Text of the Speech of CAG at AG’s Conference

Following is text of the address by the Comptroller and Auditor General of India, Shri Vinod Rai at the XXIVth Accountants General Conference on 14 October, 2008 at New Delhi:

"We are indeed grateful to the President of India for accepting our invitation to inaugurate the new building. Madam, we are privileged to have you amongst us today to inaugurate the new building and the biennial conference of the Accountants General. Your presence today is a source of inspiration to us which motivates us to rededicate ourselves to the task of providing good governance and transparency.

Madam, the objective of this year's conference of Accountants General is to focus on efficacy and efficiency in audit and accounts towards the task of strengthening good governance, transparency and accountability. We are committed to closer interaction with the auditees to partner the Executive for providing an efficient governance and delivery system. We aim to provide constructive solutions for mid course corrections in schemes of national importance. We have invigorated the process of proactively engaging with Ministries in giving our input and advising on various policies and programmes at the time of their formulation when specific requests are made for the same. This approach is based on the fundamental premise that public audit is a continuing process and not a one time exercise. Since public auditors get a comprehensive view of the entire delivery process of each scheme launched by Government, we are in a position to provide very useful inputs through regular insight and oversight audit reviews. Such an approach has been welcomed by the Executive as being constructive and result oriented towards strengthening good governance through better management of resources and strengthening of controls.

Efficient delivery of public services, proper management and control of public resources, high level of accountability and transparency are hallmarks of good governance in a democratic society. In recent years, Government has undertaken a number of major initiatives intended to significantly improve the quality of delivery of public services. There have also been fast paced developments in government's expenditure pattern. There is greater devolution of resources directly to the societies, NGOs and other implementing agencies at state, district, block and village level for implementing various major developmental programmes and schemes. They are authorized to keep such funds outside Government accounts. This is to provide greater flexibility in spending Government funds. In doing so, there is an immediate need to put in place a strong accountability mechanism for these agencies. The Government is also actively promoting public private partnerships in the key infrastructure sectors to minimize the infrastructure deficiency in the country. Economic liberalization in its wake has shifted the role of Government from being a monopolistic player in certain sectors to that of a catalyst and monitoring agent. The latter function is being carried out through Regulators in various sectors of the economy. Each such initiative of Government must have concomitant response by Audit. Management and accountability of public debt is another key challenge to the Government and its audit to us. Due to considerable repercussions of future debt servicing on the public budgets concerned, audit of public debt acquires increasing importance. Audit should provide timely and full information about the implications and risks of public debt by reporting this to parliament. Public debt often gives rise to questions about intergenerational burden-sharing. Democratic governments require that public debt and its long term effect be made transparent. This is necessary to ensure accountability and informed public debate. We are also engaged in the task of facilitating the transition from a cash based accounting system to an accrual based system. I am happy to inform that twenty one states have agreed to migrate to accrual based accounting. The present system of accounting in the Government based on cash, acts as a limiting factor in correct estimation of fiscal indicators, assets and liabilities of the Government. A vigilant auditor must see that all the transactions of receipts and expenditure of the Government are appropriately treated to ensure that the key fiscal indicators are correctly estimated and there are no instances of important transactions of issue of bonds, securities etc. being omitted to understate these indicators. As Governments move towards adopting accrual system of accounting, it will facilitate more accurate determination of debt sustainability and overall fiscal imbalance.

For any vibrant parliamentary democracy an effective system of accountability of the Executive to Parliament is fundamental. However, it requires that the Executive responds with alacrity to the observations of audit which are placed before the Parliament. Inadequate and delayed responses compromise the relevance of audit and dilute the accountability of persons involved. This also amounts to debilitating parliamentary control over the Executive. The efficacy of the CAG can only be as much as Parliament mandates it to be. If one third of audit observations do not even get a first response from Government departments over a 10 year period - as against four months within which they should respond, Parliament's intent is being denied. Audit observations become the property of Parliament after the Audit Report is presented in Parliament. The CAG cannot pursue the findings unless Parliament or the Legislature wills it to do so. To the extent that such major observations do not come before the nation in a debate, the maxim of accountability is being diluted. To the extent that perceived distortions in public expenditure are not held out against the concerned agency, the objective of transparency is being negated. To the extent that the implementing department is not being made squarely responsible for lacunae in the delivery system, good governance is being debilitated. These are the issues on which Audit can be the 'eyes and ears' of the Parliament and it is for the Constitution makers to empower it to fulfil that mandate.

Hon'ble Madam President, this Conference of Accountants General is going to deliberate on reforms that we need in the audit system, both in terms of ensuring adequacy of powers and mandate for audit and also in terms of reengineering the audit processes so that we effectively achieve the objective of enhancing accountability in public services. After we receive the recommendations of the Conference, we shall submit definite proposals to the Government for necessary administrative and legislative action for implementing audit reforms and putting in place a stronger accountability mechanism in the country which is at par with other leading democracies in the world.

This department is conscious of the fact that while we can generate good Reports, it is basically for the administration to take appropriate measures to tone up the system and produce quality delivery channels. Hence we are making every effort to provide good synergy between audit and auditees. We are increasing interactions with the sole intention of maximizing the efficiency of public expenditure and improving Government's credibility. Today's Conference provides to the Accountants General an invaluable platform to reflect on various issues and a lot more. Our capital is human knowledge. We are a learning organization and hence knowledge driven. We have to respond to the changes around us. We have to respond to the expectations from us and maximize the value that audit provides. We are continuously engaged in upgrading, re-skilling and ensuring dynamism in our capability to be adequately equipped to the rapid changes around us.

We are inspired and privileged by your presence today and I wish to take this opportunity to assure you that we aspire to be the best in the world and propose to rededicate ourselves to the task of nation building as equal partners with all other agencies."

BSC/SS/GN-259/08