SAI- INDIA

Performance
Audit
Monitoring
And Evaluation
Project/ Program
Formulation
Appraisal and
Approval
Implementation

Agencies involved…
• Project formulation
– Based on policy decisions of Government
– Designed by Implementing Ministry
– May associate experts, stakeholders
• Project appraisal and approval
– Ministry of Finance and Planning Commission appraises
– Cabinet approves
• Project monitoring and evaluation
– MIS of the project for regular monitoring
– Independent consultant appointed by Ministry for evaluation
– Every 5 years for continuation in subsequent Plan or mid term
– Program Evaluation Office of Planning Commission may select some schemes for study
• Performance audit
– SAI

Performance evaluation and Performance Audit both aim to add value…
• Performance Evaluation
– Systematic investigation to help improve, help decide an action, or learn reasons for successes and failures or strengths and weaknesses in meeting objectives
– A main objective is to assess impact
• Performance Audit
– Assessment focusing on economy, efficiency, effectiveness
– Project/ program selected based on significance and risk
Both are often instrumental in re-thinking policy or program design

Steps to conducting performance audit…
Pilot study
Audit Design: Objective, Scope, questions, criteria, tools
Planning
Entry Conference with the audited entity
Document review in selected units
Gather and analyze evidence
Compare evidence against criteria
Develop Findings and Conclusions
Implementation
Incorporate entity response
Exit conference with audited entity
Report drafted and issued to entity
Responses of entity incorporated
Reviewed by HQ
Reporting
Performance Audit report laid to legislature
Published

Institutional aspects…
• PA Guidelines to ensure process discipline
– Aligned with international standard (ISSAIs)
• Institutionally ensured…
– risk assessment during strategic selection of topic
– audit design guiding the audit process
– sampling: either statistical or risk based
– association of the entity throughout the audit process
– ensuring competent, relevant and sufficient evidence
– association of external experts to complement audit team
– specific recommendations arising from conclusions
– balanced reporting
– Follow up audits

Tool kit for approach and methodology…
• Analysis of procedures
– Review of systems and their compliance
• Case studies
– A comprehensive understanding of a particular instance
• Use of existing data
– MIS of the audited entity after being sure of its integrity
• Surveys
– Particularly social sector program
• Analysis of results
– Focus on output and whether intended has been achieved
• Quantitative analysis
– IT, data analytics

Hydrocarbon Licensing (E&P) Policy – An example
• Policy changes in the last two decades:
– Upto 1993: Exploration and production (E&P) entirely by
NOCs
– 1993-1999: Pre-New Exploration Licensing Policy (NELP):
• NOC as licensee
• JV of NOC with private entities for carrying out E&P activities over a specified period in selected blocks which were bid out
– 1999-to date: NELP:
• Bidding for selected blocks carried out by Ministry
• NOC may or may not bid
• Can have private consortia carrying out E&P activities as per the Production Sharing Contract signed with
Government.

Production Sharing Contracts for E&P
• Revenue shared between bidder and Government
• Competent bidder agreeing to the work program and offering the highest revenue share wins bid
• Bid decision on highest revenue share to Govt. :
– Revenue after considering cost recovery for successful efforts
– Share of Government as per agreed investment multiple
• As net revenue increases IM increases and so does the share of Government revenue

3 Performance Audits published so far…
• PA of 1996 and its outcome in policy revision
– Based on audit recommendations decided:
• Fields discovered by NOCs will not be bid out by Government
• Anomalies in treatment of NOCs and JVs regarding price, royalty, cess etc. were corrected and a level playing field created in NELP.
• PA of 2005 was a follow up audit

Recent PA report on the subject in 2011
(Report 19 of 2011-12)
• Audit indicated that PSC appears to have an incentive to keep costs high and IMs low.
• Government actively considering shifting from cost recovery to revenue share model
• Audit noticed that exploration activities were being extended irregularly, costs of which may be loaded on the project reducing Government share
• Government has revised its policy by allowing exploration at later stages but with a framework for ring fencing such new discoveries and their costs

THANK YOU