Strengthening public finance: How can CAG office become a game changer

Office of the Comptroller & Auditor General (CAG), also known as the Supreme Audit Institution (SAI) of Bangladesh, is a constitutional body and its establishment, functions and mandate are defined in the articles 127-132 of the Constitution. CAG generally functions as an oversight body responsible for auditing public resources, promoting transparency, and ensuring accountability in public administration.

The CAG is mandated to audit the public accounts of the republic including all courts of law, all authorities and officers of the government and submit reports to the President, who sends them to parliament through a procedure. The Public Accounts Committee (PAC) of parliament scrutinizes the CAG audit report, recommends action and thus ensures accountability of the executives regarding management of public finance. 

The PAC conducts meetings, some sort of hearing sessions subpoenaing the secretary, i.e., Principal Accounting Officer and designated officials of the audited ministry or department. The parliamentary body asks for clarifications of the audit findings and issues rulings in cases where it does not get satisfactory answers. CAG along with his senior officials attend such meetings and acts as an assurance provider of the PAC, ultimately the parliament. The exercise yields effective results in most cases in ensuring transparency in government expenditures and making the officials concerned accountable, and helps check misuse of public money. The Public Accounts Committee can recommend punitive steps in case of any gross financial irregularities, which may later be taken over by anti-corruption or relevant authorities.

At present CAG operates through 17 audit directorates, each overseeing accounts and expenditure of several ministries and government departments. Till today in Bangladesh CAG audit focusses mainly on compliance issues such as whether proper rules have been followed, if delegation of financial powers under the government's procurement rules has been violated, if officials concerned operated within their limit as permitted by laws. But CAG has many more aspects to look into. For example, it is supposed to undertake performance or value-for-money audit to see economy, efficiency and effectiveness aspects. It is a result-oriented audit to see how much government systems, operations, programs, activities or organizations are operating with the principles of economy, efficiency and effectiveness. 

Sadly speaking, we are far behind in performance audit compared to developed countries, even with neighboring and Asian countries as well.  We will not be able to add desired value to public sector auditing until we can increase the scope of performance audits. The practice has, however, started, but not at the pace that it should be and has not yet expanded to all government departments. CAG office has a lot to improve in this area. However, it should be clear that though performance audit follows the principle of economy, efficiency and effectiveness, it does not exclude any compliance, financial, fraud and corruption issues.

The CAG office has a great role to play in scrutinizing accounts and expenditure of high-spending ministries such as local government, roads and highways, department of primary education, public works, health, railway etc. Most of the large projects of the government are being implemented under these ministries or departments. The Roads and Highways Department alone is implementing several mega projects. But whatever project audits are being done by CAG office, those are still compliance-focused except carrying out financial audit of projects and programs funded by the development partners to meet their own requirements, which is performed by Foreign Aided Projects Audit Directorate (FAPAD) under Office of the CAG.  Project audits must follow a different methodology throughout the implementation cycle, starting right from estimation to end result whether projects are completed with maintaining quality, optimizing cost, managing time overrun and achieving project objectives. Without a performance focused audit approach these factors cannot be achieved. 

Risk in big projects has its roots right from the designing stage. If the design is not done correctly, it would lead to cost escalation and reduce the rate of return. There is scope to see if the estimate or feasibility was done properly, procurement process was followed as per guidelines. The CAG office scrutinizes these issues now, but there is scope to add more value to the work, especially in the case of mega projects.  

We see chronic delays and cost overruns in implementing projects under the Annual Development Plan. There are reasons such as delay in land acquisition, which is cumbersome. Delay in selecting right contractors, engaging less efficient subcontracts, changing designs in the midway and adding new components, and above all lack of appropriate training of project directors--- all contribute to project delays and cost escalations. 

Project management efficiency is crucial to check wastage of public resources and ensure intended public benefits on time. Here the government may take advantage of the local pool of trained project management professionals. Implementing agencies can outsource these professionals. Not necessarily project directors would come from government offices only. They can be hired from the private sector to improve professional efficiency. We are doing similar practices under the public-private partnership scheme. The same is true for financial management in development projects. 

Another aspect is technology. Most of the government services such as national ID, land management, public procurement system, accounting and payment system etc. are provided now online. While digitalization of these services has many benefits, they put security of personal, national and organizations' internal data at high risk. The CAG office should now turn its focus to protect digital data security since cyber security is a growing concern now in Bangladesh as it is worldwide. It is now a global top risk and CAG, through an IT audit directorate of its own, should be fully equipped to deal with this issue and fill the gaps of necessary skills and resources. 

The CAG office should have sufficient audit personnel holding internationally recognized professional qualifications such as Certified Information Systems Auditors (CISA), Certified in Risk and Information Systems Control (CRISC), Certified Internal Auditors (CIA), Certified Fraud Examiner (CFE), Project Management Professionals (PMP) and relevant accounting and audit qualification to deal with the complex technological and technical issues in coming days. Technologies like artificial intelligence (AI), robotic process automation (RPA), business process management, data analytics, blockchain etc, are impacting our working practices, and auditors need to adopt this transformation, otherwise they will be outdated and unable to perform technology driven audit. 

Media i.e., public attention of CAG report is also needed to make the report impactful in a democratic system, where people have the right to know how the public funds are being spent, and where wastage and misappropriation are happening. Unfortunately, in Bangladesh we don't have such a system except tabling the report to the parliamentary committee. There are little instances that CAG reports are discussed in the Parliament and published in the media. In India CAG audit report has its own strength. Such reports can generate huge debates in the news media there and in such an instance, one federal minister had to resign a few years back when CAG report blamed the minister for the loss of Rs 1.76 lakh crore to state exchequer.  It has been a convention there to meet the press by CAG himself once audit reports are tabled into the parliament, and findings are highlighted in the media with great importance. 

The CAG office in Bangladesh can also take such initiatives so that its reports reach the people widely and can create public pressure on the relevant authorities to take prompt actions against major violations. It should be made mandatory for ministries and government departments to comply with the CAG audit observations and take actions accordingly. This will help CAG reports make a more visible impact on transparency in utilizing `public fund.  It is not an issue of giving more power to the CAG office, it is about making the office more effective. Unfortunately, punitive actions against any authority based on audit objections are quite rare in Bangladesh, except for trivial actions such as suspension of pension. It is not legally mandated to take any action against anybody, though some supreme audit institutions in some countries, where court system of audit exists, can exercise judicial or quasi-judicial powers to take punitive steps like imposing fines or penalties or recovery of public funds.  

Specific data on the total amount of money recovered as a direct result of CAG audits is not readily available. But individual audit reports highlight significant financial discrepancies and, in some cases, the Anti-Corruption Commission (ACC) files case against the embezzler based on CAG report. To make the audit findings really effective it is important that there should be a coordination between ACC and CAG, who are working with the similar objective, to prevent misuse of public funds, to curb the fraud and corruption and ultimately to establish transparency and accountability in the country. 

Indeed, it is the right time to make the impact of the CAG audits widely felt. Since an elected parliament does not exist, public accounts committee is not there now. In such a situation, if any CAG report is published, it may be left largely unnoticed. During this parliamentary vacuum, CAG reports should be made automatically binding for ministries and departments to address the audit recommendations and take actions. If they are legally bound, the government offices can address the audit issues without waiting for the parliamentary body to tell them to take action against any financial corruption. 

Despite the limitation, there are commendable successes in government payment systems. For example, public pension management has been fully digitalized, which ensured transparency as well as hassle-free service delivery. It has reduced long queues and harassment as well as corruption in pension management. Pensioners now get payment of gratuity and pension through electronic fund transfer (EFT). Similarly, salary and other allowances of government employees and many other public payments are made through EFT straight to the recipients' bank or mobile financial service accounts. Automation is important to reduce hassle and corruption and enhance efficiency in service delivery.  If we can improve and expand it further, it will bring in more transparency and fairness in public finance. 

In conclusion, external audits alone cannot make public finance transparent. Every public office needs to have a strong internal auditing system. The Finance Division has taken up an initiative to improve internal audit in government offices. The pilot scheme has already started in five high-spending ministries. All sorts of expenditures, including projects, programs and revenue, will come under internal audit. In fact, the focus of internal audit includes any area of an institution, such as risk management, governance, internal controls, compliance, operational efficiency, information systems, fraud and corruption, culture, and many more. That is to say, where there is risk exposure there is internal audit, i.e., risk-based internal audit. Internal audit can promote ethical practice and compliance within institutions. If put into regular practice, the internal audit will be one step forward to bring transparency and accountability in utilizing public fund and ensuring good governance in Bangladesh. 

The external auditor or CAG office should also promote internal audit for achieving better results in the public sector. If internal audit is effective, CAG office can also reduce its tedious burden of numerous audit observations and focus on the more challenging issues of public interest. Together they can change the existing culture and make the public sector more people-centric, performance-focused, trustworthy and free from fraud and corruption.  Ultimately the job of the CAG office as a financial watchdog will become much easier.

The author is a former controller general defence finance