I am happy to be here today to share my thoughts with you at the inauguration of the 25^th Conference of the Accountants General where the senior executives of the audit department will meet to discuss and brainstorm on strategic and operational issues.

Executive accountability to the legislature is a cornerstone of our democracy.  It is also an essential component of good governance.  The Comptroller and Auditor General of India is the instrument of fiscal accountability provided for in the Constitution. His primary role is to report to the Legislature whether the activities of the Government in all financial matters are carried out in accordance with the Constitution and the laws and rules framed thereunder – both in letter and in spirit. He also provides assurance that the sums authorized by the legislature in the budget have been spent for the intended purposes and within the sanctioned limits.  The members of the Indian Audit & Accounts Department have the task of assisting the Comptroller and Auditor General to effectively carry out his Constitutional mandate.

The role of the CAG was established through practice and tradition in British India and finally enshrined in our Constitution.  Your institution is approaching its 150^th year. The wor5ld has seen momentous changes over this long period and the rate of change has become exponential in the recent past.  Technological innovation has revolutionized communications and access to information through television, internet and mobile phone networks.  The structures and processes of governance have also changed significantly over the past few decades.  The range of Government activities has increased manifold and many players, other than the Central and State Governments, such as local bodies, societies, NGOs and private sector through public private partnerships, have become partners in the process of development. This has introduced complexities in fund flows, expenditure, accounting and evaluation.

To remain relevant in this rapidly changing world every institution has to consciously review and modernize its procedures and practices.  The theme of your conference, “Transformation of Indian Audit and Accounts Department” reflects this reality.  The phenomenon of government funds flowing out to a plethora of agencies through multiple channels, sometimes without well defined monitoring and accounting mechanisms, gives new dimensions to accountability.  I have been informed that the CAG’s (Duties, Powers & Conditions of Service) Act enacted in 1971 is being given a fresh look to overcome the limitations in the mandate of CAG in the present scenario.  It is necessary that the legal framework is recrafted in a manner that enables the CAG to effectively discharge his constitutional responsibilities.  The legal framework has to be suitably strengthened so that any ambiguity or inadequacy in the powers of the CAG to discharge his mandate in the present day scenario, can be removed.

I am happy to learn that you have worked with the Government in developing a control based risk management framework which is going to be applied in implementing various schemes.  This will provide an in-house oversight mechanism that will empower the field level officers to prevent, detect and set right inefficiencies and leakages through suitable interventions.  Consequently, the deliveries should improve.

Our systems of Government accounting and financial reporting are facing many challenges today.  The present accounting system dates back to the days when exchequer control was achieved through the treasury system.  While it retains a certain degree of effectiveness its robustness has come under strain as the fund flow patterns of Government have changed and as the bulk of developmental expenditure takes place outside the treasuries.  We have not yet developed a system of accounting for the funds which are spent by implementing agencies for schemes through their bank accounts.  While expenditures are reported to the legislature on various schemes, they are actually amounts transferred from the government coffers to various implementing agencies who keep the funds in bank accounts.  The actual expenditure on the final beneficiary is not collated, compiled or reported.  Consequently, the balances remaining unutilized and lying in bank accounts are not known.  I am told that your department is seized of this matter and you are already studying the modalities of tracking and accounting of scheme expenditures.  You have to also provide leadership in the long haul that would culminate in the introduction of accrual accounting g, bringing greater transparency in the accounts with a clearer depiction of assets and liabilities.

The Comptroller & Auditor General has a meaningful relation with the Public Accounts Committee of Parliament in India.  I am glad that this relationship has been strengthened over the years.  In the wake of the growing demand of the people for better delivery of essential goods and social services, other modalities of the relationship between CAG and Public Accounts Committee may have to be explored. The delivery of essential goods and social services, like food, employment, basic education and health services, are gradually being declared by legislation as rights of the people.  If these are governed by rights and not simply programmes/schemes of the Government of the day, much more needs to be done to ensure such rights to even the poorest or marginalized of citizens.

While the Union provides finances for programmes and schemes for delivery of such goods and services, it is the State Governments and Panchayats and Urban Local Bodies that implement the programmes and schemes.  Concerns regarding the accountability gap that common citizens feel exist between what is reported by CAG about the programmes and the action taken by Government on these matters.  There is traditionally a unique relationship between CAG and the Public Accounts Committee of Parliament and both have been working closely. I understand that at a Seminar organized by CAG to discuss these issues, in July 2005, my predecessor Shri Somnath Chatterjee expressed his opinion on the need for a forum of Chairpersons/members of PACs/COPUs with CAG to focus on the crucial areas impacting the effectiveness of the CAG and the Committees.  I endorse the consensus arrived at in that Seminar regarding creation of such forums both at Parliament and State Legislatures, handing over audit of Panchayats and Urban Local Bodies to CAG.

The nation is moving forward on a path of growth which has to be made irreversible. It is the duty of every institution to do its bit in maintaining the momentum of growth.  Here you have to adopt a balanced approach of ensuring accountability and transparency without hindrance to innovation and initiative.  The government machinery is shifting gradually to an IT environment and your large work force too has to update its audit procedures accordingly.  I am happy that you are keeping pace with all the emerging issues which are gaining in significance and have been engaged in building capacities in dealing with these new challenges in the areas of e-Governance, support for Social Audit undertaken by civil society organizations and Environment Audit.  Continuous engagement with various stakeholders will help you to appreciate issues better and equip you to conduct more informed and balanced audit which would lead to strengthening of systems and improve delivery mechanisms.

I wish you all the best in your deliberations I am sure your discussions will lead to significant initiatives which will equip your department to face the myriad challenges thrown by a world and society in transition.  As for me, I assure you of my support in fulfilling public trust.