CAG report on Noida shows why accountability is a myth in India's cities

The first-ever CAG report on Noida highlights the fact that most of India's megacities rarely have their accounts audited

In the last few weeks of 2021, the Comptroller and Auditor General of India (CAG) released a harsh audit of Noida municipal authority. Over the past two decades, farm houses were offered for a net worth of Rs 100,000 or even less, a golf course became a backyard lane and residential colonies were created on land meant for industries.

Towering above all these was the revelation that this was the first audit of Noida since it was established in 1976. Yet Noida’s humongous messy affairs are hardly unique. They also provide answers why citizens across India looking for emergency support in the Covid-19 waves could rarely depend on their municipal infrastructure.

Looking at other large cities, it turns out, municipal corporations of many megacities rarely have their accounts audited. As India urbanises massively through this decade, the lack of oversight is a shocker.

As the crime thriller-like narration of the Noida audit report shows, the scope for municipal bosses to be creative will persist because of this gap. In Maharashtra, for instance, the audit of cities such as Pune, Nagpur, Nashik and all the urban agglomerations around Mumbai has not been done for the past six years. In next door Karnataka, of the135 urban local bodies, audits have taken place only once this decade.

It was only around 2010 that the state governments allowed the CAG to audit their municipal bodies for the first time. Their support allowed the Centre to expand the scope of Section 14(2) of the CAG Act to bring municipal bodies and panchayati raj institutions under CAG audit. But the relevant changes in state-level laws were not completed till FY12. It was only then that the national auditor picked up the books for inspection. At this rate, the citizens will be lucky to get two audits of their cities done in the two decades till 2030. The oversight shows why the National Capital Region of Noida had run up Rs 1 trillion worth of audit queries. Others are waiting to be discovered.

Unlike the audit of central or even state governments, the issues that figure in the inspection of municipalities are of immediate concern to the local population. Drainage, cleaning of streets, local markets, primary schools and just about anything that dot the urban landscape is the remit of these local bodies. But who gets to check that these are up and running?

The lack of audit has allowed many of these municipal bodies to delay the finalisation of their accounts. It is not just small towns. Global city Bengaluru did not finalise its accounts for two successive years, FY17 and FY18. No surprise, then, that the CAG data shows in FY18, audits of only 18 out of the 279 urban local bodies were completed. In the absence of audit, whimsical proposals such as the one from Maharashtra Chief Minister Uddhav Thackeray to exempt property tax in urban areas up to certain levels can easily pass, since no one will add up the costs. In Maharashtra, of its 27 large cities, accounts were not finalised for half of them. Several of them, such as Aurangabad, were running in arrears for four years. It is only after the accounts are approved by the elected bodies of each town that they travel to an office of the CAG, the Director of Local Fund Audit.

Using the Noida template, the risks from these shoddy supervisions are obvious. When a municipal officer cheats, the individual sums involved are not massive like those involving state-level purchases or in a central government project. This makes it easy to slip the numbers under the radar of the public eye. Against an approval for a 65-acre golf course, the report sardonically observes, “what is left of a nine-hole golf course are narrow green stretches for playing golf between rows of villas and housing towers.”

The amount of money lost by the municipal bodies does not make for front page news and so the reports simply sink in the legislative morass. Each audit report by the CAG has to be placed before the Public Accounts Committees (PACs) of the state legislature. The committees have to pick and choose. Clearly political manoeuvrings are far easier for audit reports about state government-run entities. 

Municipalities, even though they have an elected body, come far down the ladder of legislative oversight. In the past 20 years, no PAC has held any state government responsible for these lapses.

Even where the element of foul play is obvious, there is often no money trail to establish the charge. Again in the Noida report, there are five paragraphs where the CAG has urged “exemplary” action against the officials who have helped cheat the Authority. It will be remarkable if even one faces a charge sheet.

Essentially, the audits — or lack of them — show up the lack of accountability in municipal administrations. There are only a few — Tamil Nadu and Kerala, for example — whose local governments are in good shape.

A CAG report notes that an accrual-based accounting system is followed in all Tamil Nadu municipalities. In conformity with the National Municipal Accounting Manual of 2017, the state government prepared its own Municipal Accounting Manual tailored to local needs “and not merely to coincide” with national standards. Collection of property taxes has zoomed in these states but has rusted elsewhere. It is no surprise that Covid-19 was far better managed in the state than elsewhere.  

In the first wave of Covid-19 in 2020, the Union cabinet secretary met the municipal commissioners of the worst affected cities. This was the first time ever that the Centre went down to understand what the cities needed. It was also an opportunity for the Centre and the states to follow up on and drastically change city governance. 

As the 15th Finance Commission report notes, “Typically, local governments that receive transfers to carry out spending on behalf of higher levels of government spend less efficiently than if they were responsible for raising revenue locally from taxation.” But it can only come “when there is a periodic performance evaluation at all levels of public expenditure”.

The city cheats the people by not raising property taxes. No one notices the other cheating — of personal asset creation on government property by those well connected. There is no audit of either.