The Curious Case of Unspent Funds

Avani Kapur

Every year the week before and after the budget, debates across all media channels and civil society tend to focus on “allocations” – how much money has been allocated for Sarva Shiksha Abhiyan? What is the jump in allocations for rural development? How much is health getting? But amidst the outcry on allocations, the most important question that seems to get lost is, how was last year’s money actually spent?

A week before the budget was announced, newspapers carried a startling finding by the Comptroller and Auditor General - that “Rs. 1 lakh crore budget funds go unspent every year”. But in the midst of the attention given to allocations, the story and along with it the attention towards unspent funds, somehow disappeared.

According to the CAG report, in 2007-08, under 97 grants of civil ministries, there was an unspent provision of Rs. 1,08,000 crore. The report was based on the findings by the Comptroller and Auditor General (CAG) based on the accounts of 2005-2007. The following table from the Times of India (TOI) summarizes some of the CAG findings. For those interested in going deeper into the report, click here

Unspent funds are indeed a curious thing and broadly there are a few things that continue to perplex me and may be some of the keys to this mystery.

First, The Flow of Funds:
In recent years, there has been a paradigm shift in the Union Government’s strategy for implementation of flagship programmes and other centrally sponsored schemes (CSS) for poverty alleviation, health care, education, employment, sanitation etc. Most of these schemes were initially implemented on a cost sharing basis with transfer of central share to state government. Now, the Union Government has started transferring their share directly to state/district level autonomous bodies, societies and ngos for implementation of CSS without devolving funds through the state government accounts.

As the CAG report states, “For the year 2007-08, Union Government made a provision for transfer of central plan assistance of Rs. 51259.85 crore (as per revised estimates) directly to these state/district level societies…. Expenditure in the accounts of these implementing agencies is kept outside Government accounts not readily ascertainable.” So basically, we have no real idea about the amount of actual expenditures being undertaken and even the expenditure reflected in the accounts is to that extent, overstated. How will we develop proper mechanisms to monitor these flows of funds? If “society” funds are outside the ambit of the government accounts – where is the transparency?

Second, Timings of disbursements:
Why is it that funds continue to be released in the last few quarters of the financial years? In education, 63% of SSA funds were spent in the second half of FY 2008-09. Even the CAG report noted delays in funds in FY 2007-08. The table below summarizes some of their findings:

What is worse is that we don’t seem to have learnt from past mistakes. According to the TOI report, even the Union Government’s monthly accounts for the current year, reveal that some of the ministries’ expenditure till December 2009 was not more than 50% of the annual budget, though only 3 months remained for the end of the financial year. All this is despite the fact that on the Public Accounts Committee’s recommendations, the Ministry of Finance issued instructions to all Ministries/Departments to restrict their expenditure during the last quarter of the financial year to 33% of the budget amount.

Finally, Trends:
Why is it that some states spend more than others? For example in FY 2007-08, while Rajasthan and Chhattisgarh spent over 90% of the allocated funds for SSA, Madhya Pradesh and Bihar spent 57% and 42% respectively. Similarly in health, in FY 2008-09, Madhya Pradesh and Uttar Pradesh spent more than 90% in FY 2008-09, while Bihar spent 66% and Orissa spent 75% of total funds available.

And finally, is it easier to incur expenditure on some items more than others? or why do some expenditure items get spent more than others? Why do untied grants in National Rural Health Mission hardly get spent (Bihar spent 11% and Himachal Pradesh spent 37% of untied funds available). In education, why is it that items like infrastructure and teacher salaries get spent more than teacher trainings or innovation grants?

I don’t have the answers, but it’s time we at least start asking the questions!

Avani Kapur is Researcher and Coordinator, PAISA Project at Accountability Initiative

Show Me the Money – The trials and tribulations of finding budgetary data in India

Avani Kapur


Every year on budget day, millions across the country tune into their television or radio-sets to hear the verdict of the budget. We want to know how much money has been allocated for various schemes and how the government has been fairing on its promises during the previous years. Yet, apart from that one day where basic budgetary data is clearly spelt out for us in a language everyone can understand, for the most part, anyone who has tried getting budgetary data on the social sector knows the arduous task it entails. A quick look at the Ministry of Health Website gives a clear indication of this!

As part of my work at the Accountability Initiative, I have been involved in trying to collect and disseminate information on social sector expenditures (see here). The importance of understanding social sector budgetary data becomes relevant by the quantum of money that it involves. The fact that the Indian economy has been growing at an incredible rate is a well-known fact. And this has been accompanied with large increases in social sector spending. According to the Economic Survey of India, Rs. 2,39,340 crores was spent in 2006-07 (the latest year for which actual expenditure figures are available) on Social Services including health and education. But how much of this actually reaches the service provider?

For the most part, tracking expenditure through budget documents requires an understanding of the expenditure responsibilities within and across Central and State governments. Budgets usually involve codes and although since 1987 budget codes have been harmonized, the process and documentation of budget-making has not kept pace with the changes over the last two decades.

Broadly there are 4 places to look for budgetary data, but each comes with its own set of limitations. One of the first places to look for budget documents is the Central Government’s dedicated budget website- www.indiabudget.nic.in. However, while the detailed demand for grants provides the Revised Estimates (RE) and Budget Estimates (BE), the final accounted expenditure is not available. Second, there is the Reserve Bank of India (RBI), which gives information about the amount of money allocated under different sectors and states, but here too, there is no detailed information on how, and on what, the money is being spent.

In order to get details about expenditure one needs to go to a separate document called the ‘Finance Accounts’, which is not easily available online. Moreover, there is a 2 year lag in reporting, i.e. for 2008-09 financial year, actual expenditure is available only up to 2006-07.

Similarly, while budget documents of the State governments and relevant government ministries do provide actual expenditure, they are not always publically available online and even when they are, they are not easy to navigate as there is no standardization in the presentation of budget documents across states or departments along with the time-lag problem already mentioned.

Apart from the difficulty in finding information, even if the information is available, there are problems of different reporting styles, lack of reliable and up-to-date information.

To take the example of education, while the RBI reports it under the budget head of ‘’Education, Sports, Art and Culture’’, the Central Government budget website puts education under the head of General, Elementary, Secondary and Adult Education. This makes it difficult to know which is the right source and the data naturally doesn’t match, making cross-verification difficult.

Moreover, for social sectors such as education, there may be multiple departments delivering the service. For example, in Madhya Pradesh and Chattisgarh, schools in tribal-dominated blocks come under the domain of the Tribal Welfare Department. This means that the total expenditure for education is generally higher than the expenditure incurred by the Department of Education.

The problem is further intensified in cases where fiscal responsibility is devolved to the lower levels of government. Significant portion of grants coming from the Centre go directly to the panchayats through the State budget. While the State budget documents mention the quantum of block grants to panchayats made by various departments, they often do not mention the purpose of the grants. Moreover, the lack of documentation by the Panchayats along the lines of a national system of accounts makes reconciling the grants coming from the Centre and the State, with panchayat records, virtually impossible.

The lack of regular and reliable data is evident from the Sarva Shiksha Abhiyan Web Portal wherein, till date, expenditure under the various heads is only available up till January 2009. There is also no way of knowing when the website would be updated .

In the absence of a centralised information database tracking, the allocation and expenditure of funds (even for the government) becomes an extremely tedious exercise, having implications for planning as well as efficiency. The (often) big difference in revised estimates and budget estimates indicates that there are problems in the planning process, often caused by the inability to incorporate the spillovers of unspent funds. According to estimates, more than Rs.50,000 crores that were committed to flagship programs such as Sarva Shiksha Abhiyan, National Rural Health Mission etc, in previous years, are lying unutilized.

A centralised information system would assist in mitigating this problem by catching mistakes and inefficiencies and also ensuring transparency.

With the advent of the Right to Information Act (RTI), we now have a legal duty to provide information including budgetary information. Section 4(2) of the RTI, calls for the proactive disclosure of information of public authorities and mandates, “it shall be the constant endeavour of every public authority….. to provide as much information suo moto to the public at regular intervals through various means of communication including the internet, so that the public have minimum resort to the use of this act to obtain information”. Websites such as the Andhra Pradesh Rural Employment Guarantee Scheme (APREGS) website, with its well-organised and up-to-date information for various heads right up to the mandal level indicate that creating such a system is possible. Now it is time we step up to the challenge!

Avani Kapur is Researcher and Coordinator of PAISA project at Accountability Initiative