The Comptroller and Auditor General of India (CAG) has recently leveraged artificial intelligence (AI) and machine learning (ML) to detect widespread fraud in beneficiary schemes across several states. This innovation marks step in modernising audit processes and enhancing financial governance. The CAG’s adoption of AI/ML tools aims to prevent misuse of public funds and improve transparency in government operations.
AI and ML in Fraud Detection
The CAG has integrated AI and ML to conduct forensic audits. These technologies analyse vast data sets quickly to identify irregularities and fraudulent activities. This approach helps uncover fraud that traditional audits might miss. It saves government resources by reducing financial leakages in welfare schemes.
Digitisation of Auditing Processes
Digitisation is central to the CAG’s strategy. Remote audits are now possible where departments have digitised their records. This reduces physical visits and speeds up the audit process. It also provides timely assurance to stakeholders and ensures wider audit coverage, such as 100% audits of GST and income tax databases.
Remote Audits Across Government Departments
The CAG plans to extend remote audits to all government departments with digital data. Successful pilot audits include GST, stamp registration, e-procurement, works audit, and direct benefit transfer schemes. This expansion will promote efficiency and reduce audit delays nationwide.
Technological Infrastructure in Public Finance
State governments are progressively adopting IT infrastructure like Integrated Financial Management Information System (IFMS), Government e-Procurement Platforms, and Digital India Land Record Modernisation Programme. These systems enhance transparency, accountability, and governance by digitising financial and administrative records.
Government Initiatives Supporting Digital Finance
Initiatives such as SNA SPARSH aim to improve cash management at Union and state levels. Special Assistance to States for Capital Investment supports IT infrastructure development in public finance. These efforts facilitate the implementation of digital audit systems and strengthen fiscal discipline.
Benefits of AI-Based Forensic Audits
AI-based audits enable early detection of fraud, reduce manual errors, and improve resource allocation. They help in risk assessment and prioritise audit focus areas. This leads to better utilisation of public funds and increased trust in government schemes.
Challenges and Future Prospects
While digitisation and AI bring many benefits, challenges remain. These include data security, training personnel, and ensuring uniform digital adoption across departments. Continued investment in technology and capacity building will be essential for sustained success.
Impact on Governance and Public Trust
The integration of AI and digital audits is transforming public finance management. It promotes transparency, reduces corruption, and enhances accountability. This transformation is expected to strengthen democratic governance and improve service delivery to citizens.
Questions for UPSC:
- Critically discuss the role of artificial intelligence and machine learning in enhancing public financial management and governance in India.
- Examine the challenges of digitisation in government auditing processes and suggest measures to overcome them.
- Analyse the impact of digital infrastructure like Integrated Financial Management Information System (IFMS) on state-level fiscal discipline and transparency.
- Point out the significance of remote audits in the context of India’s federal structure and how they can improve accountability across Union and state governments.
