Government Should Fully Support CAG in its Digital Audits
DECEMBER 02, 2019
By TIOL Edit Team
THE annual auditors' manthan organised by Comptroller and Auditor General (CAG) should focus on fiscal inefficiencies & revenue leakages that recur year after year. We don't know whether such introspection happens in a manner that leads to decline in audit objections as well as frauds.
This issue can be analysed only when the CAG & Government make public agenda notes & presentations prepared for the Conclave of Accountants General and Deputy Accountants General.
Notwithstanding this limitation, we can't afford to overlook the importance of external and internal audit in both public and private sectors. Both sectors are increasingly getting inter-twined through public private partnership and outsourcing of operations.
Timely detection of non-compliance of rules & norms in sector & its sharing with other entities can help nip in bud, scams. At present, analyst often point with hindsight advantage that an internal early warning/complaint remained unattended or was taken casually in the system.
Internal audit can help nip in bud scams. We urge CAG to submit a special report on state of internal audit in the Government especially in the revenue administration. The importance of such study can be appreciated by frequent unearthing of goods and services tax (GST) frauds by revenue administration.
The need for timely alerts by robust internal auditors can be linked with the Prime Minister Narendra Modi's call for "time bound and outcome-based system of working". Mr. Modi believes CAG has great role to play in that.
Addressing the conclave on 21st November, PM noted that actual reform occurs when the entire rank and file is "fully ready with complete honesty to bring reform with full dedication". This applied to all entities including CAG.
Mr. Modi stated: "changes have also come in the audit process of the CAG. Whatever CAG does will have direct impact on the governance. CAG audit process should also not take too much time. CAG also has to progress towards CAG plus".
PM's suggestion has coincided with CAG's ambitious project for end-to-end digitalization of entire audit system of Indian Audit and Accounts Department (IA&AD). According to CAG, "The purpose of the 'One IA&AD One system' (OIOS) project is to create an IT based platform, which will create a single source of truth regarding audit activities of IA&AD".
The project would get executed after selection of System Integrator for Implementation, Rollout and Operations & Maintenance of OIOS. This is at present in the midst of tendering process.
The importance of the project is reflected in OIOS vision statement: "To make our audit more effective by empowering IA&AD officials from the audit team upwards, and to make our audit processes more efficient and effective through a state of the art end-to-end IT solution, with seamless integration and process workflow".
IA&AD has forthrightly disclosed limitations of its audit process in the tender document. These include: 1) Storage of information in a heterogeneous and distributed in both paper-based and electronic files. 2)The quality of data is variable due to absence of automated control mechanisms. It admits there are "significant risks of incompleteness of data, inaccuracies, version inconsistencies etc. This is accentuated by the fact that even the in-house IT systems are largely based on post-facto data entry".
IA&AD's another handicap is that it has no mechanism for systematic sharing of data - whether it is from one audit assignment to other, similar audit assignments in the future, or between audit offices (field/ Headquarters). Each individual audit assignment is an end in itself, and there are no real mechanisms for using past data (or data from other similar instances). Any such sharing or exchange that takes place is person dependent (or very occasionally, manual process dependent).
Yet another drawback is the deviation from the standards. In spite of specified centralized auditing standards and manuals, variations exist across audit streams and even across audit offices within the same audit streams.
We hope OIOS would help CAG reboot its entire audit system. Revamped audit system can, however, deliver effectively only if the Government cooperates fully with CAG. Its reports are replete with instances of departments and their appendages not submitting certain files sought by CAG. Cases of departments not responding to draft audit comments in time are also common.
It is here pertinent to cite CAG's Report titled 'Union Government (Commercial) No. 13 of 2019 (Compliance Audit Observations) '. Presented to Parliament on 25th November, the Report deals with public enterprises' non-compliance with rules & norms.
It shows that of the 54 audit paragraphs with financial implications of Rs 2507.66 crore, 26 paragraphs were not replied by the Departments till the preparation of the report. The Government must fix penalties on the officials and ministers who delay replies to audit objections. Same treatment should be applied to those who drag their feet in submitting action taken on the basis of reports presented to Parliament and State Assemblies.
The Government should be willing to give more auditing powers as demanded by CAG if it is equally concerned about fiscal expenditure inefficiency and wastage and revenue frauds.
An urgent case in point is CAG's plea for certain powers to prepare a report on systemic report on GST system to Parliament. This Report would deal with systemic lapses, implementation issues, findings on audit of GST network and results of audit carried out with pan-India focus and findings on tax administration of Central Board of Indirect Taxes and Customs (CBIC).
GST Council should respond positively to presentations made by CAG on this issue if it wants to rein in GST frauds and enhance GST receipts.
Put simply, the Governments have bigger responsibility to share in facilitating efficient use of public money, optimization of revenue collections and in minimizing revenue leakages.