When CAG’s Out of GoI Bag…..Avinash Celestine & Shantanu Nandan Sharma
Comptroller & Auditor General ventures into new territory. Does it have what it takes? And is it always right?
Comptroller & Auditor General ventures into new territory. Does it have what it takes? And is it always right?
Till its report on the Commonwealth Games (CWG) came along, possibly the most controversial report by the Comptroller and Auditor General (CAG) in recent years was the one on the 2G scam, and the huge figures of loss to the exchequer it highlighted: 1,76,000 crore. Many had reservations about the way that loss amount, notional as it was. “I am quite uncomfortable with the way that number was calculated,” a former senior CAG official told ET on Sunday.
But there was more on the way, and the latest CAG report on the Commonwealth Games, has put even that several hundred thousand crore number in the shade, with it indirectly implicating the prime minister himself, in the decision to appoint Suresh Kalmadi as chairman of the CWG organising committee. The Congress, predictably, proceeded to take aim against the CAG, and even the taciturn PM hit out at against the auditor’s newfound propensity to hold press conferences. An auditor’s job is to audit, not question government policy, or government appointments, say critics. Has CAG chief Vinod Rai indeed overstepped his mandate? Can Rai and his team of auditors pose questions on Kalmadi’s appointment, or even feel “heartened” by passenger amenities in New Delhi railway station?
Ironically, a possibly sharper comment on government policy was to be found, not in the CWG report, but on another CAG report released the same day (and completely missed in the media buzz surrounding the CWG report). The report, an audit of the fertiliser subsidy regime, was arguably far more important since it involved public funds to the extent of 55,000 crore rather than the 18,500 crore at stake in the CWG. Here’s what the auditor said: “We find it difficult to derive assurance that the huge expenditure incurred on fertiliser subsidy payments…actually result in full availability of high quality fertilisers…at…subsidised prices in a timely manner to farmers.” Given that the entire aim of the fertiliser policy is precisely to provide cheap fertiliser to farmers as and when they need it, the CAG effectively seemed to be saying (almost in as many words) that the policy didn’t work.
Crossing a Line?
“Policy choices are very complex and if auditors get into that field, it leads to controversy,” says BM Oza, a former CAG official. “Policymaking is the domain of the executive,” points out AK Banerjee, who retired as deputy CAG last year. “Largely, the world over audit has refrained from directly commenting on policy which is also in conformity with the convention of the (International Organisation of Supreme Audit Institutions (INTOSAI). Audit examination is generally limited to testing the integrity and reliability of the data leading to policy decisions,” he says.
“Policy choices are very complex and if auditors get into that field, it leads to controversy,” says BM Oza, a former CAG official. “Policymaking is the domain of the executive,” points out AK Banerjee, who retired as deputy CAG last year. “Largely, the world over audit has refrained from directly commenting on policy which is also in conformity with the convention of the (International Organisation of Supreme Audit Institutions (INTOSAI). Audit examination is generally limited to testing the integrity and reliability of the data leading to policy decisions,” he says.
A lot depends ultimately on the wording of the CAG observation. CAG’s audit report on allocation of 2G spectrum is a clear example of how the auditing body has raised issues on policy formulation and implementation. It may not pass its own remarks, but the entire sequence of policy events from Trai’s recommendation of August 2003 to overruling of the finance ministry’s views were laid out, enabling the readers to draw their own conclusion on faulty policy regimes.
The CWG report indirectly questioned the Prime Minister’s Office (PMO) for recommending Suresh Kalmadi as the chairman of the organising committee. It’s a straight policy question that a group of auditors is not expected to flag. After all, Kalmadi, a Congress MP with a number of friends in the BJP camp, was not the fall guy then. But Rai’s team linked its observation to a larger question of accountability and transparency. Sample this from the report: “In our view, the decision to appoint Shri Kalmadi as the OC chairman, based on the PMO recommendation, facilitated the conversion of the originally-envisaged government-owned OC into a body outside the governmental control, without commensurate accountability to government and concomitant controls to ensure propriety and transparency”.
But in certain areas, the report was more hard-hitting on policy issues. “…the lack of clear governance structure led to ad hoc creation of a multiplicity of co-ordination committees that were created, disbanded and reconstituted at different points of time”. Also, it said how the Group of Ministers (GoMs) did not meet between May and November 2008, and the interim GoM that was constituted under the chairmanship of the then urban development minister Jaipal Reddy met only thrice between December 2008 and June 2009.
Despite being a headline grabber, the CWG report, weighing in at a hefty 740 pages, is no page-turner, with masses of tables, charts and numbers and an immense level of detail. And despite his mixed feelings about the CAG seemingly dipping its toes into the policy domain, Oza says: “It’s clear that the auditors have been successful in gaining access to a huge range of documents while preparing the report.”
Raising a Ruckus
Despite any criticism of auditing activism, if insiders in the CAG are to be believed, the trend is unlikely to be reversed. It has been a calibrated move by Rai and his team of 600 Indian Audit and Accounts Service officers to initiate big cases, nail bigger names, disseminate the findings and subtly enter into the “no go” area of policy decisions. And the result: a sudden increase in the visibility of an organisation whose reports otherwise gathered dust and remained unread by most. In this respect, Rai is already being seen as a kind of modern-day Seshan — a bureaucrat who has suddenly dragged an otherwise sleepy, conformist organisation kicking and screaming into the limelight.
Despite any criticism of auditing activism, if insiders in the CAG are to be believed, the trend is unlikely to be reversed. It has been a calibrated move by Rai and his team of 600 Indian Audit and Accounts Service officers to initiate big cases, nail bigger names, disseminate the findings and subtly enter into the “no go” area of policy decisions. And the result: a sudden increase in the visibility of an organisation whose reports otherwise gathered dust and remained unread by most. In this respect, Rai is already being seen as a kind of modern-day Seshan — a bureaucrat who has suddenly dragged an otherwise sleepy, conformist organisation kicking and screaming into the limelight.
There is little doubt that the changes have been driven by Rai himself. He often tells his juniors that content is important, but what’s makes those more acceptable to media and masses is their good design with graphics, tables, highlights and photographs. According to insiders in CAG, Rai does not want his team’s work to remain of just academic value.
As his team was preparing some of the bigticket reports touching contentious issues like 2G and CWG, Rai roped in retired Indian Information Service officer BS Chauhan as media adviser who incidentally was also the press officer to former election commissioner TN Seshan. Like Seshan who changed the way elections were conducted in India, Rai too freely updates his work to the media. Prime Minister Manmohan Singh told a group of editors sometime ago that unlike in the past the CAG now holds press conferences. Even after the PM’s remark, the CAG has continued to engage the media and hold press meets while releasing its important reports. The spokesperson of the CAG has however denied that its officials had leaked a recent report. “The draft report was with 30-odd entities which were there in the exit conference,” he said.
Rai has made other changes. The auditing body has undertaken a number of study reports which are in addition to the routine performance audit reports that it prepares. Many in the government were surprised to find a CAG report on the preparation of the CWG. That in fact was the first wake-up call for the organisers. “We are preparing more such study reports. The idea is to sensitise and improve the governance of the concerned department,” says a CAG official. The CAG, for example, completed such a study report on lessons for transition to GST, and another on railways finances. And it has for the first time scrutinised books of some private companies after taking permission from the concerned ministries.
Deeper Problems
The CAG ultimately faces larger problems than a defensive government. Unlike its counterparts elsewhere in the world, there is little it can do if a government department flatly refuses to cooperate. In late 2009, the army refused the CAG access to records of ‘unit-run’ canteens (run by the individual regiments), for an audit report on the functioning of the Canteen Stores Department. In 2006, a performance audit of the Ministry of External Affairs’ passport division could be done only after the finance ministry itself ensured, through the issue of an executive order, that the records of an otherwise reluctant MEA, were thrown open to the auditor.
Other challenges are more systemic. Governments now spend a huge amount of money through non-governmental organisations, rather than directly through their own departments. |It is such NGOs to whom the money is allocated who spend it on school textbooks or constructing toilets. While this is not necessarily a problem in itself, the issue is this: since the NGO is a private entity, the CAG has no way of verifying whether or not it actually spent the money the way it was supposed to. All the NGO has to do is submit an ‘utilisation certificate’ (essentially a statement saying how it spent the money) to the auditor. “The money given by the government to NGOs is treated as ‘final expenditure’ — but it may actually be still sitting in the NGOs bank account rather than being spent,” says another former CAG official.
The CAG ultimately faces larger problems than a defensive government. Unlike its counterparts elsewhere in the world, there is little it can do if a government department flatly refuses to cooperate. In late 2009, the army refused the CAG access to records of ‘unit-run’ canteens (run by the individual regiments), for an audit report on the functioning of the Canteen Stores Department. In 2006, a performance audit of the Ministry of External Affairs’ passport division could be done only after the finance ministry itself ensured, through the issue of an executive order, that the records of an otherwise reluctant MEA, were thrown open to the auditor.
Other challenges are more systemic. Governments now spend a huge amount of money through non-governmental organisations, rather than directly through their own departments. |It is such NGOs to whom the money is allocated who spend it on school textbooks or constructing toilets. While this is not necessarily a problem in itself, the issue is this: since the NGO is a private entity, the CAG has no way of verifying whether or not it actually spent the money the way it was supposed to. All the NGO has to do is submit an ‘utilisation certificate’ (essentially a statement saying how it spent the money) to the auditor. “The money given by the government to NGOs is treated as ‘final expenditure’ — but it may actually be still sitting in the NGOs bank account rather than being spent,” says another former CAG official.
No one knows how much money is actually spent this way, but examples abound. In 2009-10 for instance, the government spent over 1,000 crore on Aids prevention and cure. More than a fifth of that (around 214 crore) was given to NGOs who used the money to distribute condoms, syringes and anti-Aids drugs. It’s also unclear to what extent the CAG can audit public-private partnerships, widely used to implement infrastructure projects. Independent regulators in various sectors (such as TRAI) have strenuously objected to being subjected to so-called ‘performance audits’ which aim to assess the efficacy of their functioning. The enormous volume of work, at both the central and state level (where the CAG also doubles up as an accountant for the government), mean staff are overstretched.
And while the CAG, through Rai, has earned itself a reputation of being a corruption chaser, it is in how he will meet these challenges that will ensure whether the changes in the organisation will outlast his tenure.
Crossing a Line?
CAG SAID
“We find it difficult to derive assurance that the huge expenditure incurred on fertiliser subsidy…actually result in availability of fertilisers at subsidised prices to farmers.”
CAG SAID
“We find it difficult to derive assurance that the huge expenditure incurred on fertiliser subsidy…actually result in availability of fertilisers at subsidised prices to farmers.”
THE PROBLEM
Questions basis of government fertiliser policy. Many say the CAG’s job is only to audit, not question policy
Questions basis of government fertiliser policy. Many say the CAG’s job is only to audit, not question policy
CAG SAID
“The decision to appoint Shri Kalmadi as the OC chairman, based on the PMO recommendation, facilitated conversion into a body outside govt control, without accountability…”
“The decision to appoint Shri Kalmadi as the OC chairman, based on the PMO recommendation, facilitated conversion into a body outside govt control, without accountability…”
THE PROBLEM
Should CAG question official appointments that are within the domain of the government?
Should CAG question official appointments that are within the domain of the government?
CAG SAID
Presumptive losses from spectrum scam estimated to be 1,76,000 cr
Presumptive losses from spectrum scam estimated to be 1,76,000 cr
THE PROBLEM
Loss was based on revenues from 3G auctions. Critics charge that these revenues can’t be applied to income from 2G auctions as the two are different
Loss was based on revenues from 3G auctions. Critics charge that these revenues can’t be applied to income from 2G auctions as the two are different
Election Commission
TN Seshan (1990-96)
As cabinet secretary he blended into the background. But as CEC, he was a terror, proceeding to disqualify 14,000 potential candidates, introducing photo identity cards for voters and butting heads with politicians over conduct of polls in Bihar, Punjab and TN
TN Seshan (1990-96)
As cabinet secretary he blended into the background. But as CEC, he was a terror, proceeding to disqualify 14,000 potential candidates, introducing photo identity cards for voters and butting heads with politicians over conduct of polls in Bihar, Punjab and TN
Lokayukta
Santosh Hegde (2006-11)
Hegde took on the mining mafia of Bellary and by doing so, went head to head with the Karnataka CM. When he resigned in 2010 to protest the state’s attempts to suspend honest officials who investigated the mining scam, the BJP leadership persuaded him to stay on
Santosh Hegde (2006-11)
Hegde took on the mining mafia of Bellary and by doing so, went head to head with the Karnataka CM. When he resigned in 2010 to protest the state’s attempts to suspend honest officials who investigated the mining scam, the BJP leadership persuaded him to stay on
Environment Ministry
Jairam Ramesh (2009-11)
Till Ramesh, the environment ministry was a backwater. By delaying or cancelling clearances to key projects, Ramesh attracted acclaim and criticism in equal measure. Ramesh seemed more controversial than he was — he actually cleared more projects than he held back
Jairam Ramesh (2009-11)
Till Ramesh, the environment ministry was a backwater. By delaying or cancelling clearances to key projects, Ramesh attracted acclaim and criticism in equal measure. Ramesh seemed more controversial than he was — he actually cleared more projects than he held back
– Agents of Change
The CAG under Vinod Rai is already being compared to the Election Commission under TN Seshan. Here are Seshan and two other public office holders who shook up the institutions they commanded
The CAG under Vinod Rai is already being compared to the Election Commission under TN Seshan. Here are Seshan and two other public office holders who shook up the institutions they commanded