CAG flags Rs 12,754 crore misclassification, Rs 54,282 crore in pending UCs in FY25 audit

The Comptroller and Auditor General of India (CAG) has unveiled critical findings in its FY25 audit of Union government accounts, revealing Rs 12,754.47 crore in misclassification and a staggering Rs 54,282.32 crore in outstanding utilisation certificates, raising serious concerns about financial transparency and accountability.

The Union government’s 2024–25 (FY25) accounts showed Rs 12,754.47 crore in misclassification, with 33,973 utilisation certificates (UCs) aggregating Rs 54,282.32 crore outstanding as of March 31, 2025, the Comptroller and Auditor General of India (CAG) said in a report tabled in Parliament on Thursday.

Of these, 13,926 certificates amounting to Rs 38,287.52 crore pertained to the past three years, while the oldest relates to grants sanctioned in 1985–86.

Transparency Concerns and Misclassification Details

Cautioning that the misclassification “affects transparency in accounts”, CAG said it was largely related to the booking of expenditure under the wrong object head.

Receipts and expenditure were also booked under the omnibus heads of “Minor Head 800 (Other Expenditure)” and “Minor Head 800 (Other Receipts)” in several cases.

The report observed that more than 50 per cent of expenditure and receipts were booked under these heads.

Receipt misclassifications amounted to Rs 4,011.91 crore.

Primarily in tax revenue heads such as the Central Board of Direct Taxes, non-tax revenues like fees, fines, and forfeitures were wrongly credited under Minor Head 800 (Other Receipts), despite dedicated minor heads being available.

Expenditure misclassifications totalled Rs 8,742.56 crore, mainly due to incorrect object heads (Rs 8,723.83 crore).

These included revenue expenditure debited to capital major heads, capital outlays treated as revenue, and subsidies booked as grants for capital assets.

Expenditure Trends and Budgeting Gaps

The report added that interest payments remained the largest component of revenue expenditure in FY25, accounting for 29.2 per cent of the total, while debt repayment was the biggest draw from the Consolidated Fund of India during the year.

It also said the proportion of committed expenditure to revenue expenditure expanded in FY25, “leaving less headroom for discretionary expenditure”.

“Since the receipt of UCs is the only mechanism to confirm that funds have been utilised for their intended purpose, departments should establish a robust system to ensure the timely submission of UCs by grantee bodies,” CAG recommended.

Budgeting gaps were also evident. Parliament approved Rs 1,47,54,642.48 crore (Rs 147.54 trillion) for FY25, but actual spending stood at Rs 1,42,63,339.67 crore (Rs 142.63 trillion), an undershoot of Rs 4,91,302.81 crore (Rs 4.91 trillion).

Yet, 16 sub-heads under 11 grants saw overruns of Rs 25 crore or more due to poor provisioning, while 19 grants recorded savings exceeding Rs 5,000 crore and seven showed persistent underspending over three years.

Fund Transfers and Recommendations

CAG said funds collected for specific purposes were not always reaching their intended destination on time. In FY25, it found a short transfer of Rs 9,222 crore to four designated reserve funds, even though Rs 3,89,220 crore (Rs 3.89 trillion) was collected as cess, surcharge, and levies during the year.

The report also noted that Rs 10,380.36 crore was pending disbursement to states and Union Territories under compensatory afforestation funds at the end of FY25.

CAG recommended that such collections be transferred strictly in line with rules and reconciled in a timely manner.