Deputy CAGs and additional Deputy CAGs are the functional heads reporting directly to the CAG. They are assisted by Directors General, Principal Directors and Directors, who are all senior level managers. A functional chart is shown below.

Comptroller and Auditor General

Deputy CAGs
(Five)

Additional Deputy CAGs

(Four)

Directors General / Principal Directors / Directors (Hqrs)

Human Audit of Resources Central International Government Relations Departments Audit Policy

Directors General / Principal Directors / Directors (Hqrs)

Audit of Central Commercial Bodies

Audit of Central and State Revenues

Audit of Local Bodies

Accounting of State Governments

Audit of State Expenditures

Audit of State Commercial Bodies

Audit of Central and State Autonomous Bodies

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The different types of field offices in IA&AD

The field offices of the IA&AD carry out the audit for all the different functions. There are following types of field offices:
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Offices of the Accountants General (Audit) in every State are responsible for audit of all receipts and expenditure of the State government, audit of Government companies, corporations and autonomous bodies in the State. There are 57 AG Audit offices in India. Besides, there are 29 offices of Accounts and Entitlements (A&E) headed by Accountants General (A&E) engaged in maintaining the accounts of the State Governments and authorising GPF and pension payments of their employees. Offices of the Principal Directors of Audit (28) are responsible for audit of the activities of the Union Government, including Civil Ministries and Departments, Defence, Indian Railways and Posts and Telecommunications. We also have Overseas Audit Offices in Washington, London and Kuala Lumpur for audit of embassies. The Offices of the Member Audit Board (MAB) are responsible for the audit of Central Public Sector undertakings. They certify the annual accounts of the statutory corporations and conduct Supplementary Audit of Government Companies.

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Organisation of a field office

A field office has an Accountant General or a Principal Director at the helm. There are various functional wings involved in different types of audit or accounting functions such as works audit, civil audit, commercial audit, works accounts, GPF, accounts, pension etc. headed by middle level IA&AS officers called Sr. Deputy Accountants General. There are Audit Officers, Assistant Audit Officers or Accounts Officers/Assistant Accounts Officers below them to supervise the Auditors, Accountants and Clerks constituting the supporting staff. The structure of a typical audit office and an accounts office is shown below.
A typical field accounts office Accountant General
(Accounts and Entitlement)

Sr. Dy. Accountant General

(Administration)

Sr. Dy. Accountant General

(Accounts)

Sr. Dy. Accountant General

(GPF)

Sr. Dy. Accountant General

(Pension)

Administration

State Accounts

General Provident Fund of State Govt. Employees

Pension of State Government Employees

A typical field audit office Accountant General

(Audit)

Sr. Dy. Accountant General

(Administration)

Sr. Dy. Accountant General

(Expenditure Audit)

Sr. Dy. Accountant General

(Commercial Audit)

Sr. Dy. Accountant General

(Revenue Audit)

Administration

Civil

State Commercial Audit

State Revenue Audit Central Revenue Audit

Works

Local Bodies

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Whom do we audit ?
The organisations subject to the audit of the SAI India are:n

All the Union and State Government departments including the Indian Railways Defence and Posts and Telecommunications. About 1500 public commercial enterprises controlled by the Union and State governments, i.e. government companies and corporations. Around 400 non-commercial autonomous bodies and authorities owned or controlled by the Union or the States. Bodies and authorities substantially financed from Union or State finances. Notable among these are some of the local bodies and Panchayati Raj Institutions which are critical grass root agencies for implementation of developmental programmes and delivery of services

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7 The audit process

Every audit office prepares an annual audit plan based upon a long term perspective plan to optimise the use of its resources. We aim to cover almost every spending unit of the Government, at least once in three years. However, we focus more rigorously on areas which are risk prone. These are generally audited annually. The various stages of the audit process are depicted in the flow chart.
Annual Audit Report Quarterly Audit Programme

Field Audit

Inspection Report (IR)

Draft Paragraphs (DPs)

CAGs Audit Reports

The annual audit plan details the units to be audited during the year which are selected after a risk assessment exercise. This plan is carried out through quarterly audit programmes. The departments to be audited are informed in advance. Field audit parties comprising Audit Officers and Assistant Audit Officers conduct local inspection of records according to the audit objectives. Our teams visit the audited entity and check all financial and operational documents. Based on this they make queries and obtain written replies of the department.

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Thereafter, an Inspection Report (IR) is prepared by a field audit party and finalised and issued by a Audit Objective middle level IAAS officer who monitors the audit Fieldwork process. The IR is then Analysis served to the audited entity. It contains the preliminary & Reporting audit observations. This Presentation gives an opportunity to the audited entity to verify all facts and figures and put forth its views or to take corrective action. Where significant audit observations remain unattended, we bring them to the notice of the highest level of Government as Draft Paragraphs (DPs). When either no explanations are given or when the explanations given are not substantiated, the cases feature in the annual Audit Reports placed by the CAG before the concerned Legislature. The Accountant General monitors the entire process of planning, execution and audit reporting by a field office.

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8 What are the types of audit we do?

Depending upon the objective of audit, we can classify audits by the SAI India into:
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Compliance Audit Financial Attest Audit Performance Audit Apart from these traditional audits, we have successfully done a number of audits of Information Technology (IT) Systems and on Environmental issues.

Traditionally, auditors checking procedural adherence would use a red pencil to underline all lapses - an image which endures - though auditing techniques are highly evolved today.

Compliance audit
Compliance audit is often called a transaction audit in which some selected transactions (for e.g. a purchase by a Medical Officer, a contract executed by a Public Works Division for building a road or a tax assessment order by an Assessment Officer) of an entity for a particular financial year are chosen for examination.
Government rules require that a supplier of equipment will be paid only when the office where it is to be installed, submits an installation report. We found that expensive equipment purchased by Chhattisgarh Government Health department had been paid for on the basis of installation reports furnished by the supplier, instead of the receiving Chief Medical Officer. While this may seem just a rule that was not followed, further investigation showed that the installation reports were fake. We found that a local supplier had appropriated the purchase orders addressed to a well known firm and faked the invoices and letter heads of the firm to supply substandard equipment.

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A compliance auditor would ask what has been/ not been done in a transaction against rule, sanction, provision and propriety. He checks whether a transaction:
n

conforms to sanction/provision of funds; adheres to all rules and regulations; adheres to the principles of financial propriety, which go beyond mere observation of rules.

n n

Financial Attest Audit

Financial statements are prepared by departmentally run undertakings, statutory corporations, Government Companies and other autonomous bodies and authorities. We certify how far the accounts are true and fair i.e. whether the financial statements (accounts) are properly prepared, complete in all respects and are presented with adequate disclosures. In some cases, our financial Audit is a supplementary audit with the primary auditor usually being a Chartered Accountant. We also audit and certify the annual accounts of the Central and State Governments.

Our reports on Central PSUs have found substantial discrepancies in the accounts of many PSUs. We found that BSNL had overstated its profit for two years by Rs 1,000 crore and Rs. 587.38 crore respectively.

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Performance audit
Pe r f o r m a n c e a u d i t d o e s n o t correspond to the traditional image of auditing as a process centered on 'checking the books' to attest their correctness. It seeks to establish at what cost and to what degree the policies, programmes and projects are working. Performance Audit, apart from asking whether things are being done in the right way, goes a step further and analyses whether the right things are being done. In addition to all the financial audit checks, the Performance Audit seeks to assess whether a programme, scheme or activity deploys sound means to achieve its intended socio-economic objectives. A performance auditor would ask what should have been done to achieve the objectives; how can we do things better and how to do better things.

Our review of Governments flagship Health care scheme NRHM revealed a sluggish fund-flow mechanism, especially in the states which have poor health indicators. This has a cascading effect on development of infrastructure at Primary and Community Health Centre levels. The procurement and supply system of medicines in many states was plagued with delays, poor stock management and poor quality control. In nine states, not a single PHC/CHC test-checked had the requisite two month's buffer stock of essential drugs/vaccines and contraceptives.

Our review on the Farmers' relief package in Maharashtra found that the Rs. 1075 crore package was not only tardily implemented but also left out a large number of distressed farmers. The package addressed short term relief measures like rescheduling of loans and grants for marriage, illness etc. but failed to correct the root causes of indebtedness such as low minimum support prices of cash crops and high cost of seeds, water and electricity.

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Information Technology Audit

To take up audit of computerised systems and e-Governance initiatives, the officers and staff of IAAD are extensively and rigorously trained in auditing information technology systems. We also collect and analyse data for our traditional (non IT sector) audits. We have carried out around 250 IT Audits till now, pointing out not just deficiencies in the software but overall service delivery issues in IT enabled systems.

The IT Audit of E-governance in Andhra Pradesh revealed that key data and huge volumes of cash pertaining to various departments linked with the system were left to the administration of a private service provider without adequate internal controls IT audit of Land Records Computerization Systems in several States revealed that the information fed was incomplete/full of errors. Therefore, they have been unable to replace the manual systems despite putting in huge amount of funds and resources.

The IT Audit initiative of SAI India has been awarded with Prime Minister's Award for excellence in public administration in the year 2008.

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Social Audit
We are conscious that the general public has become much more discerning and seek reports evaluating the performance of Government Schemes. Since Civil Society Organisations have been conducting close scrutiny of the implementation and outcomes of the schemes, we have taken various initiatives to synergise our Audit Reports with these organizations. The objective has been to muster the local knowledge and competence of these civil society organizations for a better reach of the formal audit process. Such social audits are being carried out for social sector schemes such as in health, education, rural employment and water.

Environment Audit
Our department has done a number of performance audits on various environmental issues in the past. This has been identified as an area of specialised auditing and we are in the process of establishing an international centre which shall provide training on environment audit and conduct research on environmental issues and sustainable development.

In our report on Management of Waste we raised question about flawed waste policy in India which was directed only at 'waste disposal' and ignored 'waste recycling' and 'waste reuse'. We recommended that 'waste recycling and reuse' should be incorporated as waste management strategies as they have long term viability and are internationally accepted best practices.

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The final product of the audit process The Audit Reports

What do our Reports focus on?
An Audit Report contains the final, fully corroborated audit findings. These may have been accepted by the department and/ or are proved factually and are material enough to be placed before the Legislature. The objective of our audit is to bring about improvement in the management and conduct of government's activities and programmes. We seek to determine the nature of the inadequacies identified, whether they are isolated or recurring. We want not only to stimulate corrective action but to ensure that the lapse does not occur again. We make appropriate, informed and implementable recommendations to improve systems, procedures and processes.

Our report on Income Tax Refunds revealed that while the number of refund cases has reduced significantly over the last decade-the Tax department still takes an average of a year to finally refund the excess tax. This compares poorly with the department's target of 3-6 months and international average of 40 days. The CAG has suggested to the Finance Ministry to incorporate a mechanism at the Bangalore-based Central Processing Centre so that the refund claims are dealt with on priority basis.

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Types of Reports
The Audit Reports of the CAG submitted to the Parliament and State Legislatures consist of compliance and performance audit reports covering revenue collection and expenditure of Government, separate audit reports on the functioning of certain autonomous bodies as provided by legislation, reports on the Financial position of Central and State Governments and reports on the adherence to the Appropriation Acts passed by Parliament and Legislatures. The CAG also submits the certified annual accounts of the States, known as the Finance and Appropriation Accounts, to the State Legislatures.

of iew Rev eals in x App me Ta Inco

Audit of e-SEVA

ce rman Perfo dit of u A on a Acti Gang lan P

ce rman Perfo dit of u A s Trust Port

Review ys wa of Railety Saf

ance orm Perf udit of a A hiksh as Sarv hiyaan Ab

uty Excise dts by aymen utical p ce Pharma stry Indu

Review on Procurement of Paddy

of iew Rev fence ts e men D e ur Proc

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What happens to the Audit Reports?

The reports of the CAG are submitted to the President in case of the Union and to the Governor in case of the State who in turn cause them to be tabled before the House. After tabling in the House, these Reports attract considerable media and public attention. To sensitise societal groups, media and the academic fraternity of our findings, we also print small booklets. These are designed for wide dissemination and to mould public opinion for a critical appreciation of social sector schemes being implemented by Government. A soft copy of the Report is enclosed in these booklets in a CD. All reports are also available on our website www.cag.gov.in. Once tabled in the House, the Reports stand permanently referred to the Central and State Standing Committees on Public Accounts (PAC)/ Committees on Public Undertakings (COPU). These specialised committees have been constituted to facilitate timely and intensive scrutiny of the Annual Accounts and the Audit Reports thereon. The Committees select those findings and recommendations from our reports that they judge to be the most critical to the public interest and arrange for hearings on them. We provide technical assistance to the Committees in this task. At the hearings of the Committees, the executive can be called to account for their actions/ inactions. Based on their Examination, the Committees prepare and submit their reports to the Legislature that summarise the Committee's hearings, the action taken by the executive and include recommendations to improve administrative practices and procedures.

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11 Impact of our work

The numbers
The audited entities accept our audit findings for over-payment/ recovery in the range of Rs. 15000 crore and recoveries upwards of Rs 2750 crore are made annually. We have already seen that the mandate of our SAI is very wide. In our audits we are concerned with not just the fidelity of accounts or regularity of transactions but with the overall performance of schemes and adequacy of systems. Hence the impact of our audit is both quantitative (in terms of money value of the observations) and far more importantly- qualitative. Since audit is carried out by test check of a miniscule percentage of transactions, the quantum of over payments/ under recoveries assumes greater significance. Annually we conduct on-site audit and issue inspection reports in more than 64,000 units of the Union, State and Union Territory Governments across the country and abroad and audit 14.33 million vouchers and transactions. Qualitatively, audit provides many tangible and intangible benefits. Our presence has a deterrent and preventive effect on financial lapses. Our audit reports provide an analysis of the financial health of the Union and State Governments based on time series data so that the respective Governments can draw appropriate lessons and take corrective action. At the instance of audit, many changes in policy, law and rules are made by various departments at the Union/State levels to avoid recurrence of similar irregularities. These make services more efficient, improve revenue collection and strengthen management of resources.

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A sample of our reports

A report in a State revealed that a scheme for raising the economic status of poor farmers by encouraging them to take up mushroom cultivation through a one time provision of input subsidy backfired. The farmers took bank loans but being poorly trained and lacking any marketing support abandoned the selfhelp projects and were pushed into further indebtedness.

Our report on a scheme to save the Dal lake of Srinagar revealed that while the Government had spent Rs. 236 crore on the project, the efforts were misdirected and concentrated on mechanical removal of silt and weeds rather than checking the unauthorized construction, polluting effluents and encroachments around the lake area. Thus the lake had reduced to half of its size and became shallower by 3 metres during the project period.

A review of visa, Passport and consular services had pointed out 21 instances where, due to weak internal controls, passports had been issued on fake identities by our Passport offices. These assume significance in view of the heightened internal security threats.

Changes in policy, rules, regulations in the recent past

n

Indian Railways handed over pantry cars to IRCTC without making any provision regarding realisation of haulage cost of pantry cars. Based on the audit recommendation, a clause on this has been incorporated in the MOU. Ministry of Finance amended section 18 of the Custom Act, 1962 to provide for levy of interest on differential duty payable on finalisation of the provisional assessments. Ministry of Finance amended the Service Tax rules to enable the assessee to make adjustment of the amount paid in excess from the amount of service tax liability to be discharged in the succeeding month/ quarter.

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The advisory role

SAI India is also engaged as an impartial advisor and standards setting organisation so as to bring about improved financial management in the Government. We regularly organise seminars and workshops for training the State Government departments in accrual accounting, accounting formats for PRI's etc. We also interact with Union and State legislators through conferences so that they are equipped to understand the role of audit and can utilise our Reports to ensure better governance for the citizens.

To enumerate, the SAI helps:

n n n n

Government departments in strengthening internal controls and understanding risks to improve delivery systems. The Finance Commission to gain an informed opinion on State Government's finances. The State Governments in putting in place better, transparent accounting systems for Local Bodies and PRIs. Through the Government Accounting Standards Advisory Board (GASAB)* in framing Government Accounting Standards for greater transparency.

* GASAB is a high power body which aims to make Government accounts understandable, reliable, relevant, timely, consistent and comparable across departments and organisations, both at Union and State levels. It includes representatives of the Ministry of Finance, GOI, Finance department of four States, RBI and nominee of ICAI. It also has stewards of six major accounting departments of the GOI including the SAI India.

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The SAI beyond Indian boundaries

SAI India is the member of the UN panel of external auditors and of the Governing Board of the International Organisation of Supreme Audit Institutions (INTOSAI). The CAG chairs the INTOSAI Working Group on IT Audit and the knowledge sharing committee. Currently, we are the external auditors for UN bodies like World Health Organisation, IMO, WTO and the WFP. We also impart training to audit professionals from over 120 countries at our State of art International Centre for Information Systems and Audit at Noida. This institution also caters to the training needs of our own personnel especially in the area of IT. We have also acted in an advisory capacity to SAIs of other countries by imparting training in their offices, doing training needs analysis for capacity building and providing audit experts to guide and assist their personnel.

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Our buildings, our heritage

We are a vast department with 219 offices throughout the country. Many of these offices are housed in landmark buildings of their cities aesthetically built and functionally efficient. Owing to the Raj legacy we also have possession of some glorious heritage buildings. Foremost amongst these are: the Treasury building at Kolkata which houses the offices of two Accountants General; the Gorton Castle at Shimla which houses the offices of the Accountants General, Himachal Pradesh and Yarrows at Shimla which is a home away from home for officer trainees. These Treasury Building buildings are immaculately maintained. They have been restored to provide modern amenities while keeping their original character and external facade intact.

Gorton Castle

Yarrows

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A career in the SAI

An official in the SAI has the benefit of working in an environment where he can pursue professional excellence free from political influence and interference. The SAI actively encourages its officials to acquire internationally recognised professional qualifications like CISA, CIA etc. Working in the department provides extensive opportunities to interface with almost all branches of Government. From Panchayats to Defence and from Public Sector Undertakings to the Railways, an officer in the department has the opportunity to understand the working and contribute to the cause of Good Governance of almost every department. There are many opportunities internationally in the form of audit of Indian missions abroad, audit of UN agencies and other international organisations and participating in conferences, seminars and training programmes. Group 'A' officers are recruited through the Civil Services Examination conducted by the UPSC and for Group 'B' and 'C' posts there is recruitment through Staff Selection Commission. Departmental level Section Officers Grade Exam also enables officials from entry level cadres to get merit based promotion to Assistant Audit (or Accounts) Officer cadre.

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12 CAG a few misconceptions

If there are delays in taking action on its reports, does it mean that the SAI is ineffective? Is SAI an institution with limited utility or merely a fault finding exercise that cramps quick decisionmaking? Let us recall the Answerability tenet that is central to our democracy. How well has the State honoured the Social Contract? How can People assess that? Is there any way of measuring Performance and monitoring the implementation from a citizen's point of view? Today, despite a high rate of economic growth and rising social-sector expenditure, India ranks low on key developmental parameters. In this context, the SAI provides regular, reliable and relevant information on the efficacy of the Public Finance system. Through the audit process and by ensuring accountability and transparency we partner the Government in providing leakage free delivery systems by pointing out areas vulnerable to leakage. We have brought out a special study report on the state of preparedness for the Commonwealth Games in July, 2009. The objective was to provide the Government a credible assessment of the stages of completion of different projects by various agencies. This was the first of a series designed to assist the Government for a midterm appraisal of their schemes and was not a conventional Audit Report. Where independent inquiry and cross-verification of Government sector spending down to the lowest levels is concerned, only the SAI has the expertise, the reach and the wherewithal to render professional,

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unbiased reports. The SAI functions as the eyes and ears of the Parliament. We track expenditure of each of the hundreds of Government schemes and programmes, pinpoint leakages, report inefficiencies and corrupt practices and ensure that the accountability chain of the executive to the legislature does not suffer complete breakdown. At the same time we have appreciated and pointed out good practices followed by the Government departments. Moreover as befits a developing economy, the SAI India has attempted to link performance of Government programmes with 'outcomes'. We have used clear, concise and measurable performance indicators and recommended performance benchmarks and Good Practices Guides to Government departments. Pointing out procedural lapses and violation of rules is a part of ensuring financial fair play. Today when transparency and accountability are key concerns and demand for thorough scrutiny of Government spending is growing, the key issue is how audit findings can be acted upon by the concerned agencies in a time-bound and effective manner. Any talk that audit by SAI cramps decision making is nothing but a red-herring to take attention away from the fact that accountability needs to be enforced for every rupee of public money that is spent.

Citizens have every right to know how the tax-payers money is being spent by the government to implement various programmes. If any funds spent by the government do not come under the scrutiny of Comptroller and Auditor General of India then it is nothing but a "lacuna". Vice President Shri Hamid Ansari (June 2010)

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Comptroller and Auditor General of India November 2010

www.cag.gov.in