Dr. B.R. Ambedkar on the floor of constituent assembly argued that the CAG’s office is the most important constitutional office as it is a guardian of public purse.
The issues and challenges faced by the CAG in performing its constitutional mandate of assisting the public accounts committee and the parliament of holding the govt. accountable faces the following challenges.
1] Issues related to the appointment procedure of CAG
Under Art 148 -151 the CAG is appointed by the president on the advice of Prime Minister and his Council of Ministers. The CAG’s appointment is in the hands of the executive without any role for legislature in the process. Given that the CAG’s findings may often be critical of govt. policies, govt. may appoint a more pliable individual or an individual with a conflict of interest. e.g. Shashikant Sharma’s appointment as the CAG in 2013 was questioned on the ground of his past tenure in the defense ministry where he supervised defense procurements. This could have easily led to the CAG going soft on the audit of defense procurements under his watch.
The 2nd ARC report has argued about the need to establish a bipartisan multimembered body for appointing CAG with a role for the opposition. e.g. A committee composed of the prime minister and leader of opposition and the law minister must head the selection process.
In RETHINKING PUBLIC INSTITUTIONS IN INDIA book, Amitabh Mukhopadhyaya argues that Public Account Committee (PAC) must also be consulted while appointing the CAG.
2] Scope of CAG audits
Currently the CAG performs compliance audits, financial audits and performance audits. Historically SAI (Supreme Auditing Institutions) across developing world have focused more on ‘low key’ functions of compliance and financial audits, while that of developed countries which are mature democracies have SAI which focus 70% of their time and resources on performance audits. Performance audits look into 3 Es. Efficiency, Effectiveness and Economy of govt. expenditures or issues which could affect revenue generation of the state as well. The current challenge before the CAG is to handle the criticism of its performance audits, specially when findings are critical of govt. policies. e.g. During the UPA-2’s regime, the CAGs report on 2G spectrum allocation and Coal Block allocation were critical of govt. policy having caused a huge revenue loss to the state and unduly benefiting the private players.
The other challenge before the CAG is over its potential scope to audit the private companies which provide services under a PPP model on behalf of the state or are in a revenue sharing agreement with the govt. The supreme court in the Association of Unified Telecom Services vs Union of India case, 2014 clarified the CAG’s jurisdiction over private companies in such cases if and when directed by the govt. e.g. The AAP govt. in 2014 requested the CAG to audit the accounts of private DISCOMs responsible for electricity distribution in Delhi on the charge of a potential discrepancy in reporting profits and operational losses. The 2016 draft report of CAG has pointed out a potential under reporting of profits by these private companies of upto 8,000 crores.
3] Quality of Audits
The quality of CAG reports had often been questioned specially when they criticize govt. policy. The CAG submitted itself to a peer to peer assessment conducted by INTOSAI (Int. organization of Supreme Auditing Institutions) in 2012. The INTOSAI assessment for the 2010-11 period analyzed 35 reports of CAG to evaluate their quality. It found 50% of CAG reports could have been more balanced in context and findings in 50% of the reports were not supported by enough evidence.
However despite these shortcomings the CAG reports were found by PAC and COPU ( .. .. Public Undertakings – assesses performance of PSUs) have found these CAG reports to be an invaluable and authoritative reliable source of information to discharge their duties.
INTOSAI recorded these observations of PAC and recommended more regular peer-to-peer assessments (once in 3 years) to monitor whether quality of CAG reports have improved over time or not.
4] The Delay in Tabling of Reports.
The Delay in Tabling of CAG reports and PAC’s findings on govt. policies and their impact has often been intentionally done by ruling govt.s as this could be a major embarrassment for them. However it deprives the legislature and the public of a quality source of evidence to hold the executive accountable.
2nd ARC and the PAC have repeatedly argued about the need for a time bound procedure for tabling CAG reports and PAC findings preferably within a year before the parliament.