1 Goal 1: Integrating audit efforts

1.1 Background
Our audit arrangements in respect of entities under the Government of India (GoI) are organized primarily based on the nature of the entity, rather than on a sectoral perspective. For example, While Ministries and Departments of Government of India are audited by the respective Principal Audit Offices (DGACE, PDAESM and PDASD for the Civil Side; DGADS, PDAFN, PDAOF on the Defence Side, the Railway Audit Offices etc.), the commercial undertakings under the administrative control of these Ministries/ Departments are audited by the MABs reporting to DAI(C). Units of Ministries/ Departments located outside Delhi are audited by the concerned State PAGs/ AGs, except in Mumbai and Kolkata, where they are audited by DGA(C)/ PDA(C), whose primary reporting relationship is, however, to DAI(RA). The autonomous bodies functioning under these Ministries/ Departments are audited by the respective Principal Audit Offices as well as State PAGs/ AGs, but are processed by a separate wing in Hqrs under ADAI(C&AB). Problems with Existing Audit Organisation Each audit office, and functional wing in Headquarters, is concerned primarily with audit of the units under its audit jurisdiction. There is lack of overall perspective for the Ministry/ Department as well as the sector. Currently, integration of audit perspectives across audit offices and functional wings takes place on an ad hoc/ case to case basis, and effective integration depends to a large extent on the persons involved in such an exercise. While there are many successful instances of integrated audit across functional boundaries1, in the absence of an institutional mechanism for integration, there are often cases of lack of adequate ownership for an integrated audit exercise. The current organizational structure does not facilitate creation of domain knowledge on a sectoral basis; such knowledge is restricted to individual pockets in different offices and that too to a limited extent.

This organization of audit offices may be contrasted with the organization of the auditee entities under GoI, where the administrative control of PSUs, autonomous bodies, as well as attached/ subordinate offices (wherever located) rests with the Ministry/ Department.

E.g. co-ordination between the commercial and RC wings on performance audits of hydrocarbon Production Sharing Contracts and NACIL.

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1.2 Re-Organising Audit of GoI according to Ministry

In the light of the need for institutional mechanisms for integrated audit, the audit of entitites under the GoI should be completely re-organised on the basis of the Ministry/ Department, rather than on the nature of the auditee entity. The existing boundaries/ divisions such as Civil/ Defence/ Railway Audit, Commercial Audit, Autonomous Bodies Audit should be done away with. This will provide a far better platform for integration, than the current structure. Two issues are likely to be thrown up in the context of such a radical re-organisation: Currently, commercial audit staff form a separate pool and are deployed for commercial audit of Central and State PSUs (with ad hoc deployment for certification audit of Central/ State Autonomous Bodies). Under the proposed re-organisation, these entities will no longer fall within a limited set of audit offices. In such a situation, the cadre of commercial audit staff will be deployed for all Audit Offices which require their services, particularly for certification audit and also for specialized sectoral knowledge (e.g. oil and gas); this should not be a major handicap. The audit reports of the reorganized audit offices will be referred either to PAC or COPU (depending on the subject matter of the report). This is also not a major problem, as the auditee Ministries/ Departments deal with several Committees of Parliament (PAC, COPU as well as the Departmental Standing Committees) as part of their normal operational activities. The paragraphs/ chapters dealing with PSUs can be referred to the COPU (as in the case of Commercial Chapters in combined State Audit Reports in the North Eastern States). Further, the proposed Parliamentary Relations Unit will also handle co-ordination issues, if any.

1.3 Current Audit Organisation

Currently, there are 43 audit offices dealing with audit of GoI entities, as summarized below: 13 Commercial Audit Offices (12 MABs plus DGA P&T); 4 Defence Audit Offices; 6 Civil/ Central Revenue Audit Offices (DGACE, PDAESM, PDASD, DGA (C) Mumbai, PDA (C) Kolkata, and DGACR); 17 Railway Audit Offices; and 3 Overseas Audit Offices.

These audit offices are currently reporting to four DAIs DAI(RC), DAI(C), DAI(LB & A), and DAI(RA), and one ADAI (ADAI (C&AB)).

1.4 Proposed Audit Organisation

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We now propose that the audit of GoI be reorganised under 52 audit offices 43 existing offices plus 9 new offices2, as summarized below:
Function DAI (Economic and Infrastructural Ministries) No. of Offices Audit 5 DGs/ PDs for Infrastructure DAI (Social and Services Sector) General 3 DGs / PDs for Social Sector DG/ PD Petroleum (Upstream) DG/ PD Petroleum (Downstream) DG/ PD Steel DG/ PD Coal DG/PD Heavy Industries & Micro, Small and Medium Enterprises (MSME) DG/PD Commerce, Corporate Affairs, Textiles and Tourism DG/ PD Mines, Chemicals and Fertilisers DG/ PD Power (Thermal) DG/ PD Power (Hydropower and Power Transmission) DG/ PD Shipping, Road Transport and Highways DG/ PD Civil Aviation, Urban Development, Housing and Urban Poverty Alleviation DGA P&T
3

7 DGs/ PDs for Economic Ministries

DG/ PD Agriculture, Food Processing Industries, and Consumer Affairs and Food & Public Distribution DG/ PD Human Resources Development, Panchayati Raj, Water Resources, Labour & Employment, Social Justice & Empowerment, Minority Affairs, Tribal Affairs, and North Eastern Region DG/PD Health and Family Welfare, Women & Child Development, and Rural Development DG/ PD Scientific Departments DG/ PD Environment Audit PDA London PDA Washington PDA Kuala Lumpur DG/PD Home Affairs, UT, External Affairs, Overseas Indian Affairs, Law and Justice, and Parliamentary Affairs DG/ PD I&B, Culture, Personnel, Youth Affairs and Sports, Planning Commission, Statistics and Programme Implementation DGACR, New Delhi DGA CR, Mumbai DGA CR, Kolkata

2 DGs/ PDs for Scientific Departments 3 External Audit Offices 2 DGs/ PDs for General Services

DAI (Finance and Revenue Audit)

4 Revenue Audit Offices

Or alternatively by diversion of existing DG/ PD level posts in other areas (e.g. PD RTIs, PDA Railways for some of the smaller, newly created zones), as deemed appropriate by senior management. 33 Existing office

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Function

No. of Offices

Audit DGA CR, Southern Region (Bengaluru/ Hyderabad/ Chennai) DG/ PD Finance (covering the entire Ministry of Finace, including Department of Disinvestment, and responsibility for overall certification of GoI Accounts) DG/ PD Finance & Insurance PSUs DGADS, New Delhi PDA Northern and Central Commands, Chandigarh PDA Southern Command and DRDO, Pune DG/ PD Air Force DG/ PD Navy DG/ PD Ordnance Factories DG/ PD Defence PSUs Re-structuring/ reduction of Railway Audit Offices may be considered, after considering the workload (especially in the newly created Railway Zones) and also in view of the current and future availability of IAAS Officers at AG level Audit of Railway PSUs (KRCL, DMRC, CONCOR, RITES, IRCON etc.) should be with the Railway Audit Wing

2 Financial Audit Offices

DAI (Defence and Railway Audit) 7 DGs/ PDs for Defence 17 Railway Audit Offices

Ideally, a separate post of DAI(Accounts) would be required, so as to focus full attention on this important function and also for appropriate direction for standard setting (including GASAB). Till such time as a separate post is not available, this function can be handled by one of the DAIs DAI (Finance and Revenue Audit) or perhaps DAI (Hqrs), DAI (Defence and Railway Audit). Details of the proposed re-organisation of audit offices in respect of GoI are indicated in Annexure- 3. Further, audit of all central units (expenditure/ receipts/ ABs) would be done only by the Central Audit Offices. State PAGs/ AGs will be responsible only for conduct of All India Reviews of Central Sector/ Centrally Sponsored Schemes within their State audit jurisdictions. While the proposed re-organisation would ensure integrated audit for Ministries/ Departments and other units of GoI in most cases, All India reviews (in particular those in the social sector) will need active involvement and co-operation of the State PAGs/ AGs, without which effective integrated audit cannot be achieved. There would, thus, need to be extensive co-ordination between DAI (Social and General Services Sector) and the ADAI (Reports States).

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1.5 Staff Implications of Re-organisation of GoI Audits

Considering the sensitivity of such re-organisation on IAAD staff, we propose that no transfers of IAAD officials on account of this re-organisation outside their current station of posting would be made, without their consent. Officials who consent to move to other locations could be appropriately posted, while officials who do not agree to move to other locations may either be adjusted in other audit offices at the same locations with vacancies, or adjusted against posts personal to them (which will lapse with their transfer/ retirement). Such re-organisation is not expected to be a major problem in terms of staff implications, since there are not only huge vacancies (especially on the Central Civil side) but there is need for increasing the sanctioned staff strength in many areas which have seen a huge increase in expenditure in the past (without corresponding increase in staff strength). Such increases in staff strength should be only at the supervisory grades.

1.6 Re-organisation of Audit of States

Recent proposals for re-organisation of audit of States have centred around creating posts of Regional ADAIs; this would have the advantage of a uniform command structure and single reporting relationship for field PAGs/ AGs. Considering the advantages and disadvantages, we broadly agree with the approach of creating Regional ADAIs (either four or five, depending on whether a separate ADAI(North East States) is to be created. However, two key issues with the Regional ADAI structure need to be addressed: There is a danger of All India Reviews of Central Schemes being orphaned, with one DAI having to deal with five zonal ADAIs; this could seriously compromise the objective of integrating audit efforts. To minimize this problem, in respect of Centrally Sponsored Schemes/ Central Sector Schemes involving transfer and utilization of funds at the State and lower levels, the concerned DAI (primarily DAI - Social and General Services Sector) will have to be assigned a formal co-ordinating role in this regard. Even in other areas, the opportunity for a uniform country-wide approach (particularly for Commercial and State Receipts) should be retained. This could be achieved through designation of nodal DAIs/ ADAIs for a specific topic4. The responsibilities of the nodal DAIs/ ADAIs would include providing overall guidance and, as far as possible, uniformity on an All-India basis, and also resource support in cases of shortage of resources with the requisite competencies. This concept of nodal DAI/ ADAI would also tie in neatly with the concept of knowledge centres and resource persons proposed in the next chapter.

This need not necessarily be the DAI dealing with Central Audit. While DAI (Economic and Infrastructural Ministries) could be the nodal officer for roads and highways, the Regional ADAIs could be the nodal officers for areas like public works, irrigation projects, power distribution etc.

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Annexure 3 Proposed Re-organisation of GoI Audit Offices

Sr 1 2 New Audit Office DG/ PD - Petroleum (Upstream) DG/ PD Petroleum (Downstream) DG/ PD Steel DG/ PD Coal DG/ PD Heavy Industries and MSME DG/ PD Commerce, Corporate Affairs, Textiles & Tourism DG/ PD Mines, Chemicals and Fertilisers DG/ PD Power (Thermal) Ministries Petroleum & NG (1) --Mapping Office(s) to Present Outstation Branches Baroda and Dehradun Mumbai, Kolkata, and Chennai

MAB-II Mumbai MAB-II New Delhi

3 4 5

Steel (1) Coal (1)

MAB Ranchi MAB-II Kolkata

Bhilai and Vizag Ranchi Delhi

Heavy Industries & PE, Micro, MAB-I Kolkata Small & Medium Enterprises (2) Corporate Affairs, Commerce New office at Delhi & Industry, Textiles and Tourism (4) Mines and Fertilizers (2) Power (1) Chemicals & MAB Hyderabad MAB-III New Delhi New office at Delhi

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7 8 9 10 11

--Kolkata and Chennai Kolkata Mumbai and Chennai Mumbai and Kolkata

DG/ PD Power (Hydropower and --Power Transmission) DG/ PD Shipping, Road Transport and Highways DG/ PD - Civil Aviation, Urban

Shipping and Road Transport & MAB-I New Delhi Highways (2) Civil Aviation, Urban PDA ESM New Delhi Page 6 of 9

Development, Housing & Urban Poverty Alleviation 12 13 DGA P&T DG/ PD Agriculture, Food Processing Industries and Consumer Affairs and Food & Public Distribution DG/PD HRD, Panchayati Raj, Water Resources, Labour & Employment, Social Justice & Empowerment, Minority Affairs, Tribal Affairs and NE Region DG/ PD Health and Family Welfare, Women and Child Development and Rural Development PDA (Scientific Departments)

Development and Housing & Urban Poverty Alleviation (3) Communication & IT (excluding Deptt of IT) (1) DGA P&T 11 branches (same set-up) Chandigarh, Mumbai, Kolkata and Chennai

Agriculture, Food Processing MAB-IV New Delhi Industries and Consumer Affairs, Food & Public Distribution (3) HRD, Panchayati Raj, Water DGACE New Delhi Resources, Labour & Employment, Social Justice & Empowerment, Minority Affairs, Tribal Affairs and NE Region (8) Health and Family Welfare, New Office at Delhi Women and Child Development and Rural Development (3) Dept of Atomic Energy, Dept PDA (SD) New Delhi of Space, Science & Technology, Earth Sciences, Department of IT (4) Environment & Forests, New New Office at New Delhi and Renewable Energy (2) PDA Washington PDA London Page 7 of 9

14

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15

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16

Bengaluru, Mumbai, and Kolkata

17 18 19

PDA (Environment Audit) PDA Washington PDA London

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20 21

PDA Kuala Lumpur DG/ PD Home Affairs, UT, External Affairs, Overseas Indian Affairs, Law and Justice and Parliamentary Affairs DG/ PD I&B, Culture, Personnel, Youth Affairs and Sports, Planning Commission, Statistics and Programme Implementation DGACR New Delhi DGACR Mumbai DGACR Kolkata DGACR Bengaluru/ Chennai/ Hyderabad DG/ PD Finance DG/ PD Finance and Insurance PSUs DGADS PDA DS (Northern & Central Commands) PDA (Southern Command & DRDO) Ministry of Defence (1) None DRDO Finance (1)

PDA Kuala Lumpur Home Affairs, UT, External New Office at Delhi Affairs, President/Parliament, Overseas Indian Affairs, Law & Justice and Parliamentary Affairs (7) I&B, Culture, Personnel, Youth New Office at Delhi Affairs and Sports, Planning Commission, Statistics and Programme Implementation (7) DGACR at New Delhi DGACR at Mumbai PDACR Kolkata New office New office MAB-I, Mumbai DGADS at New Delhi PDA DS at Chandigarh New Office at Pune

--Port Blair and Chandigarh

22

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23 24 25 26 27 28 29 30 31

Taking over Group Officers dealing with CRA in the State PAG/ AG offices

Kolkata, Chennai, and New Delhi Meerut, Allahabad, and Patna Jammu Delhi, Chennai and Bangalore

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32 33 34 35 36 to 52

PDA (Air Force) PDA (Navy) PDA (OF) PDA (Defence PSUs) 17 Railway PDAs

MoD (AF) MoD (Navy) MoD (OF)

PDA (AF & NAVY) New Office at Mumbai PDA (OF) Kolkata MAB Bangalore

Dehradun and Bangalore Delhi Jabalpur, Kanpur and Chennai --To be reorganized by Railway Audit Wing

Railways (1)

17 Railway Audit Offices

Notes: 1. There will be a net increase of nine offices 7 new offices at New Delhi, 1 in Pune, 1 in Mumbai. Further, MAB Chennai will be replaced by one new DGACR (Southern Region). 2. Additional branch offices to be created will be Mumbai (3), Kolkata (5), Chennai (5), Delhi (2) and Bengaluru (2); Durgapur and Bhopal offices are proposed to be closed.

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