Case Study of Use of Blockchain Technology in Rural Development[1]

Introduction

Government and Public Sector Organisations throughout the world are responsible to maintain records and trusted information. In India, information like. Aadhar, birth, death, expectancy, SECC, degrees is maintained by public sector organisations. Several transactions are happening daily where huge data and funds are transacted. Information about the same is also maintained and preserved by the Government. Direct benefit transfer and other payments made by the government has huge transaction data where beneficiaries and other stakeholders continuously interact and look for the gaps in transactions until it is concluded. Further, managing and using these data can be complicated and involve sensitivity. Some records exist only in paper form and for any amendment; citizens often must appear in person to do so.

Individual agencies tend to build their silos of data and information-management protocols, which preclude other parts of the government from using them e.g. GST database. There are several instances of the data security breach as data is not significantly protected against unauthorized access or manipulation, but errors are difficult to find due to lack of audit trail. Blockchain technology could simplify the management of such trusted information. With this technology, it is easier for government agencies to access and use critical public-sector data. Further maintaining the security of information is possible with blockchain as “Blocks” are created and collected in a chain, they cannot be changed or deleted by a single actor. Blocks are verified and managed using automation and shared governance protocols.

Currently, there are several databases which are stand-alone and they rarely talk to each other. From a technical perspective, there is no good reason for keeping data in silos. With some effort, many governments could create central repositories or enterprise systems for sharing information across agencies. Government agencies would gain from experimenting with blockchain technology for sharing and productively using relevant data kept under different silos.

Ministry of Rural Development

Ministry of Rural Development of Government of India is responsible to formulate policy for the development of rural India and promote the welfare of its rural people. In this process, it also runs several people-centric schemes through the States (sub-national) Government. These schemes have a very elaborate process and they offer benefits to marginalised and poor of rural India. To ensure that benefits are transferred to intended beneficiaries, many accountability matrices have been put in place.

There is ample scope to implement blockchain in any of the processes of many schemes run by the Ministry of Rural Development. However, to begin with, there is a need to deploy blockchain strategically through pilot projects. Blockchain can help agencies digitize existing records and manage them within a secure infrastructure. Even individuals to gain control over all the information kept with the government. It is a known fact that the policymakers have a powerful incentive to embrace digitisation. Integration of data is the in thing. Synergy is giving unexpected benefits and throwing many challenges. Blockchain will bring in confidence in data stored in different warehouses and policy formulation depends on the same.

Selection of Project for Pilot

While deciding to do a pilot project in the Ministry of Rural Development, these factors were kept in mind. Benefits of using blockchain were found to be quite significant, however, there were many challenging in choosing the project without compromising with the ongoing processes and likely inconvenience it may cause to the users. Further, there are sensitivities in the schemes of rural development hence taking up any project in the active and main process flow of the schemes were considered to be too risky. Accordingly, it was thought prudent to do a proof of concept for the implementation of blockchain technology in the process flow and documentation of the internal audit process. As this process does not affect any live process flow affecting the beneficiaries, it was considered to be safe for experimenting with new technology. Accordingly, a proof of concept was prepared and the pilot was started to implement blockchain technology in internal audit of rural development schemes. Internal audit process of the Ministry was primarily manual.

An effort was made to automate process flow for two leading schemes namely Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and Pradhan Mantri Awas Yojna- Grameen (PMAY-G). A portal namely Grameen Internal audit Portal (GRIP) was developed and the same has been put to use for these two schemes. GRIP has been developed by NIC with the framework of the Office of Controller General of Accounts (CGA) and as per the requirements and inputs provided by the Chief Controller of Accounts, MoRD. The software has been designed to facilitate both online as well as offline Internal Audit. It also has provision for maintaining the past audit records of the Auditee along with the associated list of the Internal Auditors and internal audit team involved in the audit. It acts as an excellent accountability and monitoring tool to enhance the effectiveness and performance of the audited agency and optimize resources. The Internal Audit para are drafted, posted, edited and approved on the portal itself. Once approved, various audit reports are generated automatically and electronically sent to the auditees and other stakeholders. Risk-based analytical reports are also generated by the system and sent electronically. The dashboard of the GRIP Portal provides the online status of internal audit paras. The Portal also has the features of Graphic representation of the data such as dashboard indicating pendency of internal audit para, risk wise status of para etc. This feature makes GRIP a User-Friendly Portal.

Features and Benefits of GRIP

GRIP has not only brought computerisation but also facilitated system improvement. Manual processes have been improved to make them more efficient. Process flow of internal audit before the implementation of GRIP and after has been tabulated as under:

Audit Activity	Internal Audit - Manual Process Flow
	Mode of Documentation	Mode of Delivery	Time Taken		Challenges
Formation of Audit Team	Manual Documentation	Individually	2-3 days		Auditors information to be captured manually and individually every time before the audit is scheduled
Audit Memo Communication	Physical Document	By Post	7 days		The documents delivery and acknowledgement may be delayed, which will impact the audit team visit and further planning.
Recording Entry/Exit Conference	Manual Documentation	By Hand	1 day		Document Misplaced
Recording Observations (Draft)	Manual Documentation	By Hand	2-3 days		The intensity of the original information captured during the field visit may be diluted a no provision to document the draft reports
Evidence Collection	Manual Documentation	By Hand	2-3 days		Evidence collected from the field visit may be misplaced or auditors may forget to collect evidence
Audit Para Preparation	Manual Documentation	Individually	15-20 days		Auditors may use different reporting formats which will create confusion and time taking to consolidate
Guidelines referencing	Manual Documentation	Individually	5-10 days		It is difficult to remember all the guidelines for all the schemes. Hence auditors have manually referred the scheme documents. Sometimes incorrect referencing due to lack of scheme knowledge
Audit Para Approval	Manual submission	Individually	10-15 days		Unless all para were prepared, the report never used to move to higher formation for approval
Final Audit Report	Physical Document	By Post	7 days		The documents delivery and acknowledgement may be delayed
Preparation of Action Taken Report	Manual Documentation	By Post	15-20 days		Auditees submit the action taken reports in Differences in the reporting formats
Evidence Submission	Physical Document	By Post	7 days		Auditees may forget to provide evidence
Action Taken Report Submission	Physical Document	By Post	7 days		The documents delivery and acknowledgement may be delayed
MIS and Reporting
Audit MIS Reports	Manual Preparation	By Hand	7 days		Many man-hours are required to consolidate all audit reports and difficult to avoid human errors
Executive Dashboard	No	-	-		No such dashboards are available in manual process
Individual Auditor Task Dashboard	No	-	-		No such dashboards are available in manual process
Individual Auditor Performance Dashboard	No	-	-		No such dashboards are available in manual process
Audit Activity	Re-engineered process flow – Internal Audit using GRIP
	Mode of Documentation	Mode of Delivery	Time Taken	Improved process
Formation of Audit Team	Online	Online	Same day	Auditors information can be captured only once and used for audit configuration whenever required
Sending Audit Memo	Digital Document	Online	Same day	Timely delivery and immediate acknowledgement
Recording Entry/Exit Conference	Online	Online	Same day	No chances of misplacing the documents.
Recording Observations (Draft)	Online	Online	Same day	All draft versions will be saved in the audit trail
Evidence Collection	Digital Document	Online	Same day	Evidence collection is a mandate
Audit Para Preparation	Digital Document	Online	7-10days	All auditors use Pre-defined format
Guidelines referencing	Digital Document	Online	Same day	GRIP assistance in guidelines referencing
Audit Para Approval	Digital Document	Online	Same day	Single para can be sent for approval without waiting for the entire report to be ready
Final Audit Report	Digital Document	Online	Same day	Timely delivery and immediate acknowledgement
Preparation of Action Taken Report	Digital Document	Online	7-10days	All auditees use Pre-defined format
Evidence Submission	Digital Document	Online	Same day	Evidence can be verified and intimated easily
Action Taken Report Submission	Digital Document	Online	Same day	Action Taken on Single para can be sent for approval without waiting for the entire report to be ready
Integrated MIS and Reporting Mechanism
Audit MIS Reports	Digital	Online	Automatic		All the audit-related information is made available in various reporting formats to all the users
Executive Dashboard	Digital	Online	Automatic		Dynamic dashboards are available for higher management
Individual Auditor Task Dashboard	Digital	Online	Automatic		Every auditor can monitor the assigned and pending tasks under their name
Individual Auditor Performance Dashboard	Digital	Online	Automatic		Higher management can monitor every Auditor performance
Grievance Redressal Mechanism	Digital	Online	Automatic		Any Citizen can submit grievances. It will directly be reported to Internal Audit Wing, O/o CCA, MoRD. The resolution will be provided on priority.

Challenges in adopting Blockchain in GRIP Process

a)    From the above description, it is clear that GRIP deals with document processing, monitoring of audit para and archival of reports. While raising audit para evidence are created and this evidence needs to be stored in a manner that it is not tinkered with at any stage. Similarly audit para and responses of the auditee also need to be kept safely with a provision to ensure its authenticity and security.

b)   There are multiple nodes but for the pilot, only a few need to be identified for implementation of blockchain technology at the working level.

c)    The ecosystem of rural development is huge, complex and partly connected ecosystem of multiple stakeholders. There are multiple Ministries, States, District, blocks, gram panchayats, implementing agencies, NGOs etc. They collaborate to deliver the benefits of social schemes like MGNREGA to citizens and workers. Several opportunities exist to optimize the functioning of this ecosystem.

d)   There are several disconnected systems with multiple versions of truth leading to inefficiencies.

e)    In such a huge and complex ecosystem there a known inability to have consistent visibility of the entire ecosystem. Several inconsistencies go undetected, leading to wasteful expenditure.

f)     Systems are prone to manipulation at each level, without the rest of the ecosystem knowing about changes. Therefore it is very difficult to set accountability.

g)    There are several stages where there is discretionary control before benefits reach citizens. All this gets further complicated due to the huge administrative costs of running these schemes. Use of blockchain to mitigate the identified risks is a challenge which was taken up during this project. It was expected that systems can be optimized by automation & working on trusted data.

h)   Within Ministry, 8 large groups working on different schemes face some of the same challenges as outlined above. Partly-connected groups are working on systems which don’t talk to each other. Same beneficiary listed under various schemes of Ministry without a consistent view of the beneficiary. Scenarios like: Program under Scheme A, delivered by the agency under Scheme B, giving benefits to the beneficiary under Scheme C are quite common – current technologies don’t allow any visibility into wasteful spends.

i)      Trusted auditability and accountability are a challenge – data used during audits changes (without a trace) behind the scene without the ecosystem knowing it was changed

Use of Blockchain will manage these Challenges

It facilitates trust between parties by providing a shared and verifiable history of transactions. Blockchain accomplishes this by requiring participants to agree that a transaction is valid. It then uses multiple technologies to ensure that after the transaction is recorded it cannot be modified. To implement blockchain it is essential to set up and manage Local Blockchain Environment(s). It was decided to replicate GRIP's current schema in Blockchain. An analysis was carried out to decide what type of data should go as Transactions on Blockchain. To be extra cautious it was decided to take an initial data dump of GRIP (baseline data).

With the available baseline data Blockchain, Identities for Users present in GRIP were created. It was decided to periodically get Data from GRIP Production DB. There were two options considered for data interchange. GRIP / NIC publishes data to a suitable location/format by Pushing it there. In the second option, we write a job to pull data from GRIP DB. Where GRIP Tx data have associated documents, get the documents as well on our side and store them in a repository. Job(s) to submit incoming data as Transactions to Blockchain (real-time as we get from GRIP).  Where documents are involved, the hash of documents is put on Blockchain. Tx are submitted using Blockchain Identities of equivalent Blockchain Users. Scope and solution summary of this arrangement has been diagrammatically depicted as under:

In this project the following Use Cases were presented to highlight 'value of Blockchain':

•      #1: Identity Management

•      #2: Trusted and Immutable Trail of Data

•      #3: Trusted and Immutable Documentary evidence

Following solution has been created:

•      A 2 Peer Local environment (on a physical server)

•      Hyperledger Fabric v1.2 based Blockchain

•      A Java-based frontend to demonstrate Use cases. Go and NodeJS for writing Chaincodes.

•      3 environments to setup- Dev, Test, Production environments

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[1] Ajay S Singh is a civil servant and views are personal.