New Delhi: The Parliament received 12 reports, including a bunch of performance audits, from the Comptroller and Auditor General of India (CAG) during the monsoon session concluded earlier this month, which exposed several alleged flaws and shortcomings across various central government schemes and projects, sparking political outrage.
In the reports, the CAG, which is the supreme audit authority of the country, highlighted alleged issues in schemes and projects like Ayushman Bharat and the Dwarka Expressway.
It also claimed that the Ministry of Rural Development (MoRD) diverted Rs 57.45 crore from the National Social Assistance Programme (NSAP) — which is meant to provide basic financial support to old people, widows and disabled people who are below the poverty line — to other projects in six states.
Alleged gaps and irregularities were also reported in government projects like the regional connectivity scheme UDAN (Ude Desh Ka Aam Naagrik), under the Ministry of Civil Aviation, and in the implementation of Bharatmala Pariyojana Phase-I (BPP-1).
The purported findings have triggered a political storm, with opposition parties using the reports to attack the BJP-led government over alleged corruption, mismanagement and inefficiency. The government, however, has defended its schemes and projects, claiming that they have benefited millions of people and contributed to the development of the country.
The Ministry of Road Transport and Highways (MoRTH), which is one of the ministries whose flagship highway expansion project, Bharatmala Pariyojana, was audited by CAG, has refuted most of the allegations made by the auditor in its report.
ThePrint looks at the structure and working of the CAG, as the guardian of the public purse for both the central and the state governments, and why its reports are held in such importance.
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What is the CAG?
The CAG is the sole hierarchical audit authority under the Constitution. Article 148 of the Indian Constitution requires it to audit the receipts and expenditures of the Union, states and Union Territory governments, including institutions, authorities and bodies that the government finances, as well as government-owned companies and major subsidiaries.
The CAG submits its audit reports before the Parliament or the legislature of the state or Union territory.
Article 148 of the Constitution further states that only the president can appoint the CAG, on the advice of the prime minister. The process of his removal from office before the termination of his six-year period is similar to that of a Supreme Court judge.
As an independent and non-partisan authority, the CAG is barred from holding any other office under the Union or state governments once he ceases to hold office.
The CAG submits annual audit reports to Parliament. This comprises finance accounts and appropriation accounts for financial year expenses from the consolidated fund of India and every state and UT with a legislative assembly.
The president or the governor of a state may also request the CAG to review the accounts of any authority, even if it is not directly supported by the government.
He and his team may investigate the government’s financial transactions and question the administration on it. After reviewing the transactions, the CAG may remove his objections or include them in his Parliamentary report, if they are severe.
Article 151 requires the CAG to submit the Union’s audit reports to the president, who presents them to Parliament. The governor presents state audit reports to legislatures.
The CAG does not oversee statutory businesses, like the Reserve Bank of India (RBI), State Bank of India (SBI), and Life Insurance Corporation (LIC), but it can examine their accounts, if needed.
Staff members at the CAG’s office that ThePrint spoke to said that CAG reports that are tabled during Parliament sessions are based on complete investigation and availability of records. In case of an adjournment, they are tabled in the next session.
However, according to a former CAG ThePrint spoke to, lack of timely receipt of information from ministries or authorities remains the single biggest hurdle during the preparation of reports.
What are the CAG reports
The CAG sends audit reports on appropriation accounts, finance accounts, and public undertakings to the president for placing before the Parliament. Once the audit report is tabled in the Parliament, the Public Accounts Committee (PAC) reviews them and informs Parliament.
The finance and appropriation accounts, tabled in Parliament, contain audit findings on irregular expenses and the results of all audits of trading, manufacturing, profit and loss accounts, and balance sheets of public and private corporations as well as accounts of authorities and bodies substantially funded from the country’s consolidated fund.
The CAG also conducts a performance audit to evaluate the efficacy of government schemes. Audit officials conduct a pilot study to find irregularities and then compare them to the rule. After auditing, ministries have two-four weeks to respond, before the president tables the reports in Parliament.
For instance, the CBI probe and Parliament’s PAC hearings reportedly relied on the CAG findings in the 2G spectrum allotment case.
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How are the reports made?
The Comptroller and Auditor General of India leads the Indian Audit and Accounts Department (IAAD). He is assisted by five deputy comptrollers and auditors general of India. One of the deputies also serves as the audit board’s chairperson. There are four additional deputy comptroller and auditors general of India below the deputy CAGs.
At the regional level, a number of accountants general serve as agents of the CAG in carrying out their functional and supervisory tasks at the state level.
The audit report format is reviewed and changed periodically, according to sources in the CAG’s office.
Departments within the CAG draw up separate “inspection reports” which are then sent to the relevant ministry during inspection with instructions on improvement, which are monitored. The annual audit reports cover the most significant inspections. Before being handed to the president or the governors, audit reports undergo rigorous quality assurance and CAG countersigning.
The legislature submits them to the relevant parliamentary committees for review. The Public Accounts Committee receives reports from all departments, including Railways, Post and Telegraph, and others. The Public Undertakings Committee receives corporate reports.
Since 1989, the CAG has published an Annual Activity Report for each of its departments to evaluate its operations and inform interested parties, sources added.
Although the CAG solely audits finances, when an administrative policy has substantial financial consequences, the CAG can determine if it followed the law and financial regulations and caused any extravagance or loss. The CAG can review and criticise wasteful spending on the Public Accounts Committee’s advice and propose censure.
The CAG thus functions as a watchdog, by evaluating all public expenditures and revenue for efficiency, economy, and effectiveness.
Does the CAG question policies?
In the past, CAG reports have reportedly resulted in lawsuits, licence revocation, and convictions of politicians and officials. On the flip side, the auditor has also been reportedly accused of interfering in policy matters.
For instance, former Cabinet Secretary B.K. Chaturvedi in 2019, reportedly criticised the CAG for its reports on 2G spectrum allocation auction and coal block allotments, saying the auditing body tried to “usurp” the government’s policymaking role.
According to the duties as outlined in the Constitution, however, CAG can point out if there are severe issues in any schemes or policies and check for such.
Officials ThePrint spoke to also claimed the CAG can review system compliance policies.
According to the CAG’s Manual of Standing Orders (Audit), the practice of giving the auditor free files and information has continued since pre-Independence. In 1954, the central government, however, changed its policy to send classified documents to the CAG by name and return them after work, they added.
The office can still conduct a propriety audit, examining the “wisdom, fidelity and economy” of government spending and criticising waste. The propriety audit is discretionary, unlike the legal and regulatory audit, which the CAG must perform.
The officials ThePrint spoke to also informed that, while all data in most of its reports are made public, defence data is withheld owing to it being sensitive information.
In the case of secret service expenditure, the CAG cannot request details of execution, but must accept a certificate from the appropriate administrative authority that they were incurred within his jurisdiction.
Changes within CAG
Over the years, the CAG has undergone several changes in its functioning, according to a history of the organisation available on its website.
One of the modifications was the separation of the Union government’s accounting role from the CAG’s auditing function in 1976.
The Ministry of Finance’s Controller General of Accounts (CGA) assumed responsibility for creating and maintaining the Union government’s accounts. The CAG continues to examine and certify these accounts. Since then, the vast majority of CAGs have been recruited from among senior IAS officers rather than from the Indian Audit and Accounts Service.
In 1996, the CAG established an autonomous entity named the Institute of Public Auditors of India as a “think-tank” on audit, accounting, and accountability problems to conduct research and development. In March 1999, the CAG established an Audit Advisory Board.
A National Commission to Review the Working of the Constitution (NCRWC), popularly known as the Justice M.N. Venkatachaliah Commission, was established by the BJP-led National Democratic Alliance (NDA) government in 2000. The commission reportedly proposed that a multi-member audit commission be formed to appoint and oversee the CAG’s operations. The commission also advised using a collegium mechanism to pick the CAG from a panel of three names offered by the Prime Minister. However, the successive UPA government did not act on it.
The CAG also constituted the Government Accounting Standards Advisory Board (GASAB) in August 2002, to improve standards of government accounting and financial reporting, as well as accountability mechanisms.
Another reform was reportedly urged by a high-level committee (HLC) headed by former CAG V.K. Shunglu, which was established by the Prime Minister in 2010 to investigate Commonwealth Games anomalies.
The committee proposed that a collegium of the Prime Minister, the Leader of the Opposition, and the Chief Justice of India appoint a three-member body consisting of a chairman and two members to undertake the CAG’s tasks. The committee also chastised the CAG for the time it took to undertake and complete audits. No decision was taken on this as well.
The PMO, in reply to a query in Parliament on whether the government was considering making the Comptroller and Auditor General (CAG) a three-member body on the basis of the committee’s suggestion, reportedly said “information regarding the future course of action” cannot be accessed under the transparency law.
Meanwhile, the CAG has argued that these changes will jeopardise its independence and autonomy. The CAG has asserted that it adheres to a rigorous and fair auditing procedure that includes numerous levels of inspection and interaction with the examined organisations. The CAG has also said that it adheres to worldwide auditing standards and best practices.
(Edited by Richa Mishra)
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