Need for Social Audit in India

The recent report of a joint task force on social audit has made unanimous recommendations that have opened the possibilities of social audit becoming a vibrant, independent and citizen-based monitoring system. The Supreme Court too in an ongoing PIL has taken a note of these recommendations and is exploring strengthening social audit as a systemic solution in law.

What are social audits?

• Social audits refer to a legally mandated process where potential and existing beneficiaries evaluate the implementation of a programme by comparing official records with ground realities.
• The public hearings that social audits conclude with remain its soul.
• The proceedings cannot be scripted, and the entire social audit is often a dramatic process of redistribution of power based on evidence and fact.
• These audits were first made statutory in a 2005 Rural Employment Act.

Objectives of Social Audit

• Accurate identification of requirements.
• Prioritization of developmental activities as per requirements.
• Proper utilization of funds.
• Conformity of the developmental activity with the stated goals.
• Quality of service.

Benefits of Social Audit

• Involvement of people in developmental activities ensures that money is spent where is it actually needed.
• Reduction of wastages.
• Reduction in corruption.
• Awareness among people.
• Promotes integrity and a sense of community among people.
• Improves the standard of governance.

Back ground

• Social auditing is a process that enables an organisation to assess and demonstrate its social, economic, and environmental benefits and limitations.
• It is a way of measuring the extent to which an organisation lives up to the shared values and objectives it has committed itself to.
• Social auditing information is collected through research methods that include social book-keeping, surveys and case studies
• .
• The objectives of the organisation are the starting point from which indicators of impact are determined, stakeholders identified and research tools designed in detail.
• In the 70s, when. it first appeared, social audit was a response to the budding consumer movements that rode on the issues of unsafe products and to the environmentalists’ movements that protested on the wanton dumping of pollutants to the environment.
• In the last decade when it resurfaced from the lull in the 80’s social audit was driven, and literally forced upon, by the ‘green business’ and ‘ethical investments’ communities that came to prominence through highly publicised boycotts of firms.
• Social audit in origin, it can be said then, has roots in the dire need to make business organisations more accountable to people and communities.
• Some business organisations’ decisions and actions have far-reaching implications on, and consequences to, communities and lives of peoples have to be recognised, and that whatever their impact - either beneficial or non-beneficial - these organisations have to account for them on the ground of social responsibility.
• Social Audit is thus, a method of ensuring accountability of any authority, governmental or otherwise, of its actions and inactions, what it chose to do, the manner in which it is being done and the analysis of what is done.

Factors Credited for its Growth

Several factors are credited for having contributed to the significant growth of social audit These are:

• Investigative reporting by mass media organisations into the impacts, usually negative, of corporations and other institutions on people, on the local community and on the environment;
• As pressures filed-up in the 1980s about the impact of industry on the environment, standards began to be developed requiring companies, and others, to report on likely and actual environmental ramification of its continued operations.
• The growth of interest in ethical investment has led to the need to uncover and better understand just what corporations’ do and how they use the funds invested in them.
• Consumers themselves, through consumers’ organisations, have become more conscious of how their patterns of consumption can affect the actions of corporations and even governments.
• The movement of corporate social responsibility has given the impetus to shift from simply doing good things in the community to one that embrace the notion of improved accountability to stakeholders and the need to explain themselves, if only to maintain a license to operate.
• The idea of stakeholders has opened up new understanding that all organisations affect far more people than was perhaps realised in the past and that these stakeholders have a legitimate right to at least know what is going on, or even have some influence on them.
• Most recently the introduction’ of the concept of best value reinforces the legitimacy of recognising softer outcomes as well as hard outputs at the same time as making it more essential that there is some way of accounting for and reporting on that softer performance.

Principle of Social Audit

• In the past years, there have been substantial efforts to define common themes in social audit. From the experience of all those involved, a good social audit carries the following characteristics:
• Improved social performance: This is the overarching principle, and this refers to the continuous improvement in performance by the organisation relative to the chosen social objectives as the result of social audit.
• Multi-perspective: It is important for all groups affected or who affect the organisation to be included in the process.
• Comparative: The process should allow for comparison with other organisations, over time and between stakeholder groups.
• Comprehensive: The process should be designed to collect all relevant materials and areas of concern should not be left out simply because the organisation would not like the result.
• Regular: To facilitate comparability and to demonstrate a commitment to the process, it should be regular, with a frequency of once every two years.
• Verified: Verification by independent auditors gives the process credibility.
• Published: The result (or a synopsis) of the audit should be published so that the stakeholders can see the results and to encourage openness.
• Improvement: It is important to receive feedback about the process itself and the report, and to improve the system over time.
• Embeddedness: The social audit process should be integrated with other business information gathering system.

Relevance of Social Audit

• At its simplest, Accountability refers to a process by which individuals or organisations are answerable for their actions and consequences that follow from them. What remains unclear, however, is the issue of who is entitled to hold these individuals or organisations to account and mechanism that should be used in order to do so.
• The Traditional approach to Accountability refers to the conventional method of formal authority over individual/organisation and right to hold them to account. But this approach to accountability often fails to empower those who are most affected by an organisation’s decisions. Meanwhile, the Stakeholder Approach to Accountability goes beyond the traditional approach and domain of formal authority.
• This approach is more participative in nature and democratic in sprit.

Social Accountability

• It means public accountability through civic management. It is a process by which accountability is exacted from accountability holders through direct or indirect citizen action and engagement.
• Social accountability ensures transparency, reduces leakage, forces proper spending of funds, generates trust and peace and creates demand-led improvement in services.
• It has both intrinsic value of strengthening democratic relationships of empowering people and in being instrumental in developing effectiveness through better services delivery and better governance.
• In a sense, it is a continuing audit and a constant check on malfeasance.

Social Audit vs. Financial Audit

• Social Audit is often misinterpreted as another form of audit to determine the accuracy of financial or statistical statement or reports and the fairness of the facts they present.
• A conventional financial audit focuses on financial records and their scrutiny by an external auditor following accounting principles whereas the Social Audit is much more holistic having a greater scope for measuring, understanding and improving the social performance of an activity of an organisation.

Financial Audits of an NGO of a development project primarily focus on:

Financial Documentation

• Appropriateness of Expenses
• System of processes
• Budgetary framework

But does not adequately address or capture two crucial issues that are integral to the existence or purpose of every NGO. They are:

Issue of Relevance, and area of effectiveness.

• In case of Financial Audit, there is no standardization or prescribed format available for preparation of financial statement by the NGOs. The financial statement prepared by the NGOs does not meet the reporting expectation of gamut of all the stakeholders.
• The Income and Expenditure account is a point in the case. The Income and Expenditure account gives us information on excess of income over expenditure or vice versa. In either of the case, it does not communicate anything about the financial health of the organisation.

Scope of Social Audit

Social audit is the generic term referring to the full range of activities of the entire procedure. In effect, it encompasses the following activities:

Social accounting, which covers

• Social book-keeping, an activity whereby all information related to social performance based on the organisation’s social objectives are collected, recorded and systematically classified;
• Summarisation and interpretation of the data; and
• Reporting the information to management.

Social auditing, which covers

(a) Verification of the information, and certification as to the correctness of the information; and

(b) Reporting the information to all the stakeholders and the public.

• The scope of a social audit is not restricted to corporate decisions and actions that have a specific ‘social’ focus. Social audit is concerned with any action or decision initiated by the organisation that has social consequences.
• Social audit extends beyond the usual myopic preoccupation with corporate interests to the more socially “responsible concerns, including the broader impact of corporate decisions and actions to people and communities.
• Of course, this is not for philanthropy, entirely; because any organisation will benefit from taking into account the expectations of individuals, groups and other organisations that affect the success of its operation.

Indian Scenario

• Historically, after the attainment of Independence, the initiative take through land reforms in nearly the entire territory came with a certain proliferation of bureaucracy. While the initiative taken was necessary, what proliferated put a burden on the entire political economy, reducing it to the demand and command polity (Rudolf and Rudolf).
• By the mid 1960s, the entire structure crumbled down and a peasant uprising in Naxalbari rang the alarm bells. Measures, such as splitting the rul ing party in two, bank.
• Nationalization coercive population control, anti-poverty programmes (all under the rubric of garibi hatao) and going to war in 1971 were the means for Indira Gandhi to regain popularity.
• The approach was incremental, even then, Indira Gandhi was able to manage the structure without much changes.
• However, the JP Movement that combined in itself a loose confederation of widespread protestors - students, workers’, peasants, working classes, and political opposition, against the totalitarian regime, ended the domination of one party rule.
• The regimes changed since then and so have changed the way, the bureaucracy and service delivery system structured.
• By the launch of National Economic Policy in 1991, the stage was set for embracing the clientele.
• Social audit assumes even greater importance in the context of democratic decentralisation since 1992-93.
• Structures for accountability are the weakest in panchayats and municipal bodies who are implementing anti-poverty programmes and providing basic social services.
• Half-hearted devolution of powers by most state governments continues to stymie their effectiveness. Planning by district planning committees as envisaged in the constitutional amendments has hardly been operationalised.
• At the sub-district level of taluk and gram panchayats, poor book-keeping is coupled with audit certification by Examiners, Local Funds of the state governments, which is by and large no more than an exercise in stamping and signing inadequately authenticated accounts.
• Hearing the complaints of residents before certifying accounts, as is the audit convention for local authorities in Europe, is nowhere even on the agenda in India.
• The sheer spread and numbers of the local bodies, to be considered against the availability of ethical auditors, are daunting.

Social audit is one of the audit functions with focus on monitoring various programmes. In India, it is used in the context of the effectiveness of the schemes/programmes run by the Government of India

• Social Audit in India does not ordinarily have any relation with corporate or business institutions.
• Companies engaging in Corporate Social Responsibility (CSR) do not generally produce a social audit report regarding their organisations.
• Social Audit in India is usually targeted at the public works by the government and usually with a methodology of involving public through physical verification of works, records assessment, public hearing and mass mobilisation, etc.
• Social Audit is used for exposing corrupt practices of public administration or enforcement of rights.

Why Social Audit is required in India

• Former Prime Minister late Shri Rajiv Gandhi had once famously said that only 16 Paise out of one Rupee sanctioned by government reach poor.
• In an article in 19th December 2004 edition of Times of India, Aiyar Swaminathan had commented that “Likelihood of money reaching the poor would be higher if we simply drop the money by helicopter or gas balloon into rural areas than route it through employment programmes”.
• The situation with respect to our government/public schemes has not changed much since then. Even today a crisis of credibility, confidence and trust persists with respect to government projects, programmes and schemes.
• High economic growth is threatened by corruption at all levels. Leakage of funds in public programmes and misuse of shareholders and stakeholders resources is a common scenario.
• There has been a growing tendency of depriving the marginalised in the name of “Development”. Of late, it is being noticed that ‘Social Conscience’ is fast eroding and the Means don’t matter— the End justifies any means.
• Inequitable resource allocation is a common concern in the country. This background calls for the culture of social audits to take roots in the country, in both private and public sector.

Need for social audits

• In the course of a social audit, individuals and communities get empowered and politicised in a way that they experience the practical potential of participatory democracy.
• Since more than 50% of the government’s budget goes towards welfare schemes, it’s important to track how, and how much, money is diverted away from intended recipients. Social audits serve as a better monitoring tool for these schemes.
• The impact of continuous cycles of social audit in deterring potential corruption is beyond quantification. They serve as an important tool to detect corruption and influence redress.
• The social audit process was recently endorsed by the public finance watchdog, the Comptroller and Auditor General of India. The CAG said: “All over the world, there is a growing perception among the supreme audit institutions that it is important to partner with civil society to ensure the latter’s participation in service delivery and public accountability.”

Legislative Support Available to Social Audit in India

• The 73rd amendment of the Indian Constitution: Social Audit gained significance especially after the 73rd Amendment of the Constitution relating to Panchayat Raj Institutions.
• That empowered the gram sabhas to conduct Social Audits in addition to its other functions, and it was by far the only legislative reference to the concept of Social Audit.
• Right to information Act, 2005: This is also a key pillar of support for Social Audit system in India. This was enacted by Parliament of India to provide for setting out the practical regime of the right to information for citizens.
• The Act applies to all states and union territories of India, except the state of Jammu and Kashmir.
• This Act also requires every public authority to computerize records for wide dissemination and to proactively publish certain categories of information so that the citizens need minimum resources to request for information formally. This is again a support for Social Audit system in India.
• National Rural Employment Guarantee Act, 2005-- (NREGA): Section 17 of this Act provides for regular “Social Audits” so as to ensure transparency and accountability in the scheme.
• It is the responsibility of the state government to conduct the Social Audit. The state government will conduct the Social Audit according to the pre-designed “Schedule of Social Audit”.
• The state government is to ensure that the agencies for conducting Social Audit are trained.
• The Draft “NREGA Transparency and Public Accountability Rules” lay down detailed guidance for conduct of Social Audit.
• The government has been instrumental in establishing an independent Social Audit Society for carrying out the Social Auditing of NREGA in the state.
• This society is called “Society for Social Audit” Other social sector programmes also laid down provisions and procedure for “Social Audit”.
• For example: The ministry of Housing and Urban Poverty alleviation has laid down Social Audit methodology and operational guidelines for various schemes.
• The erstwhile Andhra Pradesh Government engaged MV foundation, a voluntary organisation working on the issue of child labour and children’s right to education, to conduct “Social Audit” of Mid-Day Meals in Andhra Pradesh.

Why social audits are losing their relevance in recent times?

• Lack of support from government machineries has side-lined social audits. The lack of adequate administrative and political will in institutionalising social audit to deter corruption has meant that social audits in many parts of the country are not independent from the influence of implementing agencies. Social audit units, including village social audit facilitators, continue to face resistance and intimidation and find it difficult to even access primary records for verification.
• Lack of any legal proceedings for not following social audit principles. Unless there is a stringent penalty on authorities for not implementing social audit, they will not give up control because it reduces their kickbacks and authority.
• Lack of education among the common masses. Since common people are not that educated, they do not know their rights, let alone get them enforced.
• Way ahead
• In an age where phrases such as open data and open government are used in any conversation around governance, social audits should serve as a critical point of reference.
• An open and transparent system involves the presence of real platforms for people to be informed by official statements and records, with an opportunity to compare that with ground realities.

Conclusion

• Social audit is no longer a choice.
• Along with other transparency and accountability platforms, it is a legal, moral, and democratic necessity.
• The government can decide to use these interventions and harness peoples’ energies in facing the vast challenge of implementation and monitoring.

By Gudipati Rajendera Kumar