No CAG Performance Audit of MGNREGA for 10 Years Poses Serious Questions

CAG’s performance audits examine the extent to which an activity, programme or organisation operates economically, efficiently and effectively.

New Delhi: The Comptroller and Auditor General (CAG) of India has not conducted a Union level performance audit of the implementation of the Mahatma Gandhi National Rural Employment Generation Act (MGNREGA) since 2013.

According to CAG reports available on its website, a performance audit of the implementation of the scheme – which guarantees 100 days of work to rural households every year – was last conducted in 2013. The scheme was taken up for audit by CAG at the national level in 2016, but not as a performance audit but only to examine the Social Audit Units – which are meant to detect any cases of malpractice – under it.

The Wire has learnt that while the 2013 report was comprehensive and covered the MGNREGA’s implementation across the country, there was a plan after that to cover the social impact of the scheme, which was done in the 2016 report. However, after that, there has been no elaborate report on MGNREGA.

Sources familiar with the matter told The Wire that principally a performance audit of every scheme is done after every five years.

“About 7-8 schemes are earmarked every year for audit. Unless there is a request from the government or CAG is particular about one, in routine course a scheme may come up again for performance audit in ten years also. So, as it (MGNREGA) was done in 2016, there is a likelihood that it may come up again in 2026,” the source told The Wire.

“Regular audit is done every year which is called transactional audit through which we cover all states and all schemes. But as regards performance audit, it depends on the gravity or suppose a high court or the Supreme Court has taken issue or someone has filed in the PAC (Public Accounts Committee) about where the money is going then CAG may be directed to conduct an audit of the scheme but otherwise CAG takes a decision on its own and in routine course it can take any time. If a certain aspect of a scheme is being taken up for audit (like the 2016 CAG report on MGNREGS’ Social Audit Units) that means that the scheme has been covered. It may not cover all aspects, but even if two or three aspects are covered it means that we have touched that scheme. There are hundreds of government schemes, even in the cycle of five years it is not possible to cover all,” the source said.

The Wire has reached out to the CAG office for a response. This report will be updated if and when a response is received.

Why CAG audit reports are important

CAG reports have been of special interest since the UPA government came under fire for alleged scams in 2G spectrum and coal block allocations

In the monsoon session of parliament that ended in August, CAG presented twelve reports that revealed corruption and irregularities in the functioning of several Union government ministries and departments. 

After the CAG Office transferring three officers, some of whom had worked on the most damaging reports, the opposition parties have accused the Modi government ofintimidation. The officers were in charge of audit reports that exposed corruption in the Dwarka Expressway project and Ayushman Bharat. A third officer who had initiated the audit of the Ayushman Bharat report was also transferred. The Wire has also reported thatverbal orders were issued by CAG to stop field audit work that is crucial for auditing.

CAG has termed these reports as “erroneous and baseless.”

Also Read | CAG: After Verbal Orders to ‘Stop all Field Work’, Officers Ask for Written Orders

As a constitutional authority, CAG is the sole authority that the constitution entrusts the responsibility of auditing the accounts of the Union and state governments.

CAG’s performance audits examine the extent to which an activity, programme or organisation operates economically, efficiently and effectively.

MGNREGA’s shrinking budget

MGNREGA, a one of its kind right to work act in the world, was enacted in 2006 with the objective of enhancing livelihood security in rural areas by providing at least 100 days of guaranteed wage employment in a financial year. This is guaranteed to every household whose adult members volunteer for unskilled manual work.

It initially came into force in 200 districts from February 2, 2006 and was expanded to cover all rural areas by April 1, 2008.

The scheme is implemented by the Department of Rural Development under the Ministry of Rural  Development.

According to analysis by PRS Legislative Research, in 2023-24, MGNREGS (38%) gets the highest budgetary allocation in the department’s accounting. The rural development department also implements other major social sector schemes such as Pradhan Mantri Gram Sadak Yojana (PMGSY) and Pradhan Mantri Awas Yojana-Gramin (PMAY-G).

In the 2023 budget, the MGNREGS was allocated Rs 60,000 crore. Concerns have been raised that the allocation to the MGNREGS has declined by 33% as compared to the revised estimates of 2022-23.

Union-level CAG reports on MGNREGA

CAG’s 2013 report covered the period from April 2007 to March 2012. 

Prior to that, the first performance audit of the scheme was undertaken in 2007-08 and covered the period from February 2006 to March 2007.

The 2013 report came down heavily on the then UPA government and noted that there had been a “significant decline” in per rural household employment generation in the previous two years and “substantial decline” in the proportion of works completed. It also said that Bihar, Maharashtra and Uttar Pradesh, which together account for 46% of the rural poor, utilised only about 20% of the Central Scheme funds which indicated that the correlation between poverty levels and implementation of MGNREGA was not very high.

It also noted that “monitoring at the central level was unsatisfactory.”

The 2016 report examined the functioning of Social Audit Units under MGNREGA. Social audit is described in the report as verification of the implementation of a programme/scheme and its results by the community with the active involvement of the primary stakeholders. It is mandated under the Mahatma Gandhi National Rural Employment Guarantee Audit of Schemes Rules, 2011. The rules were framed by the Ministry of Rural Development in consultation with CAG. The rules provide for the state government to facilitate identification and creation of independent organisations i.e. Social Audit Units (SAU), process of conducting these audits and obligations of persons related to the audits.

This report noted several irregularities including that SAU had not been set up in seven states, while in eight states they were set up but not functional. It also noted a shortage of resource persons to carry out such Social Audits, among other findings.

Seven years since this report, CAG is yet to conduct a performance audit of the MGNREGA scheme as a whole or any aspect of the scheme at the Union level. A recent media report said that the SAU’s were ailing because they are fund-starved and do not have trained or adequate personnel working for them.

MGNREGA workers. Women/Gaganjit Singh/Flickr CC BY-NC-ND 2.0

“Performance audit depends on risk assessment”

Subhash Chandra Pandey, a former IA&AS officer who retired as special secretary and financial adviser in the Union ministry of Commerce and Industry and is at present serving as the president of the Institute of Public Auditors of India (IPAI), said that audits are conducted by field offices in the Indian Audit and Accounts Department. 

Field audits continue in block development offices and inspection reports are issued by State Accountant General offices. If major irregularities are found that merit the attention of the Parliament or state legislatures, these find mention in CAG reports to the concerned legislatures. 

“Occasionally, the CAG office takes up performance audits of major central schemes on all India basis and that report is sent to parliament. The MGNREGA performance audit in 2013 was the second performance review. When CAG reports go to the Parliament, these are considered by the Public Accounts Committee (PAC). The ministry or department concerned are supposed to submit Action Taken Notes on CAG reports to the PAC. They are vetted by the CAG office before submission to the PAC. So it is seen that based on the 2013 report, the government has taken several remedial actions to improve programme implementation in the (MGNREGA) programme to reduce the audit risks,” he said to The Wire.

Pandey said that major systemic changes undertaken by the Centre include Aadhaar linked direct benefit transfer (DBT) payment to tackle fake or duplicate beneficiaries, and geotagging of assets to monitor the authenticity of assets created. He added that the Management Information System (MIS) done by the Rural Development Ministry to digitise the scheme, as well as bringing in DBT to beneficiaries to tackle diversion of funds have helped to substantially mitigate audit risks.

“Budgetary amounts can be very large (like Rs 60,0000 crore for MGNREGA) but from these three angles all related to technology, the system is streamlined and risks are minimised, maybe not eliminated altogether. So maybe they may have focused on other areas where risks are higher,” he said. 

“Taking up Performance Audit for a CAG report depends on the assessment of audit risks because the audit department has limited resources while the audit mandate is vast. So audit resource deployment depends on risk assessment. If the assessment for MGNREGA is that the central government has taken adequate technological steps like Aadhaar, geo tagging and DBT – the programme’s systemic risks at the top level have been addressed.”

“What residual risks remain are at the local level, that does not merit bringing a report to the Parliament. That is actually at the panchayat level. That is why they came up with the social audit report to strengthen it as IAAD cannot go around covering all villages, there is just not enough manpower for that.” 

Lack of accountability

A former deputy CAG who did not wish to be named said that the CAG Act gives CAG almost an open mandate to determine what and to audit, including government expenditure, schemes, and programmes, both at the Centre and states, and to some extent in local bodies.

“The answer [to why an important scheme like MGNREGA is not getting audited] lies in the fact that there is no accountability at the moment for the person who is supposed to be the chief accountability officer,” he said.

“The CAG is not an auditor on call for the government. The CAG is an external auditor and can only give his opinion. The government has internal auditors in the form of the CGA (Controller General of Accounts who is responsible for exchequer control and internal audits of the Union government). The CAG is not a subordinate employee of the Ministry of Finance either.” 

“There is an Act of parliament that gives him the right to determine what he will audit. It is not explicitly mentioned that he should also present the basis on which he is exercising his right to audit what he will audit but there is a moral obligation as a constitutional officer.” 

“Alongside his audit reports every year, the CAG should present his methodology of risk analysis through which he deploys his resources to various audit concerns. Then the question arises, why MGNREGA which is such an important scheme has not attracted the attention of the CAG. He is a public official and the taxpayer has the right to know how he is deploying his resources into examining the business of the government.”

‘Slowly but steadily killing MGNREGA’

M.G. Devasahayam, a former IAS officer, said that while the MGNREGA is a centrally-sponsored scheme, the Union government is only meant to provide monetary support. The implementation lies at the block and district level and then with the state government.

Several opposition ruled states like West Bengal have accused the Union government of non-release of MGNREGA funds.

In August, the rural development ministry informed parliament that the Union government has pending payments under the wage component for a total of 18 States and Union Territories. Of this, it owes the highest amounts to opposition ruled states: Rs 2,770 crore is owed to West Bengal, followed by Rajasthan (Rs 979 crore) and Bihar (Rs 669 crore).

“From the beginning, ideologically this government has not been in favour of MNGREGA. One is that it was brought in by the previous Congress government and it was one of their flagship projects. Second they (the BJP government) want to emphasise their infrastructure flagship projects. This is why they are slowly starving MGNREGA of funds. Third, the Modi government has brought in several Central schemes themselves and they want to give publicity and attention to that. Fourth, MGNREGA was the outcome of people’s struggle. So there is no other reason apart from prejudice on the part of the present government to slowly and steadily kill it,” said Devasahayam.

“Auditing by the government and its agencies has its own limitations and often has a partisan approach. Social audit is by the people themselves and is much more rigid and looks into the actual aspects of the reach of the scheme. Social audit is against the grain of this government as it considers civil society its enemy. They don’t want social audits. They don’t want performance or social audit and want the scheme to die a natural or unnatural death.”

Other centrally sponsored schemes that have not been audited since 2018 reportedly include the Pradhan Mantri Awas Yojana (PMAY), the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) and the PM Jal Jeevan Mission (PMJJM).