CAG report exposes huge misuse of funds in AP

The Comptroller and Auditor General (CAG) presented its report for the year 2022-23 on the Comprehensive Financial Management System (CFMS) in the Andhra Pradesh Legislative Assembly for the first time on the last day of the current Assembly session on Friday highlighting the system’s weak and vulnerabilities including excess payments. The CAG pointed out that due to deficient design and processes and lack of validation controls in the system, the CFMS system was not only weak and vulnerable but also failed to provide the envisaged outcomes. The CAG report pointed out that the non-enabling of ‘duplicate checks’ of bills during payment in the CFMS application resulted in excess payments from the exchequer. “This also depicts weak processing controls in the application, besides causing excess payments of Rs 968 crore relating to 1,41,917 bills, between April 2018 and September 2021. The CAG stated that the administrative departments were informed of such payments and recommended for recovery, if not done already.” The CAG report further pointed out, “Due to non-provision of ‘Limit check’ in the application, excessive pensionary benefits were drawn in respect of 2,545 pensioners, covering 193 Treasury Officers/DDOs between April 2018 and September 2021, involving an amount of Rs 218.15 crore. The Government needs to investigate the cases of excess drawal of pensionary benefits and fix responsibility on the erring officials. It was noticed that misappropriation of Government Revenue of 43.09 lakh took place due to a lack of validation between the category of beneficiary and type of payment. Thus, the lack of validation led to the unauthorised change of beneficiary credentials in the CFMS application. The CAG further noticed that 1,44,493 Personal Deposit (PD) accounts were created through the backend of CFMS without the involvement of the Cash and Debt Management Section of the Finance Department. Further, PD administrators were not involved/aware of the lapsing of funds to the tune of Rs 71,568.44 crore (carried out as part of year-end activity for the period from March 2019 to March 2021) from PD accounts in 3,41,410 cases, as these were affected by the CFMS backend team. The CAG pointed out that thus, the system lacked effective design, process and validation controls on creation of multiple PD accounts. The CAG highlighted the continuous mismatch between receipts and expenditures indicates rising fiscal stress. The CAG stated that the gap between the revenue receipt and revenue expenditure results in revenue deficit. The revenue deficit of the State increased to ₹ 43,487 crore (3.30 per cent of GSDP) in the current year from ₹ 13,899 crore (1.59 per cent of GSDP) in the year 2018-19. The State Government spent ₹ 7,244 crore only on capital account. This was 3.45 per cent of the total expenditure in the year 2022-23. Capital expenditure was just 4.43 per cent of the total borrowings. Thus, the borrowed funds were being used mainly for meeting current consumption and repayment of borrowings instead of capital creation/development activities. The gap between the total expenditure and total non-debt receipt of the State results in fiscal deficit. The fiscal deficit of the State increased to ₹ 52,508 crore (3.98 per cent of GSDP) in 2022-23 from ₹ 35,467 crore (4.06 per cent of GSDP) in 2018-19.