1. HANDLING PUBLIC ACCOUNTS COMMITTEE (PAC)

2. Introduction C&AG plays a vital role in holding governments to account for stewardship of public funds and in helping ensure the transparency of government operations. CAG and the Parliament/State Legislatures co-partners in ensuring accountability and improving efficiency in government operations Audit Reports - part of a wider process for achieving systemic change and greater efficiency and effectiveness in government functions Audit Reports – means to a greater end than an end in themselves of making government systems and processes transparent and accountable. Following up on the audit observations and recommendations – an important part of the whole process of ensuring accountability

3. Introduction CAG’s role to ensure accountability - through the Parliament/ State legislatures. Audit Reports stand referred to the respective Financial Committees for detailed scrutiny Following the British pattern, PAC has a long history in the development of Constitution and good control practices in India

4. PAC and audit Examination of the Audit Reports by central PAC two ways: ◦Some Performance Audits/ paragraphs in the Audit Reports are selected by the main committee/ sub committees for detailed examination In case of the remaining PAs/Audit paragraphs, PAC examines Action Taken Notes submitted by the Ministries who have to submit them within 4 months of submission of Audit reports in parliament. In State PACs, all PAs/Paragraphs are normally discussed

5. PAC examination PAs/ paragraphs selected by PAC for for detailed examination are based on our feedback to the Committees Memoranda of Important Points prepared by our offices Then detailed written reply from the ministries, oral evidence and post evidence replies of the ministries are obtained. PAC comes out with a Report to the Parliament containing its observations and recommendations.

6. Ministries’ replies The ministry is required to intimate to the Committee the action taken on the PAC Report These are in the form of Action Taken Notes to be submitted within 6 months of the presentation of the PAC Report. The secretariat of the Committee keeps a constant watch over the receipt of replies from the ministries and brings to the notice of the Chairman all cases of delay.

7. ATNs and ATRs ATNs are considered by the Committee and then an Action Taken Report (ATR) is presented to the Parliament. The action taken thus reported by the ministry is laid on the table of the House. This completes the examination of a subject by the Committee.

8. Recommendations of PAC The recommendations of the Committee are normally unanimous and are generally accepted by the Government. In cases where the Committee remains unconvinced, they reiterate their views in the ATR. The area of serious divergence between the Committee and the Government in rare cases could even be taken up in the House

9. PAC discussions PAC also review the implementation by the Government of the recommendations made by it in its earlier reports. The purpose is to see how far the recommendations which have been accepted by the Government have actually been implemented. Ministry is more responsive to the PAC Reports (based on the selected PAs/Paragraphs) than the CAG audit paragraphs which are not selected for detailed examination by the PAC.

10. Only a small percentage of PA and compliance paragraphs are selected by PAC for detailed examination ◦around a third of our Performance Audits and less than 1 % of the Audit of paragraphs. Even those selected are not always discussed and the arrears spill over to the next Committee. Since the term of the PAC is annual, more often, the new Committee prefers the current Audit Reports.

11. PAC discussions Even though a small sample is picked up by the PAC for detailed examination, oral evidence is not completed in all these cases The inability to examine all the paras included in the Audit Reports is a serious matter and it would abridge control of the Parliament over the Executive. That certain category of reports, such as Report on State Finances (Report No. 1) are invariably not picked up for discussion.

12. Regularisation of excess expenditure PAC has an important role to play in the regularisation of excess expenditure. If case of excess over authorisation, the Committee after examining makes such recommendations as deemed fit. Such excesses are brought up before the House by Government for regularization in terms of Article 115 of the Constitution. To facilitate speedy regularization of such excess expenditure by Parliament, the Committee presents a consolidated report relating to all Ministries/Departments in advance of other reports

13. Excess expenditure regularisation Excess expenditure amounting to Rs. 2, 17,090 Crores is yet to be regularised by the PACs of the states. Most of the states show pendency in regularisation of around 8-10 years. Out of this, the state of J&K alone has not regularised an amount of Rs. 94939.74 crores from 1980-81. Thus the scheme of accountability as is in the Constitution has been diluted considerably.

14. Paragraphs not selected for examination The paragraphs referred to the ministries for furnishing notes, vetted by audit, showing remedial/ corrective action. These ATNs are to be submitted to the Committee within four months of laying of the Audit Report in the Parliament. Within these 4 months, the ministries are to send the action taken notes to the PAC Secretariat after these are duly vetted by audit Paragraphs not accepted are supposed to be examined by PAC, but that doesn’t normally take place

15. PAC is ordinarily concerned with the pendency and delay in the submission of ATNs on CAG paragraphs and ATRs in respect of PAC recommendations. There is not much acknowledgement of the changes made in compliance to audit observations/ recommendations included in the Audit Reports The rigour of examination and qualitative follow up is not available for the PAs and paragraphs not selected by the PAC, with the focus primarily being on timeliness of response rather than corrective action on the observations and recommendations

16. Poor follow up of ATNs Monitoring of ATNs is also not very encouraging, even in monetary terms: ◦As of 31.07.2014, ATNs in respect of 563 audit paragraphs (non selected paragraphs, ranging from 1991 to 2013) were pending for submission to the PAC at the Union level. Out of these 563, ATNs in respect of 91 paragraphs have not been received even for the first time within the time frame of four months. Even when these are submitted to the PAC, there is no follow up on the commitments made in these ATNs. The situation in the states is similar, if not worse: ◦ At the end of March 2013, 10,476 ATNs were awaited at the State level.

17. Poor follow-up of ATNs A review shows that response to the CAG paras is qualitatively different from the response to the PAC paras. Mostly, vague commitments and evasive replies are given by the management to review the deficiencies by appointing a committee, forming a task force, issuing guidelines and circulars, promises to hold regular meetings. Due to time constraints and our focus on producing the next years’ Audit Report, offices generally accept the promises in the ATNs without verification at that point of time. After the vetting remarks are given by the field office on the ATNs, the details of remedial action taken are neither compiled nor followed up by that office

18. Follow-up Audit No perceptible review is done in audit for the qualitative changes made or proposed to be made as a result of the observations/ recommendations of audit. Due to time constraints we have to vet the remedial action taken within a fortnight/ month, we do not devote sufficient time and resources for follow up. Field offices generally accept the ATNs without verification at that point of time. An urgent need was felt to initiate follow-up audit to capture the impact of audit and also to ensure that the departments pursue implementation of the recommendations expeditiously.

19. Follow-up audits Follow up of Audit paragraphs may be made only in selected cases where there is an implicit or explicit recommendation on instituting a control or other corrective action by the government. Follow up in case of Performance Audits may essentially concentrate on the status of implementation of the accepted recommendations contained in these reports. The purpose of doing follow-up is to identify how well auditee has implemented the changes they promised to do when they responded to recommendations in Audit Reports and subsequent commitments made in the ATNs It has been decided from the current audit plan to carryout one important follow- up audit in the form of a PA, of previous audit done on the same topic a few years back.

20. PAC – a State experience

21. PAC – Kerala Experience The Kerala Legislature constituted three committees: ◦Public Accounts Committee ◦Committee on Public Undertakings (CoPU) ◦Local Fund Accounts Committee (LFAC) consisting of MLAs to examine the audit paras printed in the Audit Reports. All the paragraphs in the printed Audit Reports are discussed by the respective Committees. They will collect evidence from the Secretaries concerned and other officers and suggest recommendations for the rectification of the deficiencies pointed out in the Reports.

22. PAC – Kerala Experience Remedial Measures taken statements on audit reports are to be forwarded by the Administrative Departments for vetting by AG within two months of presentation of the Audit Report in the State Legislature. PAC Section in AG office prepares MIP and forwards sufficient copies to the Committee for being used in discussion. The PAC Section in the Legislature prepares the schedule for discussion and the discussion will be held in accordance with the schedule. On completion of the examination of the witnesses from the departments the reports will be prepared by the Committee and audit will verify the report. The verified report will be printed by the PAC section of the Legislature and place it in the Legislature.

23. PAC Kerala Experience Once the report is placed in Legislature, the recommendations of the Committee will be intimated to the Department concerned by the Legislature Secretariat for execution and compliance. Action taken on the recommendations will be reported to AG for vetting and forwarded to the Legislature Secretariat for presentation to the Committee. The notes are taken for discussion before PAC and the Committee recommends for regularisation if the notes are approved.

24. PAC Kerala Experience The Committee discusses the action taken statement and if they are satisfied, the statement of action taken on the recommendation will be accepted. Otherwise further recommendation will be made and it will be intimated to the concerned department for compliance. This process will be continued till the PAC accepts the action taken statement by the Departments. This is being monitored by PAC section in AG office and the Legislature Secretariat.

25. Monitoring of the process Apex Committee Meetings are conducted by the Chief Secretary once in six months. The matter related to Audit/PAC paragraphs and further recommendations are discussed along with progress of action taken. Further Audit Monitoring committees are conducted quarterly by the Secretaries. For all these meetings representatives of our office attends the meeting. In Kerala the position of Civil reports discussion by PAC is pretty current – presently 2012-13 AR is being discussed ……only 2013-14 is pending The position of Local Bodies Committee discussion is not as good and there is some pendency – one reason being the Committee also discusses the Director of Local Fund Audit’s Reports

26. Some recommendations for improvement Pursue the departments for furnishing replies through the Committees by conducting periodic Audit Monitoring Committee meetings. Intimate the department quarterly through DO from PAG of the details of pendency in clearing recommendations. Request the Committee Chairman to give instructions to the department Secretaries during PAC/CoPU/LFAC meetings to furnish replies to the recommendations of the Committee. Request the Chairman to convene a special meeting of departmental Secretaries for those departments with maximum number of pending recommendations.