Model Answer

Introduction

The 15th Finance Commission (FFC) made several key recommendations aimed at enhancing accountability and promoting effective governance at the grassroots level in India. These measures, if implemented effectively, can improve the financial transparency, efficiency, and coordination of local bodies across the country.

Fostering Accountability Through Financial Transparency

One of the core recommendations of the 15th FC is that urban local bodies must prepare and publicly share duly audited accounts to qualify for grants. This entry-level condition ensures transparency in financial management at the grassroots level, compelling local bodies to maintain proper records and audit trails. By mandating this public disclosure, the commission is promoting greater accountability and enabling citizens to track how public funds are utilized.

Timely Release of Grants

The FFC also emphasizes the timely release of funds to local governments. States are required to transfer grants-in-aid within ten working days of receiving them from the Union Government. Additionally, grants for rural local bodies will be distributed in two equal instalments, ensuring that there are no delays that could hinder the timely execution of projects. This recommendation aims to eliminate bottlenecks and promote efficient utilization of funds at the local level, enhancing governance through more predictable financial flows.

Strengthening State Finance Commissions (SFCs)

Another important recommendation is the mandatory formation and action upon the State Finance Commissions (SFCs). States must set up these commissions and act on their recommendations before the end of March 2024. SFCs play a vital role in assessing the financial health of local governments and making recommendations to improve fiscal management. By enforcing the action on SFCs, the FFC ensures that state governments are held accountable for the financial autonomy of local bodies.

Urban Agglomerations and Shared Municipal Services Centres

To address the differentiated urbanization across India, the FFC proposes an urban agglomerations-centric approach. It recommends a nodal urban local body for managing grants in urban areas with over a million people. Additionally, the recommendation for creating Shared Municipal Services Centres with a Rs. 450 crore grant aims to centralize services like birth certificates and payroll management, improving efficiency in smaller local bodies.

Challenges and Limitations

While the recommendations of the 15th FC offer significant improvements, there are also challenges. The reduction in performance-based grants and reliance on outdated population data (2011 Census) may create disparities among states. Furthermore, the failure to scrutinize the Centre’s revenue sources, especially reliance on cesses and surcharges, limits the financial resources available for states.

Conclusion

In conclusion, the 15th Finance Commission’s recommendations can significantly enhance accountability and governance at the grassroots level by improving financial transparency, ensuring timely fund transfers, and strengthening the role of State Finance Commissions. However, for these recommendations to be fully effective, they require rigorous implementation and addressing the limitations identified.

Model Answer

Role of the Comptroller and Auditor General (CAG) in Ensuring Checks and Balances

In a democracy, preventing the misuse of power by the government is crucial, and a system of checks and balances is essential to this process. The Comptroller and Auditor General (CAG) of India, as established under Article 148 of the Indian Constitution, plays a vital role in this system. Its primary responsibility is to ensure that public funds are used efficiently, legally, and transparently, thereby holding the government accountable to the people.

The CAG conducts various types of audits to monitor government spending. These include legal and regulatory audits, where it verifies that the expenditure from public funds has been authorized by the necessary authorities and spent as per the approved budget. It also performs propriety audits to evaluate the wisdom and economy of government spending, addressing issues like wastefulness or extravagance. The performance and efficiency audits assess the effectiveness of government programs and their alignment with social and economic objectives. Importantly, CAG’s reports are laid before the Parliament and state legislatures, where they are scrutinized by the Public Accounts Committee (PAC), ensuring accountability.

Reforms to Enhance the Effectiveness of the CAG

While the CAG’s role is essential, several limitations hinder its effectiveness. The audit is conducted post-facto, based only on the documents provided, without the ability to verify the actual use of resources. This reactive approach restricts the CAG’s ability to play a more proactive role, like its counterparts in other countries such as the UK. Furthermore, the lack of a clear qualification requirement for the CAG and an opaque appointment process reduces its credibility.

To strengthen the CAG’s function, the following reforms are suggested:

1. Multi-Member Body: The CAG should be transformed into a multi-member body to handle the vast responsibilities efficiently, similar to Japan’s Audit Commission.
2. Technical Expertise: A mandatory requirement for technical expertise in auditing and financial management should be introduced for the CAG’s appointment.
3. Transparent Appointment Process: The appointment of the CAG should be made through a transparent process, perhaps by a committee like the one used for the Central Vigilance Commission (CVC).
4. Expanded Powers: The CAG should have the power to audit all government-controlled entities handling public funds, ensuring greater coverage and transparency.
5. Role as an Officer of Parliament: Designating the CAG as an officer of the Parliament would empower it to speak in Parliament, defend its reports, and enhance its influence.

Conclusion

The CAG’s role is indispensable in ensuring government accountability and transparency. Through these proposed reforms, it can be made more effective, proactive, and credible, thereby strengthening India’s democratic system.