Mainstream, VOL LV No 38 New Delhi September 9, 2017
Appointment of the CAG - Memorandum by Indian Audit and Accounts Service Retired Officers Forum
Saturday 9 September 2017#socialtags
An appointment to the post of the Comptroller and Auditor General of India (CAG) is to be made very shortly as the present incumbent, Shri Sharma, is retiring in the last week of September. In the past the government has been following an opaque and arbitrary method of appointing the CAG. The Indian Audit and Accounts Service (IA&AS) Retired Officers Forum is concerned about the matter and met Finance Minister Arun Jaitley on August 25 to emphasise the need for transparency and objectivity in the appointment of the CAG and submitted a memorandum to him. The memorandums is being published here for the benefit of our readers.
The position of the CAG in the Constitution of India
The institution through which the accounta-bility of the Executive to Parliament in financial matters is ensured is the Comptroller and Auditor General (CAG). It is the CAG who examines, whether the Executive incurs expenditure in accordance with the budget grants voted by Parliament, conforms to the parliamentary authorisations for raising revenue through taxation and other measures, observes the prescribed financial rules and procedures, and maintains proper accounts. The CAG also examines whether the money is spent with prudence, economy and propriety.
The CAG has been given an independent position under the Constitution so that he may discharge his duties without fear or favour. Under Article 148, he is appointed by the President under his hand and seal and cannot be removed, save by a motion in Parliament. He enjoys the same conditions of service as a judge of the Supreme Court. Dr B.R. Ambedkar, Chairman of the Drafting Committee of the Constituent Assembly, had described the CAG as the ‘most important functionary under the Constitution, even more important than the judiciary’. Dr Rajendra Prasad, the Chairman of the Constituent Assembly and the first President of India, had observed that the CAG ‘has the power to call to account any officer, however highly placed, so far as the State money is concerned’.
Criteria for the Selection of the CAG
While the Constitution protects the independence of the CAG, it does not lay down the criteria for selection of the CAG. It is understood that the government follows an unwritten principle that only an officer holding the post of Secretary to the Government of India should be appointed to the post. Such a policy is conceptually flawed and may give rise to a serious situation of conflict of interest. If the objective is to select the most suitable candidate, the appointing authority ought to consider a much larger range of persons, who should not only understand the complexities of governance, but also possess the requisite experience of financial management, audit and accounting procedures.
During the Constituent Assembly debates in 1949, the issue of laying down Chartered Accountancy as a qualification for the appoint-ment of the CAG came up, whereupon Shri T. T. Krisnamachari observed: “We had some very good Auditors General who were administrators and who had been in the Finance Department and who have functioned as Accountants-General in various places and who have held other important responsible positions... All the knowledge of a Registered Accountant is certainly known to a person who hold the position of an Auditor General in Government of India and Accountant General.” These observations of Shri T.T. Krishnamachari have been misunderstood, and perhaps explains the appointment of a succession of generalist CAGs. The fact that the CAG is more than an accountant or auditor does not warrant the conclusion that the CAG need not have an expertise in audit and accounts at all. Considering the nature of the duties of the CAG, one would expect that the person appointed to this post would be a person of professional competence in the field, besides wide experience of working of the government. As a matter of fact, even before independence there was a tacit convention that an officer with an accounts and audit back-ground would be appointed as the Auditor General. That tradition continued after the Constitution came into force and the designation changed from the Auditor General to the Comptroller and Auditor General. The first three incumbents and the fifth one appointed to the post of CAG, belonged to the Indian Audit and Accounts Service (IA&AS) and had the requisite professional background for the post. However, from 1978 onwards all the CAGs, have been from the Indian Administrative Service (IAS). This unhealthy practice must stop in the interest of efficient functioning of the Audit and Accounts Department.
Conflict of Interest
Apart from the fact that the person appointed as the CAG should have thorough knowledge of audit and accounts, the appointment of an IAS officer who has held the post of Secretary to the government is very likely to lead to questions of conflict of interest, as the CAG may find himself or herself having to audit decisions taken by him or her earlier in the capacity of Secretary. There is in fact a case for holding that service as a Secretary to the Government of India should disqualify a person from consideration for the position of the CAG of India.
Views of Chairman, Public Accounts Committee
The destination of the reports of the CAG is Parliament, which remits them to the Public Accounts Committee (PAC) or the Committee on Public Undertakings (COPU) for examination. The PAC has a stake in the independent and efficient functioning of the CAG. It was, perhaps, in this background that in February 1996, when a new CAG was about to be appointed, Shri Ram Naik, the then Chairman of the Public Accounts Committee, took up this matter with the President and the Prime Minister and suggested that the Prime Minster and Leader of Opposition in the Lok Sabha should jointly select the CAG and a criteria for appointment of the CAG be laid down. Subsequently, in a conference of the Central and State Public Accounts Committees, presided over by Dr Murli Manohar Joshi, the then Chairman of the PAC, it was observed that the process of selection needs to be made transparent and the control of the Executive needs to be minimised, if not eliminated altogether. It was suggested that some sort of a small collegiate or a screening committee may examine the personalities and recommend to the President a panel of three names out of which one can be appointed. The issue again came up during an all-India conference of the Chairmen of Central and State PACs held in September 2015, presided over by Shri K.V. Thomas former Chairman the PAC. It observed that recognition be made of the fact that the CAG works on behalf of Parliament and he should be made part of legislature and recommended that Public Accounts Committee be consulted while making the appointment of the CAG and the CAG Act 1971 be amended to that effect.
Most advanced democratic countries have enacted laws requiring parliamentary approval for appointment of the head of the Supreme Audit Institution, so that he works indepen-dently and is not under the influence of the Executive, whose performance he is required to evaluate and pass judgment upon. In the UK, whose parliamentary traditions we follow, the Exchequer and Audit Act of 1866 was amended in 1983, and a provision has been made that the CAG will be jointly selected by the Prime Minister and Chairman of the Committee of Public Accounts and thereafter ratified by the House of Commons. Annexed is a summary of the legal provisions on the appointment of the CAG/Head of the Supreme Audit Institutions of some of the leading democratic countries.
From these examples, it is clear that the Executive does not have exclusive discretion in the appointment of the head of the Supreme Audition Institution.
Need for Institutional Integrity— the Supreme Court in the CVC case
The procedures for selection of constitutional functionaries have not been elaborated in the Constitution; nor have they been codified in the laws enacted by Parliament with respect to constitutional and statutory bodies. It is only in the relatively recent statutes, such as the Protection of Human Rights Act, 1993, the Central Vigilance Commission Act, 2003 and the Right to Information Act, 2005, that the selection procedure to be followed in appoint-ments to these statutory bodies has been laid down. While adjudicating the legality of the appointment of P.J. Thomas as the Central Vigilance Commissioner (CVC), the Supreme Court, in its landmark judgment of March 2011, enunciated the concept of institutional integrity, which has wider implications beyond the specific institution of the Central Vigilance Commission. The Court proceeded to derive from the skeletal procedural provisions incorporated in the Central Vigilance Commission Act, certain principles of universal application, for example, the selection procedure must be open and transparent; all relevant facts and aspects must be taken into account; ‘impeccable integrity’ of the appointee is a sine qua non. Although no corresponding procedural provisions in respect of the appointment of the CAG are to be found in the Constitution or an Act of Parliament, the guiding principle of the judgment in the CVC case, which enjoins that the selection to high offices must be guided by objective procedures and criteria, should be fully applicable to the appointment of a constitutional authority, such as the Comptroller and Auditor General of India. If the CVC is regarded as an integrity institution, then the CAG, whose remit exceeds that of the CVC and has to ensure the accountability of public functionaries at all levels, is no less.
In view of the above background, transparency and objectivity in the selection of the CAG can be secured by constituting an institutional mechanism for selection of the CAG; laying down the qualifications required for appoint-ment to the post; and defining the field of selection.
In our view, the above objectives can be secured by making arrangements similar to those that exist for the selection of the NHRC, CVC and CIC. The selection committee can comprise the Prime Minister; Speaker, Lok Sabha; Leader of the Opposition, Lok Sabha; Finance Minister; and Chairman of the Public Accounts Committee in Parliament. In making the selection of the CAG, professional knowledge and background and impeccable integrity should be among the essential requirements. Other things being equal, the choice should be from among officers of the Indian Audit and Accounts Service, who man the Indian Audit and Accounts Department.
We plead for adoption of a transparent, objective and fair system in selecting the next Comptroller and Auditor General of India.
International Practice regarding appointment of Head of the Supreme Audit Institution United Kingdom
In Britain, whose parliamentary traditions we follow, those are more than a hundred years old The Exchequer and Audit Department Act of 1866 was amended by the British Parliament and the National Audit Act, 1983 was passed “to strengthen parliamentary control and super-vision of expenditure of public money by making a new provision for the appointment and status of the Comptroller and Auditor General”. The relevant provision of the Act is given below:
Sec. 1  The power of her Majesty under the Exchequer and Audit Departments Act 1866 regarding appointment of Comptroller and Auditor General shall be exercisable on an address presented by the House of Commons, and no motion shall be made for such an address except by the Prime Minister acting with the agreement of the Chairman of the Committee of Public Accounts.
The Minister must not make recommendation to the Governor General under clause (1) unless: (a) The Minister has referred the proposed recommendation to the Joint Committee of Public Accounts and Audit for approval and (b) The committee has approved the proposal.
Section 3(1) of the Auditor General Act of Canada states as follows:
The Governor in Council, shall, by commission under the Great Seal, appoint an Auditor General of Canada after consultation with the leader of every recognized party in the Senate and House of Commons and approval of the appointment by resolution of the Senate and the House of Commons.
The Public Audit Act 2001 of New Zealand, Section 7 states as follows:
Controller and Auditor-General: (1) There is an officer of Parliament called the Controller and Auditor-General. (2) The Controller and Auditor-General is appointed by the Governor-General on the recommendation of the House of Representatives.
In the USA, under Section 302 of the Budget and Accounting Act, 1921, the Comptroller General of the United States is appointed by the President on the advice and consent of the Senate. Further, under an amendment carried out through Section 104 of the General Accounting Office Act of 1980, a commission has to advise the President. The relevant provision is as follows:
Section 302 (b)(1): Whenever, after the date of enactment of this subsection, a vacancy occurs in the Office of the Comptroller General or in the Office of Deputy Comptroller General , there is established a commission to recommend individuals to the President for appointment to the vacant office. Any such commission shall consist of- (A) the Speaker of the House of Representatives, (B) the President pro tempore of the Senate, (C) the majority and minority leaders of the House of Representatives and the Senate, (D) the chairman and ranking minority member of the Committee on Government Operations of the House of Representatives and the Committee on Governmental Affairs of the Senate, and (E) in the case of a vacancy in the office of Deputy Comptroller General, the Comptroller General of the United States.” The Comptroller and Auditor General shall by virtue of his office be an officer of the House of Commons.
In Australia, the Auditor General Act of 1997, Section 9, Schedule I provides as follows:[[<> (3) Any commission established under paragraph(1) shall submit to the President for consideration the names of not less than three persons for the office of Comptroller General. The President within his discretion, may request that additional names be submitted.
Under the Bundesrechnungshof (Audit Court) Act,The President, the Vice-President, the heads of audit divisions and audit units shall be Members of the Bundesrechnungshof (Fedral Court of Audit). Section 5 states as under:
(1) Upon the proposal of the Federal Government the two Houses of Parliament shall elect the President and the Vice-President, respectively, without debate. The German Bundestag shall elect by the majority vote of its members in a secret ballot. The Federal President shall appoint those chosen. They must not be re-elected.
(2) The Federal President shall appoint 1. the other Members of the Bundesrechnungshof upon the proposal of its President; 2. Prior to submitting his proposals under Sub-paragraph 1 above, the President shall consult the standing committee of the Senate of the Bundesrechnungshof.
The Board of Audit Law of 1947 of Japan has the following provisions regarding appointment of head Supreme Audit Institution.
Section 1: The Board of Audit shall be organized with an Audit Commission consisting of three Commissioners and a General Executive Bureau.
Section 2. The President of the Board will be appointed by the Cabinet according to the result of mutual election among the Commissioners.
Section 4. A Commissioner shall be appointed with the consent of the both Houses of the Diet by the Cabinet. In case the House of Councillors does not consent to the appointment of a Commissioner despite the consent of the House Representatives, the consent of the House of Representatives, shall be consent of both Houses in the same way as provided for the Article 67 paragraph 2 of the Constitution.
The Korean Board of Audit and Inspection Act States as follows:
Article 3(Composition): The BAI shall be composed of seven Commissioners, including the Chairman of the BAI.
Article 4(Chairman):(1) The Chairman shall be appointed by the President with the consent of the National Assembly.
Under the State Audit Act of 1979, Section 6, “The appointment of the Auditor General must receive prior approval of the National Assembly.”
 The Auditor General is to be appointed by the Governor General on the recommendations of the Minister, for a term of 10 years.