Enhancing maturity of accounts of local bodies to get priority: CAG

CAG Sanjay Murthy says improving local body accounts and standardising how states report fiscal transfers is essential as Finance Commission grants expand and accountability demands grow

Comptroller and Auditor General (CAG) of India K. Sanjay Murthy on Monday said assessing asset management and operational efficiency of urban local bodies (ULBs) depends heavily on the maturity of their financial accounts, and this would be a priority area for the CAG.

 

Speaking at the National Conference of State Secretaries on local governance, Murthy noted that nearly 700 local body accounts had been analysed across geographies as a pilot exercise to assess their readiness. 

He said there have been significant observations on the quality of these accounts, and we stand alongside state governments in preparing better-quality accounts as we go forward. 

Referring to the 16th Finance Commission’s (FC-16) recommendations, the CAG highlighted the growing fiscal transfers to local bodies.

 

Murthy said that the Finance Commission grants have more than doubled, and the Urban Challenge Fund alone has a potential investment of over ₹4 trillion. He added that lack of uniformity in states’ reporting of these transfers warranted a consolidated disclosure framework and that CAG could play a central role in transparently reporting such grants.

 

FC-16 has recommended that 10 per cent of the central grant be linked to states contributing at least 20 per cent of the basic grant from their own resources to local bodies. The CAG said transparent reporting of these transfers would be key to ensuring proper implementation of this conditionality.

 

Murthy also underscored that timely and accurate audits of local bodies, supported by platforms like e-Gram Swaraj and the City Finance Portal, were crucial to strengthening fiscal accountability. He announced that the CAG’s commercial cadre handling urban audits would be doubled in the next four to five years, with expanded capacity to review newer financial products.

 

Participating in the conference, Panchayati Raj Secretary Vivek Bhardwaj emphasised that true transparency goes beyond data entry and requires identifying and addressing shortcomings in local accounting practices.

 

He emphasised that Panchayati Raj institutions should become models of accountability by keeping accounts that are not just transparent but also bankable.