Comptroller and Auditor General (CAG)

• Constitution of India (Article 149) provides for an independent office of CAG
• He is the head of the Indian Audit and Accounts Department
• He is guardian of public purse at both levels—Center and State.

Appointment and Term

• CAG is appointed by the President of India by a warrant under his hand and seal.
• He  holds office for a period of six years or upto the age of 65 years, whichever is earlier. 
• He can also be removed by the President on same grounds and in the same manner as a judge of the Supreme Court.

Independence

• He is provided with the security of tenure. He can be removed by the President only in same manner a Judge of Supreme Court
• Thus, he doesn’t hold his office till the pleasure of President, although he is appointed by him.
• He is not eligible for further office, either under the Government of India or of any state, after he ceases to hold his office. (controversy of Former CAG Vinod Rai appointed as Head of Bank Board Bureau )
• Neither his salary nor his rights in respect of leave of absence, pension or age of retirement can be altered to his disadvantage after his appointment.
• Administrative expenses of the office of the CAG are charged upon the Consolidated Fund of India. 

Duties and Powers

• Constitution (Article 149) authorises the Parliament to prescribe the duties and powers of the CAG 
• Accordingly,  Parliament enacted  CAG’s (Duties, Powers and Conditions of Service) act, 1971. Act was amended in 1976 to separate accounts from audit in the Central government.

The duties and functions of the CAG 

• He audits the accounts related to all expenditure from
  1. Consolidated Fund of India and  each state .
  2. Contingency Fund of India  & each state
  3. Public Account of India &  each state 
• He audits balance sheets of department of the Central Government and state governments
• He  audits the accounts of any other authority when requested by the President or Governor. For example, audit of local bodies
• He  advises the President with regard to prescription of the form in which the accounts of Center and  states shall be kept (Article 150).
• He submits his audit reports relating to the accounts of the Center to President, who shall, in turn, place them before both the Houses of Parliament (Article 151).
• He acts as a guide, friend and philosopher of the Public Accounts Committee of the Parliament.
• Earlier, he used to compile and maintain accounts of Central Government. In 1976, he was relieved of his responsibilities with regard to the compilation and maintenance of accounts of the Central Government due to separation of accounts from audit.

Role of CAG

• Role of CAG is to uphold the Constitution of India and laws of Parliament in field of financial administration. 
• CAG is an agent of the Parliament and conducts audit of expenditure on behalf of the Parliament. 
• In addition to legal and regulatory audit, CAG can also conduct the propriety audit that is, he can look into the ‘wisdom, faithfulness and economy’ of expenditure and comment on the wastefulness and extravagance of such expenditure. However,  legal and regulatory audit is obligatory but propriety audit is discretionary
• Secret service expenditure cant be audited by CAG.

• Constitution of India visualises the CAG to be Comptroller as well as Auditor General. However, in practice, the CAG is fulfilling the role of an Auditor-General only and not that of a Comptroller =>  CAG has no control over the issue of money from the consolidated fund and  is concerned only at the audit stage when the expenditure has already taken place (unlike Britain)

Appleby’s Criticism

Paul H Appleby = very critical of the role of CAG =>  recommended the abolition .

His points of criticism 

• CAG =  inheritance from the colonial rule.
• CAG is  primary cause of  paralyzing unwillingness  to act. 
• Auditors do not know about good administration. Auditors know what is auditing, which is not administration 

Problems

• CAG is today a primary cause of  paralysing unwillingness  to act. Due to CAG , officials don’t take decisions . Propriety Audits conducted by CAG are the main culprit .

• Generalist like IAS is posted as CAG . Specialist from Indian Audit and Account Service, Indian Economic Service or Indian Statistical Services or Indian Revenue Services should be posted as CAG .

• CAG & Defence :  CAG Reports sometimes jeopardise the security of country. Eg : CAG report tabled in Parliament in 2017   stated that the ammunition stock of the Indian Army would be exhausted after 10 days of war  .

• Issue of Notional Loss : As in 2G Case which was later quashed by Supreme Court in 2018

• CAG Activism as shown in 2G and Coalgate case.

Analysis of various issues with CAG

1 . Much of the government expenditure is kept out of CAG Audit by Governments

• CAG’s Authority doesn’t extend to Government Corporations which are created with special laws . Parliament or State Legislature can make provisions regarding Audit within Act itself. Now only 60% of the Government expenditure comes under CAG’s mandate
• New Organisational Structures in the form of Public Private Partnerships are also out of the ambit of CAG’s Audit. Eg : GMR Airport , Delhi Controversy where AAP Government demanded Auditing by CAG
• Many Government works at delivery points are taken up by NGOs and Private Agencies . These private agencies and NGOs are also out of the ambit of CAG

2. CAG’s office is getting politicized

• Constitutional Provision : Constitution explicitly states that CAG should not be given post retirement posting
• Controversy came to forefront when former CAG Vinod Rai was appointed as Chairman of Bank Board Bureau
• TN Chaturvedi (CAG from 1984 to 89) joined BJP after retirement and contested election from BJP’s ticket. He was later made Governor of Kerala too .

3. CAG is considered as impediment to accelerated performance

• Audit is of two types
  • Internal Audit  : By organisation itself
  • External Audit : by watch dog like CAG. But watchdog cant find every fault of the government

In India, Internal Audit is very weak and government departments see the external audit mechanisms as fault finding exercise rather than constructive recommendations for their working.

• Evidence of Mistrust between Government Departments and CAG : Government agencies don’t give the information required by the CAG because of mistrust. There is no provision regarding time frame 

4. Issue of Redacted Pricing (Rafale Case)

• CAG in Audit Report of Acquisition of Rafale redacted ie removed sensitive information from document siting security concerns expressed by Government . This was never done before and impinges Audit mechanism .

5. Presumptive Loss / 2G Spectrum Case

This theory is based on calculations that loss incurred by the government in allocation of natural process if proper process was followed and auction was done by route which promises maximum revenue to the government.

Presumptive  and Notional Loss Theory

• CAG calculated notional loss to the exchequer in 2G Spectrum Allocation under “first come, first served” policy at Rs 1.76 lakh crore
• In Coal Scam, CAG report initially quoted notional loss to be ₹10 lakh crore , later decreasing it by several times to Rs 1.86 lakh crore.

Dec 2017 : Special CBI Court acquitted A Raja and Kanimozhi and refused to accept Presumptive loss theory of CAG

But we have to keep in mind that government’s only aim unlike companies and corporations is not just maximisation of profit . Government has to keep in mind socio-economic factors, job creation etc. Hence, sometime government has to adopt route which doesn’t yield maximum profits.

Hence, CAG has failed to accommodate changing dynamics of doing business in LPG Era.