A minute for your Feedback please

Sunday, November 6, 2011

Cooking the books-the case of Air India MOU

It is a hallowed tradition in the private sector to 'cook the books', whether it be maintaining multiple books for financial, tax and regulatory accounting; fudging proforma metrics etc. In the Union Civil Performance Audit 2011-12 on NACIL, the C&AG lambasted the Govt-AI MOU, stating that the performance evaluation metrics were not designed aptly.
 The Memorandum of Understanding (MoUs) signed between the erstwhile IAL and AIL and MoCA were flawed. The non-financial parameters included in the MoU included minor or insignificant parameters or gave undue weightage to such parameters, at the cost of critical traffic and operating parameters in the airline industry (such as those being monitored by Directorate General of Civil Aviation). This skewed the MoU ratings of IAL and AIL unduly to present a “rosy” picture of performance. The overall combination of financial and non-financial parameters devised for the MoUs were such as to ensure that the MoUs became a meaningless exercise, rarely (if ever) reflecting poor performance, and ensuring lack of effective accountability for all parties concerned

While this would not meet the strict legal definition of accounting fraud, it resembles the infamous metrics used by Groupon in its IPO prospectus, which had a similar purpose for showing a rosy picture.

The takeaway from this sordid episode is that while reading the Result Framework Document(RFD) uploaded by each ministry on the site, try to exercise your judgement in whether it focusses on critical outcomes, or merely tries to dress up the performance. This will need some technical knowledge and extra effort, but if media attention on AI MOU like cases prevents another AI, it would be worth it

No comments: