Internal Control and
The World Bank
Commend GOI – Budget Transparency
Recognize the Role of the MOF/CGA
Appreciate Actions underway at CAG
Draw Attention to certain limitations of Fiscal
Suggest measures to further strengthen the
System of Public Financial Management and
1998: WB Interest in Institutions of
PFMA – East Asian Crisis & IDA
1999: Comprehensive Development
2000: Upscaling from Projects to
2002-04 : CFAAs/SFAAs
2004: Integration of disciplines
2005: Governance and Public
appraisal Budget allocation
Management System Budget Execution
Rural Local Bodies
Public Enterprises Control Systems
External Audit Urban Local Bodies
Internal Controls &
Scrutiny Fund Flow
Internal Control Vs External Control
All the components of the System are
Strength of the chain dependent on its
Good Policy is one that can be
Professional Management becoming
Planning Commission: Program Evaluation of CSSs
CAG: Funds used for the purposes intended with due
Fair Presentation of Information
MOF/CGA: Budget Vs Actuals, Supplementaries, PD
Accounts, Suspense balances, Year end bunching, Tax
collection efficiency, Non-tax revenues, Excesses and
Savings, Off budget transactions etc
Oversight Committees: Miniscule Coverage
ACCOUNTING FOR PUBLIC
SWARNAJAYANTI GRAM SWAROZGAR YOJANA
(RURAL SELF EMPLOYMENT PROGRAMME – FOR POVERTY ALLEVIATION)
Expenditure reported by
by the State Government
Rs. 233.78 crores
Expenditure test checked
Rs. 97.10 crore
(41.53 per cent)
Expenditure on Amount diverted/
programme unused/advanced etc.
Rs. 36.73 crore Rs. 60.37 crore
Deposits into Amount lying Advances treated as Misuse of funds/diversion Expenditure on works Other irregularities
PLA/PD/Bank/ unutilized final expenditure to other activities not not permissible Rs. 8.26 crore
Rs. 19.29 crore Rs. 12.65 crore Rs. 12.13 crore related to the programme Rs. 2.07 crore (13.7%)
(31.9%) (21.0%) (20.1%) Rs. 5.97 crore (9.9%) (3.4%)
38 % OF FUNDS WERE SPENT WITHOUT ANY IRREGULARITY
Source: CAG Report 2001-02
Income Tax: 72,000 persons >Rs10 Lakhs while 1 in 18
Households in Delhi reported income of Rs. 10 Lakhs.
2/3rds of Plan expenditure is revenue
Leakages in TPDS – 52% ?
Number of autonomous bodies under the control of GOI ?
How much “parked” in PD Accounts ?
Heavily Qualified Audit opinions in almost every Power
Sector Company + 40- 50% T& D Losses
PIL Filed in the Supreme Court: 1.75 Lakh crore “Excess”
needed Regularization- $ 40 Billion
Cost and time overruns – poor management and corruption
TI – India is way down in the totem pole.
– Has the System’s capacity to support the
objectives of FRBM been tested ?
– How effective is Internal Control ?
Management of Risk
– Are External Audit, Legislative & Public
Oversight functions sufficiently robust ?
Constitution: Provides an Overall Framework for PFMA
FRBM: Addresses the Fiscal Risk
RTI: Promotes Public Financial Accountability
CAG Act & Rules of Procedure: Promote
Parliamentary oversight of the Public Purse
Notes: 1. No Primary Law for Financial Administration or for
Procurement – GFRs provide subordinate Legislation.
2. Responsibility for ‘Internal Control’ Diffused.
GOI IS MOVING FORWARD
Planning and Budgeting – towards a
medium term outlook and framework
Financial Reporting is becoming more
General Financial rules are being updated
Accounting Standards are being debated
Audit Guidelines are being revisited
Disclosure Practices are being modernized
Transactions recording largely
computerized (IT) – MIS in the making ?
Web sites are being modernized
Will ‘macro’ balancing (FRBM) work without related
Exchequer control nor stronger Internal Control and
greater Impact of External Audit ?
Does India need a modern Organic law to govern
Financial Management, Procurement & Reporting?
Should the Administrative Secretary be directly
answerable to the public for meeting performance
standards - and for minimizing fraud, waste and abuse
of public funds ?
Incentives and training for strengthening capacity at the
downstream – ‘micro’ balancing ?
From Outlays to Development Outcomes:
FRBM is a step forward vis a vis
Planning and ‘Macro’ Budgeting
Timely to concurrently modernize the
downstream components of the budget
cycle with emphasis on
SUGGESTIONS FOR MODERNIZATION
– Open hearings of the subject matter
– MIS: Performance Monitoring and Evaluation
– Roles of the Departmental Secretary, FA,IA,
– Transactions to Systems improvement
SUGGESTIONS FOR MODERNIZATION
– Cash basis towards Resource based
– Broaden to Performance Reporting
– Policeman role to an ‘Agent for Change’ and
a provider of ‘Assurance’
– Open hearings of the PAC and the PUC
FRBM – Necessary and Timely but not
Leadership with MOF/CGA & the CAG
Agree: Time to Move from Outlays
towards Development Outcomes –
Downstream Incentives ? TFC - Silent
Modernization of the Institutional
Framework for Control &
Accountability would be a desirable