CAG: Stalled Audits, Alleged Political Bias Shake Constitutional Body

CAG Headquarters Stalled Critical Government Audits

In Part 1 of our series, we reported on allegations of corruption, cronyism, and cover-ups within the Comptroller and Auditor General of India’s office. Our investigation highlighted the controversial foreign posting fiasco within the organisation, and the CAG’s response to our story inadvertently validated our findings regarding senior officials under inquiry. However, this issue goes beyond individual allegations against officers and the failure of the constitutional body to swiftly investigate and ensure accountability.

What truly ails the C&AG is a systemic problem. The way the constitutional body operates reflects a deeper issue: its independence is fundamentally compromised. Despite its mandate as an independent watchdog, the C&AG is led by an individual handpicked by the Prime Minister and appointed by the President. This raises a critical question—can an appointee of the very government they are tasked with auditing ever provide an impartial assessment? 

This concern looms large, especially as the current CAG, Girish Chandra Murmu, approaches the end of his term on November 21, 2024, renewing scrutiny over the process of appointing his successor. The following story reveals the consequences of having the head of an institution as crucial as the C&AG handpicked by the government in power.

Why Were Maharashtra Audits ‘Paused’?

During our investigation, we spoke with several serving and former C&AG officials. A troubling trend emerged: audits approved for execution are sometimes stalled without clear justification. In some cases, it's unclear whether the delays are meant to appease the government in power. For example, The Probe has obtained a document detailing stalled audits in Maharashtra. 

Maharashtra is set to go to polls on November 20, 2024. The C&AG document dated dated 9 October 2023, states: “In view of headquarters mail dated 26-09-2023, comprehensive detailed presentation on Performance Audits (PA) and State-specific compliance audits (SCCA) / Thematic Audits (TA) taken up in the annual audit plan 2023-24 has been forwarded to Headquarters as directed by them. Pending further clarity in this regard, it is directed that all field audit work related to PAs and SCCAs/TAs may be paused with immediate effect till further orders.”

Maharashtra, as the largest contributor to India’s GDP and a major source of both GST and income tax collections, plays a key role in the nation’s economy. So, why were the audits in Maharashtra specifically ordered to be ‘paused’? The reasoning provided in the communication raises immediate suspicions. 

The audits that are stalled - Performance Audits (PAs), State-Specific Compliance Audits (SCCAs), and Thematic Audits (TAs) - also involve areas where a significant topic of interest or high-risk issues are selected by auditors. These topics are typically chosen based on systemic deficiencies, allegations of fraud, newspaper reports of fund misappropriation, and other such factors. Notably, these audits frequently cover areas that could cause embarrassment to the government.

Speaking to The Probe, a C&AG official said: “When you say that you stay away from PAs, SCCAs, and TAs but can do financial audits, headquarters-related work, and compliance audits, you are effectively asking auditors to avoid critical audit work. Instead, they are being limited to tasks like account certification, headquarters assignments, and compliance checks. The question is, when all these topics are approved for audit under the Annual Audit Plan, what is the rationale behind stopping major audits in a state in the last minute?”

When we sought further insights, another senior official, speaking on condition of anonymity, told The Probe that the suspension of audits in Maharashtra was allegedly driven by political considerations. The official suggested that the decision was influenced by the BJP’s presence in the state government, with the party reportedly eager to avoid any audits that could embarrass them ahead of the upcoming elections.

While these are allegations, the question remains whether a similar pattern existed during the Congress regime and whether these issues are systemic in nature—problems that the institution must address on a broader scale.

As our investigation unfolded, we uncovered numerous other projects within the CAG office that have been similarly stalled—often with little to no justification or based on flimsy reasons. A case in point is the stalling of a national infrastructure project. 

Theme Based Audit of “National Project” Stalled 

The Probe has accessed an internal correspondence from the CAG office, dated 11 October 2023, which reveals the stalling of another critical government audit. This time, it is a national infrastructure project. The letter, sent by a senior CAG official to an auditor is regarding the Theme-Based Audit (TBA) of a "national project." The communication clearly reveals an alarming directive from the CAG headquarters: “The competent authority has decided that the TBA may not be taken in the current Audit Cycle i.e 2023-24. Therefore, I am directed to convey the instructions of Headquarters that the Audit Party or other personnel associated in the TBA on… the National Project may be withdrawn with immediate effect.” 

A senior official within the organisation, speaking on the condition of anonymity, confirmed to The Probe that the shelving of the "national project" audit is just one of many such audits that are stalled without any credible justification. The official stressed the role of ‘political pressure’ as a major factor behind the obstruction of several audit projects.

“We have a professional way of functioning, and our major audits are based on key timelines. By and large, we aim to have our audit reports signed by the CAG and presented to the government before the budgetary discussions, i.e., before February, so that our reports can be discussed in Parliament during this critical period. The second consideration is ensuring that major reports are submitted well before the financial year ends. Here’s how we usually function: We conduct risk assessments, choose topics for audit, and get them approved in the Annual Audit Plan by January. Around March, we start the audits, which are completed in nine months—by November. By November or December, the audits are signed by the CAG and then sent to the government. This ensures the reports are ready for budgetary discussions in February and well before the financial year ends. This is the general principle, though not an absolute rule for all audits. So, when an audit that was approved in January is stopped in October, you have to wonder—why was the audit approved in the Annual Audit Plan after thorough risk assessment if the intention was to shelve it later for whatever reason?”

Performance Audit on “Debt Sustainability” Shelved

The Probe has accessed another internal document from the CAG’s office, further exposing the questionable reasons behind halting audits of key government departments and projects. This communication, dated 1 December 2023, was addressed by a senior official to the Director General of Audit and pertains to the shelving of a Performance Audit (PA) on ‘Debt Sustainability’ under the Union Ministry of Finance. 

The letter outlines the reasoning for this abrupt decision: “During discussions on Presentation on AAP (Annual Audit Plan) 2023-24, it emerged that the topic of Debt Sustainability… has lost materiality in view of the government decision to fund… through General Budget instead of Extra Budgetary Resources (EBRs). Moreover, debts… are covered by agreements for reimbursements…by sovereign guarantees. It has been decided to withdraw the above TA topic from AAP 2023-24. Accordingly, I’m directed to convey the decision of the Headquarters to withdraw the PA topic on ‘Debt Sustainability’ from the AAP 2023-24. Therefore, it is requested that the field audit parties associated in the PA work may, immediately, be withdrawn and the auditees also informed of the decision.”

The term "debt sustainability" refers to a government's ability to manage its existing debt levels without requiring future restructuring or risking default. Debt sustainability assessments take into account the country's revenue potential, debt servicing capacity, and fiscal policies, alongside external factors like global interest rates and economic conditions. 

By shelving the audit, the CAG office is essentially relinquishing its responsibility to scrutinise government debt management practices. The reasoning provided in the note for shelving the audit—that the funding has shifted to the general budget—comes across as ambiguous. This situation sets a worrying precedent where audits might be shelved due to governmental pressures or shifting priorities. It raises concerns that similar audits may be disregarded in the future, impacting governance with fiscal responsibility and accountability. 

Speaking to The Probe, a senior official within the organisation stated: “When you conduct a risk assessment and select a topic like debt sustainability for audit after approval from the highest level, what transpires in between that leads to dropping the topic? The reasoning that the audit has lost materiality due to the government’s decision to fund it through the general budget does not hold any logic, especially since the Government of India itself is highly indebted. General budgetary support is hardly an excuse to shelve the audit.”

"We Have Been Asked to ‘Go Slow’ on Audit of BJP Ruled States"

A senior official in the CAG’s office, with over three decades of experience, stated in a conversation with The Probe that a strategic, three-pronged approach has allegedly been established within the organisation to manage politically sensitive audits. "First, audits are often not planned, even when they are contextually relevant. Second, if an audit is initiated, it’s halted under various pretexts. And third, if an audit report does get tabled—due to oversight—and causes embarrassment to the government, the officer responsible faces punitive measures. This is precisely what happened with the NHAI case."

Atoova Sinha, an IAAS officer oversaw the Comptroller and Auditor General of India’s report on highway projects under the Bharatmala Pariyojana Phase-I (BPP-1), which revealed major irregularities. The report highlighted a massive escalation in costs for the Dwarka Expressway project. It noted that the National Highway Authority of India (NHAI)'s decision to construct an elevated carriageway in the Haryana segment led to costs soaring to ₹250.77 crore per kilometre—far exceeding the ₹18.20 crore per kilometre initially approved by the Cabinet Committee on Economic Affairs.

The report was tabled in Parliament in August 2023. Following the report’s tabling, Sinha, a 2002-batch officer and Principal Director in Delhi, who played a key role in the audit, was abruptly transferred to Kerala as the Accountant General in October 2023. Sinha's transfer occurred despite her having served less than a year as the Principal Director in Delhi—a move allegedly seen by insiders as direct retribution for the embarrassing findings the report unearthed.

The senior official alleged: "During the current CAG’s tenure, audits in all BJP-ruled states have been particularly superficial—all means all. Gujarat, in particular, has been mollycoddled." 

These revelations are not only alarming but also deeply unsettling, casting a shadow over the very institution that is supposed to act as the bedrock of government accountability. The Probe sent a detailed questionnaire to Comptroller and Auditor General Girish Chandra Murmu, seeking clarity on several key issues regarding the office’s recent audit activities. The questions included a request for an explanation regarding the directive issued on 9 October 2023, which instructed the Maharashtra state unit to pause all Performance Audits (PAs), State-Specific Compliance Audits (SCCAs), and Thematic Audits (TAs). Given that these audits had been approved as part of the Annual Audit Plan following a thorough risk assessment, the questionnaire sought insight into the rationale behind this abrupt suspension. 

Additionally, the C&AG was asked whether any national infrastructure projects or other national project audits had been stalled during the 2023-24 audit cycle, with a request for specific project names and reasons for the pauses. The questions also addressed the discontinuation of the performance audit on debt sustainability and sought an explanation for its removal from the audit agenda. 

Furthermore, The Probe raised questions regarding allegations from senior officials within the C&AG office regarding potential biases in audits of states governed by the BJP, particularly Gujarat. These claims, if true, would undermine the C&AG’s mandate for impartial and independent auditing. The questionnaire asked how the C&AG responded to these allegations and what measures were in place to ensure objectivity in its audits, irrespective of the ruling party in any state.

CAG Responds to The Probe

In its response, The C&AG stated: “There are no pauses in audits whether Performance Audits, Subject Specific Compliance audits(SSCA) or Thematic audits in any state (including Maharashtra) or union, including those of the large Infrastructure Projects. The audits are going as per audit plans and a very large number of reports are being prepared and continue to be placed in Parliament and State legislatures. These reports are available on the website of CAG. The process and methodology of Audit on debt Sustainability has been made more robust by making use of extensive quantitative analysis. These are also reflected in the states under the separate financial audit reports (SFAR). The audit plans are monitored and implemented with multiple scrutiny levels in Headquarters and Field Offices respectively.”

While the C&AG responded to the questions in a superficial and generalised manner, it failed to address specific queries regarding the directive issued to the Maharashtra state unit on 9 October 2023. This directive sought for the pausing of all Performance Audits (PAs), State-Specific Compliance Audits (SCCAs), and Thematic Audits (TAs) with immediate effect. We sought an explanation for the rationale behind this decision, yet the C&AG only provided vague statements about audits continuing nationwide. This response overlooks the critical issue that audits need to be executed in a time bound manner to ensure timely tabling in Parliament. Merely stating that audits are ongoing is not sufficient. The real question remains: Why were these audits specifically paused, and why did the C&AG fail to answer the rationale behind this decision?

Additionally, while the CAG mentioned that all Performance Audits, State-Specific Compliance Audits, and Thematic Audits are ongoing, including those related to national projects, it still failed to provide a concrete answer to whether any national infrastructure or other major national audits were paused or suspended during the 2023-24 financial cycle. We specifically asked for the names of the projects and the reasons for such suspensions, but no detailed response was provided.

Regarding the debt sustainability audits, we again did not receive a direct response on why the C&AG office had initially approved a performance audit on debt sustainability, following thorough risk assessments and endorsement at the highest levels within the Annual Audit Plan (AAP) 2023-24 only to shelve it later. We asked the C&AG for the specific reasons on why this topic was subsequently removed from the audit agenda.

Regarding allegations that the CAG is going slow on audits related to BJP-ruled states, the CAG's response stated: “Audits are being done completely impartially in both the Union and all states all over India, and the institution of the CAG continues to work steadfastly towards fulfilling its mandate.”

When the head of a constitutional auditing body is an appointee of the very government they are meant to scrutinise, it becomes impossible for such an individual or organisation to offer an impartial and unbiased assessment of government audits. This undermines not just the integrity of the audits but also raises concerns about potential conflicts of interest, ultimately eroding public trust in the institution’s ability to hold the government accountable. 

To read Part 1 of our investigation: Click here