CAG, Janaagraha sign MoU to strengthen ULG finances, digital audits

The five-year non-financial partnership aims to improve transparency, audit quality, and financial management in India's urban local governments through digital reforms

India’s cities are urbanising at a rapid pace, yet urban local governments (ULGs) continue to struggle with financing and governance. According to PRS Legislative Research, India’s urban local bodies (ULBs) rank among the weakest globally in fiscal autonomy, with limited devolution of revenue powers.

 

Varshith, public policy research lead at the Foundation for Democratic Reforms, noted: “As local governments in India are a state subject, it is primarily the duty of the state to ensure that ULGs maintain accounts and conduct audits as prescribed by the law. Most states have entrusted the audit responsibility to the Comptroller and Auditor General (CAG). However, the CAG is already burdened with Union and state-level audits. As a result, the financial scrutiny of ULGs is often neglected.”

 

A strategic partnership for accountable cities

 

To address this gap, the Janaagraha Centre for Citizenship and Democracy, a non-profit trust focused on transforming urban governance, and the office of the CAG of India signed a five-year, non-financial memorandum of understanding (MoU) on April 8, 2025, in New Delhi.

 

The MoU was signed by Subir Mallick, Deputy CAG (local government audit), and Srikanth Viswanathan, chief executive officer (CEO) of Janaagraha. The partnership aims to strengthen accountability mechanisms and improve financial management in ULGs, thereby enhancing service delivery and enabling Indian cities to contribute more effectively to national development.

 

 

Prabhat Kumar, Head of Public Finance at Janaagraha, said, “This engagement aims to strengthen accountability systems and improve financial management in ULGs, which would ultimately result in improved governance and service delivery.”

 

Reviving the municipal accounts manual 

A key initiative under this partnership is the development of a revised, digital-first National Municipal Accounts Manual (NMAM 2.0).

 

“Under this new partnership, the CAG will lead efforts to update the NMAM, making it natively digital,” said Kesavan Srinivasan, senior adviser at Janaagraha. He added, “With our experience from the CityFinance portal and public finance work across states, we are confident this effort will mark a paradigm shift in analysing ULG finances.”

 

The collaboration seeks to combine CAG’s constitutional authority and audit expertise with Janaagraha’s experience in digital public finance management, policy reform, and civic engagement. The broader vision includes stronger audit systems, transparent data ecosystems, and actionable municipal financial insights.

 

Towards systemic reform 

The 74th Constitutional Amendment Act (1992) gave municipalities constitutional status and empowered states to create systems for their operation and finances. Yet, the actual transfer of powers and resources remains slow, and financial management continues to be a critical bottleneck.   

 

Janaagraha’s roadmap for city-systems reform calls for digital finance management, cadre and recruitment reforms, and stronger state capacity in municipal finance—all areas where the CAG’s technical guidance is seen as essential.

 

The road ahead 

The five-year collaboration marks a pivotal moment in addressing the chronic challenges of transparency and accountability in urban governance. By aligning their respective expertise, the CAG and Janaagraha aim to improve how Indian cities are funded, audited, and held accountable.

 

However, experts remain cautious. “While it is a welcome move that the CAG is taking ULG audits seriously, I feel the additional workload could compromise turnaround times. The CAG’s human resource capacity should be enhanced to publish state audit reports faster,” said Varshith.

 

Looking ahead, the success of this initiative will depend on timely audits, implementation of recommendations, and the translation of digital and structural reforms into measurable improvements in urban service delivery and citizen participation.

 

As India’s cities expand, the CAG–Janaagraha partnership offers a model for rethinking urban financial governance—one that could guide reform across states and sectors for years to come. 

A M Droupathi Mahalakshmi and M. Sharanya are Business Standard–Rahul Khullar journalism interns.