Social Audit of MGNREGA Fund


    In News

    • Social audit report states Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) fund deviated and misappropriated of worth Rs 22 crore in Kerala

    Key Findings

    • The audit report was prepared by Kerala Social Audit Society in 296 out of the 941 village panchayats. The audit was conducted from December last year to March this year.
    • The actual magnitude of the looting of the Centre’s fund would be much more as the audit was held only in a section of panchayats, that too only for four months.
    • The social audit, a crucial mandatory component of the MGNREGS, could not be conducted in majority of the panchayats for want of village resource persons, who vet the implementation of the scheme at the grassroots level
    • Funds were misappropriated in many ways – largely through fake entries in the muster roll. 
      • Payments were illegally made to accounts of those who have not worked, those who are abroad and even to accounts of government employees at civic bodies.
    • In works meant for asset creation, fake bills were submitted to pocket money. 
      • Local politicians, belonging to parties which rule the panchayats, were found to have made fake muster rolls during civil works undertaken as part of asset creation. 
    • Many works, which were not sanctioned or allowed under the scheme, were found implemented
    • Instead of MGNREGS workers in the roll, many panchayats introduced contractors with the connivance of local politicians, to pocket money with fake muster rolls.
    • Social audit has been facing stiff resistance in many village panchayats from both the CPI(M) and Congress, the parties which rule more than 90 per cent of the local bodies.

    Social Audit

    • About: Social Audit is the examination and assessment of a programme/scheme conducted with the active involvement of people and comparing official records with actual ground realities. 
    • It is a powerful tool for social transformation, community participation and government accountability.
    • Section 17 of the MGNREGA has mandated Social audit of all Works executed under the MGNREGA. 
    • Social Audit is different from Financial Audit
      • Financial audits involve inspecting and assessing documents related to financial transactions in an organization to provide a true picture of its profits, losses and financial stability. 
      • Social audits focus on the performance of a programme in fulfilling its intended social objectives and ethical vision through consultation with a range of stakeholders including social programme beneficiaries, community members, government officials and verifying the information obtained with documents and physical evidence. 
        • Thus social audits examine and assess the social impact of specific programmes and policies.
    • The process of Social Audit combines people’s participation and monitoring with the requirements of the audit discipline. 
      • It is necessary to promote people’s participation in the audit along with support provided by an independent social audit organization that facilitates the process.
    • The Social Audit process is a fact finding process
      • The work of the Auditor is to investigate by cross-verifying facts and details in the records from the workers and cross- verifying works at site.
      • The “Auditors” must not view themselves as “Prosecutors”.
    • Key features of Social Audit:
      • Fact finding not fault finding.
      • Opportunity for awareness building on entitlements and processes.>
      • Creating the space and platform for dialogue among various levels of stakeholders.
      • Timely grievance redressal.
      • Strengthening the democratic process and institutions.
      • Building people’s pressure for better implementation of programmes.
    • Audit of Scheme Rules, 2011:
      • These Rules were prepared by the then Ministry of Rural Development in consultation with the Comptroller and Auditor General (CAG) of India. 
      • These rules are also called the Mahatma Gandhi National Rural Employment Guarantee Audit of Schemes Rules, 2011.
      • These rules define the process of social audit and responsibilities of the Social Audit Unit (SAU), state government and the field functionaries of MGNREGA, to be followed across the country.
      • These rules also emphasise the role of the SAU, its pre-requisites, the process of social audit and the responsibilities of designated officials.


    • It informs and educates people about their rights and entitlements.
    • It provides a collective platform for people to ask queries, express their needs and grievances.
    • It promotes people’s participation in all stages of implementation of programmes.
    • It brings about transparency and accountability in government schemes.
    • It strengthens decentralised governance.

    Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)

    • Mandate: The mandate of the MGNREGA is to provide at least 100 days of guaranteed wage employment in a financial year to every rural household whose adult members volunteer to do unskilled manual work.
    • Objectives: Providing not less than one hundred days of unskilled manual work as guaranteed employment in a financial year to every household in rural areas as per demand, resulting in the creation of productive assets of prescribed quality and durability
      • Strengthening the livelihood resource base of the poor
      • Proactively ensuring social inclusion and
      • Strengthening Panchayati Raj Institutions
    • Coverage: It is implemented in all rural districts of the country.
    • Role of Gram Sabha in MGNREGS: It determines the order of priority of works in the meetings of the Gram Sabha keeping in view the potential of the local area, its needs, local resources.
      • Monitor the execution of works within the GP.
      • It is the primary forum for the conduct of social audits. It provides a platform to all residents to seek and obtain all relevant information from all the Implementing Agencies including GP in relation to MGNREGA works implemented in the GP area.
    • Legal Right to Work: The Act provides a legal right to employment for adult members of rural households.

    Issues/Challenges of MGNREGA

    • Ridiculously low wage rate: Currently, MGNREGA wage rates of 17 states are less than the corresponding state minimum wages. Various judgements have upheld that the MGNREGA wage rate cannot be less than the minimum agricultural wage rate of the state.
    • Insufficient budget allocation: MGNREGA’s success at the ground level is subject to proper and uninterrupted fund flow to the states. Thrice in the last year and once this year, funds have dried up in states due to lack of “mother sanctions” from the Central government which hampers the work in peak season.
    • Regular payment delays: The Union Ministry of Rural Development considers wages paid once the FTO (Fund Transfer Order) is signed by the second signatory. However, delays take place even in the processing of signed FTOs, for which the Management Information System (MIS) does not calculate compensation.
    • Workers penalised for administrative lapses: The ministry withholds wage payments for workers of states that do not meet administrative requirements within the stipulated time period.
    • The banking puzzle: The rural banks are highly de-capacitated in terms of staff and infrastructure and thus always remain hugely crowded. The workers normally have to visit the banks more than once to withdraw their wages.
    • Faulty MIS data: The increase in corruption and weakening accountability has roots in the excessive dependence of implementation of MGNREGA on technology (real-time MIS being one of them). There is a growing pile of evidence on how real-time MIS has made MGNREGA less transparent for workers, reduced accountability of frontline functionaries and aided in the centralisation of the programme.
    • Non-payment of unemployment allowance: There are a huge number of unemployment allowances being shown in the MIS currently. But inaction from the Central government in ensuring payments of the same has shown that the government wants to use the MIS as per its convenience and is not honouring its own database.
    • Genuine job cards being deleted to meet 100% DBT targets: Genuine job cards are being randomly deleted as there is a huge administrative pressure to meet 100 per cent Direct Benefit Transfer (DBT) implementation targets in MGNREGA.
    • Discrimination: The most remarkable feature of MGNREGA is that it pays women the same as men, something that was virtually unimaginable in Rural India. However, cases of discrimination against women and people from backward groups are reported from several regions of the country.

    Way Ahead

    • Social audits: There is a need to carry out social audits as per rules and effective implementation of the delay compensation system.
    • Compensation clause: Under the scheme’s compensation clause, agencies responsible for the delay are expected to pay 0.05 per cent of wages per day after the closure of the muster roll.
    • Raising awareness: The participation of women and backwards classes must be increased by raising awareness and making it more inclusive.
    • Utilisation of funds: Reasons for poor utilisation of funds should be analysed and steps must be taken to improve them. In addition, actions should be initiated against officers found guilty of misappropriating funds.
    • National Level Monitors: The frequency of monitoring by National Level Monitors (NLMs) should be increased and appropriate measures should be taken by States based on their recommendations.

    Source: IE