Role of Chartered Accountants in Finance Concurrence in Public Sector Undertakings (PSUs)
Executive Summary– Public Sector Undertakings (PSUs) are instrumental in driving economic development of the country. Their operations often involve complex financial transactions, large-scale investments, and adherence to various rules and regulations. Finance concurrence, an essential mechanism in PSUs, ensures the financial prudence and compliance of internal controls within the organization. Chartered Accountants (CAs) play a pivotal role in this process, leveraging their expertise to maintain transparency, accountability, and efficiency in public finance.
This article explores the significance of finance concurrence in PSUs, the roles and responsibilities of CAs in this function, and the broader impact of their contributions on organizational governance and profitability.
Understanding Finance Concurrence in PSUs
Finance concurrence refers to the formal approval process within PSUs where decisions involving financial implications are reviewed and validated by the finance department. This process ensures that all financial decisions align with organizational policies, compliance with all applicable laws and regulations and financial targets of the corporation.
Finance concurrence is a critical check that mitigates risks, prevents inefficiencies, and ensures prudent utilization of resources. Its scope typically includes:
1. Budgetary Control: Ensuring expenditures/investment remain within approved budgets.
2. Project Appraisals: Evaluating the financial feasibility of proposed projects by examining cost involved and benefits available.
3. Procurement Process: Adherence to procurement procedures.
4. Contract Management: Ensuring financial terms are fair, compliant, and beneficial to the organization.
5. Proper Authorization: The proposal is authorized by the competent authority.
The Role of Chartered Accountants in Finance Concurrence
CAs are uniquely positioned to drive the finance concurrence process in PSUs. Their technical expertise, analytical skills, and understanding of regulatory frameworks enable them to evaluate financial decisions critically and ensure their alignment with organizational goals and effective use of public resources.
1. Financial Analysis and Decision Support
CAs provide in- depth financial analysis for proposals submitted for concurrence. They evaluate cost-benefit scenarios, assess risks, and project financial outcomes to ensure that decisions are economically sound. Their recommendations guide management in making informed decisions, balancing financial viability with strategic objectives.
For example– Proposal has been received for the procurement of machinery of Rs 100 Crore. However, due to change in environmental policy of the government, it is expected that the machinery becomes obsolete after 5 years. While evaluating the proposal, it is expected from CAs that risks of becoming the machinery becoming obsolete should be assessed while evaluating the financial benefits. Assuming that over the 5 years’ period, company will get the post-tax benefit of Rs 70 Crores, then it will be big loss to the company if technology becomes obsolete. These investment decisions are long term in nature and cannot be easily reversed, hence, it is the responsibility of CAs to critically review the proposal.
2. Ensuring Regulatory Compliance
PSUs operate within a complex web of regulations, including company laws, tax provisions, and government directives. CAs ensure that financial decisions adhere to these regulations, reducing the risk of penalties or legal disputes. They maintain up-to-date knowledge of regulatory changes and align concurrence processes accordingly.
For example– Company ABC has incurred the revenue expenditure on maintenance of buildings used for production facilities of LPG (i.e. GST product). Company ABC deals with both GST and Non GST products. In regards to GST ITC availment, User has mentioned that since expenditure is related to immovable property (i.e. buildings), GST ITC is not available.
After examining the legal provisions of GST, finance officer of the company noted that even though expenditure incurred on maintenance of building, since it is revenue in nature and related to GST product (i.e. LPG), therefore full GST ITC can be availed. CAs play a very pivotal role in ensuring regulatory compliance and also arrest revenue leakage within the organization.
3. Strengthening Internal Controls
Internal controls are integral to the finance concurrence mechanism. CAs design and implement robust control frameworks that prevent fraud, inefficiencies, and financial irregularities. They monitor compliance with these controls, ensuring the integrity of financial transactions and processes.
In Public sector undertakings, there are two important manuals which is to be read by CAs thoroughly before finance concurrence – Procurement Manual- which primarily deals with purchase procedure and Limit of Authority Manual- which primarily deals with deals with authorization limits (The name of manuals may differ). Apart from that many internal circulars/guidelines have been issued from time to time, CAs have to keep updated with such developments.
For example– PQR Ltd has formulated that the guidelines that if investment has not yielded minimum Return on Investment (ROI) of 10%, then the approving authority shall be one rank above the original approving authority. Therefore, it is very important for CAs to critically ensure the compliance of such guidelines.
4. Budgetary Oversight
One of the primary responsibilities of CAs in finance concurrence is to ensure adherence to budgetary allocations. They validate that proposed expenditures are within approved limits, preventing budget overruns. By monitoring deviations and suggesting corrective measures, they uphold fiscal discipline within the organization. It is very important that policy regarding re-appropriation of capital budget should be critically reviewed and implemented. For this, for every expenditure, there should be proper justification along with basis for arriving at budgeted figure.
For example– In some cases, re-appropriation will result in financial indiscipline if it happens at regular intervals. Suppose, A Ltd has kept the capital budget of Rs 50.00 Crore for procurement of machinery however at time of procurement, the price of metals decreases, resulting in procurement at actual cost of Rs 45.00 Crore. Therefore, Rs 5.00 Cr remain unutilized. User Department incurred Rs 6 Crore more than budgeted amount in procurement of another machinery and re-appropriate Rs 5 Crore from the unutilized amount. While giving the finance concurrence, CAs should ask the justification for cost overrun in this case. The cases of re-appropriation should be thoroughly reviewed in respect of budgetary controls.
5. Risk Assessment and Mitigation
Every financial decision carries inherent risks, including cost escalations, revenue shortfalls, and unforeseen liabilities. CAs conduct detailed risk assessments during the concurrence process, identifying potential vulnerabilities and suggesting mitigation strategies. This proactive approach safeguards PSUs against financial losses and operational disruptions. In some PSUs, Risk Management Committee spearheads the Corporation’s overall risk management initiative, cultivating the culture of risk awareness and accountability throughout the organization. This includes identifying the risks across various areas such as financial, operational, sectoral and cyber risks.
For example– ABC Ltd enters into agreement for purchase of equipment. The payment is to be made in foreign currency i.e. USD. While finance concurrence, CAs ensure that the risk of changes in foreign exchanges rates shall be mitigated in line with Corporation’s risk management policy by various methods such as derivative contracts etc.
6. Contractual and Procurement Vigilance
Procurement and contract approvals are critical areas where finance concurrence plays a key role. CAs ensure that financial terms are favourable, pricing is competitive, and processes are transparent. Their due diligence minimizes the risk of cost inefficiencies, disputes, and non-compliance with procurement policies. In PSUs, the operations are scrutinised by various external agencies and authorities that include Comptroller and Auditor General of India (CAG), the Central Vigilance Commission (CVC) and Parliamentary Committees. The vigilance department who administers and control of all vigilance matters which includes preventive activities which help in ensuring transparent business decisions by the respective Departments.
For example– X Ltd, a PSU is required to procure material “A”. In the proposal, it is mentioned that procurement is not from GEM (Government E- Marketplace) portal even though material is available on GEM. For this, the justification is not given for the same. While giving financial concurrence, CAs should comment on the compliance of guidelines regarding the procurement of material from GEM portal. Otherwise, the justification for not procuring the material from GEM such as available material not meeting the technical specifications, delivery and quality considerations etc.
7. Financial Reporting and Transparency
CAs facilitate accurate and transparent financial reporting, a cornerstone of public trust in PSUs. Their role in finance concurrence ensures that all financial transactions are recorded appropriately, enabling comprehensive and reliable reporting.
For example– The company has procured the machinery spares which will enhance the useful life of machinery. However, in the proposal it is mentioned that the same will be considered as a revenue item. CAs while doing the finance concurrence should have mentioned that since spares enhance the useful life of machinery, therefore, spares are meeting the requirements of Ind AS- 16 Property, Plant and Equipment. So, the cost of spares should be capitalized.
8. Promoting Accountability and Ethical Practices
CAs uphold the highest standards of integrity and professionalism in the finance concurrence process. By ensuring that decisions are backed by sound financial logic and ethical considerations, they promote accountability and public confidence in PSU operations.
For example– FS Ltd has invited the bids from the vendors for procurement of Material “K” through competitive bidding.
While reviewing the documents submitted by the vendors, CA observed that companies participated in the tender namely “X Ltd”, “Y Ltd” and “Z Ltd” are related to each other since all the three companies are subsidiary of the same parent company XYZ Ltd. As per tender conditions, there is restriction on the multiple bids from the entities that are under same parent organization. Even though, all the three companies have signed the declaration confirming that no multiple bids from the entities that are under the same parent company.
CAs responsible for finance concurrence should clearly bring out this fact in the observation and advise for re- tendering in compliance with the conditions stipulated in the tender.
Steps in the Finance Concurrence Process
1. Receipt of Proposal:
- The finance department or CA receives a proposal or document requiring concurrence, such as a budget, procurement decision, or contract.
- Proposals may include financial transactions, vendor payments, capital expenditures, or project cost approvals.
2. Initial Review:
- Verification of completeness: Ensuring that all necessary documents, supporting data, and justifications are included.
- Scope and purpose: Reviewing the objective of the financial decision or transaction.
3. Policy and Compliance Check:
- Verifying adherence to internal financial policies, guidelines, and processes.
- Ensuring compliance with statutory requirements like tax laws, GST, income tax provisions, Companies Act, or other regulatory frameworks.
4. Financial Analysis:
- Cost-Benefit Analysis: Assessing whether the proposed expenditure or transaction provides value for money.
- Budget Alignment: Checking if the expenditure is within approved budgets.
- Feasibility Assessment: Evaluating financial feasibility, including funding availability, cash flow implications, and financial risks.
5. Risk Assessment:
- Identifying and analyzing potential financial risks, including operational, regulatory, or reputational risks.
- Recommending risk mitigation measures.
6. Tax Implications:
- Reviewing the tax liabilities or benefits associated with the proposal.
- Ensuring appropriate tax deductions, credits, or compliance.
7. Approval or Rejection:
- Providing concurrence if the proposal meets all criteria, with or without conditions.
- Rejecting or seeking modifications for non-compliance, insufficient justification, or budgetary concerns.
8. Documentation and Reporting:
- Preparing a concurrence note or report documenting the analysis, observations, and recommendations.
- Retaining the document for audit and future reference.
Challenges Faced by Chartered Accountants in Finance Concurrence
Despite their critical role, CAs in PSUs encounter several challenges in the finance concurrence process:
1. Complex Regulatory Environment: Keeping pace with evolving regulations and ensuring compliance across diverse financial activities can be daunting. There are various guidelines issued by Government, Central Vigilance Commission regarding tendering process, awarding of contract which needs to be complied with.
2. Resistance to Change: Introducing new processes or controls may face resistance from internal stakeholders unfamiliar with financial intricacies.
3. Limited Resources: CAs often work with limited data, tools, or manpower, making thorough evaluations challenging.
4. Balancing Multiple Objectives: Aligning financial prudence with social and developmental objectives of PSUs requires careful judgment and balancing.
5. Time Constraints: The urgency of operational decisions can pressure finance teams to expedite concurrence processes, potentially compromising thoroughness.
Impact of Chartered Accountants on PSU Governance and Performance
CAs’ involvement in finance concurrence extends beyond transactional reviews; it significantly enhances governance and operational efficiency in PSUs.
1. Enhanced Financial Discipline and Internal Controls
By ensuring adherence to policies and budgets, CAs instil a culture of financial discipline across the organization. This minimizes wasteful expenditures and optimizes resource utilization. It strengthens internal controls by identifying the gaps and ensuring the corrective action.
2. Improved Stakeholder Confidence
Transparent and well-documented finance concurrence processes foster trust among stakeholders, including the government, investors, and the public. CAs’ independent assessments and adherence to ethical standards strengthen this confidence.
3. Risk Resilience
CAs’ proactive risk identification and mitigation strategies enhance the resilience of PSUs to financial and operational challenges. Their insights enable organizations to adapt effectively to market or policy changes.
4. Alignment with National Goals
Through their strategic input, CAs help align PSU operations with broader national development priorities, such as infrastructure growth, employment generation, and sustainability.
5. Advancing Digital Transformation
CAs play a key role in adopting digital tools for finance concurrence. By implementing technologies such as ERP systems and data analytics, they enhance efficiency, accuracy, and decision-making in financial processes.
Best Practices for Effective Finance Concurrence in PSUs
To maximize the effectiveness of finance concurrence, CAs in PSUs should adopt the following best practices:
1. Comprehensive Documentation: Maintain detailed records of all evaluations, justifications, and decisions for future reference and audits.
2. Regular Training: Stay updated with regulatory changes, financial tools, and emerging best practices through continuous learning.
3. Collaborative Approach: Work closely with operational teams to understand project nuances and align financial reviews with organizational goals.
4. Technology Integration: Leverage automation and analytics tools to streamline concurrence processes and enhance accuracy.
5. Focus on ESG Factors: Incorporate Environmental, Social, and Governance (ESG) considerations into financial evaluations to support sustainable growth.
6. Preparation of various handbooks– Preparation of handbooks specific to the organization containing the process, examples, internal circulars will always help the employees of the organization to gain the knowledge about the function.
If an organization drafts GST Manual covering the business process with its GST implications, input tax credit, illustrations, FAQs in simple terms, it will create the awareness about the GST and its impact among the Users who are not from finance background. It has been observed that preparation of these documented handbooks strengthen internal process and address the gaps in understanding among people.
Future Prospects for Chartered Accountants in PSUs
The evolving economic landscape presents new opportunities and challenges for CAs in PSUs. With increasing emphasis on efficiency, transparency, and sustainability, their role in finance concurrence will expand further. Emerging trends include:
- Integration of AI: Advanced technologies will revolutionize finance concurrence, enabling faster, data-driven, and tamper-proof decision-making processes.
- Focus on ESG Metrics: CAs will play a critical role in evaluating the financial implications of sustainability initiatives, aligning PSUs with global ESG standards.
- Global Best Practices: PSUs will adopt international financial and governance practices, requiring CAs to stay ahead of global trends and standards.
Conclusion
Chartered Accountants are the backbone of finance concurrence in PSUs, ensuring financial integrity, accountability, and strategic alignment with national priorities. Their contributions go beyond compliance, shaping the governance, efficiency, and public trust that underpin the success of PSUs.
As PSUs navigate a dynamic economic environment, the expertise, adaptability, and foresight of CAs will be indispensable in driving sustainable growth and fulfilling their mandate of serving the public good. Through their dedicated efforts, CAs continue to reinforce the role of PSUs as engines of economic progress and pillars of national development.
The same principles will be equally effective in the finance concurrence functions in private sector also. The only difference is method of its implementation and less regulated environment.
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