The Comptroller and Auditor General's Mandate

The Comptroller and Auditor General

of India (CAG)

Article 148 of India's Constitution sets up the position of the Comptroller and Auditor General of India (CAG), who heads the Indian Audit and Accounts Department. Think of the CAG as the guardian of India's public funds and the overseer of the nation's financial systems at both the central and state levels. Their main job is to make sure that the Indian Constitution and the laws made by the Parliament related to finance are followed properly.

The Independence of the Comptroller and Auditor General of India (CAG)

The Indian Constitution has put in place safeguards to ensure the independence of the Comptroller and Auditor General of India (CAG) through the following provisions:

Security of Tenure: The CAG enjoys the security of tenure, meaning they cannot be removed from office at the pleasure of the President. Their removal can only occur in accordance with the specific procedures outlined in the Constitution.

Ineligibility for Further Office: After their term as CAG ends, they are not eligible for any other government position, either at the central or state level.

Salary and Service Conditions: The Parliament determines the salary and service conditions of the CAG, and their salary is on par with that of a Supreme Court judge.

Immutable Terms: The terms related to the CAG's salary, leave of absence, pension, and retirement age cannot be altered to their disadvantage after their appointment.

Prescribed Conditions of Service: The President, in consultation with the CAG, sets the conditions of service for individuals serving in the Indian Audit and Accounts Department, along with the administrative powers of the CAG.

Financial Independence: The administrative expenses of the CAG's office, including salaries, allowances, and pensions of its personnel, are charged to the Consolidated Fund of India. This means they are not subject to approval by Parliament.

Non-Representation in Parliament: No minister can represent the CAG in Parliament, and no minister can be held responsible for any actions taken by the CAG.

These safeguards collectively ensure that the CAG operates independently, free from external influence, and can carry out their vital role of auditing and overseeing government finances without fear of interference or bias.

Appointment and Tenure of the Comptroller and Auditor General of India (CAG)

The appointment of the Comptroller and Auditor General of India (CAG) is carried out by the President of India through a formal warrant bearing his signature and seal. Before officially assuming office, the CAG must take an oath or affirmation, committing to the following:

To faithfully uphold the Constitution of India.

To safeguard the sovereignty and integrity of India.

To conscientiously and to the best of one's ability, knowledge, and judgment, carry out the responsibilities of the office without being swayed by fear, favor, affection, or ill-will.

To uphold the Constitution and the laws of the land.

The CAG serves a term of six years or until they reach the age of 65, whichever occurs earlier. They have the option to resign from their position at any time by submitting a resignation letter to the President. Additionally, the CAG can be removed from office by the President under the same conditions and procedures that apply to a Supreme Court judge.

In essence, this means that the President can only remove the CAG upon the passing of a resolution by both Houses of Parliament with a special majority, citing either proven misbehavior or incapacity as the grounds for removal.

The Role of the Comptroller and Auditor General of India (CAG)

The Comptroller and Auditor General of India (CAG) assumes a pivotal role in upholding the constitutional framework and parliamentary laws governing the financial administration in India. This role encompasses several key responsibilities that contribute to the checks and balances within the government:

Guardian of Financial Accountability: One of the paramount functions of the CAG is to act as the guardian of financial accountability within the Indian government. This role involves meticulously auditing and scrutinizing financial transactions, budgets, and expenditures to ensure compliance with the Constitution of India and the legislative mandates laid down by Parliament.

Enhancing Executive Accountability: The CAG's audit reports serve as a vital mechanism for enhancing the accountability of the executive branch, particularly the council of ministers, to the Parliament. These reports provide comprehensive insights into the financial aspects of government operations, facilitating informed decision-making and public oversight.

Agent of Parliament: In the realm of financial oversight, the CAG operates as an agent of the Parliament. This means that the CAG's primary allegiance is to Parliament, and their duties and actions are directed towards serving the interests of the legislative body.

Scope of Audits: The CAG exercises a degree of autonomy, especially in the audit of government expenditures. They have the authority to determine the extent and focus of these audits, establishing their own audit codes and manuals. This independence enables them to perform rigorous and unbiased assessments.

Legal and Regulatory Audits: The core objective of the CAG is to ascertain the legality and regulatory compliance of government spending. This involves scrutinizing whether the funds allocated were legally available for the intended purpose and whether the expenditures align with the governing authorities.

Propriety Audits: In addition to legal and regulatory audits, the CAG has the discretion to assess the "wisdom, faithfulness, and economy" of government expenditures. This means they can comment on the efficiency and prudence of financial decisions. Unlike legal and regulatory audits, propriety audits are optional.

Limitations: The CAG's auditing role faces certain limitations, particularly regarding secret service expenditures. In this context, the CAG cannot directly request expenditure details from executive agencies. Instead, they must rely on a certificate from the competent administrative authority confirming the expenditure's authorization.

Comptroller vs. Auditor General: While the Constitution envisions the CAG to be both a Comptroller and an Auditor General, in practice, the CAG predominantly functions as an Auditor General. This means that the CAG does not have control over the issuance of funds from the Consolidated Fund. Various government departments can draw funds through checks without prior approval from the CAG, in contrast to the Comptroller and Auditor General's role in Britain, where disbursements require the approval of the Comptroller and Auditor General.

In essence, the CAG's role serves as a cornerstone of financial accountability, ensuring that government expenditures adhere to legal and regulatory frameworks, promoting transparency, and strengthening the oversight of public finances by the Parliament and the public alike.

The Indian Constitution, specifically Article 149, grants authority to the Parliament to define the roles and authority of the Comptroller and Auditor General of India (CAG) concerning financial matters related to the Union, states, and other entities. Consequently, in 1971, Parliament enacted the CAG’s (Duties, Powers, and Conditions of Service) Act, with amendments in 1976 to distinguish between accounts and audit functions within the Central Government.

The Comptroller and Auditor General of India (CAG) carries out a comprehensive array of duties and functions, including:

Audit of Expenditure Accounts: The CAG conducts audits of financial transactions stemming from the Consolidated Fund of India, the Consolidated Fund of each State, and the Consolidated Fund of Union Territories with Legislative Assemblies.

Examination of Special Funds: He also reviews all expenditures originating from the Contingency Fund of India, the Public Account of India, and the corresponding funds at the state level.

Departmental Audits: The CAG meticulously examines the financial records, such as trading, manufacturing, profit and loss accounts, balance sheets, and subsidiary accounts maintained by various departments within both the Central Government and state governments.

Revenue Oversight: A vital responsibility is the audit of receipts and expenditures of the Central Government and individual states to ensure that the prescribed rules and procedures effectively oversee the assessment, collection, and equitable allocation of revenue.

Moreover, the Comptroller and Auditor General of India (CAG) conducts audits of the receipts and expenditure of the following entities:

Bodies and Authorities Substantially Financed: He meticulously reviews the financial records of all bodies and authorities that receive significant financial support from either Central or State revenues.

Government Companies: The CAG conducts thorough audits of government-owned companies to ensure transparency and accountability in their financial transactions.

Other Corporations and Bodies: In cases mandated by relevant laws, the CAG extends his audit scrutiny to encompass other corporations and bodies, ensuring compliance with legal requirements.

Furthermore, the Comptroller and Auditor General of India (CAG) carries out the following functions:

Submission of Audit Reports for the Centre: He presents his audit reports concerning the accounts of the Central Government to the President. Subsequently, the President places these reports before both Houses of Parliament, facilitating parliamentary review and scrutiny.

Submission of Audit Reports for States: Similarly, the CAG submits his audit reports related to the accounts of individual states to the respective Governor. It is the Governor's responsibility to subsequently present these reports before the state legislature, enabling state-level oversight.

Certification of Net Proceeds: The CAG is vested with the authority to ascertain and provide certification for the net proceeds of any tax or duty. His certification is considered final and authoritative. The 'net proceeds' represent the revenue generated from a tax or duty after deducting the associated collection costs.

Advisor to Public Accounts Committee: He plays a pivotal role as a trusted advisor to the Public Accounts Committee of Parliament, providing valuable guidance, insights, and expertise on financial matters under review.

Compilation and Maintenance of State Accounts: The CAG also undertakes the compilation and upkeep of the accounts of state governments. However, it's important to note that in 1976, his responsibilities regarding the compilation and maintenance of Central Government accounts were relinquished due to the separation of accounts from audit, known as departmentalization of accounts.

Additionally, the Comptroller and Auditor General of India (CAG) presents three distinct audit reports to the President, which include:

Audit Report on Appropriation Accounts: This report provides a comprehensive comparison between the actual expenditure and the expenditure authorized by Parliament through the Appropriation Act. It serves as a crucial tool for assessing the government's spending in line with parliamentary approval.

Audit Report on Finance Account: The Finance Account audit report offers a detailed overview of the Union Government's annual financial transactions, encompassing both receipts and disbursements. This report provides critical insights into the financial performance and activities of the government.

Audit Report on Public Undertakings: The third report pertains to public undertakings, offering a comprehensive assessment of their financial operations and compliance with relevant financial regulations and norms.

Subsequently, the President places these audit reports before both Houses of Parliament for their perusal and examination. Following this, the Public Accounts Committee conducts a thorough review of these reports and subsequently submits its findings and recommendations to the President.

In essence, the audit report on appropriation accounts ensures financial accountability, while the finance account report provides an overview of the government's annual financial transactions. Finally, the audit report on public undertakings assesses the financial performance and compliance of these entities.

The role of the Comptroller and Auditor General of India (CAG) in auditing Public Corporations and Government companies can be broadly categorized into three distinct approaches:

Direct CAG Audit: Some Public Corporations undergo a comprehensive and direct audit conducted by the Comptroller and Auditor General of India (CAG) himself. Examples of such corporations include Damodar Valley Corporation and Indian Airlines Corporation.

Private Auditors Appointed by Government: In certain cases, other Public Corporations are subject to audits carried out by private professional auditors. The appointment of these auditors is made by the Central Government in consultation with the Comptroller and Auditor General of India (CAG). If deemed necessary, the CAG can conduct supplementary audits. An instance of this approach is observed in the audit of the Central Warehousing Corporation.

Exclusively Private Audit: Some Public Corporations undergo a completely private audit process, meaning their financial audits are exclusively performed by private professional auditors. These corporations directly submit their annual reports and financial statements to Parliament. An example of this category is the Food Corporation of India.

In the case of Government companies, the Comptroller and Auditor General of India (CAG) also has a limited role. These companies are audited by private auditors appointed by the Government with the advice of the CAG. The CAG can, if necessary, conduct supplementary or test audits of these companies.

To enhance the technical aspects of auditing specialized enterprises, an Audit Board was established in 1968 as part of the Comptroller and Auditor General of India's office. This board collaborates with external specialists and experts to handle the audit of enterprises involved in fields such as engineering, iron and steel, chemical industries, and others. The establishment of this board was in response to recommendations from the Administrative Reform Commission of India. It comprises a chairman and two members appointed by the Comptroller and Auditor General of India (CAG).