The audit will act as a deterrent and spur state governments to work more efficiently, Rural Development Minister Raghuvansh Prasad Singh has said.

"I asked for this review by the CAG so that the flaws in the programme could be highlighted in the initial stages itself. This will help officials correct themselves and run the programme according to the guidelines," Singh said.

"The next phase will represent a greater challenge as it (the programme) is rolled out in the rest of the country. State governments will not repeat these mistakes," he added.

Speaking at a press conference after a review of the scheme at a meeting attended by state secretaries, Singh said 17 states had submitted their response to the report. Some states, he said, also attached action taken reports on incidents of embezzlement of funds.

The CAG report, for instance, pointed to cases in Bihar where there was a fraudulence of about Rs 1 crore and in Madhya Pradesh, where Rs 10 lakh was spent on a building funded through the job scheme money.

"Based on the report, several states have initiated investigations. In Chhattisgarh, one collector was transferred and a district functionary suspended. While FIRs were filed in Orissa, other states like Haryana, Tripura and Punjab, Jammu and Kashmir and Sikkim are investigating the matter," Singh said.

The ministry officials said the CAG report pointed to procedural flaws like absence of personnel and non-maintenance of muster rolls. "Almost the entire CAG report concentrates on the guidelines rather than the Act. Seventeen states have already submitted their response. Others are expected to do so by end of this month," said an official.

When asked about the response of the secretaries to the CAG report, an official said, "States agreed there are some procedural flaws in the system and assured they would rectify the mistakes."

At the meeting, Singh told states to implement the programme according to the guidelines and provide a transparent governance to drive out corruption. Singh said there were some points in the Act which the CAG audit failed to understand. "Providing job cards does not necessarily provide wages. People have to demand work to get work and money."

"Such reports will only strengthen the anti-poor lobby in the country which will reiterate its demand for scrapping the Act," he said.