CAG has come a long way from an institution created to set the British finances right after the 1857 revolt.
In the early years of its inception and until as late as the 1980s, no reference to a private company was ever made in any CAG report. They remained anonymous in the reports as A, B or X company to whom the exchequer lost money or from whom it failed to recover money. CAG not only started naming the favoured companies in the 80s but also cast its net on private entities, their holding structure and their acts of policy violations. Not surprisingly, CAG’s recent report on the distribution of 2G licences and spectrum, while raising questions on the working of the Department of Telecommunications, explicitly named and indicted private companies like Unitech, Reliance Telecom, Loop, Swan and Videcon for not meeting the requirements of the licensing policy.
CAG reports, whether on spectrum or Commonwealth Games, have heaped a lot of embarrassment on the government and private sector companies. Those who have closely worked with the institution, however, say that CAG’s job is not to look at corruption. “CAG and the auditing job it undertakes should not be confused with that of the Enforcement Directorate. It cannot prosecute, only examines, whether a particular decision has been in line with the norms,” says an Indian Audit and Account (IA&A) service official who worked on the 2G audit before joining the government as an executive.
T N Chaturvedi — the seventh CAG of independent India and the man who blew the lid off the infamous Bofors deal, turning the Congress’ dream run of 1984 into a defeat in 1989 — also says that CAG’s brief does not include detecting corruption. “Its basic function is to see whether or not all the resources of the different segments of the government are raised in line with the law and spent for purposes approved by Parliament. The leakages and irregularities in these two (raising and spending) lead to problems.”
CAG and the Indian Audit and Accounts department functioning under it constitute the Supreme Audit Institution in the country. In states, the institution looks after both audit and accounts as the accountant general. At the Centre, it confines itself to audit, with the Controller of Government Accounts doing the accounting job. The CAG office is currently headed by the 11th comptroller and auditor general, Vinod Rai. Besides, there are five deputy CAGs and four additional deputy CAGs.
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Depending on the purpose, CAG can conduct compliance, financial attest, performance or some offbeat audits like social and environment. While compliance audit is done on select transactions, like purchases by the Public Works Department, and entails raising questions related to financial propriety, financial attest audits are largely supplementary in nature. An CAG official points out to the emphasis now being laid on performance audits that go forward to see whether desired results of a government programme are being generated.
As opposed to private auditors, who are often accused of turning the other way when company managements rig the accounts, the very creation of CAG through a chapter in the Constitution ensures there is autonomy. But the fact that the head of the institution is appointed by the government and usually from the Indian Administrative Service often raises doubts. A former CAG says that the appointment to high offices also depends on how close a person is to the political head.
Former chief vigilance commissioner, Pratyush Sinha, however, denies any interference from the government. “Both CAG and the Central Vigilance Commission (CVC) are not subject to any government interference, but their recommendations are not binding on the government either. This fact affects the effectiveness of both the bodies.” In many cases, their reports have resulted in action against individuals, though it may not have been to the desirable extent. There is perhaps a need to make some of their recommendations binding.
CAG observations could act as an input for ministries to improve their functioning. “Things pointed out by CAG can rectify a problem. The government can also take civil and criminal action on the basis of its recommendations. CAG, in that sense, helps in administrative functioning and optimisation of resources, as approved by the legislature,” says Chaturvedi. He equates CAG with the Supreme Court. Both are constitutional bodies with the government having no power to remove the judges or the CAG. They can be removed only by Parliament through impeachment.
Though CAG, like the Supreme Court, is not a political organisation, its reports can cause political turmoil. Chaturvedi, who faced criticism for joining the Bharatiya Janata Party after having been a CAG, says politicisation is inevitable, since the reports are placed in Parliament. “CAG is a non-political body, but Parliament is a political one. It will raise questions. In a democracy, it is natural that problems are trigged if things are not done properly.”
The changing role of CAG has also a lot to do with the government policy and the quantum of money being handled in the economy. It now also looks at public-private partnership projects, where the government does the viability gap funding for private developers. Even in the case of the petroleum ministry approving higher cost of development of Reliance Industries’ D6 block, CAG decided to audit the case, as it had a bearing on the quantum of revenue flowing to the government.
Since primary source of audit for CAG are the documents provided by the companies and government departments concerned, CAG has proposed amending the Duties, Powers and Conditions of Service Act to get statutory power to audit PPP projects. The proposed amendment will also bring Panchayats in its ambit. “About 53 per cent of the government’s expenditure currently remains out of audit. These amendments will enable greater scrutiny,” says the CAG official. The amendment also proposes fixing a time limit for tabling the reports, since the government often delays unfavourable reports.
Those who are answerable to organisations, like the CVC and CAG, often blame stringent oversight mechanism for delay and dithering over crucial decisions. But, as Sinha points out, vigilance and audit are both management tools and there is no adversarial relationship between them and the decision makers. “Both insist on transparency, equity and objectivity in decision making and implementation of government policy. Both emphasise normative behaviour on the part of public servants.” If decisions are taken in a fair and transparent manner, there is nothing to fear, especially since the Supreme Audit Institution has evolved from a mere inspector of government accounts to its conscience keeper.
CAG's 'Noddy' report books
Audit and inspection may sound scary, but some of the CAG reports now resemble the small-sized Noddy books. The current CAG, Vinod Rai, brought the new concept to create public awareness about its reports, mostly forgotten after being tabled in Parliament. Reports that touch the day-to-day life of public, like that on railway cleanliness, are published in this format. Some 14 such picture books, carrying snapshots and a CD with detailed report in their jackets, have already been released.
The controversial report on the issue of allocation of 2G licences and spectrum was tabled in Parliament on November 16, 2010. Two days before that, A Raja resigned as the communications minister, as the controversy had preceded the tabling, with the media splashing the report much earlier. The Congress accused the CAG of leaking the reports. On this, former CAG T N Chaturvedi says, the comptroller and auditor general is not administered the oath of secrecy, though propriety demands that the reports be first tabled in Parliament.