“The duty of CAG is not merely to ensure the legality of expenditure but also its propriety”

The Comptroller and Auditor General of India (CAG) is an independent constitutional authority (Articles 148-151) tasked with auditing government finances at both Union and State levels. Dr. B.R. Ambedkar envisaged the CAG as “probably the most important officer” under the Constitution – often called the guardian of the public purse. This underscores that the CAG’s duty goes beyond verifying the legality of expenditure to also examining its propriety. In essence, the CAG must ensure not only that public money is spent in accordance with law, but also that it is used wisely and honestly for the intended purposes without waste or abuse. The statement “The duty of CAG is not merely to ensure the legality of expenditure but also its propriety” highlights this wider mandate of promoting accountability in governance.

Constitutional Provisions and Mandate of CAG

The Constitution provides a strong framework to enable the CAG’s oversight of public finances:

• Article 148 establishes the CAG as an independent constitutional office appointed by the President, with security of tenure and removal procedures akin to a Supreme Court judge, ensuring autonomy in auditing executive finances.
• Article 149 authorizes Parliament to define the CAG’s duties and powers. Under this, the CAG (Duties, Powers and Conditions of Service) Act, 1971 was enacted, empowering the CAG to audit all receipts and expenditure of the Union and States for legality and correctness.
• Article 150 stipulates that the accounts of the Union and States shall be kept in a form prescribed by the President on the advice of the CAG. This ensures standardized accounting and recording, aiding transparent auditing.
• Article 151 requires the CAG’s audit reports to be submitted to the President or Governor, who shall lay them before Parliament or the state legislature. This mechanism brings audit findings into the public domain for legislative scrutiny.

Through these provisions, the CAG acts as an instrument of legislative control over the executive’s financial operations, thereby securing accountability and transparency in public expenditure.

Legality of Expenditure: Ensuring Compliance with Law

Legality of expenditure means that public funds are spent strictly as per the law and sanction of the competent authority. The CAG conducts compliance/regularity audits to verify: (1) that money disbursed was legally available and used for the approved purpose, and (2) that expenditure conforms to the financial authority (appropriation acts, rules) governing it. In other words, CAG checks that every rupee is drawn from the Consolidated Fund under proper authorization and spent on the objectives approved by the legislature.

Key constitutional provisions reinforce this aspect: for example, Article 266 mandates that no money can be withdrawn from the Consolidated Fund except under appropriation made by law. The CAG’s audits often flag any deviation. In one case, a CAG audit of Assam’s finances revealed unauthorized withdrawals from the state Consolidated Fund without legislative approval, indicating a clear illegality which the legislature and government had to address. Similarly, the CAG scrutinizes whether expenditures stay within the limits voted by Parliament and do not violate specific statutory provisions or rules (such as General Financial Rules, etc.).

Example – 2G Spectrum Case: A striking instance of CAG upholding legality was the 2G spectrum allocation scam (2010). The CAG found that telecom licenses were allocated in 2008 on a first-come-first-served basis at 2001 prices, flouting prescribed procedures and fairness in law. This not only violated the legal norms for public auctions but also caused a presumed loss to the exchequer. The CAG’s report estimated a significant revenue loss and flagged the allocations as irregular. The findings were taken up by Parliament’s Public Accounts Committee and even used in the CBI investigation and court proceedings. Eventually, the Supreme Court relied on the principle of legality to cancel the tainted licenses, underscoring how CAG’s focus on legality can prompt corrective action.

In essence, through legal or compliance audits, the CAG ensures every public expenditure has parliamentary authority and adheres to relevant laws. This guards against embezzlement, misappropriation or unauthorized spending, thereby upholding the rule of law in financial administration.

Propriety of Expenditure: Examining Wisdom and Economy

Beyond legality, the CAG’s mandate extends to auditing the propriety of expenditure – essentially judging whether government spending was done with prudence, efficiency, and in the public interest. As explained in standard texts (M. Laxmikanth’s Indian Polity), the CAG can conduct a “propriety audit,” examining the wisdom, faithfulness (fidelity) and economy of government expenditure, and commenting on wastefulness or extravagance in such spending. This means even if an expenditure is legally authorized, the CAG may question whether it was necessary and yielded value for money. Such scrutiny goes beyond the formality of law to the substance of financial management.

Some features of propriety audits include:

• Discretionary Nature: Unlike the regular compliance audit (which is obligatory for all transactions), taking up a propriety audit is at the CAG’s discretion. The CAG exercises judgment to flag only those instances of expenditure that appear improper or avoidably costly. This ensures focus on material issues of public interest rather than micromanaging every decision.
• Standards of Financial Propriety: Over time, certain norms (often termed “canons of financial propriety”) guide this audit – e.g. no public money should be spent for the benefit of a select individual or section without general benefit, no authority should spend more than the occasion demands, etc. The CAG brings to notice cases where these norms are violated even if no specific law is broken.
• 3Es – Economy, Efficiency, Effectiveness: In modern audits, propriety overlaps with performance audits, evaluating whether governmental programs achieved intended outcomes with economy and efficiency. This helps ensure that funds not only reach the right purpose legally, but are utilized in the best possible manner.

Examples of Propriety Issues Identified by CAG: The CAG’s recent reports abound with instances where it questioned the appropriateness of expenditures:

• Extravagant Infrastructure Spending: The CAG’s 2023 audit of the Dwarka Expressway project (under the Bharatmala highway program) flagged an alarming cost escalation. The 29-km expressway was sanctioned at ₹250.77 crore per km, whereas the Cabinet had approved only ₹18.2 crore per km for such corridors – a 13-fold cost hike indicating “very high” and unjustified expenditure. The audit noted that the project was approved without a proper Detailed Project Report, suggesting inadequate due diligence. By questioning this, the CAG highlighted a potential case of wasteful spending of public money.
• Leakages in Welfare Schemes: A CAG audit of the Ayushman Bharat – Pradhan Mantri Jan Arogya Yojana (PM-JAY) in 2023 exposed multiple frauds and inefficiencies in the flagship health insurance scheme. The report found that treatments had been claimed for patients who were already declared dead, and thousands of beneficiaries shared the same Aadhaar number or invalid mobile number in the records. Such irregularities, while not explicitly illegal on the surface, pointed to serious mismanagement and possible collusion, defeating the scheme’s purpose. By bringing these to light, the CAG pressed authorities to plug holes (e.g. by strengthening verification and penalizing errant hospitals).
• Irregularities in Nutrition Programs: In 2021, a CAG audit in Madhya Pradesh found ₹428 crore worth of irregularities in the Take Home Ration (THR) scheme (part of ICDS nutrition programme) over 2018-21. Audit evidence showed grossly inflated beneficiary numbers – for instance, the Women and Child Development department projected 5.51 lakh out-of-school adolescent girl beneficiaries, whereas the Education department’s survey showed only 0.43 lakh eligible girls. The acceptance of this fictitious data led to excess production and diversion of nutritional supplements. Though funds were allocated through proper channels, their use was clearly improper and not in public interest. The CAG not only flagged these issues but also recommended action against the delinquent officials involved.

Each of the above examples shows the CAG upholding propriety: questioning inefficiency, waste, or abuse of public funds that might have otherwise gone unnoticed. This kind of audit ensures that executive decisions stand the test of economy and ethics, not merely legality. Importantly, CAG’s propriety oversight often stimulates administrative improvements – e.g. better cost estimation in infrastructure projects, stricter fraud controls in welfare schemes, and more accurate beneficiary targeting.

CAG and Accountability Mechanisms (PAC, JPC, etc.)

The CAG’s reports do not by themselves penalize the executive; rather, they form the basis for further scrutiny and action by other institutions, thereby enforcing accountability in a democracy. The Parliamentary committees, especially the Public Accounts Committee (PAC), play a pivotal role in this process.

Once the CAG’s Annual Audit Reports (on the Union government’s Finance and Appropriation Accounts, and on various departments or schemes) are laid before Parliament as per Article 151, the PAC examines the findings in detail. The PAC – a committee of selected MPs traditionally chaired by an opposition member – calls the concerned ministry officials to account for the irregularities pointed out by CAG. It has the power to summon persons and records, and seeks explanations for expenditure deviations, waste, or losses. After examination, PAC submits its own report to Parliament with recommendations, for instance: recovery of misspent funds, tightening of procedures, or even administrative/disciplinary action against officials responsible. This mechanism ensures that CAG’s work translates into corrective steps by the executive under legislative oversight. In essence, the PAC acts as an extension of the CAG in holding the government financially accountable.

Illustration: The CAG report on the 2G spectrum issue (mentioned earlier) was intensely discussed by PAC. Similarly, revelations from CAG audits have been taken up by PAC in cases like the Commonwealth Games 2010 expenditures and more recently the 2022 report on defense public sector undertakings. In fact, in the 2G case, the PAC’s proceedings and even a Joint Parliamentary Committee (JPC) investigation relied on the evidence provided by the CAG report to question policy lapses and fix responsibility. Although JPCs are ad-hoc committees constituted for specific scandals (e.g. JPCs were set up for Bofors in 1987, Stock Market Scam in 2001, 2G Scam in 2011, etc.), they too have drawn on CAG findings as a starting point to probe deeper into executive decisions. This shows how CAG’s work feeds into the larger accountability architecture, including investigative agencies and sometimes the judiciary. For instance, the Supreme Court’s decision to cancel coal block allocations in 2014 cited the arbitrary and non-transparent allocation process, a gap first spotlighted by a CAG audit (Coal Block Allocation report, 2012) questioning the lack of competitive bidding.

Furthermore, Committees on Public Undertakings (COPU) in Parliament and state legislatures’ financial committees perform similar functions for CAG reports related to public sector enterprises, ensuring public investments are monitored. Various Administrative Reforms Commissions (ARC) and expert committees have repeatedly stressed strengthening these oversight links. The Second ARC (2005-2009), for example, emphasized transparency and accountability as core principles of governance – roles to which institutions like the CAG and PAC are central. The CAG’s reports, by bringing facts to light, empower not only legislators but also citizens, media, and civil society to demand accountability. In the current era, even digital transparency initiatives (like putting audit reports online) have increased public awareness and pressure on governments to act on audit findings.

Significance in Governance: Accountability, Transparency and Ethics

By ensuring both legality and propriety in expenditure, the CAG upholds several dimensions of good governance:

• Constitutional and Legal Accountability: CAG’s work gives effect to the Constitution’s intent that the executive is answerable to the legislature for every penny spent. It enforces the financial chain of command – Parliament’s power of the purse – in practice. This legal accountability is a cornerstone of parliamentary democracy, ensuring no taxation or spending happens arbitrarily. It also bolsters the doctrine of separation of powers: the auditing function provides a check and balance on the executive’s financial administration. As an example, when CAG audits uncovered that government departments spent beyond or against appropriations (a breach of Article 266), the ensuing scrutiny prevented the normalization of such practices.

• Administrative Efficiency and Reform: CAG’s propriety and performance audits often highlight inefficiencies, implementation gaps, or poor planning in government schemes. This has an administrative payoff – audited entities are prompted to improve financial management and plug leakages. For instance, after audit reports on schemes like mid-day meals and MGNREGA pointed out instances of funds not reaching beneficiaries or being used sub-optimally, ministries undertook steps to tighten monitoring. Over time, repetitive audit observations also lead to systemic reforms (e.g. improved public procurement processes or stricter project appraisal norms) to ensure value for money in public spending.

• Transparency and Informed Public Discourse: The publication of CAG reports (tabled in legislatures and often reported in the media) brings transparency to government operations that otherwise occur behind departmental doors. They provide credible, verified information on how public funds are utilized. For example, recent CAG reports flagging irregularities in the Ayushman Bharat health scheme or the Dwarka Expressway project became headlines in The Hindu and Indian Express, sparking public debate on government accountability. Such transparency is empowering – citizens and opposition parties can question the government, bolstered by CAG’s findings. The Right to Information (RTI) Act and civil society activism have further complemented this, as CAG reports often serve as crucial documents for follow-up questions and social audits. Indeed, the CAG embodies the principle that information is the bedrock of accountability in governance.

• Ethical Governance and Public Trust: On an ethical plane, CAG’s role in examining propriety reinforces the idea that public office is a public trust. By calling out wasteful or unjustified expenditures, the CAG upholds principles of integrity, prudence, and fairness in public finance. This helps deter corruption and misuse of funds – officials know that expenditures can be scrutinized not just for technical sanction but for genuineness of need. The outcome is a culture where financial discipline and honesty are valued. Over time, this builds citizens’ trust that their tax money is guarded against abuse. As an illustration, when the CAG exposed how certain beneficiaries of a loan waiver scheme were ineligible (signifying potential favoritism or corruption), it not only led to fixes in that scheme but also signaled a broader ethical stance that public resources cannot be diverted for private gains. Thus, CAG’s work promotes probity in governance.

Challenges and Balanced Analysis

While the CAG’s dual focus on legality and propriety is crucial, there are also challenges and debates regarding its role, which need a balanced consideration:

• Post-facto Nature of Audit: The CAG typically audits transactions after the expenditure has occurred (ex-post). This means that irregularities are often caught after the horse has bolted. As noted, the CAG “audits after actual expenditure is made, a mere post-facto audit”. By the time a CAG report comes out (often with a lag of a year or more after the spending), the money may already have been lost or misused. For example, if funds are embezzled in year X, the CAG report highlighting it might be tabled in year X+2. Although deterrence and ex-post penalties are important, this delay can limit immediate remedial action. Recognizing this, experts have suggested more real-time audits or concurrent audits in certain high-risk areas, and faster submission of reports. In fact, a high-level committee headed by former CAG V.K. Shunglu (appointed in 2010 to probe the Commonwealth Games scam) criticized the slow audit cycle and recommended speeding up the audit process. The committee also mooted reforms like a multi-member CAG or a collegium for appointing CAG to enhance effectiveness – though these have not been implemented.

• Limitations in Mandate: There are areas of government spending that escape full CAG scrutiny by design. For instance, secret service expenditures (e.g. intelligence agencies) are certified by the concerned department’s minister, and the CAG cannot audit detailed accounts – it must accept a certificate for these in the interest of national security. Similarly, some institutions like RBI, public sector banks, and certain corporations are not directly audited by CAG (they have their own auditors, with CAG having only an oversight or supplementary audit role). These exclusions mean that a chunk of financial activity is outside CAG’s purview, which could be significant in terms of public funds. Balancing secrecy/accountability in such cases remains an administrative dilemma.

• Executive Interference and Resource Constraints: The CAG needs full access to information to perform audits. Often, delays in getting records from executive agencies hinder timely audit completion. There have been instances where departments were uncooperative or withheld files (sometimes citing confidentiality). Although the CAG has legal powers to requisition records, in practice a lack of timely compliance can weaken the audit. Moreover, the sheer volume of government transactions means CAG has to do sample-based audits. Finite manpower and resources constrain it from examining every transaction in depth. This necessitates prioritization and sometimes important issues might slip through or be caught only much later.

• Allegations of Overreach vs. Need for Broad Audit: A debate sometimes arises on how far CAG’s mandate extends. M. L. Judd (Appleby) in the 1950s famously criticized the Indian audit system, opining that excessive audit “tends to have a negative and paralyzing effect on administration”. In modern times too, officials have occasionally accused the CAG of overstepping into policy evaluation rather than sticking to auditing execution. For example, after the 2G and coal block reports, some in the government argued the CAG shouldn’t compute “notional losses” based on alternative policy choices (e.g. auction vs. first-come-first-served), as policy-making is the executive’s prerogative. A former Cabinet Secretary even remarked that CAG was trying to “usurp the policy-making role” of government in those instances. However, the counter-argument – supported by constitutional thinkers – is that the CAG is fully within rights to point out inefficiency or inadequacy in policy implementation if it leads to financial loss. In fact, Article 149 and the CAG’s general mandate allow commenting on any “waste” of public resources, whether arising from poor policy or poor execution. The key is that CAG does not make policy; it only evaluates outcomes against stated objectives and norms of public interest. Indeed, the Supreme Court in multiple judgments has appreciated CAG findings in highlighting policy lapses while stopping short of treating CAG reports as conclusive evidence (they form one input among many). Thus, the balance lies in CAG maintaining objectivity and rigor – auditing facts and comparing outcomes with established benchmarks – while refraining from political judgments. The Public Accounts Committee also acts as a filter here, deliberating over CAG findings to ensure conclusions are fair.

In summary, the CAG’s role, though immensely beneficial, must continuously adapt – through capacity building, use of technology (e.g. data analytics for audit), and possibly procedural reforms – to address these challenges. The institution’s credibility and effectiveness hinge on being independent yet constructive: working with the executive to rectify faults without diluting the sternness required to call out wrongdoing.

Conclusion

The CAG of India, through its constitutional authority and incisive audits, serves as a bulwark of accountability in our democracy. By ensuring legality, the CAG upholds the rule of law and Parliament’s power of the purse; by insisting on propriety, it upholds the spirit of responsible governance – that public funds are a sacred trust to be used with utmost care and wisdom. This dual role has been instrumental in exposing scams, correcting course in flagship programs, and saving public money from misuse. Institutions like the PAC further amplify its impact, making the executive answerable on audit findings.

Upholding financial accountability has not just legal and administrative implications, but deep ethical ones – it reinforces citizens’ faith that governance is conducted in a transparent and just manner. As the government’s expenditure grows and enters new domains (infrastructure mega-projects, welfare schemes, defense acquisitions, digital economy, etc.), the CAG’s vigilance remains indispensable. Indeed, an empowered and effective CAG is integral to good governance: it deters financial irregularities, encourages better performance, and ensures that development is achieved within the discipline of law and norms of propriety. In the long run, the vision of our Constitution – of governance for the public good under strict accountability – is significantly actualized through the CAG’s efforts. Thus, the statement stands true: the CAG’s duty is not confined to checking the books for legality, but extends to safeguarding the broader public interest through propriety in expenditure, thereby fostering a culture of accountability and transparency in India’s governance.

Sources: Constitution of India (Articles 148-151); Indian Polity by M. Laxmikanth; CAG’s Duties & Powers (CAG Act, 1971); The Hindu and Indian Express reports on CAG audits (Ayushman Bharat, Dwarka Expressway, Take-Home Ration scheme); CAG Audit Reports and The Print analysis; Parliamentary Committee proceedings (PAC, JPC); Second ARC reports on Accountability; and Public Accounts Committee (PAC) reviews.