Performance Audit in SAI India

Mandate, Evolution, Practises and

Experience
Your Introduction

• Describe yourself in one sentence?

• Do you possess some skills like IT skills, speaking skills, management

skills?

• Why are you acquiring/pursuing such skills?

• Assessment of your performance?

Performance Audit- more recent
Traditional Audit ?? Performance Audit- Efficiency Audit
Financial –
In line with accounting policy, true and fair
presentation of accounts, correct depiction • Value for Money Audit
of financial position
Accounts Centric
Compliance – • 3Es Audit
In accordance with law, rules, regulations,
procedures-
Accountability Centric • Efficiency cum Performance Audit
Wisdom in spending-
Application of prudence in spending public
money • Performance audit
Propriety centric
 Mandate for Performance Audit
• International Congress of Supreme Audit Institutions
(INCOSAI) conference in Montevideo (Uruguay), (1998)
• Agreed to endorse the development of guidelines for the
implementation of the INTOSAI Auditing Standards
• Need for special guidelines in performance auditing, since it
differs in character from financial auditing

• Implementation Guidelines for Performance Auditing – July

2004
• Some SAIs have the right to evaluate government and/or
agency policy effectiveness and include program evaluation in
their performance audit mandate.
• Others are not required to conduct such audits.

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 Mandate for Performance Audit
Mandate requirement under iCAT [ISSAI Compliance Assessment Tool]
Reference Requirement
ISSAI 3100 The SAI shall communicate a clear vision of the purpose for performance auditing
and the desired outcomes to be achieved.
Key principles
(2010)

ISSAI 3100 The SAI shall seek to obtain a suitable legal mandate that comprises the
following criteria:
a) a mandate to carry out performance auditing on the economy, efficiency and
effectiveness of government programs and entities;

b) freedom to place the audit results in the public domain;

c) access to all information needed to conduct the audit
d) freedom to decide who to recruit.
ISSAI 300 The SAI shall be free to decide, within their mandate, what, when and how to
ISSAI 3000 audit, and shall not be restrained from publishing their findings.

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Mandate for Performance Audit

Any such provisions in any of your

SAIs?

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 Mandate for Performance Audit
• UK National Audit Act, 1983
• expressly authorises and empowers the CAG to carry
out examination into economy, efficiency and
effectiveness with which a department, authority or
body has used its resources while discharging its
functions.
• Auditor General of Canada has been specifically
authorised to report on cases in which
• money stands expended without due regard to
economy, efficiency or
• where satisfactory procedures have not been
established to measure and report the effectiveness
of the programmes.
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 Mandate for Performance Audit

• The term Audit - not defined in the Constitution of India or CAG’s

(DPC) Act
• The absence of definition of the expression Audit has left the
scope of audit open ended which has enabled the State Audit of
India
• to respond to changes in the pattern of Government activities
and expenditure,
• to keep pace with the developments in the profession of
Audit
• to try to match the expectations of the stakeholders

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 Mandate for Performance Audit
• Strengthened by practice and convention drawn from
over 50 years of performance audits on a variety of
subjects
• Variously termed as “Review”, Efficiency Cum
Performance Audit (ECPA) or Value for money audit
(VFM)
• Efficiency-cum-Performance Audit (ECPA) first
introduced in early sixties
• First set of PA guidelines introduced in 2004
• Revised guidelines in 2014

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 Mandate- Levels 1 and 2 professional Guidance
Constitution of India – There shall be a CAG of India…….,neither an officer of Parliament nor
a part of Executive.
• Autonomy, independence (ISSAI -3100)

CAG’s DPC Act, 1971- Law governing Duties, Powers and Conditions of Service of CAG
• Empowers CAG to make Regulations
• Decide scope and extent of audit
• Submit Audit Reports to President of India/Governor of states who shall cause them to be
laid on the table of both houses of Parliament/state legislatures respectively

Regulations of Audit and Accounts, First time in 2007, latest edition 2020
• Chapter 7 of the Regulations on Audit and Accounts, 2007 provides the specific guidance on
Performance Audit
“ Performance audit is an independent assessment or examination of the extent to which
an organization, programme or scheme operates economically, efficiently and
effectively” (Regulation 68 )
Mandate- professional Guidance
Auditing Standards of CAG
• in line with INTOSAI Auditing Standards,

Four levels of professional guidance

Guidelines
Practise Notes
Case Studies
MANDATE- Settled by Executive clarification and law
• June 2006, the Ministry of Finance clarified that the power of the CAG to
conduct audits includes performance audits asking all ministries /
departments to facilitate conduct of all types of audits.

• The Supreme Court also upheld the power of the CAG to conduct
performance audits in ARVIND GUPTA Vrs. UNION OF INDIA holding that
the CAG's functions to carry out examination into economy, efficiency
and effectiveness with which the Government has used its resources is
in-built in the 1971 Act and there is no unconstitutionality in the
Regulations providing for performance audits.
 Judicial Pronouncements on
Performance Audit mandate
Reghu Nath Kelkar Vrs. Union of India and others
Public Interest Litigation

Petitioner :
No specific audit in respect of the borrowings of the Central
Government under the Market Stabilization Scheme was conducted
since 2004 nor was there any specific audit of the application of
funds borrowed thereunder
Alleged failure of the CAG to conduct a comprehensive audit

Bombay High Court:

The time, scope and extent of audit are all matter which fall
within the jurisdiction of the CAG and is not a matter on
which Court ought to tread.
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 Mandate for Performance Audit
2013 Arvind Gupta Vrs. Union of India
Petitioner :
CAG of India has no power to give performance audit report and the
provisions in the Regulations of Audit and Accounts, 2007 framed
under the CAG(DPC)Act, 1971 empowering the CAG to conduct
performance audit is violative of the Constitution”

Supreme Court :
CAG's functions to carry out examination into economy,
efficiency and effectiveness with which the Government has
used its resources, is in-built in the 1971 Act.
Performance Audit Reports prepared under the Regulations
have to be viewed accordingly.
No unconstitutionality in the Regulations.
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 Mandate for Performance Audit
Highlights of Supreme Court Judgment in Telecom Case

Supreme Court :When nation’s wealth/natural resources , like

spectrum, is being dealt with either by the Union, State or its
instrumentalities or even the private parties, like service
providers, they are accountable to the people and to the
Parliament

CAG’s examination of the accounts of the Service Providers in a

Revenue Sharing Contract is extremely important to ascertain
whether there is an unlawful gain to the Service Provider and an
unlawful loss to the Union of India, because the revenue
generated out of that has to be credited to the Consolidated Fund
of India
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 Mandate for Performance Audit
Arun Kumar Agrawal vs Union Of India & Others May, 2013

Supreme Court :

The CAG also has to examine decisions which have financial

implications including the propriety of the decision making.

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 MANDATE- What is required to assess performance?
• Section 18(1) of the DPC Act authorizes the CAG,
Inspection - to inspect any office of accounts under the control of the Union or of a
State, including treasuries,
- require that any account , books, paper and other documents which deal with
or form the basis of or are otherwise relevant to the transactions to which his audit
duties extend to be sent to such place as he may appoint for his inspection, and
Collect Information - to put such questions or make such observations as he may
consider necessary to the person in-charge of the office.

• Authority to decide what to inspect and examine-

- Section 23 of the DPC Act authorises the CAG to make regulations for carrying into
effect the provisions of the Act in so far as they relate to the ‘scope and extent of
audit.
• Section 24 of the DPC Act authorizes the CAG to dispense with - when
circumstances so warrant - any part of detailed audit of any accounts or class of
 Performance Audit
3 Es of Performance Audit

Economy Efficiency Effectiveness

Costs Inputs Outputs Outcomes

Objectives
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How to conduct Performance Audit?
Plan-Execute-Report

First principle: Plan well after proper analysis and risk analysis to
identify areas critical to performance
Next:
How does one assess performance?Criteria?
• Avoid setting own yardsticks to measure performance.
• Performance in terms of the performance indicia, targets and
timelines of measurable outputs and outcomes either set under
applicable laws or set by the entity itself.
• There could be peer comparisons only where credible external
benchmarks are found.
• Compare before and after picture provided credible data on the
baseline scenario is available.
 How to Plan?

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 How to Execute?Audit implementation cycle

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 Evidence collection Methods/Tools used in PA
• Use of beneficiary surveys, citizens feedback and Interviews: As early as
1998-99 in Food Security programme, in 2004-05 Consumer Protection Act,
2011-12 –MGNREGA,
• Use of Site visits/photographs : Used in a large number of Reports to show
the status- Social sector and Infrastructure - Mid day meal, Swachchh
Bharat Mission, 2013-14-Monuments and Antiquities , Recent Report on
NOIDA
• Joint Inspections: For physical verification of assets, Audit Reports on road
projects, housing schemes, Schools attendance etc.
• Technical Test Reports: Drawing road material sample for lab examination,
2004-05- PMGSY, 2018-19-Delhi Metro –Indian Institute of Technology.
Technology driven evidence collection Methods/Tools
• Use of Remote sensing and GIS tools: PA on illegal mining in
Rajasthan,Tamil Nadu, Karnataka ; PA on encroachments and change
in land use in National parks and Wild life sanctuaries in Karnataka
Use of google maps/google earth :
Tamil Nadu: Google maps help CAG find quarry
exploitation
Preparing for technical subjects
• Training of team at Banking Institute - Debt Waiver scheme, 2005-06
• Technical capsule for team conducting audit of Protection of Tigers -
2005-06
• One week training and discussion with the industry experts, Global
Advisors, Law firms for Disinvestment Audit -2004-05
• Training for the team in preparing and conducting beneficiary survey-
MGNREGA
• Three day national seminar on coal quality convened by IICM and
workshop in “industrial practise in coal management in Power
sector”by audit team- Performance audit on Coal Mangment in
TANGEDCO, Tamil Nadu-2020-21
Recent Initiatives
• Data driven and remote audits
• Consultative Audits
• Use of digital and analytical tools
• Natural Resources accounting –several SDG goals have direct or indirect
connect with SEEA-CF-2012 developed by UN System of Environmental
Economic Accounting – Central Framework;
CAG of India playing an important role in preparation of Natural Resource
Accounting.

CATALYST- A publication of SAI India showcases innovative efforts using

technology and business processes reengineering in auditing,
2021 and 2022- Available online
 Mandate for Performance Audit

• Article 149 of the Constitution

• The C&AG shall exercise such powers and perform such duties in
relation to the accounts of the Union and the States and of any
other authority or body as may be prescribed by or under any
law made by Parliament.
• Parliament passed Comptroller and Auditor General’s (Duties,
Powers and Conditions of Service) Act in 1971 effective from 15
December 1971.
• Article 151 of the Constitution of India
• The reports of the C&AG of India relating to the accounts of the
Union or a State government shall be submitted to the President
or the Governor of the State respectively, to be laid before each
House of Parliament/ Legislature of the State. 26
Performance Audit - Components

Economy

Efficiency Effectiveness

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 Economy

• Minimising the cost of resources used by acquiring

them
• in due time,
• in appropriate quantity and quality and
• at the best price.
• Focus on the cost of the inputs and processes.
• Question to be asked by the auditor is “Do the means
selected represent the most or at least a reasonably
economical use of public funds”

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 Efficiency

• The relationship between resources employed and

outputs delivered; in terms of quantity, quality and
timing.
• Efficiency exists where the use of financial , human,
physical and information resources is such that
• output is maximised for any given set of resources inputs;
or
• input is minimised for any given quantity and quality of
output, i.e., spending resources well
• Audit conclusion on efficiency may be based on
comparison, standards and best practices.

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 Effectiveness

• Essentially a goal-attainment concept

• Meeting the objectives set and achieving the intended
results.
• It is the relationship between the intended impact
and the actual impact of an activity.
• It measures the outcome which may require long
term rather than short term assessment

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