Audit is foolproof: Kerala Infrastructure Investment Fund Board

Kochi: Facing criticism over the LDF’s pet off-budget funding and borrowing mechanism for development being outside the CAG ambit, finance minister T.M. Thomas Isaac is quick to point out that Kerala Infrastructure Investment Fund (KIIFB) is subject to a multi-layered oversight and review by the fund trust and advisory committee, led by the celebrated former CAG, Vinod Rai.

The CAG’s review is time-consuming and often is delayed for years, which will dent KIIFB’s image among investors, its lenders and bond buyers. This is perhaps the reason why the government prefers KIIFB internal and review audit protocol as against the CAG’s “laboured and delayed audit outcome”.

 The opposition, however, have raised doubts on the government’s refusal to subject KIIFB to the CAG’s comprehensive audit.  

Dr Isaac says the KIIFB Act 1999 entitles it to employ its own audit mechanism.

Sources point out that CAG has powers to audit KIIFB, as is done already, under Section 14 of the Comptroller and Auditor General's (Duties, Powers and Conditions of Service) ACT. But this is restricted to the government grants to KIIFB. The CAG has urged the state government for access to KIIFB as “statutory auditors” under Section 20.

As per Section 20 of the Act, “the CAG may propose to the President or the Governor of a State... that he may authorised to undertake the audit of accounts of any body or authority, the audit of the account of which has not been entrusted to him by law, if he is of opinion that such audit is necessary because a substantial amount has been invested in, or advanced to, such body or authority by the Central or State Government... and on such request being made, the President or the Governor...may empower the CAG to undertake the audit of the accounts of such body or authority.”

  “May” also means “may not” in legalese and this provision in the law leaves scope for the state government’s discretion in putting up a request for a comprehensive CAG or let its entity be audited like other  public undertakings.    

KIIFB is subjected to quarterly and annual audit to match international standards and the results have to be submitted to lenders like in the case of Masala bonds than wait till CAG disposes of the accounts like it does with  departments and PSUs.

KIIFB has 22 SPVs executing its projects and these have their own audits.  After the quarterly exercise, KIIFB’s audited figures are submitted to the FTAC. The latter issues a fidelity certificate, which is submitted to the Assembly along with the annual budget. This leaves the scope for a full scrutiny with the Assembly committee concerned, sources said.