INTERNATIONAL CENTRE FOR AUDIT OF LOCAL GOVERNANCE (iCAL)

TAG: GS 2: GOVERNANCE

THE CONTEXT: On July 18, 2024, the Comptroller and Auditor General (CAG) of India inaugurated the International Centre for Audit of Local Governance (iCAL) in Rajkot, Gujarat.

EXPLANATION:

• This institution is the first of its kind in India and aims to set global standards for auditing local governance bodies.
• It is located in the office building of the Accountant General (Accounts & Entitlement and Audit-1) in Rajkot.

Objectives and Functions of iCAL

• Empowering Local Government Auditors:
  • iCAL will serve as a collaborative platform for policymakers, administrators, and auditors linked with local governments.
  • Its primary objective is to empower auditors, executives, and elected representatives of local governments through training and leadership development initiatives.
  • This empowerment is essential for improving financial performance assessment, service delivery, and data reporting.
• Enhancing Independence and Excellence:
  • The centre aims to enhance the independence of local government auditors, ensuring they can effectively perform their roles.
  • By promoting best practices and providing capacity-building resources, iCAL will act as a centre of excellence and foster high standards in local governance auditing.
• Knowledge Sharing and Capacity Building:
  • iCAL will function as a knowledge centre and think tank, addressing governance issues at the grassroots level across nations.
  • It will organize interactive workshops, knowledge-sharing sessions, and peer exchanges, facilitating the dissemination of best practices in local governance auditing.
• Structure and Leadership
  • The Principal Accountant General (Audit-I) of Gujarat has been given additional charge by the Director General of iCAL.
  • This leadership structure ensures that the centre is managed by experienced professionals with a deep understanding of local governance auditing.

Auditing Local Bodies in India

• Three-Tier Governance Structure:
  • India’s governance structure consists of the Union or Central government, state governments, and local bodies at urban and rural levels.
  • Rural areas have Panchayati Raj Institutes (PRIs), such as village panchayats, taluka (block) panchayats, and district panchayats, while urban areas have Urban Local Bodies (ULBs), such as municipal corporations and municipalities.
• Role of ELFA and CAG:
  • Local bodies are responsible for maintaining their accounts.
  • Many state governments have an Examiner of Local Fund Accounts (ELFA) or Director of Local Fund Accounts (DLFA) to audit these accounts.
  • For example, in Gujarat, ELFA operates autonomously under the finance department, auditing the utilization of state-granted funds to local bodies.
  • The CAG conducts fund audits at all governance levels and provides technical guidance and support to ELFA or DLFA, supplementing their work.

Need for iCAL

• Growing Demand for Proper Auditing:
  • India has around 2.5 lakh panchayats and 8,000 ULBs.
  • With a significant flow of funds to these local bodies, proper auditing is increasingly needed to ensure transparency and accountability.
  • The CAG emphasized the importance of promoting global good practices in local governance auditing.
• Addressing Funding and Utilization Issues:
  • Despite the substantial flow of funds, local bodies often face funding availability and utilization challenges.
  • A 2022 report from the Reserve Bank of India (RBI) highlighted that many municipalities prepare budgets and review actuals against budgeted plans but need to use audited financial statements for effective balance sheet and cash flow management, leading to inefficiencies.
• Global Collaboration and Best Practices:
  • There must be institutionalised collaboration among Supreme Audit Institutions (SAIs) and with international audit organisations to share best practices, exchange knowledge and experiences of global auditors
  • Sharing best practices and exchanging knowledge and experiences with global auditors can significantly improve local government audit practices.

Vision for iCAL

• To effectively navigate the complexities of auditing local governments, auditors and local government employees must build up the capacity to enhance their understanding of financial management practices and internal controls.
• Open communication channels with local government officials can facilitate the audit process, improve data accessibility, and foster cooperation in addressing audit findings.
• iCAL aims to support local governments in effectively fulfilling their roles, thereby contributing to sustainable development and improved governance at the grassroots level.
• The establishment of iCAL marks a significant step towards achieving these objectives, aligning with the broader goals of enhancing transparency, accountability, and good governance in local bodies across India.

SOURCE: https://indianexpress.com/article/explained/centre-audit-local-governance-gujarat-9460978/