APPOINTMENT OF CAG NEED FOR TRANSPARENCY

B P Mathur*

The Comptroller and Auditor General ( CAG) plays a vital role in ensuring supremacy of Parliament over the Executive. He examines whether money voted by Parliament has been spent with due regard to wisdom, faithfulness and economy and censures Government, if money has not been put to good use. His reports pointing out misuse, wastage and imprudent use of public money is placed in Parliament and examined by its committee on Public Accounts. To enable CAG to perform his job independently, the Constitution has given him a high status, equivalent to that of a Supreme Court Judge and he cannot be removed save by a resolution by both Houses of the Parliament.

Every year CAG submits 15 to 20 Audit Reports to Parliament relating to Central Government transactions, covering an expenditure of Rs 5,50,000 crs and revenue of Rs 5,000,00 crs. In addition he submits separate Audit Reports for each of the 28 State Governments to their respective Legislatures, covering an expenditure of Rs5,00,000 crs and revenue of Rs 4,50,000 crs. The reports cover diverse subjects such as poverty alleviation programmes, defence deals, privatization of PSU's and efficiency of Revenue department in collecting taxes. CAG's job is of great responsibility needing high degree of professional expertise and acumen. The Chairman of the Constituent Assembly Dr B R Ambedkar had described CAG, ` as the most important officer under the Constitution' and Dr Rajendra Prasad the first President of India had said , ` he has power to call to account any officer, however highly placed, so far the State money is concerned'.

Lack of Effective Financial Control in Government

Today the finances of government, particularly in the States are in a sad state of mismanagement. The States follow an archaic system of accounting, a legacy of the British Raj, as the Accountant General of the State functioning under the CAG, keeps the accounts, rather than the spending ministries. The 28 States have spent a sum of Rs 2,65,000 crs in excess of budgetary grant (upto March 2005- the latest year for which data is available), and the `excess expenditure' has not been `regularized' as required under Art 205(b) of the Constitution, for a period ranging from one to ten years. The accounts in the Central Government were decentralized in 1976, and now kept by each ministry under the Controller General of Accounts, substantially improving the information flow needed for expenditure management. Most staff handling accounts and finance work in the government departments, both Central and States, have no professional training or qualification, and are ill equipped for the job. The system of financial management in Ministries and Departments is rudimentary with practically no internal control, resulting in all round mismanagement of finances. Hundreds of autonomous bodies receive Government grants, but do not submit proper and timely accounts, divert money for unauthorized purposes and yet continue to get grants year after year. The CAG has been unable to use his authority to improve financial management in Central and State Government departments and public funded bodies.

The Appropriation and Finance Accounts of Government, after they are certified by CAG, are presented to Parliament and State Legislatures, more than a year after the close of financial year,

* B P Mathur is former Dy CAG and author of book `Government Accountability and Public Audit'. B P Mathur@hotmail.com

thus ceasing to be of real utility in controlling expenditure and in preparation of budget. The delayed submission of Appropriation Accounts to Legislative Assembly, by the Accountant General Bihar who works under CAG, was a contributory factor in the Bihar fodder scam. In eight years from 1987-88 to 1994-95, the Animal Husbandry Department drew Rs 505 crs over and above budgetary Grant, defrauding the Exchequer, while the CAG disowned his own share of responsibility by pleading that Treasury Officers and Officials of Animal Husbandry Department did not submit vouchers and cooperate with him. The Telgi stamp paper scam in which hundred of crores of Government revenue was lost, was facilitated due to lack of effective audit, as the Security Press Nasik and Registrar of Stamps in different States, are audited by offices functioning under CAG. Similar was the position regarding LOC scam in Assam, and Personal Ledger Account bungling in West Bengal, where crores of rupees of public money was fraudulently drawn from the Treasury, while CAG watched helplessly.

Need to Improve Working of Audit Department

Officers of Audit Department are seriously handicapped in carrying out effective investigation, as they possesses no legal powers to force departments to produce records and documents. They also do not have powers to summon officers to give evidence on oath so that they can come to conclusive findings. All over the world, Supreme Audit Institutions have been entrusted adequate powers to carry on their investigation and have authority to secure production of records, and punish officials for perjury, if they deliberately give false information. The CAG Act of 1971 empowers Government and the CAG to frame rules to make functioning of the Audit Department more effective, but not a single rule has been made so far during last 35 years of the existence of the Act. There is need to entrust adequate powers to audit officials so that they can effectively discharge their responsibilities.

The Commission to Review the Working of the Constitution (CRWC) headed by Justice Venkatachaliah, had made several recommendations to improve the working of the Audit department (2002). It has recommended constitution of an Audit Board at the apex level, instead of all powers concentrated in one person namely CAG, for better discharge of audit responsibilities. CRWC had also recommended greater authority and powers to State Accountant General's for effective audit of State Government's transactions and an external review of CAG's organization. But these recommendations have been pigeonholed.

Need for Professional Expertise in persons appointed as CAG

Much of the problem of Audit department is due to the fact that persons appointed as CAG in recent past do not have professional expertise of accounts and audit and unable to give much needed leadership and direction. The first few CAG's which were appointed soon after Independence were professionals of high caliber such as V Narahari Rao, Ashok Chanda and A K Roy who could bring about major reform in the working of the government. However, from 1976 onwards Indian Administrative Service ( IAS) officers holding the post of Secretary to Government of India, nearing superannuation, have been appointed as CAGs, largely because they are close to centre of power. This has seriously eroded morale of Audit personnel, and effected its efficiency. Today Audit Department has ceased to be an effective instrument of control over public fund, which it once was.

The Chairman of the Public Accounts Committee, Members of Parliament, enlightened citizens, and socially active NGO's have been agitating for many years for transparency in the appointment of CAG, but Government is unmoved. Government appointed a new CAG in January 2008, a former IAS officer who is not known to possess any technical qualification in audit and accounts nor any practical experience. An NGO- Public Cause Research Foundation, actively supported by Common Cause, has filed a PIL in the Supreme Court in November 2007, seeking direction of the Court to Government, to lay down criteria and guidelines for appointment to the post of CAG, and prevent arbitrary exercise of power by the Government.

CAG an agency of Parliament

During the last hundred years, in most democratic countries public audit systems have undergone major transformation and have become an effective instrument to enforce accountability of the Executive. Initially, finance, accounts and audit functions were combined and audit departments in most countries straddled a boundary between the executive and legislature. However, as democracy progressed and Parliament started asserting its right of supremacy, public audit is increasingly been recognized as a legislative branch agency, helping to rein in an `errant executive', which develops a tendency to behave arbitrarily and capriciously, once elected and given reins of office. Therefore most advanced democratic countries have made statutory enactments requiring appointment of head of Supreme Audit Institutions to be ratified by Parliament, so that his independence from Executive is secured.

In Britain, whose conventions we follow, Audit Act was amended in 1983, and a provision was made, which requires that, his selection be made by the Prime Minister in agreement with the Chairman of the Committee on Public Accounts, and be ratified by House of Commons. In Australia, the Governor General appoints the Auditor General only after the Joint Committee of Public Accounts approves the name. Similar changes were made in other Commonwealth countries such as Canada and New Zealand, which requires their House of Representative to approve the appointment of Auditor General. In USA , a five member commission consisting of President of Senate, Leaders of majority and minority party of the House, recommends the names to President, who appoints the Comptroller General, after obtaining consent of the Senate. In countries with diverse systems such as Germany and Japan, South Korea and Thailand, the appointment of head of State Audit is done with the approval of their National Assembly.

A Parliamentary Committee should appoint CAG

As Indian CAG's functions are analogous to that of other truly democratic countries, the Parliament should have full confidence in the person appointed to the post and should have a decisive say in his selection. A committee consisting of Speaker, the Leader of Opposition in Lok Sabha, and the Chairman of the Public Accounts Committee along with the Prime Minister, and Finance Minister need to be constituted to select the most suitable incumbent. The Public Accounts Committee should be entrusted the task of identifying suitable candidates and preparing a panel, as is the practice in some Commonwealth counties. There is also need to lay down qualification for the post and only a person who has thorough knowledge of government accounts and audit with extensive on hands experience, should only be appointed.

There is little doubt that a person whose responsibility is to comment, whether public funds have been put to good use and examines whether public officials, including high functionaries like ministers, have not used public money for private gain, should not owe his appointment to the very same Executive, whose actions he is going to judge.