Social Audit

Social audit is a process in which details of the resources, both financial and non-financial, used by a public agency for a development initiative are shared with people, often through a public platform. It includes in-depth scrutiny and analysis of the working of an entity in which the public is involved viz-a-viz social relevance.

Types of Audit

Financial audit

It is believed to record, process, summarise, and reporting of financial data.

Operational audit

Establishing a standard of operation, measuring performance against the standard, examining and managing deviation, and rehearsing standard based on experience is the main focus.

Social auditing not only provides the financial aspect of auditing but also the operational aspect of auditing. Hence, it provides an assessment of the impact of a department, even on non-financial objectives, through systematic and regular monitoring on the basis of the views of stakeholders.

In India, the initiative of conducting a social audit was taken by Tata Iron and Steel Company Limited, Jamshedpur, in the year 1979.

Social audit serves as an instrument for the measurement of social accountability. It gained significance after the 73^rd Constitution Amendment Act relating to the Panchayati Raj institution. The approach laid down in the 9th Five-Year Plan (2002-07) emphasised social audit for effective functioning of Panchayati Raj institution and empowered Gram Sabha to conduct social audit in addition to its impact on other functions.

NREGA 2005 provides social audit so as to ensure transparency and accountability in the state.

The State Government shall identify and establish, under NREGA, an independent organiser called the Social Audit Unit to facilitate the conduct of social audit by the Gram Sabha.

It reduces corruption
- As social audit uncovered irregularities and malpractices in the public sector and maintained oversight in government institution functioning that reduces leakages and corruption.
Monitoring and feedback
- It monitors the social and ethical impact of organisational performance and provides feedback on the work.
Accountability and transparency
- Social audit, ensuring accountability and transparency in the working of a local government body, reduces the trust gap between the people and the local government.
Participative and democratic
- Social audit provide participation of people in the implementation programme and may help in facilitating social development activities.
Strengthen Gram Sabha
- Social audit gives voice to Gram Sabha, which is considered the linchpin of rural government structure.
Generate demand
- Serve as the basis for framing management policies and socially responsibly highlighting the real core problem.
Improve professionalism
- Social audit boosts professionalism in a public body by forcing the budget to keep a record or account of expenses made against grants received from the government or other resources.
Effective utilisation of resources

Social audit is highly localised, and it covers only certain aspects.
- Social audit is often sporadic and ad hoc.
- Monitoring is informal and unprocessed.
- The findings of social audits sometimes are very generalised over the entire population.
- Individual programmes present their own unique challenges. For example, sometimes literacy is a big issue, programme for adults requires data on migration.
- Several problems require a package of programmes to be implemented. For example, water supply also requires data on sanitation and nutrition. Only then will rule and nutrition be covered.
- Sure, audit needs a more holistic approach and trained auditors.
- Lack of action on audit records and findings
Rules are not followed
- In many states, the social audit unit draws a report from the gram panchayat regarding the execution of work and expenditure. Social audit reports are either not prepared or are not made available to the Gram Sabha in their local language.
Not institutionalised
- Government has not mandated institutionalisation of social audits, thus making auditors vulnerable to implementing agencies who face resistance and find it difficult to even access primary reports for verification.
Apathy of implementing agencies
- Implementing agency request for postponement of audit. It fails to provide the document on time, does not send an independent observer for the Gram Sabha, and fails to take action on the findings of the social audit.
Lack of stringent penalty
- Violation of norms also does not attract any penalty, which makes a social audit a toothless exercise.
Social audit unit lacks independence
- Some social audit units have to obtain sanctions from the project implementing agency before spending funds. Many states do not follow the open process standard for appointment of social audit unit director.
Lack of awareness
- In the absence of a well-conceived information system, government agencies rely heavily on an incomplete system of reporting and tracking progress, due to which it becomes very difficult for the auditors to take action appropriately.
Ultimately, no incentive to participate is also a major challenge.

Way forward

Provide more funds to social audit units
- Ministry of Rural Development earlier recommended 1% MGNREGA for social audit. Later, it got reduced to 0.5%.
Director and staff selection
- Selection of director and staff of social audit units should be free from political control, and the selection process should be strictly followed.
Resource need on social audit
- A resource hub should be constituted under the National Institute of Rural and Panchayati Raj just to ensure that training and support mechanisms are provided for social audit.
Use of information and communication technology, social media, and live recording to ensure accountability of the process
It must have a legally sanctioned outcome
- The outcome of the social audit must have legal sanction, and the state government should enact a specific rule for these.
Increase frequency
- Social audit must be conducted in every gram panchayat every 6 months using a management information system to track details of the seats at all levels to streamline the life cycle.
Civil society participation
- People should be invited from different universities.
- Example: Jharkhand has instituted a formal mechanism by inviting prominent social society representatives to be part of the social audit.
Knowledge dissemination through the role of media
The report of social audit must be placed in the LC, as the LC in such a state represents grassroots-level aspiration and participation, which will ensure participation and accountability of the social audit report at the state level.

Social Audit

Types of Audit

Financial audit

It is believed to record, process, summarise, and reporting of financial data.

Operational audit

Establishing a standard of operation, measuring performance against the standard, examining and managing deviation, and rehearsing standard based on experience is the main focus.

History of social auditing

In India, the initiative of conducting a social audit was taken by Tata Iron and Steel Company Limited, Jamshedpur, in the year 1979.

NREGA 2005 provides social audit so as to ensure transparency and accountability in the state.

The State Government shall identify and establish, under NREGA, an independent organiser called the Social Audit Unit to facilitate the conduct of social audit by the Gram Sabha.

Significance of social audit

It reduces corruption

As social audit uncovered irregularities and malpractices in the public sector and maintained oversight in government institution functioning that reduces leakages and corruption.

Monitoring and feedback

It monitors the social and ethical impact of organisational performance and provides feedback on the work.

Accountability and transparency

Social audit, ensuring accountability and transparency in the working of a local government body, reduces the trust gap between the people and the local government.

Participative and democratic

Social audit provide participation of people in the implementation programme and may help in facilitating social development activities.

Strengthen Gram Sabha

Social audit gives voice to Gram Sabha, which is considered the linchpin of rural government structure.

Generate demand

Serve as the basis for framing management policies and socially responsibly highlighting the real core problem.

Improve professionalism

Social audit boosts professionalism in a public body by forcing the budget to keep a record or account of expenses made against grants received from the government or other resources.

Effective utilisation of resources

Limitation and challenges of social audit

Social audit is highly localised, and it covers only certain aspects.

Social audit is often sporadic and ad hoc.
Monitoring is informal and unprocessed.
The findings of social audits sometimes are very generalised over the entire population.
Individual programmes present their own unique challenges. For example, sometimes literacy is a big issue, programme for adults requires data on migration.
Several problems require a package of programmes to be implemented. For example, water supply also requires data on sanitation and nutrition. Only then will rule and nutrition be covered.
Sure, audit needs a more holistic approach and trained auditors.
Lack of action on audit records and findings

Rules are not followed

In many states, the social audit unit draws a report from the gram panchayat regarding the execution of work and expenditure. Social audit reports are either not prepared or are not made available to the Gram Sabha in their local language.

Not institutionalised

Government has not mandated institutionalisation of social audits, thus making auditors vulnerable to implementing agencies who face resistance and find it difficult to even access primary reports for verification.

Apathy of implementing agencies

Implementing agency request for postponement of audit. It fails to provide the document on time, does not send an independent observer for the Gram Sabha, and fails to take action on the findings of the social audit.

Lack of stringent penalty

Violation of norms also does not attract any penalty, which makes a social audit a toothless exercise.

Social audit unit lacks independence

Some social audit units have to obtain sanctions from the project implementing agency before spending funds. Many states do not follow the open process standard for appointment of social audit unit director.

Lack of awareness

In the absence of a well-conceived information system, government agencies rely heavily on an incomplete system of reporting and tracking progress, due to which it becomes very difficult for the auditors to take action appropriately.

Ultimately, no incentive to participate is also a major challenge.

Way forward

Provide more funds to social audit units

Ministry of Rural Development earlier recommended 1% MGNREGA for social audit. Later, it got reduced to 0.5%.

Director and staff selection

Selection of director and staff of social audit units should be free from political control, and the selection process should be strictly followed.

Resource need on social audit

A resource hub should be constituted under the National Institute of Rural and Panchayati Raj just to ensure that training and support mechanisms are provided for social audit.

Use of information and communication technology, social media, and live recording to ensure accountability of the process

It must have a legally sanctioned outcome

The outcome of the social audit must have legal sanction, and the state government should enact a specific rule for these.

Increase frequency

Social audit must be conducted in every gram panchayat every 6 months using a management information system to track details of the seats at all levels to streamline the life cycle.

Civil society participation

People should be invited from different universities.
Example: Jharkhand has instituted a formal mechanism by inviting prominent social society representatives to be part of the social audit.

Knowledge dissemination through the role of media

The report of social audit must be placed in the LC, as the LC in such a state represents grassroots-level aspiration and participation, which will ensure participation and accountability of the social audit report at the state level.