Business Environment unit 3

1. RASHMI SINGH

2. Audit: The word 'Audit' originated from the Latin
word 'audire' which means 'to hear‘.
It is an unbiased examination and evaluation of a
person, organization, system, process, enterprise,
project or product.
Can be done
INTERNALLY (by employees of the organization) or
EXTERNALLY (by an outside firm)

3. 1. Government or institutional audit is one that is conducted in-
house or through external, professional, auditing institutions,
and is ordinarily conducted without the significant
involvement of the affected people and/or the intended
beneficiaries.
2. Social audit is one that is conducted jointly by the
government and the people, especially by those people who
are affected by, or are the intended beneficiaries of, the
activity being audited.
3. People’s/Public audit is one that is conducted by the people
themselves, including those who are directly affected or are
the intended beneficiaries, sometimes with the assistance of
movements and NGOs.

4. TTY

5.  The audit is traditional and age old practice; however, the
concept of social audit came in effect in mid 20th century.
 Some of the pioneering work in this area has been done by
Charles Medawar in the application of the idea in medicine
policy, drug safety issues, and on the matters of corporate,
governmental, and professional accountability.(5)
 Medawar opined that in a democracy, the decision makers
account for the use of their powers, which should be used with
the consent and understanding of all concerned.(6)
 In the last two decades, this concept has significantly been
applied for social and health sector.(2–4,7)

6.  Emerged in the 1940’s when academic Theodore Kreps called on
companies to acknowledge their responsibilities to citizens.
 In 1960-70’s , a fresh wave of interest in Social and Ethical
Accounting, Auditing and Reporting (SEAAR) & Concept of
‘stakeholders’ emerged.
 In 1980s, the social audit concept travelled from the private to the
public sector in response to new emerging democratic governance
trends.
Lately, social media (facebook, twitter, wikileaks) are playing
an important role to channel citizen’s initiatives to uncover
corrupt practices and mismanagement, as well as to hold
governments accountable.

7. The concept of “Social Audit” has been linked to “Corporate
Social Responsibility” (CSR)
CSR is essentially a concept, whereby companies integrate
social and environmental concerns in their business
operations and in their interaction with their stakeholders on a
voluntary basis.
 For Example,
 Microsoft has created a Bill & Melinda Gates Foundation for Research &
Development work on HIV / AIDS
 McDonald’s outlets take care of its surroundings by maintaining cleanliness and
hygiene.
 In India, Infosys has created an NGO to work for development of society

8. Social audit is an on-going process by which the potential
beneficiaries and other stakeholders of an activity or
project are involved from the planning to the monitoring
and evaluation of that activity or project.(1)
This concept has amply been used in social sector and
that is why the term social audit has come up.
What globally is known as “People’s Audit or Public Audit”,
in India we call it “Social Audit”.

9. Identify and measure their impact on stakeholders.
Communicate this information internally and externally.
Apply this information to make continual improvements
in areas that stakeholders see as important.

10.  Broadly, this process of Social Audit involves, the following
components, i.e.,
a) Availability of information / details of the resource, financial and
non-financial, used by public agencies for development
initiatives,
b) Organising the ultimate users / beneficiaries / people,
c) Scrutiny of the information by the end users.
• Foundation of Social Audit is INFORMATION AVAILABILITY--
-- as people can ask questions only when they possess the
requisite information regarding the subject

11.  Freedom of speech & expression is protected in Article 19 of the
Constitution of India:
All citizens shall have the right to freedom of speech and
expression.
 In 1982, the Supreme Court of India ruled that access to
government information was an essential part of the fundamental
right to freedom of speech and expression.

12.  Allows any one to access information regarding the functioning of a
scheme or project, by filing a specific request.
 Made people aware that the right is legally enforceable
 Universal access
 Suo moto disclosures
 Guarantees the people that they can conduct a social audit of any
scheme or programme that they think needs their scrutiny, even ifthe
concerned public authority has not organised a social audit.
(suo motu describes an act of authority taken without formal prompting from another party )

13. PROCESS OF ACCESS :
 Public authority must appoint a Public Information Officer (PIO), who accepts
requisitions and provides information.
 The PIO must ordinarily respond to a requisition within 30 days
 Information relating to the life or liberty of a person must, nevertheless,
be provided in 48 hours.
PENALTIES are prescribed for illegitimate delay or refusal
 For unreasonable delay-- Rs. 250 per day
 For destruction of information, knowingly giving false information etc., with
an upper limit of Rs. 25,000
There has been increasing interest about the use of this technique in
health sector in the developed and developing world, in the last decade.(2)
There are well-reported examples of beneficial effect of social audit in
increasing program performance in health sector.(3,4)

14.  The investment of thousands of crores of rupees made by the
Government of India and various national and international
agencies, since independence in social development
programmes, has not been justified by the impact it has made.
 Huge gap between the desired impact and the actual impact takes
anyone within the Govt. or otherwise to think deeply about the
failures.

15. PROGRAMME
PLANNER &
IMPLEMENTERS
SOCIALAUDIT
For flow of information
(THE MISSING LINK)
BENEFICIARIES
D
E
M
A
N
D
S
U
P
P
L
Y
Flow of
information
(THE
MISSING
LINK)
Supply of
development
inputs
WEAK STRONG

16. Assessing the physical and financial gaps between needs
and resources available for local development.
Creating awareness among beneficiaries and providers of
local, social and productive services.
Increasing efficacy and effectiveness of local development
programmes.
Scrutiny of various policy decisions, keeping in view
stakeholder interests and priorities, particularly of rural poor.
Estimation of the opportunity cost for stakeholders

17. Allow people to enforce transparency & accountability.
Promote dialogue and deliberation to promote public-private
partnership.
Increase public participation at all stages of public policy &
budget cycle.
Identify, control and report irregularities & prevent abuse of
funds and power.
Measure the impact of policies/programs.
Enable citizens to exercise their rights.

18. PRINCIPLES OF SOCIAL AUDIT &
UNIVERSAL VALUES

19. Social audit is an evolving area and there are a number of
basic principles outlined for social audit.
 Different groups of people outline different principles and
below is the summary of these principles. These help in
the formation or actual planning of the social audit.(1,8,9)
These principles are described as following:
1. Multi perspective/Polyvocal: Aim to reflect the views
(voices) of all those people (stakeholders) involved with
or affected by the organization/department/program.

20. 2. Comprehensive: Aims to (eventually) report on all
aspects of the organizations, work and performance.
3. Participatory: Encourages participation of stakeholders
and sharing of their values.
4. Transparency: Complete transparency in the process of
administration and decision-making, with an obligation on
the government to suo moto (voluntary disclosure of
information) give the people full access to all relevant
information.

21. 5. Multidirectional: Stakeholders share and give
feedback on multiple aspects.
6. Regular: Aims to produce social accounts on a regular
basis so that the concept and the practice become
embedded in the culture of the organization
covering all the activities.
7. Comparative: Provides a means whereby the
organization can compare its own performance each
year and against appropriate external norms or
benchmarks and provide for comparisons to be made
between organizations doing similar work and
reporting in similar fashion.

22. 8. Verified: Ensures that the social accounts are
audited by a suitably experienced person or
agency with no vested interest in the organization.
9. Disclosed: Ensures that the audited accounts are
disclosed to stakeholders and the wider
community in the interests of accountability and
transparency.
10.Accountability: Immediate and public
answerability of elected representatives and
government functionaries, to all the concerned
and affected people, on relevant actions or
inactions.

23. Social auditing implies doing a few things and analysis of
selected components.(1,8,9)
I. Economic components: The social auditor may
analyze economic indicators and should be able to
describe the economic or material characteristics of the
community.
II. Political components: Measures of political setting
provide a better idea in tracking the problems and in
finding some solutions.
III. Environmental components: The researcher can
look into aspects like air quality, noise, visual pollution,
water availability, and recreational facilities, which
affect the quality of life in the area under study.

24. IV. Health and education components: Health and
education indicators such as availability of health
care, educational facilities, and educational attainment
can provide useful measures in conducting social
Audit. These indicators can also be correlated with
better functioning of social systems and higher
standards of health and education.
V. Social components: Social component measures the
social relationships and provides an understanding of
the general living conditions, including the availability
of telephones, transport facilities, housing, sanitation,
and opportunities available for individuals for self
expression and empowerment.

26. A social audit is conducted over the life span of a scheme or programme, and not
just in one go or at one stage.
Audits planning, implementation, monitoring and evaluation.

28. To ensure that
quality of work
is in tune with
quantity and
estimated cost
After the
completion of
work
To ensure
that wages
are paid
rightly,
properly and
to right
people
Implementation
stage
To ensure that
estimates are
proper and are
in tune with
the approved
quantum of
work
Preparation
stage
To ensure that
the Gram
Panchayat Plan
is need-based
covering
productive/
investments
and drawn up
in consultation
with community
serving the
poor and the
disadvantaged
Planning stage

29. There are well defined and outlined six steps in
social auditing, which have been summarized
as :(1,8,9)

30.  identify the institution or program or activity, which is to be audited
and understand why it is selected.
 understand the organization, the focus and context of social audit and
then by framing the objectives for social audit.
 The objectives of social audit should be relevant to the strategy,
realistic about what can be achieved, and recognized by existing
routine activity.
 look into the process of implementing the project, assess the quality
of the infrastructure created; assess the basic services provided;
and the satisfaction of the beneficiaries on the benefits provided.

31.  identify the stakeholders to be consulted in the audit and
determining how often these stakeholders could be included in
the “dialogue” process.
 The selection of representatives for consultation is to be
unambiguous and transparent and should cover maximum
stakeholder groups.
 The consultation should be planned with the stakeholders to
extract accurate and needed information. These consultations
should be objective, unbiased with informal dialogue and help
in building rapport trust and confidence in the community.

32.  identify key issues that need to be cross checked in the social
audit as well as how information and data pertaining to the
schemes will be collected.
 Each issue should lead toward an answer on a particular
piece of outputs or results.
 When identifying the issues it is important to see clearly what
is the use of information that is going to be collected.
 Information is to be gathered which can be used to explain
facts or certain issues, influence policy, reflect the tangible
outcomes, and more importantly, they should be measurable.

33.  Moreover, in social audit process, two types of data are crucial.
- Secondary data collected from government documents
and reports,
- primary data collected from stakeholders and community
members.
 Gathering secondary information is very important in the
process of social audit & it is inevitable for making social audit
reports.
 Information required for preparing social audit reports may not
be available in single point but may be in different records in
different forms.

34. The information is useful when it is classified into clusters
based on relevance & consolidated for dissemination
The physical verification of the work by a visit to the
worksite to verify whether whatever mentioned in the social
account has actually happened in the way mentioned.
care should be taken in recording the findings as a small
mistake could leave the processes of the audit in disarray.

35.  The main purpose of public meeting is to obtain public
testimony or comment.
 The key findings of the audit will be discussed in the public
meeting and the concerned government officials will respond
to the key issues raised in such a meeting.
 A public meeting for social audit is a special meeting for a
specific purpose, with no other matters addressed other than
a particular issue of focus.

36.  Social audit is sure to instigate some backlash from the
vested interest. Therefore, the effective mechanism to
address the issue is to introduce continuous consultations
with key stakeholders and by institutionalizing social audit
through legal provisions.
 impact is the greatest and most sustainable when social
audit process is systematically implemented by a civil
society, state or by any other organizations.
 The social audit process is more effective when it is
institutionalized. The replication of social audit on regular
basis is one such process, which will force the state to
incorporate this as an integral part of the government.

37.  The second mechanism is by internalizing within the
Government. The social audit brings in transparency and
accountability only if it is internalized in the government
system.(1)
 The third step in this direction is the involvement of civil
society organizations, which play a crucial role in
institutionalizing the process of social audit.
 These organizations help in creating the awareness and
motivating the civil society viz. Action aid India is also
playing a vital role in conducting the Jan Sunvais in Orissa
and other parts of the country.(12)

38.  Integrity Pacts: an anticorruption tool developed by
Transparency International to prevent corruption in public
procurement.
The “pact” entails an agreement between
government procurement officials and bidders to ensure that
the bidding process abides by internationally recognized
procurement standards of fairness, transparency, and
efficiency.
 Social Media Initiatives: Zabatak is a free website directed to
Egyptians (http://www.zabatak.com/?l=en_US). The website is
started and managed by a group of young civil Egyptians with
the purpose of creating a “bribery-free and safe” Egypt.

39.  Service Delivery Surveys
 Household Surveys for Social Audit
 Community Based Monitoring

40. • May result in serious problems being uncovered that the
company would prefer not to disclose.
• May result in stakeholder criticism and dissatisfaction.
• Imposes a burden on recordkeeping and costs.
• Provides no guarantee that the firm will not face challenges
related to its citizenship efforts.
• Is a relatively new process with
few common standards.

41. Monitors the social and ethical impact and performance of the
organization
Provides a basis for shaping management strategy in a
socially responsible and accountable way
Identify potential problems before they arise.
Facilitates organizational learning on how to improve social
performance.
Informs the community, public, and other organizations about
the allocation of their resources (time and money)
Increases the organization’s accountability to the groups it
serves and on which it depends.

42. Organization gains an improved understanding of community
needs, esp. marginalized groups, and the extent of
satisfaction of those needs
Enables the organization to get a clearer idea of people’s
‘perceptions’ and levels of satisfaction on services
Trains the community on participatory planning of
programmes with a development organization
Community / clients become closely involved in organizational
planning and review processes leading to greater trust
Promotes collective decision making and sharing
responsibilities
Develops human resources and social capital
Encourages local democracy

44.  Initiated by Mazdoor Kisaan Shakti Sangathan (MKSS)
 People had difficulty getting paid the minimum wages
 MKSS brought people together and simply read out official
documents procured either through surreptitious means or from
officials who had no idea of their import
 Records... contained false information.
 E.g., transport bills of over 6 km when the real distance was only 1 km, or
people listed on the muster rolls who lived in other cities or were dead.
 Proved that corrupt officials and others were siphoning money and
minimum wages were being paid only on paper
 idea of a Jan Sunwai or ‘public hearing’ was introduced
 RESULTS: Brought people together
People found their own platform
Change in panchayat ac
National movement led by Ms Aruna Roy… RTI Act2005

45.  Parivartan, a voluntary organisation, started as people’s movement
in June 2000, to provide relief to taxpayers from corruption in the
income tax department
 The organisation began to use the Delhi Right to Information Act
2001 to resolve public grievances
 RESULTS:
 Social audit conducted by Parivartan, along with local residents of
Sundernagri and New Seemapuri - for development works undertaken by
the Engineering Department of the Municipal Corporation of Delhi (MCD).
 Ration shopkeepers won't divulge their records, Food Department officials
won’t file complaints, and the police won’t act on their own or accept
complaints from the public. After the initiatives of Parivartan, a number of
people from different parts of Delhi filed applications under the Delhi Right
to Information Act and sought the records of their ration shopkeepers.

46. Initiated by the state government & facilitated by
M.V.Foundation
In Adilabad and Kurnool districts; in 111 schools
RESULTS:
While about 70-80 children attend school everyday, attendance was
marked for about 100 children and bills for mid day meal are presented
accordingly
Only in 45 out of 111 schools the rice was stored in the school kitchen
shed; 21 out of 111 schools the cooking was done in the kitchen shed
Cooking agency is with the Sarpanch’s family and the ration dealer is
also related to them. The rice is stored with them and they cook in their
own house
In some schools the quality of the meal was so poor that many children
did not eat
Any kind of overt caste discrimination in the serving of mid day meals in
less than 10% of the schools

47. TRUTH is the greatest
national possession. A state,
people and a system that
suppresses truth or fears to
publish it, deserves to
COLLAPSE"
"Kurt Eisner“