Auditor the target

Print edition : December 28, 2012

CAG Vinod Rai and PAC Chairman Murli Manohar Joshi at a function in New Delhi in October.-RAJEEV BHATT

The combative attitude of the UPA towards the CAG underscores its disregard for a constitutional authority and disrespect for democratic processes of debating policy decisions.

THE OFFICE OF THE COMPTROLLER AND AUDITOR General (CAG) of India has witnessed a successful transformation in the last two years, with the constitutionally mandated institution bringing to the fore issues of accountability in governance. In a decisive shift in its mode of functioning, the countrys supreme audit institution has, in its performance audits, raised doubts about the governments adoption and manner of implementation of key economic policies, instead of being merely an auditor of public expenditure. Further, by putting the audit reports in the public domain and inviting debate, the CAG has enhanced the participation of all stakeholders in influencing policy decisions.

However, the CAGs proactive approach has not gone down well with the United Progressive Alliance (UPA) government. It has cast doubts on the credibility of the CAGs findings and also accused the CAG of exceeding its brief by commenting on policy decisions. These attempts to discredit the CAG are seen as reactionary and inimical to the deepening of the polity through debate on key policy issues.

Commenting on the role of the CAG, Subrat Das, executive director of the Centre for Budget Governance and Accountability, said: The CAG as the supreme audit institution of the country has a legislative oversight over the government budget. It is an instrument of accountability enshrined in the Constitution of India to ensure that the executive remains accountable to the legislature. In the last two years, CAG reports have got the public attention they deserve.

The Lima Declaration 1977 of the International Organisation of Supreme Audit Institutions (INTOSAI) states that all public financial management, irrespective of whether and in what manner it is reflected in the general national budget, shall be subject to audit by the supreme audit institutions. Notwithstanding the international consensus on the CAGs role in holding governments accountable, the UPA government has tried hard to refute the findings in CAG reports on controversial issues such as 2G spectrum allocation. The government has also shown an unwillingness to engage in a constructive manner with the key actors in the democratic decision-making process. A more constructive approach would have led to a strengthening of institutions such as the Parliamentary Standing Committee and the Public Accounts Committee (PAC), which interact with the CAG and try to understand the flaws in policymaking pointed out in its reports.

November 16, 2010: DG of Audit R.P. Singh with Deputy CAG Rekha Gupta at a press conference after the CAG report was tabled in Parliament.-SHIV KUMAR PUSHPKAR

Following the re-auctioning of 2G spectrum freed as a result of the Supreme Courts cancellation of 122 licences issued on a first-come-first-served basis, Minister of Information and Broadcasting Manish Tewari remarked that the CAG should introspect on the processes it used to arrive at the figure of Rs.1.76 lakh crore loss to the exchequer.

Then came the so-called revelations of former CAG official R.P. Singh on how PAC Chairman Murli Manohar Joshi of the BJP had tried to influence the report on 2G spectrum allocation. This was used to launch a virulent attack on the CAG. R.P. Singh also said he was not in agreement with the final figure of the presumptive loss and questioned the methodology used to arrive at it. Interestingly, he did not reveal any of these reservations when he deposed before the Joint Parliamentary Committee (JPC) on the 2G scam in November 2011.

In a point-by-point rebuttal of the criticism of the CAG, Ramaswamy R. Iyer, Professor at the Centre for Policy Research, in an article in The Hindu , said: Considering the close working relationship between the CAG and the PAC, there is hardly anything strange about telephonic or other communication between the two.

Role of the CAG

The stepped-up attacks on the CAG are apparently a direct consequence of the CAGs performance audit, in which it questioned the way government expenditure is designed and the financial implications of policy decisions. In a paper titled Concept of Accountability and the Role of Supreme Audit Institutions in Indian Journal of Public Audit and Accountability, former CAG V.K. Shunglu underlined the significance of performance audits in the growth of the States development and welfare activities and the resultant increase in public spending. Performance auditing requires the auditor to go beyond the mere accounting of expenditure and examine the wisdom behind the decision to spend and also whether policy objectives were met, he wrote. Seen in this context, the attempt to discredit the CAG also casts doubts on the governments commitment to social welfare schemes given the fact that the CAG flagged several irregularities in the implementation of these schemes.

Shunglu also argued that the CAG did aid and supplement the efforts of government to provide good governance and it should be regarded by the executive as an ally in attaining the larger objective of ensuring [that] accountability can be achieved more appropriately. However, it is clear that the UPA is heading towards an adversarial relationship with the CAG, and this will only weaken the hold of all stakeholders in the executive decision-making process.

Speaking to Frontline, Yamini Aiyar, a Senior Fellow at the Centre for Policy Research, said: The process of questioning the functioning of the CAG should happen through proper parliamentary debates. The CAG has opened up a very important space for public discussion. Any political discourse which is critical of its role should not attempt to weaken the institutional features of the CAG as they exist today. The work of the CAG can be made more meaningful by strengthening institutions that act as an interface between the CAG and the government.

I&B MINISTER MANISH TEWARI. He questioned the CAG's presumptive loss figure in the 2G spectrum allocation.-AKHILESH KUMAR

Subrat Das explained: There is a need for greater engagement of the legislative committees such as the PAC, the JPC and the Committee on Public Sector Undertakings with the CAG. We need experts in various fields to be members of these committees so that they can make more informed use of CAG reports. The Parliament Secretariat also needs more institutional support, both at the Centre and in the States.

On the issue of monitoring social welfare schemes, Yamini Aiyar said the CAG should play an important role. Under the present system of accounting, money released by the Centre is booked as expenditure and this does not convey a real picture of the utilisation of funds. Thus, a proper audit is necessary to show how money flows into the system, she said

The C. Rangarajan Committee report on Efficient Management of Public Expenditure, published in July 2011, recommended that all planned expenditure by the Centre be brought under the purview of the CAG. This recommendation is yet to be implemented. About 31 per cent of planned expenditure is still not under the purview of a CAG audit, said Yamini Aiyar. This is because the CAG has the constitutional mandate to audit expenditure that is released through the state treasury, and a portion of the funds for social welfare schemes are released directly to autonomous independent agencies at the State level.

Decentralisation debate

A comment by Minister of State in the Prime Ministers Office V. Narayanaswamy regarding making the CAG a multi-member body fuelled a debate about decentralisation of the institution. The BJP termed the move unconstitutional and the Minister himself retracted the statement. A debate around decentralisation of the CAG is at present a misplaced policy priority as the larger and more significant issue at hand is the decentralisation of social schemes and financial powers granted to stakeholders at the State level.

In fact, there are risks to decentralising the office of the CAG. Shunglu observed that a federal structure having separate auditors at the national and State levels presents its own problems. [T]he finances of the States and the Central government are inextricably linked. The institutional mechanisms for financial devolution have so many common strands that it is not possible to perform one duty without also being authorised to do the other duty.

Said Subrat Das: The impression that the CAG is single-handedly auditing all the accounts of the Centre and the State governments is incorrect. The CAG consists of a cadre of competent, trained people who are carrying out accounting.

The emergence of conflicts between the executive and the institutions constitutionally mandated to hold it accountable are commonplace in a democracy. However, these conflicts need to be resolved in Parliament and not through verbal battles played out in the media. The combative attitude of the UPA government towards the CAG underscores its disregard for a constitutional authority and by extension disrespect for democratic processes of debating policy with the stakeholders concerned.

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