Tuesday, Oct 21, 2014

Of, by, for auditors

CAG could confine itself to precisely directed revenue-sharing arrangements, maybe there will not be much damage and some good. PTI CAG could confine itself to precisely directed revenue-sharing arrangements, maybe there will not be much damage and some good. PTI
Written by Pratap Bhanu Mehta | Posted: April 23, 2014 12:51 am | Updated: April 22, 2014 10:59 pm

CAG audit of telcos raises questions of blunt accountability instruments.

The Supreme Court order in Association of Unified Telecom Service Providers and others versus Union of India, enabling the Comptroller and Auditor General to audit telecom companies is going to raise far-reaching institutional questions in the future. One can, for the moment, bracket the technicalities of this case. There is no dispute over the fact that telecom companies in revenue-sharing agreements need to be audited; and these auditing requirements are part of the licencing arrangements. The question was over the clauses under which the audit was to be carried out and the mode of doing so.

But the Supreme Court seems to have, for all practical purposes, given carte blanche to the CAG to more or less audit at will any private entity that might have any remote connection with funds drawn from the Consolidated Fund of India or any entity that remotely deals with any public good. It has pretty much declared the CAG to be part of the basic structure of the Constitution, on par with democracy and fundamental rights. It was perhaps inevitable that a government of contractors, for contractors, and by contractors would beget the counter reaction that we would become a government of auditors, for auditors, and by auditors.

Why might this be an issue? There is a genuine institutional problem to which we have not given too much thought. Over the last few years, there has been a blurring of functional roles between the state and private sector. On some estimates, half of taxpayers’ money is now being channelled through private or civil society entities. Often, the CAG has had difficulty exercising jurisdiction over entities in public-private partnerships, leading to the charge that PPPs are at least as much about evading accountability as they are a method of promoting efficiency. In revenue-sharing contracts, it is inevitable that the government will be interested in determining whether the revenue is indeed being shared or being fudged. So in principle, there cannot be any objection to some form of accountability. Indeed, most of these contracts provide for such mechanisms. Unfortunately, in India, accountability mechanisms provided for in these various contracts often fail, and there is the temptation to reach for more blunt and high-powered accountability instruments. The Trai and Department of Telecommunications have, on some interpretations, not been performing their accountability functions; hence the demand for a different kind of scrutiny.

The question is whether, in reaching for the CAG, there are real dangers that need to be taken into account.

What makes this question difficult to answer straightforwardly is this. We now know that much depends on the norms and practices of an institution. If the CAG could confine continued…

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