CAG

The Comptroller and Auditor General of India (CAG) plays a vital role in financial oversight, ensuring accountability and upholding constitutional principles. Appointed by the President, the CAG serves a secure term, with post-retirement restrictions. Constitutional provisions safeguard independence, and funding is charged on the Consolidated Fund. The CAG audits various expenditures, certifies taxes, and submits reports to Parliament. Powers of the CAG need to be expanded to ensure greater scrutiny of government expenditure. Other recommendations for improving CAG include greater transparency in the appointment process and also the power to disallow expenditure.

The Legislature plays a key role in financial control over the Executive, involving two stages: initial scrutiny during policy formulation and subsequent oversight of policy implementation. The Annual Financial Statement, or Budget, is presented and approved in Parliament, marking the first control stage. The second stage involves verifying funds utilization according to parliamentary intentions, overseen by Financial Committees in Parliament and State Legislatures. The Comptroller and Auditor General of India supports this phase, conducting audits to ensure financial accountability of the Executive to the Legislature, as mandated by the Constitution.

The Comptroller and Auditor General of India, established by Article 148, serves as the head of the Indian Audit and Accounts department. Recognized as the guardian of the public purse, the CAG is considered a key component of India's democratic system, alongside institutions such as the Supreme Court, election commission, and UPSC. The CAG ensures the Parliament's supremacy over the Executive in financial matters. Constitutional provisions ensure the CAG's independence, allowing him to carry out his functions without Executive interference. The primary responsibility is to uphold the Constitution and laws in the realm of financial administration.

• Appointment: The President of India appoints the Comptroller and Auditor General (CAG) through a warrant under their hand and seal.
• Term: The CAG serves a term of 6 years or until the age of 65, whichever comes first.
• Removal- He can be removed by the President, in the same manner as that of a SC judge.
• Qualification: There are no specific qualifications required for individuals to become a CAG.

• Security of Tenure: The Comptroller and Auditor General (CAG) enjoys security of tenure, meaning they do not hold office at the pleasure of the President, ensuring independence in their role.
• Post-Retirement Restrictions: After leaving office, the CAG cannot hold any further position in the central or state government.
• Salary and Service Conditions: The Parliament determines the salary and service conditions of the CAG, which cannot be altered to their disadvantage after appointment.
• Funding: The expenses related to the office of the CAG are charged upon the Consolidated Fund of India.

Using powers under article 149, the Parliament enacted the CAG’s (Duties, Powers and conditions of service) Act, 1971. The powers and functions of CAG are as follows:

• He audits accounts related to all expenditure from the consolidated fund, contingency fund and public account of India; consolidated fund, contingency fund and public account of each state and Union territory (those having such fund)
• He audits the receipts and expenditure of the following:
  • The Centre and each state.
  • All bodies and authorities substantially financed from the Central or state revenues;
  • Government companies; and
  • Other corporations and bodies, when so required by related laws.
• He ascertains and certifies net proceeds of any tax or duty and his certificate is final in this regard.
• He submits his audit reports of central accounts to the President, who shall in turn place them before both houses of Parliament. Analogously in a state, he submits his audit reports of state accounts to the Governor, who shall in turn place them before the state legislature.
• He compiles and maintains the account of the state government. ( In 1976 , he was relieved of his duty to maintain accounts of Central Govt)
• He acts as the friend, philosopher and guide to the PAC which exercises detailed financial control on the behalf of Parliament.

The CAG submits three audit reports to the President-

• Audit report on appropriation accounts, Audit report on finance account, and Audit report on public undertakings.
• The President lays these reports with both the Houses of Parliament. After this,
  • the Public Accounts Committee examines the first two reports, while
  • the report on PSUs go to the Committee on Public Undertakings and lays down its findings in the Parliament.

• Constitutional Duty: The Comptroller and Auditor General (CAG) is mandated to uphold the Constitution of India and parliamentary laws, particularly in the realm of financial administration.
• Strengthening Parliamentary Control: The CAG plays a pivotal role in reinforcing parliamentary control over the Executive, a cornerstone of parliamentary democracy.
• Executive Accountability: Acting as a mechanism to ensure accountability, the CAG criticizes instances of mismanagement of public funds, like the Bihar government's underutilization of funds for the 'Namami Gange' program was pointed by CAG
• Substantive Impact: Beyond symbolism, the CAG's reports contribute significantly to public awareness and exert pressure on the government to take action, as seen in instances such as the report on the 2G spectrum sale.
• Legal and Regulatory Audit: The CAG conducts audits to ensure that funds were legally available, approved, and spent as sanctioned by the appropriate authority, termed as legal and regulatory audit.
• Performance Audit: Additionally, the CAG conducts performance audits, evaluating the value for money in government activities, commenting on the efficiency, fidelity, and economy of expenditures, thereby addressing issues of wastefulness and extravagance.
  • The Comptroller and Auditor General of India (CAG) has transformed from a traditional auditor to actively scrutinizing the government's economic policies in performance audits.
  • The CAG's expanded role aligns with a 2013 Supreme Court judgment, which recognized its authority to conduct performance audits, thereby ensuring accountability in the government's use of resources. This transformation reflects the dynamic nature of the CAG's role in a changing governance landscape.

• Lack of power of disallowance Unlike in Britain, the Comptroller and Auditor General (CAG) in India lacks the authority to disallow the issue of money from the Consolidated Fund. In Britain, CAG approval is required before the executive can draw funds from the public exchequer.
• Decreasing Audits on Union Government: The number of reports tabled by the CAG on the Union Government has decreased, with an average of 22 reports per year from 2019 to 2023, compared to 40 reports per year between 2014 and 2018.
• Exclusion of Expenditure from Audit: A significant portion of government spending remains beyond the CAG's audit scope. This includes expenditures related to Secret Service and Public-Private Partnerships (PPPs).
• Delayed Information: Government agencies often delay providing information to the CAG, reflecting a lack of trust in the external audit process.
• Politicization of the Office: Former CAGs taking up roles such as Chairman of Bank Board Bureau and joining political parties raise concerns about the politicization of the office.
• Perception of Fault Finding: Government departments perceive external audit mechanisms, including the CAG, as fault-finding exercises rather than sources of constructive recommendations.

• Collegium Appointment Process: Explore adopting a broad-based collegium, similar to the Central Bureau of Investigation (CBI), for the appointment of the CAG, promoting a more inclusive and diverse selection process.
• Multi-member Body Model: Transform the CAG into a multi-member body, akin to the Election Commission of India (ECI), to enhance collective decision-making and bring diverse perspectives to the auditing process.
• Grant Power of Disallowance: Empower the CAG with the authority of disallowance, aligning with the practices of the national auditors in the United States and the United Kingdom, strengthening financial oversight.
• Punitive Powers for CAG: Consider granting punitive powers to the CAG to address delays in information submission by government agencies, ensuring timely cooperation.
• Pre-acquisition Audit for Defence Deals: As suggested by BP Mathur in "Reengineering CAG of India," consider implementing pre-acquisition audits by the CAG for major defense deals to prevent unwarranted criticism and delays, a more efficient procurement process.

The Comptroller and Auditor General of India (CAG) serves as a linchpin in financial oversight, appointed by the President with constitutional safeguards for independence. Despite challenges like limited powers and decreasing audits, the CAG plays a crucial role in reinforcing parliamentary control and ensuring executive accountability. To enhance its effectiveness, a collegium appointment process, a multi-member model, disallowance powers, punitive measures for delays, and pre-acquisition audits for defense deals are recommended. These reforms can fortify the CAG's role, contributing to improved financial governance in India.