CEA Nageswaran backs CAG audit of local bodies

New Delhi: Chief economic adviser V Anantha Nageswaran on Monday underscored the need for audits of funds flowing to Panchayati Raj institutions by the Comptroller and Auditor General of India (CAG). Such a move, he stressed, can potentially improve transparency at such local bodies and bolster ease of living at the grassroots level.

He also flagged incomplete and siloed data systems at the gram panchayat level. This has impaired the ability of the State Finance Commission (SFC) to guide policy-making meaningfully.

So, successive Finance Commissions of India-from the 13th to 16th-have "noted with increasing frustration that they cannot base their own recommendations on SFC reports as the reports lack the evidence base they need," he said.


Nageswaran was speaking after launching a report on datasets for SFCs at an event, organised by the Ministry of Panchayati Raj, here.

"The CAG audit would tell us state by state, function by function, where we actually stand. It would create an evidence base that does not currently exist, and it would create accountability for the gap between constitutional intent and administrative reality," he said.

The CEA also favoured uniform accounting heads for fiscal accountability of states. This will ensure homogeneous treatment of all central transfers to local bodies to allow comparability.

"Because without a systematic, independent assessment of what has actually been devolved versus what was promised, we are flying blind," he added.

Panchayati Raj secretary Vivek Bharadwaj underscored the importance of strong SFCs in the country's fiscal federal architecture.