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CAG Audit of NREGA is not Enough

While a CAG audit is welcome, it alone won't improve the effectiveness of the National Rural Employment Guarantee Act

Published: Oct 28, 2011 06:12:46 AM IST
Updated: Feb 21, 2014 11:46:16 AM IST
CAG Audit of NREGA is not Enough
Image: Madhu Kapparaath for Forbes India

Union Minister for Rural Development Jairam Ramesh’s recent decision to ask the CAG (Comptroller and Auditor General of India) to audit MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) funds has created a buzz among social sector observers. They’ve been demanding reforms in MGNREGA’s implementation to arrest the slide in its effectiveness.

The MGNREGA has a budget of about Rs. 40,000 crore. Such an audit would bring clarity to delays in wage payments, one of the biggest obstacles in the Act’s effectiveness. Equally important would be the projects being funded — this would give a better understanding on how far the funds are actually improving the rural infrastructure.

However, this isn’t the first time that the CAG will audit MGNREGA. It had come up with a report in 2007 after auditing the first year of the Act’s implementation, and its comments were used by many naysayers to dismiss the nascent Act.

The problem is that a CAG audit is essentially a financial audit, and not a  performance audit which measures the Act’s real impact. “In a country as geographically and socially diverse as ours, the CAG simply does not have the wherewithal to conduct a performance audit. For example, the CAG can only check whether on paper the wages were paid or not,” says Himanshu, professor of economics at Jawaharlal Nehru University. So, often enough it wouldn’t be able to check whether the right people got the wages.

“That’s why it should be seen as complementing the social audits, which can truly perform the performance audit,” says Himanshu stressing the need to strengthen the way local people themselves audit NREGA.

Reetika Khera, professor at IIT Delhi, says that even within the official framework more needs to be done.

“I think more audits are a good idea, though I feel that these one-off things are less helpful than having an annual audit of the Gram Panchayat (village level local self government) accounts, as we do for anyone else.”

As a result, there is no proper “squaring of accounts” exercise which could check, say at the district level, whether all the money released for “wages” matches with the village level records.

There is no precedent of a CAG audit of social welfare schemes in India although the Planning Commission has been thinking of conducting independent evaluations for all social welfare schemes.

In the current context when corruption has become perhaps the most important national issue, this decision may not only provide another level of scrutiny to a scheme that is beset with corrupt practices, but also start a trend. 

(This story appears in the 04 November, 2011 issue of Forbes India. To visit our Archives, click here.)

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  • Welingkar

    I think the critics are jumping the gun. Given the kind of leakages that have been happening in all social schemes in India and even in the MGNREGA, which when created, they said would ensure wages would reach the right people,it is important that a body like CAG audit the working. As far as the matter of performance audit is concerned, does the MGNREGA actually take local needs into account when planning works? If the people have not enough voice in vetoing or deciding projects, what use is a performance audit?

    on Oct 28, 2011