CAG Report Finds Glaring Holes, Violation of Cardinal Rules in Centre's Accounting Practices

The Comptroller and Auditor General found multiple issues in the Centre's reporting practices, including funds being parked in unauthorised accounts and incomplete disclosures due to opaque use of footnotes.

New Delhi: Last month, 12 audit reports prepared by the Comptroller and Auditor General (CAG) on various Union government departments were tabled in parliament. One of these was a financial audit on the government’s accounts (Report 21).

The Telegraph conducted an analysis of a 27-page chapter within Report 21 called ‘Quality of Accounts and Financial Reporting Practices’, finding that it “shines a light on accounting shenanigans that will leave any private conglomerate and its auditors aghast at the sheer audacity of the sharp practices in central government accounts”.

For instance, the audit report finds that the Department of Space put public funds in banks’ current accounts despite there being “no provision in government accounting … rules to retain public funds outside government accounts”.

Rs 154.94 crore of public funds were parked in these accounts by the space department, the CAG said.

It added that although it had asked the department to close the accounts in October 2021, the latter had failed to do this even as of November 2022.

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The auditor also pointed to a case where two Union government ministries failed to coordinate their share of funds with each other.

This was in respect to the ‘Rashtriya Swachhata Kosh’ (Hindi for ‘national cleanliness fund’), out of which the sanitation and urban affairs ministries were entitled to 80% and 20% shares respectively.

But in the financial years 2015-2017, the sanitation ministry “utilised the entire amount” in the fund, after which its urban affairs counterpart incurred an adverse balance.

This balance persists as of May 2023, the CAG noted.

Another one of the report’s findings relates to cesses (a kind of additional tax) having nowhere to go despite prior approvals and planning.

In this case, the CAG said that during the financial year 2021-2022, Rs 52,732 crore was collected by the Union government as a ‘health and education cess’.

Nearly 60% of this amount (Rs 31,788 crore) was transferred to the ‘Prarambhik Shiksha Kosh’ (Hindi for ‘primary education fund’).

The remainder was supposed to be transferred to two other funds: namely, the ‘Madhyamik and Uchhatar Shiksha Kosh’ (Hindi for ‘middle and higher education fund’) and the ‘Pradhan Mantri Swasthya Suraksha Nidhi’ (Hindi for ‘prime minister health protection fund’).

But the audit body found that “in spite of the cabinet’s approval for their creation”, these two funds “were not even created”.

“Both are yet to be operationalised [as of May 2023] due to non-finalisation of their accounting procedures,” the report added.

The CAG also noted that the way the Union government used footnotes in its finance accounts made its finances more opaque.

“A total of 258 footnotes had been included for disclosing additional information in [the finance accounts] for FY 2021-22. However, these footnotes did not disclose the complete picture of the finances of the Union government,” Report 21 said.

Apart from these, The Telegraph reported that the government underreported some of its liabilities by over Rs 21,000 crore.

Gujarat government didn’t prepare state forest policy

A performance audit report by the CAG has found that the Gujarat government had not prepared a state forest policy as of 2021 even though the National Forest Commission recommended all states to do so in 2006.

The CAG’s report was submitted to the Gujarat government last month and was tabled in its legislative assembly on Saturday (September 16).

It said that Gujarat’s forest department had also not established a mechanism for ensuring the implementation of the National Forest Policy and National Wildlife Action Plan, PTI reported.

The state government had also not declared critical wildlife habitats in sanctuaries despite 14 years having passed following the implementation of the Forest Rights Act, the CAG’s report said according to PTI.

The auditor also noted that ISRO had identified 12 wildlife corridors in Gujarat in 2014 and 2017, following which it made recommendations to the state’s forest department.

But the department “neither conducted any study itself to identify the precise corridors nor took cognisance of the scientific study conducted by ISRO”, the CAG said.

Kerala revenue departments ‘tardy’ in pursuing arrears

The country’s apex audit institute also prepared a compliance report on the Kerala government’s revenue sector, which it sent to the state government last month.

Kerala’s legislative assembly tabled the compliance report on Thursday (August 14).

The report finds that the state government’s revenue sector has racked up arrears worth Rs 28,258 crore as of March 2022, which amounted to a significant 24% of the state’s total revenue.

“This necessitates urgent intervention from the government to clear the outstanding arrears,” the CAG said in the report.

It added: “The absence of prompt reporting of arrears to [the] revenue department and tardy pursuance by the departments concerned for realising the arrears are the main reasons for the huge pendency of arrears.”

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The CAG also provided a breakdown of the Rs 28,258 crore in arrears, which says that Kerala’s goods and services tax department holds the highest proportion of arrears at Rs 13,410 crore (or 47%) of the total.

But Kerala’s finance minister K.N. Balagopal justified his government’s measures, saying that tax arrears the state was supposed to collect had decreased by Rs 420 crore over one year.

“Usually, the deficits in tax departments never come down, but only increase. But this year, there is a reduction of Rs 420 crore in tax deficits, compared to the tax deficits during the last financial year. This is a historical achievement,” PTI quoted Balagopal as saying.