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Defence & Security
Science & Technology
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- GS 2 || Polity || Constitutional Bodies || CAG
Why in the news?
In a reply to the RTI filed by the ‘The Indian Express’, it was found that the CAG reports relating to Union ministries and departments came down from 55 in 2015 to merely 14 in 2020 – a fall of nearly 75%.
Comptroller and Auditor General (CAG) of India
- Comptroller and Auditor General (CAG) of India is the apex Constitutional authority responsible for audits of the expenses of the National and state governments and other organisations of State.
- Presently, Girish Chandra Murmu is the Comptroller and Auditor General of India (CAG.) Earlier, he was the Lieutenant-Governor of Jammu & Kashmir Union Territory.
Historical Perspective of CAG:
- An Office of the Accountant General was first established in 1858 following the Queen’s proclamation.
- In 1860 Sir Edward Drummond was appointed as the first Auditor General.
- In 1866, the position was known as ‘Comptroller General of Accounts’, and in 1884, it was again renamed as ‘Comptroller and Auditor General (CAG)’ of India.
- After the GoI Act, 1919 was enacted, the statutory backing to the CAG was given and it became an independent body.
- The Government of India Act 1935 further provided for the offices of Provincial Auditors General in a federal set-up.
- 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.
- In 1971 the central government enacted the Comptroller and Auditor General (Duties, Powers, and Conditions of Service) Act, 1971. The Act made CAG responsible for both accounting and auditing duties for central and state governments.
- In 1976 CAG was relieved from accounting functions and it was entrusted to the Indian Audit and Accounts Services (IA&AS).
Various constitutional provisions related to the CAG are:
- Article 148 broadly deals with the CAG appointment, oath and conditions of service.
- Article 149 deals with Duties and Powers of the Comptroller and Auditor-General of India.
- Article 150 states that the accounts of the Union and of the States shall be kept in such form as the President may, on the advice of the CAG, prescribe.
- Article 151 says that the reports of the CAG of India relating to the accounts of the Union shall be submitted to the President of India, who shall cause them to be laid before each House of Parliament.
- Article 279 deals with the Calculation of “net proceeds” is ascertained and certified by the Comptroller and Auditor-General of India, whose certificate is final.
- Third Schedule – Section IV of the Third Schedule of the Constitution of India prescribes the form of oath or affirmation be made by the Judges of the Supreme Court and the Comptroller and Auditor-General of India at the time of assumption of office. Know more about the Judge of the Supreme Court of India.
- According to the 6th Schedule the accounts of the District Council or Regional Council should be kept in such form as CAG, with the approval of the President, prescribes.
- In addition, these bodies’ accounts are audited in such a manner as CAG may think fit, and the reports relating to such accounts shall be submitted to the Governor who shall cause them to be laid before the Council.
Independence of CAG:
CAG performs significant functions vital for good governance. Therefore, it is of utmost importance that the body functions in indecent ways without fear or favour from anyone. Following provisions in the Constitution ensures independence of the CAG:
- Security of tenure: 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.
- Removal through only Constitutional process: 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.
- Ineligible for any future employment under the State: She is ineligible to hold any office, either under the Government of India or of any state, once he retires/ resigns as a CAG.
- Salary and allowances are charged upon the Consolidated Fund of India: Her salary is charged upon the Consolidated fund of India and her other service conditions cannot be varied to her disadvantage after appointment.
- Control over the government accounting service: CAG’s 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.
Powers of CAG:
CAG derives its powers from different sources like–
- Constitution (Articles 148 to 151)
- The Comptroller and Auditor General’s (Duties, Powers and Conditions of Service) Act, 1971
- Important Judgments
- Instructions of Government of India
- Regulations on Audit & Accounts-2007
Statutory Audits performed by the CAG:
- CAG audits the accounts related to all expenditure from the Consolidated Fund of India, Consolidated Fund of each state and UT’s having a legislative assembly.
- She audits all expenditure from the Contingency Fund of India and the Public Account of India as well as the Contingency Fund and Public Account of each state.
- She also audits all trading, manufacturing, profit and loss accounts, balance sheets and other subsidiary accounts kept by any department of the Central Government and the state governments.
- She 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.
- She audits the accounts of any other authority when requested by the President or Governor e.g. Local bodies.
- She advises the President with regard to prescription of the form in which the accounts of the Centre and States shall be kept.
- CAG submits her audit reports relating to the accounts of the Centre to the President, who shall, in turn, place them before both the houses of Parliament.
- CAG also submits her audit reports relating to the accounts of a State to the Governor, who shall, in turn, place them before the state legislature.
- CAG also acts as a guide, friend and philosopher of the Public Accounts Committee of the Parliament.
Comparison with CAG in UK
- In respect of role: CAG of India only performed the role of an Auditor General and not of a Comptroller but in Britain it has the power of both Comptroller as well as Auditor General.
- In manner of audit: In India the CAG audits the accounts after the expenditure is committed i.e. ex post facto. In the UK, money cannot be drawn from the public exchequer without the approval of the CAG.
- In manner of Post: In India, CAG is not a member of the parliament while in Britain, CAG is a member of house of the Commons.
- Changing nature of auditing: Audits are getting complex because different forms of corruption and maladministration are extremely difficult to isolate and detect. Besides the task of keeping a close watch on the Central and State governments, CAG are now also auditing several public-private partnerships (PPP) projects which are extremely challenging and professionally demanding.
- Deputation of IAS cadre officers: The CAG has become a job of accounting expertise. The current trend of appointing IAS officers as CAG does not augur well with the current nature of the job. Officers from Indian Economic Services (IES) or from other accounting services such as IA&AS are more suitable to occupy the post of CAG.
- Unspecified criteria for selection of CAG: No criterion or procedure has been prescribed either in the Constitution or in the statute for the appointment of CAG.
- This has given the sole power to the executive to appoint a person of their choice as the CAG. This goes against the international best practices prevalent across the world.
- Operational difficulties: The CAG has the authority to inspect any Government office and to call for any accounts. However, in practice, the supply of records is often denied. Moreover, usually inordinately delayed and more often than not, crucial documents are supplied to the auditors at the end of the audit programme with the sole objective of obstructing meaningful audit of those crucial records.
- Shorter tenures: Though the Indian Constitution provides for a six-year term to the CAG, the cap of 65 years of age has been reducing the actual terms of successive CAGs in the recent times. Shorter tenure works as an impediment to the independent and proper functioning of the institution due to lack of continuity of the leadership and loss of expertise.
- Exaggerated reports: Some of the audits of CAG in recent times have attracted criticism due to exaggerated loss estimates or outlandish figures.
Important reforms as suggested by Vinod Rai ( A celebrated ex-CAG):
Vinod Rai was an ex-CAG whose reports on irregularity and corruption brought a fall down of the UPA government in 2014. He suggested important reforms in his book “Not Just An Accountant”. These reforms were:
- 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)
- Time bound furnishing of required information to CAG:: Just like the citizen’s right to get the information within a month under RTI Act 2005, auditors should be provided access to records on priority basis within seven days, failing which, heads of departments should be required to explain the circumstances that caused the delay.
- Complete independence for CAG: Considering the critical role of CAG in good governance, there is an immediate need for complete independence. The most important reform would be to make CAG a part of the Public Account Committee (PAC), like in the UK and Australia. While appointing CAG, the government should also take prior consultation with the Chairman, PAC.
- Long and fixed tenure: The cap of 65 years makes the tenures of CAG shorter as compared to other countries. Internationally, the CAG of the UK and the Comptroller General of the US have 10 and 15 years of tenures respectively.
- Set standards of international level: CAG is often criticised for lack of standards in its audit reports. It is suggested that the CAG should follow rigorous standards so that the integrity of audits is not affected by extraneous considerations.
Model Mains Question:
- Discuss the challenges faced by the Comptroller and Auditor General (CAG) while discharging her functions with full efficiency. Suggest measures to address these challenges.