Comptroller and Auditor General of India

Overview

• Article 148 of the Constitution provides for an independent office of the Comptroller and Auditor General (CAG).
• The CAG is the head of the Indian Audit and Accounts Department.
• The CAG is the guardian of the public purse, controlling the financial system at both central and state levels.
• The CAG is responsible for upholding the Constitution and laws of Parliament in financial administration.
• Dr. Ambedkar considered the CAG the most important officer under the Constitution.
• The CAG is a bulwark of the democratic system, alongside the Supreme Court, Election Commission, and Union Public Service Commission.

Appointment and Term

• The CAG is appointed by the President of India with a warrant under their hand and seal.
• Before assuming office, the CAG makes an oath/affirmation before the President:
  • To bear true faith and allegiance to the Constitution of India.
  • To uphold the sovereignty and integrity of India.
  • To duly and faithfully perform duties without fear or favor.
  • To uphold the Constitution and the laws.
• Term: 6 years or up to the age of 65, whichever is earlier.
• The CAG can resign by addressing a resignation letter to the President.
• Removal: The President can remove the CAG on the same grounds and in the same manner as a judge of the Supreme Court (special majority in both Houses of Parliament, on the ground of proved misbehaviour or incapacity).

Independence

• Security of tenure: the CAG can only be removed in accordance with the Constitution's procedure.
• Ineligibility for further office: the CAG cannot hold any further office under the Government of India or any state after ceasing to hold their office.
• Salary and service conditions are determined by the Parliament.
• Salary is equal to that of a judge of the Supreme Court.
• Salary and rights regarding leave, pension, or age of retirement cannot be altered to their disadvantage after appointment.
• The President prescribes the service conditions of personnel in the Indian Audit and Accounts Department and the administrative powers of the CAG after consulting the CAG.
• Administrative expenses of the CAG's office are charged upon the Consolidated Fund of India, not subject to parliamentary vote.

Duties and Powers

• The Constitution (Article 149) authorizes Parliament to prescribe the CAG's duties and powers.

• Parliament enacted the CAG's (Duties, Powers and Conditions of Service) Act, 1971.

• Duties and Functions:

  1. Audits accounts related to all expenditures from the Consolidated Fund of India/State/Union territory.
  2. Audits transactions related to Contingency Funds and Public Accounts.
  3. Audits trading, manufacturing, profit and loss accounts, balance sheets, etc., of government departments.
  4. Audits receipts and expenditure of bodies/authorities substantially financed by central/state revenues.
  5. Audits accounts of bodies/authorities receiving grants/loans from the central/state government for specific purposes.
  6. Audits receipts of the Centre and States to ensure effective revenue assessment, collection, and allocation.
  7. Audits the accounts of all stores and stock kept in all government offices and departments.
  8. Audits the accounts of all Government Companies in accordance with the provisions of the Companies Act.
  9. Audits the accounts of all Corporations whose statutes provide for audit.
  10. Audits accounts of any other body/authority when requested by the President/Governor.
  11. Advises the President regarding the form in which the accounts of the Centre and the states shall be kept (Article 150).
  12. Submits audit reports on central accounts to the President, who lays them before Parliament (Article 151).
  13. Submits audit reports on state accounts to the Governor, who lays them before the state legislature (Article 151).
  14. Ascertains and certifies the net proceeds of any tax or duty (Article 279); the certificate is final.
  15. Acts as a guide, friend, and philosopher of the Public Accounts Committee of the Parliament.
  16. Compiles and maintains the accounts of state governments. (Relieved of this for the central government in 1976)

• Powers related to Audit Duties:

  • Inspect any office/department subject to audit.
  • Examine transactions and question the person in charge.
  • Call for records, papers, and documents from any audited entity.
  • Decide the extent and manner of audit.

Role

• Uphold the Constitution and laws of Parliament in financial administration.
• Secure accountability of the executive to the Parliament through audit reports.
• Submits three audit reports to the President:
  • Audit report on appropriation accounts
  • Audit report on finance accounts
  • Audit report on public undertakings
• The President lays these reports before both Houses of Parliament. The Public Accounts Committee examines the reports.
• The CAG ascertains whether disbursed moneys were legally available and applicable and whether the expenditure conforms to the governing authority.
• Conducts both regulatory and propriety audits. Propriety audit, unlike regulatory audit, is discretionary and examines the 'wisdom, faithfulness and economy' of government expenditure.
• Conducts performance audits that cover economy, efficiency, and effectiveness in the receipt and application of public funds.
• More freedom in auditing expenditure than receipts, stores and stock. The CAG decides the scope of expenditure audit and frames their own codes, but must get executive approval for rules on other audits.
• Limitations on auditing secret service expenditure: the CAG cannot call for particulars but must accept a certificate from the competent authority.

CAG and Corporations

• The role of the CAG in auditing public corporations is limited.
• Categorization:
  • Some corporations are audited totally and directly by the CAG.
  • Some are audited by private professional auditors appointed by the Central Government in consultation with the CAG.
  • Some are entirely subjected to private audit.
• Government companies are audited by private auditors appointed by the Government on the advise of the CAG. The CAG can also undertake supplementary or test audit.

Appleby's Criticism

• Paul H Appleby criticized the CAG's role and significance:
  1. The function of the CAG in India is an inheritance from the colonial rule.
  2. The CAG is a primary cause of unwillingness to act, and auditing has a repressive influence.
  3. Parliament exaggerates the importance of auditing.
  4. The CAG's function is not very important; auditors do not know much about good administration.
  5. Auditing is a necessary but pedestrian function.
  6. A deputy secretary knows more about departmental problems than the CAG.

Challenges

• The Second Administrative Reforms Commission identified challenges:
  • Limited detailed examination of audit paras by the Public Accounts Committee (PAC).
  • Action Taken Notes by Ministries/Departments are largely formal.
  • Huge pendency of audit paras in State Legislatures.
  • Thousands of unattended inspection reports.
  • CAG's reports sometimes are not timely.
  • Audit findings are based exclusively on documents, not ground reality.
  • External audit reports tend to be unduly negative.
  • Audit often does not discriminate between bona fide/malafide intentions.
  • Audit Reports are not always presented in a constructive manner.
  • Reporting already known problems does not add value.
  • Findings are at times not focused.
  • Audit does not give due credit for good performance.
  • The relationship between the auditor and auditee is not always harmonious.
  • Audit is viewed as a system for policing Government Organizations.
  • Though Audit Committees have been set up, their functioning is not satisfactory.
  • There is a lack of informed media coverage of CAG's reports.
  • There is inadequate synergy/coordination between external audit and internal audit.
  • External audit does not provide audit assurance on the fair presentation of financial statements of the Government.
  • There is rarely any audit of grants and loans to NGOs.

Articles related to CAG at a Glance

Article No.	Subject matter
148	Comptroller and Auditor-General of India
149	Duties and powers of the Comptroller and Auditor-General
150	Form of accounts of the Union and of the States
151	Audit reports