In the complex machinery of governance, transparency and accountability are the cornerstones of effective administration, especially in matters concerning finance and expenditure. At the helm of ensuring fiscal probity in the world’s largest democracy stands the Controller and Auditor General (CAG) of India, an institution of paramount importance in upholding the principles of financial integrity and accountability.
The Controller and Auditor General (CAG) is an autonomous entity established by the Indian Constitution. As the leader of the Indian audit and accounting department, the CAG serves as the principal custodian of public funds. This institution plays a crucial role in holding the government and other entities accountable for their use of public finances, ensuring transparency and accountability to Parliament, State Legislatures, and ultimately, the citizens.
Constitutional Provision
Functions of Controller and Auditor General of India
- The audit mandate of the Controller and Auditor General (CAG) is derived from various sources, including the Constitution (Articles 148 to 151), the Comptroller and Auditor General’s Act of 1971, significant judicial rulings, government instructions, and the Regulations on Audit & Accounts of 2007.
- CAG conducts audits on expenditures from the Consolidated Fund of India, each state’s Consolidated Fund, and Union Territories with legislative assemblies.
- Audits also cover expenditures from the Contingency Fund of India, Public Account of India, and similar funds of states and Union Territories.
- CAG scrutinizes trading, manufacturing, profit and loss accounts, and subsidiary accounts of Central and state government departments.
- The audit scope extends to the finances of bodies and authorities substantially funded by Central or state revenues, government companies, corporations, and other entities as required by relevant laws.
- Upon request by the President or Governor, CAG audits accounts of other authorities, including local bodies.
- CAG advises the President on the format of accounts for the Centre and states.
- Audit reports pertaining to the Centre’s accounts are submitted to the President for presentation before both houses of Parliament. For state accounts, reports are presented to the Governor for placement before the state legislature.
- CAG serves as an advisor to the Public Accounts Committee of Parliament, offering guidance and expertise.
Challenges
- Audits in contemporary times are becoming increasingly intricate due to the evolving forms of corruption and maladministration, which are challenging to detect.
- Alongside its traditional role of overseeing Central and State governments, the CAG now audits numerous public-private partnership (PPP) projects, presenting both unprecedented opportunities and challenges.
- The appointment of the CAG lacks specific criteria or procedures outlined in the Constitution or statute, granting the executive sole authority to appoint individuals of their choosing, diverging from international best practices.
- Despite having the authority to inspect government offices and request accounts, auditors often face obstacles, such as denied access to records and delayed document provision, hindering meaningful audits.
- Suggestions have been made for the complete independence of the CAG, proposing integration with the Public Accounts Committee (PAC) similar to the systems in the UK and Australia.
- Constraints like a shortened tenure and age caps limit the CAG’s independence and effectiveness, contrasting with the longer terms of counterparts in the UK and the US.
- While the work of auditing is carried out by officers and staff of the IA&AD, there’s no statutory recognition of their efforts, unlike the National Audit Office of the UK.
- Granting statutory recognition to the IA&AD and delegating powers to lower functionaries would enhance audit quality and credibility, ensuring greater impact and outcomes.
- Criticism of recent CAG audits due to exaggerated loss estimates highlights the importance of adhering to rigorous standards to maintain audit integrity and credibility.
Reforms
- Ensuring Independence: Many countries globally have established laws outlining qualifications and appointment processes for the head of their Supreme Audit Institutions, ensuring independence from executive influence.
- Transparency in Appointment: In India, instituting an institutional mechanism is necessary to enhance transparency and objectivity in the selection process of the CAG.
- Curbing Delays: Similar to citizens’ rights under the RTI Act 2005, auditors should have priority access to records within seven days. If this timeframe isn’t met, department heads should be obligated to provide explanations for the delay.
- Enforcement of CAG Orders: Amendments to the CAG Act of 1971 should grant punitive powers to the CAG to address delays in information submission by government agencies.
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