RAA Papers

Contents
PART – I

1. Introductory comments

2. Inspection Reports (IR)

3. Inspection Reports (IR)

4. Audit Recoveries Accounts (ARA) 

5. Audit Clearance (AC)

6. What ails the Public Service?

7. Accountability: better assurance

8. Recent Initiatives

9. Challenges for the Public Service

10. A Clean Public Service- Nation's PRI         

PART – II
Chapter I- PROPERTY ACCOUNTABILITY :

1. System of maintaining even a basic inventory

2. Practice or system of physical verification of properties

3. Proper and complete Handing/Taking over

4. The impact of pool vehicle reduction on treasury

5. Disposal of machinery in piecemeal to deceive accounting

6. Central Stores and obsolete inventories

Chapter II-
FINANCIAL ACCOUNTABILITY :

1. Culture of paying suppliers and contractors generously

2. Residential phone bills paid for by the office

3. Participation at National Sports Tournaments

4. Unauthorized credit sale and advances

5. Regular advances/credits made

6. Huge deviations in quantities of works executed

7. Irrational regularization of lapses

Chapter III- 
CORPORATE NON–CIVIL SERVANT ACCOUNTABILITY:

1. Considerable amount of Government Fund at the disposal of STCB

2. Norms for Subsidy to Corporations

3. Proprietary audits of public bodies

4. Competetative and Integrity

Chapter IV-  
REVENUE ACCOUNTABILITY:

1. Defaulting suppliers, taxpayers and contractors

Chapter V-
POCUREMENT ACCOUNTABILITY :

1. Unlicensed suppliers and contractors

2. The credential of the contractors and suppliers  

3. Patronize a select group of suppliers and contractors

4. Entertainment of false documents

5. Deliberate interpretation of the lowest bid

Chapter VI-
COORDINATION AND COOPERATION, OVERLAPPING AND REDUNDANCIES :

1. Revenue audits redundant

2. Overlapping and duplication of functions

3. Entertainment of TA/DA

4. Air Travel and Ticketing Irregularities   

Chapter VII-
GENERAL :

1. Education and Awareness Accountability

2. Under-utilization of our capacities

3. Copy Rights

4. Catering and Hospitality

5. R & D, Standards, BSR

6. Professionalism & Dedication

7. Private sector and Watchdog – Institutions

Chapter VIII-
 
CONCLUDING REMARKS

Auditor General's – Advisory Series – 2001

PART – I

1. Introductory comments: Setting the stage:

The Audit Inspection Reports (AIR) traditionally were transmitted to the Auditee and organization concerned. Some are acted upon and in most of the cases they appear to have been shelved by the Administration and Finance Divisions (AFD) etc. In many cases they were guarded as secret documents not accessible even to those whose careers would be affected by it.  

As a consequence in such an environment, most often one is not sure what became of the hard work of auditors. After spending valuable time and resources nothing good really came out that gave satisfaction to the society. how much of accountability was brought.  

Thus rules became evidently exception and bad practices were adopted as acceptable  precedences. Only in a few, rules were adhered to ritualistically, in others it was discretion or ad-hocism was the golden rule.  

The observations of the auditors is intended to serve as the feedback, so valuable and gainful. If these were not used for the intended purpose; from which if we did  not learn lessons; why do we audit at all?  

The Royal Audit Authority (RAA) would wish to indulge the decision-makers and give a bird’s eye-view of what we saw, learnt and felt.  We expect the fruits of the hard work of the auditors must contribute to make our system more accountable, sustainable and closer to attainment of self-reliance.

2.Inspection Reports (IR):

For the year 2000 more than  202 agencies were audited in the Kingdom including audit of Helvetas and SNV Country offices.  183 Inspection Reports were transmitted to various organizations. Follow-up of more than 59 previous reports are being actively pursued, some as old as beyond 1988.

Special audits of the security forces were conducted that is expected to enhance accountability of the scarce resources and revive the financial disciplines. 

A special report on the investment of the RGoB in different  investment schemes  under the management of the professional Fund Managers is being finalized for consideration of the Board of Directors of the Royal Monetary Authority.  

Joint investigations with the Ministry of Agriculture were undertaken. One similar audit is taking place currently for the National Women Association as desired by the HRH  President .  

An Annual Plan is being introduced as such that there will be regular auding of all the organizations while no auditor will be overworked nor remain  under -utilized. 

3. Audit Recoveries Accounts (ARA): 

A considerable amount of public fund remain unaccounted  or in the hands of various individuals. The requirement of the production of Audit Clearance (A.C.) in respect of the Civil Service had  been found to be the only effective means of assuring recovery and accountability. Every effort is being made  to insure that every Chetrum of the Kingdom is accounted. More than 37 million in cash itself had been collected  till spring of 2001, as shown below: 

SL.NO.	YEAR	AMOUNT COLLECTED /YEAR
1.	1985-90	6,964,449.06
2.	1991-95	4,702,675.40
3.	1996-99	13,466,712.30
4.	2000	10,055,101.49
Sub-total		35,188,938.24
5.     January -April  01		4,808,693.00
Grand total		39,997,631.24

 Source AIMS as on 10^th April,2001

In the year 2000, a minimum of Nu. 10,055,101.49  in cash were recovered to the RGoB. It amounts to higher than the rural tax of 7.051 million for the entire nation collected for the fiscal year 1999-2000 including outstanding. (National Revenue Report 1999-2000).  

In the first quarter of 2001, over a total of Nu. 4,808,693.00 million were recovered.  

These do not take in to account the minimum of Nu.40 million realizable in the form of commercial taxes and the moneys that are yet to be deposited/recovered in Audit Recovery Account from various agencies of the Royal Government.  

The Royal Audit Authority (RAA) expects that the officials of the Department of Power will account of  an amount  of Nu.6,031,706.89 due to the outstanding energy charges. Likewise the Bhutan Telecom the then Department of Telecommunication is pursuing with the defaulting customers for an amount of Nu.4,084,141.91. 

Above all the benefit that could be accrued to the economy through the injection of greater sense of the efficiency, effectiveness, economy  and accountability in the system due to the vigorous and dedicated auditing by the auditors cannot be quantified. 

4. Audit Clearance (AC): 

The Audit Clearances are being obtained by a total of 67 government organizations and autonomous bodies except for the three financial institutions, Chhukha Hydro-Power Corporation and the Security Forces (including Army Welfare Project).  

Most civil organizations and individuals do appreciate that such a system has contributed to maintain credibility in their organizations for both personal and organizational accountability assurance. The Royal Audit at times have to adjust its Annual Plan to comply with such requests for auditing. 

The Audit Clearance Application Form has been streamlined to make it less bureaucratic. And to impose responsibility to process the same on the organization instead of the individual. This was also to make the head of organization who extracts  work out of the employees is duty bound to ensure rewards given to its employees  justly and timely. Above all in an appreciable and a magnanimous manner.  

We present  herewith the statistics on the clearance that were issued in the year 2000 as  follows: 

SL. No.	Category	Number of Clearances issued
1.	Promotion,	2293
2.	Training,	1133
3.	Resignation,	851
4.	Contract Extension,	291
	TOTAL	4568

Regrettably inspite of the changes and education of the personnel managers, Audit Clearance is used as the sole basis for determining the eligibility in processing the service benefits.  Further it appears organisations do still encourage either employees to obtain the Audit Clearance or the initiative rest with the employee while the officials entrusted with the personnel functions confine themselves in the respective cozy chambers. 

The Audit Inspection observed that because of the Audit Clearance- integrity, the accountability and quality of the civil service is gradually improving. However, in the non-civil service sectors the accountability is a serious issue. The control systems and practices in these organizations do not always can be termed satisfactory. The report of the three forces, RICB, RMA etc. are proof enough.  The Audit Inspection Reports transmitted to some of these remained unheeded. As a consequence, rather than the administrative or punitive actions being taken even preventive measures being initiated were not visible.  

An organization where the system of accountability, control and reward system is poor, it must be understood to mean that the quality leadership is lacking. The heads of organizations to whom Audit Reports were transmitted would only understand the magnitude and correctness of such conclusions that the RAA is drawing from the reports (if they have read).  

5. What ails the Public Service? 

It is evident from observations that most of the problems were due not to the absence of policies, rules and regulations but were often due to poor coordination and controls and indifference and inconsistency in their applications. A deliberate distortion in the interpretation of rules to suit the ulterior motives especially in the tendering and procurements. A culture where we could say no without hesitation or fear, and ability to award entitlements on merit not on compassion, assertion of rights, fraudulent obligations must be discouraged in a remunerated services and in monetized economy. 

6. Accountability: better assurance; 

In the past, a system of fixing responsibility was not properly streamlined for each audit Para.  The head of organization were expected to take action on the audit findings. The indifference shown to the reports evident  from statements made in responses such as  “we tried but we could not succeed.” Or "The Audit finding is noted.” The Contractors/ suppliers and private individuals could not be brought to accountability directly or indirectly remained out of the  purview of the audit.  They had the field day. 

Now, a different strategy to effect accountability is being introduced.  One that where accountability is a major problem the entire unit/organization is held answerable. That  would mean for a given period no member of that group will be issued with A.C. till the audit is satisfied. Also the responsibilities are now put more on the individual public official whose lapse/ excesses  have caused damage to the RGoB in particular where private sector was the beneficiary. It is thus up-to the concerned public servant  to take the private party to task or let him loose.  The values of damages where appropriate with commercial interest is being recorded in the concerned officials name in the Audit Information Management System (AIMS) begins to work. 

7. Recent Initiatives: 

The present audits while they serve the purpose organization specific, we also need to create impact on the  whole society.  The RAA while continuing with the present financial and transaction oversight auditing on a regular and periodic basis to ensure compliance, efficiency and effectiveness of implementation of policies, programs and management of funds by organization, we will also carry out, beginning the year 2001, the theme, core service, issue and area based cross-sectional inspections.  This can probably bring accountability in the system in a uniform and sustainable manner and over the board. While doing so focus will be to address the overall achievements of an organization. 

8. Challenges for the Public Service: 

No matter how persistently the Auditors will pursue its commitment to promote accountability, equality, equity and responsibility; it can only be sustained with the full cooperation and commitment of everyone at the helms of administration, being administered. As such while emphasis will be placed on individual accountability  where necessary increasingly collective accountability would be stressed so that everything becomes everybody’s business. 

9. A Clean Public Service- Nation's PRIDE. 

I have no doubt that if the responsible and accountable Heads of agencies did ever review the audit reports issued so far and compare with what follows in this paper,  non would agree less with us.   

It has thus become very critical and urgent that we bring the common issues and problems to the attention of all those who could make the difference to elicit their concern and commitment for Accountability. 

A little that each of us may do can make a great deal to create our public service that each of us can boast and make it to be – “NATION'S PRIDE”:　

PART – II

COMMON FINDINGS AND ISSUES

The findings that are described are the refrain that runs through audit of all audit reports. While the details  of nature of  offences would be covered and presented in the Audit Inspection Report(AIR) and the Annual Audit Report (AAR), we put forth the following: 

Chapter I-          PROPERTY ACCOUNTABILITY

1. System of maintaining even a basic inventory:

Absent for both moveable and immovable properties; 

Historically, the Bhutanese systems of m-yig- (Ma-yig);-àm-- and To-yig (Tho-yig) were found as effective system of inventorization and accountability of public properties and services. Failure to maintain would merit Cd- (Ched)or sometimes resorted to gZi-'‘g-ni  (Zhi-chag-ni). A  property once registered under a àm-dmr-Tm-cn-m--(thram martham chenmo) has to be accounted for un-conditionally. 

Today, regrettably in most of the public institutions, not to mention about the moveable, but even the immovable assets of the Government is not inventoried or accounted for. Because of which it becomes difficult to assess the extent of the size, status, and quantity of the assets the Royal Government  owns. 

Further in the country there is urgent need for establishment of a central registry or archive where historically and legally valuable documents could be deposited and managed for reference of the posterity as well as current studies.

2.  Practice or system of physical verification of properties:

Not a common feature; 

There is traditionally culture of lo-­is- (annual stock taking ), by independent groups. However, except in a few establishments the physical verification system is not found being a practice.  It was neither being initiated by the officials responsible nor insisted upon by the supervising authorities. As a result, it makes auditing of assets not only difficult if not totally impossible. Sadly it is often detected to encourage misuse and abuse of public properties.

 3. Proper and complete Handing/Taking over:

          on appointment, transfer and resignation; 

The Financial Manuals and the Civil Service Rules and Regulations stipulate that whenever a public servant leaves/joins office or post, irrespective of rank or grade or position, he/she is required that a proper handing and taking over is carried out to ensure the accountability of government properties and funds.

However except in exceptional cases in most cases only a symbolic handing and taking over  is carried out.  

As a result during the course of audit, individuals try to get away, to be accountable for funds and properties, on the excuse of not being handed over or taken over.  

Without the slightest realization that an individual taking over has the succession responsibility for accountability and the official handing over has the duty-bound to hand over charge  completely and properly.

 4. The impact of pool vehicle reduction on treasury:

nullified by the sale of vehicles on arbitrary basis; 

It was laudable move by the CCM to reduce number of surplus pool vehicles. The decision to reduce the use and number of pool vehicles was appreciated by all as it could release resources from where it is not crucially required. But any well meant policies can go wrong during implementation, the benefits of the programme accrued only to a few privileged but not the treasury. The allocations were made in a manner that had questioned the very objective of the exercise The allocation being found not transparent, suspected of abuses and irregularities.  

The programme would have attained its objectives had these vehicles been allotted to organisations, which did not own such as the Dzongkhags, Thrimkhangs etc.  These could have been the justified recipients. Or the surplus vehicles could have been auctioned to be fair.  

Regrettably, increasing number of the beneficiaries now monopolize another pool vehicle. We need to come out of some of these cycles once and for all as such a practice is not a new incidence plaguing the RGoB. 

5. Disposal of machinery in piecemeal to deceive accounting: 

Very often the government properties in particular the machineries were found sold to employees either fully repaired at government costs after allotment or parts knowingly procured to be disposed off, instead of in a package.  The beneficiaries also often are the persons who had the priviledge of the inside in future.

6. Central Stores and obsolete inventories: 

a. In the sixties and seventies, when there were no capacity in the private sector, to provide for goods and services, the maintenance of Central Stores by Ministries where justified. With considerable advance and progress in retailing, wholesaling, transports and other national and local capacity, the necessity to maintain the stores to the present extent need to be reviewed.  

The considerable misuses, abuses, damages and wastes due to the stores detected could be minimized, while the private sector development could receive added boost. Further, if the concept of delivery of procurement where feasible is done on C.I.F., risk and cost to the government will be minimized either from thefts, loss, spoilage and waste on transportation. 

We feel that need to sustain such a store was only due to ad-hocism and poor forecasting and planning of programmes and resources. 

b. Besides a lot of obsolete immovable assets and documents or lying in stores of respective agencies without being disposed of as required by the rules. These impinge on both human and spatial resources. Further the accountabilities become impossible to be fixed with change of responsible persons and poor documentation over the time.

Chapter II-          FINANCIAL ACCOUNTABILITY 

1. Culture of paying suppliers and contractors generously:

in excess and double; 

It is found not uncommon practice that engineering, financial and supervising personnel seldom discharge their duties with care and prudence. The professional code is lacking in most.  Because of these lapses, the payment, made out of the budgets is often either paid in excess, over  or double, causing considerable financial damage to the poor government. To the audit’s surprise rarely payments made out short or collected fully or on time or in excess. 

2. Residential phone bills paid for by the office:

as a matter of right; 

The Ministry of Finance with an objective to cut down cost and to reduce bureaucracy had discontinued payment of claims for residential telephone bills except genuine official calls. But a large number of residential phone bills were claimed by officers as a routine as official calls (months after months).  The Controlling and Disbursing authorities in spite of exercising control, appear to have encouraged the practice. 

3. Participation at National Sports Tournaments:

at the RGoB expense; 

According to the existing Circular issued by the Ministry of Finance, an organization can only pay for Registration Fees for taking part in sports tournaments out of the L.C. Account. Audit had observed funding of the full cost of participation  from LC Account that impinges on the funding of the programs. On the other hand others who are rule abiding cannot participate even if they wish as much as those who did.

4. Unauthorized credit sale and advances:

huge balances ; 

Due to lack of effective or no follow up, huge sums of public funds continue to be with the individuals or parties, on account of the sale proceeds not realized, the advances given not recovered and bills not adjusted. The recovery of these would become almost impossible either due to records now not available or not being maintained or the individuals responsible are longer stated as available. 

5. Regular advances/credits made:

Prior to settlement of the previous ones. 

Advances/Credits appear regularly being given to the employees and customers without any basis and often without liquidation of the previous ones.  A considerable amount of public funds were at the disposal of individuals as may be noted from the Audit Recoveries Accounts.

6. Huge deviations in quantities of works executed:

compared to Bill of Quantities (BOQ) as high as 1000%; 

There appears a total lack of professionalism and discipline as evident from poor estimates, poor planning, weak supervision and control,  unrestrained practice of allowing deviation in violation of the rules.  This is  one area of concern that every head of organization need to pay attention if the public resources are to be managed in the judicious fashion. 

7. Irrational regularization of lapses:

that encourages more such acts being  committed by the entire system.  

The Financial Manual provides for regularization of  only those activities that only a superior authority is the competent one over the subordinate who is responsible for carrying out  the assignment.  

The Royal Audit Authority (RAA) observed that an irregularity of the nature of violation of Rules were being found regularized. Therefore repeated  irrational regularization of gross lapses encourage similar acts being committed by the entire system.

 Chapter III- CORPORATE NON–CIVIL SERVANT ACCOUNTABILITY

1. Considerable amount of Government Fund at the disposal of STCB:  

As is the general practice all over the world, the Government is the major customer for the private sector. So is the case here in Bhutan, as government buys substantial goods from the STCB.  

Whenever the procurements were procured from STCB, huge advances sometimes exceeding the value were found paid. STCB takes in deviation to the universal commercial norms the full advance for goods to be procured. Besides all services rendered are billed on delivery of the goods.  

Thus a substantial portion of the government moneys are not only at their disposal of the STCB, it also indicates the government organizations  do not take the responsibility insist on deliveries being made on time and settlement of the balances ( Even after a substantial period upon delivery of goods).   

 Source: Annual Company Accounts (2000 under audit)

2. Norms for Subsidy to Corporations:

to the extent of the liability incurred ;

The present system of the government financial support of corporations that have the national security or social service liability would perpetuate the company's dependence on the RGoB and its performance. The companies should be reimbursed only to the extent of the expenses  incurred on accounts of rendering such services on behalf of the RGoB. Otherwise, the companies should be held fully accountable for profitability or performance and self-reliance to be attained at the earliest.

3. Proprietary audits of public bodies:

The Royal Audit Authority as required by the Company Act of the Kingdom of Bhutan 1989 was responsible to appoint the statutory auditors to the public companies.  During the course of the auditing, proprietary audit was also done on a sample basis. This was found not adequate as companies revealed accounts to the extent that suits their interest. As such the proprietary audits are being carried beginning 2000 in the public companies and financial institutions where public interests are necessary to be ensured. 

It is regretted to point