Sambhav-2025

Approach Briefly introduce the Comptroller and Auditor General (CAG) and its constitutional role. Discuss the significance of CAG in public financial management. Mention the limitations in CAG’s audit powers (institutional, operational, legal). Suggest reforms needed to enhance CAG’s effectiveness (structural, procedural, technological). Conclude suitably.

Introduction

The Comptroller and Auditor General (CAG) of India, under Article 148 of the Constitution, ensures accountability in government expenditure. However, despite being a constitutional authority, CAG’s auditing powers face institutional, operational, and legal limitations, which hinder its ability to ensure effective financial oversight.

Body

Significance of CAG in Public Financial Management:

• Ensures fiscal transparency and accountability by auditing government expenditures and policies.
• Highlights inefficiencies, financial irregularities, and corruption, ensuring corrective action (e.g., CAG Report on Ayushman Bharat, 2023, exposing discrepancies in health insurance claims).
• Evaluates the effectiveness of public spending, promoting better governance (e.g., CAG Report on Indian Railways, 2023, which flagged financial distress due to increasing operating costs).

Limitations in CAG’s Audit Powers:

• Institutional Limitations:
  • No direct enforcement power: CAG’s reports are recommendatory, and implementation depends on Public Accounts Committee (PAC) and government response.
  • Limited audit scope on private entities: Many private firms receiving public funds fall outside CAG’s jurisdiction, restricting full financial accountability.
• Operational Challenges:
  • Delayed audit cycle: CAG audits expenditures post facto, reducing its ability to prevent financial mismanagement in real-time.
  • Dependence on government data: Reports rely on self-declared financial statements from departments, increasing the risk of data manipulation.
  • Lack of specialized auditing skills: Emerging sectors like healthcare schemes (e.g., Ayushman Bharat) and infrastructure projects (e.g., PMGSY) require expert auditors.
• Legal Constraints:
  • No authority over PPP projects: CAG cannot audit Public-Private Partnerships (PPPs) despite significant public fund involvement.
  • Limited power over state government finances: States often resist CAG audits, citing federal autonomy under Article 282.
  • Delayed legislative action on reports: CAG findings face delays in parliamentary discussions, weakening their impact (e.g., Railways Audit Report 2023, highlighting inefficiencies but awaiting policy correction).

Reforms Needed to Enhance CAG’s Effectiveness:

• Strengthening Institutional Authority:
  • Make compliance with CAG reports mandatory, ensuring timely action on audit findings.
  • Expand CAG’s jurisdiction to audit private firms and PPP projects, preventing financial opacity
• Enhancing Audit Mechanisms:
  • Implement real-time auditing through AI and blockchain to prevent financial irregularities (e.g., AI-driven audit mechanisms used in Sweden).
  • Conduct performance-based audits, evaluating not just expenditure but also policy effectiveness (e.g., CAG’s report on PMGSY, highlighting poor road quality despite high spending).
• Legal and Structural Reforms:
  • Amend the CAG (Duties, Powers, and Conditions of Service) Act, 1971, granting power to audit state-funded private projects and welfare schemes.
  • Ensure time-bound discussions in Parliament on CAG reports to enhance their impact.
• Capacity Building and Technological Advancements:
  • Train auditors in forensic accounting, digital finance, and AI-based audits to strengthen financial scrutiny.
  • Use Big Data analytics for risk-based audits (e.g., UK’s National Audit Office uses predictive analytics to detect financial fraud).

Conclusion

CAG is a crucial pillar of financial accountability, but institutional, operational, and legal constraints reduce its effectiveness. Strengthening its audit powers, expanding its scope to PPP projects, and leveraging technology can enhance transparency, financial discipline, and policy effectiveness. Given the scale of public spending, a reformed and empowered CAG is essential for good governance and public trust in India.