According to BR. Ambedkar “The Comptroller and Auditor General of India shall be the most important officer under the Constitution of India. Fair he is to be the guardian of the public Purse and it is his duty to see that not a farthing is spent out the consolidated Fund of India or of State without the authority of the appropriate legislature”..

Public Audit is a vital instrument of ensuring supremacy of Parliament over executive and enforcing public accountability. Public audit institutions developed over time to help legislatures to implement the power of the purse. This power had two essential elements: the granting of the moneys and supervision of the expenditure. State audit in its present form was introduced first time in Great Britain as an integral part of parliamentary control over national finance with the enactment of Exchequer and Audit Department Act in 1866.The Act required all departments for the first time, to produce annual accounts known as appropriation accounts. The act also established the position of Comptroller and Auditor General (C&AG) and an Exchequer and Audit department to provide the supportive staff from within the civil service. The results of C&AG’s investigations were considered by a dedicated parliamentary committee called the Committee on Public Accounts thus establishing a circle of parliamentary financial control

            The system of Government accounting and auditing and the organizational structure of the Indian Audit and Accounts department (IAAD) as it exists today in our country is the legacy of British Raj and is more or less patterned on British model. The IAAD has a history dating back to 1858 when the East India Company administration was taken over by the British Government and an Auditor General of India, who looked after both audit and accounts functions, was appointed. The introduction of constitutional reforms in 1919 brought about statutory recognition to the Auditor General.. The Government of India Act 1935, gave further recognition to the importance and status of the Auditor General.                      
1.1 Constitutional and Statutory Mandate

 The Indian Constitution gave  special status to Comptroller & Auditor General (C&AG) as laid down in Articles 148 to 152. The C&AG’s Act, 1971 regulate the duties,  powers and conditions of service of the Comptroller and Auditor General.

4.         Section 13, 16 and 17 of Act gives authority to C&AG to audit all expenditure from and receipt into the Consolidated fund of India and the State. Section 14, 15, and 20 of the Act authorises C&AG to audit the receipts and expenditure of bodies or authorities substantially financed by loans or grants from Union or State or Union Territory. Article 151 of the Constitution prescribes that Audit Reports on the accounts of Union and the States be submitted to Parliament /State Legislature.
1.2 Organizational Structure:Relevant Provisions Of The Indian Constitution: Article 148(1): There shall be a Comptroller and Auditor General Of India who shall be appointed by the President by warrant under his hand and seal and shall only be removed from office i8n like manner and on the like grounds as a Judge of the Supreme Court Of India. Article 151: Audit
Reports: 1) The Reports of The Comptroller and Auditor General Of India relating to the accounts of the Union shall be submitted to the President, who shall cause them to be laid before each House Of Parliament. 2) The reports of the CAG of India relating to the accounts of a State shall be su8bmitted to the Governor of the  state, who shall cause them to be laid before the Legislature of the State.:
5.       The C&AG is the head of the Indian Audit and Accounts Department. The office of the C&AG directs, controls and monitors the activities of the various offices of the department and is responsible for development of organisational objectives and policies, auditing standards and systems, laying down policies for management of man power and final approval of the Audit report. For carrying on these responsibilities field formations exist for each specific areas of auditing and accounting.
6.         The offices of IAAD are spread throughout the country. There are 34 Union Government Audit Offices headed by Director General/ Principal Director of Audit and 60 State Accounts and Audit offices headed by Principal Accountant General and Accountant General. There are 60000 personnel in the IAAD with about 500 Group A officers belonging to the Indian Audit and Accounts Service (IA&AS).The total budget of the IAAD is around Rs 846 crs bulk of which constitutes expenditure on pay and allowances of the staff.

  1.3 Evolution of  Audit since Independence

7.         The traditional audit conducted by the supreme audit institutions (SAI) is known as Regularity audit which implies checking upon the legality of an action taken by a public official or a person using public funds and whether the decision or its implementation is according to the law, rules or regulations governing that activity Gradually its dimension was extended to Financial audit and now to Value for Money auditFinancial Audit basically means audit of financial statement and whether they provide reasonable assurance that they present fairly the financial position, results of operations, and cash flows of an audited entity in accordance with generally accepted accounting principles. In Financial audit, State auditors do almost the same kind of job which the Chartered Accountants do while auditing a public limited company .
Value for Money or 3E’s Audit: also known as Performance audit is an independent assessment of the performance of an organization, programme, project or an activity in terms of its goals and objectives- how far expected results have been achieved from the use of available resources of money, men and material. Put it differently an examination is made regarding economy, efficiency and effectiveness of public spending, which has co9me to be known  as 3E audit.l. Put it differently an examination is made regarding economy, efficiency and effectiveness of public spending, which has come to be known as 3E’s audit.
q       Economy: minimising the cost of resources used or required – spending less;
q       Efficiency : the relationship between the output of goods and services and the resources to produce them- spending well;
q       Effectiveness: the relationship between the intended and actual results of public spending – spending wisely.
.         The concept and technique of audit has undergone a major change during the last fifty years. Before India became independent, the government audit was mostly confined to check against provision of funds, rules and orders and competence of authority concerned to sanction expenditure. With the launching of the Five Year plans for economic and social development there has been change in the pattern of government expenditure necessitating shift in the emphasis, concept and practice of audit as scrutiny of individual transactions became inadequate as it tended to mistake wood for the tree. The Parliament and the public are more interested to know whether various development and welfare programmes are being executed efficiently and whether they were producing the expected results. This lead Audit department to enter in the area of Performance Evaluation and Value for Money Audit. Audit department is now producing a large number of performance reviews every year covering almost every facet of government’s working.
9.         Audit of Revenue: C&AG after some initial resistance on the part of revenue department was able to extend its dimension to audit of revenues which includes audit of tax assessment such as Income tax, Central Excise and Customs, Sales tax etc. The audit of receipts has helped bringing considerable revenue for the government by pointing out cases of under assessment of tax, and also assisted in better functioning of tax administration machinery by pointing out lacunae or loopholes in the Act/ Rules and deficiencies in the functioning of tax administration.
10.        Audit of Commercial Enterprises:The audit of government companies was brought within the purview of C&AG’s audit at the insistence of then CAG by introducing a suitable provision in the Companies Act 1956, although there were initial attempts to exclude his jurisdiction. Thus, while Chartered Accountants are required to certify Annual Accounts of government companies, C&AG has been granted right to conduct supplementary audit.
2.1 No Powers to Enforce Audit Findings – Violation of Rules
11.        One of the primary functions of audit is to see that provisions of law, rules and regulations are properly applied while incurring expenditure or collecting revenue. In order to regulate usage of money elaborate rules and regulations have been drawn by government. While audit notices systematic violation of law, rules and regulations by departmental officers it is unable to take an effective action to prevent them.
12.        The Bihar fodder scam will illustrate the point. Serious financial irregularities and misappropriation of government funds were being committed by senior government functionaries and the Treasury officials all acting together in collusion. The Accountant General (AG) Bihar could not detect the irregularity in time as Treasury officers suppressed the vouchers through which money was drawn and did not transmit them to AG thus preventing its audit. C&AG has been making mention of excess drawl over voted provision in its Audit Report presented to Bihar Legislature but Public Accounts Committee, it is said did not even met to discuss the report leave apart take preventive action. After the scam became public knowledge, C&AG has produced a well documented Audit Report but it is more a case of getting wise after the event—after crores of public money has been looted and shutting  the stable door after the steed has been stolen.
13.        The accounts keeping
of State governments companies is in chaotic state. Out of about 900 State government companies the Annual Accounts of as about 700 companies is in arrears sometimes for periods as long as ten to twelve years. The Companies Act stipulates that the Annual Accounts of these companies should be got audited by Statutory auditors (Chartered Accountants) and C&AG within six months of the close of financial year viz. 30th September. Should a situation where management of these companies violate with impunity the legal provision laid down in the Companies Act be allowed? Similar is the situation with large number of autonomous bodies, which receive substantial grant from government every year. Many of them do not submit their Annual Accounts in time for audit. In numerous cases, accounts when prepared do not follow the accounting standards, contain serious mistakes and when pointed out, the concerned organisations refuse to rectify the errors . And yet they continue to get government grants every year. Should not C&AG be empowered to take legal action against management of such defaulting organisations, so that tax payer is assured that no misuse and misappropriation of public funds has taken place?

Some of the most formidable challenges faced by CAG are enormous delays in audit and submission of Audit reports, But, the CAG had overcomne this by undertaking overseeing of preparedness for Commonwealth games on the Central Governmewnt part and carried out quick appraisal and other lapses and ultimatewly unearthged Commo Wealth Games scam worth crores of rupees.

Secondly many states are demanding Seperate   independent Audit  Authorities for the states on the lines of “                                 Sp
State Eelction Commisions and Stater financilal Commssions. so that an effective and effcient way of conducting  audit of states’ Adnministrative expenditure in view of heavy work load of CAG. This can be done by bringing in necessary constitutional amendment doing full justice of federalism enshrined in our Constitution.

Another critisim was Government’s allegation that CAG was interfering with Government policy decisions; it flies  on the  face of accusing Government.,as CAG has Unearthed a number of scams in the recent past.such as CWG scam, 2G spectrum scam, Adarsh Housing Society scam of Maharashtra, prior to that Bofors in 80s, Fodder scam in Bihar, S band, KG basin, NRHM scam etc etc. casing loss of billions of rupees to the public exchequer.

CAG doesn’t have power to demand necessary information from the Government/executive directly. He has to submit audit reports to the Public Accounts Committee and Public Undertakings Committees., The CAG is an agent of the parliament and conducts audit of expenditure of the Governments, both central and state and oi on his behalf PAC and PUC o submit his audit repiorts to the Parliament.t. h. However in this process enormous delay occurs, which is responsible for administrative or Government apathy on account of delay and the report becoming ineffective and irrelevant due to lapse of time, thus leading to Government inaction and apathy with respect to his reports Hence the reports of the CAG should be dealt with the utmost care and urgency and appropriate action should be taken for Government Malfeasance.

2.2 Legal position 
14.        Section 13 of the Comptroller and Auditor General’s Act, lays down that it is the duty of audit: to  ascertain that the money, which has been disbursed was legally available for the service or   purpose on which it has been applied and  there is a proper authority to spend the money. What happens when a public official spends money, which is not legally available viz., it is in violation of laid down rules and regulations. The Act is silent about it – all that the last sentence of Section 13 says, “ in each case to report on the expenditure, transaction or accounts so audited by him.”  If the C&AG makes a report about the irregular usage of money to the Departments whose officials have committed the default and they contest C&AG’s decision or do not take any action, it virtually amounts to the departments sitting over judgement on C&AG’s findings and obstructing the duty he is required to perform under the law. In no other country of the world State audit finds itself in such a helpless situation.
2.3 Position in Advanced Countries
15.        Most Supreme Audit Institutions (SAI) have been vested with powers to fix responsibility on the officials who have caused loss to the exchequer and have legal power for its recovery. In New Zealandunder the Public Finance Act of 1977, the Controller and Auditor General(CAG) is empowered to hold an enquiry which may require any  evidence to be given either orally or in writing and to which the provisions of Crimes Act relating to perjury  applies. The CAG has power for surcharge if he finds that there is deficiency or loss of money or store caused through fraud, mistake, default, negligence, error or improper or unauthorized use. In Japan the Board of Audit has powers to adjudicate and can order an official to indemnify the loss and direct the supervising officer to take disciplinary action against the delinquent official when it finds that the official has caused grave loss to the State either deliberately or by gross negligence. In France Cour des Comptes which functions like a court may order accounting officers to settle uncollected revenue or irregular expenses out of their own resources, if during an investigation it finds that the accounting officer has failed to provide satisfactory justification- on the ground that they have formal personal responsibility. Hindering  Cour’s investigation may give rise to a monetary fine. The judgements of Cour are legally binding and can be appealed only on points of law.
In South Korea ,  the Board of Audit and Inspection (BAI) law , confers authority to the Board to examine and adjudicate whether an accounting official or any other person is liable for reparation and the manner in which recovery is to be made and execute collection by applying mutatis mutandis provisions concerning disposition of taxes in arrears in the National Tax Collection Act. In China under the State Audit Act, an audited unit violating financial and economic laws and regulations, the audit organs may confiscate or instruct them to return the illegal gain; take over the embezzled state assets; take decisions to cut off such appropriations or loans; and impose fines. In Thailand under the State Audit Act of 1979, Auditor General can summon an official to deliver accounts and registers; attach money, properties, accounts registers, documents etc. of the audited agency and summon a person to testify as witness. If a person who has the duty to keep in his custody money or property or documents etc., damages, destroys, or causes loss he is liable for imprisonment upto five years or a fine or both. The Auditor General and the competent officials while performing their duties under the State Audit Act are treated as officials under the Penal Code.
2.4 Need for Conferring Legal Powers 
The situation in our country needs to be remedied by conferring legal power to Audit Officers to enable them to implement their findings by making suitable provisions in the C&AG’s Act  on the lines enjoyed by State audit institutions of other countries. The Act should entrust Audit Officers with following powers: (a) powers to summon the concerned officers before it for evidence on oath and (b) where default is established, after giving due opportunity, they be required to make good the loss, (c) in case the official does not make good the loss and the default or neglect  is established, a report be made to the superior authority of the department where officer is working for taking disciplinary action under the Civil Services Conduct Rule, (e) where action of public official involves criminal liability, the public prosecutor be informed either by Audit official or by the Department to which he belongs for  initiating criminal action under the Penal code.  For discharging this quasi-judicial function the powers similar to those available under Commission of Enquiry Act be vested with the Accountant General / Principal Director of Audit who are heads of department  by making suitable legal provision to that effect. To make the system transparent and fair there should also be a provision of appeal with final appellate stage at the level of  Addl/Deputy Comptroller and Auditor General at the head quarters of CAG Office.

Boomerang on the party

“Whenever the Congress is in trouble or faces criticism, they try to weaken the institutions if they are constitutional bodies,” senior BJP Leader M Venkaiah Naidu told reporters on Union Minister V Narayanasamy’s remarks on CAG.In an interview to PTI yesterday, Narayanasamy had said a former CAG’s suggestion of constituting a mufti member CAG body is under the Considerations of the Central Government..Leaving political leaders  and their comments aside, a muti member body on the lines of our election commission along with separate ‘state independent Audit authority bodies should be brought by bringing an amendment to the constitution  so that it prevents the CAG for succumbing to dictatorial and authoritarian tendencies  and partisanship in discharge of his duties and he/she may overstep their authority vested in him as he is the sole Auditing Authority in India at present. He should be conferred s more teeth.” CAG is an independent Constitutional Authority and Custodian and guardian  of Public Exchequer/ Tax Payers Money, and he is duty bound to discharge his duty most honestly to point out  breach of public officials’ financial propriety, integrity and ethical practices on their part in the form of efficient and effective audit reports to the parliament through public Accounts Committees and Public Undertaking Committee.
”Ms.Nirmala P.Rao
Legal expert and Political Analyst.
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