A-B-C Of The CAG

Everything you needed to know about the Comptroller Auditor General and his responsibilites.

WrittenBy:Somi Das
Date:
Article image
  • Share this article on whatsapp
imageby :
subscription-appeal-image

Support Independent Media

The media must be free and fair, uninfluenced by corporate or state interests. That's why you, the public, need to pay to keep news free.

Contribute

 The Comptroller and Auditor General is back in the news – and not for unearthing some huge government scam. This time it’s for venturing into the domain of auditing private companies- a move that has caused much heartburn among industrial leadersThe Delhi High Court has permitted an audit of private telecom firms by the CAG. This is to check whether the firms had underpaid their government licence fees. It’s a ruling which could have an impact on other sectors like power and oil.

So who is this CAG that the court has allowed to cast a keen eye on private telecom firms? Here’s the dummies’ guide to the CAG.

What is CAG?

The CAG is an authority established by the Constitution of India to audit all accounts and expenditures of the Union and the State government. The CAG report is deliberated upon by the Public Accounts Committee (PAC)- a Parliamentary body headed by the member of the Opposition. Commercial reports are examined by the Committee on Public Undertakings (COPU).The CAG official website describes itself as the “friend, philosopher and guide” of the financial committees of Parliament and the State Legislatures. The Comptroller and Auditor General Of India is Shashi Kant Sharma.

How is the CAG appointed?      

The President of India appoints the CAG for a term of six years or till the incumbent attains the age of 65 years, whichever is earlier. The appointment is made on the recommendation of the Prime Minister. However, there is no fixed criterion of appointing a CAG – a point of contention among the political class. In 2012, in the backdrop of the 2G report controversy, Commonwealth Games and coal block allocations,Communist Party Of India’s Gurudas Dasgupta had written to the Prime Minister suggesting that that the process of appointment be changed to a collegium including the Prime Minister, Leader of Opposition and Chief Justice of India making the appointment. Prime Minister Manmohan Singh, however, turned down the demand and said that the Opposition already played a decisive role on the progress of any CAG report through the Parliamentary Advisory Committee (PAC).

What is the jurisdiction of CAG?

  1. All the Union and State Government departments and offices including the Indian Railways and Posts and Telecommunications.
  2. About 1500 public commercial enterprises controlled by the Union and State governments, i.e. government companies and corporations
  3. Around 400 non-commercial autonomous bodies and authorities owned or controlled by the Union or the States.
  4. 4400 authorities and bodies substantially financed from Union or State.

Does CAG’s jurisdiction extend to private companies?

Delhi Chief Minister Arvind Kejriwal has already ordered a CAG audit of power distributors in the national capital. Following the order, the CAG has asked for the details of accounts of Delhi’s three private power distribution companies.In his address at the Delhi Assembly, Lieutenant Governor Najeeb Jung said, “A CAG audit of the power distribution companies in the national capital from the time of privatisation shall be carried out. The government is willing to even consider cancelling the licences of the companies, which do not cooperate with the audit”.

Delhi’s three power distribution companies — controlled by Tata Power Ltd and Reliance Infrastructure have already expressed their discomfort about the audit. The move also sparked off a debate on whether CAG’s jurisdiction allows it to audit private companies.

The Delhi Court’s ruling clearly states that CAG has the power to audit all the revenue receipts of the government. Telecom companies pay a part of their revenue — between 3% and 8% in most cases — as their licence fees to the government.

The High Court further said “neither Rule 5 of the Telecom Regulatory Authority of India, Service Providers (Maintenance of Books of Accounts and other Documents) Rules, 2002 is ultra vires Section 16 of the Comptroller and Auditor General (Duties, Powers and Conditions of Service) Act, 1971 nor is Section 16 ultra vires Article 149 of the Constitution of India. The Rule and the Section fits perfectly into the constitutional scheme of every rupee flowing into the Consolidated Fund of India, by way of revenue, to be audited by the CAG”.

What are the different modes of audits followed by the CAG?

The CAG has two different ways of doing its audits- the first is a regulatory audit and the second is a performance audit. Under the regulatory audit, the CAG audits “whether the moneys shown as expenditure in the Accounts were authorised for the purpose for which they were spent”. Under this kind of audit the CAG also examines if all rules were followed while incurring expenditures and whether the approval of a competent authority was sought for the same. The CAG also conducts the propriety audit which takes into account “cases of improper expenditure or waste of public money”.

Performance audits are conducted to check whether government programmes have achieved the desired objectives and results at the lowest cost.

Major controversies surrounding the CAG

The biggest clash between the CAG and the Government of India took place during the tenure of Vinod Rai. The chief auditor’s – 2G, CWG, Coalgate- reports on all these issues left the UPA 2 grappling with charges of corruption. The former CAG drew criticism from the government on two counts- for computing a “notional loss” in its 2G report and for overstepping its mandate and commenting on government policies.

More recently, the appointment of the current CAG Shashi Kant Sharma was the reason for much debate over the fact that the CAG is selected without any pre-defined criterion. In response to a PIL filed in the Supreme Court challenging the appointment of Sharma as the CAG, the Finance Ministry argued:“In the light of the views expressed by the framers of the Constitution, the present PIL cannot seek to prescribe eligibility criteria, which were specifically omitted by the framers of the Constitution”.

The government said that any attempt to establish a criterion by which a CAG would be selected would amount to amending the Constitution.

Sources:

The author can be contacted at somi@small-screen.com

subscription-appeal-image

Power NL-TNM Election Fund

General elections are around the corner, and Newslaundry and The News Minute have ambitious plans together to focus on the issues that really matter to the voter. From political funding to battleground states, media coverage to 10 years of Modi, choose a project you would like to support and power our journalism.

Ground reportage is central to public interest journalism. Only readers like you can make it possible. Will you?

Support now

You may also like