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Book Reviews
Public accountability and transparency are essential elements of good governance. Need for ethical conduct in governance and higher standards of transparency and accountability are gaining voice in all countries across the world in recent times and the volume "Contemporary Issues in Public Accountability and Audit" brought out by the Institute of Public Auditors of India, New Delhi (APH Publishing Corporation, New Delhi-110002) is an important contribution towards this end. The institute was established in 1996 with the objective of promoting sound accountability, auditing and financial management practices in the government and allied sectors. It has over the years brought forth many important issues concerned with the administration, accounting, auditing and public financial management in the public domain, generating healthy debate and deliberation among the various stakeholders. The latest volume is another attempt to generate a timely debate on the burning issues of public accountability and audit, especially in view of the fact the reports of the Comptroller & Auditor General of India on various issues are attracting increasing attention among the media and the public, and often unnecessary controversies are raised about his mandate, methodologies and observations. Supreme Audit Institution in every country has always been and still remains one of the strongest pillars towards ensuring transparency and accountability in the execution of the legislative will as reflected in the implementation of Government’s policies and programmes in accordance with popular mandate. Whenever the reports of SAI appear to indict the Government in some way or calls into question the sagacity of Government action in any matter, the resultant controversy may escalate into a confrontational situation. Lack of awareness about the precise role and mandate of audit and the constitutional purpose that it serves is often a cause of these unseemly controversies, and this is an aspect that this volume seeks to address.
With a foreword written by Shri Vinod Rai, Comptroller and Auditor General of India, the book is divided into five sections. The first section deals with the mandate and role of the Comptroller and Auditor General. Section two deals with the Audit Report and the Public Accounts Committee, section three is concerned with the issues of governance and accountability, section four is devoted to accounting and audit and section five addresses certain crucial issues related to public accountability as outlined in the Indian Constitution.
In the backdrop of several fiscal scams and corruption scandals having been exposed by the CAG of India, a debate has been raging in the country to raise his powers. The CAG of India derives power from the Constitution of India as guaranteed by an act of Parliament – the “Duties, Powers and Conditions of Service of the Comptroller & Auditor General of India Act, 1971”. The provisions of the Constitution and this statute give him the responsibility to audit the accounts of the government, that is audit all receipts from wherever sources collected and all expenditure wherever incurred by the government. The Act empowers him to call for the records and examine those records before arriving at his conclusions for giving the necessary assurance regarding the compliance to rules, norms and standards in Government transactions and their proper accounting, and on the efficiency, economy and effectiveness of Government expenditure. But the statutes do not place any obligation upon the executive for production of the records as demanded by him within a stipulated period. The executive often fails to produce records to audit and thus escapes the audit scrutiny with impunity. This often renders the concept of ensuring accountability through audit into a farcical proposition.
In the article 'The Concept of Accountability and Role of Supreme Audit Institutions', Shri V.K. Shunglu, former CAG of India notes that the concept of audit is central to the concept of accountability, but audit by itself cannot ensure comprehensive accountability – accountability, in fact, depends on diverse elements like the legislative, the judiciary, the media, vigilance, performance of internal audit and the independent non-government organizations and of course also on the external audit. Mr. Shunglu cites many examples on the evaluation and accountability framework in India to stress the need for building a positive and supportive partnership under the aegis of INTOSAI with other accounting and auditing bodies. Emphasizing the role of INTOSAI and its various standing committees and working groups, he traces the story of its emergence as a recognized leader in public sector auditing. The emerging new trends in the public sector are changing the character of the public administration, for example privatization, disinvestment and gradual decentralization of administrative structure. Emphasis on accountability and good governance by multilateral donor institutions like the World Bank and IMF and the increasing use of ICT are changing the scenario of public accountability and audit globally. These are also presenting challenges to the SAIs which they must face.
In the second article of this section, 'CAG and Mandate Question', Mr. V.N. Kaul, another former CAG of India, goes into the details about the statutory provisions regarding CAG's role and powers and argues that in view of the changed scenario in today's world, the mandate requires a review. Almost all major government audit systems based on the Westminster model have undergone significant changes after the 1980s and it is time to review the mandate of the CAG of India also, so as to enable the institution of the CAG to fulfill the emergent expectations of the stakeholders and to meet the present and future challenges.
In 'The Role of the CAG in our Federal Polity', Dr. S.C. Pandey, an officer of Indian Audit and Accounts Service, discusses the various elements of the constitution and argues that the audit mandate as contemplated in the Constitution has undergone some erosion due to subsequent amendments, especially the ones that added the third tier of local self governance to the fiscal management machinery that was originally beyond the jurisdiction of the CAG. Privatization and the public private partnership and emergence of Joint Venture Companies made the water murkier and later the government strategy to spend large amount of money through off-budget transfers to sub-national governments have added further confusion in the scenario. In view of the above he argues for a review of the constitutional mandate of the CAG. Like the previous authors, he also emphasizes that unless there is an unfettered and unlimited access to information, documents and records, the CAG can never discharge his responsibilities adequately. Another issue that is engaging the attention of the executive in India is the supposed distinction between the Government’s policy and its execution. Whereas the mandate of the CAG does not allow him to question the policy of the government, in practice the distinction between policy and its execution often gets blurred and this pits the SAI in an adversarial situation with the government of the day. Perhaps there is a need to strike some balance to ensure that public interest is served and it can be served only by brining more transparency and accountability in the system.
In the last article of the first Section Mr. Vijay Kumar, ex-Deputy CAG, examines the role of the CAG in the context of programme evaluation. Since independence, India has followed a planned development model guided by the Planning Commission through its five-year plans. In 2005-06 the Government had introduced outcome budget to put in place a mechanism to measure the development outcomes of all its major programmes. In 2009, the Central Government had also introduced the PMES (Performance Monitoring and Evaluation System) – this was envisaged to serve as another accountability mechanism to ensure that objectives of the development programmes are fulfilled in substantial measures. However, despite all these developments, the programmes are often found lacking seriously in achievement and in this context the role of CAG becomes very important. The INTOSAI Working Group on programme evaluation has also contributed significantly towards this end and the performance audit carried out by various SAIs including SAI India have brought into focus many of the critical issues and implementation bottlenecks which have marred the successful implementation of development programmes. The additional development is the emergence of social audit which also provides useful inputs to the CAG's audit on the results to many of the development programmes by trying to measure their impact of these programmes in terms of the improvements in the people standards of living brought about by them.
The second Section dealing with "Audit Report and Public Accounts Committee" features two papers, the first of which, "Visibility and effectiveness of Audit Reports " by Ms. A.L. Ganapathi, a former Deputy CAG, discusses the requirements of quality of audit reports and their place in the social accountability mechanism. The next article "The Public Accounts Committee : New Challenges" by Mr. Dharam Vir, another ex-Deputy CAG, examines the functioning of the PACs in India. Once one of the most powerful instrument of the Parliamentary control of the executive meant to be "a keystone of the arch of parliamentary control on public finances", the PAC machinery has now become overloaded due to the phenomenal increases in the scale and magnitude of government operations combined with "pervasive and persistent decline in the level of financial discipline". The number of audit reports and observations have also proliferated greatly over the years and given the fact that an overwhelming majority of these cannot be examined by the PAC due to the constraints of its time, the PAC system, as it functions today negates the very purpose of ensuring timely and effective parliamentary control over the government. Citing interesting examples from the PAC reports, the paper concludes that the institution of the PAC, meant to be a powerful instrument of government's accountability, has evolved over past 90 years, but now the strains on it are evident. The fractured and fragmented nature of the national polity, growing public demands for accountability and transparency today demand some out of box thinking to make the PAC live up to its original ideals.
In the third Section dealing with the theme 'Governance and Accountability', Mr. P.K. Brahma, a former Deputy CAG, in his article "Ethics in Governance" traces the history of ethics in corporate governance and analyses the ethics deficit noted in corporate governance in various countries including USA (Enron, WorldCom, Tyco International, AIG, Lehman Brothers, Madoff, Washington Mutual, General Motors and CIT Group) Italy (Parmalat) and India (Satyam Computers). He discusses the Indian experience in dealing with the issue of ethics in corporate governance, which has largely been a case study in appointing many Committees and hardly acting on their reports with earnestness and sincerity. Institutions like the Lok Pal which ought to have been set up long ago are yet to be set up, legislations like the one on the protection of whistleblowers that ought to have been enacted long back have not yet seen the light of the day, and in the process good governance has been denied and people’s faith in it has been seriously eroded. Corruption today poses a lot of difficult challenges to development and good governance –appropriate legal framework is essential to stem the rapid erosion and break down of the social as well as individual value systems. In the next article, "Corruption, Accountability and Audit", Mr. P.K. Tiwari also discusses some of these issues including the role of CAG in combating corruption.
In the paper "Does Petty Corruption Matter?" Mr. P.K. Mukhopadhyay makes the distinction between the petty corruption and grand corruption, following the definition used in the National Anti Corruption Strategy drafted by the Central Vigilance Commission. Petty corruption involves routine extraction of bribe and other considerations for services a citizen is legally entitled to, while grand corruption deals with dispensing of rights by authorities in positions of power- this involves procurement of contracts, allocation or sale of national assets like land and mining rights - this provides occasion for making megabucks. Petty corruption hits the poor very hard as it encroaches upon his life at every stage. It makes people lose their faith in the political and justice system and erodes the credibility of institutions irrevocably. The paper cites various studies made to assess the magnitude of petty corruption especially, the India Corruption Study, 2011 and lists out the various measures necessary to tackle such petty corruption. The increasing use of Information and Communication technologies in improving delivery of services, institution of the citizen's charter and social audit and above all the RTI Act have improved the situation substantially, but the hydra-headed monster refuses to die. The public audit has also not been very effective in dealing with this menace. An effective system of internal oversight may improve the scenario, but the approach should be to improve system rather than attacking individual cases of petty corruption.
In his paper "Audit and its Relevance for Corporate Governance" Mr. T.N. Thakur defines the components of corporate governance and discusses the relevance of audit for improving corporate governance. While corporate governance is about promoting corporate planning, transparency, accountability, the auditors' specific responsibilities are in relation to financial aspect of the corporate governance as well as the accounting aspect and performance management, as defined in the Audit Commission Act, 1998of UK,. The paper also discusses the government audit standards of GAO wherein the role of professional judgment is emphasized along with independence of audit. A good audit conducted following well formulated auditing standards would certainly ensure good standards of corporate governance and contribute to enhancing the credibility of auditee organizations.
The Fourth Section of the volume is devoted to "Accounting and Audit". In this, Mr. B.S. Ramaswamy in his paper "New Initiatives in Government Accounting", discusses the adoption of accrual system for accounting in various countries like USA, UK, New Zeeland, Malaysia, Singapore, Thailand and Philippines. The Government Accounting Standards Advisory Board (GASAB) was set up by the CAG of India in 2007 for felicitating the transition from the existing cash based to accrual based accounting. The paper discusses the problems in accrual accounting being faced in India and the roadmap for GASAB in this regard. In the next paper "Statistical Sampling : A Measure for Risk Assessment in Auditing", Mr. Samar Ray, a former Deputy CAG discusses the theoretical concepts and techniques of sampling and the practices followed in this respect within SAI, India. In "IFRS and IND - Accounting Standards", Mr. K.P. Sasidharan discusses the differences between the Indian standards on accounting and the IFRS and flags the challenges before the auditing profession as the documentation will undergo a sea change -necessitating audit programmes to be redrawn in an IFRS environment. The last section of the volume on the theme of 'Public Accountability and the Constitution' features only one paper by Mr. T. Sethumadhavan, "Public Accountability under the Indian Constitution". The paper discusses the concept and features of public accountability the various features of public accountability. The concept of accountability is often perceived to be synonymous with good governance, but accountability concerns are not limited to financial accountability alone, they, in fact, encompass legal accountability, professional accountability and social accountability as well. Public accountability as a concept defines a basic feature of our Constitution - something that the Supreme Court's had ruled as unalterable. The paper discusses the various facets of public accountability including judicial review and the Parliamentary control of the executive. The constitution outlines the roles and responsibility of each authority created under the constitution to ensure and enforce public accountability. The higher judiciary, the Comptroller and Auditor General of India, the Central Election Commission have all served important functions and played very effective roles in ensuring public accountability as envisaged in the Constitution and together they have often been successful in thwarting the attempts of the executive to dilute the concepts of public accountability. Eternal vigilance being the price of liberty, the public must assiduously safeguard the public accountability as delineated in the constitution - it is, in fact, the duty and responsibility of every citizen of the country.
The book is rich in variety and timeliness of its content. The editors deserve our thanks for a job well done and the publisher for bringing out a well-produced and easy-to-read volume
IPAI India, Copyright 2012-2013