Context

• The institution of the Comptroller and Auditor General (CAG) came into existence in 1860 and later gained Constitutional status in 1950. The founding fathers of the Constitution envisaged an important role for the CAG in keeping a watch over the expenses voted on by the Parliament. 
• The business of the CAG’s institution is conducted through the Indian Audit & Accounts Department. Together, the CAG and the IA&AD constitute the Supreme Audit Institution (SAI) of India. 

Role of CAG

• The CAG plays a key role in the Public Financial Management space of the country. It conducts audits of all the receipts and expenditures of the Government.  
• The CAG advises the Government on the manner in which the accounts of the Union  and State Governments are to be maintained. While for the Union Government, the Controller General of Accounts prepares the accounts, for the State Governments, the responsibility is vested with the CAG. 

Jurisdiction

• CAG has a nationwide audit mandate encompassing all three tiers of the federal structure of governance: the Union Government, the State/UT Governments, and the local bodies, thus, ensuring that accountability is enforced up to the last mile. 
• The audit jurisdiction includes attached & subordinate offices, autonomous bodies, Statutory authorities and Public Sector Undertakings (PSUs).  
• The Legislative Committees are a powerful tool for ensuring  accountability and promoting good governance. The CAG Audit Reports presented to the Parliament/State Legislatures are selected by the Legislative Committees for detailed examination.  
• The CAG functions as a friend, philosopher, and guide to the legislative committees by suggesting topics of focus and highlighting issues of concern. The committees carry out an in-depth examination of the CAG’s Audit observations and call upon the  executive ministries and departments to explain their actions on the irregularities pointed out in  the reports. 

Types of Audit

• Audit by the CAG is of three types: financial attest audit to ascertain the accuracy and correctness of the financial statements of the entity; compliance audit to check adherence to applicable rules, regulations, and procedures; and performance audit to assess whether systems within the entity operate with economy, efficiency, and effectiveness.  
• CAG’s audit of receipts has proved instrumental in ensuring that public funds are  realised in accordance with the prevailing laws. 
• Based on an audit of receipts during 2021-22, the Union and State Governments accepted that recoveries of Rs 25,571 crore needed to be made. 
• The audit observations, along with evidence-based recommendations, have provided insights to the Government in steering positive change by means of course corrections, changes in implementation design, and the removal of bottlenecks at the cutting-edge level. 

Reforms over the years

• With digitalisation, Governments have moved towards an Integrated Financial Management  System (IFMS), which is a comprehensive payment, receipt, accounting, and management information system. 
• This has enabled transparency in financial administration by increasing the visibility of all transactions, including revenue deposits, funds released to Implementing Agencies, payments made to beneficiaries of Government Schemes, etc., and thereby facilitating better monitoring.  
• Automation of other governance mechanisms such as electronic filing of tax returns and  assessments, toll collection system (FASTag), Direct Beneficiary Transfers, e-NAM,  etc. has further enhanced transparency in public financial management and enabled better accountability mechanisms.  

Conclusion

• The CAG’s institution upholds the trust reposed by tax payers in India and investors in Indian enterprises; and continues to contribute constructively towards the goal of establishing a robust financial administration.