CAG & Parliamentary Committees

The audit office in India predates the Constitution, going back to the era when the Crown took over from the East India Company.

• The First Auditor General was Edward Drummond in 1860.

The CAG is an independent constitutional authority who audits all government accounts and reports to the President — the watchdog of public finance and the citizen's eye.

• It is a Constitutional Body and an Independent body — not under the control of the Executive.
• Salary is charged on the Consolidated Fund of India (so it is non-votable).
• CAG is the head of the Indian Audit & Accounts Department (IA&AD).
• There is also a State CAG, like the State UPSC and State Election Commission.

• Holds office for 6 years or up to the age of 65 years, whichever is earlier.
• Sends resignation to the President.
• Not eligible for any further office either under the Government of India or a State Government (to keep the office impartial).

• Removed by impeachment, in the same manner as a Supreme Court Judge, on the grounds of proven misbehaviour or incapacity.
• The same impeachment process applies to the removal of the EC, CAG, CJI and President.

• Auditor of all accounts of the Consolidated Fund, Contingency Fund and Public Account, of both the Centre and the State Governments.
• Can audit Government companies as per the provisions of the Companies Act, 2013.
• Reports to the President.
• The reports of the CAG are examined by the Public Accounts Committee (PAC), a Parliamentary Committee.

A small cluster of Articles in Part V of the Constitution defines the CAG's appointment, powers and reporting.

• Article 279A — establishes the GST Council (a Constitutional Body), inserted by CAA-101, 2016.
• The GST was implemented from 1 July 2017.
• Article 246A — relates to State GST.

A Parliamentary Committee is a small group of MPs that does the detailed work the full House cannot — hence the nickname "Mini Parliament".

• Provides a check on the Government.
• An instrument for detailed scrutiny of bills, budgets and policies.
• Provides legislative expertise.

• Standing Committees — permanent in nature.
• Ad Hoc Committees — temporary, for a specific purpose.

Standing Committees are the permanent fixtures of Parliament, while Ad Hoc Committees come and go with a single task.

• Works continuously throughout the year.
• There are six types of Standing Committee:

1. Financial Committees 2. Departmental Standing Committees 3. Committees to Enquire 4. Committees to Scrutinise and Control 5. Committees Relating to the Day-to-Day Business of the House 6. House-Keeping / Service Committees

• Formed for a specific purpose.
• Ceases to exist once the task is completed.

There are three Financial Committees — these are the most exam-important Parliamentary Committees and they share several common rules.

• Term = 1 year, and members can be re-elected.
• A Minister cannot be elected to any of these committees.
• The Chairman is appointed by the Speaker of the Lok Sabha.

### 6a. Public Accounts Committee (PAC)

The PAC is the most important of all Parliamentary Committees, and it examines the CAG's audit report after the money has already been spent.

• Total members = 22 (15 from Lok Sabha + 7 from Rajya Sabha).
• Established in 1921 — the oldest financial committee.
• Members elected by Single Transferable Vote; a Minister cannot be elected; term 1 year (re-election allowed).
• Chairman appointed by the Speaker; since 1967 always from the Opposition party.
• Function: examines the annual audit report of the CAG (Article 148).
• The concept of the PAC was borrowed from the UK constitution.

### 6b. Estimates Committee

The Estimates Committee is the largest Parliamentary Committee, and it works on the budget *before* the money is spent, hunting for economies.

• Total members = 30 — the largest committee, all from the Lok Sabha (0 from Rajya Sabha).
• Established in 1950, recommended by John Mathai (the then Finance Minister).
• Members elected by Single Transferable Vote; a Minister cannot be elected; term 1 year (re-election allowed).
• Chairman appointed by the Speaker, always from the ruling party.
• Function: examines the estimates in the budget and suggests economies in public expenditure.
• Also described as a Continuous Economy Committee.
• Key role: ensures public money is spent economically, efficiently and wisely.

### 6c. Committee on Public Undertakings (CoPU)

The Committee on Public Undertakings keeps an eye on the country's PSUs, making sure they are run efficiently and in the national interest.

• Total members = 22 (15 from Lok Sabha + 7 from Rajya Sabha).
• Established in 1964, recommended by the Krishna Menon Committee.
• Members elected by Single Transferable Vote; a Minister cannot be elected; term 1 year (re-election allowed).
• Chairman appointed by the Speaker, always from the ruling party (and from the Lok Sabha).
• Function: examines the financial reports of PSUs (Public Sector Undertakings).
• Key role: ensures PSUs are run efficiently and in the interest of the nation.

### Financial Committees — Composition Summary

All government money flows through three funds, and all three are audited by the CAG.

The three funds 1. Consolidated Fund of India — Article 266(1) 2. Public Account of India — Article 266(2) 3. Contingency Fund of India — Article 267

### 7a. Consolidated Fund of India (Article 266(1))

This is the main account of the government, and money can be withdrawn from it only after Parliament passes the relevant bill.

• Money can be withdrawn only after the bill is passed by Parliament.
• A permanent fund controlled by the President; the account is held in the RBI.
• Charged Expenditure = non-votable expenditure (Parliament's approval is not required to *vote* on it). Examples:
• President's emoluments and post-related expenditure.
• Salaries, allowances and pensions of the President, Deputy Chairman & Chairman of Rajya Sabha, Speaker & Deputy Speaker of Lok Sabha, Judges of the Supreme Court, the CAG, and the Election Commission.
• Pension of High Court Judges.

### 7b. Public Account of India (Article 266(2))

The Public Account holds money that the government merely *holds in trust* — like provident funds and small savings — so it needs no parliamentary vote.

• Governed by Article 266(2).
• Holds Provident Fund, and money from post offices, banks, etc.
• Parliamentary approval is not needed for expenditure from this account.

### 7c. Contingency Fund of India (Article 267)

The Contingency Fund is the government's emergency reserve, dipped into for unforeseen expenses *before* Parliament approves them.

• Contingency Fund of India = Article 267(1); Contingency Fund of a State = Article 267(2).
• Used to meet unforeseen / emergency expenditure pending Parliament's approval — also called the Emergency Fund.
• Its source is the Consolidated Fund of India, with a fixed corpus of ₹500 Crore.
• Money is withdrawn after the President's sign.
• Controlled by the Finance Secretary on behalf of the President.

### Public Finance — Comparison Table

• The CAG audits all three — Consolidated Fund, Contingency Fund and Public Account.
• Consolidated Fund → requires parliamentary approval for all expenditure.
• Public Account → does not require parliamentary approval.
• Contingency Fund → used for unforeseen / emergency needs.