CAG picks flaws in Centre’s accounting 

CAG picks flaws in Centre’s accounting 

Context

The Comptroller and Auditor General of India (CAG) has highlighted several flaws in the Union government’s accounting procedures for the financial year 2015-16, which could have led to an understatement of the fiscal deficit and revenue deficit for that year

FRBM audit shows FY16 fiscal deficit possibly understated

Deferred Payments

The CAG Audit Report on the government’s compliance of the rules and targets set by the Fiscal Responsibility and Budget Management (FRBM) Act 2003 also highlighted the fact that the government had deferred payments amounting to more than ₹1.87 lakh crore in 2015-16, which would have also had an impact on its fiscal and revenue deficits for that year.

Underestimation in grants for creation of Capital Assets

As a result of deficiency in estimating the expenditure on grants for creation of capital assets, the provision included in the Budget at a Glance for grants for creation of capital assets was underestimated by ₹18,827 crore, which has also impacted the correct estimation of effective revenue deficit

Misclassification of Revenue Expenditure

• Further, the report added that due to the misclassification of revenue expenditure as capital expenditure and vice versa, the revenue deficit was understated by ₹1,583 crore during financial year 2015-16
• In addition to this, ₹20,911 crore collected under levies and cesses were not transferred to the relevant funds, which led to an “understatement of revenue/fiscal deficit by an equivalent amount” during 2015-16.

Pending Subsidy Claims

The report also found that, at the end of 2015-16, subsidy claims of ₹1,62,530 crore relating to fertiliser, food, and petroleum were pending, and that the devolution of taxes to the States was short by ₹24,942 crore that year, which had a bearing on the computation of the deficit ratios for that year.

Deferring Committed Liability

The practice of deferring committed liability on the ground that accounts are prepared on cash basis, while serving as an instrument to contain the current level of deficit, may not ensure inter-generational equity in fiscal management as envisaged in the [FRBM] Act.

Budgetary variances

The CAG also noted that there were several issues with the transparency of the government’s account statements.

No Disclosure of refunds in govt. accounts

Refunds of ₹1,29,482crore were made from gross direct tax collections in FY2015-16 but no corresponding disclosure was available in the government accounts

Govt. Failed to meet FRBM targets for 2015-2016

The CAG pointed out that the government had failed to meet the FRBM targets for 2015-16 on both the fiscal deficit and the revenue deficit, and that it had subsequently changed the targets and deadlines without making the relevant changes in the Act itself