shri rangarajan rs on accounting as an enabler for good...

Shri Rangarajan RS

on Accounting as an Enabler for Good Governance and More Effective Audit

Accounting as an Enabler for Good Governance and

More Effective Audit

Overview: Common definitions describe governance as a process by which power is exercised without

explicitly stating the ends being sought. The OECD in an e-book entitled ‘Citizens as Partners -

Information, Consultation and Public Participation in Policy-Making identifies eight characteristics of

Good Governance: Participatory, Consensus Oriented; Accountable; Transparent; Responsive;

Effective and efficient; Equitable and Inclusive; and, Follows the Rule of Law’. The first

module of the Theme Paper examines and brings up for discussion some aspects that can further the role

that an Accountant General (A&E) can play as an Enabler for Good Governance.

The second module highlights the ways Audit can utilise the wealth of data available with the A.G (A&E)

for a better informed audit planning and execution of audit engagements in a more effective manner.

In the third module, the Paper critically examines the present status of VLC, both software and hardware,

in the fast and ever changing digital environment and attempts to throw up for discussion the way forward

for the VLC to continue to be a robust system.

Module One: Accounting as an Enabler for Good Governance

1.1 Introduction

Accounts can play a key role in furthering each one of the characteristics of Good Governance. For

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accounting at the State level to aid in Good Governance, it should be able to service all the

stakeholders: ordinary citizen, the executive, the elected representatives and lending/funding

agencies. Presenting the accounts in a simpler, easy-to-understand-form, making the accounts

complete, working towards a more uniform coding of accounts, consolidation of all expenditure that

occur in a state, more focus on accounting for receipts, taking further the process of migration to

accrual accounting, upgrading the VLC system and making it more viable and robust, setting up of a

central Data Warehouse and upgrading and maintaining the skill and knowledge level on accounts

and its processes in audit offices will all be appropriate and necessary steps over the near term in

making accounting play a key role in Good Governance and effective audit.

1.2. Simplifying the Finance Accounts

‘We might hope to see the finances of the Union as clear and intelligible as a merchant’s books, so that every

member of congress and every man of any mind in the union should be able to comprehend them, to

investigate abuses, and consequently to control them’.

President Thomas Jefferson to Treasury Secretary Albert Gallatin, 1802

1.2.1 While many of the stakeholders and interested academicians find the Finance Accounts very

useful for the wealth of information it contains, there is also a section of would-be-interested parties

that view the Finance Accounts as being ‘too cluttered and technical’. It is doubtful whether the

‘ordinary citizen’ is inclined to scan through the thick publication containing financial data. The

question before us is: “How do we service all the stakeholders?”

1.2.2 The Finance Accounts needs to reflect details of all Receipts and Outgoings in fulfillment of

CAG’s Constitutional Mandate. Further, such details, for the whole State, are available only in the

Finance Accounts. The functionaries of the State Governments, at various levels, refer, cull out and

use the information relating to their specific functions. Without taking away this essential

functionality, we need to explore ways to make the reading of Finance Accounts simpler and more

user-friendly. In addition, there has also been a felt-need for ‘General Purpose Financial Statements’

as the Finance Accounts is seen more as a budget compliance document.

1.2.3 In pursuance of the recommendation of the XXIV AG Conference, the matter relating to the

revision of the Finance Accounts was entrusted to consultants. Their report, which draws upon the

requirements of IPSAS and IGAS, has been examined. Feedback received from stakeholders,

including the Planning Commission, Finance Commission and our offices, have been considered. The

matter was also discussed at length in the AsG workshop held between 14 and16 September 2009 at

ICISA, Noida. The need to further improve quality of accounts, the areas to be focused upon and

action to be taken in immediate and in mid-term was discussed in detail.

1.2.4 In addition to further improving the quality of accounts in a time bound and milestone-linked

manner, it has been proposed that the Finance Accounts be brought out in two volumes. The first

volume, more in the nature of ‘General Purpose Financial Statements’ would give a macro level bird’s

eye view of the State finances. Volume I is to be concise and comprise:

i. Audit Certificate

ii. Statement of Financial Position

iii. Statement of Receipts and Disbursement (more aggregated)

iv. Statement of Receipts (more granular)

v. Statement of expenditure both by function and nature (more granular)

vi. Notes to accounts, including accounting policies

vii. Cash Flow Statement (appendix)

1.2.5 The second volume, Volume II, catering to the discharge of CAG’s Constitutional Mandate and

to the needs of State Government functionaries and specilaised bodies like the Planning Commission,

Finance Commission, etc would comprise three sections:

A. Summarised statements on debt, loans and advances, Grants-in-Aid, Guarantees etc

B. Detailed statements as at present included in the Finance Accounts’

C. Appendices including appendices on plan scheme expenditure, externally aided

projects etc.

1.2.6 Points for discussion

What should be the nature and content of the Finance Accounts, given the felt-need of the

stakeholders and CAG’s constitutional Mandate?

Should Chapter I of the Audit Report form part of the Finance Accounts?

1.3 Completeness of Accounts:

1.3.1 Direct Central Transfers

A book of accounts catering to the needs of different types of stakeholders would fully serve its

purpose only if it were complete. A large amount of money, most of it for development work, is being

routinely transferred directly by the Central Government to the implementing agencies within each

State. The quantum of direct fund flow to the implementing agencies outside State Budget is

estimated to be upwards of Rs. 80000 crore for 2009-10. The expenditure from direct transfers by the

agencies is not reflected in the Finance Accounts. Where funds for a particular scheme are provided

both through the State budget and routed directly outside the State budget, the Finance Accounts

would reflect only the funds that flow through the state budget. For example, in Chattisgarh, in case

of two important centrally sponsored schemes, Sarva Shiksha Abhiyaan (Education for all) and

National Rural Employment Guarantee Scheme, which have separate exclusive minor heads, the

expenditure incurred through state budget and through direct transfer is tabulated below:

Scheme Name Major, Sub-

Major, Minor

Head

Figure in

Finance

Accounts

(FY 2008-09)

Rs Crore

Direct

Central

Transfer

(FY 2008-09)

Rs Crore

Sarva Shiksha

Abhiyaan

2202-01-111 92.6 509

National Rural

Employment

Guarantee Scheme

2505-60-101 183 1,644

1.3.2 As can be seen, the quantum of central transfer far exceeds the expenditure from the state

budgetary funds captured in the Finance Accounts. There is, as yet, no formal accounting framework

to capture the out-of-the-budget transfers and expenditure. This issue has been raised with the

Finance Ministry, Planning Commission and Finance Commission. The discussions have centered

around the following areas:

1.3.3 Uniform Coding:

The schemes and their components need to follow a common coding pattern so that the same codes

and nomenclature are adopted across the Union and the States. Once this is accomplished, scheme

expenditure would be available at a higher degree of granularity and would easily be amenable to

aggregation, meaningful comparison, evaluation and analysis. Presently, though individual offices are

in a position to provide plan scheme wise expenditure for Central as well as State plan schemes for

funds flowing through the state budget as the Plan Budget link documents are in place, yet

aggregation of data across the states and completeness cannot be ensured.

1.3.4 Information on central scheme releases is hosted on the CPSMS portal of the CGA. However,

the CGA portal, unlike some ministries, is not in public domain. There are hurdles in accessing the

portals by the AG Offices. The general public has no access.

1.3.5 Points for Discussion:

Even if the authorities are not sure as to the total accuracy of the information, should not the

CGA portal be placed in public domain, may be as a ‘beta’ version’ with disclaimers deemed

necessary? Given the quantum of funds that flow, such a move will usher in more transparency.

The need for CGA Office to take up codification of all schemes and components on an urgent

basis.

Pending action at (2) above, a few offices may jointly initiate action to codify major central

schemes and components and create linkages with VLC so as to be in a position to upload data

into a link/portal designed by us on our website. Information that could be provided is

indicated in the annex. The most appropriate form of presentation of data may be discussed.

Codification would help in aggregation of data across the states for some major flagships

schemes for funds routed thorough the State Budget.

1.4 Consolidation of CSS expenditure at State Level

Another aspect impinging on the completeness of the accounts is the details of expenditure at the

‘third tier of government’. Planning Commission has suggested that expenditure on CSS by various

agencies, ULBs, PRIs and the State Government should (a) be consolidated at State level; and,

(b) such consolidated statements should form part of the State’s Finance and Appropriation

Accounts.

1.4.1 Consolidation of all expenditure at the State Level:

The state AG Offices compile about 70% of the total expenditure occurring in their state. These

offices have a mechanism in place and are fully equipped to capture, to consolidate and to bring out a

statement on the remaining 30% of the expenditure that flows outside of the state budgeting process.

The only requirement is for our offices to be given access to the records of the expenditure.

Suggestions in this regard broadly fall under:

Uniform accounting formats and mandatory submission of accounts to the AG (A&E)by

the special purpose agencies.

The autonomous bodies/societies of the States should provide expenditure figures

periodically in a pre-determined format and with pre-determined details to the State

AsG(A&E) and Pr.AG/AG (Audit). The vouchers and other documents should be

retained by the bodies/societies.

o The computerisation of autonomous bodies/societies/NGOs may be on a compatible

platform to enable easy data consolidation.

o Uniform accounting formats for the PRIs should be amenable for integration/link with

the State Accounts.

o The system of monitoring of timely receipt of Utilisation Certificates, generation of

monthly scheme wise data (provisional unaudited figures) and reporting of scheme

wise expenditure to audit and Central/State Government needs to be reviewed and

made more stakeholder-oriented.

Audit arrangements: The value-add by our Department is the validation of the

expenditure, including bank reconciliation, based on pre determined sample size. The

issues relating to audit and consequent certification of expenditure need to be

addressed comprehensively.

1.4.2 Depicting Grants as Transfers:

At the Union level where funds are transferred to States and implementing agencies, Planning

Commission has suggested depiction of such grants as transfers instead of expenditure at the

first instance in the Union accounts. Such a depiction should not only be possible but also

desirable in the interest of transparency.

1.4.3 Points for discussion:

The Finance and Appropriation accounts of the State Governments are an account of actual

expenditure vis-à-vis the appropriations granted by the State Legislatures. The request from

some of the stakeholders of the Union is to include the expenditure details (relating to the

Central transfers outside of the state budgets) in the State accounts even though these

expenditures are not in pursuance of the state legislative mandate. The matter may require

consultation with the State Government. The Conference may discuss the manner in which

the consolidation can be achieved and reported. Also, the level of aggregation of the accounts

of societies/bodies that the AG (A&E) should request for/receive.

Formats in which expenditure is required to be reported by the implementing agencies have

been developed. These are annexed. The Conference may deliberate on the adequacy of the

formats.

Capturing of the end use of Grants-in-aid given by the State Government. Aspects of capture

of all sanctions, maintenance of sanction database, mechanism to check end use, modification

in GiA voucher to capture object wise details etc may be discussed.

Institutionalizing of audit arrangement.

A revised UC has been developed. The way forward in streamlining and formalising the system

of monitoring of timely receipt of meaningful Utilisation Certificates and generation of

monthly feed back or MIS reports to various stakeholders may be discussed.

1.5 Accounting for Receipts

1.5.1 Apart from the foregoing initiatives, more focused accounting of receipts would be a very

welcome step towards aiding Good Governance.

1.5.2 The accounts, at present, are more in the nature of budget compliance documents. This

functionality furthers legislative oversight. Accounts are also useful to the executive for monitoring

the progress of the various schemes, control over expenditure, compliance with budget etc. However,

all the state governments are able to exercise a much finer control over expenditure as they have

direct immediate control over treasuries. In any case, our reporting, by design, is financial rather than

managerial in nature. Our focus is primarily on reporting on expenditure. While this ‘bias’ has its

uses, it would be appropriate that accounting for receipts is also given due importance in the

accounting process.

1.5.3 Receipt accounting is an independent variable and is not amenable to the same level of control

by the State government. Further, we would be in a position to do sensitivity analysis of the impact

of various pronouncements relating to changes in taxation rates. Improvement in accounting would

offer greater value for the decision makers when receipt accounting is also made comprehensive.

1.5.4 On the receipt side, we do not collect basic challan-wise data, as the data is not even available

with the Treasury. Usually, the Commercial Tax range or an RTO deposits the daily collection

through a consolidated challan in the Treasury. Unless we capture challan-wise data, we would not be

in a position to offer much analytical support. On the other hand, if we manage to build up a few

years’ challan-wise data, predictive models of tax rate and collection, tax administration and

collection and many others can be developed.

1.5.5 Points for Discussion:

The timeframe and broad methodology to take forward accounting for receipts may be discussed.

1.6 Time frame for transition to accrual accounting

“……… there is a need to move to an accrual based system of accounting…… The Twelfth Finance

Commission recommended the introduction of an accrual based system of accounting in the Government.

This recommendation has been accepted. I am happy to know that the Government Accounting Standards

Advisory Board established under the CAG has been working on migration to accrual basis”

Dr. Manmohan Singh, Prime Minister at the AG’s Conference, October, 2008.

“Accrual Accounting improves quality of legislative oversight over the executive. It helps the executives in

taking more informed decisions. It also helps in bringing about an element of transparency in the

government. It brings about matching of assets and liabilities and also introduces an element of

intergenerational equity".

Vinod Rai, Comptroller and Auditor General of India, October, 2009.

1.6.1 The Government Accounting Standard Advisory Board (GASAB) has been set up by the CAG

with the support of GoI. GASAB is a microcosm of the Government with both the Board and the

secretariat having representations from all the accounting services of the Union Government.

1.6.2 Apart from formulating standards, GASAB has also been working on the migration to accrual

basis accounting. Pilot Studies have been conducted and ‘proof of concept’ established. A Roadmap

and an Operational Framework have been finalised and forwarded to GoI. Significant steps taken so

far include:

21 State Governments have agreed in principle migration to accrual accounting

Departments of Posts and Railways have moved forward

Pilot studies at Union and States

IA&AD Accrual Accounting project

Seminars and Workshops across the country

Roadmap, Operational Framework and other technical architecture

Issue of Indian Government Financial Reporting Standards (IGFRS) harmonized with

IPSAS.

CAG of India in his advisory mandate under Article 150 has advised Government to

accelerate accounting reforms in the direction of accrual basis accounting.

A ‘National Project on accrual accounting for Good Governance’ has been proposed.

1.6.3 We are now in a position to handle the national project on migration to accrual basis

accounting. Since final switch-over from cash to accrual basis accounting across Union and States is

likely to take at least five years, it may be worthwhile to review the efforts done so far and decide on

the strategy to be adopted.


Should we take up one or two departments of a couple of State Government in their entirety and

convert the accounts to accrual accounting?

Should we include them as additional statements or appendices in the Finance Accounts?

What methodologies can we adopt to further sensitise the stakeholders?

Module 2: Second Generation VLC

2.1 The fact that the AG(A&E) offices are able to generate stand alone reports quickly is due to the

VLC system. However, given the rapid strides in technology the system is nearing obsolescence as it is

almost at the end of its project cycle. The VLC system needs to be upgraded and viability of the

present application/software has to be evaluated. This has been necessitated given the following

reasons:

2.1.1 Lack of availability of technical support for existing VLC software (at present and in future).

The following is a synopsis of areas of concern:

Support for SCO Unixware 7.1.1 discontinued

Limited further releases of SCO unixware

Incompatibilities with new hardware; availability of Oracle certified servers poses a problem

Client side: Not totally compatible with Windows XP and Vista

Oracle 8i database de-supported by Oracle since 31-Dec-2006 (extended support)

Third party support is also dwindling

Maintenance and restoration in case of a crash is doubtful

Hardware at the end of their lifecycle cannot be replaced

Assurance on business continuity is doubtful

New requirements difficult to integrate

2.1.2 Need for compatibility with Treasury computerisation in States, limited ability to adapt to

version changes in future, feasibility of bringing about changes in database as a result of changes in

MIS requirements are the other areas of concern.

2.1.3 Some state Governments have launched treasury computerisation programmes. The Union

Government, as part of Mission Mode Project under National eGovernance Action Plan has also

taken up the issue of Treasury Computerisation. However, the situation is fluid and one cannot be

sure of the platform and architecture that may finally be chosen. Further, developing a VLC version

II would need at least a couple of years and the process would perforce need to take into account the

developments in the states and the Union. However, in the interest of business continuity, we need to

ensure the continued viability of the existing VLC. Therefore, a two pronged approach would be

needed:

(i) Ensure the continued viability of the existing VLC system by upgrading. The process should

be such that the upgrading should be ‘future-proof’.

(ii) Side by side, we need to finalise the user requirement and system design has to be developed

for VLC II. Various other stages, namely procurement of hardware, software, migration

of data, conversion of reports, testing, acceptance etc need to be specified and timelines

assigned

2.1.4 Points of discussion:

Ensuring business continuity during transitory phase and smooth migration from VLC I to

VLC II

Constituting a committee under a DAI to decide on the Department’s strategy and approach

towards taking VLC II forward.

Module 3: Accounts as an Enabler for more Effective Audit

3.1 VLC System

3.1.1 In the first module of this paper we have detailed measures that would further improve the use

of accounts by the stakeholders. The subsequent module deals with the VLC system. This module

concerns a better use of the available VLC data for audit purposes.

3.1.2 The VLC system as it exists now is capable of generating accounting information for audit

planning purposes. There are stipulated returns that an AG(A&E) is to furnish his/her audit

counterpart. Audit is also expected to work through the VLC system and generate/validate/verify

reports and processes. It is also possible to generate stand alone reports to suit specific needs of audit.

While there is no gainsaying the fact that the information available in the VLC system can be further

improved by system changes, it is also true that not all audit offices use the data available with the

VLC system to the fullest extent possible.

3.1.3 Information extracted from the VLC system on a variety of parameters (AC/DC Bills, U.Cs,

DAA/OB Suspense, Grants to autonomous bodies, Central and CSS plan schemes etc) is furnished by

way of returns to audit. The periodicity varies from monthly to quarterly to yearly. Other MIS on

need basis can also be generated. For example, extraction of DDO wise voucher details is possible. In

the Offices that receive compiled accounts (Tamil Nadu, Andhra Pradesh and Karnataka), extraction

of such details at district level is possible. Their utility as a valuable input to audit planning and

execution is undeniable.

3.1.4 The skill and knowledge level of the accounting processes in audit offices have steadily been

eroded in the past two decades as officers and staff dating back to pre-bifurcation days of the

department have retired. Further, the VLC terminals for use of audit are not being used effectively.

The opportunity of utilizing the accounting data for audit planning its execution and effecting mid-

course adjustments in audit engagements is also not being fully exploited. Apart from attending to

infrastructural bottle-necks, there is a need to improve the skill and knowledge level of audit

personnel in the nuances of accounting processes and the VLC system, as knowledge of accounts is a

sine quo non for any effective audit process, particularly attestation audit. Audit offices need to

develop a sense of recognition of the fact that a wealth of information is available in the VLC system

and be more proactive.

3.1.5 Audit offices should be encouraged to second a few officers to the accounting offices to augment

their skills and knowledge both in accounting and in the VLC system by working in the accounting

office. The objective should be to develop adequate skilled human resource in the audit office over a

period of time. Unless IAAS Officers also posses adequate knowledge in accounting, it would be

difficult to ensure upgrading and maintaining accounting knowledge base in audit offices. Effort

should be made to post every direct recruit as a group officer in charge of accounts before he/she is

elevated as A.G.

3.2 Data Warehouse

3.2.1 Though there is a wealth of data available on the financial position of a given state before the

close of the succeeding month at state level, the position on any available parameter is not amenable

for comparison, on a concurrent basis, among all the states or among a few chosen ones.

Establishment of a central Data Warehouse would serve the purpose well.

3.2.2 The Data Warehouse, with data primarily being fed by VLC system, should be developed and

maintained centrally for the entire country by one field office. A dedicated data analysis group should

be responsible for the upkeep and enhancement of the central Data Warehouse. While there are many

variants of VLC database across different A&E offices, suitable extraction of data will ensure

uniformity of the formats for reporting through the Data Warehouse. All reports should be capable of

being accessed over the Extranet or VPN.

3.2.3 It will not be possible to immediately operationalise the Data Warehouse beyond minor head

with additional details on Central Plan and ACA schemes (funds flowing through state budget). The

Data Warehouse should use and provide the best possible reporting solution, as is available through

the latest developments in the field of Business Intelligence and Data Mining.

3.2.4 Audit would be able to extract suitable data from the Warehouse, either online or using offline

analysis tools. The reports available through a Data Warehouse and Business Intelligence (BI)

solutions can be different from the reports generated through VLC. The BI reports are analytical in

nature, and empowers the user to “Slice-and-dice” the data, and see only the data that he wants and

in the manner that he wants. Making a BI solution available to Audit will ensure immediate adoption

of accounts data by Audit for both audit planning and execution. Another benefit would be that

officers and staff in AG(Audit) would be able to appreciate government accounts better and find

practical use for it. The following types of users could be envisaged:

a. State Government, for data analysis purpose only.

b. Central government / fund disbursing agencies.

c. AG Audit (for audit planning and audit execution requirements)


Effort should be made to post every direct recruit as a group officer in charge of accounts

before he/she is elevated as A.G.

Institutionalising secondment to accounts office to build capacity in audit offices on a

continual basis

Institutionalising use of VLC

Identifying broad parameters of Data Warehouse

Accounting as an Enabler for Good Governance and More Effective Audit

SUMMARY OF COMMENTS RECEIVED[1]

1. The present Statement no. 1- should be retained in Volume I with in-depth comments on variations in

receipt and payments. The present Statement no. 15 should be shifted to Volume I. Therefore, there

would be no need for Statement of Receipts and Disbursement (more aggregated) as is being suggested.

2. Expenditure of similar nature (for eg housing for police) should be merged and shown against a single

entry, irrespective of the number of schemes that may fund the same activity.

3. The need to reconcile figures appearing in Statement 13 and 14

4. Thresh hold for scheme wise expenditure: is Rs One crore appropriate?

5. Position of various funds credited by the State government and other earmarked balances such as

Deposits of market loans from where the state Government has made investments may be shown in an

Appendix and the Statement no. 19 could be dispensed with.

6. Introduce an Appendix that provides:

Department-wise salary expenditure

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Expenditure on maintenance of various assets such as buildings, roads canals, etc. with salary and non-

salary portion

The summarised statement on loans and advances should also contain comments on loans, share capital,

equity given to Board as and Companies which are given to them to overcome their losses

7. Chapter 1 of the Audit Report need not be included in the Finance Accounts as Finance Accounts does

not receive due attention of the Legislatures

8. Direct transfer from Central Government to various departments, urban local bodies, PRIs, etc. of the

State Government may be shown in Finance Accounts. However, the Formats need to reexamined and

fine tuned.

9. Challan-wise data of receipts for predictive models of tax rate, collection and tax administration

mentioned in the theme paper is not necessary.

10. We should not take responsibility of converting a couple of Department accounts into accrual basis

accounts unless asked by State Government.

11. In VLC phase-II audit requirement should be reassessed in detail and audit module should be

developed in such a user friendly manner that audit personnel may obtain desired information by entering

parameters only. Audit office should be given connectivity to VLC server.

12. The quality of accounts should be emphasized and given due attention.

Comments by Shri A.K.Patnaik, DG

Accounting as an Enabler for Good Governance and More Effective Audit

Module One

Points for discussion

What should be the nature and content of the Finance Accounts, given the felt need of the Stake holders and

C&AG’s Constitutional Mandate?

Suggestions- Volume-I

(i) The present statement no. 1-Summary of transactions containing Major head-wise receipts and payments of previous

year with that of the current year under Revenue heads should be retained in Volume I with indepth comments on

variations in receipt and payments. Without comparison, it will be half statement. Comparison gives an idea of

increase/decrease in receipts either due to changed taxation policy or insufficient efforts in tax collection by the

Government. In respect of expenditure, it will give an idea whether increase is under General Services which will indicate

that Government is spending more on Administrative matters and if there is decrease, it will indicate that the Government is

performing better and controlling unnecessary administrative expenses. Increase in expenditure under different segments of

social and economic services will indicate the State’s effort towards Human resource development and infrastructure

maintenance. This will be of interest to stakeholders, viz., GOI, Planning Commission and Finance Commission, etc.

(ii) Proposed Volume I should also include a statement containing Principal sources of funds and their applications in the

form of investments (other than Revenue expenditure) in Capital Expenditure and Loans. In fact present Statement no. 15

should be shifted to Volume I.

(iii) In view of suggestion at (i) being accepted, there will be no need to give Statement of Receipts and Disbursement

(more aggregated) as suggested at point (iii) of the paper circulated for AG’s Conference.

Volume-II

(a) Finance Accounts has become too bulky to be handled. Forty per cent of the total pages are covered by Statement

no. 13 which contains unnecessary details of scheme-wise capital expenditure during the year and to end of the

year. As per existing format, each scheme costing Rs. 1 crore and less are merged and shown as “Other schemes

costing Rs. 1 crore and less”. Interestingly, in several cases even investments of less than Rs. 1 crore in

companies/co-operative societies are merged and shown under this head. These investments remain non-

verifiable/non-reconcilable with the figures shown in Statement no.14 which are prepared on the basis of books of

companies/co-operative societies. Both figures must tally. In Uttar Pradesh Finance Accounts alone, the difference

between two sets of figures is Rs. 13,262.56 crore. This is fraught with the risk of misappropriation, embezzlement

at the levels of companies and co-operative institutions as the investments figures in these bodies as per their books

shown in Statement non.14 is less than that of Statement no.13. In the last several years, there is no reconciliation to

find out why difference is increasing year after year.

It is suggested that-

(i) Expenditure of similar nature pertaining to any scheme should be merged in one. For example, capital expenditure on

construction of residences for police personnel whether incurred from Modernisation of Police Force (MOPF)

scheme or from any other scheme should be shown under one detailed head “Construction of residences for Police

personnel” even if State Government has made provision under different detailed heads. Presently, if we want to

know the total expenditure on construction of residences for police personnel, we will have to make total from

several heads even from Major Heads as 4055 and 4216 both have been used by the Government of Uttar Pradesh

for construction of residences for police personnel. The argument that Statement no.13 reflects the scheme-wise

capital expenditure and if we want to know the expenditure under MOPF scheme, we can ascertain from Statement

no. 13, does not have much force as the total expenditure incurred under MOPF on different items cannot be

ascertained from Finance Accounts as in some cases, it is Revenue expenditure which is closed to Government

account and, in some other cases, in respect of capital expenditure, could have been merged under other schemes

costing Rs. 1 crore and less.

Another example for non-residential buildings-It should be sufficient to depict that so much expenditure was

incurred on non-residential buildings of a particular department. It is not necessary to show that it was spent under

Ambedkar Yojna or Ram Manohar Lohia Yojna because after some time it becomes totally irrelevant but the figures

are being carried over for the last 30-40 years in this fashion. A serious thought has to be given to Statement no. 13.

Further, the detailed head “other schemes costing Rs. 1 crore and less” being used presently may be enhanced to Rs.

10 crore. It will also reduce the number of pages.

Of course, investment figures of any amount in companies and co-operative institutions will have to be shown distinctly

(and not merged with any scheme) as this will be needed (i) for reconciliation with Statement no. 14 and (ii) will continue

to be important till the companies/co-operative institutions does not make repayment. In case of repayments, write back of

the amount will be easy. Besides, dividend received on such investments can be evaluated in accounts only when separate

figures on which dividend is received are available.

(b) Department-wise salary expenditure with head-wise under each department should be given in the Appendix instead of

only head-wise as it does not given an idea of administrative expenditure by the departments.

(c) Statement on maintenance of various assets such as buildings, roads canals, etc. with salary and non-salary portion

should also find place in an Appendix.

(d) Finance Accounts should also contain comments on loans, share capital, equity given to UPSEB, UPSRTC, etc., which

are given to them to overcome their losses.

(e) Position of various funds credited by the State government and other earmarked balances such as Deposits of market

loans from where the state Government has made investments may be shown in an Appendix, as on 31 March of the year to

which Finance Accounts relates. In view of the proposed Appendix, existed statement no. 19 could be dispensed with.

Thus, in our opinion, Volume-I of Finance Accounts should contain-

1. Audit Certificate,

2. Statement of Financial Position,

3. Major head-wise receipts and payments with previous year’s corresponding figures as being shown in Statement no.1

at present. Also indepth comments on variations in receipts and payments, (in place of Receipts and

Disbursements-more aggregated suggested in theme paper),

4. Notes to accounts, including accounting policies,

5. Principal sources of funds and their application (other than Revenue expenditure), (this is new addition being

suggested by us),

6. Cash flow Statement (Appendix).

Volume-II

A- Summarised Statements on debt, loans and advances, Grants–in-aid, Guarantees, etc. as suggested in the theme paper.

Our suggestion-The summarised statement on loans and advances should also contain comments on loans, share capital,

equity given to UPSEB, UPSRTC, etc., which are given to them to overcome their losses.

B- This section would contain detailed statements as at present included in the Finance Accounts as suggested in the theme

paper taking into account our suggestion in respect of Statement no. 13, 15 and 19.

C- The third section would comprise appendices including appendices on plan scheme expenditure, externally aided

projects, etc. as suggested in the theme paper plus (i) Department-wise salary expenditure with head-wise under each

Department should be given, (ii) Statement on maintenance of various assets such as buildings, roads canals, etc.

with salary and non-salary portion should also find place, (iii) Position of Funds credited by Government and other

earmarked balances from where investments have been made should be given in Appendix as suggested at (C) in

place of Statement no. 19 which may be dispensed with.


Should Chapter-I of the Audit Report form part of the Finance Accounts?

Chapter-I contains very detailed audit comments on State Government finances by collecting the figures not only from

Finance Accounts but from other sources such as Government, Public Sector Undertakings, Departmental Commercial

Undertakings, etc. Information/comments on losses of Revenue due to evasion of taxes, write off/waived and refunds,

Outlay-Outcome of expenditure, information about Department/commercial undertakings, etc. do not flow from Finance

Accounts. It is also felt that audit comments as incorporated in Chapter-I if included in Finance Accounts will not receive

due attention of the Legislatures as over the years, Finance Accounts have not been treated source of information for them.

In Chapter-I, efforts will be made that some of the paragraphs such as loans and advances, contingent liabilities, etc. are

taken up by PAC for discussion. In case, it is included in Finance Accounts, it will be difficult to persuade PAC to take up

Finance Accounts also for discussion in addition to Volume-I and II of Audit Reports (Civil) and Audit Report (Revenue

Receipts) for discussion. In this way also, Chapter-I will lose sight of the main stakeholder.


Even if the authorities are not sure as to the total accuracy of the information, should not the CGA portal be

placed in public domain, may be as a ‘beta’ version with disclaimers deemed necessary? Given the quantum

funds that flow, such a move will usher in more transparency.

The need for CGA Office to take up codification of all schemes and components on an urgent basis.

Suggestion-

The figures which have a disclaimer cannot be used by any agency for any purpose. Transparency without accuracy

appears to be meaningless. CGA office should take up codification of all schemes on urgent basis. If we can help them to

do it in a given time frame, we may provide necessary assistance to him.

Pending action at (2) above, a few offices may jointly initiate action to codify major central schemes and

components and create linkages with VLC so as to be in a position to upload data into a link/portal designed

by us on our website. Information that could be provided is indicated in the annexure. The most appropriate

form of presentation of data may be discussed. Codification would help in aggregation of data across the

states for some major flagship schemes for funds routed thorough the State budget.

Suggestion-

Parallel work of codification by CGA as well as by us may result in unfruitful labour by us as codification done by CGA

for all the schemes will be finally adopted. It would be advisable that CGA does it urgently with certain time frame. At

present, VLC linkage is available in respect of Centrally sponsored schemes being funded through state budget in

individual states. This can be uploaded on our website, if necessary. Till the codification work is completed by CGA for

aggregation of data across the states, stake holders may see the figures on the websites of State AG.


The Finance and Appropriation Accounts of the State Governments are an account of actual expenditure vis-

à-vis the appropriations granted by the State Legislatures. The request from some of the stakeholders of the

Union is to include the expenditure details (relating to the Central transfers outside of the State budgets) in

the State accounts even though these Expenditures are not in pursuance of the state Legislative mandate.

The matter may require consultation with the State Government also. The conference may discuss the

manner in which the consolidation can be achieved and reported. Also, the level of aggregation of the

accounts of societies/bodies that the AG (A&E) should request for/receive.

Suggestion-

In our opinion, amounts of direct transfer from Central Government to various departments, urban local bodies, PRIs, etc.

of the State Government may be shown in Finance Accounts. After all, Funds are being utilized in the State by their

departments and the local bodies and we are giving simply factual position.

For incorporation of expenditure in Finance Accounts, in the first instance, State Governments should be persuaded to

adopt and implement the accounting formats developed by C&AG for maintenance of accounts in PRIs/ULBs. Complete

computerization of accounts in these institutions should be made and linked at State level as is being done for State Civil

accounts in treasuries. After compilation of accounts at State level, this will have to be transferred in the Format in which

State Government accounts are appearing in Finance Accounts.

Similarly, standard accounting formats for maintenance of accounts in autonomous bodies, societies and NGOs which are

amenable to computerization should be developed, computerization done and expenditure collected at State level and

passed on to AG (A&E) for incorporation in Finance Accounts. Pending above as it will take time, District Panchayati Raj

Offices in respect of all the three tiers of PRIs, Director, Urban Local Bodies in respect of all the three tiers of ULBs,

Registrar, co-operative societies in respect of co-operative institutions and Finance Department in respect of autonomous

bodies and NGOs should be made responsible for collection of monthly accounts in predetermined format from all

institutions and pass on to AG (A&E) for consolidation and incorporation in Finance Accounts.

Formats in which expenditure is required to be reported by the implementing agencies have been developed.

These are annexed. The Conference may deliberate on the adequacy of the formats.

Suggestion-

Format which has been developed for collection of accounts figures from implementing agencies is not adequate and

needs change.

(a) Heading of the format indicate that it is for the funds which are routed outside State Budget where as columns indicate

State Receipts and own receipts also. This appears to be contradictory.

(b) The format does not take care of expenditure from GOI receipts separately. That is important because we have to show

the total expenditure against total transfers from GOI against a particular scheme. This will also serve the purpose in

the light of recommendations of Twelfth Finance Commission (TFC) which have recommended that GOI should not

show transfer of funds as expenditure but as “Transfer” only in the first instance. Format may be revised accordingly.

Capturing of the end use of Grants-in-aid given by the State Government. Aspects of capture of all sanctions,

maintenance of sanction database, mechanism to check end use, modification in GiA voucher to capture

object-wise details etc. may be discussed.

Suggestion-

Database for sanctions of Grants-in-aid may be developed as it will be a help to audit also. Grants-in-aid voucher may be

modified to capture object-wise details. So far capturing of the end use of Grants-in-aid given by the State Government is

concerned, UCs formats may be revised accordingly and Grants receiving institutions should be compelled to furnish the

UCs timely to the grantee institutions. Presently, in the sanctions issued by the guarantee institutions, generally, it is

written that next installment or next year’s grants-in-aid will be released after receipt of UCs of first instalment but in

practice it does not happen. Second instalment is released even without receipt of UCs for first instalment and so on. This

practice will have to be reversed. Grantee institutions should forward these statements to AG (A&E) for consolidation.

Institutionalizing of audit arrangement.

Suggestion-

This can be done. Some dedicated parties for audit of grants-in-aid may be formed in each office depending on the volume

of work available in different states.

A revised Utilisation Certificates (UC) has been developed. The way forward in streamlining and formalizing

the system of monitoring of timely receipt of meaningful UC and generation of monthly feedback or MIS

reports to various stakeholders may be discussed.

Suggestion-

The revised UC format which has been developed has not been enclosed. Therefore no comment is possible on that.

However, timely receipt of vouchers and generation of MIS for various stake holders can not be under-empahsised.

Guarantee institutions should be persuaded to impose condition of release of second instalment of grants only after receipt

of UC of 1st Instalment. Grants receiving institutions also need to be educated about importance of submission of UCs

timely in the prescribed format as due to its non-submission, the accounts lack transparency.


The timeframe and broad methodology to take forward accounting for receipts may be discussed.

Suggestion-

Challan-wise data of receipts for predictive models of tax rate, collection and tax administration mentioned in the theme

paper is not necessary.

In case of Uttar Pradesh, Treasury-wise receipts under each head as provided in the budget is available with Financial

Directorate and if necessary it can be linked to AG (A&E), UP to have their data on daily basis with minor head-wise.

This can be consolidated on daily basis, monthly, annually immediately after close of the financial year. For audit

comments and suggestions, these data should be sufficient.


Should we take up one or two departments of a couple of State Government in their entirety and convert the

accounts to accrual accounting?

Suggestion-

This is for State Government to do initial accounts. We should not take responsibility unless asked by State Government.

Module 2: Second generation VLC

Ensuring business continuity during transitory phase and smooth migration from VLC I VLC II.

Constituting a committee under a DAI to decide on the Department’s strategy and approach towards taking

VLC II forward.

Module 3: Accounts as an Enabler for more Effective Audit


Effort should be made to post every direct recruit as a group officer in charge of accounts before he/she is

elevated as A.G.

Institutionalising secondment to accounts office to build capacity in audit offices on continuous basis.

Institutionalising use of VLC

Identifying broad parameters of Data Warehouse.

Yes. Every Group Officer should be posted in VLC before his elevation to Accountant General.

At the time of development of VLC system, audit requirement was assessed and an audit module was developed

with VLC system. In Accounts office in UP, two nodes were provided to be used by audit personnel. However, username

and password were never provided to audit office despite our persistent efforts. These nodes are being used by Accounts

office for data entry work. Whenever audit personnel visited Accounts office for using these nodes, either these nodes were

not free or they could not use it due to non-availability of username & password. Sometimes, username and password was

entered by Accounts office persons but even then, audit module could not be run as audit module was never integrated with

the VLC system and it worked only on test data. Audit office requested for integrating audit module and provide

connectivity to audit office so that VLC data may be accessed from audit building itself and for the purpose Optical Fibre

Cable (OFC) was also laid from Accounts Office to Audit Office but Accounts office did not provide connectivity on the

plea that server can not take extra load. In such situation, whenever audit office needed any information from VLC, it had

to make written request for obtaining the same which required unnecessary effort and undue delay.

To overcome above problem, audit office is taking dump data from Accounts-I and Accounts-II offices and restoring it in

audit office server. Information is being extracted from above database through query. Audit Office is extracting

information regarding DDO-wise expenditure/Treasury- wise expenditure and other details such as Division-wise

expenditure (PWD, RES, Forest divisions). Sampling of vouchers for Central audit and extraction of details of high value

and risk area vouchers for field audit are also being done. Following this system, audit office is facing difficulty as this

office is not getting incremental backup and each month. Complete database has to be dropped and restored again which

takes 10 to 12 hours. Further, there is no software for this and audit personnel are not aware with VLC database

architecture.

There is a need for Headquarters office intervention for issue of strict instructions to Accounts Offices to cooperate with

audit requirement and allow use of audit nodes without any hindrance. Audit module/audit nodes password should be with

audit offices. Accounts office staff should be made to understand that VLC system has been developed for use of A&E

offices and audit offices both. In Uttar Pradesh, we have already developed the sense of recognition of the fact that a wealth

of information is available in VLC system and audit staff is already proactive but due to hindrance as stated above, it is

very difficult to utilize it optimally.

In VLC phase-II audit requirement should be reassessed in detail and audit module should be developed in such a user

friendly manner that audit personnel may obtain desired information by entering parameters only. Audit office should be

given connectivity to VLC server so that audit module may be operated from the audit building itself and audit personnel

don’t have to visit Accounts office for obtaining information. Further, a selected number of AOs/AAOs of audit side should

be trained in accounts compilation process and should be attached in VLC from the development stage (VLC Phase II)

itself so that they remain aware with VLC system and can do the needful to meet audit requirement arising in future.

Further, in SOGE Part-I examination Compilation of accounts in detail and VLC system may also be incorporated in the

syllabus of ‘Principles of Government Accounts’ paper.

For training in VLC, it would be better that audit personnel (UP) are sent to other RTIs, especially, RTI, Nagpur as in

Allahabad being local, effective training is difficult.

Additional points for discussion

Quality of maintenance of accounts

The theme paper does not speak about quality of maintenance of accounts though this is as much important as divulgence

of information in Finance Accounts. It has been observed in Finance Accounts that:-

(i) Funds continue to be exhibited in Statement no. 16 without any transaction for the last several years.

(ii) Adverse balances remain unreconciled for the years together.

(iii) Balances of loans and advances in Finance Accounts, the detailed accounts of which are maintained by the Department

have not been confirmed for a couple of decades by them.

(iv) Huge differences between the investment figures of Statement no. 13 and those incorporated in the Statement no. 14

appear which is increasing year after year but no reconciliation is done. In UP, it is over Rs. 1300 crore which is

fraught with risk of misappropriation, defalcation, etc.

Comments by Shri L.Tochhawng, A.G. (A&E)-I, MP, Gwalior

ACCOUNTING AS ENABLER FOR GOOD GOVERNANCE AND MORE EFFECTIVE AUDIT The theme paper, over all highlights the core issues that could be further delibrated upon. For now,

observations are confined to a few areas only. While we feel the proposal for the idea of including Chapter-I of

Audit Report as a preface to Vol.-I is appropriate and desirable since the source data is primarily that of the Finance

Accounts, whether this (i.e. Chapter I) inclusion should be in its present or summarised/abridged form would need

to be decided and the issue of duplicacy in reporting would also need to be addressed i.e. whether the same will find

a place both in the Finance Accounts and Audit Report.

Direct Central Transfers: As has been said, the contents of Finance Accounts give the only actual cash basis receipts and outgoings

leaving a significant chunk of unaccounted transactions i.e. those which comprise mainly of funds transferred direct

to the implementing agency by Central Government (outside of the State budget). Obviously the book of accounts is

not in complete shape as major part of transactions is excluded in the Finance Accounts. The matter would require

consultation with the State Government, meanwhile we could be act upon the following lines:

i) Information/data may be obtained from the state government along the lines of the suggest format (Annex-I of

the theme paper).

ii) A database of sanctions prepared on the basis of information uploaded in e-Lekha will be aggregated in AG

(A&E), and matched with the corresponding data obtained/reported by the State Government.

iii) State Government will submit a report for the year prior to the annual closure of accounts to enable us to

prepare the data for its inclusion in the Finance Accounts for the year as a separate Appendix.

It is felt that for the purpose of tracking funds flow to the state and their corresponding information on

disbursements, this could be confined to data on funds received from Government of India only i.e. with reference

to the source of receipt (reference Annexure-I). Information relating to State receipt and Own receipt could be

excluded.

Time frame for transition to Accrual Accounting In Madhya Pradesh one pilot study has been completed and taken as a model by GASAB for further study.

Currently two units selected from two departments one Forest Division (territorial) at Bhopal and Health

Department (Civil Surgeon, Urban) at Gwalior are under pilot study. Pending the finalisation and acceptance of the

accounting standards for accrual accounting, at this juncture, it may be better to proceed with the Pilot Studies on

units of departments as is being currently done here, and suggestion for taking up of the Department as a whole

could be left to a later stage when the accounting standards have evolved in its complete stage and applicability.

Second General of VLC Presently this Office has two mid range servers on which Unix 7.1.1 Operating System with Oracle 8i is

installed. As per the Backup Policy of our Office we are taking Full Export, Cold Backups and Backups of Archive

Log Files. Monthly, immediately after generation of Monthly Civil Accounts, a copy of Cold backup of which is

sent to iCISA, Noida.

Business Continuity (VLC) (1) Keeping in view the future requirements, at present there is a need for High End Server with Red hat Linux as

Operating System with Oracle 10g software.

(2) During the transitory phase from Oracle 8i to Oracle 10g, keeping in view the Business Continuity Plan, it is to

be presumed that at least 5 working days of down time would be required for safe and secure migration of

data from VLC-I to VLC-II. The lowest inflow of data from users is just after the generation of Monthly

Civil Accounts i.e. 25th to 30th of the same month. It is during this period that up gradation from Oracle 8i to

Oracle 10g and conversion of forms along with migration of data would be most suitable. Hopefully we

should be able to feed all the treasury data through Treasury Interface thereby reducing the arrears that

would arise during the down time.

VLC as an aid to effective audit (1) With reference to utility of VLC data by Audit, all relevant data as required by the of Ms. Ganapathi Committee

report have been generated by VLC to ensure effective utilization of VLC data for Audit purpose.

(2) Seven nodes in VLC hall have been earmarked for use by Audit officials.

(3) Since Oracle 10g has the utility for Data Warehousing and Data Mining, it will be beneficial for projection of

VLC data in a manner which is useful from Audit point of view.

With reference to the required skill sets for accounting functions, the need for prior posting of Group Officers in the

Accounts Offices before being elevated as Accountant General is absolutely indispensable.

Besides this at the level of Assistant Accounts Officers (Audit Stream), secondment for the Accounts

Offices imperative for capacity building and development of skill sets in accounting functions before being regularly

posted in Audit Office. As a matter of fact, it is desirable that those newly inducted Assistant Accounts Officers who

have already had valuable experience and have worked in the VLC system are given the first preference and priority for

secondment to work on the Central Audit Modules and are assigned the task of further developing on the data

warehousing and data mining work within the premises of AG (A&E) Office.

[1] Office specific comments have not been reproduced

Note: "The theme papers included in this site are solely for the purposes of internal discussion in the

AG Conference to be held on 5-9 April 2010. None of the theme papers can be construed as

authoritative view of the Comptroller and Auditor General of India".

http://saiindia.gov.in/english/home/Quick_Links/AG_Confrence/AG_conference2010/Theme5.htm#_ftnref1

4

Session 5: Code of ethics in IAAD and promoting ethics through new initiatives Session at a Glance 4

Workshop on Ethics and Values in governance Page Glance 4

Session Objective Materials Required Session Structure Teaching Methods Used

Time Required

By the end of the Session participants will be able to understand the core values and principles of the IAAD Code of Ethics and share experience on new initiatives which promoted ethics in the IAAD.

Projector, slides, flipcharts, markers, etc.

Session Overview INTOSAI Code of ethics IAAD Code of ethics

Slide/lecturette Group activity, Handout 5

25 Mins

Key Teaching Points (KTPs)

Experience sharing on new initiatives promoting ethics in IAAD.

Presentation, , discussion etc.

45 mins

Evaluation

Not required

Summary

5 mins

Total time 75 mins

Notes: Before the workshop participants should be asked to bring examples of new initiatives in their offices which have promoted ethics.

O/o Principal Accountant General (A&E), AP, HYDERABAD, FUNDS EDP SECTION.

CHANGES/IMPROVEMENTS/ADVANTAGES IN THE ACTIVITIES OF THE GROUP WITH THE

CHANGE FROM FOXPRO (1997) TO ORACLE (2006)

FOX PRO ORACLE

1. Manual data entry for capture of vouchers as well as GPF subscription details of the Subsribers.

Direct migration of GPF vouchers from web sites of DTA, PAO (Hqrs) & Directorate of works accounts(all account sources).No data entry upto the voucher level. Data entry only to capture GPF subscription details of the Subsribers.

2. Integration with E-LOP checking of Accounts group in respect of want vouchers not done on Fox platform.

Integration with E-LOP checking of Accounts group in respect of want vouchers was established with electronic transfer of GPF want items to VLC database which helped greatly in collection of GPF wanting schedules.

3. Manual review of debit vouchers and also review of report showing postings (abstract report) was done with the help of hard copies.

On line review of debit vouchers/abstract reports thereby dispensing with printing hardcopies.

4. Analysis of data before monthly closure of accounts is not available. Analysis only before annual closure of accounts done.

Complete analysis of data before closing monthly accounts adopted and error rectification is taken up immediately.

5. Printing of annual account statements using pre printed stationery and their dispatch to the DDOs.

Generation o f E-Slips and placing them in the web site avoiding dependence on the DDOs for the statement and facilitating easier accessibility to the Subsribers to down load their slips.

6. Old LCs collection from the library during the finalization of Final payment case thereby involving delay in finalization of a case.

As scanned images of old LCs are made available on line, review of Final payment(FP) case is made easy thereby facilitating faster finalization of a FP case.

7. FP authorizations printed using pre-printed stationery with carbon copies involving misprint due to carbons and also tedious to separate the carbons.

FP & Booster authorizations re-designed in A4 size format and printing them use securitized paper instead of pre-printed stationery.

8.Correspondence and dispatch done manually

Capturing of all correspondence details (inward, disposal& dispatch) integrated with GPF software for better control, easy monitoring and quick disposal.

9.FP calculation done manually System based calculation of GPF final amount in respect

of FP cases.

10. Approval of FP authorizations was not done through the system.

On line approval of authorizations at Branch Officer’s level.

11. Manual review and checking of GPF data by Internal Test Audit (ITA) section.

On line review/check of GPF data by ITA section.

12. Generation of monthly arrear reports manually.

Generation of monthly arrear reports directly from system. Generation of System based performance assessment graphs.

13. Data entry done for capture of details for registered post.

Use of bar code scanners in dispatch section to capture speed post details facilitated capture without any mistakes and without doing any data entry.

14. Search option (for clearance of un post items/missing credits and missing debits) though available was limited in its scope.

Searching options are working more efficiently and accurately with many options to search leading easy clearance of Un post items / missing credits / missing debits.

The following are the technical advantages accrued due to change of platform from FOX PRO to ORACLE:

1. Handling of large database easier on Oracle as compared to Fox Pro.

2. Indexing of tables is efficient in Oracle.

3. Frequent corruption of indexes was a common feature in FOXPRO which has been completely

overcome in ORACLE.

4. Validations are more efficient in Oracle. Table level validations are working well.

5. Compiling the forms / reports is more convenient in Oracle.

6. Processing is much faster in ORACLE.

7. Grants and permissions to users on tables, forms and reports are more efficient and convenient

in Oracle.

8. Oracle is working well on INTRANET than Foxpro application.

9. Linking of tables is much faster and efficient in Oracle.

10. Blocking of NETWORK is completely NIL in Oracle. In FOXPRO platform the frequent LOCKING of

Data base was one of the major problems faced.

Session 4: Code of Ethics in IAAD and promoting ethics through new initiatives Guide 4

Workshop on Ethics and Values in governance Guide 4

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Facilitator’s Guide Reference 1 Session Overview

Show Title slide 1, Greet participants and welcome them to Session 5- Code of ethics in IAAD and promoting ethics through new initiatives. Show slide 2 and tell them that in this session we shall learn what Code of ethics means by looking at the INTOSAI Code of ethics, IAAD code of Ethics and new initiatives which have promoted ethics in the IAAD.

Slide 1 Slide 2

2 Learning Objective Show slide 3 and Tell: By the end of the Session participants will be able to understand the core values and principles of the IAAD Code of Ethics and share experience on new initiatives which promoted ethics in the IAAD.

Slide 3

3 Basic Concepts Ask participants what they understand by the term Code of ethics? Collect responses from volunteers. Jot down on flipchart. Tell that we will try and understand the term with reference to how the Code of ethics is referred to by the INTOSAI. Show slides 6-13 and explain how Code of ethics is featured in the ISSAI framework, how it is defined and how important it is for SAI image, and also the requirements under IASSAI 30. Ask if anyone will tell us about the IAAD code of ethics. Collect responses. Show slides 15-17 to explain the summary of the IAAD code of ethics mentioning that it covers not only the general ethical requirements prescribed for civil servants in India- i.e the values and principles as contained in the CCS Conduct Rules, as also the particular requirements of auditors including professional obligations broadly based on ISSAI 30. Mention that it is directed at individual auditor, head of SAI, Executive officers and all individuals working for or on behalf of the SAI in auditing and accounting work . Also mention the following:

• Adoption and application of Code of ethics in public sector promotes trust, confidence and credibility in

Slides 6-13

Session 4: Code of Ethics in IAAD and promoting ethics through new initiatives Guide 4

Workshop on Ethics and Values in governance Guide 4

Pag

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the auditors and their work • TRUST-SAI’s conduct and approach to be above suspicion and reproach and worthy of respect and trust • CONFIDENCE-Stakeholders to be fully assured of the fairness and impartiality of the SAI in the discharge of

its constitutional mandate • Reports and opinions of the SAI to be considered thoroughly accurate and reliable for CREDIBILITY

Finally show slide on core values in IAAD and highlight the following:

Integrity

Independence, Objectivity and Impartiality

Professional secrecy and

Competence Tell that we will deal more with these core values in the next session when we start addressing the issue of ethical dilemma. Distribute Handout 5 and show slide 18 Tell that we will try and understand and learn more about the IAAD code of ethics through this Activity. Divide participants into 5 groups. Give instructions on the Activity:

• Refer to ISSAI 30 Checklist in Handout 5. • Discuss the checklist in groups (with respect to IAAD) and bring out the strong and weak areas of IAAD

in terms of the checklist. • Share in plenary

Complete the activity in 30 minutes

Handout 5 and Slide 18

4 Key Teaching Points (KTPs)

Tell that we will now have an experience sharing on promoting ethics through new initiatives. Facilitate the presentations of new initiatives by the participants and generate discussion in the plenary.

6 Summary Ask a volunteer to sum up session. Sum up session and Thank all.

Handout 4.A

Workshop on Ethics and Values in governance Handout 4.A

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ISSAI 30 Checklist

1. Has the SAI adopted a Code of Ethics?

2. Is the SAI confident that all staff are acquainted with the adopted Code of Ethics and

are held accountable for acting accordingly?

3. Does the SAI have systems in place to act on breaches of the Code of Ethics?

4. Has training on the behaviours and cultures required by the Code of Ethics been

provided to all staff within the past year?

5. Do SAI staff understand the importance of independence and impartiality, not only

in fact, but also in appearance?

6. Are all staff of the SAI maintaining both actual and perceived political neutrality?

7. Does the SAI have a system to monitor the receipt of gifts and gratuities?

8. Does the SAI have a system to manage any relationships between staff and audited

entities?

9. Have staff been trained on the importance of protecting the confidentiality of

information obtained in the auditing process?

10. Do SAI staff have a good understanding of the legal, constitutional, legal and

institutional principles and standards governing the operations of all audited

entities?

11. Are all SAI staff meeting the continuous obligation to update and improve the skills

required to discharge their professional responsibilities?

IAAD Core values

Workshop on Ethics and Values in Governance

Key elements of Code of Ethics:

– Independence

– Integrity

– Trust, confidence and credibility

–Objectivity and impartiality

–Professional Secrecy/Confidentiality

–Competence

Integrity

2.1 Integrity is the core value of a Code of Ethics.

• Integrity of the auditors establishes trust andprovides basis for reliance on their judgment.

• Auditors have a duty to adhere to:

– high standards of behavior in relationships with the staff of auditee.

– To sustain public confidence the conduct of theauditors should be above suspicion and reproach.

• How will you measure Integrity?

Integrity

12.Integrity can be measured in terms of what isright and just.

• Integrity also requires auditors

– to observe the principles of independence andobjectivity,

– maintain irreproachable standards of professionalconduct,

– make decisions with the public interest in mind, and

– apply absolute honesty in carrying out their work andin handling the resources of the SAI.

• What do you understand by auditor being independent?


3.1. Independence from legislature, theexecutive, the audited entity and other outsideinterest groups

3.2. Auditors should strive not only to beindependent of audited entities and otherinterested groups, but also to be objective indealing with the issues and topics under review.

3.3. It is essential that auditors areindependent and impartial, not only in fact butalso in appearance.

Independence, Objectivity and

Impartiality

3.4 SAI is not involved in the management of the organizations they audit.

3.5 SAI personnel do not develop too close a relationship with the entities they audit


Impartiality

3.6 SAI prevents internal conflicts of interest and corruption and ensures transparency and legality of its own operations.

3.7 Auditors refrain from becoming involved in all matters in which they have a vested interest.

• What are the factors that affect independence of auditors?


Impartiality

3.8. In all matters relating to the auditwork, the independence of auditors should notbe impaired by personal or external interests.Independence may be impaired, for example, by:a) external pressureb) influence on auditorsc) prejudices held by auditors aboutindividuals, audited entities, projects orprogrammes;


3.9. There is a need for objectivity andimpartiality in all work conducted by auditors,particularly in their reports, which should be

• accurate and• objective.• Conclusions in opinions and reports should,

therefore, be based exclusively on evidenceobtained and assembled in accordance with theSAI’s auditing standards.


3.10.

• Auditors should make use of informationbrought forward by the audited entity andother parties.

• This information is to be taken into account inthe opinions expressed by the auditors in animpartial way.

Professional Secrecy

• Auditor should be prudent in the use and protection

of information acquired in the course of their

duties.

• Auditor should not use any information that would

be contrary to law or detrimental to the legitimate

and ethical objective of the SAI.

Information for personal benefit

• The information obtained during the course of

auditor’s duties should not be used for securing

personal benefit.

Maintaining the Confidentiality

• The information obtained should not be

used outside the scope of audit.

Handling of document

• “Confidential” “Secret” and “Top Secret”documents are to be handled with the SAIStanding instruction for the handling ofsuch documents. Auditor should notdisclose information obtained in theauditing process to third parties eitherorally or in writing except for the requiredpurpose.

Protection of Sensitivity

• If certain privileged or confidential information

prohibited from general disclosure by law is

obtained during the course of an audit, the auditor

should maintain confidentiality and ensure that no

compromise be made as regards to its disclosure of

confidentiality.

Session 4: IAAD Code of Ethics and promoting ethics through new

initiatives

Workshop on Ethics and Values in Governance

Session Overview

2

INTOSAI Code of Ethics- ISSAI 30

Core values and principles in IAAD Code of ethics

New initiatives in IAAD

Learning Objective

• By the end of the Session participants will beable to understand the core values andprinciples of the IAAD Code of Ethics andshare experience on new initiatives whichpromoted ethics in the IAAD.

Workshop on Ethics and Values in governance 3

INTOSAI Code of Ethics and IAAD Code of Ethics

4

What is Code of Ethics?


The ISSAI Framework

•Level 1 -Founding Principles

•Level 2 – Prerequisites for the Functioning of SAIs

•Level 3 – Fundamental Auditing Principles

•Level 4 – Auditing Guidelines


Level 2 – Prerequisites for the Functioning of SAIs

• ISSAI 10 – Mexico Declaration on SAI independence

• ISSAI 11 – Guidelines and Good Practices related to SAI Independence

• ISSAI 20 – Principles of transparency and accountability

• ISSAI 21 – Principles of transparency and accountability – Principles and Good Practices

• ISSAI 30 – Code of Ethics

• ISSAI 40 – Quality Control for SAIs


ISSAI 20 – Principles of Transparency and Accountability

One of the nine Principles of ISSAI 20:

• SAIs apply a high standard of integrity and ethics for staff at all levels


ISSAI 40 – Quality Control for SAIs

One of the six elements of SAI Quality Control Framework as per ISSAI 40:

• Relevant ethical requirements


ISSAI 30: Code of Ethics

Comprehensive statement of values and principles which would guide the daily work of auditors.


ISSAI 30: INTOSAI Code of Ethics• The Lima Declaration of Guidelines on Auditing

Precepts is the foundation of the Code of Ethics

• Code not to be interpreted as having any impact on the organisational structure of the SAI.

• Responsibility of each SAI to develop its own Code of Ethics which best fits its environment using the INTOSAI Code of Ethics as the foundation.


ISSAI 30: SAI Image

• TRUST

• CONFIDENCE

• CREDIBILITY


ISSAI 30: Ethical requirements

• Integrity

• Independence,

• Objectivity and Impartiality including political neutrality

• Avoid Conflict of interest

• Professional Secrecy

• Competence including professional development


Code of Ethics in the IAAD


Code of Ethics for IAAD -2012

Values and principles contained in the CCS

Conduct Rules

Broad principles contained in ISSAI 30

General ethical requirements

prescribed for civil servants in India

Particular requirements of auditors including

professional obligations


Code of Ethics for IAAD -2012

Directed at individual auditor, head of SAI,

Executive officers and all individuals working for or

on behalf of the SAI in auditing and accounting

work

Adoption and application of Code of ethics in public

sector promotes trust, confidence and

credibility in the auditors and their work

TRUST-SAI’s conduct and approach to be above

suspicion and reproach and worthy of respect

and trust

CONFIDENCE-Stakeholders to be fully assured of the fairness

and impartiality of the SAI in the discharge of its

constitutional mandate

Reports and opinions of the SAI to be considered thoroughly accurate and reliable for CREDIBILITY



IAAD code of ethics-Core Values

Integrity

Independence,

Objectivity and Impartiality

Professional Secrecy

Competence

Code of Ethics in the IAAD

Activity 4A• Refer to ISSAI 30 Checklist in Handout 4.

• Discuss the checklist in groups (with respect to IAAD) and bring out the strong and weak areas of IAAD in terms of the checklist.

• Share in plenary

• Time: 10 + 20 = 30 minutes


ISSAI 30: Checklist•Has the SAI adopted a Code of Ethics.

•Is the SAI confident that all staff are acquainted with the adopted Code of Ethics and are held accountable for acting accordingly.

•Does the SAI have systems in place to act on breaches of the Code of Ethics.

•Has training on the behaviours and cultures required by the Code of Ethics been provided to all staff within the past year.

•Do SAI staff understand the importance of independence and impartiality, not only in fact, but also in appearance.


ISSAI 30: Checklist•Are all staff of the SAI maintaining both actual and perceived political neutrality.

•Does the SAI have a system to monitor the receipt of gifts and gratuities.

•Does the SAI have a system to manage any relationships between staff and audited entities.

•Have staff been trained on the importance of protecting the confidentiality of information obtained in the auditing process.

•Do SAI staff have a good understanding of the legal, constitutional, legal and institutional principles and standards governing the operations of all audited entities.

•Are all SAI staff meeting the continuous obligation to update and improve the skills required to discharge their professional responsibilities.


Promoting ethics through new initiatives


• Presentation on new initiatives in GPF and Pension

• Experience sharing by participants

Summary

• INTOSAI Code of Ethics

– ISSAI 30

• Code of Ethics in IAAD

• New initiatives promoting ethics in the IAAD


Thank you


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