CAG (Comptoller and Auditor General of India) | Constitutional Law - CLAT PG PDF Download

Comptroller and Auditor General of India

CAG probably the most important officer in the Constitution of India: B.R. Ambedkar

Introduction

India's Constitution sets up the Comptroller and Auditor General of India (CAG) as a key leader in charge of watching over the country's money matters. They ensure that everything to do with finances follows the rules laid out in the Constitution and by Parliament. Dr. B.R. Ambedkar thought the CAG was super important, just like other big institutions in India's democracy.

   Comptroller and Auditor General of India

APPOINTMENT AND TERM  

The CAG is appointed by the President of India through a formal warrant. Before assuming office, the CAG takes an oath or affirmation:

1. To uphold the Constitution of India;
2. To protect India's sovereignty and integrity;
3. To diligently and faithfully perform their duties to the best of their ability;
4. To uphold the Constitution and laws.

The CAG's tenure lasts for either six years or until they reach 65 years of age, whichever comes first. They have the authority to resign at any time by addressing a resignation letter to the President. Removal from office follows a process similar to that of removing a Supreme Court judge, requiring a special majority resolution passed by both Houses of Parliament based on proven misbehavior or incapacity.

INDEPENDENCE

The Constitution includes specific measures to safeguard and ensure the independence of the CAG:

1. Security of tenure: The CAG can only be removed following the procedure outlined in the Constitution. Their term doesn't depend on the President's pleasure despite being appointed by them.
2. Ineligibility for further office: Once the CAG ceases office, they cannot hold any further positions within the Government of India or any state.
3. Salary and service conditions: These are determined by Parliament, with the CAG's salary aligning with that of a Supreme Court judge.
4. Protection against alterations: Post-appointment, neither the CAG's salary nor their rights regarding leave, pension, or retirement age can be changed to their disadvantage.
5. Prescribed conditions and administrative powers: The President, after consulting with the CAG, prescribes the service conditions for those in the Indian Audit and Accounts Department, including the administrative powers of the CAG.
6. Financial autonomy: Administrative expenses of the CAG's office, covering salaries, allowances, and pensions, are charged to the Consolidated Fund of India, exempt from Parliament's vote.
   

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DUTIES AND POWERS

The Constitution (Article 149) empowers Parliament to define the **duties and powers** of the CAG regarding various accounts. The Parliament passed the CAG's (Duties, Powers and Conditions of Service) Act in 1971, outlining the **responsibilities** of the CAG as follows:

1. Auditing of accounts: This includes scrutinizing expenditures from the Consolidated Fund of India, state funds, and union territories with Legislative Assemblies.
2. Review of transactions: Auditing transactions related to the Contingency Fund of India, Public Account of India, state contingency funds, and public accounts of states.
3. Scrutiny of financial records: Auditing trading, manufacturing, profit and loss accounts, and other subsidiary accounts maintained by Central and state government departments.
4. Auditing of revenue-funded bodies: Reviewing the receipts and expenditures of bodies substantially financed by central or state revenues.
5. Accounts of grant recipients: Auditing accounts of bodies and authorities receiving grants and loans from the central and state governments for specific purposes.
6. Revenue assurance: Reviewing receipts of the center and states to ensure proper revenue assessment, collection, and allocation as per established rules.
7. Stock audits: Auditing stores and stock across offices and departments of the central and state governments.
8. Government company audits: Auditing the accounts of government companies as per the provisions of the Companies Act.
9. Corporation audits: Auditing accounts of corporations stipulated for audit by the CAG.
10. Special audits: Auditing accounts of other bodies or authorities when requested by the President or Governor, such as local bodies.
11. Advisory role: Providing advice to the President on the form in which Centre and state accounts should be maintained (Article 150).
12. Submission of reports: Submitting audit reports related to Centre's accounts to the President, who presents them before both Houses of Parliament (Article 151). State audit reports go to the Governor, presented before the state legislature (Article 151).
13. Certification of tax proceeds: Ascertaining and certifying the net proceeds of taxes or duties (Article 279), with the 'net proceeds' being the tax or duty proceeds minus collection costs.
14. Advisory role: Serving as a guide and advisor to the Public Accounts Committee of Parliament.
    

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ROLE 

The role of the CAG is to uphold the Constitution of India and the laws of Parliament in financial administration. It ensures the accountability of the executive (the council of ministers) to Parliament by submitting three audit reports to the President: one on appropriation accounts, another on finance accounts, and a third on public undertakings. These reports are then presented before both Houses of Parliament after examination by the Public Accounts Committee.

As per the 1971 Act, the CAG is mandated to verify whether disbursed funds were legally available for the intended service and whether the expenditure aligns with the governing authority. Beyond this, the CAG can conduct a propriety audit, assessing the wisdom, faithfulness, and economy of government spending, though this audit is discretionary unlike the mandatory legal and regulatory audit.

In 2006, the Government of India's Ministry of Finance issued an Office Memorandum clarifying the scope of the CAG's audit, including performance audits which focus on assessing the economy, efficiency, and effectiveness in public funds' utilization. It aims to comprehensively appraise the progress and efficiency of developmental programs.

While the CAG enjoys more freedom concerning expenditure audits, deciding the audit scope and framing audit codes and manuals, it requires executive government approval for other audits' conduct rules. Limitations exist regarding secret service expenditure, where the CAG cannot request expenditure particulars but must accept certification from the relevant administrative authority.

CAG AND CORPORATIONS

The CAG's role in auditing public corporations is somewhat restricted and categorized into three types of relationships:

1. Some corporations undergo total and direct audits by the CAG.
2. Other corporations are audited by private professional auditors appointed by the Central Government, sometimes with supplementary audits conducted by the CAG if required.
3. Certain corporations are exclusively audited by private professional auditors, bypassing the CAG entirely. These corporations submit their annual reports and accounts directly to Parliament.

Similarly, the CAG's involvement in auditing Government companies is also limited. These companies are audited by private auditors chosen by the Government upon the CAG's advice, where the CAG might conduct supplementary or test audits as necessary.

APPLEBY'S CRITICISM

Paul H Appleby, an American scholar of Public Administration, expressed strong criticism against the role of CAG in India. He advocated for the abolition of the CAG's office and raised several points of concern:

1. The CAG's function in India largely stems from the colonial era.
2. Presently, the CAG is a significant contributor to a widespread reluctance to make decisions and take action. This creates a repressive and negative impact.
3. The Parliament and the Constitution haven't properly defined the CAG's functions, leading to an exaggerated sense of the importance of auditing in Parliamentary responsibility.
4. The CAG's role isn't as crucial as perceived. Auditors lack substantial knowledge about effective administration, and their influence is limited.
5. Auditors specialize in auditing, a necessary yet limited function with a narrow viewpoint and limited practicality.
6. A deputy secretary within a department is likely more knowledgeable about its issues than the CAG and their entire staff.
   

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CHALLENGES

The critique on the audit process and Public Accounts Committee (PAC) discussions can be summarized as follows:

1. In the Audit Reports submitted annually to the Parliament by the CAG, only about 15-20 out of 1000-1500 paras are thoroughly examined by the PAC. Ministries and Departments usually prioritize action on these discussed paras.
2. Ministries and Departments are expected to submit Action Taken Notes for the unexamined paras, but these notes often tend to be more formal than substantive in nature.
3. In State Legislatures, there's a significant backlog of pending Audit Paras—some as old as 10 to 20 years. Delays in addressing these issues reduce their significance and relevance.
4. Several inspection reports, containing numerous observations with potential revenue implications, remain unattended in Government Departments. There's little accountability for the delay in taking action on these audit observations.
5. There's a concern that the CAG's reports are sometimes untimely due to the substantial gap between irregularity occurrence and audit reporting. The post-audit nature of the process might render findings and recommendations too late for corrective measures.
6. Audit findings primarily rely on documents and files, lacking physical verification. This absence of on-ground verification sometimes leads to a disparity between documented and real situations.
   

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