CAG Appointment Without Following Institutional Integrity Principle
Common Cause, an organisation dedicated to serving public causes through democratic interventions, is shocked that the NDA government has followed exactly the same practice and procedures as the predecessor UPA government in the appointment of the new Comptroller and Auditor General (CAG) of India. The Narendra Modi government, which claims to have zero tolerance for corruption, has missed a golden opportunity to set a high benchmark to fight systemic corruption by putting in place an objective and accountable system of appointment for the crucial constitutional post.
It is important to highlight that the selection criteria should include possession of the requisite professional knowledge and background, ability of an exceptional order and impeccable integrity. This is essential for preserving the integrity and credibility of the institution of public audit. In the past, Common Cause has brought this to the attention of the Prime Minister, Finance Minister, the Lok Sabha Speaker and the Chairman of the Public Accounts Committee (PAC), who happen to be the Leader of the Opposition in Lok Sabha, outlining the grounds and possible mechanisms for making the process objective, transparent and accountable.
By following the footsteps of the UPA, the NDA government has lost an opportunity to create an institutional criteria to make the selection process impartial and transparent in order to fight the systemic corruption. We wish to highlight that it was possible quite simply through a combination of legislative and institutional reforms aimed at making the selection process objective, broad-based and transparent. The Prime Minister could have easily opted for an interim arrangement similar to the framework that exists for appointment to NHRC, CVC and CIC.
Established in 1980, Common Cause is known for interventions that have benefited millions of common citizens. Our PILs in coal block allocations and 2G spectrum cases transformed the way national resources are allocated in India. Besides saving serious amounts of public money, the new jurisprudence helped in building institutional integrity in governance.
A Brief Background of the appointment of the CAG
It is a well-established fact that in a democratic polity, the Executive is accountable to Parliament. A key element in this accountability principle is financial accountability. Under the Indian Constitution, it is exercised through the instrument of the CAG. Parliament sanctions money for various activities of the Government through annual budgetary appropriations. It is the CAG who examines whether the Executive has incurred expenditures in accordance with the budget grants voted by Parliament, conformed to the parliamentary authorisations for raising revenue through taxation and other measures, and observed the prescribed financial rules and procedures. The CAG also examines whether the grants are spent by the Executive with due regard to wisdom, faithfulness and economy.
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’. It follows from the above that if the CAG is to discharge the onerous responsibility of his office, only a person of the highest professional competence and unimpeachable integrity should be appointed to that chair.
For last many years the Government has been following an opaque and arbitrary method in making appointments to the post of the CAG. The criteria on the basis of which the selections are made are shrouded in secrecy. 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. Notwithstanding the fact that some of the individuals appointed to this constitutional office have acquitted themselves with credit, 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 field of candidates, who should not only possess the requisite experience of financial management, audit and accounting procedures, but also have a deep understanding of the complexities of governance and a vision of the future of our democratic polity.
It is pertinent to mention here that during the Constituent Assembly debates in 1949, the question of laying down qualifications for the post of the CAG was keenly debated. Shri T T Krisnamachari had 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.” Although no formal qualifications for the post were eventually laid down, it was generally accepted that only persons having a thorough knowledge of finance, accounts and audit would be appointed to the post. In recognition of this fact the first few CAGs appointed after independence were professionals from the Indian Audit & Accounts Service (IA&AS). However, in the appointments made from 1978 onwards, Government has not accorded due importance to the professional background of the appointees and found it expedient to appoint IAS officers to the post of CAG. 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 a thorough knowledge of audit and accounts, the appointment of an IAS officer who has held the post of Secretary to Government in a sensitive department is likely to lead to a conflict of interest, as the CAG may be called upon to audit the decisions made by him earlier in the capacity of Secretary. While it is not the intention here to cast any aspersion on any individuals conduct, it needs to be stressed that the incumbent of the Constitutional office of CAG must be above suspicion and command the confidence of the public, so that he is able to work without fear or favour.
Views of Chairmen, Public Accounts Committee (PAC)
The reports of the CAG are submitted to Parliament, which in turn demits them to the PAC for examination. Hence, Parliament and the PAC have high stakes in the independent and efficient functioning of the CAG. Quite understandably, the lack of transparency and disregard of professional qualifications in appointments to the office of the CAG have come to the adverse notice of the PAC. In February 1996, when a new CAG was about to be appointed, Shri Ram Naik, the then Chairman, PAC, raised this issue with the President and the PM and suggested that the PM and the Leader of Opposition in Lok Sabha should jointly select the CAG and that the criteria be laid down. Subsequently, in a conference of the Central and State PACs, Dr. Murli Manohar Joshi, the then Chairman of the PAC, observed that the process of selection of the CAG needed to be made transparent and the control of the Executive minimized, if not eliminated altogether. It was suggested that a small collegiate or a screening committee could examine the personalities and recommend to the President a panel of three names out of which one should be appointed.
The issue again came up during the All India Conference of Chairmen of Central and State PACs held in September 2015 under the chairmanship of Shri K V Thomas, the then Chairman, PAC. The Conference recommended that in recognition of the fact that the CAG works on behalf of Parliament, he should be made part of the legislature. It was also suggested that the PAC should be consulted while making the appointment of the CAG, and that the CAG (Duties, Powers and Conditions of Service) Act, 1971, be amended to give effect to these recommendations.
International Practices
In a democracy, the Supreme Audit Authority (SAI) works on behalf of Parliament in ensuring the accountability of the Executive to Legislature. Most advanced democracies have enacted laws requiring parliamentary approval for appointment of the head of the SAI, so that he works independently and is not under the influence of the Executive, whose performance he is required to evaluate and judge. In the UK, whose parliamentary traditions we follow, the hundred year old Exchequer & Audit Act was amended in 1983 to provide for the CAG to be jointly selected by the PM and the Chairman of the Committee of Public Accounts and for the appointment to be ratified by the House of Commons. The introduction of this provision was necessitated due to a qualitative change in the nature of the CAG’s work following the extension of his domain to the conduct of Value-for-Money Audit and the evaluation of the government’s performance in terms of effectiveness of the expenditure of public moneys sanctioned by Parliament.
Modifications similar to those of the UK have been made in the relevant statutes of other advanced Commonwealth countries, such as Australia, Canada and New Zealand. The statutes now enjoin that the Auditor General be appointed with the approval of Public Accounts Committee/House of Representatives. In the United States of America, from the time the General Accounting Office (GAO) was set up in 1921, the appointment of the Comptroller General is made on the advice of the Senate after following an elaborate selection process through a commission that includes representatives of both Houses of the Congress. In Germany, which has a system of Audit Court, the President and the Vice- President of Federal Court of Audit (the Bundesrechnungshof) are appointed by the Federal President only after the two Houses of Parliament have approved the proposal made by the Federal Government. Japan has a system of Board of Audit consisting of three commissioners. The Commissioners are appointed with the consent of both Houses of the Diet (Parliament) by the Cabinet. In newly emerging countries, such as South Korea, the Chairman of the Board of Audit is appointed by the President with the consent of the National Assembly, while in Thailand the appointment of the Auditor General must receive prior approval of the National Assembly.
From the above, it is clear that in most democratic countries, the head of Supreme Audit Institution is appointed after consulting the Public Accounts Committee /Parliament. Nowhere in the world does the Executive enjoy an absolute discretion to appoint the CAG.
Need for Institutional Integrity
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 the functioning of constitutional 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 procedures to be followed in appointments to the statutory bodies concerned have been laid down.
While adjudicating the legality of the appointment of Shri P. J. Thomas as Central Vigilance Commissioner (CVC), the Supreme Court in its landmark judgment of March 2011 enunciated the concept of institutional integrity. This concept has wider implications beyond the specific institution of the CVC. The Court proceeded to derive from the skeletal procedural provisions incorporated in the CVC Act the following principles of universal application:
- 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 procedures in respect of the appointment of the CAG are to be found in the Constitution or any 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 apply fully to the appointment of a Constitutional authority, such as the CAG. If the CVC is regarded as an integrity institution, then the CAG, whose remit goes far beyond that of the CVC and who has to ensure the accountability of public functionaries at all levels, is no less.
High Level Committee for Selection of CAG
In view of the fact that the State audit works on behalf of Parliament and that it should be independent of the Executive, Parliament should have a decisive say in the selection. It is accordingly suggested that a High Level Parliamentary Committee may be constituted to select the CAG through a transparent and objective process. The Committee may consist of the following:
- Prime Minister, who may chair the Committee,
- Speaker of the Lok Sabha,
- Leader of Opposition in the Lok Sabha,
- Finance Minister, and
- Chairman of the PAC, who may act as the Convener.
It is also suggested that the Speaker, in consultation with the Chairman of PAC, may appoint a Search Committee, which may do the initial screening and short list the names of persons deemed suitable for the post. These names may be considered by the high level selection committee and the person found most suitable may be recommended for appointment to the President.
Challenges before Public Audit
The India Audit Department has a very wide mandate, as besides audit of the entire gamut of the expenditures and receipts of the Central and State governments, it has to audit the accounts of public sector undertakings, autonomous bodies and grant-in-aid institutions which run into hundreds. It faces huge challenge in conducting value-for-money and performance audit of numerous government schemes and programmes, defence and other large value contracts, public-private partnership agreements and other government transactions. Realizing the importance and the complexities of the task, the National Commission to Review the Working of the Constitution (NCRWC) headed by Justice M N Venkatachaliah (2002) had emphasized the need for institutional reforms in the Audit Department. The Commission also suggested that a multi-member Audit Board be constituted at the apex level and that legal status be given to the Accountant General, giving him enhanced powers, so that he may effectively conduct the audit of State government transactions.
There is an increasing tendency on the part of public funded institutions to evade the CAG audit and avoid legislative accountability. Hence, the CAG Act needs to be amended to bring all public funded bodies within its ambit. At the same time, it is necessary to build a consensus for the required legislative and institutional reforms. To this end, a forum for promoting collaborative interactions among all the stake holders concerned needs to be established. It is also imperative to upgrade the quality of the audit personnel and introduce modern techniques of audit in the CAG set up so that it may effectively discharge its Constitutional responsibility.
The conjuncture demands that only a person having an intimate knowledge of the working of public audit and accounts systems be appointed to the office of CAG to pilot the twin initiatives for legislative and institutional reforms. However, that can be done by a combination of legislative and institutional reforms or by following an interim arrangement similar to the framework that exists for appointment to NHRC, CVC and CIC.
Kamal K Jaswal, B P Mathur Vipul Mudgal
(President) (Vice President) (Director)
On behalf of Common Cause
12.09.2017COMMON CAUSE
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