CAG Murmu flags need for transparent accounting by States

GC Murmu, Comptroller and Auditor General (CAG)
| Photo Credit: KAMAL NARANG

The Comptroller & Auditor General (CAG) of India, Girish Chandra Murmu, on Monday said the States must take measures to maintain proper accounting of subsidies, reduce fiscal deficits, remove revenue deficits and keep outstanding debts at an acceptable level.

At the Annual Accountant General’s Conclave, Mr. Murmu said the States should meet their capital expenditure, including loans and advances, from their own sources of revenue, or at the least confine the net debt to their capital expenditure. “While we understand the importance of subsidies to help the underprivileged, it is essential to transparently account for such subsidies and we require to distinguish between justifiable subsidies from freebies, which are not fiscally responsible,” he said.

“States should take steps to earn adequate returns on their investments and recover their cost of borrowed funds without resorting to implicit subsidies,” said the CAG chief. He noted that to improve fiscal management, both the Centre and several State governments had been implementing the Fiscal Responsibility and Budget Management (FRBM) Act in recent years.

“We, however, continue to notice fiscal sustainability risks and financial indiscipline in many States due to off-budget borrowings, misclassification of revenue expenditure as capital expenditure and because state guarantees are not getting captured in finance accounting. These factors make qualitative and timely preparation of accounts by the CAG one of the most important responsibilities to tackle these challenges,” Mr. Murmu said.

He said State finances had undergone several changes in recent years due to the Act’s implementation, computerisation of treasuries and implementation of the Integrated Financial Management System (IFMS). For instance, the State Accountants General have implemented the Voucher Level Computerisation (VLC) system for compiling accounting information at the level of vouchers.

He said the implementation of the Public Financial Management System (PFMS) by the Central government had wide implications for State accounting so far as sanctions of State grants, funds transfer and monitoring were concerned. “The VLC system needs to interact meaningfully with these systems in real-time and seamlessly. These changes have given us an opportunity to reinvent our approach to remain relevant,” he said.

Organised by the CAG’s Government Accounts Wing, the Accountant General’s conclave is attended by the Principal Accountants General and Accountants General to discuss issues related to the maintenance of accounts of State governments. Article 150 of the Constitution mandates that the accounts of the Union and of the States has to be kept in a manner as prescribed by the President on the CAG’s advice.

Section 10 of the Duties, Powers and Services Act also empowers the CAG to compile accounts of the central and State governments. “We have been fulfilling this obligation every year by making finance and appropriations accounts for the State government, which gets tabled on the floor of the legislature to ensure the accountability and transparency of the State finances,” said Mr. Murmu.