The auditor directed the state government to scrupulously follow modalities prescribed in the act.
The CAG report was tabled in the state Assembly today by the state Finance Minister Abdul Rahim Rather.
"No annual report on the state of affairs of the scheme had been brought out and tabled in the state legislature as required under the programme guidelines," the report said.
"A performance review of the scheme, MGNREGA, by the audit brought to fore several areas of concern such as unauthorised retention of funds, delayed release and diversion of funds, execution of unapproved works, delay in payment of wages to workers," the report of CAG for the year ending March 31, 2012, revealed.
State employment guarantee fund, though establish, has not been operated as intended on March 2012, and there was undisbursed balance of Rs 15.81 crores in the fund mainly representing arrears of undisbursed difference in wages, it said.
Indicting the state government, it said perspective plans have not been formulated in initial years of implementation of the scheme and the labour budget had not been submitted to the Centre belatedly.
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