The Role of the Comptroller and Auditor General (CAG) in Indian Constitutional Law

This article has been written by Sujal Shekhar, a law student from Delhi Metropolitan Education (IP University).

Introduction

The Indian Constitution, which was written in great detail, provides a framework of government that guarantees the operation of the state’s institutions through checks and balances. The office of the Comptroller and Auditor General (CAG) of India is one of these organisations and is a key component in guaranteeing accountability in the nation’s financial management. In accordance with Part V, Chapter V of the Constitution, the CAG is responsible for overseeing the Union and State governments’ financial statements, maintaining openness, and keeping the executive branch accountable to the legislature and, ultimately, the Indian people.
Protecting the country’s financial integrity is a major responsibility of the CAG. It acts as the country’s financial watchdog, making sure that public monies are spent sensibly and for the intended goals. The CAG, an independent body, supports the democratic principles outlined in the Indian Constitution by serving as a pillar of accountability. This article explores the roles, responsibilities, and changing authority of the Comptroller and Auditor General (CAG) in Indian Constitutional Law. In addition, it examines significant rulings made by judges and assesses the difficulties this organisation is now facing.

Historical Evolution of the CAG

The British government started putting in place systems to guarantee control over public finances during the colonial era, which is where the office of the Comptroller and Auditor General (CAG) had its start. The Government of India Act, 1858, established an Auditor General to supervise the financial operations of the colonial government, marking the first major move in this direction. This was required because the British government needed a way to make sure that money was managed properly in all of its colonies, including India.

The powers of the Auditor General were expanded by later legislative changes in the late 19th and early 20th centuries, taking on a more thorough auditing function beyond simple accounting of government expenditures. Nonetheless, the Government of India Act, 1935, which created the position of the Auditor General of India, is credited with helping to form the present function of the CAG. This legislation created the notion of the executive branch’s accountability to the legislative, which serves as the foundation for the CAG’s current function in addition to allowing for the independent audit of government finances.

The chance to create the office of the CAG as a constitutional body came during the Constitution’s draughting following India’s independence. In order to maintain financial responsibility in the recently formed country, the Constituent Assembly discussions highlighted the significance of an independent audit process. The Draughting Committee’s chairman, Dr. B.R. Ambedkar, spoke out a lot on the CAG’s significance and emphasised its function as a watchdog over government spending.

Consequently, a pivotal moment in the development of the CAG position was the Constitution of India, 1950, which recognised the office of the CAG constitutionally. The CAG was entrusted with auditing the Union and State governments’ financial statements, and it was no longer only an administrative institution but a crucial constitutional authority. The CAG’s responsibilities have grown over the years, and the agency is now vital to preserving financial accountability in India’s democratic system.

Constitutional Provisions Relating to the CAG

The appointment, responsibilities, powers, and removal of the CAG are defined by a number of significant clauses included in the **Constitution of India**. These clauses are dispersed among several articles, but are most concentrated in Part V of Chapter V, which addresses the powers and duties of the CAG.

• Article 148: This fundamental clause is the basis for the establishment of the CAG’s office. The article gives the CAG tenure security and describes the process for nomination by the President of India. Additionally, this article guarantees that the CAG may only be removed from office by a process similar to that of removing a Supreme Court judge, which entails a motion approved by both chambers of Parliament with a two-thirds majority on the basis of proven incompetence or misbehaviour. The CAG’s independence and resistance to political pressure are guaranteed by such a strict process.
• Article 149: This article describes the CAG’s duties and authority. The CAG is in charge of auditing the Union’s, each State’s, and any other legally mandated authority or body’s financial statements. The CAG can be given more authority by Parliament through law, giving it the flexibility to change to meet evolving governance requirements.
• Article 150: According to this article, the President of India, acting on the CAG’s advice, shall establish the format in which the Union and the States’ accounts are to be maintained. This implies that the CAG has a say in how government accounts are structured and formatted, which is important for conducting a reliable audit of financial transactions.
• Article 151: Under this article, the CAG is required to send reports on audits of the Union government to the President and State governments to the Governors in question. The legislature must then be presented with these reports. The Constitution guarantees that the audit results are open to public review and parliamentary supervision by requiring reports to be submitted to the legislature.
• Article 279: According to this article, the CAG is required to determine and certify the net profits of any taxes or duties. The CAG’s certification is conclusive. In the context of revenue sharing between the Union and the States, this clause is essential since it guarantees the protection of both parties’ financial interests and eliminates any doubt over the amount of income that will be collected.
• Sixth Schedule, Paragraph 13: The CAG is authorised to examine the financial records of District Councils and Regional Councils in the northeastern states under the Sixth Schedule of the Constitution, which offers unique administrative provisions for the tribal territories. This expansion of the CAG’s authority guarantees that financial investigations will extend to local government organisations as well.
• The Constitution incorporates the CAG’s responsibility as a defender of public finances through these articles, in addition to outlining the organisation and operations of the agency.

Functions and Duties of the CAG

Ensuring that public money are spent effectively and for their intended objectives is the main responsibility of the CAG. Through a mix of financial, compliance, and performance audits, the CAG accomplishes this. The CAG’s primary responsibilities include:

1. Financial Audit: This is the primary duty of the CAG and entails checking the accuracy and completeness of government finances. Every government ministry, department, and public sector organisation (PSU) has its financial statements audited by the CAG. This audit makes sure there are no inconsistencies or errors and that government receipts and expenditures match the approved budgets.

2. Compliance Audit: To make sure that government agencies and PSUs abide by pertinent laws, rules, and regulations, the CAG also does compliance audits in addition to financial audits. Examining whether government employees have the required permission to incur expenses and if they have done so in compliance with the law are two examples of this.

   3. Performance Audit: Performance audits have been a major addition to the CAG’s responsibilities in recent decades. Beyond the financial audit, a performance audit determines if government initiatives and programs are accomplishing their goals effectively and cheaply. Performance audits, for example, can assess how well public funds designated for programs such as the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) are being used.

4. 4. Audit of Public Sector Undertakings (PSUs): The CAG is essential to the PSUs’ accounting audit process. Given that PSUs are in charge of overseeing significant volumes of public resources, this is especially crucial. The CAG makes ensuring that PSUs run effectively and responsibly, and that their financial operations are transparent.

   Audit of Revenue revenues: To make sure the government’s revenue collecting mechanisms are operating effectively, the CAG audits the revenues. To ensure that taxes are being collected in accordance with the established rules and regulations, audits of tax collections are part of this process.

6. Audit of Local entities: The CAG has also been tasked with inspecting the accounts of local entities like as Panchayats and Municipalities, due to the transfer of financial resources to them, especially following the 73rd and 74th Amendments. This makes that local governments, who oversee large sums of public money, are held responsible for their financial actions.

   7. Audit of Defence Expenditure: The CAG is also in charge of checking the Ministry of Defence’s outlays, which includes defence acquisitions. Considering the enormous budgetary allotments for defence and the delicate nature of defence expenditure, this is an essential role.

8. Audit of Grants and Loans: The Union government’s grants and loans to States and other organisations are audited by the CAG. The audit makes sure that the conditions of the loans and grants are being followed and that the money is being used for the intended reasons.

   The CAG plays a vital role in good governance by assisting in the upkeep of financial discipline in the government’s operations through these audits.

Independence of the CAG

The CAG’s capacity to act as an unbiased auditor of public finances depends on its independence. The Constitution offers a number of protections to guarantee that the CAG functions free from excessive presidential control. Among the crucial elements preserving the CAG’s independence are:

The President of India appoints the Chief Administrative Gazetteer (CAG), ensuring that the appointment is made at the highest level of government. Moreover, the CAG may only be removed from office by a resolution approved by both houses of Parliament based on evidence of proven misconduct or incapacity, much like a Supreme Court judge. Through this procedure, the administration is prevented from unilaterally dismissing the CAG, protecting the independence of the office.

2. Security of Tenure: Until the age of 65, whichever comes first, the CAG has a fixed tenure of six years. By doing this, it is certain that the CAG will have enough time to perform their tasks without worrying about being let go too soon.

   3. Salary and Conditions of Service: The CAG’s pay and other terms of employment are set by Parliament and cannot be changed in a way that would be detrimental to them while they are in office. This precludes the executive from influencing the CAG by modifying their compensation or terms of employment.

4. Report Submission: The President or the Governor receives the audit reports directly from the CAG and is required to present them to the legislature. This guarantees that the CAG’s conclusions are not withheld or postponed by the administration and are instead examined by the public and legislature.

   5. Authority Over Staff: The Indian Audit and Accounts Department employees, who support the CAG in conducting its audits, are entirely under the CAG’s authority. The CAG can operate freely and free from interference from the government because to its personnel autonomy.

6. Non-Executive Role: The CAG is not involved in the formulation of government policy or the execution of programs. Its role is purely to audit and provide an impartial assessment of the government’s financial activities. This separation of roles further enhances the CAG’s independence.

These constitutional safeguards ensure that the CAG can perform its duties without fear:

• Judicial Pronouncements on the Role of the CAG

Over the years, the judiciary has played a significant role in interpreting and reinforcing the powers and functions of the Comptroller and Auditor General (CAG) in India. Various judgments have clarified the scope of the CAG’s authority and its role in maintaining financial accountability. Judicial pronouncements have helped protect the CAG’s independence while strengthening its mandate. Below are some of the key cases that have contributed to defining the CAG’s role in Indian Constitutional Law:

1. Subramanian Swamy v. Union of India (2012):

The Supreme Court emphasised the value of the CAG’s findings in fostering accountability and openness in government in this historic decision. The dispute over the distribution of 2G spectrum, which resulted in a large financial loss for the public coffers, gave rise to the lawsuit. The CAG’s audit findings are an essential instrument for uncovering financial irregularities and misappropriation of public monies, the Supreme Court underlined. The court held that although though the CAG’s purview is limited to reporting and auditing, the legislature must take heed of its conclusions in order to guarantee accountability.

2. T.N. Seshan v. Union of India (1995):

The Supreme Court expressed observations about the independence of offices like as the CAG in this case, which principally dealt with the independence of constitutional agencies. The court ruled that in order to preserve democratic values of accountability and openness, constitutional agencies such as the CAG and the Election Commission must be permitted to operate free from interference by the executive branch. The ruling upheld the idea that the CAG’s function is essential to preserving the checks and balances on government spending.

3. Arvind Gupta v. Union of India (2013):

In this instance, Production Sharing Contracts (PSCs) in the oil and gas industry were audited by the CAG. The Supreme Court ruled that contracts involving public resources, such oil and gas, can be audited by the CAG on behalf of the government and private parties. The court underlined that the management of natural resources is covered by the CAG’s responsibility to provide accountability and openness. This ruling upheld the idea that the CAG’s authority encompasses all activities using public funds or resources and is not only restricted to government agencies.

4. Association of Unified Telecom Service Providers of India (AUSPI) v. Union of India (2014):

   In this case, the power of the CAG to audit private telecom firms that had signed revenue-sharing contracts with the government was at issue. The Supreme Court decided that where a contract with the government exists, the CAG is entitled to audit the financial records of private companies, especially if public monies or resources are at stake. The court underlined that even in cases when private organisations collaborate with the government, the CAG’s job is to guarantee that public funds are appropriately accounted for.

The CAG’s audit duties have been extended by these court rulings, strengthening its position as the custodian of public money and guaranteeing that even private companies in charge of public resources are held responsible.

CAG and the Public Accounts Committee (PAC)

In order to maintain financial accountability within the Indian legislative system, the Public Accounts Committee (PAC) and the Comptroller and Auditor General (CAG) collaborate. The PAC’s analysis of public finances is based on reports and audits of government spending carried out by the CAG. The PAC examines these reports and makes sure that the necessary remedial action is done, even if the CAG is in charge of auditing and reporting.

1. Role of the CAG in Supporting the PAC:

The Constitution’s **Article 151** requires the CAG to submit audit reports to the legislature via the President or the Governor. The PAC is then tasked with reviewing these reports in further detail. The PAC looks at whether public spending is consistent with legislative permission and if the government has followed the CAG’s recommendations. This review contributes to ensuring the wise and effective use of public funds. The PAC receives comprehensive information on anomalies, mismanagement, and inefficiencies in government expenditure from the CAG’s reports.

2. Role of the PAC in Parliamentary Oversight:

   A vital part of keeping the executive branch answerable to the legislative is the Parliamentary Assembly body (PAC), a permanent body of Parliament. Members come from both chambers of Parliament, with the opposition parties accounting for the bulk of its membership. This composition contributes to the preservation of the committee’s discussions’ objectivity. In order to obtain testimony from government officials and departments, the PAC conducts hearings and reviews the audit reports that the CAG has generated. The PAC recommends to the government ways to improve governance and address financial irregularities based on its review.

3. CAG’s Reports as the Basis for PAC’s Work:

The audit reports provided by the CAG are extensive and include a variety of topics, such as performance, compliance, and financial audits. These reports draw attention to instances of incompetence, unnecessary spending, and financial regulation violations. The PAC closely examines these reports and requests explanations from government representatives for any inconsistencies. This procedure guarantees that the legislature will be held responsible for the executive’s financial actions.

4. Follow-up and Implementation:

   The government is likely to put the suggestions made by the PAC, which were informed by the CAG’s reports, into practice. In order to guarantee compliance, the PAC follows up with government agencies and keeps an eye on how its suggestions are being implemented. The execution of PAC’s suggestions is frequently sluggish, and many of them go neglected for extended periods of time, which presents a hurdle.

5. Collaboration in Improving Governance:

For India to have better financial accountability and governance, the PAC and CAG working together is essential. The PAC makes sure that the legislature takes the necessary steps to address the financial mismanagement concerns that the CAG finds. When combined, they provide a potent means of ensuring that public resources are utilised effectively and holding the executive branch responsible.

In essence, the CAG and PAC work in close coordination to promote transparency, financial discipline, and good governance within the Indian government. While the CAG acts as an independent auditor, the PAC uses the CAG’s reports to ensure legislative oversight of the executive.

Challenges Faced by the Comptroller and Auditor General (CAG)

Despite being independent and protected by the law, the office of the Comptroller and Auditor General (CAG) suffers a number of obstacles that prevent it from reaching its full potential. These institutional and operational obstacles may have an impact on the CAG’s capacity to carry out efficient audits and guarantee financial accountability in governance.

1. Political Pressure and Influence

Indirect political pressure has been applied in several cases, even with the constitutional protections against excessive influence on the CAG. There are worries that the CAG position might become politicised because the President of India appoints the position, following the Council of Ministers’ suggestion. Even though the public views the CAG as impartial, covert political establishment influences might affect how audits are carried out or how important problems are handled in delicate circumstances. The difficulty is in keeping the office impartial and credible while exposing financial wrongdoing while avoiding political meddling.

2. Limited Powers of Enforcement

   The primary responsibilities of the CAG include auditing and disclosing any financial irregularities or inefficiencies. Although the agency has the ability to audit government accounts, it lacks the authority to compel adherence to its recommendations or conclusions. Corrective action is the responsibility of these committees once they have reported to the State legislatures or the Parliament. Regretfully, a lot of audit findings are frequently disregarded or delayed. The CAG lacks the legal authority to enforce sanctions or mandate investigations into its conclusions. This restriction lessens the CAG’s overall efficacy since its audits could not always result in the required changes.

3. Resource Constraints

Resources are severely limited for the CAG’s office, especially when it comes to staffing, technical know-how, and infrastructure. With the growth of government programs and more sophisticated financial transactions, governance becomes more complex. Insufficient resources may make it more difficult for the CAG to conduct a thorough audit of these activities. Public administration is becoming more and more dependent on digital financial transactions and complex accounting procedures, which calls for auditors with specialised knowledge and access to state-of-the-art auditing instruments. The CAG may find it difficult to keep up with these developments without enough money and training, which might have an impact on the thoroughness and promptness of its audits.

4. Scope of Governance and New Responsibilities

As governance changes, the CAG’s function is growing, but this growth is not without its difficulties. The scope of the CAG’s work has expanded due to the rise in public-private partnerships (PPPs), the employment of increasingly sophisticated financial structures by the government, and the participation of private organisations in the management of public resources. There are additional difficulties in conducting audits of private companies that have government contracts or receive public cash, especially when it comes to maintaining accountability and transparency in the absence of direct CAG control over the internal financial records of these companies. Furthermore, sophisticated monitoring and increased auditing experience are necessary for significant privatisation projects and revenue-sharing arrangements.

5. Public Perception and Awareness

The public’s understanding of the CAG’s significance is still low, despite the crucial role it plays in protecting public finances. Although significant CAG findings on topics like the distribution of 2G spectrum or coal blocks have attracted public attention, regular audits sometimes go unreported. The task at hand involves increasing the exposure of the work done by the CAG so that public representatives, media, and civil society may take a more active role in guaranteeing accountability based on CAG findings.

CAG’s Role in Contemporary Governance

The CAG’s function has changed dramatically in the twenty-first century to reflect the shifting dynamics of the economy and administration. The role of the CAG has grown even more important as a result of the government implementing new revenue methods, big infrastructure projects, and social welfare programs.

1. Audit of Mega Infrastructure Projects

India’s emphasis on developing its large-scale infrastructure, like building roads, airports, and railroads, has made the CAG’s audits more thorough. These initiatives entail large public funding, frequently accompanied by private sector involvement via Public-Private Partnerships (PPPs). In order to make sure that contracts are granted equitably, money is used effectively, and projects are finished on schedule and under budget, the CAG audits these projects. Audits of well-known projects, such as the **Delhi Metro** and the **Golden Quadrilateral**, have uncovered inconsistencies and inefficiencies and improved project execution.

2. Scrutiny of Social Welfare Schemes

   Billions of rupees are spent by the Indian government on social welfare programs such as **Ayushman Bharat**, **Pradhan Mantri Awas Yojana (PMAY)**, and **Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)**. To determine if the funds have been distributed for the intended purposes and whether the schemes are meeting their objectives, the CAG audits the schemes’ performance. For instance, the government implemented measures to enhance the scheme’s delivery after the CAG’s assessment of MGNREGA revealed places where monies were either mishandled or underutilised.

3. Audit of Goods and Services Tax (GST)

After the Goods and Services Tax (GST) was implemented in 2017, the CAG’s purview was extended to include overseeing the execution of this intricate tax reform. Examining if the tax system is operating as planned, if states are getting their fair share of money, and if there are any gaps or inefficiencies, are all part of the GST audit. Policymakers have benefited greatly from the CAG’s insights into how the GST regime operates, which has resulted in changes to the procedures for tax distribution and collection.

4. Natural Resource Management

In terms of auditing the management of natural resources, such as coal, oil, gas, and minerals, the CAG has assumed a more significant role. For example, the audits conducted by the CAG on spectrum and coal block allocations have uncovered significant losses to the public coffers as a result of anomalies in the allocation procedure. Significant financial and political ramifications of these audits have resulted in changes to public resource management policies and practices.

Comparative Analysis: CAG of India and International Counterparts

The similarities and variations in the roles and operations of supreme audit agencies are brought to light by a comparative study of the CAG of India and comparable entities in other nations.

1. National Audit Office (UK)

Comparable in operation to the CAG in India is the **National Audit Office (NAO)** in the United Kingdom. their duties include inspecting government agencies’ and departments’ financial statements and reporting their results to the **Public Accounts Committee** of parliament. The NAO, on the other hand, reports directly to Parliament, guaranteeing a more direct line of responsibility to the legislature than does the CAG of India, which answers to the President and Governors.

Through audits pertaining to Brexit and the administration of public health funding, among other financial issues, the NAO has been instrumental in keeping the UK government responsible for its financial actions. Similar to the CAG’s purview, the NAO is authorised to carry out comprehensive performance audits in addition to financial and compliance audits.

2. Government Accountability Office (GAO) (USA)

In the US, the US Congress is assisted by the impartial, independent **Government Accountability Office (GAO)** in maintaining federal government accountability. The GAO audits and assesses government operations, just as the CAG. But the GAO’s authority is more expansive since it may look into matters pertaining to fraud, waste, and abuse in addition to recommending policies.

   One significant difference is that while the CAG reports to the President and Parliament, the GAO is directly accountable to Congress, and its reports often lead to legislative or administrative changes.

3. Court of Audit (France)

   Another organisation that functions similarly to the CAG is the **Cour des Comptes** (Court of Audit) in France, however with judicial authority. It evaluates the administration of public resources, audits public institutions, and makes suggestions for enhancing financial governance. In contrast to the CAG in India, which is just an auditing body, public officials who mismanage public funds may face legal punishment from the French Court of Audit.

Unlike the CAG, which is limited to reporting and making recommendations, the Court of Audit may enforce its conclusions thanks to this extra layer of responsibility provided by the judicial authorities.

Conclusion

An essential organisation for maintaining fiscal responsibility, openness, and sound governance within India’s democratic framework is the Comptroller and Auditor General (CAG). The CAG’s job as the public purse’s watchdog goes beyond simple auditing; it also serves as a protector of public confidence, making sure that public monies are used sensibly and efficiently for the benefit of the general public.

But in order to properly audit complex financial systems, the CAG has to be given more enforcement authority, sufficient funding, and technical capabilities to meet the demands of a changing governance environment. The influence of the organisation may also be increased by bringing attention to the significance of the CAG’s work and making sure that its recommendations are followed.
In conclusion, the CAG continues to be a vital component of India’s constitutional framework, guaranteeing the accountable management of public resources. However, the institution’s purpose and skills will also need to change as government develops.