Who will audit the auditor?

A few days back there was a news report that the Central government had referred a proposal for paramilitary housing to the CAG for advance clearance.. The spends were large – expected to be around Rs 30000 crores – and the recent high profile attacks by the CAG had prompted the government to play safe. Yesterday, Chidambaram said that CCTV cameras had been cleared for procurement three months ago, but the Delhi PWD was hesitant in ordering the same. Why? Because of fears that whichever vendor they went with, they could be hauled up for wrong choice by the auditor. We all saw the impact of that hesitation. What kind of a culture are we building? Is this the way we want to run our country? Under the constant fear of the auditor?

But then what can we expect if every single decision taken by the decision makers is reviewed – at a much later date with the full benefit of hindsight – and used to badger the decision makers? Every single decision is sliced and diced; every single decision is assumed to be taken for personal pecuniary gains; every single decision is challenged on one or the other grounds. An auditor has the luxury of having all facts and figures available on hand – since the audit is done many months or years after the decision was taken. But the one who takes the decision has to take the decision in real time. Without the benefit of having all facts accurately measured and available on hand. Decision making always happens under imperfect conditions. There is not a single person I know who can take all decisions right.

There is nothing wrong in the audit process if followed honestly. The auditor’s job is to isolate and bring up only those decisions which went wrong. It is not the auditor’s job to praise good decision making. The auditor by nature is expected to be critical of everything. That’s what the auditor is paid for. The problem comes with the way audit reports are handled. Audit reports always have to be presented to the topmost authorities – those who can ask questions and seek explanations from the decision makers. In the corporate set-up, that topmost authority is the Audit Committee of the Board. In the government, it is the PAC. The topmost authority may well be satisfied with the explanation given by the decision makers and may decide to do nothing with the audit report. Never is the auditor’s report assumed to be correct till it convinces the topmost authority. This is the check-and-balance built into the audit process. The auditor unearths the muck; the PAC verifies it. Unfortunately, what we have been seeing of late is that audit reports are leaked to media. And media – given its penchant for sensationalism – can’t wait for the process of audit to be completed. They have to make their pronouncement immediately. In the world of today, everyone is assumed guilty before being proven innocent. Being proven innocent subsequently has no impact. A person declared guilty once is guilty for ever.

These days, the auditor appears to be displaying suspicious behavior. For eg., it came out recently that the Chief Auditor of the CAG – the man who actually led the audit of the 2G licensing process – was not in favor of making any estimation of the losses suffered by the government on account of the First Come First Served policy it followed. The man was of the opinion that it was impossible to know what the spectrum would have costed if it had been auctioned. He was uncomfortable with the methods that were being suggested to bring up a figure…..any figure. The Sing Tel offer for a pan-India 2G license was meaningless since an offer made unsolicited and out of the sky in this manner has no sanctity in a government process. And also because the offer was later withdrawn. Using the 3G auction data was wrong again since the product here was totally different – 3G was a premium service with limited reach objectives; the other (2G) a revolutionary product that would empower millions with its potential for equalizing business opportunities. The third method was even more suspect. Using the “dilution of equity” that license winners had adopted to raise capital. The auditor did not understand that dilution of equity is different from selling of equity? Anyways, that’s not the point here. The point is that this Chief Auditor was under pressure from his boss – Mr. Vinod Rai – THE man – to put some estimates out. The rest is history. The government’s been battered. In the minds of the people, it doesn’t matter now when TRAI says that they had never recommended auctions. That in their opinion, the government has perhaps actually earned 5-7000 crores more by the FCFS process than it would have had it gone for auctions. The truth hardly matters now…..

Brings me to an important question in my mind. Who is going to audit the auditor? The CAG is a constitutional body and hence is independent of the Executive and the Legislature. That’s great. But the writers of the Constitution provided for the CAG to be under the review of the Parliament. Hence the PAC mechanism. There is also a method prescribed for his removal – his impeachment can only be effected by a 2/3rds vote in both houses of Parliament. That pretty much explains why no CAG has ever been impeached. Just like no judge has ever been impeached since independence (Soumitra Sen hasn’t been impeached yet – he’s resigned). If judges have never been impeached even on grounds of corruption – when a non-partisan view can possible emerge in Parliament – what chance is there of a CAG ever being impeached on grounds of mere political bias? Or for his inefficiency or inaccurate reports? Can Parliament ever be expected to take a non-partisan view of a CAG’s blunders?

If a country’s decision makers live in a permanent fear of taking decisions, it can only be terrible news for the country. AK Antony – the Defence Minister – is often referred to as an example of a “clean” politician. But no one accuses Antony of never taking or delaying decisions. A Defence Minister who never takes decisions – or waits for a consensus to emerge over years and years – may endanger the security of the nation. In our country, that seems acceptable. A minister who doesn’t decide for years can get away by claiming that he is seeking consensus. A minister who takes a decision relatively fast (17 months in the case of Praful Patel’s aircraft procurement) is accused of having taken a decision in a “tearing rush”. When will we as a country start demanding and rewarding good performance and efficiency instead? I would anyday support a Praful Patel – who changed the look of the aviation sector in the country – rather than an Antony who is silently weakening the Indian defence.

The CAG has a very important role to play. We know how much corruption exists amongst the government ministries. The CAG has to bring all that up. But the CAG has to remain strictly apolitical. The CAG cannot seek media attention. The CAG cannot be sensational as a body. That unfortunately does not seem to be the case at the moment.

The real truth is that we cannot work under the fear of audit. No decision will ever get taken. But this does not mean that the audit process should be given the go-by. What it means is that auditors must do what is written in the Constitution. Present their report to the PAC and leave it to it to decide. The auditor cannot go to media and sensationalize matters. Just like the judiciary never goes to the media with their judgments. The CAG has to conduct itself better. It cannot become a power center. Its role is to remain in the background. Alert…..but always in the background.