Chapter 6 - Indian Audit and Account Service (IAAS) | A Bouquet of Services by IPS Lohit Matani and IPS Vishal - UPSC PDF Download

Indian Audit and Account Service (IAAS)

Contributor: Mr. Raj Kamal Ranjan, IAAS 2015 Batch

6.1 Cadre Structure and Overview

The Indian Audit and Accounts Service (IAAS), a formalized civil service (Group A) of the Union of India, forms the middle and top level management of the organization, through which the Comptroller and Auditor General of India (CAG) exercises its mandate. The lower level comprises of Officers of Group B and below. The three levels together form the Indian Audit & Accounts Department (IA&AD).

The Constitution of India defines the basic structure of the institution of the CAG of India – that the CAG of India is an independent constitutional authority who is neither part of the legislature nor executive. The CAG is the audit authority for the States and the Union of India and the accounting authority for the States. This mandate of CAG of India passes onto the IA&AS which performs the compilation of accounts for states, and audit for both, the states and the centre.

The service can be divided into officers looking after State accounts and the officers at Headquarters. The state accounts and audit offices are headed by Accountants General or Principal Accountants General. The equivalent officers at the Central level are Principal Directors (PDs) or Directors General (DsG). The PDs and DsG report to Additional Deputy CAG or Deputy CAG. The Deputy CAGs are the highest-ranked officers in the service.

CAG is the cadre controlling authority of IAAS.

6.2 Roles and Responsibilities

An IAAS officer performs the following roles and responsibilities:

I. Audit Functions of Government Bodies:

IAAS officers help the CAG in conducting the following audits at the Central and State level:

1. Receipts and expenditure of the Union and the State Governments accounted for in the respective Consolidated Funds.
2. Transactions relating to the Contingency Funds (created for use in emergency circumstances) and the Public Accounts (used mainly for loans, deposits and remittances).
3. Trading, manufacturing, profit and loss accounts, balance sheets and other subsidiary accounts kept in any Government Department.
4. Accounts of stores and stock kept in Government organizations, Government companies and Government corporations whose statutes provide for audit by the CAG.
5. Authorities and bodies substantially financed from the Consolidated Funds of the Union and the States.
6. Any authority or body even though not substantially financed from the Consolidated Fund at the request of the President of India or the Governor of a State.
7. Accounts of bodies and authorities receiving loans and grants from the Government for specific purposes.

II.Audit Functions of Government Companies

In government companies (companies in which the share of government companies is more than 51%), CAG advises for the appointment of Chartered Accountants (CAs) for their audit. IAAS officers give direction to these chartered accountants on the manner in which the audit should be conducted. They can also intervene and conduct the audit of such companies and their audit report is tabled in the parliament and state legislative bodies. IAAS officers form Audit Boards for periodically appraising the working of such government companies or Public Sector Undertakings (PSUs).

Office of the AG (Audit) is in charge of auditing the activities of the State Government, while the Office of Principal Director (Audit) takes care of auditing the activities of the Central Government. Each state has an Office of the AG (Audit), while the Office of PD (Audit) is located region wise, which may contain more than one state.

III.Account Functions

IAAS officers help the CAG in laying down the general principles of Government accounting and broad principles applicable to audit of receipts and expenditure. They also help the CAG in ascertaining and certifying the net proceeds of taxes levied and collected by the Union Government but assigned to States or distributed between the Union and the States.

IAAS officers compile the accounts of all State Governments except Goa. In the States they function under the office of Accountant General (Accounts and Entitlements).

IV.   Functions Related to Salary

IAAS officers authorize the salary and allowances to officers of a few State Governments.

V. Pension Related Functions

IAAS officers authorize the payment of pension and other retirement benefits to the employees of most of the State Governments and Union Territories and maintain their Provident Fund Accounts.

VI.   Audit Reports

IAAS Officers bring out a number of audit reports relating to a number of Central and State Department. In these reports, they communicate their major findings and observations. These reports are submitted to the President or Governors for being laid in the Parliament or State Legislative Assembly, respectively.

VII. Other Functions

Officers of IAAS perform the following other functions:

1. They perform gazette entitlement for the All India Service officers belonging to a particular State.
2. They also work as Financial Advisers to the Government of India.
3. They conduct scrutiny of intricate contracts, understanding of tax and revenue laws, and assessment of the financial health of commercial corporations.

6.3 Normal Growth Profile

We will be discussing about the various career opportunities an IAAS Officer has in a separate topic. However, this topic only deals with various ranks an IAAS Officer holds during his professional life. These ranks are held when he/ she is working in his/ her main line department.

6.4 Recruitment

The recruitment into IAAS happens through two channels:

1. People are inducted into IAAS after qualifying in the Civil Services Exam conducted by UPSC.
2. The Group B Officers of Indian Audit and Accounts Department (IAAD) are promoted to the IAAS grade after 8-10 years of service.

6.5 Training

The training structure of the IAAS is divided in to the following stages:

On-the-job part of training, which lasts for around eight months, attempts to bridge the gap between theory and practice. The officer trainees are attached to offices of the Accountants General in various states. The training is divided into separate audit and accounts & entitlements components. It is an opportunity for hands on learning as the trainees are exposed to the functioning of all divisions and levels of the office and administrative and personnel issues. They are assigned specific responsibilities such as heading audit parties and acting as Branch Officers and Assistant Public Information Officers.

In the Phase 2, the officer trainees return to the academy to share their experiences and to brain storm creative solutions and innovative ideas to tackle field issues. The overseas attachment is a component of Phase II where the trainees are sent on a study to institutions like NAO (United Kingdom) in order to widen their horizons and enrich their knowledge while gaining an international perspective.

In Service Training: Academy organizes training courses for serving IA&AS officers based on the outcome of an elaborate annual training needs analysis carried out by the Academy on the basis of information gathered from officers, their supervisors and the strategic plan of IA&AD. Some of the standard courses conducted by the Academy include courses on Financial Attest Audit, Performance Audit, Auditing/Accounting Standards, Detection of Fraud, Information System Audit and Data Analysis, Risk Analysis Methods, Statistical Sampling including Data Downloading & Analysis, Improving Governance through Accountability, and Basics of Engineering for Audit etc.

6.6 Variety of Opportunities for IAAS Officers

Apart from the usual work profile in the State government, IAAS Officers have ample opportunities to serve in organizations of State, national as well international level.

6.7 Perks and Privileges for IAAS Officers

IAAS Officers are given the following facilities to serve the public without greed and diversion:

1. IAAS officers work under a constitutional body (CAG), which makes it aloof from any undue political interference.
2. IAAS is known for most timely promotions among all civil services.
3. During their auditing functions, IAAS officers get an opportunity to work in close contact with all the departments of the Government. This happens because they audit and oversee the performance of all the departments and organizations.
4. It is a knowledge oriented service. Officers are valued in the bureaucracy for their multi-faceted experience and expertise in the area of audit, accounts and finance. Government supports officers to regularly obtain advanced certifications in diverse and relevant courses.
5. The plethora of work involved has made the service refreshing and challenging.
6. It is an employee friendly service. It allows an optimal work life balance.
7. IAAS officers get continuous exposure to international assignments. Only after 7 years of their service, IAAS officers get opportunity to serve in several international organizations. Some of them are mentioned in the previous topic.
8. CAG of India is globally acknowledged for its auditing functions. Thus, IAAS officers remain in great demand for auditing many world level international bodies.
9. IAAS is a unique service which observes the working of organizations at international, national, state and district level.
10. Officers of IAAS get numerous after retirement work opportunities in private sector organizations. They get an opportunity to become permanent employees of UN organizations after retirement.

6.8 Occupational Hazards

The IAAS officers complain that their service does not has the type of charm and fame like that of All India Service. Secondly, an officer requires to constantly update his/ her knowledge to excel in this service. Thus, officers not having a bent towards gaining regular knowledge suffer in this service. Thirdly, the service has lesser role in implementation of decisions and schemes. Their role is largely restricted towards finding faults in the implementation of other agencies. Fourthly, the amount of success an audit report receives depends on the mercy of the Public Accounts Committee (PAC). Thus, the result of the hard work of IAAS officers is sometimes contingent on the interest shown by PAC.

6.9 Case Studies indicating the work life, challenges and dilemmas faced by an IAAS Officer

6.9.1 Paddy Scam of Bihar

In Bihar, the process of procuring and distributing paddy is controlled by the Bihar State Food and Civil Supplies Corporation Ltd. (BSFC). BSFC procures rice from the farmers at the Minimum Support Price (MSP). It then gives this rice to various rice mills for processing. The processed rice is given to the Food Corporation of India for distribution at the Fair Price Shops.

There were media allegations that a high amount of rice is diverted to the open markets and the poor people were not receiving the benefits of the above process. CAG decided to conduct the audit of BSFC on the basis of these allegations. On the basis of their audit, the IAAS officers came out with the following points:

1. Paddy worth Crores of rupees were given to rice mills only at the security deposit of Rs. 50,000. This security deposit was not proportionate to the paddy allocated to the mill.
2. Many of the rice mills were ghost rice mills which existed only on paper and not on ground. Paddy was allotted to them as well.
3. False land receipts were prepared to show the ground presence of these rice mills.
4. BSFC over procured paddy from farmers. This was not distributed among the existing rice mills. This led to a loss of greater than Rs. 250 crore of paddy as wastage. Moreover, gunny bags worth Rs 65 crore were wasted and proportionate amount for payment and logistics was shown to be spent.
5. The BSFC did not procured paddy directly from the farmers but through certain middlemen. Thus farmers also did not receive the actual value of MSP.
6. IAAS officers found a deep government officials- rice mill nexus in looting the exchequer in the above manner.
7. An estimated loss of Rs 70 crore took place in one district. It was estimated that Rs 480 crore loss took place in the state of Bihar.

While preparing the report on the above points, IAAS officers faced pressure from various directions to under report their findings in the report. They were also pressurized to show that the loss is not due to deliberate malpractice but due to global economic and technical reasons. They were also pressurized to not take the name of individual officers but to blame BSFC as a whole.

Q: In the above case, what were the grey areas where the authorities had discretionary powers? Why such discretionary powers often lead to corrupt malpractices? Analyze the above case of paddy scam and point out the lacunae in the system that allowed this scam to develop. What pressures IAAS officers face in general while working? Explain them. How can these pressures be overcome?

6.9.2 Tractor Scam

IAAS officers were able to detect a tractor scam in Bihar on the basis of their diligent auditing techniques. The Government of Bihar provided subsidy for the purchase of tractors by the farmers and the poorer sections of Bihar. Various departments were involved in the process of purchase of subsidized tractors.

Regional Transport Office (RTO) was involved in the registration of the purchased tractors. Banks were involved in providing subsidy on these tractors. District Administration was involved in giving sanction to the applications submitted for the purchase of subsidized tractors. The process seemed robust as many departments were involved.

However, while auditing in one district of Bihar, the officers found that many tractors mentioned on paper were not bought actually. A lot of purchase was shown on the files kept in the District Collector’s office but there were very few tractors actually present in the village. When the officers went to the RTO office, they saw that registration was also given to these ghost tractors. When they went to the banks, they saw that 5 subsidies were given on a single tractor only.

The officers realized that the concerned officials from the District Administration, banks and RTO office have colluded to loot money from the Indian exchequer. The officers submitted their report. The report led to the suspension of the District Collector and many officials from banks and RTO office.

Q: What motivated the government servants for indulging in such malpractices? Why do we see nexus only in perpetrating bad motives and why not for perpetrating good motives? Can you recollect a situation where the government officials came together as a team to attain their good motives?

6.9.3 At the Mercy of Public Accounts Committee

One challenge that IAAS officers face is that the success of their audit reports depends on the mood and interest of the members of Public Accounts Committee (PAC) of the parliament and the state legislatures.

Each and every audit requires the same amount of efforts, whether it leads to a big scam or not. Mr. Avinash Rathi was posted as Deputy Director for auditing the departments of Bihar Government. He made a team to audit the agriculture department of the state. His team went to the field and did real hard work to collect important information. He used to take daily review of the team on their findings and used to direct them for the next day’s work. It also required a high number of inputs in terms of working hours, office resources, and travel and food allowance.

Moreover, being a third party, IAAS officers were not able to question the various officers of BPSC and agriculture department. They being experts in their fields were able to easily hide important information from the IAAS officers. Mr. Avinash was the in charge of only one district. After persistent hard work, he was able to detect a paddy scam of Rs 70 crore in his district. However, other district officers did not highlight any such scam.

After preparation of audit report, State PAC was not interested in it. It did not picked up important points from it. However, it was the good fortune of Mr. Avinash that Central PAC highlighted the findings of the audit report leading to a good debate in the parliament. The State PAC members were not that learned to understand and appreciate the findings by Mr. Avinash.

Q. On the basis of above case study, highlight the challenges that IAAS officers face in their job. What strategies can an officer adopt in order to highlight the hard work he has done while preparing an audit report?