CAG Audit of State Finances

The Comptroller and Auditor General of India is the constitutional authority that independently audits State finances, helping the legislature hold the executive accountable for public money. Under Article 149, Parliament prescribes the CAG's duties and powers concerning State accounts. The audit examines whether revenue and expenditure comply with law, legislative authorization and accepted standards of financial management.

Constitutional foundation

Article 148 establishes the CAG and protects the office through safeguards concerning tenure, removal and service conditions. Article 149 authorizes Parliament to define the CAG's audit duties. Under Article 150, the President prescribes the form of State accounts on the CAG's advice.

• Under Article 151(2), audit reports relating to a State are submitted to the Governor, who must lay them before the State Legislature.

Scope of audit

The Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Act, 1971 operationalizes the constitutional mandate.

• The CAG audits expenditure from the Consolidated Fund of the State and transactions relating to its Contingency Fund and Public Account.
• It audits State receipts to examine whether rules and procedures provide an effective check on assessment, collection and allocation of revenue.
• It may audit specified authorities and bodies substantially financed through government grants or loans.
• Audit may include financial, compliance and performance audit, covering correct reporting, observance of authority, and economy, efficiency and effectiveness.

Legislative accountability

The State Legislature, particularly its Public Accounts Committee, examines audit findings and the government's responses. The CAG reports irregularities and weaknesses but does not itself impose penalties or authorize expenditure; corrective and accountability measures rest with the legislature and executive.