Accounts and Audit of the Authority (Section 42)

A regulator that spends public money and fees paid by the regulated sector must account for them. Section 42 of the PFRDA Act requires the Authority to keep proper accounts, subjects them to audit by the Comptroller and Auditor-General of India (CAG), and requires the audited accounts to be laid before Parliament. With the annual report under Section 46, this is the main channel of financial accountability of the Authority.

1. Maintenance of Accounts (Section 42(1))

• Proper accounts: the Authority must maintain proper accounts and other relevant records.
• Annual statement: it must prepare an annual statement of accounts.
• Form: in the form prescribed by the Central Government in consultation with the CAG. Section 51 empowers the Government to make rules on the form of the annual statement of accounts.

2. Audit by the CAG (Section 42(2))

• Auditor: the accounts are audited by the Comptroller and Auditor-General of India.
• Intervals: at such intervals as the CAG specifies.
• Cost: expenditure incurred in connection with the audit is payable by the Authority to the CAG.

Audit by the CAG, rather than by a private firm of auditors, reflects the public character of the Authority. The CAG is a constitutional authority under Articles 148 to 151, and its audit of bodies such as PFRDA is governed by the Comptroller and Auditor-General's (Duties, Powers and Conditions of Service) Act, 1971 as well as by Section 42.

3. Powers of the Auditor (Section 42(3))

• Same as Government audit: the CAG, and any person appointed by the CAG for the audit, have the same rights, privileges and authority as the CAG has in auditing Government accounts.
• Documents: in particular, the right to demand production of books, accounts, vouchers and other documents and papers.
• Inspection: the right to inspect any of the offices of the Authority.

4. Laying before Parliament (Section 42(4))

• Certified accounts: the accounts, as certified by the CAG or his appointee, together with the audit report, are forwarded annually to the Central Government.
• Parliament: the Government must cause them to be laid before each House of Parliament.
• Scrutiny: once laid, the accounts and audit observations may be examined by parliamentary committees, such as the Public Accounts Committee, and raised in debate.

5. What the Audit Covers

• Financial audit: whether the accounts give a true and fair view of the Authority's income, expenditure, assets and liabilities.
• Compliance audit: whether expenditure was made within the Act, rules and regulations, and from the correct fund. For example, spending from the Subscriber Education and Protection Fund must be for subscriber protection, not ordinary administration.
• Performance aspects: the CAG may also comment on economy, efficiency and effectiveness, such as delays in achieving objectives or uneconomical procurement.

6. Place in the Accountability Framework

• Accounts and audit (Section 42): financial accountability through the CAG and Parliament.
• Annual report (Section 46): a full account of activities within nine months of the year's end, laid before Parliament.
• Rules and regulations (Section 53): laid before Parliament for scrutiny.
• Policy directions and supersession (Sections 43 and 44): executive control by the Central Government.
• Appeals and writs: judicial accountability for individual decisions.

Together these ensure that the Authority, though autonomous in regulatory matters, remains answerable to Parliament for how it raises and spends money and how it performs its functions.

7. Questions Arising

Can the CAG audit the pension funds or the NPS Trust under Section 42?

Not under Section 42, which concerns the accounts of the Authority. Pension funds are companies with their own statutory auditors, and the schemes and the NPS Trust are audited as PFRDA's regulations require. The CAG's audit may, however, examine how the Authority supervises them, as part of its review of the Authority's functioning.

What if the audit reveals irregular expenditure?

The CAG records it in the audit report, which is laid before Parliament. The Authority must respond, parliamentary committees may examine the matter, and the Government may issue directions or take action against those responsible. Serious misuse of funds by the Authority's members or staff may also attract the criminal law, since they are public servants under Section 47.

8. Related Topics and Provisions

• Finance: grants, the Pension Regulatory and Development Fund and tax exemption (Sections 34, 39 and 40)
• Subscriber Education and Protection Fund (Sections 29 and 41)
• Central Government control: returns and reports (Sections 43 to 46)
• Pension funds and the NPS Trust (Section 23)