Comptroller and Auditor General of India: How to undermine an institution  

Institutions make and unmake a nation. As Abraham Lincoln had said, a country will preserve itself, but only people can preserve its institutions which make them free and happy. Strong institutions are the sine qua non for guaranteeing the individual liberties and collective happiness of a nation. The institution of the CAG, the Indian Audit & Accounts Department (IA&AD), is arguably one of the strongest pillars of our democracy - its integrity, Independence and professionalism are invaluable assets to the nation that cannot be compromised under any situation.

Naturally, the process of appointment of the CAG would always raise questions and apprehensions on these counts. It is indeed a matter of shame that even after 73 years of Independence, we have not been able to institutionalise a transparent procedure for the appointment of an officer described by Dr B. R. Ambedkar as “probably the most important officer in the constitution of India”.

The complete opaqueness and arbitrariness surrounding the procedure of appointment of the CAG in which the executive enjoys absolute discretion has often raised allegations of patronage politics, not without reason. But the executive knows that the uproar would soon die away and public memory would fade into oblivion. When the next appointment is made, the cycle will repeat.

Any good democratic institution has a succession plan and it was so for the IA&AD till 1978 when the senior most Deputy CAG used to be appointed as the CAG. But ever since then, only an IAS officer, surely in the good books of the powers that be, has always been appointed as the CAG. This time also, it was no different, except that for the first time, the new CAG is junior to as many as four Deputy CAGs and belongs to the same batch of civil services as three others. For a department respected for its professionalism, integrity and technical competence, this is indeed demoralising. One of the Deputy CAGs has already proceeded on long leave, presumably in protest, and if the others follow suit, it will expose the Government to acute embarrassment before the international community; after all, the IA&AD and its head are highly respected internationally in the community of public auditors represented by the International Organisation for the Supreme Audit Institutions (INTOSAI), which is a body of all the public auditing institutions in the world.

India is signatory to the UN-approved INTOSAI declarations and covenants like the Lima Declaration or Mexico Declaration which resolutely assert the Independence of the public auditing institutions, on the selection of audit topics to planning, programming, conduct, reporting, and follow-up of audits.

Any perception of interference in this Independence through the appointment of the CAG is sure to raise eyebrows which may damage the international reputation of the CAG, who currently heads the UN Panel of External Auditors, with responsibility for auditing several international organisations. The unstated logic for selecting the CAG from among the IAS is that the CAG is not just an accountant and needs to possess a much broader perspective which is precisely why the Constitution has not prescribed any qualification for him. An IAS Officer who has served as Secretary to an important Ministry or department like Finance, Defence, Home etc. is perceived to have that kind of a perspective and experience, hence they are the ones appointed as the CAG.

The underlying assumption is that IAS officer is more likely to take a broader view of public policy and related issues; an IA&AS officer is more likely to take a narrower view dominated by financial perspective which often does injustice to the administrative problems related to policy implementation. The counter argument is that an IAS officer would be more loyal to the Government that appointed him rather than an IA&AS Officer who is trained to criticise the government.

As per the Constitution, Articles 148-151, and the provisions of the Comptroller and Auditor General’s (Duties, Powers and Conditions of Service) Act, 1971 which together govern the functioning of the IA&AD, the CAG is responsible, inter alia, for auditing the receipts and expenditure of the Central and State Governments, bodies and authorities substantially financed from the Central or State revenues and government companies and commercial undertakings.

He prescribes the formats for government accounts, and acts as the friend and philosopher guide to the Public Accounts Committees in their examination of the audit reports. Even by the wildest stretch of imagination, it is indeed inconceivable how anyone without a deep knowledge of accounts and audit would be able to discharge these duties cautiously and conscientiously, without fear or favour, as the CAG is supposed to do.

Two kinds of problems arise when an IAS officer is appointed as the CAG – first, due to the lack of adequate knowledge and understanding of the technical issues involved and second, due to the unescapable conflict of interest that automatically follows. Let me recall from my personal experiences at the Office of the CAG where I had spent 5 years as Director General. Audit has to adjust itself to any changes in the external environment, and one such change was necessitated when the new Indian Accounting Standards were made applicable to corporate entities including the government companies which are audited by the CAG.

Unlike many government departments where hierarchies rule the roost, the IA&AD functions in a remarkably democratic manner where all major issues are debated and contested through comprehensive, no-holds-barred, brainstorming sessions. So, in a meeting presided over by the then CAG and attended by all the senior officers in his office including myself, two officers made a presentation highlighting the difficulties that the new accounting regime would pose to audit and the pros and cons of the strategies to be followed.

The issues were then dissected and discussed threadbare by others in a highly technical discussion that would not make much sense to a laymen, but the CAG who had by then spent a few years in the Department should have had no problem. But he kept on watching the entire drama in conspicuous silence, breaking it only at the end of the debate with a statement that I will never forget - he hoped that the deputies had understood the technical issues involved since he could not understand any.

It was hardly suggestive of the kind of inspiring leadership the CAG is supposed to provide. On another occasion, another CAG was unable to grasp the technical contents of an audit report and told so to the Deputy CAG, a perfect gentleman and a no-nonsense officer, who curtly retorted, “Sir, if you cannot understand the report, that may not be our problem. You need to sign it nevertheless”. The CAG signed the report without ‘understanding’ it.

As regards the conflict of interest, it is inevitable. Once a secretary to an important ministry is appointed as the CAG, he will necessarily have to audit actions and decisions made by himself in his earlier avatar. The case of Mr Shashi Kant Sharma is a stark pointer to this quagmire. As the Director General (Acquisition), he was instrumental for the acquisition of 12 Augusta Westland VVIP helicopters in 2007. He later was Defence Secretary from March 2011 to May 2013 and was appointed the CAG thereafter. When a tsunami broke into the political arena in 2013 regarding the Rs 3500 crore deal, the subject had to be audited. Simultaneously, a PIL was filed before the Delhi High Court challenging his appointment as CAG on the ground of this conflict of interest and following a procedure that was entirely arbitrary and opaque. The audit report, however, did not bring out any serious irregularity and the PIL was dismissed by the Delhi High Court.

In the absence of any prescribed criteria for appointment of the CAG, the Court went by the qualities of competence and integrity and found nothing wanting in the case of Mr Sharma. As regards the procedure of appointment, it observed that the convention of a short list of civil servants emanating from the Cabinet Secretary from which the final appointee is picked up by the Finance Minister and the prime Minister was followed. Since a civil servant would serve in different ministries or departments which could be the subject of an audit report, it held that his appointment as the CAG would not constitute any conflict of interest. The judgment evaded the crucial questions: (i) whether a transparent, objective procedure is desirable and if so, why the same cannot be prescribed and (ii) why a civil servant has to be appointed as the CAG at all? Why not the senior most officer in the IA&AD or a respected professional who understands the business of audit and accounts thoroughly? After all, no advanced country follows such ridiculous convention.

As regards the audit report, Mr Sharma may not have committed any irregularity or breach of trust at all, but there will always be a lingering doubt in public mind that the report was tutored, which tarnishes the image and damages the credibility of the institution irrevocably. Credibility is the most precious inheritance of the IA&AD and must be protected at all costs. We must also remember what Peter Drucker had said, “No institution can possibly survive if it needs geniuses or supermen to manage it. It must be organised in such a way as to be able to get along under a leadership composed of average human beings.”

I don’t expect the codification of any objective appointment procedure for the CAG in the foreseeable future, because irrespective of political affiliations, all governments are equally scared of a transparent process of selection that may result in an outcome which might damage their electoral prospects. This would bring even bitter political rivals to collude and collaborate to undermine the spirit behind the Constitutional provisions.

Hence opaqueness and arbitrariness will continue to dominate the selection, the attempt being to pick someone considered to be loyal, and hence lowrisk. Nobody will ever give a damn to the Institution:

“We shall stamp our feet with new power And old things will fall down, We shall laugh, and Institutions will curl up like burnt paper.” - D.H. Lawrence

(Dr Govind Bhttacharjee retired as Director General from the office of the CAG and is former Professor at the Indian Institute of Public Administration)