CAG audit flags INR 350 crore misappropriation, rising debt, idle funds, and accounting discrepancies in Nagaland’s 2023–24 finances.
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DIMAPUR — The Comptroller and Auditor General (CAG) of India has raised serious concerns over Nagaland’s financial management in its State Finances Audit Report for 2023–24.
While revenue receipts rose significantly during the year, the audit uncovered 34 cases of misappropriation amounting to INR 350.14 crore, major accounting discrepancies, and a rising debt burden the state is struggling to manage.
According to the report, Nagaland’s revenue receipts increased to INR 16,155.13 crore in 2023–24, a 14.58% rise over the previous year. The state’s own tax revenue stood at INR 1,598.09 crore, non-tax revenue at INR 677.85 crore, devolution of Union taxes and duties at INR 6,426.82 crore, and grants-in-aid from the Centre at INR 7,452.37 crore.
With revenue expenditure at INR 14,819.70 crore, the state recorded a revenue surplus of INR 1,335.43 crore. This was nearly double the previous year’s surplus of INR 688.90 crore.
Also read: CAG flags lack of disclosure on government grants, assistance in Nagaland
Concurrently, the fiscal deficit widened to INR 1,784.45 crore, equivalent to 4.26 per cent of the Gross State Domestic Product (GSDP). After audit adjustments for misclassification, the revenue surplus reduced to INR 1,279.80 crore and the fiscal deficit increased to INR 1,826.63 crore, the report stated.
Despite the surplus, the state’s spending patterns remain rigid as capital expenditure increased to INR 3,122.52 crore in 2023–24, about 17.41% of total expenditure.
Yet, more than half of all borrowings were still used to repay past loans.
Revenue expenditure was dominated by committed outlays such as salaries, pensions, and interest payments, which together accounted for over 67% of revenue receipts. When combined with inflexible expenditure, these categories consumed more than 81% of total revenue expenditure, leaving little room for developmental priorities.
Discrepancies
The audit reported 34 cases of misappropriation, defalcation, or losses amounting to INR 350.14 crore that remained unresolved as of March 31, 2024.
Out of these 34 cases, four cases involving INR 25.76 crore were reportedly pending in the court of law. Further, out of the total cases, there were 10 cases of loss to government due to theft, misappropriations and loss of government materials involving INR 117.63 crore, out of which an amount of INR 5.81 crore was recovered.
The School Education department accounted for INR 83.31 crore across three cases, while the Disaster Management department was linked to two cases totalling INR 74.04 crore. In Public Works department, four cases together involved losses of INR 58.23 crore. Taxes department was associated with irregularities worth INR 26.62 crore in two cases, and Planning and Transformation department had one case involving INR 20.23 crore, among others.
Many of these cases date back more than five years and remain pending either before courts or under departmental investigation, the CAG stated.
Further, the audit found a serious mismatch of INR 397.76 crore between the state’s accounts and those of the Reserve Bank of India. The Accountant General’s records showed a closing balance of INR 407.42 crore, while RBI figures reflected only INR 9.69 crore.
The discrepancy was attributed to misreporting and delays in reconciliation by agency banks.
Another issue flagged in the report was the “indiscriminate” booking of receipts and expenditure under Minor Head 800, which is “intended to be operated only when the appropriate minor head has not been provided in the accounts.”
In 2023–24, Nagaland booked INR 545.35 crore in expenditure and INR 531.58 crore in receipts under Minor Head 800, the report stated, adding that the use of a residual accounting head obscures the true nature of transactions and reduces transparency in public finances.
Idle funds
According to the report, the state transferred INR 2,812.60 crore to Single Nodal Agencies (SNAs) for centrally sponsored schemes in 2023–24. However, “detailed vouchers and supporting documents of actual expenditure were not received by the office of the Principal Accountant General (A&E) from the SNAs.”
By March 31, 2024, INR 1,096.65 crore remained unspent in 117 SNA bank accounts. In this connection, the CAG cautioned that such parking of funds outside the treasury system undermines fiscal control and can distort the state’s deficit and surplus figures.
Also read: Capital of INR 963 crore on 311 incomplete projects ‘locked’ since 2012 in Nagaland — CAG report
Notably, Nagaland also failed to clear a large backlog of pending financial documents. Against 405 Abstract Contingent bills drawn up to February 2024, a total of 333 Detailed Countersigned Contingent bills worth INR 613.29 crore were still outstanding as on March 31, 2024.
“The non-adjustment of AC Bills is fraught with the risk of misappropriation and therefore, requires close monitoring by the respective DDOs for ensuring submission of Detailed Countersigned Contingent (DCC) bills. Further, there is no assurance that the expenditure of the State Government reflected in the Finance Accounts is correct or final due to non-receipt of DCC bills to that extent,” the CAG noted.
Rising debt
Further, the CAG noted that the state government’s outstanding liabilities increased by 49.33% over five years, rising from INR 12,179.10 crore in 2019–20 to INR 18,187.32 crore in 2023–24. The debt-to-GSDP ratio also worsened during the same period, increasing from 40.99% to 43.42%.
In 2023–24 alone, public debt reached INR 15,944.06 crore, a rise of INR 2,702.25 crore or 20.41% over the previous year’s INR 13,241.81 crore.
The audit highlighted that more than half of fresh borrowings in 2023–24 were used simply to repay past loans, leaving limited fiscal space for capital investment.
Interest payments alone amounted to INR 1,068.43 crore during the year, constraining developmental expenditure.
In addition, guarantees worth INR 228.57 crore were extended to state corporations and financial institutions. Although none of these were invoked during the year, the CAG warned that such contingent liabilities add further risk to the state’s already fragile fiscal position.