Context

The latest India-specific data on COVID-19 infections is alarming. With the nation spending substantial resources to manage the pandemic, the role of the supreme audit institution of India, the Comptroller and Auditor General (CAG) of India has again been highlighted.

Background

• The latest audit of the Union Government’s accounts tabled in Parliament in September reveals that the Finance Ministry quietly retained over 40% of all cess collections in 2018-19 in the Consolidated Fund of India (CFI).
• As many as 35 different cesses, levies and charges yielded ?2.75-lakh crore in the year, but just around ?1.64-lakh crore was remitted to the specific reserve fundsfor which these cesses were levied.
• This not only helped understate India’s revenue and fiscal deficit numbers but also meant that the purposes for which Parliament approved such cesses — be it health, education or infrastructure development — were not met.
• The Comptroller and Auditor General of India (CAG) has pointed out grave lapses in the accounting of revenue from the GST compensation cess.
• The CAG of India has, not for the first time, urged the Finance Ministry to take immediate corrective action.
• Over 10 years, not a paisa of the ?1.25-lakh crore of cess collected on crude oil was transferred to an oil industry development body it was meant to finance.
• Part of the hefty cess collected as additional excise duties on petrol and diesel, ostensibly to finance roads and infrastructure, was similarly retained in the CFI. 

Analysis

• The CAG of India is an independent constitutional authority who is neither part of the legislature nor executive.
• Appointment and removal: He is appointed by the President under his hand and seal and can be removed only through a motion of
• Selection: The constitution of India protects the independence of the CAG. However, there is no laid down criteria for selection of the CAG.
• Dr B.R. Ambedkar described the CAG as the most important functionary under the constitution.
• The CAG is the Supreme Audit Institution or SAI of India.
• The CAG is the instrument that ensures and promotes accountability of the executive to parliament.
• The CAG is an auditor to the government of India, which is headed by the prime minister.
• He is the guardian of the public purse and controls the financial system of the country both at the central level and state level.

Constitutional Provisions Related to CAG Part V, Chapter V of the Constitution of India, talks about the Comptroller and Auditor General of India. Article 148 speaks of the CAG, his appointment, the oath of his service. Article 149 broadly speaks of the duties and powers of the CAG. Article 150: The accounts of the Union and States shall be kept in such form as the President may prescribe on the advice of the CAG. Article 151: The reports of the CAG relating to the Union shall be submitted to the President. The reports of the CAG relating to the State shall be submitted to the Governor.

Historical Background of the Office

• The office of CAG started functioning from 1858, and the first Auditor General was appointed in 1860.
• However, statutory recognition to this institution was given by the Government of India Act of 1935, which provided for appointment of the Auditor General by the King of England, thereby cementing the independence enjoyed by the post in the years to follow.
• The constitution of free India included four articles (148, 149, 150 and 151) which define the basic structure of the institution of the CAG of India.

Mandate of CAG

As envisaged in Article 149 of the Constitution, the Parliament enacted a detailed legislation called the CAG’s Duties, Powers and Conditions Act in 1971 which describes his mandate and puts almost every spending, revenue collecting or aid/grant receiving unit of the Government (the Centre and the States) under his audit domain. His duties are to audit and report upon:

• All receipts into and spending from the coffers (called the Consolidated Fund) of the Union and State Governments. 
• All transactions relating to the Emergency expenses (called Contingency Funds) and relating to the monies of the public held by the Government e.g. Postal savings, Vikas Patras (called Public Accounts) at Central as well as State levels.
• All trading, manufacturing, profit and loss accounts, balance sheets and other subsidiary accounts kept in any Government department. 
• All stores and stock accounts of all Government offices and departments. 
• Accounts of all Government companies and Corporations e.g. ONGC, SAIL etc. 
• Accounts of all autonomous bodies and authorities receiving Government money e.g. municipal bodies, IIM's, IIT's, State Health societies. 
• Accounts of any body or authority on request of the President/Governor or on his own initiative.

Audit Reports

• CAG submits three audit reports to the President:
  • Audit report on appropriation accounts.
  • Audit report on financial accounts.
  • Audit report on public undertakings.

International Practice

• Internationally, most countries have enacted laws putting in certain qualifications and also the process of appointment of the head of their SAI, so that he works independently and is not under the influence of the Executive, whose performance he is required to evaluate and provide audit opinion on achievement of the objectives.
• United Kingdom: The Exchequer and Audit Act of the United Kingdom, as amended in 1983 provides that the CAG will be jointly selected by the Prime Minister and Chairman of the Committee of Public Accounts and thereafter ratified by the House of Commons.
• United States: In the USA, under Section 302 of the Budget and Accounting Act, 1921, and the subsequent amendment of the General Accounting Office Act, 1980, the Comptroller General of the United States is appointed by the President on the consent of the Senate.
  • Further, under an amendment carried out through Section 104 of the General Accounting Office Act of 1980, a commission has to advise the President. 
• Canada: In Canada, the Governor in Council appoints the Auditor General of Canada after consultation with the leader of every recognised party in the Senate and House of Commons and approval of the appointment by resolution of the Senate and the House of Commons.
• Australia: The governor general appoints the auditor general only after the Joint Committee of Public Accounts and Audit approve the proposal.
• New Zealand: The Public Audit Act (2001) of New Zealand provides for the appointment of the CAG by the Governor General on the recommendations of the House of Representatives.
• Japan: Japan has a Board of Audit with an Audit Commission consisting of three Commissioners and a General Executive Bureau.
  • A Commissioner is appointed with the consent of the both Houses of the Diet by the Cabinet.
  • The President of the Board is to be appointed by the Cabinet according to the result of mutual election among the Commissioners.
• Sri Lanka: The constitution of Sri Lanka provides that the Auditor-General shall be a qualified Auditor and should be appointed by the President subject to the approval of the Constitutional Council.
• Bhutan: In Bhutan, the Auditor General is to be appointed by the Druk Gyalpo from a list of eminent persons recommended jointly by the Prime Minister, the Chief Justice of Bhutan, the Speaker, the Chairperson of the National Council and the Leader of the Opposition Party.
• Africa: In Africa, Constitution of Malawi provides that no person shall be appointed as Auditor General unless that person has formal relevant qualifications and significant experience in audit work.

UNGA Resolution Internationally, a resolution adopted by the General Assembly of the United Nations on December 22, 2011, emphasised that SAIs can perform their tasks objectively and efficiently only if they are independent of the audited entity and are protected against outside influence. It also recognised the important role that SAIs play in promoting efficiency, accountability, effectiveness and transparency of public administration. Thus, appointment of the CAG assumes greater significance.

Conclusion

The CAG has the inescapable constitutional and statutory mandate and responsibility to ensure public accountability, transparency, effective service delivery and good governance.