Military reforms are just not about setting policies for the procurement and military structuring as much it is about suggesting systemic improvements towards establishing inherent efficiency of the entire logistics ecosystem; critical assessment of economy, efficiency and effectiveness of programs, systems, activities and procedures.
How does that work for the world’s second largest military? Also, at USD 76.6 billion, USD India’s military expenditure was the third highest in the world in 2021.
The size of the military and its staggering expenditure make the planning and management a complex task and much difficult to measure and audit its outcome. Until now the whole system worked only on the transactional values of the military expenditure—capital as well as revenues.
To address such anomalies, in a sweeping reform, Ministry of Defence (MoD) has brought in the new elements – Performance and Efficiency Audit– aimed at recommending systemic improvements.
On July 14, MoD issued an order to the Controller General of Defence Accounts (CGDA) to include performance and efficiency audits of the activities undertaken by the defence services and organisations.
The scope and the conduct of auditing based on “performance” and “efficiency”, for the first time, extend to capital equipment, weapon systems, and platforms.
It will measure and audit the objective and independent information, highlighting the shortcomings in planning, implementation, systems affecting outcomes in specific and quality of expenditure in general.
The Defence Accounts Department, headed by the Controller General of Defence Accounts is mandated to carry out internal audit of all expenditure and receipts besides accounting and payment functions. Secretary (Defence Finance) functions in the dual capacity of representative of Ministry of Finance in the field of Defence Expenditure and as Chief Accounting Officer for the Defence Services, discharging this responsibility through the CGDA. Controller General of Defence Accounts as chief of Internal audit support Defence Secretary.
How crucial is the role of this branch of audit is evident that various critical reports have often drawn maximum attention of the media and Parliament in the post 1990 era for some of the Audit Reports and paras presented to Parliament. In 1989, it was C&AG’s Report on Bofors that created a furor in press and Parliament. In 2001, it was C&AG’s Report on Kargil War purchases (Operation Vijay). Other Reports that drew widespread attention were: ‘Design and Development of Main Battle Tank’; Development of Multi Barrel Rocket Launcher System (the Report appeared in 1999); and Aircraft Accidents in Indian Air Force (Report of 1998).
Performance and Efficiency Audit in Ministry of Defence
In order to strengthen the Overall Internal Oversight and Risk Management Framework, it has been decided to broaden the present mandate of Internal Audit conducted by CGDA from the transaction-based compliance audit to outcome-based Performance/Efficiency Audit, aimed at recommending systemic improvements of a holistic nature.
The Scope and mandate of Performance and Efficiency Audit to be carried out by CGDA is outlined.
Performance and Efficiency Audit will be aimed at highlighting the shortcomings in planning, implementation, systems affecting outcomes in specific and quality of management in general. According to the statement in the Order issued, this will constructively promote economy, effectiveness and efficiency in governance by creating the necessary environment of accountability and transparency in the organization and ensure that the operations are effectively carried out through continuous improvement.
The greater aspect of such process is actually about moving beyond the confines of compliance and regulatory Audit.
Performance & Efficiency Audit will focus on objective and reliable examination of whether programs, systems, activities or organizations are performing in accordance with the pre-assigned roles/objectives and whether there is room for improvement.
The new dimension brought into the standard auditing practices will be a complex exercise especially in the world of military. As per the internal guidelines, the broad indicative areas will spill over the all aspect of defence procurement.
The auditing will incorporate the critical scrutiny of provisioning review exercise and provisioning cycle including assessment of optimum inventory levels, review of scaling & authorization, and also examination of all business processes involved in IT systems for handling logistics, inventory management, provisioning cum procurement and tendering prioritization of procurement.
The performance of various organizations handling provisioning, procurement, tendering and quality assessment will be scrutinized. The Efficiency audit will broaden the scope of contract management, inventory, Financial Planning & budget and processing, with an objective to improve the entire procurement and expenditure system
Another crucial aspect is the inclusion of maintenance and services of Platforms to ascertain the technical life of the Assets.
The mandate of audit further broadens towards the utilization of assets of all types constructed out of funds provided from the Consolidated fund of India
Who’s who in the Apex Committee (ACPEA)
Further, to make the Internal Audit mechanism more responsive and to incorporate a robust risk management framework for strengthening Internal Oversight, an Apex Committee on Performance & Efficiency Audit (ACPEA) has been constituted within the Ministry.
The Defence Secretary will chair the committee along secretary defence (Finance). The apex committee is constituted with the vice chiefs of the three services, chief of integrated staff committee (CISC), Director General (Acquisition), CGDA and DG (R&M) Defence Research and Development Organisation (DRDO). Other key members include additional Secretary, DMA and Additional Secretary, DoD.
|Secretary Defence (Finance) / FA(DS)||Member|
|Additional Secretary, DoD||Member|
|Additional Secretary, DMA||Member|
|DG (R&M), DRDO||Member|
|Additional CGDA||Member Secretary|
The auditing functionality
The main functions of Apex Committee on Performance & Efficiency Audit (ACPEA) involve the monitoring and taking actionable notes on Key observations of Performance Audit Reports.
The key element if such conduct is to identify the specific areas for the Performance and Efficiency audit. But the most crucial element is just not about the audit findings but recommend actionable measures to rectify the anomalies if there is any. Such findings will be presented to defense minister.
The objective is to strengthen the mechanism to address overall Internal Oversight and Risk Management Framework in defence procurement and related areas.
The complex framework
The detailed procedure and approach for carrying out such audit, including the broad structure of Audit teams will be worked out by CGDA. It will be a complex task.
Due to sensitivity considerations involved, Audit of Defence Services is somewhat different than other audits. The difference is not so much in regard to the audit procedures and systems but mostly in regard to audit response to the concerns of Defence Ministry regarding sensitivity of some audits.
Another special feature of Defence Audit Reports is that unlike the Audit Reports of other wings, no press briefs are issued in case of Defence Audit Reports.
While the Internal Audit Teams carrying out Performance and Efficiency Audit will have unfettered access to information, documents and files, the key challenge will be to assimilate the various intangibles.
This is indeed a much broader mandate for CGDA from its existing template of conducting transaction- based compliance audit.
For example, auditing military platforms for its performance and efficiency will require military experts at specific level; even the setting the elements and standards for the auditing of such systems and platforms will be a huge task.
According to CGDA, the frame work is being worked out and will be presented to the APEX committee to set the final guidelines to conduct audit on such parameters.
This mandate for audit in the Defence Accounts Department is derived from the Military Finance Department in India, which was working under the crown. The mandate as above includes audit of sanctions accorded by all authorities lower than Govt. of India including Services headquarters.