Comptroller & Auditor General of India (CAG) – Indian Polity Notes

During his speech in the constituent assembly, Dr B R Ambedkar said the office of Comptroller and Auditor General (CAG) is of utmost significance to ensure the proper working of the nation. CAG is one of the most important constitutional authorities in India.
The principal responsibility of the CAG is to audit the accounts of the state and central governments which are spending taxpayer’s money. It is so significant in financial accountability that it must be given independence in the same way as that of the judiciary of the country.

Constitutional Provisions:

Articles 148 to 151 deals with CAG

Appointment:

• CAG is appointed by the President of India and he/she is administered oath of office by the President.
• CAG holds office for 6 years or upto age of 65 years.
• CAG can resign from his office by addressing resignation to the President.
• CAG can also be removed from office by the President on grounds similar to the Supreme Court judges.

Independence of CAG:

1. CAG has the security of tenure. The procedure of his/her removal is very cumbersome i.e. not easy to remove. 
2. The office of CAG is one of those authorities who though appointed by the President but do not serve at the pleasure of the President.
3. Post-retirement, the CAG is not eligible for reappointment or holding any office under union or state.
   1. [Additional Data: After retirement, former CAG Vinod Rai was appointed as the Chairman of the Banks Board Bureau. Many held it as a violation of Article 148(4)]
4. The salary and allowance are equal to the Supreme Court judge & charged on the consolidated fund of India.
5. CAG is not answerable to the Parliament.

Powers and Functions of CAG:

Article 149 provides for the parliament to prescribe powers & functions to the CAG, accordingly CAG’s (Duties, Powers and Conditions of Service) Act 1971 was passed.

Functions of CAG are:

1. Auditing all accounts related to all expenditures from the consolidated fund, contingency fund and public account of the union, states and union territories with legislature.
   1. There is no parallel body like CAG at state level.
2. To audit and report on all trading, manufacturing and profit and loss accounts kept by any departments of the union and states.
3. Audits receipts & expenditure of the centre and each state.
4. To audit organisations which are substantially financed by the government and other institutions not substantially financed when so requested by the President or the Governor.
5. Advises Union and States about format in which their accounts are to be maintained.
6. Audits PSUs and Government Companies
7. Under Article 279(1), it can also provide net proceeds certificate to Govt of India.
8. CAG helps the Finance Commission in acquiring informed opinion on the state governments finances.

Reports of CAG:

CAG submits following reports to the President.

1. Audit Report on Appropriation Accounts.
2. Audit Report on Finance Accounts
3. Audit Report on Public Undertakings

These reports are then tabled in the parliament by the President.

CAG v PUBLIC ACCOUNTS COMMITTEE:

• CAG is acts as a “friend, guide and philosopher” to the Public Accounts Committee (PAC). 
• Both acts complimentary to each other.
• When CAG reports are tabled on the floor of the parliament, the report is analysed by PAC.

Types of Audit:

1. Compliance Audit: It established money was available in the budget and used for the purpose for which it was meant.
2. Financial Audit: It ensures that proper books of accounts are maintained and they are faithful representations of actual transactions
3. Efficiency Audit: It is largely applicable to commercial enterprise in terms of manpower utilisation and  material utilisation, capacity utilisation etc.
4. Propriety Audit: Question the wisdom of faithfulness and economy behind the financial decisions.

Challenges:

1. Appointment: Though in last decade many scams like 2G scam, commonwealth games scam, Adarsh scam etc. were brought in light using CAG report. But, it is said that those who are close to government are appointed in key positions like CAG. As it is CAG who certifies that government is keeping account of every single paisa spent.

REFORM: Appointment should be made based on recommendation of committee which includes not only members of government and opposition but experts form the field too.

2. At present law doesn’t mandate the justification from CAG if it points out misappropriation of funds. In several instances, CAG reports were held inconclusive. 

REFORM: CAG should be mandated by law to prove misappropriation of funds.

3. Via propriety audit, CAG can decides whether or not there was need to spending money. 

Spending public money is prerogative of elected representatives. In democracy, people have voted for the parliamentarians to decide who money is to be spent.

4. In USA and UK, CAG is part of legislative branch of the government but India it is kept outside legislature and executive.
5. India’s first peer review was done in 2012. They found that around 50% of allegations of irregularities made by the CAG were not backed by concrete evidence.

Steps for improving efficiency of CAG:

1. Appointment of CAG from cadre of IAAS. Out of 14 CAGs only first three CAG were from cadre of IAAS. It should be clearly encadred.
2. Like US, UK, the CAG should be made part of legislature in India too. This will increase effectiveness of his reports as the parliament would discuss and debate on report seriously and CAG would be answerable to the Parliament.

UPSC Practice Questions:

UPSC Mains:

Q1. Exercise of CAGs powers in relation to the accounts of the Union and the States is derived from Article 149 of the Indian constitution. Discuss whether audit of the Governments policy implementation could amount to overstepping it’s own (CAG’s) jurisdiction.

Q2. The Comptroller and Auditor General of India has a very vital role to play. Explain how this is reflected in the method and terms of his appointment as well as the range of powers he can exercise.

UPSC Prelims:

Q1.  According to the constitution of India, it is the duty of the President of India to cause to be laid down before the Parliament which of the following:

1. The recommendations of the union finance commission
2. The report of public accounts committee
3. The report of the comptroller and auditor general
4. The report of the national commission for scheduled castes.

Select using codes given below.

a) 1 only
b) 2 and 4
c) 1, 3 and 4
d) 1, 2, 3 and 4

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