This is going to be the new paradigm of the government and enforcing it will be financial advisors who were doing nothing more than pushing files for the past three decades. The financial advisors attached to ministries, departments and public sector undertakings are being bestowed with financial powers that were hitherto lying in the hands of the secretaries.
Their new role has been defined in an official memorandum sent out by expenditure secretary Adarsh Kishore on September 30 to all ministries.
As he puts it, "The role of a financial advisor will be akin to a chief financial officer in a corporate structure, with specific responsibilities for ensuring fiscal prudence and sound financial prudence."
Henceforth, these financial advisors will be "accountable to the finance ministry with a mandate to ensure financial prudence in every ministry where they are posted," Kishore stressed.
The new redefined charter for financial advisors, thirty years after it was originally drafted on October 6 1975, comes into effect from October 15, 2005.
The new charter entrusts the financial advisors with the vexed problem of matching release of funds to state governments and other agencies only after submission and audit of utilisation certificates linked to scheme-wise and project-wise achievement of targets.
Financial advisors have also been asked to beef up "non-tax receipts which have become important in the light of the FRBM Act," the letter states.
The financial advisors will also maintain a list of assets and liabilities of every ministry to bring them into the government's account books.
The charter is hailed as the finance ministry getting tough with the ministries to tighten their belts in view of the fiscal deficit threatening to shoot up. The tax collections are not keeping pace with the budget targets and hence the urgency felt to keep the deficit under check.
The order empowering the financial advisors to be the financial bosses of their respective ministries and departments instead of just functioning as attached officers comes close on the heels of another order a few weeks ago by the expenditure secretary on stopping release of money unless they submit utilisation certificates for the funds already availed.
The audit reports of the government had showed that 41,038 utilisation certificates which were due by March, 2004 are still pending involving funds Rs 10,572 crore (Rs 105.72 billion) and therefore the finance ministry has to put a stop somewhere to this malpractice, Kishore underlined.
In time before the serious exercise begins next month for the budget preparation, the role of the financial advisors has been outlined to include 'Budget Formulation' where financial advisors will advise ministries to move towards zero based budgeting, prioritizing expenditure and allocation within Budget ceilings.
The financial advisors will also maintain the Outcome Budget and a Performance Budget to prove physical measurable and monitorable results of the money spent by the ministries.
Kishore's letter attaches importance to the role of the financial advisors on boards of public sector units as the government's nominee directors. "This role assumes increasingly more important dimensions with greater autonomy to PSUs."
As nominee directors, the financial advisors will be required to protect the financial interests of the government as the largest shareholder in these corporations. A separate policy for this is also being readied by the finance ministry in consultation with the department of public enterprises.
The advisors will now have to maintain special reporting systems to be the finance ministry's window into each ministry.
An annual finance report of every ministry will be prepared by the financial advisors which will show operational expenses of every ministry, opening and closing balances at the beginning and end of every financial year, unspent balances.
Another Annual Outcomes and Systems Report will be prepared by the financial advisors which will track the outcomes versus targets and steps taken by them to improve the delivery systems, Kishore disclosed.
The report will also have quarterly versions, which will be perused by the finance ministry. The extremely detailed paper work that financial advisors will now have to maintain will be in addition to quarterly reviews by the finance minister himself.
