Babu Beat. CAG adopts a vertical approach for better outcomes

India’s hyper-vigilant audit institution has been in the news this week as former Jammu and Kashmir lieutenant governor Girish Chandra Murmu was sworn in as its new chief, taking over from Rajiv Mehershi. But behind the spotlight, the Comptroller and Auditor General of India (CAG), whose reports flagged off controversies like 2G spectrum and Coal Block allocations, has been quietly doing some internal restructuring.

CAG, which has officers from Indian Audit and Accounts Department including Indian Audit and Accounts Service, is now creating verticals to address the needs of each sector. Each vertical will be responsible for the audit of a PSU, corporation and autonomous body falling under one Ministry so that an integrated view of the sector is obtained. For example, earlier Ministry of Agriculture and Farmer Welfare was audited by one office/team and Food Corporation of India (FCI) by another. Now, it will be handled by one team.

Until recently, in the States, Departments were clustered as ‘General’, ‘Economic’ and ‘Social’ and audit of PSUs (commercial audit) was a separate activity. For audit of Union Government, Ministries were divided into three Principal Audit offices looking after Scientific Departments, Economic and Social Ministries and Others. Audit of PSUs under the Ministries was a distinct vertical.

Over time, the CAG teams recognised inter-connected outcomes and linkages between various government schemes and programmes. A good example of this is Ministry of Jal Shakti, which has a lot of convergence with Agriculture. Thus it was felt that the audit approach should also reflect this convergence and follow a cluster approach. So the same team auditing Agriculture will look at the Jal Shakti ministry as well.

“We wanted to create structures so that Ministries and Departments which have inter-connected outcomes and synergies could be placed within the audit jurisdiction of an office for better understanding of domain and other advantages,” said Rajiv Mehrishi, the former head of CAG.

It does make sense, as it cuts down on time lag and unnecessary bureaucratic hurdles.

As Prashant Pandey, Country Manager for Right Management (India) of Manpower Group, points out, “We need to understand that CAG is not a regular corporate organisation. Even within corporates if you look at audit companies, consulting companies or for that matter any services company all have a sector focus.” Each sector has its own dynamics, he says, adding, “If you look at how value gets created in each of this sector through the value chain, it is unique for each organisation. The rules of the organisations, like the way they are regulated, for example, will be different. The freedom that an organisation has in terms of operation has a direct bearing on the regulatory framework it operates under. Insurance companies for example cannot just one day get up and launch a new product unless it goes through a regulatory process.”

More transparency needed

The current CAG restructuring has some lofty goals. Among them are improved understanding of the domain, better appreciation of complexities and convergences in programme and service delivery, an integrated view of policy, programme and schemes, and understanding of multiplicity of audit entities and agents. But, there is a set of people who feel that CAG needs to loosen up a bit and take guidance from external experts.

In fact, in 2011, there was a suggestion by a high-level committee headed by former CAG V K Shunglu that CAG at the top should be a three-member body, but the suggestion found few takers.

“CAG is a slightly different audit body compared to others. Here you need to have fine balance between control and competence. When I say control I am referring to operational independence that CAG needs to have and which cannot be compromised. The need to get external competence should not get you into a situation where you are diluting the control and operational independence,” feels Pandey. He fears that the moment you get outside people you open yourself to becoming influenced.

The crux is that the CAG has to ensure that there is no element of suspicion behind every report. What is desired is creating greater transparency and doing away with bureaucratic power plays.