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SAI INDIA

NAAA, Simla

National Academy of Audit & Accounts

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Vision of SAI, India

We strive to be a global leader and initiator

of national and international best practices

in public sector auditing and accounting,

recognized for independent, credible , balanced

and timely reporting on public finance and

governance

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Mission of SAI, India

• 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

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Constitutional Provisions• Article 148 - C&AG appointed by the President; cannot be removed from

office except by impeachment

• Article 149 - C&AG to perform such duties and exercise such powers in relation to the accounts of the Union & of the States as prescribed by or under any law made by Parliament

• Article 150 - Form of Accounts of the Union & States to be prescribed as per advice of C&AG

• Article 151- Audit Reports relating to the accounts of the Union/States to be submitted by the C&AG for laying before the Parliament/Legislatures

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Unique features

• Not an officer of the Parliament.

• Is an independent authority appointed under the Indian Constitution.

• Guaranteed a fixity of tenure to enable him to function without fear or favour.

• Can be removed from office only in the manner prescribed for sitting Judge of the Supreme Court.

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Unique features

• In a federal structure, he is a unifying authority who audits the expenditure and receipts of both the Union and the State Governments.

• Submits his reports to the President of India or Governor of a State to be presented to the Parliament or State Legislature.

• Charged with the responsibility of compiling the accounts of the State Governments.

• Certifies the accounts of the Union Government

• The form in which the government accounts are to be maintained is determined by the President of Indian under advice from the Comptroller and Auditor General of India

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Comptroller & Auditor General of India

• Government of India order, 4th December 1857 constituting a General

Department of Accounts including the offices of audit, pay and accounts and

appointing the Accountant General to the Government of India

• As part of the financial reforms of 1860, the Accountant General of India was

re-designated as Auditor General of India.

• The designation underwent a few changes before becoming Comptroller and

Auditor General of India appointed under the Constitution of India, 1950

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Organisation Structure

• Size of IA&AD– 48,139 MIP ;against sanctioned strength of 68,374

• Size of IA&AS– 745 Officers

• about 620 in the Department• 465 Group Officers

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Field formation

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Budget

• Rs. 2,922 crore

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International Participation and Contribution

• Appointed (Nov 2013) as Member UN Board of Auditors for 6 years w.e.f 1st July 2014

• Chair of UN Panel for External Auditors from 2011 to 2013

• External Auditor for 5 UN Organizations

• Member of INTOSAI, Chair of ASSOSAI

• Forums, Seminars, Training Courses, International engagements, Peer Review, Bilaterals etc

• Training: Bhutan, Nepal, Oman

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INTOSAI - India’s role

Member of the Governing Board from 2007-13.

Chair Goal 3 – Knowledge Sharing and Knowledge Services Committee

Chair the Working Group on IT Audit

Member of INTOSAI-Donor Steering Committee

Member of various Committees, Working Groups and Sub-Committees

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International Audits

• SAIs are elected/selected as External Auditors of UN and its Agencies and other International Organizations

• Appointment made after following due process

• Contractual assignment

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International Audits – Current portfolio

•Member of UN Board of Auditor 2014-2019

•WTO – 2000 onwards

•WFP – 7/2010 to 6/2016

•IOM – 7/2010 to 6/2016

•WIPO – 7/2012 to 6/2018

•IAEA- Term ended in 2014

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DPC Act 1971 (Duties and Powers of CAG)

Chapter- ISections 1 & 2Introduction

Chapter –III Sections 10-20

Duties and Powers Audit of expenditure,

revenue, loans, grants, PSUs, Corporations compilation-audit of

accounts

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CAG’s DPC Act, 1971

• Audit Mandate

– Audit of accounts of the Union and of the States– Audit of receipts and expenditures from and into the Consolidated Fund of

India, Contingency Fund & Public Accounts– Audit & report on accounts of government companies, statutory corporations,

Autonomous bodies

• Accounts Mandate

– responsible for compilation of accounts for State Governments– responsible for preparing & submitting monthly/ yearly accounts to the

legislature

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Regulations on Audit and Accounts - 2007

• Regulations on Audit and Accounts framed & notified in the Gazette of India in 2007

– explains the scope and extent of audit– types of audit– auditing principles – planning, conducting the audits – analysing and reporting the findings – explains the general principle of Government Accounting

briefly dealing with Accounting Standards, form of accounts (books of accounts), financial reporting

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Coverage & output• CAG’s Reach

– Reaches all 3 tiers of Government: Union, State, Local Bodies– Covers PSEs, Autonomous Bodies, Major Grantees– Number of audited units 2,56,000; 54,513 actually audited – Issued 49,894 Inspection Reports during 2013-14 to various

audited entities– We examined 6,812 accounts of Union and State Governments,

PSUs, Autonomous Bodies, Externally Aided Projects and others.

– 134 Audit Reports prepared in last year

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What is Public Sector Auditing?

• Public sector audit is a form of legislative oversight under constitutional arrangement over the executive that – seeks to enhance accountability and promote

improvement in use of public resources

•Constitution of India entrusted the responsibility of public

sector auditing in India to the C&AG, assisted by IAA&D

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Types of Audit by CAG

Compliance Audit

Financial Audit

Performance Audit

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Union Government comprises of about 50 Ministries with about 100 Demands for Grants and Railways

grouped into following sectors

– Revenue Services Sector (Tax Departments)

– Economic Services Sector (Oil & Gas, Coal, other Minerals, Industries, Power, Transport)

– Social Service Sector (Health, Education, Culture, Social Welfare, Food Security, Rural Develop)

– General Services Sector (Defence, Paramilitary, Administration, Legislature)

It is same on a smaller scale for all State Governments

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Public Sector Audit looks at the spending departments as follows

A public sector entity is created to deliver a service. Primary function is to fulfil its service delivery mandate efficiently. Their operational performance is expected to be efficient- first responsibility

Entity to carry out their operations -provided with financial resources, budget. acquires all other resources like men, material, assets, land, building etc that they need for their activities. Procurement rules, GFR, FR&SR, Travel Conduct Rules, Budget Rules -to safeguard from- theft, loss, misuse, abuse, mismanageSafeguard of resources at all the times by following the related rules is the second responsibility.

Entities to keep an ‘account’ of all financial transactions and related administrative records ( sanctions)Keeping an account of financial ‘transactions’ in the books of accounts --reporting within financial reporting framework – the third responsibility

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Audit with an objective to examine • ‘to what extent the entities service delivery operations are efficient

and economical’ is performance audit.

• ‘to what extent entity could safeguard all the resources with which it is entrusted or responsible for - from theft, loss, mismanage, misuse, abuse, waste, by complying with rules compliance audit. (natural resources)

• ‘to what extent the entity’s financial reporting is reliable’ i.e., to what extent correctly recognised, measured, the figures are classified, captured, reported in the financial statements is financial audit.

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Audit of Central Government Departments is organized in the following lines

(about 50 Ministries with about 100 Demands for Grants)

• Economic Services Sector (Oil & Gas, Coal, other Minerals, Industries,

Power, Transport-Railways)

• General Services Sector (Defence, Administration)

• Social Service Sector (Health, Education, Culture, Social Welfare, Food

Security, Rural Development)

• Revenue Services Sector (Tax Departments)

Audit of Central Government Departments

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Audit of Economic Services Sector Departments

Audit of Railways18 offices headed by Principal

Directors (PDs) 14 citiesAssisted by 24 Directors /Dy

dedicated cadre of Audit Officers, Asst AOs,Auditors

Posts and Communications

1 office in Delhi headed by Director General (DG)

14 Dir/Dy at 12 locationsdedicated cadre AO,AAO

Audit of all Economic Services Departments (Power, Transport etc) by 12 offices headed by Principal Directors

assisted by 34 Dir/Dy – dedicated cadre AO, AAO, Auditors

> 400 central PSUs – Financial Audit of Annual Financial Statements- “supplementary audit”- Commercial Audit

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Audit of General, Social Services Sectors Departments

Audit of Defence Ministry - 6 offices headed by DG/PDsArmy, Air Force, Navy, Ordinance Fact- dedicated cadre

Audit of all other General, Social Service Departments by

12 offices headed by DG/PDs at 9 cities 48 Dir/Dy Dir (PD

Central) Most of the Autonomous Bodies (IIT, IIM, Museums

etc about 350) fall under this. Financial Audit of their Annual

Accounts- SAR (Separate Audit Reports)

Above PD Central Offices also carry out Revenue Audit (Income Tax, CE, ST, Customs) – cadre of the State AG

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Audit of State Governments

Audit of 29 State Governments is carried out by Accountants

Generals (AGs)/PAGs assisted by 140 DAGs (Deputy AGs/Senior DAGs)

organized into Economic, Social, Revenue Services Departments

Each State has its own cadre of AOs, AAOs, Auditors etc

Compilation of Accounts of the States and Entitlements (Pension, PF of State Govt. Employees) in 26 States is done by AsG assisted by 75 DAGs. (in some only DAGs) These office have their own cadre of Accounts Officers, Asst. Accounts Officers, Accountants, Clerks etc.

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Audit Planning

• Perspective Plan of SAI India

• Strategic Audit Plan

• Annual Audit Plans focusing on risk areas

• Audit Plans enmesh financial and performance audits as well as compliance testing procedures

• Indices drawn and used for performance evaluation

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Audit Assignments

The entire Audit activity is carried out in the form of Audit Assignments (Audits); i.e., audit of entities, subordinate offices etc of the Department/Ministries

Carried out by Audit Teams (Audit Parties). It is lead by of 1 Audit Officer having 2 to 4 members -AAO, Auditors

Duration of the Audit Assignment or an Audit would vary from 1 week to 2,4,6 or 8 weeks depending on the size & type of unit & type of audit. A larger Audit Assignment like Disaster Management would consist of several Audits carried out by a number of Audit Parties- locations

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An Audit Assignment

Each Audit starts by having an Audit Objective

3 broad audit objectives; to what extent service delivery operations of the entity are efficient -Performance Audit

to what extent its accounting, book keeping and Financial Reporting is reliable – Financial Audit

to what extent entity could safeguard its resources from theft, loss, misuse, abuse, mismanage by complying the related Rules and instructions - Compliance Audit

Audit Objectives in turn will have sub-objectives

Whether procurement was as per prescribed rules?

Audit Criteria (against which measured)- related Rules

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An Audit Assignment or An Audit

After identifying Audit Objective, Sub-Objectives and Audit Criteria; the Audit Party selects the Sample

(4 of 15 purchase contracts - 2 years, sample of transactions)

Entry Conference: Audit Party explains the above to the Executive to the Head of the Dept./Office. Less formal in smaller audits (1 to 2 weeks)

explains period to be covered in audit & duration of audit.

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Audit Process – Evidence & Documentation• Fact based audit

• Large reliance upon documentary evidence from within the audited entity

• Other forms of evidence like expert reports, beneficiary surveys, also relied upon

• Evidence can be both financial and non-financial & includes designs, drawings, test reports and a lot of technical data and reports

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Audit Process: Reporting and Follow up

• Audit notes communicate the initial results of audit; vetted by a supervisory officer

• Discussions held informally as well formally on all audit findings • Entry and exit conferences • Audit Inspection Reports vetted and followed up • Important findings included in Audit Report • Audit Report goes through several layers of check • Approved Audit Reports tabled in Parliament • Different procedures for financial, compliance & performance

audit

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Staffing for Audit

• Standardized audit teams structured to bring together experience and skill

• Supervision of audit teams according to perceived audit risk

• Specialized audit staff streams for certain areas of audit requiring subject specific knowledge, skills and experience

• Performance audits taken up in project mode and special workshops organized to enhance skills

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Quality assurance• Detailed Auditing Standards, Manuals, practice notes –constant updation

in line with international best practices

• Periodic inspections of offices -Robust internal audit/inspection systems

• Internal Peer review

• Functional distribution of audit functions ensures adequate specialisation and focus

• Multilevel vetting of Audit Reports for quality assurance

• Emphasis on training and continuing professional education of personnel

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Training in SAI India

• National Academy of Audit & Accounts-Shimla • iCISA, NOIDA• ICED, Jaipur• Regional Training Institutes-Nine • Regional Training Centres-Three • In-house Training facilities in field offices

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Audit Output

Very significant & high monetary value audit findings in the Inspection Reports

are processed for Audit ReportIt goes through rigorous quality control processIn an year about 40 Audit Reports (Union Government) and 120

Audit Reports (State Reports) are presented to the Parliament and the Legislatures. Could be Performance Audit, Compliance Audit, Financial, mix..

Discussed by Public Accounts Committees (PAC)-ATN Audit Reports feature about 10% of the audit findings rest

remains in IRs -correspondence between the audited entity and the field audit office.

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Follow up

• SAI should have independent procedures for follow up to ensure that audited entities properly address their observations and recommendations and corrective actions are taken( ISSAI 10)

• Secretary to Dept. Concerned shall cause preparation of self explanatory action taken note(s) on audit paragraph(s), for submission to PAC/ COPU ( Regulations on Audit and Accounts 2007)– Whether facts & figures in Audit reports are acceptable– Circumstances in which the irregularities pointed out in audit observation

occurred– Action taken to fix responsibility and likely time frame for completion of

action– Current status of recovery, if any – Action taken or proposed to be taken on suggestions and

recommendations made by audit

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Our Audit Impact

• Some of our audit observations point towards underassessment of taxes, which necessitates recoveries from concerned parties by executive

• Recoveries status for FY 2013-14

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Financial Impact of audit of Annual Accounts of PSUs

• Supplementary audit of Government companies & corporations , under section 619(4) of the Companies Act

• Corrections made as a result of supplementary audit at the union level

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External interface

• Parliament and State Legislatures • Executive • Media • Academic / Research /Policy think tanks • Civil Society • Professional Bodies like ICAI • International bodies like INTOSAI, ASSOSAI, UN • Audit Advisory Board

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Legislative oversightThree financial Committees of Parliament

• The Public Accounts Committee (PAC), the Estimates Committee and the Committee on Public Undertakings (COPU).

• The PAC and COPU conduct detailed examination of CAG’s reports (Compliance and performance) on a selective basis. In the case of the remaining paragraphs, the ministries submit Action Taken Notes (ATNs) vetted by IA&AD to the PAC/COPU.

• The Committees of State/Union Territory legislatures examine selected paragraphs/ performance audit reviews in a few States, while in others, the entire reports are examined by them

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Legislative oversight

• “Friend, Philosopher & Guide” to legislative finance committees

• CAG Reports: main bases of committees’ work• • CAG assists the committees in:

– examination of witness – preparation of reports – monitoring follow-up action

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THANKS