Audit delays leave Gujarat’s municipal finances worth ₹2 lakh crore unchecked

By Prof. Hemantkumar Shah* 

The accounts of Gujarat’s eight municipal corporations have not been audited for several years, leaving financial records worth over ₹2 lakh crore unaudited. Information obtained through a Right to Information (RTI) application filed by citizen Santoshsinh Rathod reveals that the office of the Examiner of Local Fund Accounts has failed to conduct timely audits, leading to an alarming lack of financial transparency across Gujarat’s urban local bodies.

According to the reply dated September 1, 2025, under Section 4(1) of the RTI Act, the accounts of Ahmedabad Municipal Corporation have been audited only up to 2017–18, while no audits have been done since then. Audit reports for subsequent years have neither been prepared nor submitted to the Corporation. The situation is similar in the remaining seven municipal corporations — Vadodara, Surat, Rajkot, Jamnagar, Bhavnagar, Junagadh, and Gandhinagar — each showing gaps of several years.

For instance, Ahmedabad Municipal Corporation’s 2024–25 budget was around ₹12,000 crore. This means that since 2018–19, accounts worth approximately ₹50,000 crore have not been audited. When combined, the eight corporations’ pending audits together amount to around ₹2 lakh crore of public expenditure that remains unchecked.

In Ahmedabad, Vadodara, and Surat, audits have not been conducted for seven years; in Rajkot for six years; in Jamnagar and Bhavnagar for five years; and in Junagadh for four years. Despite multiple government circulars and statutory requirements under the Gujarat Local Fund Audit Act, 1963, the mandatory annual audits have been repeatedly delayed.

The Finance Department had, in its circular dated December 23, 2011, directed that audit reports of local self-government institutions be presented annually before the legislature. However, since the audits themselves were not completed, no reports have been submitted for several years. Even after the 11th Central Finance Commission (2000–05) mandated that municipal accounts be audited and approved by the Comptroller and Auditor General (CAG), the state government took no meaningful action for six years.

The Gujarat Local Fund Audit Act, 1963 provides that municipal accounts be audited under the supervision of the Examiner of Local Fund Accounts. The CAG, too, had reminded the state government on August 27, 2009, that these audits must be completed in accordance with the law. Despite this, implementation has been neglected, as confirmed in the RTI response. The Gujarat Provincial Municipal Corporations Act was amended in 2011 to include Section 108K, empowering the state to appoint special auditors. Yet, no such action has been taken even after years of inaction.

This prolonged failure has created a severe transparency deficit. In a functioning democracy, annual audit reports should be placed before elected representatives for discussion and corrective measures. When audits are delayed for years, discrepancies remain hidden and accountability disappears.

The absence of audits for municipal budgets involving public money raises several troubling implications:

1. It violates Section 4 of the Gujarat Local Fund Audit Act, 1963, which requires annual audits of all local self-government institutions.

2. The state legislature has failed to ensure the presentation of audit reports each year, abdicating its oversight role.

3. Delayed audits make it impossible to fix responsibility on officials or elected representatives, many of whom may have retired or moved on.

4. Without timely audits, irregularities go unnoticed and financial discipline weakens.

5. Lack of transparency undermines democratic governance, as citizens and councillors remain unaware of how public funds are managed.

In essence, Gujarat’s eight municipal corporations — governing cities that together house nearly two crore people — have seen no financial accountability for years. This represents a serious breach of law and democratic responsibility, eroding public trust in governance and transparency.

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*Senior economist based in Ahmedabad