(Sample Material) IAS Online Coaching : Polity - Comptroller & Auditor General of India

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Subject: Polity

Topic: Comptroller & Auditor General of India

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Public audit is a vital instrument of ensuring supremacy of Parliament over executive and enforcing public accountability. Public audit institutions developed over time to help legislatures to implement the power of the purse. This power had two essential elements: the granting of the moneys and supervision of the expenditure. State audit in its present form was introduced first time in Great Britain as an integral part of parliamentary control over national finance with the enactment of Exchequer and Audit Department Act in 1866.Thc Act required all departments for the first time, to produce annual accounts known as appropriation accounts. The act also established the position of Comptroller and Auditor General (C&AG) The results of C&AG’s investigations were considered by a dedicated parliamentary committee called the Committee on Public Accounts thus establishing a circle of parliamentary financial control.

The system of Government accounting and auditing and the organizational of the Indian Audit and Accounts department (IAAD) as it exists today in our country is the legacy of British rule.CAG is the head of the Indian audit & Accounts department.

The Indian Constitution gives special status to Comptroller & Auditor General (C&AG as laid down in Articles 148 to 151. The Act gives authority to C&AG to audit all expenditure from and receipts into the consolidated fund of India and the States. It also authorises C&AG to audit the receipts and expenditure of bodies or authorities substantially financed by loans or grants from Union or State or Union Territory. Article 151 of the Constitution prescribes that Audit Reports on the accounts of Union and the States be submitted to Parliament /State Legislature.

The importance of the Institution of CAG is such that it needs to be ensured independence for effective functioning. There are several provisions enshrined in the Constitution to safeguard his independence.

  • He is appointed by the President of India by warrant under his hand and seal and his oath of office requires him to uphold the Constitution of India and the laws made there under

  • He can be removed from office only on grounds of proven misbehavior or incapacity after an address by both Houses of Parliament supported by a two-thirds majority.

  • His salary and conditions of service cannot be varied to his disadvantage after appointment.

  • He shall not be eligible for further office under the Government of India or of any State after recruitment.

  • His administrative powers and the conditions of service of persons serving in the Indian Audit and Accounts Department shall be prescribed by rules made by the President only after consulting him.

  • The administrative expenses of his office are  charged  upon the Consolidated Fund of India and are not subject to beg voted by Parliament.

Although India has a federal setup, the Constitution provide for a unitary audit by the Comptroller & Auditor General, who conducts audit of the accounts of both the Union and State Governments.

The duties, powers and conditions of service of the Comptroller and Auditor General are laid down in the CAG’s (Duties, Powers and Conditions of Service) Act, 1971.

The Statutory duties of the CAG include audit of:-

  • Receipts and-expenditure of the Union and the State Governments accounted for in the respective Consolidated Funds.

  • Transactions relating to the Contingency Fund and the Public Accounts of Union as well as States.

  • Trading, manufacturing, profit and loss accounts and balance sheets and other subsidiary accounts kept in any Government Department.

  • Accounts of stores and stock kept in Government organisations, Government companies and Government corporations whose statutes provide for audit by the CAG.

  • Authorities and bodies substantially financed from the Consolidated Funds of the Union and the States (Where the grant or loan is not less than rupees twenty five lakh and the amount of such grant or loan is not less than seventy-five percent of the total expenditure of that body or authority, such body or authority is considered to be substantially Financed).

  • Any body or authority even though not substantially financed from the Consolidated Fund at the request of the President or the Governor.

  • Accounts of bodies and authorities receiving loans and grants from the Government for specific purposes.

  • He audits the receipts & expenditure of the Centre & each state to satisfy himself that the rules & procedure in that behalf are designed  to secure an effective check on the assessment ,collection & proper allocation of revenue.

  • He audits all transactions of the Central & state governments related to debt,sinking funds,deposits ,advances ,suspense accounts & remittance business.

  • He advises the President with regard to prescription of the form in which accounts of the Centre and states shall be kept.

  • He submits his audit reports relating to the accounts of the Centre/State to President/Governor  who shall in turn place them before both the houses of parliament/state legislature

  • He ascertains the net proceeds of any tax or duty .His certificate is final.

  • He acts as a guide to the Public Accounts committee of the Parliament.He compiles & maintains the accounts of state governments..

There is special arrangement for the audit of Government companies i.e. where equity participation is 51 per cent or more. The primary auditors of these - companies are Chartered Accountants, appointed by the Union Government on the advice of the CAG. The CAG gives directions to the Chartered Accountants on the manner in which the audit should he conducted lie is also empowered to comment on or supplement the reports of the primary auditors. In addition, he has the right to conduct audit of accounts of such companies and report the results of audit to Parliament and State Legislatures.

A special feature of the audit of such Government companies and Public Sector Undertakings is the periodic comprehensive appraisal of their working by the Audit Boards constituted by the CAG. Experts in disciplines relevant to tile operations of a PSU are appointed as members of these Audit Boards. The Audit Boards undertake comprehensive appraisals in the form of Audit Reviews of a few selected undertakings each year which are incorporated in the CAG’s Commercial Audit Reports. Similar Audit Boards have also been set up in a few States for audit of PSUs of the State Governments

Audit Reports on Public Sector Undertakings and Autonomous Bodies are sent to the concerned Ministries or Departments for being laid before the Parliament or the State Legislatures.

As laid down in the Constitution of India, the Audit Reports, after approval of the Comptroller and Auditor General of India, are presented to the President of India or Governors of the States for laying before the Parliament or the State Legislatures as the case may be. Public Accounts Committee (PAC) takes up the Audit Report few examination. The CAG acts as the “friend, philosopher and guide” for the PAC. In selection of the topics for oral evidence, PAC seeks the suggestion of the CAG/AG before calling the concerned heads of the departments for giving evidence. Based on the Audit Report and the evidence taken, the PAC frames its recommendations which are placed before both the Houses of Parliament/Legislatures. The Government sends. Action Taken Notes (ATNs) on the recommendations of PAC. The PAC prepares the final report taking into account the ATNs. In India the institution of CAG only audits the accounts after the expenditure is committed. It does not have control over the withdrawal of moneys as in Britain where the name Comptroller is justified.

CAG submits three audit reports to the President 

  • Audit reports on appropriation accounts

  • Audit reports on Finance Accounts

  • Audit report on Public Undertakings

Nature of Audit

   While fulfilling his Constitutional obligations, the Comptroller & Auditor General examines various aspects of Government expenditure. The audit done by C&AG is broadly classified into the following types:

Regularity Audit (Compliance or Financial)

It is an audit to ascertain whether the moneys spent were authorised for the purpose for which they were sent. Also, it is an audit to see that the expenditure incurred was in conformity with the laws, rules and regulations

Propriety Audit

The term ‘propriety’ means the rightness and moral quality of a course of action Propriety audit thus focuses on whether the expenditure made is in public interest Propriety audit focuses on aspects like whether public money is misused for the benefit of a particular person or section of community.

It extends beyond scrutinising the mere formality of expenditure to it wisdom and economy and to bring to light cases of improper expenditure or waste of public money. It is conducted to report whether all the expenditure sanctioned and incurred are need based amid all the revenues due to Government have been realized in time and credited to the government account. It is ‘Value for Money audit.”

Efficiency Audit

Efficiency audit is a the audit, which ensures that the money invested yields optimum results. The main purpose of efficiency audit is to ensure that

  • that investment is properly prioritized and channeled into most profitable lines.

  • there is most profitable utilization of investment

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