Cancerous Corruption
In a mock trial, despite repeated questioning by the
prosecution attorney on his accepting slush money to compromise a case, a
witness maintained a stoic silence. When the judge asked him to reply to the
question, the witness replied that he thought the attorney was talking to the
judge.
Global phenomenon :
Corruption is as old as modern civilisation and has made
Bofors, 2G auctions, IPL and Commonwealth Games household names. Presently,
corruption has hogged the limelight in the country because of the sheer
magnitude of the amounts involved. It is anybody’s guess that the revenue
deficit of India would have reduced substantially had a major portion of the
money above been routed through normal channels and taxes paid on them. The
phenomenon is universal as evidenced by the statistic that over a third of the €
35.5 billion allocated by the European Union in 2009 for regional infrastructure
projects were affected by errors either unintentional or by fraud. In EU new
member state Romania, journalists have uncovered that two cross-border centres
funded with over € 840,000 are actually being used by regional authorities for
private parties and weddings. The role of auditors in tackling corruption has
been debated for long, but nothing concrete could be legislated due to the
specific nature of an auditors’ responsibility (commenting on the accuracy of
the financial statements) and the fact that the financial statements audited
would inevitably be post the corruption event. A Corruption Audit seems
necessary and inevitable.
Corruption Audit :
A Corruption Audit should be distinguished from a Forensic
Audit, which is a specialised branch of audit that principally covers fraud and
the findings of the audit are courtworthy. The common purpose of both the audits
is to ensure that the economic resources of the entity are not misused for the
personal benefit of either insiders or outsiders. The Institute of Internal
Auditors (IIA) has a publication on Corruption Audit. The publication lists 10
indicators of corruption- general administration, procurement, capital works,
human resource management, privatisation, ministries, government departments,
revenue collecting departments, the judiciary and education. Specific names can
be assigned to each of these indicators in India. In the criteria for Corruption
Auditing, the publication lists procurement of goods and services, consultancy
services and spaces on lease as significant areas. A Corruption Opportunity Test
(COT) is performed on the criteria and indicators to hone specific areas. Just
as in a normal Internal Audit, a detailed audit programme is prepared. A
Corruption Audit is executed with the assistance of a lot of surveys — client
surveys, public surveys and employee surveys being popular methods. The
International Organisation of Supreme Audit Institutions (INTOSAI) has been
active in building anti-corruption awareness, but the sheer scale of the problem
and the fact that they focus on Government Audits ensures that these measures
take time to fructify. The Corruption Audit Report would highlight specific
areas that are prone to corruption and would provide recommendations to prevent
recurrence. A Corruption Audit would be the responsibility of the Internal
Auditor who has the time and resources to scale up his audit to meet these
specific requirements. The audit would draw upon the existing policies of the
company such as whistle-blower policies, employee and contractor referral
procedures and past experience in dealing with outside agencies and specific
issues therein. The critical part of the audit would be to ensure that such
policies are drafted, implemented and made to work. The findings of the audit
could throw up specific names or departments that are parties to transactions.
To make such audits work, it would be imperative to question and initiate action
against confirmed cases of corruption and make the findings public.
Tackling Corruption :
The Comptroller and Auditor General of India in collaboration
with the Institute of Chartered Accountants of India could consider introducing
Corruption Audits in select entities and for specific projects. Like dope tests
on athletes, they should be surprise forays and should be conducted on all
participating entities. History has taught us that corruption-prone areas are
government tenders, large contracts, auctions and bidding processes. The results
of such an audit could be noteworthy.
A whistle-blower policy on corruption can be thought of as a
remedial measure. Corruption invariably involves two or more parties and is
contractual in nature. Being contractual, there could be individuals or persons
aware of the contract who could be rewarded for whistle-blowing the deal.
Chartered Accountants constitute a key part of the service
economy of India and could be privy to a lot of information on dubious
contracts. They would be under pressure to be a part of the contract or give
their assent to it. They should resist the temptation to succumb and lodge their
disagreement in writing. There could be uncomfortable and embarrassing moments
the first time, which if overcome, will yield tangible benefits over the long
term.
Eradicating an issue that gives the Indian economy a run for its money could
take time, effort and persistence. The key is to make a start.
Extract from the Address by the President, Pratibha Patil, to
the Parliament on 21st February 2011.
Hon’ble Members,
12. Our citizens deserve good governance; it is their
entitlement and our obligation. My government stands committed to improving the
quality of governance and enhancing transparency, probity and integrity in
public life. A Group of Ministers is considering all measures, including
legislative and administrative, to tackle corruption and improve transparency.
The Group will consider issues relating to the formulation of a public
procurement policy and enunciation of public procurement standards, review and
abolition of discretionary powers enjoyed by Ministers, introduction of an open
and competitive system of exploiting natural resources, fast-tracking of cases
against public servants charged with corruption, and amendments to the relevant
laws to facilitate quicker action against public servants. It will also consider
issues relating to the state funding of elections. The report of the Group of
Ministers is expected soon. A bill to give protection to whistleblowers has been
introduced in Parliament. My government has also decided to ratify the United
Nations Convention Against Corruption.
13. The subject of electoral reforms has been de-bated over the years. I am sure that all parties across the political spectrum support the need for bringing about such reforms. I am happy to share with the Hon’ble Members that my government has constituted a committee on electoral reforms to fast-track the process. The committee has held regional conferences with the concerned stakeholders. This will culminate in a national conference in April this year. It is expected that this process of consultation would lead to a consensus on an acceptable agenda of reforms.
14. My government attaches high priority to improving the delivery of justice and reducing delays in the disposal of cases. The details of the National Mission for Delivery of Justice and Legal Reforms are expected to be finalised soon. This should result in re-engineering of procedures, improving of human resources in this sector and leveraging of information technology. The Judicial Standards and Accountability Bill, already introduced in Parliament, is intended to enhance the accountability of the judiciary, thereby improving its image and efficiency.
Hon’ble Members,
15. The issue of black money has attracted a lot of attention in the recent past, especially that allegedly stashed away in foreign banks. The government fully shares the concern about the ill-effects of black money whether generated by evasion of taxes on income earned legitimately or through illegal activities. My government stands committed to tackling the menace frontally. It requires diligent, sustained effort by all law enforcement agencies, including those of state governments.
16. My government has taken many steps to strengthen the legal framework, build new institutions, and improve capacity to tackle this problem. A multidisciplinary study has been commissioned to study its ramifications for national security and recommend a suitable framework to tackle it. The government is also working closely with the international community, especially through the G-20, to expedite the process of identification and recovery of such money. India is now a member of the Financial Action Task Force in recognition of its anti-money laundering and anti-tax evasion measures. India has also gained membership of the Eurasian Group and the Task Force on Financial Integrity and Economic Development. My government has taken steps to facilitate exchange of information for tax purposes with such countries and entities where Indian citizens may have parked their money. The early results have been encouraging. These steps have led to additional collection of taxes of Rs. 34,601 crore and detection of additional income of Rs. 48,784 crore. My government will spare no effort in bringing back to India what belongs to it and to bring the guilty to book.
