NEWS: The report calls for establishing a strong information architecture that enables data-driven fiscal decentralisation via SFCs and strengthens grassroots governance.

About

• SFCsà Constitutional bodies established under Article 243-I of the Indian Constitution.
• Recommends the distribution of state revenues between the state government and local bodies.

Key Challenges

• Preventing SFCs from accessing a holistic view performance of local bodies.
• Absence of Panchayat level and sector-wise expenditure trackingà limits performance-based fiscal analysis.
• Across states and a lack of consolidated financial statements complicate cross-state comparisons.
• Shortage of trained staff at the grassroots level hinders proper digital record-keeping.
• Delays in setting up SFCs, lack of devolution, etc

Key Recommendations

• The CAGà Should audit the implementation of 73rd Constitutional Amendment across states to evaluate the actual extent of local devolution.
• States should set up dedicated cells to continuously maintain and update financial data.
• Introduce uniform accounting heads for local transfers and adopt a common reporting template to ensure consistency and cross-state comparability.
• Classify Panchayat Advancement Index metrics into "needs," "performance," and "equity" to help refine fiscal devolution formulas.