The CAG talks about his office’s expanding role, from cricket to the UN, over and above its primary mandate of monitoring government expenditure
At a time when audits are getting complex, governments richer and forms of corruption and maladministration extremely difficult to detect, the Comptroller and Auditor General (CAG) of India has suddenly landed in the midst of unprecedented opportunity and challenge: besides the historic task of keeping a close watch on the Central and State governments, it is now auditing several public-private partnerships (PPP), the UN Headquarters, and is poised to become part of the new cricket dispensation. While holding forth on a variety of subjects, CAG Shashi Kant Sharma stresses the need for federal auditors to play a key role in Goods and Services Tax (GST) reforms. He also reveals that the CAG would soon begin auditing demonetisation and its fallout. Excerpts:
With its landmark 2014 judgment, the Supreme Court permitted the CAG to audit private telecom companies, and opened up a new template for CAG audit of private companies that exploits public assets. How are the audits progressing? Has your first telecom audit helped the government recover some money?
Though the judgment of the Honourable Supreme Court was in the context of telecom companies, it reinforced an important principle that wherever public resources are being used by private companies for revenue generation, CAG will have a duty to examine as to whether the government is getting due share out of such revenue.
Our first report on the telecom audit was submitted to Parliament a year back and now we are ready with the second report. The government has taken steps to recover revenue from the telecom companies, though some issues are under litigations before courts.
What are the major audits under way now?
Some of the reports ready for presentation are on the Air India turnaround plan, environment clearance mechanism, agricultural crop insurance scheme, flood control and flood forecasting, etc.
Currently, we are engaged in several important audits such as the Right to Education, National Rural Health Mission, defence pensions and Ganga rejuvenation.
What about your report on Delhi power distribution companies, which has significant financial implications for the capital’s consumers? When will it be made public? Are you auditing other power distributors too?
We had conducted an audit of Delhi discoms on a request of the Delhi government. The audit was completed in early 2015. But the report could not be presented due to the judgment of the Hon’ble Delhi High Court. The matter is currently being heard by the Hon’ble Supreme Court.
Audit of power distributors in States is taken up from time to time, but in these cases, the companies are mostly government companies. We will soon take a call on audit of private discoms in other States.
From climate change to PPPs, there are dramatic changes happening in the way government funding and public goods are exploited. How is it impacting CAG’s functioning?
Audit, being essentially an assurance mechanism, has to be responsive to changes in the governance system and we always adapt to such changes. Environmental issues like climate change and preservation of wildlife, mitigation of natural disasters etc, draw our attention and in the recent past we have come out with reports on environment audits as well. One such report which was widely talked about was on the Kaziranga [National] Park [in Assam]. Similarly, on PPP, our reports on DIAL (Delhi International Airport Limited) and MIAL (Mumbai International Airport Limited) were widely received. Currently, we are preparing ourselves to audit issues like implementation of the Sustainable Development Goals and the proposed Goods and Services Tax.
Have you nominated a member to the BCCI (Board of Control for Cricket in India) as suggested by the Supreme Court? Are you also nominating members to State-level cricket associations? Are they going to be serving auditors?
We will positively act on the order of the Supreme Court. We are waiting for a communication from BCCI or Justice Lodha Committee in this regard. A view on whether the nominee will be a serving auditor will be taken at the right time.
In the wake of the Big Data revolution, what measures are you taking for making use of data analytics in public auditing?
Big Data is the most fascinating development of the last decade or so. How can public auditing remain untouched by this development? Analysing data and linking multiple databases for audit process has enormous potential for upgrading our audit skills. Data analytics will not only improve risk analysis in audit planning but also make the audit outcome sharp and focussed, based on better evidence.
We came out with a Big Data management policy in our organisation in 2016. Thereafter, we established a Centre for Data Management and Analytics at our office in Delhi. Some topics were taken up as pilots. We submitted a report on social security pensions in Kerala, which was based on analysis of data from multiple sources, like Census data, BPL data, expenditure data and the auditee’s data. Currently, we are using data analytics in the audit of the National Rural Health Mission. In both these audits, we collaborated with the Harvard Kennedy School. We are taking help of IIM Bangalore in imparting training to our senior officers in Big Data. The experience so far has been encouraging and it gives us confidence for the future.
Some of the audits of recent times have attracted criticism for what many believe are exaggerated loss estimates or outlandish figures. How do you look at those allegations? And how do you maintain the integrity of fair audit in the face of such allegations?
When you look at an estimated figure, you have to look at the assumptions also. Estimates are based on assumptions which must be transparently disclosed. All our reports scrupulously follow this. But, unfortunately, not everybody looks at the full report. To the allegations, I can only say that we follow rigorous standards so that the integrity of our audits is not affected by extraneous considerations.
How many audit reports does the CAG produce in a year, both at the State and Central level? Are they all getting enough attention from the legislature (Public Accounts Committees) and the departments concerned?
We produce quite a large number of reports. For example, in 2015-16, we produced 188 reports, of which 53 were for presentation to the Parliament and 135 for the State legislatures. The promptness with which the reports are taken up by the PACs and the action taken by the governments vary from State to State.
How do you assess the efficiency of CAG and its audits? Do you have a mechanism in place?
We have established [a] rigorous internal mechanism for meeting the auditing standards which are results of our own experience and meet international standards. Being a very active member of International and Asian Organizations of Supreme Audit Institutions, we play an important role in evolving various international standards on public audit. Also, to ensure transparency, we annually publish [a] Performance Report on our activities.
How will CAG tackle the issue of demonetisation and its fallout? It definitely is one of the most impactful administrative decisions taken in a long, long time, so you cannot ignore it.
Demonetisation per se is a banking and money supply issue and as such, outside CAG’s audit jurisdiction. But CAG is well within its rights to seek audit of the fiscal impact of demonetisation, largely its impact on tax revenues. That way the issue gets linked with the public exchequer. There are also other linkages with the public exchequer, such as expenditure on printing of currency notes, RBI dividend to the Consolidated Fund. The Income Tax Department is reportedly planning to engage specialised private sector firms to carry out analysis of the huge data it has received from the banks.
This banking transaction data and the follow-up by the Revenue Department can also be subjected to CAG audit. The audit can look into various risks, such as errors and omissions in identifying the potential tax evaders, failures to pursue the identified suspects, selective and arbitrary pursuance of leads and consequences thereof, etc. Many of these issues will be covered in our audits which we propose to take up in the coming days.
What role will CAG play in implementation of the GST? Will you be auditing GST?
The GST is essentially a major change in the taxation paradigm. Hence, CAG’s constitutional mandate covers GST just like the earlier taxation regimes were covered. As our auditees are revenue departments of States and the Union, I would expect them to make available to the auditing teams all documents, returns and information etc. required for audit. Therefore, it is necessary that the proposed GST law adequately empowers the revenue authorities to render required support and assistance to audit. I have already conveyed this to the government.
On our part, we are planning restructuring of our revenue audit arrangements, so as to best serve the requirement of the new taxation regime. That would include issues of capacity-building, data access and analysis, reorientation of audit methodology and procedures and developing end-to-end IT solutions.
What is the agenda of the Commonwealth Auditors General Conference in Delhi this month?
We are hosting the Commonwealth Auditors General Conference as its current chair. It will be held from 21st to 23rd of March in Delhi. Leveraging technology in public audit and environment audit are two themes of the conference. Over 40 countries are expected to participate. I am hopeful that the conference will help in fostering partnerships amongst Commonwealth countries for capacity development in public audit.
For the first time CAG auditors are auditing the UN headquarters. How is the work progressing, when will it be over? And how challenging is it?
Yes, it is quite creditable that for the first time, India is entrusted with the responsibility of auditing UN headquarters. We started this work in September 2016 when our risk assessment team visited New York. The audit is in progress and 11 teams are engaged in this whole exercise. The report for the year 2016 will be completed by May 2017. The audit of UN headquarters involves multifarious operations, sometimes overlapping, and encompassing the secretariat functions and field operations as well as special political missions. This complexity of UN operations, reflected in the number of financial statements, makes the job of auditing quite challenging.
You have taken over as the Chairman of the UN Board of Auditors from January 1 for a period of two years. What does the role entail?
As Chairman, my job is to report audit findings of the Board of Auditors to the General Assembly through the Advisory Committee on Administrative and Budgetary Questions, which is a committee like our Public Accounts Committee. Currently, Auditors General of Germany and Tanzania are the other two members on the Board. I chair the meetings of the Board. Our job is to provide independent assurance to the General Assembly on matters relating to proper use of resources by the management.
Post a Comment
At a time when audits are getting complex, governments richer and forms of corruption and maladministration extremely difficult to detect, the Comptroller and Auditor General (CAG) of India has suddenly landed in the midst of unprecedented opportunity and challenge: besides the historic task of keeping a close watch on the Central and State governments, it is now auditing several public-private partnerships (PPP), the UN Headquarters, and is poised to become part of the new cricket dispensation. While holding forth on a variety of subjects, CAG Shashi Kant Sharma stresses the need for federal auditors to play a key role in Goods and Services Tax (GST) reforms. He also reveals that the CAG would soon begin auditing demonetisation and its fallout. Excerpts:
With its landmark 2014 judgment, the Supreme Court permitted the CAG to audit private telecom companies, and opened up a new template for CAG audit of private companies that exploits public assets. How are the audits progressing? Has your first telecom audit helped the government recover some money?
Though the judgment of the Honourable Supreme Court was in the context of telecom companies, it reinforced an important principle that wherever public resources are being used by private companies for revenue generation, CAG will have a duty to examine as to whether the government is getting due share out of such revenue.
Our first report on the telecom audit was submitted to Parliament a year back and now we are ready with the second report. The government has taken steps to recover revenue from the telecom companies, though some issues are under litigations before courts.
What are the major audits under way now?
Some of the reports ready for presentation are on the Air India turnaround plan, environment clearance mechanism, agricultural crop insurance scheme, flood control and flood forecasting, etc.
Currently, we are engaged in several important audits such as the Right to Education, National Rural Health Mission, defence pensions and Ganga rejuvenation.
What about your report on Delhi power distribution companies, which has significant financial implications for the capital’s consumers? When will it be made public? Are you auditing other power distributors too?
We had conducted an audit of Delhi discoms on a request of the Delhi government. The audit was completed in early 2015. But the report could not be presented due to the judgment of the Hon’ble Delhi High Court. The matter is currently being heard by the Hon’ble Supreme Court.
Audit of power distributors in States is taken up from time to time, but in these cases, the companies are mostly government companies. We will soon take a call on audit of private discoms in other States.
From climate change to PPPs, there are dramatic changes happening in the way government funding and public goods are exploited. How is it impacting CAG’s functioning?
Audit, being essentially an assurance mechanism, has to be responsive to changes in the governance system and we always adapt to such changes. Environmental issues like climate change and preservation of wildlife, mitigation of natural disasters etc, draw our attention and in the recent past we have come out with reports on environment audits as well. One such report which was widely talked about was on the Kaziranga [National] Park [in Assam]. Similarly, on PPP, our reports on DIAL (Delhi International Airport Limited) and MIAL (Mumbai International Airport Limited) were widely received. Currently, we are preparing ourselves to audit issues like implementation of the Sustainable Development Goals and the proposed Goods and Services Tax.
Have you nominated a member to the BCCI (Board of Control for Cricket in India) as suggested by the Supreme Court? Are you also nominating members to State-level cricket associations? Are they going to be serving auditors?
We will positively act on the order of the Supreme Court. We are waiting for a communication from BCCI or Justice Lodha Committee in this regard. A view on whether the nominee will be a serving auditor will be taken at the right time.
In the wake of the Big Data revolution, what measures are you taking for making use of data analytics in public auditing?
Big Data is the most fascinating development of the last decade or so. How can public auditing remain untouched by this development? Analysing data and linking multiple databases for audit process has enormous potential for upgrading our audit skills. Data analytics will not only improve risk analysis in audit planning but also make the audit outcome sharp and focussed, based on better evidence.
We came out with a Big Data management policy in our organisation in 2016. Thereafter, we established a Centre for Data Management and Analytics at our office in Delhi. Some topics were taken up as pilots. We submitted a report on social security pensions in Kerala, which was based on analysis of data from multiple sources, like Census data, BPL data, expenditure data and the auditee’s data. Currently, we are using data analytics in the audit of the National Rural Health Mission. In both these audits, we collaborated with the Harvard Kennedy School. We are taking help of IIM Bangalore in imparting training to our senior officers in Big Data. The experience so far has been encouraging and it gives us confidence for the future.
Some of the audits of recent times have attracted criticism for what many believe are exaggerated loss estimates or outlandish figures. How do you look at those allegations? And how do you maintain the integrity of fair audit in the face of such allegations?
When you look at an estimated figure, you have to look at the assumptions also. Estimates are based on assumptions which must be transparently disclosed. All our reports scrupulously follow this. But, unfortunately, not everybody looks at the full report. To the allegations, I can only say that we follow rigorous standards so that the integrity of our audits is not affected by extraneous considerations.
How many audit reports does the CAG produce in a year, both at the State and Central level? Are they all getting enough attention from the legislature (Public Accounts Committees) and the departments concerned?
We produce quite a large number of reports. For example, in 2015-16, we produced 188 reports, of which 53 were for presentation to the Parliament and 135 for the State legislatures. The promptness with which the reports are taken up by the PACs and the action taken by the governments vary from State to State.
How do you assess the efficiency of CAG and its audits? Do you have a mechanism in place?
We have established [a] rigorous internal mechanism for meeting the auditing standards which are results of our own experience and meet international standards. Being a very active member of International and Asian Organizations of Supreme Audit Institutions, we play an important role in evolving various international standards on public audit. Also, to ensure transparency, we annually publish [a] Performance Report on our activities.
How will CAG tackle the issue of demonetisation and its fallout? It definitely is one of the most impactful administrative decisions taken in a long, long time, so you cannot ignore it.
Demonetisation per se is a banking and money supply issue and as such, outside CAG’s audit jurisdiction. But CAG is well within its rights to seek audit of the fiscal impact of demonetisation, largely its impact on tax revenues. That way the issue gets linked with the public exchequer. There are also other linkages with the public exchequer, such as expenditure on printing of currency notes, RBI dividend to the Consolidated Fund. The Income Tax Department is reportedly planning to engage specialised private sector firms to carry out analysis of the huge data it has received from the banks.
This banking transaction data and the follow-up by the Revenue Department can also be subjected to CAG audit. The audit can look into various risks, such as errors and omissions in identifying the potential tax evaders, failures to pursue the identified suspects, selective and arbitrary pursuance of leads and consequences thereof, etc. Many of these issues will be covered in our audits which we propose to take up in the coming days.
What role will CAG play in implementation of the GST? Will you be auditing GST?
The GST is essentially a major change in the taxation paradigm. Hence, CAG’s constitutional mandate covers GST just like the earlier taxation regimes were covered. As our auditees are revenue departments of States and the Union, I would expect them to make available to the auditing teams all documents, returns and information etc. required for audit. Therefore, it is necessary that the proposed GST law adequately empowers the revenue authorities to render required support and assistance to audit. I have already conveyed this to the government.
On our part, we are planning restructuring of our revenue audit arrangements, so as to best serve the requirement of the new taxation regime. That would include issues of capacity-building, data access and analysis, reorientation of audit methodology and procedures and developing end-to-end IT solutions.
What is the agenda of the Commonwealth Auditors General Conference in Delhi this month?
We are hosting the Commonwealth Auditors General Conference as its current chair. It will be held from 21st to 23rd of March in Delhi. Leveraging technology in public audit and environment audit are two themes of the conference. Over 40 countries are expected to participate. I am hopeful that the conference will help in fostering partnerships amongst Commonwealth countries for capacity development in public audit.
For the first time CAG auditors are auditing the UN headquarters. How is the work progressing, when will it be over? And how challenging is it?
Yes, it is quite creditable that for the first time, India is entrusted with the responsibility of auditing UN headquarters. We started this work in September 2016 when our risk assessment team visited New York. The audit is in progress and 11 teams are engaged in this whole exercise. The report for the year 2016 will be completed by May 2017. The audit of UN headquarters involves multifarious operations, sometimes overlapping, and encompassing the secretariat functions and field operations as well as special political missions. This complexity of UN operations, reflected in the number of financial statements, makes the job of auditing quite challenging.
You have taken over as the Chairman of the UN Board of Auditors from January 1 for a period of two years. What does the role entail?
As Chairman, my job is to report audit findings of the Board of Auditors to the General Assembly through the Advisory Committee on Administrative and Budgetary Questions, which is a committee like our Public Accounts Committee. Currently, Auditors General of Germany and Tanzania are the other two members on the Board. I chair the meetings of the Board. Our job is to provide independent assurance to the General Assembly on matters relating to proper use of resources by the management.
Post a Comment
Comments
Post a Comment