Chapter – 2

INTERNAL CONTROL SYSTEM

WHAT IS AN INTERNAL CONTROL SYSTEM?

A built­in Internal Control System ensures strict adherence to 
statutes, codes and manuals, minimize the risk of errors and 
irregularities and helps to protect resources against loss due 
to waste, abuse, and mismanagement. 

Basically,   internal   control   systems   are   the   laws,   policies, 

and   procedures   that   affect   the   daily   operations   and 
management.

Internal   control  is   a   process   effected   by   an   organization's 

structure,   work   and   authority   flows,   designed   to   help   the 
organization accomplish specific goals or objectives. It is a 
means   by   which   an   organization's   resources   are   directed, 
monitored,   and   measured.   It   plays   an   important   role   in 
preventing   and   detecting  fraud  and   protecting   the 
organization's   resources,   both   physical   (e.g.,   machinery   and 
property)   and   intangible   (e.g.,   reputation   or   intellectual 
property   such   as   trademarks).     At   the   organizational   level, 
internal   control   objectives   relate   to   the   reliability   of 
financial   reporting,   timely   feedback   on   the   achievement   of 
operational  or strategic  goals,  and compliance with laws and 
regulations.   At   the   specific   transaction   level,   internal 
control   refers   to   the   actions   taken   to   achieve   a   specific 
objective   (e.g.,   how   to   ensure   that   the   organization's 
payments   to   third   parties   are   for   valid   services   rendered.) 
Internal control procedures reduce process variation, leading 
to more predictable outcomes. 

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Categories of  Internal Controls

Internal   controls   may   be   described   in   terms   of:   a)   the 

objective  they   pertain   to;   and   b)  the  nature   of   the   control 
activity itself.

Objective   categorization  :  Internal   control   activities   are 

designed   to   provide   reasonable   assurance   that   particular 
objectives   are   achieved,   or   related   progress   understood.   The 
specific   target   used   to   determine   whether   a   control   is 
operating effectively is called the control objective. Control 
objectives fall under several detailed categories:

Table 1 : Control Objectives
1 Validity Only valid or authorized transactions are 
processed.
2 Occurrence Transactions   occurred   during   the   correct 
period. 
3 Completeness All   transactions   are   processed   without 
omissions.
4 Valuation Transactions   are   calculated   using   an 
appropriate   methodology   or   are   computat­
ionally accurate. 
5 Rights &  Assets should represent the rights of the 
Obligations company, and liabilities its obligations. 
6 Presentation &  Financial   statements     are   properly 
Disclosure classified and disclosed. 
7 Reasonableness Results should be reasonable.

Management   is   responsible   for   implementing   appropriate 

controls   that   apply   to   transactions   in   their   areas   of 
responsibility.   Internal   auditors   perform   their   audits   to 
evaluate   whether   the   controls   are   designed   and   implemented 
effectively to address the relevant objectives.

Activity   categorization   :  Control   activities   may   also   be 

described by the type or nature of activity. These include :

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 Table 2 : Control Activities
1 Segregation of  separating   authorization,   custody,   and 
duties record   keeping   roles   to   limit   risk   of 
fraud or error by one person. 
2 Authorization  review   of   particular   transactions   by   an 
of transactions appropriate person.
3 Retention of  maintaining documentation to substantiate 
records transactions. 
4 documentation observation   or   review   of   ongoing 
operational activity. 
5 Physical  usage   of   cameras,   locks,   physical 
safeguards barriers, etc. to protect property.
6 Analysis Analysis of results, periodic and regular 
operational   reviews,   metrics,   and   other 
key performance indicators (KPIs)
7 IT Security usage  of passwords,  access   logs,  etc. to 
ensure   access   restricted   to   authorized 
personnel. 

2.2. DEFINITIONS AND EXPLANATION : A process, effected by the 
Board of Directors, management and staff, designed to provide 
reasonable   assurance   regarding   the   achievement   of   objectives 
in the following categories: 
Table 3 : Internal Control Objectives
1 Effectiveness and efficiency of operations.
2 Reliability of operational and financial reporting.
3 Compliance with applicable laws and regulations.

Internal   Control   System:    A   synonym   for   internal   control 

applied   in   an   entity,   in   its   totality.  Internal   Control   is 
broadly defined as a process, effected by an entity's board of 
directors,   management,   and   other   personnel,   designed   to 
provide   reasonable   assurance   regarding   the   achievement   of 
objectives   in  the  following   categories:   a)   Effectiveness   and 
efficiency   of   operations;   b)   Reliability   of   financial 
reporting; and c) Compliance with laws and regulations.

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Internal   control   is   a   system,   defined   and   implemented   under 
its responsibility, which aims to ensure four core results.
 Table 4 : Aims of Internal Control  
1 laws and regulations are complied with; 
2 the instructions and directional guidelines fixed by 
Executive Management or the Management Board are applied; 
3 the company's internal processes are functioning 
correctly, particularly those implicating the security of 
its assets; 
4 financial information is reliable; 

All the above should generally contribute to the control over 
all activities, to the efficiency of its operations and to the 
efficient   utilisation   of   its   resources.  By   helping   to 
anticipate and control the risks involved in not meeting the 
objectives   the   company   has   set   for   itself,   the   internal 
control system plays a key role in conducting and monitoring 
its   various   activities.   However,   internal   control   cannot 
provide   an   absolute   guarantee   that   the   company   s   objectives 
will be met.

SCOPE   OF   INTERNAL   CONTROL   :  It   is   up   to   every   Institute   to 

design an internal control system which is suitably adapted to 
its   situation.   In   the   case   of   a   group,   the   parent   company 
ensures   that   internal   control   systems   exist   within   its 
subsidiaries.   These   systems   should   be   adapted   in   line   with 
their  own  individual   characteristics   and   to   the   relationship 
that exists  between  the parent company and the subsidiaries. 
Internal   control   is   a   system,   defined   and   implemented   under 
responsibility.  It comprises  a set of resources,  patterns of 
conduct,   procedures   and   actions   adapted   to   the   individual 
characteristics   of   each   company   which:   contributes   to   the 
control   over   its   activities,   to   the   efficiency   of   its 
operations and to the efficient  utilisation  of its resources 
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which takes into consideration, in an appropriate manner, all 
major risks ­ operational, financial or compliance. The system 
more designed to ensure that:
Table 5 : Control Activities
1 laws and regulations are complied with;
2 the   instructions   and   directional   guidelines   fixed   by 
Executive Management or the Board are applied;
3 the company's internal processes are functioning correctly, 
particularly those implicating the security of its assets;
4 financial information is reliable.

Internal   control   is   therefore   not   limited   to   a   set   of 

procedures   nor   simply  to   accounting   and   financial  processes. 
Nor   does   it   embrace   all   of   the   initiatives   taken   by   the 
executive   bodies   or   by   management,   such   as   defining   company 
strategy,   fixing   objectives,   management   decisions,   dealing 
with the risks or monitoring performance.

2.4. COMPONENTS OF THE INTERNAL CONTROL SYSTEM
Table 5 : Components of the Internal Control System
Control   Environment   sets   the   tone   for   the   organization, 
influencing the control consciousness of its people. It is 
1
the   foundation   for   all   other   components   of   internal 
control. 
Risk   Assessment   is   the   identification   and   analysis   of 
2 relevant risks to the achievement of objectives, forming a 
basis for how the risks should be managed 
Information   and   Communication   systems   or   processes   that 
support   the   identification,   capture,   and   exchange   of 
3
information in a form and time frame that enable people to 
carry out their responsibilities 
Control Activities ­ the policies and procedures that help 
4
ensure management directives are carried out. 
Monitoring   ­   processes   used   to   assess   the   quality   of 
5
internal control performance over time. 
6

These   control   procedures   are   a   specific   set   of   policies, 

procedures,   and   activities   designed   to   meet   an   objective.   A 
control may exist within a designated function or activity in 
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a process.   The objectives of the Internal Control System are 
applied   in   these   Institutes   ­   (1)   to   verify   that   internal 
procedures comply with the legal and regulatory provisions in 
force. (2) to verify that the limits fixed in terms of credit, 
foreign exchange, interest rates, etc. and (3) to ensure that 
quality   of   accounting   and   financial   information   are 
maintained.

2.5. The subsystems included in the internal control system:
Table 6 : Subsystems of the Internal Control System
1.   a system for controlling internal operations & procedures
2.   an organisation for accounting and information processing
3.   system for assessing risks and measuring results
4.   risk monitoring and control system
5.   documentation and information system
6.   system for monitoring the cash flows

Applications of Internal Control
Table 7 : Applications of the Internal Control System
sets   the   tone   for   the   control   consciousness 
Control 
of its people.  It is the foundation for all 
Environment :
other components of internal control. 
Risk 
how the risks should be managed 
Assessment :
systems   or   processes   providing   information 
Information and 
that   enable   people   to   carry   out   their 
Communication :
responsibilities 
Control  the policies and procedures that help ensure 
Activities : that management directives are carried out. 
processes used to assess the internal control 
Monitoring :
performance. 

2.6.  Whether roles  and responsibilities  are fixed at various 

levels : Everyone in an organization has a responsibility for 
internal   control   to   some   extent.   Virtually   all   employees 

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produce   information   used   in   the   internal   control   system   or 
take   other   actions   needed   to   effect   control.   Similarly,   all 
personnel are responsible for communicating the ­ problems in 
operations, ­ noncompliance with the code of conduct and the ­ 
policy violations or illegal  actions. Thus each major entity 
in the governance structure has a particular role to play.
Management:   The   Director   of   the   Institute   has   overall 
responsibility   for   designing   and   implementing   effective 
internal   control.   He/She   sets   the   "tone   at   the   top"   that 
affects integrity and ethics and other factors of a positive 
control   environment.   The   Director   fulfills   this   duty   by 
providing leadership and direction to senior functionaries and 
reviewing  the  way  they're  controlling  the  activities.  Senior 
functionaries,   in   turn,   assign   responsibility   for 
establishment  of   more  specific   internal   control   policies   and 
procedures to personnel responsible for the unit's functions. 

Board   of   Governors: Management   is accountable  to  the Board  of 

Governors, which provides governance, guidance and oversight. 
Effective   board   members   are   objective,   capable   and 
inquisitive.   They   also   have   a   knowledge   of   the   Institute's 
activities and environment,  and commit the time necessary to 
fulfill  their board  responsibilities. Management  may be in a 
position   to   override   controls   and   ignore   or   stifle 
communications   from   subordinates,   enabling   a   dishonest 
management which intentionally misrepresents results to cover 
its   tracks.   A   strong,   active   board,   when   coupled   with 
effective communication channels and capable financial, legal 
and internal audit functions, is often best able to identify 
and correct such a problem.

Auditors:   The  internal   auditors  and   external  auditors  of   the 

organization   also   measure   the   effectiveness   of   internal 

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control   through   their   efforts.   They   assess   whether   the 
controls   are   properly   designed,   implemented   and   working 
effectively,   They   make   recommendations   on   how   to   improve 
internal   control.   To   provide   reasonable   assurance   that 
internal controls involved in the  financial reporting  process 
are   effective,   they   are   tested   by   the   external   auditor   (the 
organization's public accountants). They are required to opine 
on the internal controls of the company and the reliability of 
its financial reporting.

Limitations   in   the   existing   Internal   Control   of   the 

Institutes:  Internal control can provide reasonable assurance 
that the objectives of an organization will be met. Effective 
internal   control   implies   that   the   organization   generates 
reliable   financial   reporting   and   substantially   complies   with 
the   laws   and   regulations   that   apply   to   it.   However,   this 
depends   on   factors   such   as   competition,   technological 
innovation,   etc.   These   factors   are   outside   the   scope   of 
internal   control;   therefore,   effective   internal   control 
provides   only   timely   information   or   feedback   on   the 
achievement   of   operational   and   strategic   objectives,   but 
cannot guarantee their achievement. Internal control involves 
human   action,   which   causes   the   possibility   of   errors   in 
processing or judgment. Internal control can also be affected 
by collusion or coercion among employees or top management.

Effectiveness   of   Internal   Control  :  Fraud   and   internal 

control:  Internal   control   plays   an   important   role   in   the 
prevention and detection of fraud. It is required to perform a 
fraud   risk   assessment   and   assess   related   controls.   This 
typically involves identifying where theft or loss could occur 
and determining if existing control procedures are acceptable. 
Internal   Controls   and   Improvement  :  The   internal   control 
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system   is   implemented   not   only   to   prevent   fraud   and   comply 
with   laws   and   regulations   but   also   used   to   systematically 
improve businesses in regard to effectiveness and efficiency. 
Continuous   Controls   Monitoring.  Advances   in   technology   and 
data   analysis   have   developed   numerous   tools   which   can 
automatically   and   continuously   evaluate   the   effectiveness   of 
internal   controls.  Like  continuous   auditing,  continuous 
controls monitoring is very much advisable.

a) Compliance with laws and regulations  :  This refers to the 
laws and regulations of the Institute. Given the large number 
of areas that exist, the Institute's organisation needs to be 
structured in such a way so that it: is aware of the various 
rules   that   apply   to   it;   can   be   informed   in   due   time   of   any 
changes   that   are   made   to   them   (legal   monitoring);   can 
transpose these rules into its internal procedures; can inform 
and train staff on those rules which affect them.
b) Application of the instructions and directional guidelines 
fixed   by   the   Director   or   the   Board  :  The   instructions   and 
directional guidelines given by the Management or the   Board 
enable staff to understand what is expected of them and to be 
aware   of   the   scope   of   their   freedom   of   action.   These 
instructions   and   directional   guidelines   must   be   communicated 
to the staff concerned, based on the objectives allocated to 
each   of   them,   so   as   to   provide   guidelines   on   how   their 
activities   should   be   conducted.   These   instructions   and 
directional   guidelines   must   be   defined   in   line   with   the 
overall objectives and the inherent risks.
c) Correct functioning of the internal processes, particularly 
those   implicating   the   security   of   its   assets  :  For   all 
operational, commercial and financial processes, standards or 
operating   principles   have   to   be   established   and   performance 

16
indicators set up. Similarly for processing of accounting and 
financial information, these processes include not only those 
which deal directly with the preparation of financial reports, 
but   also   the   operational   processes   which   generate   the 
accounting data.
δ) Reliability of financial information : The reliability of 
financial   information   can   only   be   obtained   through   the 
implementation   of   internal   control   procedures   which   are 
capable   of   faithfully   recording   all   the   operations 
performed   by   the   organisation.  The   quality   of   this 
internal   control   system   can   be   targeted   by   means   of: 
segregation of duties, enabling a clear distinction to be 
made   between   recording   duties,   operational   duties   and 
retention   duties;   function   descriptions   which   should 
enable   the   origins   of   the   information   prepared   to   be 
identified, together with its recipients.

17
 Review of Literature

eGOVERNANCE, TRANSPARENCY IN ADMINISTRATION, and
VIGILANCE IN ADMINISTRATION

National e­Governance Plan (NeGP)
The Government of India has approved the National e­Governance 
Plan,   comprising   of   27   Mission   Mode   Projects   (MMPs)   and   8 
components.   The   Government   has   accorded   approval   to   the 
vision, approach, strategy, key components and implementation 
framework for the NeGP. However, the approval of the NeGP does 
not constitute a financial approval for all the Mission Mode 
Projects (MMPs) and components under it. 
Importance   of   e­Governance  :  e­Governance   can   transform 
citizen   services,   provide   access   to   information   to   empower 
citizens, enable their participation in government and enable 
access   to   economic   and   social   opportunities.   ICT   tools 
(Information   and   Communication   Technology)   are   effectively 
adding   new   dimensions   to   old   institutional   set­ups.   e­
Governance uses Information and Communication Technology (ICT) 
for   delivering   Government   Services,   exchange   of   information, 
communication   transactions,   integrating   various   stand­alone 
systems   and   services   between   Government   and   Citizens   (G2C), 
Government and Business (G2B) as well as back office processes 
and interactions within the entire Government frame work.

Table 8 : e­Governance Achievements and Contributions
e­Governance seeks to achieve:  (ii)  Transparency
(i) Efficiency (iii) Citizen's participation

Enabling e­governance through ICT (iii) Citizen's awareness and 
contributes to :       empowerment
(i)  Good governance (iv)  Citizen's welfare
(ii) Trust and Accountability  (v)   Democracy
(vi)  Nation's economic growth

e­Governance   initiatives   across   the   country  :  Over   the   past 

18
decade   or   so,   there   have   been   islands   of   e­Governance 
initiatives   in   the   country   at   the   National,   State,   district 
and even block level. Some of them have been highly successful 
and are ready for replication across other States.
Central Mission Mode Projects  MMPs 
BANKING  :  The   evolution   of   Core   Banking   Technology   in   India 
has   empowered   and   transformed   customer   of   the   branch   to   the 
customer   of   the   bank   providing   him/her   the   convenience   of 
anytime and anywhere banking in India . 
THE CENTRAL BOARD FOR EXCISE AND CUSTOMS (CBEC) : The Central 
Board for Excise and Customs (CBEC) is implementing this MMP 
with a view to facilitate trade and industry by streamlining 
and simplifying Customs & Excise processes and helping Indian 
businesses to enhance its competitiveness and create a climate 
for   voluntary   compliance   by   providing   guidance   and   building 
mutual trust. 
THE DEPARTMENT OF IT : The Department of IT is implementing a 
comprehensive plan to deploy ICT for setting up an excellent 
taxpayer service with the objective of promoting remote access 
to information and facilities to allow taxpayers and citizens 
to transact all businesses with department on anywhere anytime 
basis. 
GENERAL INSURANCE SECTOR : With a view to improve services to 
customers in the General Insurance sector, this MMP has been 
conceived. The project is  to be implemented through the four 
PSU Insurance companies.
THE   MINISTRY   OF   COMPANY   AFFAIRS   (MCA)  :  The   Ministry   of 
Company   Affairs   (MCA)   is   implementing   an   e­Governance 
initiative called MCA21 e­Governance Project'. 
NCD/MNIC : To establish linkage between partner databases such 
as RD, PDS and EPIC has been initiated by the DIT as per the 
directions of the Process Committee. 
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PASSPORT,   IMMIGRATION   &   VISA  :  Aims   to   reduce   immigration 
clearance   time   and   ensure   better   security   checks.   This 
includes   modernisation   programme   for   immigration   check   posts 
and advance passenger information.
PENSIONS : A 'Pensioner's Portal' has been proposed to be set 
up   which   will   have   two   components   ­   Non­interactive:   to 
provide   updated   information   on   pension   issues   and   ­ 
Interactive part: to monitor grievance redressal.
E­OFFICE  :  This   project   is   aimed   at   significantly   improving 
the operational efficiency of the Government, by transitioning 
to a Less Paper Office within next five years. 

State Mission Mode Projects­MMPs
AGRICULTURE  :  Agriculture has been included as a MMP in NeGP 
and is to be operationalised by Department of Agriculture and 
Cooperation.
E­DISTRICT :The project scope is to integrate various district 
departments to provide seamless services to  citizens.
EMPLOYMENT EXCHANGE  :  Through the employment exchange portal, 
according   to   the   requirement   of   employers   quick   lists   of 
candidates and call letters can be generated.
LAND RECORDS : There is an ongoing project for digitization of 
land records, being implemented by MoRD.
MUNICIPALITIES  :  The   vision   for   the   National   Mission   Mode 
Project for e­Governance in Municipalities is to leverage the 
ICT opportunities for sustained improvement in efficiency and 
effectiveness of delivery of municipal service to citizens. 
PANCHAYATS  :  The   MMP   has   been   designed   to   overcome   the 
challenges   being   faced   in   the   villages   such   as   lack   of 
reliable communication.
POLICE  :  Common Integrated Police Application (CIPA) has been 
implemented at 128 Police Stations of Delhi.

20
PROPERTY REGISTRATION  :  Successful implementation of the CARD 
(COMPUTERAIDED   ADMINISTRATION   OF   REGISTRATION   DEPARTMENT) 
project   implemented   by   government  of   Andhra   Pradesh   resulted 
in the countrywide initiative launched by DIT aimed at taking 
best practices of successful implementation.
ROAD TRANSPORT  :  With a view to create a unified data schema 
to   be   used   by   all   states   for   computerisation   of   transport 
offices   for   issuing   vehicle   registration   certificates   and 
driving licences, Road Transport was included in the NeGP.
TREASURIES : In order to get the accounts of State Governments 
expeditiously and to provide for better Management Information 
Systems,   networking   of   all   agencies   involved   in   finalisation 
of accounts of State Governments is looked into. 
Integrated Mission Mode Projects  MMPs
e­COURTS  :  From 2001­03, 700 city courts in four metros were 
computerised   and   during   2003­04,   computerisation   of   another 
900 courts were undertaken.
E­PROCUREMENT  : This MMP is being implemented to ensure that 
government   procurement   becomes   simplified,   transparent   and 
result­oriented.
ELECTRONIC DATA INTERCHANGE  (EDI) FOR ETRADE  :  The objective 
of   the   MMP   is   to   simplify   procedures,   introduce   electronic 
delivery   of   services   by   regulatory   and   facilitating 
organisations,   provide   24*7   access   to   users,   increase 
transparency   in   procedures,   reduce   transaction   cost   and   time 
and introduce international standards and practices. 
NATIONAL   EGOVERNANCE   SERVICE   DELIVERY  GATEWAY  :  The   National 
e­Governance   Plan  (NeGP)   of   the   Govt.  of   India   aims   to   make 
all   Government   services   accessible   to   the   common   man   in   his 
locality,  through  common   service   delivery  outlets  and  ensure 
efficiency,   transparency   &   reliability   of   such   services   at 
affordable costs to realise the basic needs of the common man. 
21
INDIA PORTAL : The National Portal of India is a Mission Mode 
Project under the National E­Governance Plan being implemented 
by NIC. The objective behind the Portal is to provide a single 
window   access   to   the   information   and   services   of   the   Indian 
Government at all levels. 

USHERING IN TRANSPARENCY FOR GOOD GOVERNANCE
(Centre for Good Governance, Hyderabad)
Transparency  means that decisions taken and their enforcement 
are done in a   manner that follows rules and regulations. It 
also means that information  is freely available  and directly 
accessible to those who will be affected by such decisions and 
their enforcement.
Transparency:   Core   principle   of   Good   Governance  :  Good 
governance has major characteristics like participation, rule 
of   law,   transparency,   responsiveness,   equity   and   inclusive­
ness, effectiveness, efficiency, accountability and strategic 
vision   and   consensus   orientation.   Study   of   legislations   and 
their   implementation   suggests   that   a   number   of   bottlenecks 
exist in the way of free flow of information to the citizens 
which should be removed for ushering in greater transparency. 
This requires the following:
Table 9 : Measures of removing bottlenecks in transparency
1 Strengthening   of   legislation   on   the   patterns   of   the 
Maharashtra and Delhi  Acts.
2 Government Departments to provide their Annual Activity and 
Performance Reports to civil groups and public 
3 Information   about   the   services   rendered   by   Departments, 
rules and regulations to be placed in the public domain;
4 Interactive sessions may be held by the Heads with the 
public for citizens’ views on policies and programmes;
5 Public access to budgetary processes and budget reports.
6 Placing all Government Orders on Departments websites 
7 Public   access   to   various   reports   of   Committees   and 
Commissions   appointed   by   the   Government;Publication   of 
white   papers   on   all   importance   governance   matters 
concerning the public by public bodies;
22
Measurement Books or ‘M Books’ of public works departments may 
be   put   in   the   public   domain   on   departmental   websites.   The 
public   may   have   access   to   quality   inspection   documents 
relating to all major public works.
Production and Dissemination of White Papers  : Information is 
a   key   factor   to   ensure   efficient   and   effective   public 
services. It not only empowers the people to exert demand for 
better   services,   it   also   empowers   the   service   providers   to 
benchmark and provide services. 
Table 10 : Suggestions for efficient and effective public services:
1 Production   and   dissemination   of   white   papers   by   all 
Government   Departments/Agencies/Undertakings   on   implement­
ation of program­mes and projects to be made mandatory; 
2 Steps   may   be   taken   to   create   a   public   opinion   and   to 
educate the people about the decisions of the Governments 
at various levels; 
3 These   white   papers   will   have   to   be   given   wide   publicity 
through print and electronic media. Discussions, seminars, 
meetings and similar other public discourses will have to 
be organised to explain the pros and cons of the problems 
at   all  levels.   Senior   officers   of  the  government   as  also 
Ministers   will   have   to   actively   participate   in   these 
endeavours.
4 The   administration   will   have   to   be   proactive   rather   than 
merely reacting to public criticism as at present.
5 This   will   require   a   change   in   the   mindset   of   the   higher 
bureaucracy;   periodical   training,   change   management   and 
refresher courses will help in this task.
6 Every   public   undertaking/agency   receiving   money   from   the 
Government   should   produce   and   place   in   the   public   domain 
annual   report   containing   the   structure   of   the   entity, 
vision, mission, functions, who worked in what capacities, 
what works were undertaken, how expenditures were made and 
on what, achievements and failure, details of independent 
scrutiny made on use of fund, and outstanding results, if 
any.
7 Each State Government may bring out each year a white paper 
on its public revenues and public expenditure and pose for 
public discussion and debate options which are available, 
in   the   short   and   medium   term,   for   dealing   with   the 
situation.

The   concept   of   a   Public   Disclosure   Commission   as   in   some 

23
advanced   countries   may   be   experimented   to   guide   and   monitor 
statutory disclosures and aid citizens in the availability of 
information they need.
Citizen’s   Charters   &   Service   Charters  :  In   a   democracy   all 
power belongs to the people. They elect the government and the 
government,   in   turn,   must   be   accountable   to   the   people.   In 
this   regard   the   preparation,   implementation,   monitoring   and 
evaluation of Citizen’s Charters is absolutely essential. 
Table 11 : Principles for Citizens’ Charter
1 Consultation: People should be consulted regarding service 
levels   &   quality   of     service     Service   Standards:   People 
must be made aware of what to expect in terms of level and 
quality of services 
2 Access: People should have equal access to the services to 
which they are entitled    
3 Courtesy: Treat people with courtesy and consideration   
4 Information:   People   must   receive   full   and   accurate 
information about their services 
5 Openness and Transparency: People should be informed about 
departments’ operations, budget and management structures 
6 Redress: People are entitled to an apology, explanation and 
remedial action if required service is not delivered 
7 Value   for   Money:   Public   services   should   be   provided 
economically   and   efficiently.   The   implementation   of 
citizen’s   charters   must   be   monitored   publicly   and   public 
service report cards be published to ensure efficiency and 
effectiveness.

24
Redressal   of   Public   Grievances  :  Machinery   for   redress   of 
public   grievances   has   to   be   strengthened   in   every 
Ministry/Department,   fixing   of   time   limits   for   disposal   of 
public   grievances.   An   online   computerized   Public   Grievances 
Redressal   and   Monitoring   System   (PGRAMS)   may   be   operated   to 
facilitate citizens to lodge and monitor the progress of their 
grievances on internet. 
The following suggestions may be considered:

Table 12 : Suggestions for Redressal of Public Grievances
1 Establishment   of   an   Institution   of   Ombudsman   to   oversee 
redressal   of   grievances   (as   in   Insurance   and   Banking 
Sectors)   or   a   Public   Grievance   Commission   (as   in   Delhi) 
Strengthening of Consumer Courts
2 Establishment of a grievance redressal machinery 
3 Establishment   of   Call   Centre   and   development   of   a   web­
enabled grievances disposal monitoring system;
4 Involvement   of   civil   society   in   the   processing   and 
tracking disposal of grievances;
5 Fixing time frames for grievance redressal;
6 Monitoring   of   grievance   redressal   at   the   top   levels 
periodically   using   computerized   monitoring   system   and 
placing the results before the public.

Financial   Transparency   in   Government  :  Accountability   and 

transparency are indispensable pillars of good governance that 
compel the state and civil society to focus on results, seek 
clear   objectives,   develop­effective   strategies,   and   monitor 
and   report   on   performance.   Through   public   financial 
accountability   and   transparency,   governments   can   achieve 
congruence   between   public  policy,  its  implementation   and   the 
efficient   allocation   of   resources.   Lack   of   financial 
accountability   could   lead   to   inefficiency,   waste,   and 
pilferages, and even impede development.
Table 13 : Norms for financial transparency
25
1 Records Management:Creation, Maintenance & Use Disposition;
2 Accounting:   Planning,   Budgeting   and   Expenditure,   Internal 
Control and Internal Auditing, and Financial Reporting;
3 External Auditing: Compliance, VFM, Certification Auditing.

Public   Access   to   Information   on   Public   Finances  :  Increased 

transparency   of   and   the   public’s   access   to,   information   on 
public   finances   is   essential   to   supplement   legislative 
scrutiny.   Opportunities   need   to   be   provided   for   public 
consultation   or   participation   throughout   the   budget   process. 
Development  and maintenance  of avenues for filing, follow up 
and   redressal  of   public   complaints   to  support  identification 
of waste and mismanagement of resources is essential. 
Transparency   in   Public   Procurement   Legislation  :  All 
procurement  in government may be regulated by a Transparency 
in Public Procurement Legislation. This law may be enacted for 
ensuring   transparency   in   public   purchase   of   goods   and 
services, in selecting tenderers, or inviting, processing and 
acceptance   of   tenders   by   procurement   entities   including   e­
procurement agencies. It is meant to provide a legal framework 
for   all   public   procurement   and   should   be   applicable   to 
Government   Departments,   Public   Sector   Undertakings, 
Universities, Panchayats, Local Bodies, Statutory Boards, and 
those who receive money from Government.

The   following   strategy   for   transparency   to   promote   good 

governance are recommended:

Table 14 : Strategy for Transparency and Good Governance

 No Strategy Specific Initiatives

1 Strategy 1:  Access to Information Laws
o Right to information legislation
Access to  o Records Management laws and Computerisation
information o Whistle Blower Protection
26
 Table 14 : Strategy for Transparency and Good Governance

o Disclosure of Income and Assets subject to 
  rules
o Complaints and Ombudsman Office
Putting information in the public domain
o Putting up ‘M’ books on the website
o Web based approvals to be put on the 
  website
Strategy for Transparency and Good Governance
No Strategy Specific Initiatives
2 Strategy 2:  . Developing and implementing model code of 
Ethics and  conduct Integrity   for political represent­
Integrity atives, civil service, judiciary, civil society 
groups etc
. Removal of all discretionary powers provided 
to officials under the law which may lead to 
misappropriation in government
. Public hearings & Public meetings
Transparency in procedures and systems 
by opening up procedures for public 
review
     Peoples’ estimates; social audit
. Prior consultation with public in the process 
of policy making
Participatory budgeting
Transparency in budget as done by some 
state governments
Independent audit
. Administrative procedure legislation providing 
for  transparent and accountable administrative 
action.
Strategy 3: . Public service agreements for delivery of 
services by executive agencies – holding them 
Institutional  accountable objectively and transparently
reforms . Participation of stakeholders in various 
decision making processes
o Citizen committees to be a part of the 
  decision making process
o Encourage and facilitate public 
  participation through
    Public Hearings
 Study Circles
 Citizen Advisory Boards
 Government Contract Committees
 Public Watchdog Groups
         Independent Anti­Corruption Agencies
. Enhance participatory decision making through 
constitution of Citizen Boards and focus groups
. Capacity building of citizen and civil society 
27
 Table 14 : Strategy for Transparency and Good Governance

groups
Strategy 4:  . Easy access of government officials to the 
Targeting  public
Specific  • Contact numbers of senior officials to 
Issues be made available to the public for the 
purpose of registration of grievances
• Departmental websites to provide the 
contact numbers, emails and other 
details of senior officials

IMPROVING VIGILANCE ADMINISTRATION
(Directorate of Vigilance, Goa)

1)   Creating   a   culture   of   honesty  :  Some   Organizations   and 

departments   have   a   reputation   for   corruption.   The   junior 
employees and Officers who join such departments initially are 
not   oriented   to   be   a   part   of   the   corrupt   system.   Already, 
nomination   of   Vigilance   Officers   exists   in   Goa   Government. 
However, their activities are not reviewed from time to time 
and there is no much evidence of their active involvement in 
curbing the corruption in their departments. It is, therefore 
decided that the Vigilance Officer of the departments can make 
a direct reference to the Secretary (Vigilance) or the Chief 
Vigilance   Officer   in   the   Secretariat,   if   any   instance   of 
corrupt activities of anybody in the department comes to their 
notice. He need not route these complaints through the Head of 
the Department.  Similarly, any other junior employee also can 
send the information directly to the Secretary (Vigilance) or 
the   CVO.   Such   references   will   not   be   taken   as   acts   of 
indiscipline. 
2) Greater transparency in administration : The Goa Government 
has   already   enacted   the   “Right   to   Information   Act”   and 
notified the competent authorities thereunder. This has opened 
up the functioning of the Government  Departments  for greater 
28
public scrutiny. There might be some occasions where there is 
necessity   to   maintain   secrecy   where   discretion   has   to   be 
exercised.   But   once   discretion   has   been   exercised   or   as   in 
matters of tenders, once the tender has been finalized, there 
is   no   need   for   secrecy.   There   is,   therefore,   a   need   for 
publishing   on   notice   board   of   each   department/organization, 
the details of all the cases regarding tenders or out of turn 
allotments   or   discretion   exercised   in   favour   of   an 
employee/party.   This   will   go   a   long   way   in   reducing   wrong 
decisions and will automatically check corruption.
3) Speedy departmental inquiries : There is an impression that 
the Government employees are not sufficiently rewarded in case 
of good work and are not punished promptly in case of omission 
and   commissions.   One   reason   for   delay   in   punishment   is 
regarding   the   delay   in   concluding   the   disciplinary   enquiry 
proceedings. The departmental inquires are in turn, delayed as 
there are no special officers for doing this work except the 
Commissioner of Departmental Inquiries and there are a number 
of adjournments requested for and granted during the course of 
enquiry.   The   Vigilance   Department   is   compiling   separately   a 
panel   of   names   of   Inquiry   Officers   so   as   to   appoint   more 
Inquiry Officers to ensure that the departmental inquiries are 
completed in time. 
4)  Negotiation   of  tenders  :  In  order   to  reduce   the  possible 
corruption, post tender negotiations have to be banned totally 
except in the case of negotiations with the lowest tender. If 
it is not possible to accept the lowest tender, the department 
has to go in for re­tendering.

INCREASING TRANSPARENCY IN PROCUREMENT/SALE
(CENTRAL VIGILANCE COMMISSION, New Delhi)
The Commission is of the opinion that in order to bring about 

29
greater   transparency   in   the   procurement   and   tendering 
processes there  is need for widest possible  publicity. There 
are   many   instances   in   which   allegations   have   been   made 
regarding inadequate or no publicity and procurement officials 
not making available bid documents, application forms etc. in 
order to restrict competition.

Improving   vigilance   administration   is   possible   only   when 

system improvements  are made to prevent  the possibilities of 
corruption.  In order to bring about  greater  transparency  and 
curb   the   mal­practices   mentioned   above   the   Central   Vigilance 
Commission in the exercise of the powers conferred on it under 
Section   8(1)(h)   issues   following   instructions   for   compliance 
by all govt. departments, PSUs, Banks and other agencies over 
which the Commission has jurisdiction. These instructions are 
with regard to all cases where open tender system is resorted 
to for procurement of goods and services or for auction/sale 
etc. of goods and services. In addition to the existing rules 
and   practices   regarding   giving   publicity   of   tenders   through 
newspapers,   trade   journals   and   providing   tender   documents 
manually   and   through   post   etc.   the   complete   bid   documents 
along with application form shall be published on the web site 
of the organization.  The complete application form should be 
available   on   the   web   site   for   purposes   of   downloading   and 
application made on such a form shall be considered valid for 
participating in the tender process.
The concerned organization must give its web site address in 
the   advertisement   NIT   published   in   the   newspapers.   If   the 
concerned   organization   wishes   to   charge   for   the   application 
form   downloaded   from   the   computer   then   they   may   ask   the 
bidding party to pay the amount by draft/cheques etc. at the 
time of submission of the application form and bid documents.

30
While   the   above   directions   must   be   fully   complied   with, 
efforts  should be made by organizations  to eventually switch 
over   to   the   process   of   e­procurement/e­sale   wherever   it   is 
found to be feasible and practical. The above directions are 
issued in supersession of all previous instructions issued by 
the   CVC   on   the   subject   of   use   of   web­site   for   tendering 
purposes.   These   instructions   shall   take   effect   from   1st 
January,  2004 for all such organizations  whose web­sites are 
already   functional.   All   other  organizations   must   ensure   that 
this facility is provided before 1st April, 2004.
V. IMPROVING VIGILANCE ADMINISTRATION
(CENTRAL VIGILANCE COMMISSION)
The Central Vigilance Commission Ordinance 1998 under Section 
8(1)(h) directs that the power and function of the CVC will be 
the   following:     “exercise  superintendence  over   the   vigilance 
administration   of   the   various   Ministries   of   the   Central 
Government or corporations established by or under any Central 
Act,   Government   companies,   societies   and   local     authorities 
owned or controlled by that Government”.   Improving vigilance 
administration   is   possible   only   if   system   improvements   are 
made   to   prevent   the   possibilities   of   corruption   and   also 
encourage   a   culture   of   honesty.   In   exercise   of   the   powers 
conferred   on   the   CVC   by   Section   8(1)(h),   the   following 
instructions are issued for compliance:
Creating   a   culture   of   honesty  :  Many   organisations   have   a 
reputation   for   corruption.   The   junior  employees   and   officers 
who join the organisations hopefully may not be so corruption 
minded   as   those   who   have   already   been   part   of   the   corrupt 
system.   In   order   to   ensure   that   a   culture   of   honesty   is 
encouraged and the junior officers do not have the excuse that 
because   their   seniors   are   corrupt,   that   they   have   to   also 
adopt   the   corrupt   practices,   it   is   decided   with   immediate 
31
effect   that   junior   employees   who   initiate   any   proposal 
relating to vigilance matters which is likely to result in a 
reference to the CVC can send a copy directly to the CVC by 
name. This copy will be kept in the office of the CVC and data 
fed   into   the   computer.   If   within   a   reasonable   time   of   say 
three to six months, the reference does not come to the CVC, 
the CVC then can verify with the concerned authorities in the 
department as to what happened to the vigilance case initiated 
by the junior employee. If there is an attempt to protect the 
corrupt or dilute the charges, this will also become visible. 
Above  all  the  junior   officers  will   not   have   the   excuse   that 
they have to fall in line with the corrupt seniors. 

Greater  transparency  in administration  :  One major source  of 

corruption arises because of lack of transparency. There is a 
scope   for   patronage   and   corruption   especially   in   matters 
relating   to   tenders,   cases   where   exercise   of   discretion 
relating  to out of turn conferment of facilities/ privileges 
and   so   on.   Each   Organisation   may   identify   such   items   which 
provide   scope   for   corruption   and   where   greater   transparency 
would be useful. There is a necessity to maintain secrecy even 
in matters where discretion has to be exercised. But once the 
discretion   has   been   exercised   or   as   in   matters   of   tenders, 
once the tender has been finalised, there is no need for the 
secrecy. A practice, therefore, must be adopted with immediate 
effect by all organisations within the purview of the CVC that 
they   will   publish   on   the   notice   board   and   in   the 
organisation’s   regular   publication   the   details   of   all   such 
cases   regarding   tenders   or   out   of   turn   allotments   or 
discretion exercised in favour of an employee/party. The very 
process   of   publication   of   this   information   will   provide   an 
automatic   check   for   corruption   induced   decisions   or   undue 

32
favours  which go against  the principles  of healthy vigilance 
administration.   The   CVC   will   in   course   of  time   take   up   each 
organisation   and   review   to   see   whether   any   additions   and 
alterations   have   to   be   made   to   the   list   of   items   which   the 
organisation identified in the first instance for the monthly 
communications   for   publicity   in   the   interests   of   greater 
transparency. This may be implemented with immediate effect.

Speedy departmental inquiries : one major source of corruption 
is   that   the   guilty   are   not   punished   adequately   and   more 
important they are not punished promptly. This is because of 
the   prolonged  delays   in   the   departmental   inquiry   procedures. 
One of the reasons for the departmental inquiry being delayed 
is   that   the   inquiry   officers   have   already   got   their   regular 
burden of work and this inquiry is to be done in addition to 
their   normal   work.   The   same   is   true   for   the   Presenting 
Officers also.

Tenders : Tenders are generally a major source of corruption. 
In order to avoid corruption, a more transparent and effective 
system must be introduced. As post tender negotiations are the 
main source of corruption, post tender negotiations are banned 
with immediate effect except in the case of negotiations with 
L1 (i.e. Lowest tenderer).

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