January 11, 2025

Context: A recent report by the Comptroller and Auditor General (CAG) has flagged that over ₹33 crore was spent on the renovation of then Delhi Chief Minister's residence. The renovation, which began in 2020, included extravagant purchases and upgrades. 

Comptroller and Auditor General:

• The Comptroller and Auditor General (CAG) is the country’s supreme audit body and guardian of the public purse. He is the head of the Indian Audit and Accounts Department. 
• Article 148: CAG is appointed by the President of India. 
• CAG holds office for a period of six years or up to the age of 65 years. He can resign any time by addressing the resignation to the president.
• Independence of Office:
  • Security of tenure: Can be removed by the President only in accordance with the procedure mentioned in the Constitution. 
  • Administrative expenses of the office of CAG are charged upon Consolidated Fund of India. 
  • No minister can represent the CAG in Parliament (both Houses) and no minister can be called upon to take any responsibility for any actions done by him. 

Duties and Powers of CAG:

• Audits the accounts related to all expenditure from:
  • Consolidated Fund of India, consolidated fund of each state and consolidated fund of each union territory having a Legislative Assembly.
  • Contingency Fund of India and contingency fund of each state
  • Public Account of India and public account of each state. 
• He audits the receipts and expenditure of the Centre and each state.
  • CAG submits his audit reports to the President relating to the accounts of the Centre. The President places them before both the Houses of Parliament. 
  • CAG submits his audit reports relating to the accounts of a state to the governor, who shall place them before the state legislature. 
• He audits the receipts and expenditure of:
  • All bodies and authorities substantially financed from the Central or state revenues
  • Government companies
  • Other corporations and bodies, when so required by related laws. 
• He audits accounts of any other authority when requested by the President or Governor. E.g., audit of local bodies. 
• Courts can also recommend CAG audits. E.g., the Supreme Court asked the CAG to conduct an audit of the Delhi-Noida Direct (DND) flyover project.

Various types of Audits CAG conducts:

• The CAG 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 the Houses of Parliament. After this, the Public Accounts Committee examines the selected reports and seeks a response from the government. The PAC also asks the government to take action on the recommendations and submit an Action Taken Report. 
  • Appropriation accounts compare the actual expenditure with the expenditure sanctioned by the Parliament through the Appropriation Act.
  • Finance accounts show the annual receipts and disbursements of the Union government.

Emerging importance of office of CAG

• Ensures transparency and accountability: Plays crucial role in democratic framework by ensuring transparency, accountability, and professional integrity in functioning of government.
• Separation of powers: Helps in maintaining Separation of powers between legislature and executive by ensuring that the government’s financial activities align with its legislative intentions.
• Promotes good governance: Through its audit findings and recommendations, CAG promotes good governance practices and streamlines their operations.
• Reduces inefficiency: By making the executive adhere to financial discipline.
• Sustainable future: Cooperating with international agencies like UN for audit and performance of Sustainable Development Goals.
• Handholding: Undertakes handholding and capacity building of state level auditors, local fund auditors in Audit planning, audit methodologies through technical guidance and support.
• Annual reports: Publishing Annual Technical Inspection Reports on functioning of PRIs and ULBs.
• Audit of Local Governments: To make an assessment how well the delivery of the services pertaining to devolved functions have reached the last mile.
• Creating a pool of accountants: In collaboration with institute of Chartered Accountants of India, CAG is conducting online courses to create a pool of competent accountants for preparing urban and local government accounts.

Issues arising out of functioning of CAG

• Selection and appointment: Constitution of India ensures the independence of office, but there is no laid down criteria for appointment. Conseqently, there is-
  • Executive monopoly over appointment: Cabinet Secretary prepares a shortlist which is submitted to finance minister who then submits it before the Prime Minister.
  • Conflict of Interest: CAG is an auditor to Government of India headed by PM, since executive has monopoly over the appointment, this creates a conflict of interest which dilutes accountability process.
  • Inter services conflict: Office is hijacked by the appointment of mostly IAS officers rather than IAAS officers.
• Performance audit: There are apprehensions whether the office of CAG is equipped enough to carry out performance audits. Similarly, in Arun Kumar Agrawal v Union of India, the Supreme court has held that the CAG is not entitled to question the merits of policy objectives of the State government.
• Secret service expenditure: Secret service expenditure is kept outside the purview of CAG; he cannot call for particulars of expenditure undertaken by such executive agencies.
• Procedural issues:
  • Post facto analysis:  Its report is post facto in nature, it has only prospective value in improving systems and procedures for the future.
  • Lack of focused findings: Findings are not focused and are in form of scattered ‘observations’, this creates media hype, but micro level issues of departmental functioning are not addressed.
  • Systemic issues not addressed: Large number of problems are identified which are already known, but systemic issues in public organizations are not addressed.
  • Audit seen as a policing mechanism: Audit reports are not taken as a valuable input to management, rather seen as a policing mechanism.
  • Indifference from government: Poor response from government to external audits reduces its effectiveness.
• Delayed presentation of reports: Article 151 provides for laying CAG reports in Parliament or state legislatures but no time limit is specified. This is why governments often do not lay CAG audit reports on time. This ultimately deprives the legislature of crucial information before the budget session.
• Reduced output: Substantial reduction in the output by the CAG in terms of number of audit reports. In 2010-11 CAG prepared 221 reports but in 2018-19 it prepared only 73 audit reports.

Recommendations and way forward

• Appointment:  Need to consider the best practices to add qualifications and bring transparency in appointment.
  • UK: CAG is jointly selected by Prime Minister and Chairman of the committee of Public Accounts and later ratified by the House of Commons.
  • USA: A commission advises the President with respect to the name and Comptroller General is appointed by the President on the consent of Senate.
  • Canada: Auditor general of Canada is appointed after consultation with the leader of every recognized party in the senate and House of Commons and approval of the appointment by resolution of the Senate and the House of Commons.
  • It is suggested that in India, recommendation should be done by a search committee comprising of Prime Minister, Home Minister, and Leader of Opposition.
• Enlarging the Scope: Bringing Panchayati Raj Institutions, State funded societies under the ambit of CAG audit.
• Powers and performance:
  • Empowered CAG like New Zealand: CAG in New Zealand has the power to ask for liability of the loss from the government and another party.
  • Amend CAG Act 1971:  Amend the CAG act 1971 to include pre audit of defense expenditure of more than 3000 Cr. Further, the State Auditor General should be given the status of Judge of High Court.
  • RTI like time limit: Auditors should be provided access to records on priority basis within a stipulated time of 7 days (like 30 days in RTI Act), failing which the heads of department should be required to explain the circumstances that caused the delay.