The Comptroller and Auditor General (CAG) of India: Guardian of Public Funds

Introduction

The Comptroller and Auditor General (CAG) of India is a key constitutional authority tasked with supervising the financial operations of the Union and State governments. Established under Article 148 of the Indian Constitution, the CAG operates as an independent entity, ensuring transparency and accountability in the use of public funds. As the head of the Indian Audit and Accounts Department, the CAG upholds financial discipline and is widely regarded as the custodian of the public purse. Dr. B.R. Ambedkar even referred to the CAG as “the most important officer under the Constitution” due to the vital role it plays in safeguarding the financial integrity of the government.

Together with institutions like the Supreme Court, Election Commission, and UPSC, the CAG forms one of the foundational pillars of India’s democratic governance.

In India’s federal structure, no funds can be withdrawn from the Consolidated Fund of the Union or any State without legislative approval. The CAG, therefore, ensures that the Executive remains financially answerable to the Legislature by auditing public expenditures and reporting discrepancies. This mechanism strengthens the democratic ethos of legislative oversight and transparency.

A similar role existed during colonial rule under the Government of India Act, 1935, where the Auditor-General’s independence was protected by removal procedures similar to those for judges. The current framework continues this legacy, reinforcing the importance of the CAG’s independence and autonomy.

Appointment and Tenure

The CAG is appointed by the President of India, by warrant under the President’s hand and seal. Prior to assuming office, the CAG is required to make and subscribe to an oath or affirmation before the President, pledging:
1. Faithful allegiance to the Constitution of India;
2. Upholding the sovereignty and integrity of India;
3. To perform the duties of the office faithfully, impartially, and to the best of their ability, knowledge, and judgment, without fear, favour, affection, or ill-will;
4. To uphold the Constitution and the laws of the land.

The CAG holds office for a term of six years or until attaining the age of 65 years, whichever occurs earlier. The CAG may resign at any time by submitting a written resignation to the President. The CAG may also be removed from office by the President, following the same grounds and procedure applicable for the removal of a Supreme Court judge—that is, based on a resolution passed by both Houses of Parliament with a special majority, on grounds of proven misbehaviour or incapacity.

Independence of the Office

The Constitution incorporates several safeguards to preserve the independence of the CAG:
1. The CAG is assured security of tenure and may only be removed through the prescribed constitutional process. Unlike other Presidential appointees, the CAG does not hold office at the pleasure of the President.
2. Upon demitting office, the CAG is ineligible for further appointment under either the Government of India or any State Government.
3. The CAG’s salary and service conditions are determined by Parliament. By statute, the CAG’s salary is equivalent to that of a Supreme Court judge.
4. Once appointed, neither the salary nor the entitlements relating to leave, pension, or retirement age of the CAG may be altered to their disadvantage.
5. The conditions of service for officers of the Indian Audit and Accounts Department, and the administrative powers of the CAG, are determined by the President after consultation with the CAG.
6. The administrative expenses of the CAG’s office—including salaries, allowances, and pensions of its staff—are charged upon the Consolidated Fund of India and are not subject to Parliamentary vote.

Duties and Powers

Article 149 of the Constitution empowers Parliament to define the powers and duties of the CAG in relation to the accounts of the Union, the States, and other bodies. In pursuance of this provision, Parliament enacted the Comptroller and Auditor General’s (Duties, Powers and Conditions of Service) Act, 1971.

The functions of the CAG, as prescribed by the Constitution and Parliament, include:
(a) Auditing and reporting on all expenditure from the Consolidated Fund of India, each State, and each Union Territory with a Legislative Assembly, to ensure that such expenditure conforms to the law;
(b) Similarly, auditing and reporting on expenditures from the Contingency Funds and Public Accounts of the Union and States;
(c) Auditing and reporting on trading, manufacturing, and profit and loss accounts maintained by any department of the Union or State Governments;
(d) Auditing the receipts and expenditures of the Union and each State to ensure that procedures for the assessment, collection, and proper allocation of revenues are effective;
(e) Auditing and reporting on the receipts and expenditures of:
i. All bodies and authorities substantially financed by Union or State revenues;
ii. Government companies; and
iii. Other corporations or bodies, as required under the laws governing such entities.

Role of CAG

The Comptroller and Auditor General (CAG) plays a vital role in maintaining financial accountability within India’s constitutional framework. The CAG ensures compliance
with the Constitution and Parliamentary laws in the sphere of financial administration. The accountability of the Executive to Parliament is primarily exercised through the
audit reports prepared by the CAG.
The CAG submits three main reports to the President:
(i) Audit Report on Appropriation Accounts;
(ii) Audit Report on Finance Accounts; and
(iii) Audit Report on Public Undertakings.

These reports are tabled in Parliament, where they are examined by the Public Accounts Committee (PAC).

Under the CAG’s (Duties, Powers and Conditions of Service) Act, 1971, the CAG audits whether funds disbursed were legally available for the purpose to which they were applied and whether such expenditures comply with the relevant authorisations . In addition to the mandatory legal and regulatory audit, the CAG may also conduct a propriety audit, assessing whether public expenditure was economical, efficient, and free from waste.

In 2006, a government memorandum further clarified that performance audit falls within the CAG’s mandate. Performance audit reviews economy, efficiency, and effectiveness in the use of public funds, examining whether development objectives are achieved cost-effectively.

While the CAG enjoys broad autonomy in auditing expenditure, its authority over auditing receipts, stores, and stocks is subject to executive approval. Moreover, certain expenses, such as secret service expenditures, remain outside detailed audit scrutiny and are certified by the competent authority. Though the Constitution envisions the CAG as both Comptroller and Auditor General, in practice the CAG primarily serves an auditing role. The CAG does not control the release of funds; many departments independently draw funds from the Consolidated Fund, with the CAG exercising post-facto audit, unlike its British counterpart, who retains control over fund release.

Challenges

The Second Administrative Reforms Commission (2005–2009) highlighted several challenges limiting the CAG’s effectiveness:
1. Limited scrutiny: The PAC reviews only 15–20 out of thousands of audit observations annually. Ministries priorities only those discussed by the PAC.
2. Delayed responses: Many Action Taken Notes are perfunctory; long backlogs exist at the State level.
3. Delayed audit cycle: Audits often review programs post-completion, reducing scope for timely corrective action.
4. Document-based audits: Ground realities may differ from what records reflect; physical verification is minimal.
5. Negative tone: Audit findings can appear overly critical, failing to acknowledge operational constraints or bona fide errors.
6. Impact on innovation: Excessive focus on fault-finding may discourage risk taking and innovation.
7. Fragmented reporting: Audit reports sometimes lack systemic analysis or constructive recommendations.
8. Relationship issues: Interactions between auditors and auditees are limited; audits are viewed as policing mechanisms rather than management tools.
9. Audit committees: Existing committees reviewing audit actions are often ineffective.
10. Public interface: Media coverage of CAG reports is limited; public access to detailed inspection reports is poor.
11. Audit of NGOs: There is insufficient audit of grants and loans to NGOs.

Comparison with the British Model

In the United Kingdom, the CAG holds more control over fund disbursement. Departments must seek prior approval from the British CAG before drawing funds from the Exchequer, thereby enforcing pre-expenditure control.

In India, however, government departments draw funds directly from the Consolidated Fund, and the CAG conducts only post-expenditure audits. This limits its role to verifying legality and propriety after spending has occurred.

Key debates have emerged around the CAG’s scope in India:

1. Should the CAG comment on extravagance and inefficiency.
While some argue that the CAG should highlight wasteful spending, others believe that such evaluations fall within the domain of administration, not audit.

2.Should the CAG audit government-backed commercial entities?
Since these undertakings are funded by public money, many former CAGs advocate for their inclusion. However, practical audits depend on provisions in governing laws or company documents, restricting Parliamentary oversight. The government often contends that these require specialized commercial expertise.

The CAG’s (Duties, Powers and Conditions of Service) Act, 1971 partially bridged this gap by mandating CAG audits of government companies and bodies substantially financed by public funds, even without specific statutory provisions.

Amendment of 1976

The CAG’s (Duties, Powers and Conditions of Service) Act, 1971 was amended in 1976 by the Comptroller and Auditor-General's (Duties, Powers and Conditions of Service) Amendment act, 1976. It resulted in resulted in the separation of accounts from audit for the Central Government. This meant the CAG was relieved of the responsibility of compiling and maintaining accounts, a function that was shifted to departmentalization of accounts. While the CAG continued to audit these accounts, they no longer had the responsibility for preparing them.

Conclusion

The Comptroller and Auditor General (CAG) of India plays a pivotal role in ensuring transparency, accountability, and good governance within the democratic framework of the country. By auditing government revenues and expenditures, the CAG acts as the watchdog of public finance, holding authorities accountable for the prudent use of public resources. In a rapidly evolving administrative and economic landscape, the relevance of the CAG remains undiminished. Strengthening its independence, ensuring timely audits, and enhancing public awareness about its findings are crucial for fostering a more transparent and responsible governance system. Ultimately, the CAG serves not just as a constitutional authority, but as a guardian of public trust.

References
1. Constitution of India
2.Indian Constitutional law by MP Jain
3.https://vajiramandravi.com/upsc-exam/comptroller-and-auditor-generalcag/
4.https://www.nextias.com/blog/comptroller-and-auditor-general-of-india/
5.Rahuls Ias Notes