I am very happy to be here today for the National Seminar on ‘Legislature and Audit Interface’ being held to promote the effectiveness of Legislatures in matters related to oversight of the financial activities and performance of the Executive with the aim of ensuring transparency, accountability and good governance. I am sure all of you would agree that transparency and accountability are the driving forces for good governance.

2.         Parliament and State Legislatures are custodians of executive power and conduct. It is important to understand the process by which the legislatures discharge this responsibility:

(i)      After the budget proposals are submitted to the House, there is a general debate on the budget, and then we adjourn for about 20 days. On behalf of the legislatures, the Estimates Committee examines the details of the estimates in the annual budget presented by the executive to the legislatures and submits its report to the House. Since 1993, with the creation of Departmentally related Standing Committees of Parliament, the demand for grants of the Ministries are scrutinized and reported on by them to the House before they are put to vote. The system followed in different State Legislatures in this context vary somewhat but not in principle.

(ii)     After the authorization of budget proposals by the legislature, again on behalf of the legislatures, the Comptroller & Auditor General of India keeps a continuous watch on both assessment and collection of revenues as well as expenditure by government. He carries out supplementary audit of government companies whose accounts are certified by chartered accountants appointed from a panel maintained by CAG. At the end of the financial year, he certifies the annual accounts of the Union and State governments and reports his audit findings to the respective legislatures.

(iii)    His reports are examined by the Public Accounts Committee and the Committee on Public Undertakings. Both the Reports containing the recommendations of these Committees as well as the action taken report on them by the government, are tabled in the legislature.

Broadly speaking, this is the cycle of discharging parliamentary financial control that is followed. The basic objective is to ensure that taxes are assessed in accordance with the laws governing them and public funds are spent prudently and economically within the authorizations made by the Parliament. 

3.         With ever-increasing government spending, enormous amount of outlays on programmes for improving the basic quality of life of the common man and changed systems of public finance and service deliveries for achieving better outcomes, the tasks of financial committees and the CAG in modern times have become more extensive and complex. Besides, people expect much greater transparency and public accountability for good governance. This national seminar provides an excellent opportunity for discussing whether the existing system of financial control and external oversight through the financial committees and the CAG is serving the desired purpose or do we need to reform it in a certain manner to make it more relevant, transparent and effective, meeting the expectations of stakeholders in the changed scenario of the 21^st Century.

4.         It is important for us to note that Parliament and State Legislatures no longer confine themselves to simple cash authorizations but approve macroeconomic budgets which authorize performance-linked expenditure along with efficient assessment and collection of taxes. Macroeconomic budgeting involves relying on not just public investment by government but equally, on pricing policy and monetary policy. The Budget papers include not only the demand for grants, appropriation bill and the finance bill, but equally important documents like the Finance Minister’s Speech, the macroeconomic strategy to be pursued, performance and outcome budgets, statements on gender budgeting, along with statements with reference to the Financial Responsibility and Budget Management Act, 2002. The public enterprises are also bound these days not only by the provisions of the Companies Act related to government companies but also by means of memorandum of understanding of respective Ministries with the undertakings. Now, while the demand for grants of the various Ministries are scrutinized by the Departmentally related Committees, the rest of what constitutes the budget, the financing of public expenditure in its macro-economic dimensions, involving tax and borrowing proposals as well as price and monetary policy, is not examined at present by any committee of the legislature at the budget proposal stage. We need to consider if these matters should continue to be left to the general debate in the House or whether a strategy paper could be circulated by Ministry of Finance about a fortnight before the budget session which could be examined by the Estimates Committee with technical support by the CAG. The Committee could report its concerns and findings to the House before a better informed general debate on the budget is taken up.  The capacity of the Estimates Committee and its secretariat staff to undertake technical work of this nature will naturally have to be built up.

5.         As I said earlier, after the budget is authorized, CAG keeps a watch on its operation by the executive. CAG will be making a separate presentation today on the new Audit Bill proposed by him.

6.         One of the major concern of the bill is about the instrumentalities through which expenditure is being increasingly channeled by government. Public spending on flagship programmes for improving health care, universal elementary education, sanitation, employment etc. has increased by leaps and bounds. Most of these programmes are being implemented by Panchayats and municipal bodies or under the society mode by direct transfer of funds from central ministries to registered government societies at state/district/block and Panchayat levels. There are serious gaps in the accountability framework of these implementing agencies and the CAG's present mandate for audit of these agencies is also limited.

7.         Moreover, as you are all aware, both the Union and State Governments are using Public Private Partnerships more intensively to help meet gaps in the provision of basic services in the infrastructure sector.  Enormous amount of investment has been made in PPP projects in Roads & Highways, Ports, Urban Development, Railways, Airports and other infrastructure sectors. PPP infrastructure projects involve transfer of public assets, delegation of governmental authority for recovery of user charges, private control of monopolistic services and sharing of risk and contingent liabilities by the government.  It is essential for the government to ensure that services being delivered through such arrangements to the users meet the agreed time, cost, and quality standards. Apart from ensuring transparency and competitiveness in the process of award of contracts, it is equally important to protect the public exchequer from any unintended misuse of claims from concessionaires.  Protection of user interest and the need to secure value for public money demand  that such  arrangements must receive adequate attention of oversight bodies like CAG, Committee on Public Undertakings and Public Accounts Committee.

8.         Audit is frequently faced with situations where auditees do not comply with CAG’s request for records/information. This not only delays the audit process but also seriously impacts the quality of audit examination and thwarts possible disclosure of serious irregularities, frauds and embezzlements. 

9.         Turning to the functioning of the Public Accounts Committee and the Committee on Public Undertakings, I would like to say that it is not just our self assessment that we should take into account, but also the public perceptions about our effectiveness. Effective parliamentary oversight is the  cornerstone of good governance. Prompt response of the executive in taking corrective measures on the objections raised by CAG in inspection reports addressed to the heads of offices and then on the recommendations of Public Accounts Committees and Committees on Public Undertakings on audit paras submitted by CAG in Reports to legislatures, is crucial. A recent report (11^th Report of the Public Accounts Committee, 15^th Lok Sabha) presented to Parliament, however, shows that the response of the Ministries in taking action on the CAG’s Reports has not been very encouraging. I understand that the response of State Government executives in taking remedial action on CAG’s Reports is also equally sluggish. Some very effective and concrete measures need to be taken both by the Governments and the Legislatures to address this situation.

10.       Apart from empowering the financial Committees, there is a need to build  their capacity to examine technicalities involved in financial dealings. Both the members of such committees and the secretariat staff supporting them need to go through a highly professional orientation program.

I hope the National Seminar today will make far reaching recommendations for strengthening our financial committees and audit systems so that they are able to effectively fulfill their expected roles and responsibilities in changing times and help ensure most efficient use of public resources.

Thank You.