1. Overview of the CAG

  • Role and Importance: The CAG of India is an independent constitutional office established by Article 148 of the Constitution. It is regarded as the guardian of the public purse and oversees the financial administration at both central and state levels. Dr. B.R. Ambedkar emphasized its significance, considering it one of the essential pillars of Indian democracy alongside the Supreme Court, Election Commission, and Union Public Service Commission.

2. Appointment and Term

  • Process of Appointment: Appointed by the President of India through a warrant.
  • Oath of Office: The CAG takes an oath to uphold the Constitution, sovereignty, and laws of India, functioning without fear or favoritism.
  • Tenure: The term lasts for six years or until the age of 65, whichever is earlier. The President can remove the CAG based on the procedures and grounds similar to that of a Supreme Court judge, involving both Houses of Parliament.

3. Independence of the CAG

  • Security of Tenure: The CAG does not serve at the President’s pleasure, meaning they are safeguarded against arbitrary removal.
  • Ineligibility for Future Offices: After the CAG’s tenure, they cannot take any government position in India.
  • Salary and Conditions: These are determined by Parliament and cannot be altered to their disadvantage. The salary is equivalent to that of a Supreme Court judge.

4. Duties and Powers of the CAG

  • Duties: Outlined under Article 149 and further specified in the CAG’s (Duties, Powers, and Conditions of Service) Act of 1971:
    1. Audit expenditure from the Consolidated Fund (central and state).
    2. Audit transactions of the Contingency and Public Accounts.
    3. Audit financial accounts of government-run enterprises.
    4. Audit receipts, expenditures, and allocations from the center and states.
    5. Audit government companies and corporations, verifying their use of funds.
  • Advisory Role: The CAG advises the President on the form of Union and state accounts (Article 150) and submits audit reports to both the President and state governors.

5. Reports and Accountability

  • Types of Reports: The CAG prepares three primary reports for the President:
    1. Appropriation Accounts: Compares authorized expenditure with actual expenditure.
    2. Finance Accounts: Details annual receipts and disbursements.
    3. Public Undertakings: Examines the financial efficiency of public-sector enterprises.
  • Parliamentary Scrutiny: These reports are presented in Parliament and reviewed by the Public Accounts Committee.

6. Types of Audits Conducted by the CAG

  • Legal and Regulatory Audit: Mandatory audits verifying the legality and propriety of expenditures.
  • Propriety Audit: Examines the “wisdom, faithfulness, and economy” of government expenditures, allowing the CAG to comment on wasteful or extravagant spending.
  • Performance Audit: Includes an evaluation of the economy, efficiency, and effectiveness of public fund usage. This audit assesses whether objectives are met effectively within resource constraints.

7. Challenges Faced by the CAG

  • Limited Scope of Audit: The CAG has a more restrictive role in the audit of stores, stocks, and receipts than in expenditure audits.
  • Secret Service Expenditure: The CAG is limited in its authority over secret service expenses, which it can only verify through certificates from respective administrative authorities.

8. Role in Public Corporations and Government Companies

  • Categories of Audits:
    1. Direct Audits: Some corporations are entirely audited by the CAG.
    2. Joint Audits: Others are audited by private auditors with supplementary audits by the CAG.
    3. Exclusive Private Audits: Certain corporations undergo audits by private auditors only.
  • Government Companies: Audited by private auditors appointed on the advice of the CAG, who may conduct supplementary audits as necessary.

9. Criticism of the CAG

  • Appleby’s Critique: American scholar Paul H. Appleby criticized the CAG’s role in his reports on Indian administration, arguing it stems from colonial influence and has a paralyzing effect on administrative decision-making. He viewed the CAG’s auditing process as overly rigid, potentially hindering effective administration.
  • Perspective on Auditors: Appleby asserted that auditors may lack the nuanced understanding of good governance necessary for effective administration.

10. Contemporary Challenges Identified by the Administrative Reforms Commission

  • Backlog of Audit Observations: A significant delay exists in reviewing and acting on audit observations, with thousands of observations pending examination, some for up to 20 years.
  • Perceived Negativity: The CAG’s focus on identifying faults and irregularities is sometimes viewed as excessively negative, potentially discouraging innovation and risk-taking within government departments.
  • Limited Media Engagement: The lack of public interaction and transparency in CAG’s findings diminishes the impact of its reports.

11. Articles Related to CAG at a Glance

  • Article 148: Establishes the office of CAG.
  • Article 149: Defines the duties and powers of the CAG.
  • Article 150: Determines the form of accounts of the Union and states.
  • Article 151: Covers the submission of audit reports to the President and governors