In the current controversy over the role of India’s Comptroller and Auditor general (CAG), not many realise that the Indian “supreme audit institution”, as such institutions are known worldwide, is firmly within the mainstream of global best practices. What is more, it has come to acquire its present stature because of the highly constructive support given to it by India’s leaders, beginning with the country’s founding fathers.
Worldwide, public or legislative auditing is based on the Lima Declaration of the International Organisation of Supreme Audit Institutions (INTOSAI), affiliated to the UN. India’s CAG is a member of INTOSAI and all its members follow the International Standards of Supreme Audit Institutions (ISSAI). The CAG has been on the governing body of INTOSAI for over 20 years, apart from chairing its IT audit working committee. In 1996, it was awarded the Jorg Kandustch prize for its outstanding contributions to the development of the profession of public auditing.
The CAG’s expertise is globally recognized. It has been appointed as external auditor for the International Atomic Energy Agency, World Health Organisation, World Intellectual Property Organisation and several more such institutions based on open bids against competition from Sweden, Germany, France and the UK. Unlike the UN proper, these specialised agencies do not decide on the appointment of their external auditors on the basis of voting. Significantly, the CAG of India did not win solely on cost but also on technical considerations. Many of its bids were not the lowest.
India’s Constituent Assembly spent considerable time and effort in crafting the provisions relating to the CAG’s mandate and the functioning of the Indian Audit and Accounts Department under him owes its position to this. The CAG of India is referred to as “a constitutional authority” rather than an officer of Parliament. The position is thus somewhat different from that of its counterparts in the UK, Canada and Australia who are officers of Parliament. The independence of the CAG is secured by his fixed six-year term of office and all the guarantees that apply to a judge of the Supreme Court.
Another significant provision in the Constitution is that the salary and allowances of the CAG and his staff, as well as the expenses of his office are “charged” upon the appropriations and not subject to vote.
This was a very deliberate decision taken during the framing of the Constitution. The chairman of the drafting committee, explaining the reasons for this said: “The reason why it is made non votable is (a) very good reason, because first as we do not want the executive to interfere too much in the necessities determined by the Auditor General with reference to his own requirements, we do not want a lot of legislators who might have been discontented for some reason or other or because they may have some kind of a fad for economy, to interfere with the good and efficient administration of the Auditor General”.
Another significant decision was that the drafting committee consciously decided not stipulate any accounting qualification for the CAG, noting instead in its minutes that the incumbent should have an extensive experience of public administration.
The members of the Constituent Assembly which enacted the Constitution went on to become the Members of Parliament on both sides of the house and in 1952, just two years after the adoption of the constitution, Prime Minister Jawahar Lal Nehru found it necessary to state in the House: “For the CAG to be criticized on the floor of the House would tend to undermine his special position under the Constitution and would make it difficult for him to discharge his duties without fear or favour”.
The CAG’s prime and overriding function is to help Parliament exercise financial control over public resources. The CAG sends its reports to the Public Accounts Committee (PAC) and Committee on Public Undertakings (COPU) of Parliament. The eminent constitutional scholar Basil Chubb summarized the job of the CAG thus: “The committee’s (PAC) work depends, in effect, entirely upon the audit and examination carried out by the Comptroller and Auditor General and his Exchequer and Audit Department. Its primary sources of information the public accounts have been thoroughly examined and sifted before the few points which rate attention are put before the Committee in simple and intelligible fashion by the Comptroller and Auditor General”.
These two important committees of Parliament have been sources of great strength to the institution of the CAG. In 1962, when the Defence Minister during a debate on the Defence Estimates referred to the manner in which the audit of the accounts of the defence services were being conducted, the PAC examined in great detail the “Scope and Extent of Audit conducted by the CAG of India and the Form and content of the Audit Report”. The Committee held that:
“ …it is the function of the CAG to satisfy himself not only that every expenditure has been incurred as per prescribed rules, regulations and laws, but also that it has been incurred with “faithfulness, wisdom and economy”. The Committee also held that: “…if the Audit Reports are to be of any value to Parliament it is essential that the matters to be included and the comments to be made therein are left to the sole discretion of the Comptroller and Auditor General.” Thus, fairly early in the day the PAC effectively countered any efforts to limit the ambit of the CAG’s functions.
As the role and scope of government has changed and expanded through what may be called the developmental decades, the CAG has had to expand the scope of his audits and also to report on a range of emerging issues.
Both the PAC and COPU have not only accepted reports of the CAG that have reflected evolving audit practices, on more than one occasion they have put on record their appreciation of these audit reports.
Thus, without any formal change in mandate, the CAG has not only been enabled but encouraged to expand his role.
The passage of the CAG’s (Duties, Powers and Conditions of Service) Act in 1971 formalised another major audit practice, which was the audit that he is now required to undertake to “satisfy himself that the rules and procedures … are designed to secure an effective check on the assessment, collection and proper allocation of revenue … and are being duly observed”.
This has resulted in an audit practice that forms a very significant part of the activities of the CAG, and recoveries ordered on account of audit observations on under-assessments exceed the total expenditure on the CAG’s department almost tenfold.
There are also numerous instances where rules and even clauses of the Revenue Acts have been amended because of observations made in the audit reports about unintended benefits arising out of the wording of these Acts.
The relationship between Parliament and the CAG of India has been one of close and frequent interaction. There are occasions when CAG reports have been the subject matter of intense, and even heated exchanges in Parliament.
But irrespective of the parties which have constituted the government of the day, there were never any derogatory remarks about the CAG either as a person, or as an institution.
Parliament has always been generous in its expression of appreciation for the CAG. Though a former CAG of the UK described his institution as “very much a lone wolf ”, those who man the department in India know that they and their counterparts around the globe execute mandates of a very similar nature.
At its 9th congress held at Lima in 1977,INTOSAI adopted what has become known as the ‘Lima Declaration’. The CAG of India, together with its counterparts around the globe draw their intellectual and moral authority from this declaration. It affirms that the orderly and efficient use of public funds constitutes one of the essential prerequisites for the proper handling of public finances and the effectiveness of the decisions of the responsible authorities.
To achieve this objective, it is indispensable that each country have a Supreme Audit Institution whose independence is guaranteed by law. Such institutions become even more necessary because the state has expanded its activities into the social and economic sectors and thus operates beyond the limits of the traditional financial framework.
The specific objectives of auditing, namely, the proper and effective use of public funds, the development of sound financial management, the proper execution of administrative activities and the communication of information to public authorities and the general public through the publication of objective reports, are necessary for the stability and the development of states in keeping with the goals of the United Nations. In December last year, the General Assembly of the United Nations endorsed the Lima Declaration through a specific resolution.
Now that the immediacy of the CAG’s reports that took the country by storm is past, it would be appropriate for all those involved in the national endeavour for accountable and responsive government to reflect coolly and to discuss constructively the role of the Supreme Audit Institution of India, in the light of what the Constituent Assembly of our Republic intended and what the United Nations (of which we are such a significant constituent) now envisages.
(The author is a former deputy CAG)