CAG: ·Comptroller
Contact Admin ·
and Auditor General of India
Handout for Foundation Batch
Faculty: Jatin Gupta
Q. Exercise of CAG’s 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
Government’s policy implementation could amount to overstepping its own (CAG) jurisdiction.
2016
Q“The Comptroller and Auditor General (CAG) 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. 2018
Introduction
The office of the CAG in India was established through the Government of India
Act, 1935, and retained after independence under Article 148 of the Indian
Constitution.
CAG is an independent authority under the Constitution of India. He is the head of the
Indian audit & account department and chief Guardian of Public purse. It is the
institution through which the accountability of the government and other public
authorities to Parliament and State Legislatures and through them to the people is
ensured.
“I am of the opinion that this dignitary or officer is probably the most
important officer in the Constitution of India. He is the one man who is going
to see that the expenses voted by Parliament are not exceeded or varied from
what has been laid down by Parliament in the Appropriation Act.” —Dr. B.R
Ambedkar
In India, the CAG does not control the flow of funds (pre-expenditure control).
Instead, it focuses on post-expenditure auditing, which involves ensuring that public
money has been spent in accordance with the laws passed by Parliament. On the
other hand in the UK, the CAG acts as the guardian of the Consolidated Fund,
ensuring that no money is withdrawn from the fund without parliamentary approval.
Appointment and Removal of CAG:
● The CAG is appointed by the President of India by a warrant under his hand
and seal.
● The CAG holds office for a period of six years or up to the age of 65 years,
whichever is earlier.
● He can resign at any time from his office by addressing the resignation letter
to the president.
● He can also be removed by the president on the same grounds and in the
same manner as a judge of the Supreme Court.
CAG: ·Comptroller
Contact Admin ·
and Auditor General of India
Handout for Foundation Batch
Faculty: Jatin Gupta
Independence of CAG:
● CAG is appointed by the President by warrant under his hand and seal and
provided with a fixed tenure
● Can be removed by the President only in accordance with the procedure
mentioned in the Constitution which is the manner same as the 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 the 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 to the Consolidated Fund of India
that is not subject to vote.
Duties and Powers of CAG:
As per article 149, the Parliament has enacted the CAG Act, 1971 which describes
the powers and the duties to be performed by this office.
● Audits the receipts and expenditures from the consolidated fund of India and
transactions related to contingency funds and public accounts.
● Audits all the government companies and the central PSUs.
● Audits all the autonomous bodies and authorities receiving government funds.
● Audit of accounts of any other authority at the request of the President.
● Advise the President on the form in which the accounts of the Union and the
state shall be kept.
● Acts as an agent of the Parliament and conducts an expenditure audit on their
behalf.
● Ensures the accountability of the executive to the legislature in financial
administration.
● To check the legality of the funds shown in the accounts have been disbursed
properly and to make sure it was spent for the specific purpose and by the
specific body.
● Assist the Finance Commission in understanding the actual Financial Position
of the States.
Note: Till 1976 the CAG was performing the dual roles of keeping the accounts as
well as auditing the same but in the same year a scheme of compartmentalization of
accounts was made and the CAG was relieved of the functions of accounting
(Controller General of India was established). Although the CAG continues to perform
CAG: ·Comptroller
Contact Admin ·
and Auditor General of India
Handout for Foundation Batch
Faculty: Jatin Gupta
the accounting functions for the States in India.
Types Of Audit
The CAG Act of, 1971 provides power to the CAG to determine the scope of the
audit.
● Audit against provisions of funds: Aims to determine whether funds
disbursed were legally available for the intended purpose.
● Regularity Audit: Objective is to ensure that expenditure complies with the
governing laws and regulations.
● Propriety Audit: It checks if spending is sensible and honest, not just if it
follows the rules. They look for waste, losses, and extravagant spending.
● Performance Audit: An efficiency-cum-performance audit assesses how well
development programs and schemes are being carried out and whether they
are producing the desired results
● Systems Audit: Systems audit involves analyzing and evaluating the
performance of organizations and systems governing authorization, recording,
accounting, and internal controls against quality standards.
Issues with Propriety Audit:
i) The Auditor enjoys the benefit of hindsight-making the decision/audit bias.
ii) Auditors do not necessarily understand the intricacies of administration.
iii) It results in policy paralysis as officers prefer to keep the files undecided.
iv) Propriety audits involve subjective judgments about what constitutes "wasteful" or
"extravagant" expenditure.
v) Excessive scrutiny or public shaming based on propriety audits can demotivate
honest public officials, especially when decisions are made in good faith.
Argument Supporting the Propriety Audit:
i) CAG's role is that of a Supreme Audit Institution and he must do more than simply
audit the Government accounts.
ii) The money spent by the government is Public Money and he must expose any
irregularities.
iii) Several scams in the past came to light because of such an audit conducted by
the CAG
iv) Citizens have become more demanding in terms of accountability of institutions
v) Propriety audits act as a deterrent against financial indiscipline
vi)Propriety audits promote ethical governance practices, ensuring principles of
transparency, economy, and efficiency
Significance of CAG Office
● The CAG office is crucial for ensuring accountability of government.
● Advisory Role to PAC: The CAG advises the Public Accounts Committee
CAG: ·Comptroller
Contact Admin ·
and Auditor General of India
Handout for Foundation Batch
Faculty: Jatin Gupta
(PAC). By providing technical insights, the CAG strengthens oversight and
protects public funds.
● Uncovering Scams: The CAG has exposed significant scams, enhancing
transparency and public trust in government institutions.
● Evaluating Policy Decisions: The CAG examines if relevant factors were
considered in policy decisions, ensuring fairness and public interest.
● Upholding Constitutional Principles: The CAG ensures compliance with
constitutional principles and laws, promoting the rule of law and ethical
governance
● CAG helps identify inefficiencies in public programs and suggest
improvements, driving better resource management
Issues in the functioning of office of CAG
● The absence of impartiality in the manner of appointment is a significant
concern. The President of India makes the appointment based on the advice
and consent of the Council of Ministers, granting the executive branch the sole
authority to select the CAG of their choosing. This practice deviates from the
globally recognized best practices observed worldwide.
● The constitution does not include any prescribed eligibility criteria for the office
of the CAG. Frequently, the IAS officers are given precedence over the IAAS
officers, who have specialized domain expertise and, therefore, should be
given priority for such positions.
● CAG is usually not interested in the audit of private companies involved in the
delivery of public services.
● The effectiveness of the CAG report depends on the PAC report and
Parliament discussions. But, unfortunately, there isn't enough debate in
Parliament regarding these reports.
● CAG has the advantage of hindsight, which policymakers don't. Therefore,
overly critical CAG reports might hurt civil services.
● Some recent CAG audits have been criticized for exaggerated loss estimates
and outlandish figures.
Suggestions to reform the functioning of CAG’s Office
● The findings of the audit should be reported to the President and Parliament
promptly and shared with the media and the public simultaneously, with
explanations for clarity
● Steps should be taken to improve parliamentary discussions on CAG reports
to enhance their effectiveness. For instance, dedicated parliamentary sessions
could focus on CAG findings.
● The CAG should align with global best practices in public sector auditing,
learning from institutions like the UK National Audit Office and the US
Government Accountability Office (GAO).
CAG: ·Comptroller
Contact Admin ·
and Auditor General of India
Handout for Foundation Batch
Faculty: Jatin Gupta
● The CAG must adopt a balanced approach in its propriety audits to avoid
discouraging legitimate, well-intentioned decisions taken by civil servants.
● The CAG’s office must be provided with sufficient resources, including
skilled personnel and technological tools, to handle its increasing workload
and ensure timely and accurate audits.
● The selection process for a crucial constitutional functionary should be open,
objective, and credible. A committee procedure similar to that used for the
Central Vigilance Commission and the National Human Rights Commission
would ensure this.
