Performance Audit by Comptroller and Auditor General of India

The functions of the Comptroller and Auditor of India are derived mainly from the provisions of Article 149 to 151 of the Constitution of India. The Act [ Duties and Powers of the Comptroller and Auditor General of India under the Comptroller and Auditor General’s (Duties, Powers and Conditions of Service) Act, 1971] has made provisions in Section t4 and 15 for the audit of the accounts of authorities and bodies receiving financial assistance in the form of grants or/and loans from the Government of India or State or UnionTerritory Section 14 of the Act deals with the audit of receipts and expenditure of Bodies andAuthorities substantially financed from Union or State Revenue.

Jurisdiction of CAG

The provisions in Section 14 and 15 for audit of accounts of authority or bodies receiving financial assistance in the forms of grants or loans are subject to certain conditions and criteria specified in those Sections.

 Section 14(I) attracts the following institution if it is:-

1. The grant and/or loan must be to a body or authority.
2. The grant or loan must have been paid out of the Consolidated Fund.
3. The autonomous body must be “substantially financed” by grant or loan in accordance with the explanation of that term given in the Section.
4. The audit will be of all receipts and expenditure of the body or authority.
5. Audit will be subject to the provisions of any law, for the time being in force applicable to the body or authority. The said clause is interpreted to mean that our audit will co-exist with and compliment the audit arrangements that may be specified in such law.
6. The words “body” and “authority” used in Article 149 of the Constitution, have not been defined either in the Constitution or in the Act, wherein also these words have been used. However, “authority” has been interpreted by the Attorney General of India to mean a person or body exercising power or command vested in it by virtue of provisions in the Constitution or Acts passed by the Parliament or the State Legislatures. “Body” has been interpreted by him to mean an aggregate of persons, whether incorporated or unincorporated. The expression ‘body’ would therefore include institutions or organizations set up as autonomous organisations under specific statutes or as a society registered under the Societies Registration Act, 1860 or Indian Trust Act 1882 or other statutes, voluntary organizations or non-governmental organizations, Urban and Rural local self government institutions, co-operative societies, societies or clubs etc.
7. The term ‘body’ and ‘authority’ includes a Company or Corporation. Thus, if a Company or Corporation is not covered by Section 19(1), 19(2) or 19(3) of the Act, it is open, to take up audit under Section 14(1), 14(2) or 20(2), as the case may be subject to the conditions specified in each section being satisfied. The second condition in Section 14 is that the grant and/or loan must be paid from the Consolidated Fund. Cases in which the grants or loans are received by a body or authority through another body or authority which is itself financed by the Central or State Government, have to be excluded for purposes of audit under Section 14, unless it could be clearly established that the intermediary body or authority was a mere agency for remitting the grant/loan provided by Government.

F.No. 6(5)-B (R) / 99
Ministry of Finance
Department of Economic Affairs
Budget Division
New Delhi 13th June, 2006

Subject: – Performance Audit by Comptroller and Auditor General of India

Clarification has been sought whether Performance Audit falls within the scope of audit by C&AG under the Comptroller and Auditor General’s (Duties, Powers and Conditions of Service)Act, 1971.

2. The Government has considered the matter. Under Section 23 of the DPC Act, 1971, the Comptroller and Auditor General of India has the powers to make regulations for carrying into effect the provisions of the Act in so far as they relate to scope and extent of audit. In pursuance of these provisions C&AG has been conducting performance audits in addition to financial audits and compliance audits based on guidelines / principles / regulations framed for the purpose. All audit reports of the C&AG are placed before the Parliament and State Legislatures, as the case may be as constitutionally mandated.
3. It is, therefore, clarified that performance audit, which is concerned with the audit of economy, efficiency and effectiveness in the receipt and application of public funds is deemed to be within the scope of audit by Comptroller and Auditor General of India for which Performance Auditing Guidelines drawn up by the Comptroller and Auditor General of India already exist.
4. All the Ministries / Departments are accordingly expected to facilitate the conduct of audits including performance audit by providing access to all the documents required by C&AG in connection with such audits. In this regard attention of all the ministries is invited to O.M. F.No.1(43)-B/78 dated 23rd September 1978 issued from the Ministry of Finance, clarifying the procedure in respect of submission of official documents for audit without any apprehension and with due care with respect to custody and handling of classified files in accordance with standing instructions.
5. The respective subordinate offices and other entities that come under the purview of the CAG audit may also be advised accordingly.

(P. R. Devi Prasad)
Officer on Special Duty (FRBM)

Supreme Court Judgements

I. Arvind Gupta Vrs. Union of India
Powers of CAG to Conduct Performance Audit

II. Reghu Nath Kelkar Vrs. Union of India and others
Powers of CAG regarding time, scope and extent of audit

III. National Dairy Development Boards Vrs. CAG of India.
Powers of CAG to Conduct Performance Audit

IV. Arun Kumar Aggarwal Vrs. Union of India
CAG Audit Report as a basis for grant of relief or initiating action

V. Shri S. Subramaniam Balaji Vrs. the Government of Tamil Nadu and others.
Duty of CAG regarding examination of expenditure

VI. Association of Unified Tele Services Providers & Others VsUnion of India-scope and ambit of the powers and duties of the Comptroller and Auditor General of India (CAG)