CAG points out several flaws in Gujarat govt's financial management

The Comptroller and Auditor General of India (CAG) has pointed out several flaws in the financial practices of the Gujarat government and said there was a need to formulate a realistic budget based on the needs of the departments.

The "State Finance Audit Report of the CAG for the year ended March 31, 2022" was tabled on the floor of the Gujarat Assembly on Wednesday, the last day of the month-long budget session. Pointing out that financial accounts of 2021-22 were "affected" as capital expenditure was overstated and revenue expenditure understated, the CAG said, "The state government needs to formulate a realistic budget based on the needs of the departments and their capacity to utilise the allocated resources." "An appropriate control mechanism may be instituted by the government to enforce proper implementation and monitoring of budget so that large savings within the grant or appropriation are controlled, and anticipated savings are identified and surrendered within the specified timeframe," it added. The national auditor observed that though departments demand additional funds for different schemes and activities; they "finally end up spending less than the original budget provision and the supplementary provision or parts thereof. As a result, the unutilised funds cannot be made use of". The CAG noted that some departments could not utilise more than 50 per cent of the original provision (Rs 50 crore or more), leading to savings of Rs 3,528.83 crore at the end of the year in 21 schemes. As per the Gujarat Budget Manual-1983, rush of expenditure, particularly in the closing months of the financial year, is a breach of financial propriety, the CAG said. However, the CAG report revealed that expenditures in March were significantly higher than that of other months during the financial year 2021-22. In some cases, CAG noted that 50 per cent of the total expenditure for a particular work was spent in March, while nominal funds were spent in the three previous quarters. The CAG also noted that under 124 sub-heads, 100 per cent expenditure (Rs 4,747.17 crore) was incurred in March 2022. "Thus, contrary to the spirit of financial regulation, substantial expenditure was incurred by the state government at the end of the financial year, indicating inadequate control over expenditure and poor budgetary management," it added. The CAG found a major flaw in the allocation of funds by the Health and Family Welfare Department in running "HLT 29 Epidemics Diseases Programme" in the state. Though non-communicable diseases (NCD) do not come under epidemics, a provision of Rs 50 lakh was made under HLT 29 for NCD in 2019-20, 2020-21 and in 2021-22. "Similarly, a budget provision of Rs 20 lakh was made under HLT 29 for Thalassemia every year during 2019-20, 2020-21 and 2021-22 though it is not an epidemics/communicable disease. Provision for NCD and Thalassemia could have been made under the general planning instead of under HLT 29 epidemics," said the CAG. The CAG also pulled up the Finance Department over the issue of "non-submission of information as well as accounts regarding grants and loans paid to various institutions". "Non-submission of 4,563 Utilisation Certificates amounting to Rs 10,309.47 crore within the specified period not only weaken the financial accountability mechanism but also indicate failure of the departmental officers to comply with the rules and procedures to ensure timely utilisation of grant for the intended purpose," it said. Non-submission of accounts by autonomous bodies and authorities violated the prescribed financial rules and directives. These point to inadequate internal controls and deficient monitoring mechanisms of the state government, the report said. The CAG further suggested that the "state government needs to institute a rigorous monitoring mechanism to ensure that the Departments comply with the prescribed rules and procedures regarding submission of utilisation certificates". According to the CAG, Article 205 of the Constitution of India states that no money shall be drawn from the Consolidated Fund except under appropriation made by law by the state legislature. However, "excess expenditure of Rs 14,367 crore pertaining to the period from 2007-08 to 2011-12 and 2013-14 to 2021-22 had escaped legislative oversight, as it was pending regularisation as per Article 205", the auditor noted, adding that excess expenditure over provision vitiates the system of budgetary and financial control.