CAG calls for greater focus on audit of state finances | The Financial Express

CAG calls for greater focus on audit of state finances

Asks AGs at states to improve reporting on sustainability

CAG calls for greater focus on audit of state finances
Negative trends in various deficit parameters under the Fiscal Responsibility & Budget Management Act, and non-achievement of Medium-Term Fiscal Plan Targets are among the other concerns. (Photo: Pixabay)

With state finances under strain due to declining “own tax revenues“, relaunching of old pension schemes in some states and rise in subsidies, the Comptroller and Auditor General of India G C Murmu on Thursday asked Accountants Generals (AGs) to improve reporting on the sustainability of state finances. 

Murmu also stressed strengthening the audits of local bodies given that 15th Finance Commission grant award of Rs 4.36 trillion to support local governments for a five-year ending FY26.

Addressing the AGs conference in New Delhi, Murmu said going forward CAG’s audit process management and guidance would focus on “next steps towards strengthening local bodies audit, identifying socially relevant audits and reporting on sustainability of state finances.”

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“The fiscal health of states is a relevant issue that warrants careful assessment… the Reserve Bank of India and the Finance Commission have also taken note of the potential sources of fiscal risks for states, including declining own tax revenue, relaunching of old pension schemes in some states, rising dues of loss-making power distribution companies, and the periodic disbursal of farm-loan waivers and subsidies,” Murmu said.

In its state finance audit reports, CAG has been consistently highlighting risk factors that impact state finances, such as increasing committed expenditures, rising outstanding public debts and liabilities, low mobilisation of own resources comprising revenue from tax and non-tax sources and high arrears in revenue collection. Negative trends in various deficit parameters under the Fiscal Responsibility & Budget Management Act, and non-achievement of Medium Term Fiscal Plan Targets are among the other concerns. 

Keeping given the huge Finance Commission grants to local bodies, Murmu said there is a need to assure that the grants are properly utilised and programmes and schemes are effectively implemented.

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“Our audits of local bodies, therefore, need to verify whether the crucial fiscal steps, as recommended by the Commission, such as (i) setting up State Finance Commissions (ii) acting upon its recommendations (iii) presenting the action taken to the state legislatures concerned (iv) putting the accounts of local bodies in the public domain and (v) fixing minimum rates for property taxes, have been met,” he told Ags. Local government authorities would also need to independently verify whether the grants provided for basic social services, such as sanitation and meeting the open defecation-free target, solid waste management, drinking water provisions, rainwater harvesting and water recycling, have been effectively used for the purposes, as recommended, he added.

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First published on: 18-11-2022 at 06:15:00 am
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