STRATEGIC PLAN 2020 - EXECUTIVE SUMMARY

Strategic Plan­ 2020 for IAAD

Executive Summary

Background

In March 2010, the CAG had indicated that the vision and mission statements for the IAAD were being revisited, and a Strategic Plan was necessary in order to realize the vision and elaborate on the activities that would flow from the mission. The Strategic Plan is expected to provide direction to the Department for the next ten years, and would cover both audit and accounts/ entitlement functions. A working group, consisting of Shri KR Sriram, Shri RG Viswanathan, Ms. Rebecca Mathai, Shri YN Thakare (Convenor), Shri Anadi Mishra, and Ms. Vidhu Sood, wasconstituted to come up with a Strategic Plan that was in consonance with the existing/ proposed legislative mandate.

We reviewed the strategic / corporate plans of several SAIs, in order to consider the international practices followed in corporate planning. Further, we also identified the following patterns in governance that are likely to emerge over the next ten years or so:

·       Delivery of basic services will continue to remain Government’s responsibility.

·      PPP will become the predominant mode for delivering infrastructure and other economic services.

·       Devolution and decentralization will increase substantially.

·       IT will be used in an integrated fashion to drive governance and empower the citizen.

·      Sustainable development and the rights of underprivileged groups will become larger concerns.

·       Fraud, corruption and waste will continue to remain key concerns.

These patterns have acted as drivers for our Strategic Plan. In our view, this Strategic Plan should represent the overarching framework for planning in the IAAD, which will need to be supported by detailed plans over five year and annual time horizons. We have identified six key goals. Our recommendations in respect of these goals are summarized below:

Goal 1 – Integrating Audit Efforts

Our current arrangements for audit of GoI entities are organized based on the nature of the entity (Government office, PSU, autonomous body etc.), rather than with a Ministry/ sectoral perspective. We recommend the following:

1A.        Re‐structuring the organizational structure for audit of Government of India entities on the basis of the Ministry/ Department, rather than on the type of the entity (Government office, PSU, Autonomous Body etc). In this way, a Central Ministry as well as the PSUs and Autonomous Bodies under it will be audited together by a single office (or group of offices), and audit of several Ministries/ Departments (grouped sector‐wise) will be under a single DAI. The existing boundaries of Civil, Defence, Railway, Commercial and Autonomous Bodies Audit will be done away with.

1B.         Regional ADAIs for State Reports, with arrangements for co‐ordination and ensuring consistency in a country‐wide approach.

Goal 2 – Promoting professionalism in public sector auditing

Werecommend the following measures, to promote greater professionalism within the IAAD:

2A.        Creating an institutional mechanism of Knowledge Centres (KCs) for knowledge capture and maintenance on a sector‐specific basis

2B.         Creating sector‐specific pools of Knowledge Resource Persons (KRPs) at two levels (IAAS and supervisory officials) and providing suitable remuneration for this continuing, additional responsibility

2C.         Encouraging Central and State Governments to build and strengthen institutional arrangements for internal audit and risk management

2D.        Establishing a Chartered Institute for Public Accountants and Auditors of India (CIPAAI) on the lines of ICAI and ICWAI, under the aegis of the CAG of India.

2E.         CIPAAI would tackle issues of day‐to‐day accounting problems and professional upgradation of the skills of the vast pool of finance, accounts and audit personnel at the grass roots level, and address deficiencies in the accounting processes and financial controls across organisation like huge arrearsin accounts finalisation and weaknesses in internal audit.

2F.         CIPAAI would provide professional certification to the Group A professionals of the CAG organisation entering into the Government of India through Civil Service Examinations.

2G.        CIPAAI would provide professional certification to the Group B and C professionals from the CAG by subsuming the SOGE currently being conducted by the CAG and also to other finance, accounting and audit professionalsin State/Central government departments on demand.

2H.        The need in SAI India to set up an International Consultancy wing, as there is a great demand for SAI India’s expertise in areas of Public Audit and Financial Management amongst many SAIs who are in the process of developing the public audit systems in their countries.

Goal 3 – Improving communication with stakeholders and ensuring higher visibility

We recommend the following measures for improved communication with all stakeholders:

3A.        Need for theCAG to be more proactive in his interactions with themedia

3B.         Setting up a separate Parliamentary/Legislative Relations Unit to extend proactive support

3C.         Building a brand for the organisation

3D.        Treating Inspection Reports as products of the CAG for consumption by the public and other stakeholders

3E.         Introducing more value added products like study reports, compendiums etc., so that they act as ‘Aids to Management’

3F.         Setting up countersin each city for distributing audit reports to common citizens

3G.        Giving more focused dissemination and communication through vernacular languages

3H.        Revamping the CAG website

Goal 4 – Enhancing audit effectiveness and impact

With regard to an integrated approach to financial and compliance audits, we recommend:

4A.        Conducting pilot integrated financial‐cum‐compliance audits in different areas with a view to assessing the advantages and disadvantages of such integration, and drawing up a phased approach to integrated financial‐cum‐compliance audit

We recommend the following approach for financial attest audits

4B.         Strengthening the assurance based approach to financial attest audit of Government accounts

4C.         Preparing detailed annual financial attest audit plans and evolving appropriate statistical models

4D.        Combining inputs from past audit findings and VLC data analysis into the financial audit process

4E.         Commenting on adequacy and effectiveness of internal controls affecting the accuracy of financial statements, and encourage moves towards a Management Responsibility Statement

4F.         Introducing audit automation software, towards preparation of assurance memos

4G.        Building capacity for the forthcoming alignment of Indian Accounting Standards with IFRS from April 2011

4H.        Move towards conduct of certification audit of autonomous bodies exclusively by commercial auditstaff

With regard to compliance audit, we recommend the following:

4I.          Switching to a thematic approach for compliance audit (involving at least 80% of available compliance audit resources), with assurance‐based reporting and follow‐up based on recommendations

4J.          Reducing the number of compliance audits and IRs drastically, and introducing detailed audit planning for thematic audits

4K.         Introducing audit automation software, for systematic documentation and working papers

With regard to performance audit,we recommend the following:

4L.         Since Performance Audits greatly enrich public accountability and enable the CAG of India to make practical contributions to improving the efficiency and effectiveness of the public administration, there is a need to increase the allotted party man days on such audits from the current exposure of around 10 per centto 50 per centby 2020.

4M.       New strategies to strengthen the process of Performance Audits like greater stakeholder involvement, fine‐tuning audit methodology and redefining the follow‐up process, need to be institutionalised so that Performance Audits make the desired impact.

Goal 5 – Improving delivery of accounting and entitlement functions

With regard to accounting and entitlement functions, we recommend the following:

5A.        Encouraging States to assume ownership of accounts, where they express willingness and possess adequate capacity

5B.         Leading reforms of the accounting structure and partnering the GoI/ States in ushering in institutional accounting mechanisms for direct transfers of funds

5C.         Transforming A&E offices into data centres for financial information and analysis

5D.        Encouraging States in developing capacity for assuming entitlement functions, and managing a diminishing role

5E.         Ensuring effective use of technology for delivering services of the highest quality, as long as entitlement functions remain with IAAD

Goal 6 – Improving Human Resources management

In view ofthe enormous demands on our audit resources due to the likely changes in governance, HR (both at the Group A and Group B levels) will need considerable revamping. We recommend the following:

6A.        Reviewing office wise existing sanctioned staff strength to ensure that audit resources are optimally deployed across all offices

6B.         Determining the right span of control for Group Officers to achieve quality performance

6C.         Recruiting only at Assistant Audit Officer level and phasing out recruitment at auditor, clerk, steno and Group D levels.

6D.        Creating an exclusive IAASGroup B Service (with DAG level posts in the Group B cadre)

6E.         Creating Zonal Cadres of IAAS‐Group B in the short term and an All India cadre in the long term

6F.         Modifying Recruitment Rules for IAAS‐Group A to include fast track promotions from IAAS – Group B

6G.        Creating an IAAD Recruitment Board

6H.        Ensuring a constant intake of Professionals into IAAS Group B

6I.          Raise benchmark for promotion by selection to “Very Good”

Operationalising the Strategic Plan and Monitoring Implementation

For operationalising the Strategic Plan‐2020 (after its approval), a full‐time Strategic Planning Group needs to be created. This group will be responsible for finalizing the detailed implementation (for approval by the competent authority), and monitoring its roll‐out in a phased manner.

For ensuring effective monitoring of implementation of the Strategic Plan, formal mechanisms for monitoring are essential in the form of performance measures for each goal, along with associated timelines. An indicative set of performance measures and timelines has been suggested.