Ministry of Finance

Maharashtra State Finance Audit Report of the Comptroller and Auditor

General provides an analytical review of the Annual Accounts of the Government of Maharashtra

Posted On: 23 DEC 2019

The Report of the Comptroller and Auditor General provides an analytical review of the Annual Accounts of the Government of Maharashtra,based on the audited accounts for the year ending 31 March 2018.  The financial performance of the State has been assessed based on the Fiscal Responsibility and Budgetary Management Act,2005 and Fiscal Correction Path of the Government, Budget Documents, Economic Survey of Maharashtra 2017-18, Fourteenth Finance Commission Report and other financial data obtained from various Government Departments and organisations.The State Finance Audit Report of the Comptroller and Auditor General for the year ended 31 March 2018 has been tabled in State Legislature on 20.12.2019.

The Report is structured in three Chapters:

Chapter I is based on the audit of Finance Accounts and makes an assessment of the Maharashtra Government’s fiscal position as on 31 March 2018. It provides an insight into trends of committed expenditure and the borrowings made by the State Government.

Chapter II is based on audit of Appropriation Accounts and gives a grant-wise description of Appropriations and the manner in which the allocated resources were managed by the service delivery Departments of the State Government.

Chapter III gives a selected insight into the Maharashtra Government’s compliance with various reporting requirements and Financial Rules.  The Report also compiles the data collated from various Government Departments/Organisations in support of the audit findings.

The important audit findings are briefly highlighted in the following paragraphs:

Chapter I

Finances of the State Government

Fiscal correction: During 2017-18, the State achieved two of the three major parameters specified by the Fourteenth Finance Commission viz. (i) the ratio of debt to Gross State Domestic Product at 17.32 per

cent was lower than the 23.30 per

centceiling and (ii) the fiscal deficit at 0.96 percent of Gross State Domestic Product. However, the third parameter of Interest Payment/Revenue Receipt ratio at 13.55 percent was higher than the norm prescribed by Fourteenth Finance Commission, and State’s Medium Term Fiscal Policy Statement (12.73 percent) during 2017-18. As against the revenue deficit of Rs 8,536 crore during 2016-17, there was a revenue surplus of Rs 2,082 crore due to higher growth rate of the revenue receipts (19 percent) than the revenue expenditure(13 percent).

Capital Expenditure:The percentage of capital outlay to total expenditure declined from 10.43 percent in 2016-17 to 9.97 percent during 2017-18.Considering the declining trend in the capital expenditure to total expenditure over the last five years, there is scope for the Government to prioritize its spending on creation of more capital assets.

Review of Government investments:The average return on the State Government’s investment in Government Companies, Joint Stock Companies and Partnerships, Statutory Corporations etc. was 0.04 percent during 2013-18 while the Government paid an average interest at the rate of 7.7percent on its borrowings during the same period.

Since the chances of obtaining return on investment made in companies incurring losses and where the accumulated losses has resulted in erosion of the net-worth, are remote, the State Government should consider making future payments to these Companies in form of Grants instead of Share Capital so as to reduce the disparity in investment vis-à-vis return.

Revenue Receipts: The growth rate of revenue receipts increased significantly at 19 percent (Rs. 38,961 crore) in 2017-18 over 2016-17.

Central Tax transfers: Tax devolutions from the Central Government increased from Rs 33,715 crore in 2016-17 (17 percent of revenue receipts) to Rs 37,219 crore in 2017-18 (15 percent of revenue receipts). The devolution of the State’s share of Union Taxes assigned to the State increased by 10 percent during 2017-18, the third year of award period (2015-20)of Fourteenth Finance Commission as compared to the second year. Grants-in-aid from GoI, which constituted 11 percent of revenue receipt in 2016-17 however, decreased to nine percent in 2017-18.

Debt servicing:The average expenditure on debt servicing during 2013-18was Rs 34,897 crore which accounted for 88.1 percent of average publicdebt receipts during the same period, implying that a larger percentage ofdebt was being used for debt servicing. This also indicated that a very insignificant portion of the debt was available for meeting developmental expenditure to promote growth.

Interest payments: Interest payments (Rs33,018 crore), which increased by 16 percent during the year over 2016-17, was more than the projections made in the Medium Term Fiscal Policy Statement and Fiscal Correction Path (Rs31,027 crore) but less than the assessment made by the Fourteenth Finance Commission (Rs34,569 crore) Report.

Cash Balance:The cash balances of the State Government at the end of March 2018 was Rs88,469 crore, which included an amount of Rs33,972 crore invested in Sinking Fund meant for Appropriation for reduction or avoidance of debt.The effective cash balance of the State Government as on 31 March 2018 was ` 38,528 crore which is 14 percent of the total expenditure of the State Government (Rs 2,69,392 crore).

The State Government may consider institutionalizing the policy of need-based borrowing and thereby maintaining only minimum surplus cash balance. This could, in practice, include laying down benchmarks for the ideal quantum of cash, relative to its capital outlays, fiscal deficit targets and borrowings.

Chapter II

Financial Management and Budgetary Control

The programme implementation of various social and developmental programmes in the State left an overall saving of Rs77,892 crore, set-off by an excess of Rs 47 crore.  This requires regularization under Article 205 of the Constitution of India. There were instances of inadequate provision of funds. In many cases the anticipated savings were either not surrendered or surrendered on the last two days of March 2018.

All the departments may submit realistic budget estimates, keeping in view the trends of expenditure and the actual requirement of funds in order to avoid large savings/excesses. Departments may closely monitor the expenditure against the allocations and incurring of excess expenditure over the grants should be strictly avoided. Surrender of funds should be done much before the last working day of the closing year so as to enable the State Government to utilize the funds on other schemes. Release of funds at the end of the year should be avoided.

Instances of Government receiptsbeing kept in Personal Ledger Accounts without crediting the same to the Consolidated Fund of the State were also noticed.

Chapter III

Financial Reporting

The Government’s compliance with various rules, procedures and directives was found wanting in various Departments which was evident from delays in furnishing of Utilisation Certificates by various Grantee Institutions against the loans and Grants-in-aidreceived by them from the State Government.

Delays were also seen in submission of Annual Accounts by Autonomous Bodies and Departmentally managed Commercial Undertakings. There were instances of large outstanding cases of losses and misappropriations for which Departmental action was pending since long. Detailed contingency bills were not submitted on time or not furnished at all in violation of prescribed Rules and Regulations, indicating lack of internal controls besides raising apprehensions about proper end-use of funds.Omnibus Minor Head across Major Heads continued to be operated during the year for recording receipts and expenditure,thereby affecting transparency in financial reporting of Government transactions.

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