The CAG and the Attorney General

The first principle

In a parliamentary system the legislature grants money and the executive spends it, so the legislature needs someone it can trust to tell it how the money was actually spent; and a government that acts through law needs a lawyer it can trust to tell it what the law allows. The Constitution creates two such officers. The Comptroller and Auditor General (CAG) looks backwards at public spending on behalf of Parliament, and the Attorney General (AG) advises and represents the Union government. Their design differs for one reason: the CAG must be independent of the executive he audits, while the AG is meant to be its trusted counsel.

The core

The CAG: appointment and independence

• Appointment and term. The CAG is appointed by the President by warrant under his hand and seal (Article 148) and holds office for six years or until the age of 65, whichever is earlier, under the Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Act, 1971 (the DPC Act).
• Removal. He can be removed only in the manner of a Supreme Court judge, by an address of both Houses passed by a special majority on the ground of proved misbehaviour or incapacity, so he does not serve at the pleasure of the President.
• Financial security. His salary, equal to that of a Supreme Court judge, is fixed by Parliament and cannot be cut to his disadvantage during his term, and the administrative expenses of his office, including staff salaries, are charged on the Consolidated Fund of India.
• No reward to look forward to. After leaving office he is not eligible for any further office under the Union or a state government, which removes the temptation to please the government of the day.
• Ambedkar's view. In the Constituent Assembly B. R. Ambedkar called the CAG probably the most important officer under the Constitution, because he is the means by which Parliament's control over public money is made real.

What the CAG audits and reports

• Scope. Under Article 149 and the DPC Act, the CAG audits all expenditure from the Consolidated Fund, the Contingency Fund and the Public Accounts of the Union and each state; government receipts; trading and manufacturing accounts of departments; government companies and statutory corporations; and bodies substantially financed by government grants.
• Reports. Under Article 151, reports on the Union's accounts go to the President and on a state's accounts to the Governor, who must lay them before Parliament or the state legislature.
• The follow through. The Public Accounts Committee (PAC) examines these reports, takes evidence from secretaries, and asks ministries for action taken notes, which is why the CAG is called the friend, philosopher and guide of the PAC. The Committee on Public Undertakings plays the same part for reports on public sector enterprises.

Dimensions

Legality, propriety and performance

• Legality, or regularity, audit. This asks whether money was spent on the purpose for which Parliament granted it, under proper authority and according to rules. It is the CAG's obligatory duty.
• Propriety audit. This asks whether the spending was wise, faithful and economical, that is, whether a prudent person would have spent his own money that way. It is discretionary, but it is what makes the CAG more than a book keeper.
• Performance audit. This asks whether a programme achieved its objectives with economy, efficiency and effectiveness, for instance whether a housing scheme actually produced houses that people live in. It has become the most visible part of the CAG's work, though the DPC Act does not mention it expressly.

Propriety in action

• 2G spectrum (2010). The CAG's performance audit of spectrum allocation in 2008 estimated a presumptive loss of up to ₹1.76 lakh crore, because licences were given at 2001 prices on a first come first served basis instead of by auction. In 2012 the Supreme Court cancelled 122 licences.
• Coal blocks (2012). The audit of coal block allocation estimated a financial gain of about ₹1.86 lakh crore to private allottees, because blocks were allotted without competitive bidding. In 2014 the Supreme Court cancelled 214 allocations.
• What they show. The reports did not stop at asking whether a rule had been followed; they questioned whether the method served the public interest, which is propriety and value for money. Critics called the loss figures notional, but the policy shift to auctions of spectrum and coal that followed shows their effect.
• Private partners. In Association of Unified Telecom Service Providers v Union of India (2014) the Supreme Court held that the CAG can audit the accounts of private telecom companies to check the revenue they share with the government, since that revenue belongs to the public.

Limits on the CAG

• After the event. Audit comes after money has been spent, and unlike the Comptroller in the United Kingdom, the Indian CAG has no control over the issue of money from the Consolidated Fund.
• Secret service expenditure. He cannot call for details of such spending and must accept a certificate from the competent authority that the money was spent as authorised.
• No power of enforcement. He can only report; action depends on the PAC and the government, and many reports are discussed years after they are tabled, if at all.
• Separation of accounts. Since the departmentalisation of Union accounts in 1976 the CAG no longer compiles the Union's accounts, which lessened his workload but also his day to day view of transactions.

In practice

The Attorney General

• Appointment and tenure. Under Article 76 the President appoints as AG a person qualified to be a Supreme Court judge. He holds office during the pleasure of the President, has no fixed term, and receives such remuneration as the President determines; by convention he resigns when the government changes. M. C. Setalvad was the first AG.
• Duties. He advises the Government of India on legal matters referred to him, performs other legal duties assigned by the President, and under the Law Officers (Conditions of Service) Rules, 1987 appears for the Union in the Supreme Court, in High Courts when required, and in Presidential references under Article 143.
• Rights. He has the right of audience in all courts in India (Article 76(3)). Under Article 88 he can speak in either House, in a joint sitting and in any committee of which he is named a member, but cannot vote, and Article 105(4) gives him the privileges of a Member of Parliament.
• Limitations. He must not advise or hold a brief against the Government of India, must not advise or appear for another party in cases in which he may be called upon to advise or appear for the government, and must not defend an accused in a criminal prosecution or accept a company directorship without permission. He is not a full time counsel, so private practice is allowed, and he is not a member of the Cabinet; legal matters at the political level belong to the Law Minister.
• Other law officers. The Solicitor General and the Additional Solicitors General assist the AG, but their offices are created by the 1987 Rules, not the Constitution. The Advocate General of a state is the constitutional counterpart of the AG, appointed by the Governor under Article 165 with similar qualifications and rights in the state legislature (Article 177).

Issues and way forward

• Appointment by the executive alone. The government that is audited chooses the CAG. Selection by a committee that includes the Leader of the Opposition, as for the Central Vigilance Commissioner, would add credibility.
• No statutory base for performance audit. Amending the DPC Act to cover performance audit, audit of public private partnerships and access to records of private partners would end disputes over jurisdiction.
• Delay and weak follow up. Reports reach Parliament late and the PAC cannot examine most of them. Time limits for action taken notes and for tabling would close the loop.
• Local bodies. Panchayats and municipalities spend large sums with weak audit; stronger technical guidance by the CAG over state local fund auditors would help.
• A single officer or a board. Some have proposed a multi member audit body, like the Election Commission, to spread the load and add expertise; others argue that a single officer is more clearly accountable.
• Independence of the AG. Because he serves at pleasure, his advice can appear political. Treating his opinions as advice to the government rather than to the party in power, and publishing major opinions when the government relies on them in public, would strengthen the office.

Common confusions

• CAG and PAC. The CAG audits and reports; the PAC, a committee of Parliament, examines the report and fixes responsibility. The CAG is an officer, not a member.
• Legality and propriety audit. Legality asks whether a rule was followed and is compulsory; propriety asks whether the money was spent wisely and is discretionary.
• AG and Law Minister. The AG is a lawyer who advises; the Law Minister is a member of the Council of Ministers responsible to Parliament.
• AG and Solicitor General. The AG is a constitutional office under Article 76; the Solicitor General is a statutory rule based post below him.

For the exam

• Keyword bank: Comptroller and Auditor General, Article 148, Article 151, DPC Act 1971, legality audit, propriety audit, performance audit, value for money, Public Accounts Committee, secret service expenditure, Attorney General, Article 76, Article 88, right of audience, Advocate General.
• Practise the previous year questions on this topic →
• Use in an answer:
  • Introduction with data: "The CAG's 2010 audit of 2G spectrum allocation, with a presumptive loss estimate of ₹1.76 lakh crore, showed how a propriety audit can change national policy, in this case towards auctions."
  • Introduction with a quote: "B. R. Ambedkar described the Comptroller and Auditor General as probably the most important officer under the Constitution, because he keeps Parliament's control over public money from being a formality."
  • Conclusion: "The CAG's value lies not in the size of the losses he estimates but in the questions he forces Parliament to ask, which requires faster follow up by the PAC and a statutory base for performance audit."
  • Conclusion: "The Attorney General serves the government but not the party in power; his worth depends on advice that tells the government what the law is, not what it wants to hear."