Transcript implementation-of-schemes-audit-of-Social

IMPLEMENTATION OF SCHEMES
AND AUDIT OF SOCIAL SECTOR
An Outline for the
Presentation
Social Sector – definition and framework
Increasing role of social sector in poverty
alleviation, rural development and social
development
Audit of social sector – a conceptual
framework
Performance audit of social sector – key
issues
Case studies in Performance Audits
The road ahead
Social sector – an introduction
In HDIs and Social Protection Index, there
are still huge challenges for the country
and India ranks 135 or so in the overall
ranking in the world.
While higher investment and
commitment in social sector is desirable
for social equity and justice, higher
spending does not necessarily translate
into better outcomes in poverty
alleviation
Social Sector – an introduction
Quality of expenditure and focus
on targetted spending would bring
results
of
higher
social
development
Audit, in particular, Performance
audit plays a key role in providing
assurance on economy, efficiency
and effectiveness of social sector
programmes
The importance of Social
sector “social services” or “social sectors” include those sectors
where government interventions are expected to have a
direct influence on human & social development:
◦ Education, health and family welfare, nutrition, water supply and
sanitation, social security and welfare
◦ Social sector interventions bring down disparities and asymmetrical
access to education, health care and nutrition and lead to better and
improved social and human development indicators
The importance of Social sector
The share of rural development and social services
sectors has increased from 31% in X Plan to 38% in XI
Plan to 40% in the XII Plan.
This is more prominent in the central plan budget
where the outlays increased to 65% in the XI plan from
50% in the X Plan
The major flagship programmes of the Centre provided
the bulk of the funding –– for social sector and poverty
alleviation programmes that the Constitution in the
Eleventh Schedule indicates as the domain of PRIs
Social Sector in Union Budget
Union Budget 2015-16 was a paradigm
shift
The newspapers said that “it marks the
dawn of 'Co-operative federalism' and
empowerment of the States."
The central government accepted the
recommendations of the 14th Finance
Commission to increase share of Central
taxes from 32% to 42%to the States
The union budget has maintained the Plan
Outlay for the Social Sector programs at
the level of revised estimates for FY 201415.
Union budget for social sector
Though with respect to last year’s
allocations, there have been cuts in
agriculture, drinking water and sanitation,
panchayat raj, water resources and to the
ministry of women and child development
Union Budget announced number of
social security schemes and also increased
outlay for MGNREGA by Rs. 5,000
The principle is that most of the schemes
are in the State List and should
legitimately be owned and implemented
by the States
Union Budget in social sector
The allocations and resource
sharing arrangement with states
would change for 24 central
schemes, mostly in the social
sector.
The implementation of schemes
would depend upon priorities of
the State Governments.
We have to wait and see the impact
on existing flagship schemes in
education, health, nutrition,
livelihood and water and sanitation
Social sector spending
In 2012-13 (Budget Estimates), the Union Budget
outlay for social sectors was around 1.9 per cent of
GDP
India’s total public spending (combined budgetary
spending by Centre and states) every year on social
sectors continues to be less than 7 per cent of GDP.
Problems afflicting social sector
The poor quality of infrastructure in schools,
hospitals, healthcare centres and anganwadi
centres
The shortage of qualified and trained human
resources for delivery of services (teachers,
doctors, para-medical personnel and
anganwadi workers),
Poor budgeting, accounting and auditing and
accountability arrangements
Unacceptably low levels of unit costs for
provisioning of various services in these sectors
The under-utilization of funds, lack of
absorptive capacity -as one of the key problems
in social sectors in the country at present
lack of fiscal decentralization from Centre to
state governments as well as from state
government to local governments.
Problems of underutilisation of funds
Deficiencies in decentralized planning in schemes
–
◦ caused by a shortage of staff to carry out
planning activities
◦ lack of emphasis on training and capacity
building of staff and community leaders for
decentralized planning
◦ and inadequate emphasis on community
participation in the planning process.
Bottlenecks in budgetary processes in the
schemes, such as
◦ delay in the flow of funds,
◦ delay in sending sanction orders for spending,
◦ weak monitoring and supervision of
programme implementation activities.
Systemic weaknesses in the government
apparatus in the states – low importance to
finance and accounting and Internal controls
Audit of social sector
programmes
Social Sector programmes can best be evaluated through Performance
Audit
Performance audit will help an evaluation of the economy, efficiency
and effectiveness of the programmes and schemes
Compliance audit is also important in cases where large scale
procurement is involved and where the integrity of systems and
processes are important and also in tax levy-collection, borrowings,
entity that creates infrastructure, privatisation, disinvestment,




Compliance & Performance in entities concerned
with economic regulation of electricity, telecom,
carbon emission.
Performance & Financial in entities engaged in
manufacture & sale, exploration/mining,
production & sale, intangible services
Depending on the nature of activity of entity and
audit requirement SAI may prefer to carry-out any
one of the three ‘audits’, or two of them in
different combinations or all three.
Concerned SAI would decide depending on its
requirement
Performance audit – legal framework and
standards
DPC Act
Regulations on Audit and Accounts, 2007
Auditing Standards of IAAD
Performance audit guidelines
Performance Auditing Guidelines - 2014
INTOSAI – Implementation guidelines for performance audit
ASOSAI guidelines for performance audit
Concept of Performance
auditing
Performance auditing is an independent examination of the
efficiency and effectiveness of government undertakings,
programs or organizations, with due regard to economy, and the
aim of leading to improvements
Concept of Performance
Auditing
“Performance audit is an independent assessment or
examination of the extent to which an organisation,
programme or scheme operates economically, efficiently
and effectively.” - Regulations on Audit and Accounts, 2007
Objectives of Performance Auditing
The main objective of performance auditing is to constructively
promote economical, effective and efficient governance.
It also contributes to accountability and transparency.
Performance auditing focuses on areas in which it can add value for
citizens and which have the greatest potential for improvement
Three EEEs - Economy
It is minimising the cost of resources used having regard to
the appropriate quality;
It is “Spending less”; and
Question to be asked by the auditor is “Do the means
selected represent the most or at least a reasonable
economical
Concept of Efficiency
It is the relationship between the quality and quantity of goods
and services yielded and the cost of resources used to produce
them;
It exists if the output is maximised for a given set of resource
inputs or input is minimised for any given quality and quantity of
output (spending well); and
Audit conclusion on efficiency may be based on comparison,
standards, best practices.
Effectiveness
It is the extent to which objectives of an activity are
achieved;
It is the relationship between intended impact and actual
impact of an activity;
It is “Spending wisely”;
Governance process
Shift in emphasis
AS GOVERNANCE PROCESSES HAVE BECOME OUTCOME ORIENTED, SHIFT IN AUDIT EMPHASIS INEVITABLE
SHIFT FROM ACCOUNTS AND FINANCE TO SOCIAL SCIENCES, ECONOMICS, SCIENCE AND
STUDIES
TECHNOLOGY, DEVELOPMENT
ACCOUNTANTS TO MANAGERS
GOVERNMENT TO GOVERNANCE
TRANSACTIONS TO THE ENTIRETY
P E R F O R M A N C E A U D I T S W I T H A P U R P O S E : M E A N S T O A N E N D
V A L U E A D D I T I O N - O U T C O M E O F P E R F O R M A N C E A U D I T S ; M A K I N G A D I F F E R E N C E .
P R I M A R I L Y C O N C E R N E D
WITH OUTCOMES AND
COMPARISON OF INTENDED IMPACTS WITH
ACTUAL IMPACTS
Audit process
Audit
objective
Audit
criteria
Audit
tests
Audit
findings
Recommendations
Design Matrix for performance audit – inventory management
Audit objective
Criteria
Evidence
required
Evidence
source (s)
Data
collection
methods
Data
analysis
methods
WHAT DO WE WANT TO
KNOW?
WHAT
STANDARD
DO WE
MEASURE
AGAINST?
WHAT
EVIDENCE
WILL ANSWER
THE
QUESTION
WHERE ARE
WE GOING TO
GET THE
EVIDENCE?
HOW ARE WE
GOING TO
GET THE
EVIDENCE?
WHAT WILL
WE DO WITH
IT ONCE WE
GET IT?
1. Whether accurate
inventory records
are maintained in
computerized
inventory systems.
Norms and
guidelines
for storing
and issuing
inventory
Inventory
records
Inventory
stores
deptt.
Inventory
records and
reports
including
physical
verification
Analyse
Inventory
records and
reports and
get an
assurance
2. Whether goods
are stored under
appropriate
conditions with
proper security
3. Whether FIFO
method is followed
26
New Performance Auditing Guidelines
Audit objectives should be limited in number
(ideally about 3)
From objective to approach – system-based
or result-oriented
Audit teams should prepare Audit Design
Matrix and Audit Findings Matrix
◦ Audit objectives – sub-objectives
◦ Audit Questions
◦ Criteria
◦ Evidence
◦ Cause – Effects
◦ Conclusions
◦ Recommendations
Nature of recommendations
Should be specific, action-oriented,
implementable, constructive and beneficial to the
entity, should add value
◦ The department may ensure that Bank
Guarantees are valid
◦ VAT Manual should be prepared for effective
administration of VAT Act and Rules
◦ Surveys should be conducted periodically to
identify the beneficiaries and encourage
unskilled labourers to register themselves and
avail of scheme benefits
Nature of recommendations
Before sanctioning further residential schools the
government should accord priority to equipping
the existing ones with adequate financial
resources
Recommendation should clearly indicate who is
responsible for implementation of the
recommendation
◦ The society needs to maintain separate accounts for funds
received from the client departments including interest
earned on unspent balances to avoid mixing up funds
◦ The department needs to put in place a mechanism to
ensure timely receipt of UCs from the society for the funds
released
Don’ts in recommendations
No truisms and self-evident propositions or
reiteration of existing instructions
◦ Avoid cost overruns in implementation of the
projects
◦ Government should expedite implementation of the
schemes and completion of the projects within the
time schedule prescribed
◦ Ensure that the terms of the agreements are duly
enforced
◦ Ensure the strict compliance of the provisions of the
land acquisition Act in acquisition of land (rather the
cause of the non-compliance with the Act and how
the department could take steps to overcome it
should be commented.
Procurement & Supply Management
Cycle of Medicines
31
Waste/Risks in Drug Management in public sector
procurement – important audit focus
High Prices
Poor Quality
Improper storage
Pilferage
Over stocking of inventory
Expiration of drugs
Irrational Drug Prescribing
32
Audit objectives – to examine
◦ Procurement plans properly drawn up by the
◦ Procurement policies and procedures properly adhered to
◦ Operational procedures consistent with good pharmaceutical
procurement
◦ Policies and procedures on bidding process management, tender
evaluation and award of contract were efficient and effective
◦ Inventory management policies of medical stores/hospitals were
followed
◦ Guidelines for distribution of medicines followed
◦ Measures to promote rational drug use effective
33
To SUM UP
Audit emphasis more on systems
processes than on individual events
and
Emphasis more on assurance
Risk areas to be identified – risk based audit
Emphasis more on key performance
indicators than financial materiality
Materiality related to theme or importance
than only on financial values
Audit as Aid to management – value
addition
Highlighting positive issues
Recommendations
for
improvement
–
specific,
action
oriented,
feasible,
administratively sound and cost effective