Law and You > Constitutional Law > Comptroller and Auditor General (CAG) of India

The Comptroller and Auditor General (CAG) of India is a constitutional body established under Article 148 of the Indian Constitution. It plays a vital role in ensuring transparency, accountability, and proper utilization of public funds in the country. The primary function of the CAG is to audit the accounts of the Union and State governments, along with public sector organizations and autonomous bodies funded by the government. This body is entrusted with overseeing the financial management of government activities and ensuring that public money is spent in accordance with the law.

The CAG acts as a guardian of public funds and is an independent authority, free from executive control. Its audits help in maintaining checks and balances within the governance system and provide valuable insights to the Parliament and State legislatures on financial matters. The CAG’s reports are presented before the Parliament and are instrumental in the decision-making process, helping to identify inefficiencies, frauds, and misuse of funds. By upholding the principles of financial propriety, the Comptroller and Auditor General of India contributes significantly to the nation’s governance framework, promoting transparency, and ensuring that taxpayers’ money is used judiciously and effectively.

Historical Background of Comptroller and Auditor General:

Office of the Accountant General was established in 1858 (the year the British took over administrative control of India from the East India Company). In 1860 Sir Edward Drummond was appointed as the first Auditor General. Meanwhile after some restructuring the Auditor General of India came to be called the Auditor and Accountant General to the Government of India. In 1866, the position was renamed Comptroller General of Accounts, and in 1884, it was re-designated as Comptroller and Auditor General of India. Under the Government of India Act 1919, the Auditor General became independent of the government as statutory backing was given for the position.

The Government of India Act 1935 further strengthened the position of the Auditor General by providing for Provincial Auditors General in a federal set-up. The Accounts and Audits Order of 1936 provided detailed accounting and auditing functions of the auditor general. This arrangement remained unchanged until India’s independence in 1947. After independence, Article 148 of the 1949 Indian Constitution provided for the establishment of a Comptroller and Auditor General to be appointed by the President of India.

Appointment of Comptroller and Auditor General of India:

Article 148 of the Constitution of India establishes the authority of the office of Comptroller and Auditor General of India. The Comptroller and Auditor General is appointed by the President of India. The person appointed to this office should take an oath of office before the President or any other person appointed by the office of the President.

The individual appointed as CAG must be a person who has served as a senior officer in the Indian Audit and Accounts Service or has had experience in auditing, accounting, or financial matters. While the President has the authority to appoint the CAG, the independence of the office is crucial, ensuring that the CAG is free from any external influence, including from the executive or political powers.

Term and Removal:

• The Comptroller and Auditor General of India Holds office for a term of 6 years or until the age of 65, whichever is earlier.
• He/She can resign by submitting a letter to the President or
• He/She may be removed in the same manner as a Supreme Court judge on grounds of misbehaviour or incapacity through impeachment by Parliament.

Duties & Responsibilities (Article 149)

The powers and functions of the CAG are subject to the provisions of the Indian Constitution and any Acts of Parliament, along with the service conditions for the Indian Audits and Accounts Department. The rules governing these would be prescribed by the President in consultation with the incumbent. The main functions of CAG are as follows:

• Auditing the accounts related to all expenditure drawn from the Consolidated Fund of India, consolidated fund of every state and consolidated fund of every union territory having a Legislative Assembly.
• Audit of all expenditure from the Contingency Fund of India and the Public Account of India as well as the contingency funds and the public accounts of states.
• Audit of all trading, manufacturing, profit and loss accounts, balance sheets and other subsidiary accounts of any department of the Central Government and state governments.
• Auditing the receipts and expenditure of the Government of India and each state to ensure that the rules and procedures in that regard are designed to secure an effective check on the assessment, collection and proper allocation of revenue.
• Auditing the receipts and expenditure of the following: 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.
• Auditing all transactions of the Central and state governments related to debt, sinking funds, deposits, advances, suspense accounts and remittance business. He also audits receipts, stock accounts and others, with approval of the President, or when required by the President.
• Auditing the accounts of any other authority when requested by the President or Governor. For example, the audit of local bodies.
• Advising the President with regard to prescription of the form in which the accounts of the Centre and the states shall be kept (Article 150).
• Submitting audit reports relating to the accounts of the Central Government to the President, who shall, in turn, place them before both the Houses of Parliament (Article 151).
• Submitting audit reports relating to the accounts of a state government to the Governor, who shall, in turn, place them before the state legislature (Article 151).
• Ascertaining and certifying the net proceeds of any tax or duty (Article 279). The certificate is final. The ‘net proceeds’ means the proceeds of a tax or a duty minus the cost of collection.
• Acting as a guide of the Public Accounts Committee of the Parliament. He compiles and maintains the accounts of state governments. In 1976, he was relieved of the responsibilities regarding the compilation and maintenance of accounts of the Government of India due to the separation of accounts from audit, through departmentalization of accounts. The CAG submits three audit reports to the President:
  • Audit Report on Appropriation Accounts
  • Audit Report on Finance Accounts
  • Audit Report on Public Undertakings

Independence of CAG

To maintain autonomy and prevent government influence, there are several provisions in the Constitution for safeguarding the independence of CAG. They are as follows:

• CAG is appointed by the President by warrant under his hand and seal and provided with tenure of 6 years or 65 years of age, whichever is earlier.
• CAG can be removed by the President only in accordance with the procedure mentioned in the Constitution that is the manner same as removal of a Supreme Court Judge.
• He is ineligible to hold any office, either under the Government of India or of any state, once he retires/ resigns as a CAG.
• His salary and other service conditions cannot be varied to his disadvantage after appointment.
• His administrative powers and the conditions of service of persons serving in the Indian Audit and Accounts Department are prescribed by the President only after consulting him.
• The administrative expenses of the office of CAG, including all salaries, allowances and pensions are charged upon the Consolidated Fund of India that is not subject to vote.

Significance of Office of CAG:

The office of the Comptroller and Auditor General (CAG) of India holds immense significance in maintaining the financial integrity, transparency, and accountability of the Indian government. Established under Article 148 of the Indian Constitution, the CAG plays a pivotal role in auditing and overseeing the use of public funds. Here are some key points highlighting its importance:

1. Ensuring Financial Accountability: The CAG is responsible for auditing the financial accounts of the Union and State governments, as well as public sector undertakings and autonomous bodies funded by the government. Its role ensures that public money is spent according to legal and financial norms, safeguarding taxpayers’ interests.
2. Promoting Transparency: Through its audit reports, the CAG brings to light any financial irregularities, inefficiencies, or mismanagement of public funds. This helps to maintain transparency in the government’s financial dealings and decisions, ensuring that the public is informed about how their money is being utilized.
3. Supporting Legislative Oversight: The CAG’s audit reports are submitted to Parliament and State Legislatures, where they are used to assess the financial performance of the government. These reports enable lawmakers to scrutinize government expenditure and hold the executive accountable.
4. Independent Oversight: The CAG operates as an independent body, free from political or executive interference. This ensures unbiased audits and strengthens the credibility of its findings, fostering trust in the financial management of the government.
5. Contributing to Good Governance: By identifying areas of financial inefficiency, fraud, or corruption, the CAG helps improve the governance framework of the country. Its findings serve as a valuable tool for policy formulation and financial reforms.

In essence, the office of the CAG is a cornerstone in India’s democratic governance, ensuring that public resources are managed efficiently, ethically, and transparently.

CAG and Public Accounts Committee (PAC)

The Comptroller and Auditor General (CAG) of India and the Public Accounts Committee (PAC) of Parliament have a vital and complementary role in ensuring financial accountability and transparency in the functioning of the Indian government.

PAC is a Parliamentary Standing Committee created under GOI Act, 1919, constituted by Parliament to scrutinize the CAG’s reports. The PAC is responsible for reviewing the findings of the CAG’s audit reports and ensuring that any irregularities, inefficiencies, or misappropriations in government spending are addressed. The PAC consists of members from both Houses of Parliament (Lok Sabha and Rajya Sabha) and is headed by a member from the opposition party, which ensures its independence and impartiality.

CAG audit reports are handed over to the PACs at the centre and at the state. Three CAG reports i.e. audit report on appropriation accounts, audit report on finance accounts and audit report on public sector undertakings are examined by PAC.

Interaction between CAG and PAC

• Scrutiny of Audit Reports: Once the CAG submits its audit reports to Parliament, the PAC reviews them in detail. The PAC calls relevant officials and ministers to explain the discrepancies or financial mismanagement highlighted in the CAG’s reports.
• Recommendations: After reviewing the audit findings, the PAC makes recommendations to the government on improving financial practices, ensuring compliance with the law, and preventing wastage of public funds. These recommendations are usually accepted and implemented by the government.
• Ensuring Accountability: While the CAG provides independent and objective analysis of government finances, the PAC plays a crucial role in ensuring that the government takes action based on these findings. The PAC holds the government accountable for any financial irregularities and presses for corrective actions.
• Legislative Oversight: The PAC functions as an essential tool for legislative oversight over the executive. By scrutinizing the CAG’s reports, the PAC ensures that the government is held to account for its financial decisions, contributing to better governance.

The CAG and PAC together form a powerful mechanism for ensuring financial discipline in the government. The CAG acts as an independent auditor, and the PAC serves as the forum for parliamentary oversight, holding the executive accountable for financial mismanagement or inefficiency. Their collaborative role strengthens democracy and promotes transparency in the use of public funds.

The responsibility of the CAG does not end here. He has to watch whether the corrective action suggested by him has been taken or not. In cases whether it has not been taken, he reports the matter to the PAC which will take up the matter.

Challenges faced by Comptroller and Auditor General (CAG) of India

The Comptroller and Auditor General (CAG) of India plays a crucial role in ensuring financial accountability and transparency in the Indian government. However, despite its importance, the CAG faces several challenges in fulfilling its responsibilities effectively. Some of these challenges include:

• Limited Powers and Scope: While the CAG audits the financial accounts of the Union and State governments, its power to enforce its findings is limited. The CAG can only make recommendations, but it has no authority to take direct corrective actions. This often leads to delays in addressing financial irregularities or inefficiencies highlighted in its reports.
• Inadequate Resources and Manpower: The CAG is responsible for auditing a vast range of government departments, public sector undertakings, and other bodies, often with a limited workforce and resources. This shortage can result in delays in audits and may affect the quality and comprehensiveness of audits, especially in the case of complex government projects or new sectors.
• Political Interference and Influence: Despite being an independent body, the CAG occasionally faces political pressures, especially when its audit reports highlight issues that may affect the ruling government. While the CAG is meant to remain independent of political influence, the involvement of politics in the functioning of public institutions can sometimes impact the effectiveness of its operations.
• Delay in Implementation of Audit Recommendations: The CAG’s audit reports, which are presented before Parliament, often lead to recommendations for improving financial management and addressing discrepancies. However, there is often a delay in the government’s response to these recommendations, and not all of them are implemented effectively or promptly. This reduces the impact of the CAG’s findings.
• Lack of Access to Information: In some cases, the CAG may face challenges in accessing critical financial data, especially in areas where records are incomplete, outdated, or not readily available. This hampers the audit process and may make it difficult to conduct comprehensive audits.
• New and Complex Areas of Audit: With the increasing complexity of government operations, including in the digital and private-public partnership sectors, the CAG faces the challenge of auditing new and technologically advanced areas. Auditing non-traditional sectors, such as e-governance projects, can be difficult due to the lack of clear auditing standards and expertise.
• Political Resistance to Audit Findings: The CAG’s findings, particularly when they highlight inefficiency, corruption, or financial mismanagement, can face resistance from government officials or political parties. This resistance may delay investigations or prevent necessary actions from being taken.
• Increased Workload: As the government expands and diversifies its activities, the volume and complexity of audits undertaken by the CAG have also grown. The sheer scale of the CAG’s work, particularly in auditing numerous public sector enterprises, government schemes, and departments, often leads to a heavy workload, affecting the timeliness and quality of audits.
• Audit of State Governments: Auditing state governments can be particularly challenging, as the financial systems of each state may differ, leading to inconsistent auditing practices. Additionally, political sensitivities at the state level may hinder the CAG’s ability to conduct thorough audits without facing resistance.

Despite these challenges, the CAG remains a critical institution in ensuring that public funds are utilized efficiently and transparently. Overcoming these challenges requires increased resources, political will, and a strengthening of institutional independence, all of which would enhance the effectiveness of the CAG in fulfilling its constitutional mandate.

Reforms Suggested by Vinod Rai (former CAG):

• Bring all private-public partnerships (PPPs), Panchayati Raj Institutions and government-funded societies, within the ambit of the CAG.
• CAG Act of 1971 should be amended to keep pace with the changes in governance. A collegium type mechanism to choose a new CAG on the lines of selecting a Chief Vigilance Commissioner (CVC).
• From climate change to PPPs, there are dramatic changes happening in the way government funding and public goods are exploited. CAG has to change its audit mechanisms in this context.
• CAG has to prepare itself to audit issues like implementation of the Sustainable Development Goals and the Goods and Services Tax.

Steps Taken:

• In the wake of the Big Data revolution, CAG came out with a Big Data management policy in 2016 and also established a Centre for Data Management and Analytics in Delhi. This is a welcome step.
• In 2017, CAG of India hosted the Commonwealth Auditors General Conference. Leveraging technology in public audit and environment audit were the two themes of the conference. Conference helped in fostering partnerships amongst Commonwealth countries for capacity development in public audit. CAG successfully audited the UN headquarters which involves multifarious and complex operations; it shows the credibility of Indian CAG.

More Suggestions for Better Function of CAG:

• Adoption of Technology and Digital Tools: The CAG can leverage advanced technologies such as data analytics, artificial intelligence (AI), and blockchain to enhance its auditing processes. These tools can improve the accuracy, speed, and depth of audits by automating routine tasks, analyzing large volumes of data, and identifying irregularities more effectively. AI-powered audit tools can also assist in the detection of fraud, waste, and inefficiency in government spending.
• Strengthening Capacity and Resource Allocation: Increasing the manpower and resources available to the CAG will enable it to handle the growing volume and complexity of government financial activities. Training staff in modern audit techniques and ensuring adequate financial support will help the CAG improve its audit quality and timeliness, especially in complex areas such as e-governance, public-private partnerships (PPP), and social welfare schemes.
• Collaboration with Other Audit Institutions: The CAG can collaborate more closely with international audit bodies like the International Organization of Supreme Audit Institutions (INTOSAI) and domestic auditing agencies to share best practices and improve audit methodologies. These collaborations can bring in valuable expertise in auditing emerging sectors, such as cybersecurity, environmental audits, and sustainability.
• Enhanced Legislative and Executive Support: There is an opportunity to improve the CAG’s ability to implement its recommendations by fostering greater collaboration with both the Legislative and Executive branches of the government. Ensuring quicker and more transparent responses to audit reports can improve the impact of the CAG’s work. Additionally, regular follow-ups by the Public Accounts Committee (PAC) can ensure that audit findings are acted upon promptly.
• Improving Audit of Public-Private Partnerships (PPP): With an increasing number of government projects being undertaken in collaboration with the private sector through public-private partnerships (PPP), auditing such projects has become more complex. The CAG can build expertise in auditing PPP projects, ensuring that public interests are safeguarded and that these projects are being executed with financial prudence and transparency.
• Incorporating Real-Time Auditing: The concept of real-time auditing—where financial activities are monitored as they happen—can be explored further. By integrating continuous auditing systems and utilizing digital financial systems, the CAG can intervene early to detect and prevent irregularities, improving overall financial governance.
• Audit of Social Welfare Schemes: With the government increasingly implementing large-scale social welfare programs, there is an opportunity for the CAG to focus on auditing the efficiency, effectiveness, and transparency of these schemes. Ensuring that funds allocated to programs like healthcare, education, and rural development are used effectively is crucial for ensuring social and economic progress.
• Focus on Environmental and Sustainability Audits: As environmental concerns gain prominence, the CAG can expand its scope to include environmental audits. Assessing government projects for their environmental impact and sustainability can help ensure that public funds are being spent on projects that align with sustainable development goals (SDGs) and climate change mitigation.
• Public Engagement and Transparency: Increasing the visibility and accessibility of CAG reports to the public can foster greater accountability and trust. By developing more interactive platforms to disseminate audit findings and engaging citizens in discussions on public financial management, the CAG can enhance its role in promoting transparency and civic participation.
• Integration with National Financial Management Systems: Integrating the CAG’s audit processes with national financial management systems and public financial management reforms can streamline auditing efforts. This could help in real-time tracking of government spending, reducing delays, and improving coordination between government departments and the CAG’s office.
• Focus on Audit of Government Digital Platforms: With the increasing use of digital platforms for government services, it is essential for the CAG to develop specialized audit capabilities in the areas of cybersecurity, e-governance, and digital financial transactions. This will ensure that the digital transformation of government services remains secure, transparent, and accountable.

The CAG of India has significant opportunities to enhance its efficiency and effectiveness by adopting modern technologies, improving capacity, collaborating with other agencies, and broadening the scope of its audits. By embracing these opportunities, the CAG can continue to play a central role in ensuring the prudent use of public funds, improving governance, and fostering transparency in the government’s financial activities.

Conclusion

In conclusion, the Comptroller and Auditor General (CAG) of India plays an indispensable role in upholding the financial integrity of the government by ensuring transparency, accountability, and the proper utilization of public funds. As an independent constitutional body, the CAG’s audits of government accounts, public sector undertakings, and other bodies receiving government funds provide critical insights into the financial health and efficiency of government operations. Its work supports legislative oversight and empowers lawmakers to make informed decisions based on its findings.

Despite facing challenges such as limited resources, political pressures, and evolving complexities in government operations, the CAG remains a cornerstone of India’s democratic governance. There are several opportunities ahead to enhance the CAG’s efficiency, including the adoption of new technologies, improved resource allocation, and a focus on emerging areas like environmental audits and public-private partnerships.

The CAG’s role in strengthening governance and ensuring the judicious use of taxpayers’ money is vital for the country’s progress. By continuing to evolve and adapt to the changing landscape, the CAG can contribute significantly to India’s pursuit of good governance, transparency, and sustainable development, making it a vital institution in the nation’s financial ecosystem.

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